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SECOND DIVISION

[G.R. No. 144899. February 5, 2004]

ELIZABETH C. BASCON and NOEMI V. COLE, petitioners, vs. HONORABLE COURT OF


APPEALS, METRO CEBU COMMUNITY HOSPITAL, INC., and GREGORIO
IYOY, respondents.

DECISION
QUISUMBING, J.:

This petition for review on certiorari assails the Court of Appeals Decision[1] in CA-G.R.
SP No. 51690, dated March 13, 2000, which set aside the decision of the National Labor
Relations Commission (NLRC), 4th Division, dated November 25, 1998, in NLRC Case No. V-
00234-97. The NLRC had reversed the judgment of the Labor Arbiter, dated April 24, 1997, in
NLRC-RAB-VII Case No. 07-0828-96, which held valid herein petitioners dismissal from
employment. Petitioners also challenge the appellate courts Resolution,[2] dated August 9,
2000, which denied their motion for reconsideration.
The petitioners in the instant case were employees of private respondent Metro Cebu
Community Hospital, Inc. (MCCH) and members of the Nagkahiusang Mamumuo sa Metro
Cebu Community Hospital (NAMA-MCCH), a labor union of MCCH employees. Petitioner
Elizabeth C. Bascon had been employed as a nurse by respondent MCCH since May 1984. At the
time of her termination from employment in April 1996, she already held the position of Head
Nurse. The other petitioner, Noemi V. Cole, had been working as a nursing aide with MCCH
since August 1974. Both petitioners were dismissed by the respondent hospital for allegedly
participating in an illegal strike.
The instant controversy arose from an intra-union conflict between the NAMA-MCCH and
the National Labor Federation (NFL), the mother federation of NAMA-MCCH. In November
1995, NAMA-MCCH asked MCCH to renew their Collective Bargaining Agreement (CBA),
which was set to expire on December 31, 1995. NFL, however, opposed this move by its local
affiliate. Mindful of the apparent intra-union dispute, MCCH decided to defer the CBA
negotiations until there was a determination as to which of said unions had the right to negotiate
a new CBA.
Believing that their union was the certified collective bargaining agent, the members and
officers of NAMA-MCCH staged a series of mass actions inside MCCHs premises starting
February 27, 1996. They marched around the hospital putting up streamers, placards and posters.
On March 13 and 19, 1996, the Department of Labor and Employment (DOLE) office in
Region 7 issued two (2) certifications stating that NAMA-MCCH was not a registered labor
organization. This finding, however, did not deter NAMA-MCCH from filing a notice of strike
with the Region 7 Office of the National Conciliation and Mediation Board (NCMB). Said notice
was, however, disregarded by the NCMB for want of legal personality of the union.
Meanwhile, the MCCH management received reports that petitioners participated in
NAMA-MCCHs mass actions. Consequently, notices were served on all union members,
petitioners included, asking them to explain in writing why they were wearing red and black
ribbons and roaming around the hospital with placards. In their collective response dated March
18, 1996, the union members, including petitioners, explained that wearing armbands and putting
up placards was their answer to MCCHs illegal refusal to negotiate with NAMA-MCCH.
Subsequently, on March 28, 1996, MCCH notified the petitioners that they were to be
investigated for their activities in the mass actions, with the hearings being scheduled on March
28, 1996 and April 1, 1996. Petitioners, however, denied receiving said notices. In a notice dated
April 8, 1996, MCCH ordered petitioners to desist from participating in the mass actions
conducted in the hospital premises with a warning that non-compliance therewith would result in
the imposition of disciplinary measures. Petitioners again claimed they did not receive said order.
Petitioners Bascon and Cole were then served notices terminating their employment effective
April 12, 1996 and April 19, 1996, respectively.
The dismissal of petitioners did not deter NAMA-MCCH from staging more mass actions.
The means of ingress to and egress from the hospital were blocked. Employees and patients,
including emergency cases, were harassed, according to MCCH management, which also
complained that mass actions held inside the hospital had created an atmosphere of animosity
and violence, aggravating the condition of ailing patients. Furthermore, the hospital also suffered
heavy losses brought about by a notable decline in the patient admission rates and the refusal of
suppliers to extend credit. To address its labor problems, MCCH sought an injunction from the
NLRC on July 9, 1996 in Injunction Case No. V-0006-96.
Meanwhile, on July 1, 1996, Bascon and Cole filed a complaint for illegal dismissal,
docketed as NLRC-RAB-VII Case No. 07-0828-96. They denied having participated in said
mass actions or having received the notices (1) enjoining them from wearing armbands and
putting up placards, with warning that disciplinary measure would be imposed, and (2) informing
them of the schedule of hearing. They admit, however, to wearing armbands for union identity
while nursing patients as per instruction of their union leaders.
On July 16, 1996, a Temporary Restraining Order (TRO) was duly issued in Injunction Case
No. V-0006-96.
On August 27, 1996, the local government of Cebu City ordered the demolition of the picket
staged by the members of NAMA-MCCH for being both a public nuisance and a nuisance per se.
On September 18, 1996, the injunction was made permanent by an NLRC Resolution in
Injunction Case No. V-0006-96, the fallo of which reads:

WHEREFORE, premises considered, the petition for injunction is hereby GRANTED enjoining
respondents in the course of their strike/picket from committing the illegal acts mentioned in
Article 264 (e) of the Labor Code more particularly the blocking of the free ingress to and egress
from petitioner hospital and from committing threats, coercion and intimidation of the non-
striking/picketing employees/workers reporting for work, vehicles/patients desiring to enter for
the purpose of seeking admission/confinement in petitioner hospital and for such other lawful
purpose.

SO ORDERED.[3]

In a Decision[4] dated April 24, 1997, the Labor Arbiter found the termination complained
of in NLRC-RAB-VII Case No. 07-0828-96 to be valid and legal, and dismissed the complaint.
The Labor Arbiter held that petitioners were justly dismissed because they actually participated
in the illegal mass action. It also concluded that petitioners received the notices of hearing, but
deliberately refused to attend the scheduled investigation.
Petitioners then appealed the Labor Arbiters ruling to the NLRC, 4th Division, which
docketed the appeal as NLRC Case No. V-00234-97.
In its Decision[5] dated November 25, 1998, the NLRC, 4th Division reversed the ruling of
the Labor Arbiter and ordered the reinstatement of petitioners with full backwages. First, it found
that petitioners merely wore armbands for union identity, per instruction of their union officials.
Said wearing of armbands while nursing patients, is a constitutional right, which cannot be
curtailed if peacefully carried out. Second, it ruled that the placards complained of by MCCH did
not contain scurrilous, indecent or libelous remarks. Finally, it concluded that, in a belated but
crude attempt to camouflage the illegal dismissal of petitioners, MCCH merely fabricated the
notices allegedly sent to petitioners.
Anent the charge of gross insubordination, the NLRC ruled that petitioners were not guilty
thereof, because the elements thereof had not been sufficiently proven, to wit: (1) reasonableness
and lawfulness of the order or directive, (2) sufficiency of knowledge on the part of the employee
of such order, and (3) the connection of the order with the duties which the employee had been
engaged to discharge.
Unconvinced of the correctness of the NLRC decision, MCCH filed a motion for
reconsideration presenting the following documentary evidence:

1) Affidavits of Paz Velasco, Luciano Quitoy, Joseph Dagatan, and Gina Jumao-as to show that
petitioners were duly served the notices in question;

2) Letter reply of NAMA-MCCH dated March 18, 1996 wherein petitioners, together with the
rest of the union members, collectively acknowledged receipt of the March 15, 1996 directive;

3) Position Paper of terminated co-employees where the receipt of the subject notices were
admitted as well as the commission of the aforementioned protest mass actions; and

4) Appeal of private respondents, who did not join the protest mass action, to the Board of
Trustees of MCCH to show that reinstatement is no longer feasible in view of strained
relationship.

On February 4, 1999, the NLRC denied the plea for reconsideration of MCCH.
Undeterred, MCCH filed a special civil action for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure before the Court of Appeals, docketed as CA-G.R. SP No. 51690.
In its Decision[6] dated March 13, 2000, the Court of Appeals decided CA-G.R. SP No.
51690 as follows:

WHEREFORE, the petition is granted. The Decision of public respondent NLRC 4th Division
dated November 25, 1998 in NLRC Case No. V-00234-97 is hereby REVERSED and the
complaint of private respondents is dismissed for lack of merit. Petitioner Metro Cebu
Community Hospital (MCCH) is however ordered to pay the private respondents separation pay
equivalent to one-half month for every year of service in the interest of equity.

No costs.

SO ORDERED.[7]

The appellate court held that Bascon and Cole were validly terminated for their gross
insubordination or willful disobedience as:
1) The order for petitioners to refrain from wearing armbands and putting up placards
was legal, fair and reasonable.
2) The order was connected with the duties, which the petitioners had been engaged to
discharge.
3) Said order was sufficiently made known to petitioners as receipt of the same by the
latter was convincingly substantiated by hard evidence.
The appellate court stressed that petitioners gross insubordination constituted unlawful acts
undertaken in conjunction with an illegal mass concerted action akin to an illegal strike. Finally,
the Court of Appeals ruled that petitioners union activities violated the rights of patients and
third parties such that they were outside the ambit of legality and beyond the mantle of protection
of the freedom of speech.
Hence, the instant case, with the petitioners submitting for resolution the following issues:
I

CAN THE HONORABLE COURT OF APPEALS SUPPLANT ITS FINDINGS OF


FACTS WITH THAT OF THE COMMISSION?

II

CAN THE HONORABLE COURT OF APPEALS REVERSE THE DECISION OF THE


COMMISSION ALTHOUGH THERE IS NO FINDING OF GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION?

III

CAN AN EMPLOYEE BE TERMINATED FOR INSUBORDINATION FOR IPSO


FACTO NOT SHOWING UP FOR THE INVESTIGATION?[8]
Anent the first and second issues, as a general rule, the findings of facts of the NLRC are
deemed binding and conclusive upon the Court. We have repeatedly said that the Court is not a
trier of facts. Thus, resort to judicial review of the decisions of the NLRC in a special civil action
for certiorari under Rule 65 of the Rules of Court is generally limited to the question of grave
abuse of discretion amounting to lack or excess of jurisdiction. [9] However, where, as in the
instant case, the findings of facts of the NLRC contradict those of the Labor Arbiter, a departure
from the general rule is warranted. Thus, the Court may look into the records of the case and
reexamine the questioned findings.[10] Where the NLRC and the Labor Arbiter disagree on
their finding of facts, the Court can review the records to determine which findings should be
preferred as more conformable to the evidentiary facts.[11]
In St. Martin Funeral Home v. NLRC,[12] we held that the special civil action
of certiorari is the mode of judicial review of the decisions of the NLRC either by this Court or
the Court of Appeals, but the latter court is the more appropriate forum in strict observance of the
doctrine on the hierarchy of courts and that, in the exercise of this power, the Court of Appeals
can review the factual findings or the legal conclusions of the NLRC.[13]
With regard to the third issue, note that petitioners were terminated for allegedly
participating in an illegal strike and gross insubordination to the order prohibiting them from
wearing armbands and putting up placards, not for ipso facto failing to show up in the scheduled
investigation. Thus, the real issue is whether or not petitioners were validly terminated for (1)
allegedly participating in an illegal strike and/or (2) gross insubordination to the order to stop
wearing armbands and putting up placards.
As to the first ground, Article 264 (a) of the Labor Code provides in part that:

Any union officer who knowingly participates in illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be declared to
have lost his employment status (Emphasis ours)

Thus, while a union officer can be terminated for mere participation in an illegal strike, an
ordinary striking employee, like petitioners herein, must have participated in the commission
of illegal acts during the strike (underscoring supplied). There must be proof that they
committed illegal acts during the strike.[14] But proof beyond reasonable doubt is not
required. Substantial evidence, which may justify the imposition of the penalty of dismissal,
may suffice.
In this case, the Court of Appeals found that petitioners actual participation in the illegal
strike was limited to wearing armbands and putting up placards. There was no finding that the
armbands or the placards contained offensive words or symbols. Thus, neither such wearing of
armbands nor said putting up of placards can be construed as an illegal act. In fact, per se, they
are within the mantle of constitutional protection under freedom of speech.
Evidence on record shows that various illegal acts were committed by unidentified union
members in the course of the protracted mass action. And we commiserate with MCCH, patients,
and third parties for the damage they suffered. But we cannot hold petitioners responsible for
acts they did not commit. The law, obviously solicitous of the welfare of the common worker,
requires, before termination may be considered, that an ordinary union member must have
knowingly participated in the commission of illegal acts during a strike.
As regards the appellate courts finding that petitioners were justly terminated for gross
insubordination or willful disobedience, Article 282 of the Labor Code provides in part:

An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work.

However, willful disobedience of the employers lawful orders, as a just cause for dismissal
of an employee, envisages the concurrence of at least two requisites: (1) the employee's assailed
conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and
(2) the order violated must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge.[15]
In this case, we find lacking the element of willfulness characterized by a perverse mental
attitude on the part of petitioners in disobeying their employers order as to warrant the ultimate
penalty of dismissal. Wearing armbands and putting up placards to express ones views without
violating the rights of third parties, are legal per se and even constitutionally protected. Thus,
MCCH could have done well to respect petitioners right to freedom of speech instead of
threatening them with disciplinary action and eventually terminating them.
Neither are we convinced that petitioners exercise of the right to freedom of speech should
be taken in conjunction with the illegal acts committed by other union members in the course of
the series of mass actions. It bears stressing that said illegal acts were committed by other union
members after petitioners were already terminated, not during the time that the latter wore
armbands and put up placards.
Finally, even if willful disobedience may be properly appreciated, still, the penalty of
dismissal is too harsh. Not every case of willful disobedience by an employee of a lawful work-
connected order of the employer may be penalized with dismissal. There must be reasonable
proportionality between, on the one hand, the willful disobedience by the employee and, on the
other hand, the penalty imposed therefor.[16] In this case, evidence is wanting on the depravity
of conduct and willfulness of the disobedience on the part of petitioners, as contemplated by law.
Wearing armbands to signify union membership and putting up placards to express their views
cannot be of such great dimension as to warrant the extreme penalty of dismissal, especially
considering the long years of service rendered by petitioners and the fact that they have not
heretofore been subject of any disciplinary action in the course of their employment with
MCCH.
The termination of petitioners employment not being for any of the just or authorized
causes, it constitutes illegal dismissal. Article 279 of the Labor Code, as amended, provides that:

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.
Hence, illegally dismissed employees are entitled to both reinstatement and full backwages
as a matter of course. MCCH alleges that due to strained relations, reinstatement is no longer
possible. We disagree. In Quijano v. Mercury Drug Corporation,[17] we stated that the doctrine
of strained relations is inapplicable to a situation where the employee has no say in the
operation of the employers business. Petitioners herein are nurse and nursing aide, respectively
in MCCH and thus, have no prerogative in the operation of the business. As also held in
the Mercury Drugcase:

To protect labors security of tenure, we emphasize that the doctrine of strained relations
should be strictly applied so as not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in strained relations, and the phrase
cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can
never be reinstated.[18]

We cannot in our conscience allow MCCH to unjustly deny petitioners their lawful
occupation, especially at this late point in their lives when it would be a near impossibility for
them to find another employment. The employers power to dismiss must be tempered with the
employees right to security of tenure. Time and again we have said that the preservation of the
lifeblood of the toiling laborer comes before concern for business profits. Employers must be
reminded to exercise the power to dismiss with great caution, for the State will not hesitate to
come to the succor of workers wrongly dismissed by capricious employers.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-
G.R. SP No. 51690 dated March 13, 2000 is REVERSED. Private respondent Metro Cebu
Community Hospital is hereby ordered to reinstate petitioners Noemi V. Cole and Elizabeth C.
Bascon without loss of seniority rights and other privileges and to pay them full backwages,
inclusive of allowances, and other benefits computed from the time they were dismissed up to
the time of their actual reinstatement.
No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

SECOND DIVISION

[G.R. No. 142007. March 28, 2001]

MANUEL C. FELIX, petitioner, vs. ENERTECH SYSTEMS INDUSTRIES, INC. and COURT
OF APPEALS, respondents.

DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the respondent Court of
Appeals, dated January 6, 2000, affirming the decision of the National Labor Relations
Commission (NLRC), dated June 17, 1998, declaring the dismissal of petitioner Manuel C. Felix
to be legal, although granting his claim for 13th month pay, and the appeals courts resolution,
dated February 18, 2000, denying petitioners motion for reconsideration.
The facts, as found by the Court of Appeals, are as follows:
Respondent Enertech System Industries, Incorporated is engaged in the manufacture of
boilers and tanks. Petitioner Manuel C. Felix worked as a welder/fabricator in respondent
company. On August 5, 1994, petitioner and three other employees, namely, Dante Tunglapan,
Hilario Lamog, and Emerson Yanos, were assigned to install a smokestack at the Big J Feedmills
in Sta. Monica, Bulacan. During the entire period they were working at the Big J Feedmills,
petitioner and his companions accomplished daily time records (DTRs). Petitioner wrote in his
DTR that he had worked eight hours a day on the basis of which his wages were computed.
The work was estimated to be completed within seven days, but it actually took the workers
until August 17, 1994, or about two weeks, before it was finished. On that day, petitioner and his
three co-employees were each given notice by respondent, which read in part:

Reports came to our office that for the past few days you were reporting at [the] Big J jobsite at
around eleven oclock in the morning and you were leaving said site at two oclock.

We would like to inform you that said act constitutes Abandonment of Work which is [a]
violation of our Company Code on Employees Discipline that warrants a penalty of
DISMISSAL.

Therefore, you are hereby given 24 hours to explain your side on the said matter.[2]

The next day, August 18, 1994, petitioner and his co-workers were placed under preventive
suspension for seven working days. On August 26, 1994, respondent, through its personnel
assistant, Ma. Imelda E. Samson (MIES), and in the presence of two union officers, Armando B.
Tumamao (ABT) and Jessie T. Yanos (JTY), interviewed Johnny F. Legaspi (JFL), who owned
the Big J Feedmills, and his engineer, Juanito Avena. The transcript of their interview reads:
MIES: Anong oras ho ba nagtatrabaho ang mga tao naming nai-assign dito?
JFL: Madalas nagsisimula sila ng alas-diyes ng umaga at minsan naman alas-onse ng umaga;
mula ng nag-umpisa sila dito hindi pa sila naka-buo ng apat na oras na trabaho mag-
hapon.
MIES: Bakit ho, anong oras ba sila dumarating?
JFL: Hindi pare-pareho, may alas-otso ng umaga, minsan 9:00, minsan 9:30 ng
umaga, pero hindi sila sabay-sabay na dumarating ha. Madalas pa nga mag-aalas-diyes
na sila dumarating, pag kumpleto na silang apat saka pa lang sila magsisimulang
magtrabaho.
ABT: May mga araw ho nagdadaan sila sa Shop namin para pumick-up ng gamit baka
ito ho iyong tinatanghali sila ng dating?
JFL: Iyon nga ang sabi nila eh, kaya daw sila tinatanghali kasi nga kumukuha sila ng gamit sa
shop ninyo, pero hindi naman sila sabay-sabay kumukuha ng gamit o suweldo, di
ba? Saka nagpapapirma sila ng delivery receipt kay Engr. Avena at isa-isa lang naman
ang nagpupunta sa Shop ninyo, yung naiiwan dito sa Shop hindi agad nagtatrabaho,
hinihintay pa nila yung kasama nila.
ABT: May dumarating ho ba ng alas-siyete ng umaga?
JFL: Wala nga eh, tanghali na nga sila dumarating, pagdating magtatabraho sandali tapos
titigil para kumain sa tindahan wala pang alas-dose kumakain na sila kasi baka
maubusan sila ng ulam o kakainin, tapos alas-dose magpapahinga na sila, matutulog doon
sa may boiler bago pa lamang mag-alas-kuatro umaalis na sila kaya wala talagang otso
oras ang trabaho nila.
JTY: Paano nyo ho nalalaman kung nagtratrabaho sila o hindi?
JFL: Alam ninyo, galing ako sa sakit; kailangan ko ng pahinga pero imbes na sa loob ako
nagpapahinga dito na lang ako sa labas, umagang-umaga pa lang, nandito na ako. Kita
niyo naman mula dito nakikita ko ang lumalabas at pumapasok dito, saka makikita mo
kung may tao doon sa bubong saka doon sa may boiler at maririning mo rin kung nag-
we-welding o may nag-pupukpok.
Lumalapit nga itong si Manuel sa amin at nagpapagawa ng sulat na nagpapatunay na
pumapasok sila ng 7 to 4 pero hindi ako pumayag kasi lalabas na nagsisinungaling na
ako. Gusto lang naman namin lumagay sa tama, kung ano yung totoo iyon na iyon,
noong minsan nag-report kami sa opisina ninyo na nag half-day sila, yun pala natutulog
lang sila sa ilalim ng boiler sa may skid. Kaya naman gumawa kami agad ng sulat para
ipaalam sa inyo na hindi pala sila umuwi, nandoon pa pala sila, natutulog.[3]
These statements were corroborated by the affidavit [4] of petitioners co-employee,
Emerson G. Yanos, who stated that petitioner and his co-worker Dante Tunglapan usually arrived
for work at the Big J Feedmills between 9:30 to 10:00 a.m., stopped working at 12:00 noon, then
resumed work at 1:00 p.m., continuing until 3:00 p.m. Before going home, they had snacks.
Reynaldo Tapiru, petitioners co-employee and neighbor in Sitio Kabanatuan, Valenzuela,
also stated in an affidavit[5] that he had seen petitioner either in his house or within their
compound on August 6, 7, 8, and 14, 1994, between 3 and 4 oclock in the afternoon, when he
was supposed to be working at the Big J Feedmills in Bulacan at that time.
On September 9, 1994, respondent required petitioner to report to the company lawyer on
September 13, 1994 for investigation.[6] Then, on October 17, 1994, it issued a
memorandum[7] placing petitioner under preventive suspension for 30 days. Finally, on
November 21, 1994, respondent sent petitioner a memorandum terminating his employment on
the following grounds:

SECTION 7. DISHONESTY

6. Falsifying time cards or any other timekeeping records, or drawing


salary/allowance by virtue of falsified time cards.
SECTION 8. INSUBORDINATION

4. Willful holding back, slowing down, hindering, or limiting work output.

5. Encouraging, coercing, inciting, bribing, or otherwise inducing any employee to


engage in any practice in violation of the Companys work rules.[8]

Petitioner filed a complaint for illegal dismissal against respondent before the Arbitration
Branch of the NLRC. On June 19, 1997, Labor Arbiter Arthur Amansec rendered a decision
finding petitioner to have been illegally dismissed and ordering respondent as follows:

WHEREFORE, complainant Manuel Felix is hereby found to have been illegally DISMISSED
from employment and concomitantly respondent is hereby ordered to reinstate complainant with
backwages and pay his proportionate 13th month pay for 1994.

Other claims are hereby ordered DISMISSED for lack of merit. The Complaint of Dante
Tungpalan should be as it is hereby DISMISSED by reason of settlement.

SO ORDERED.[9]

Respondent appealed to the NLRC. Pending appeal, a writ of execution was issued on
September 23, 1997 directing respondent to reinstate petitioner either physically or in the
payroll.
On October 10, 1997, respondent filed an omnibus motion [10] arguing that reinstatement
was no longer possible as the violations of company rules committed by petitioner had caused
strained relations between petitioner and itself. Respondent further alleged that because of
petitioners falsification of his daily time records which enabled him to collect his full salary, it
could no longer trust him. Respondent prayed that the writ of execution be recalled and that a
new order be issued allowing it to pay petitioner separation pay in lieu of reinstatement.
On June 17, 1998, the NLRC rendered a decision reversing the labor arbiters decision and
dismissing petitioners complaint for illegal dismissal for lack of merit. The NLRC found
sufficient evidence to prove that petitioner put in less than the required eight hours daily work
during his detail at the Big J Feedmills and, therefore, held that his dismissal was in accordance
with the Company Code of Discipline and the Labor Code.[11]
Petitioner filed a motion for reconsideration, but the same was denied. [12] He appealed to
the Court of Appeals which, on January 6, 2000, affirmed the dismissal of petitioner although it
granted his claim for 13th month pay. In its resolution of February 18, 2000, the Court of
Appeals denied reconsideration of its decision. Hence this present petition.
Petitioner assails the decision of the Court of Appeals in not ordering the award of
backwages by reason of respondent corporations refusal to reinstate him pending appeal of the
case. He argues that the omnibus motion filed by respondent during the pendency of the appeal
should have been treated as respondents admission of liability for reinstatement or, in lieu
thereof, for separation pay.
First. Petitioner prays that the Court reinstate the labor arbiters decision finding respondent
corporation guilty of illegal dismissal. The labor arbiter held as doubtful the statement of Johnny
Legaspi and petitioners two co-employees to the effect that petitioner and his co-workers put in
only four hours; that the statements of Legaspi and Yanos were inaccurate as there was no
timekeeper at the job site to monitor the arrivals and departures of employees; and that the delay
in the completion of the project could be due to an erroneous estimate on duration of work, lack
of materials, or lack of work coordination.[13]
Petitioners argument has no merit. The Court of Appeals, taking into account the findings
of the NLRC, the interview with Johnny Legaspi and his engineer, and the affidavits of Yanos
and Tapiru, correctly concluded that there was substantial evidence presented showing that
petitioner did not really work eight hours a day, as he had stated in his time cards.[14]
Indeed, the validity of petitioners dismissal is a factual question. It is not for the reviewing
court to weigh the conflicting evidence, determine the credibility of witnesses, or otherwise
substitute its own judgment for that of the administrative agency. Well-settled is the rule that the
findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect but at
times even finality if such findings are supported by substantial evidence. [15] This is especially
so in this case, in which the findings of the NLRC were affirmed by the Court of Appeals. The
findings of fact made therein can only be set aside upon a showing of grave abuse of discretion,
fraud, or error of law.[16] There is no such showing of grave abuse of discretion in this case.
For this reason, we find petitioners dismissal to be in order. Falsification of time cards
constitutes serious misconduct and dishonesty or fraud, [17] which are just causes for the
termination of employment under Art. 282(a) and (c) of the Labor Code which provides:

ART. 282. Termination by employer. An employer may terminate an employment for


any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

....

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(Emphasis added)

As to the labor arbiters observation that a timekeeper should have been assigned to the Big
J Feedmills, we think the Court of Appeals correctly disposed of the same, thus:

Employees are hired in order to foster the employers business, and company rules and
regulations are part of such goal. If we adhere to the labor arbiters view that a timekeeper
should have been placed by private respondent or to commission the latters client to act as
timekeeper, it would be an additional burden not only on the part of private respondent but also
on its client. It would be contrary to every business motto that clients should be given utmost
satisfaction and convenience. Moreover, if every time an assignment is given to an employee,
the employer will send out someone to spy, the atmosphere of harmonious relationship between
the employer and its employees will be beclouded, thundering forth suspicion and distrust among
themselves.[18]

Second. Petitioner contends that the omnibus motion filed by respondent on October 10,
1997 during the pendency of the appeal is an admission that it is liable for reinstatement or, in
lieu thereof, for separation pay.
The contention has no merit. No such inference can be derived from a reading of the
omnibus motion filed by respondent. To the contrary, respondent in fact vehemently opposed the
implementation of the writ of execution issued by the labor arbiter.20 Thus, respondent said:

2. That reinstatement can no longer be made or is no longer possible considering the nature of
the offense or violation (although an issue under appeal) which the complainant committed. This
offense or violation has caused serious and severe strained relationship between the complainant
and the respondent employer;

3. That it must be recalled, and as the records of the case will confirm, complainant committed a
virtual criminal act of falsifying his daily time records based on which he collected his
salary. Due to the seriousness of this offense, there is no way by which respondent employer can
trust complainant again and place the future and welfare of the company to shenanigans who try
to defraud it;21

Respondent appears merely to have been mistaken about the options open to it upon
promulgation of the labor arbiters decision. As to the question of whether separation pay in lieu
of his reinstatement may be awarded to petitioner, it is settled that such can be done only upon
finality of judgment, that is, when the judgment is no longer appealable, hence final and
executory, and where reinstatement can no longer be effected, as when the position previously
held by the employee no longer exists or when strained relations result in the loss of trust and
confidence.22
Rather, with the labor arbiters decision still pending appeal in the NLRC, what is applicable
is Art. 223 of the Labor Code, which in part provides:

[T]he decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely reinstated in the
payroll. The posting of a bond by the employer shall not stay the execution for reinstatement
provided herein.

If at all, therefore, respondent should have reinstated petitioner in the payroll, instead of
offering him separation pay. Be that as it may, the omnibus motion filed by respondent cannot be
construed as an admission of its liability for reinstatement.
Third. Anent petitioners claim that he is entitled to backwages from the time the labor
arbiter rendered a decision in his favor until said decision was reversed by the NLRC, this issue
should have been raised earlier in the Court of Appeals and not only now in the present
petition. Hence, this matter cannot be considered by the Court.22
WHEREFORE, the decision of the Court of Appeals is AFFIRMED for lack of showing that
it committed a reversible error.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

FIRST DIVISION

JESUS B. LOPEZ, G.R. No. 167385


Petitioner,
Present:

Davide, Jr., C.J. (Chairman),


- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC) SECOND
DIVISION, HON. COMMISSIONERS
ANGELITA GACUTAN, VICTORIANO
CALAYCAY, RAUL AQUINO,
MAYNILAD WATER SERVICES,
INC., BENJAMIN REYES and Promulgated:
CRISTINA M. BONIFACIO,
Respondents. December 13, 2005

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court, seeks the reversal of
the January 5, 2005 Decision[1] of the Court of Appeals in CA-G.R. SP No. 81543, and its March 4, 2005
Resolution[2] denying the petitioners motion for reconsideration.
The antecedent facts show that on April 21, 1998, Regina M. Gopez wrote a letter[3] to
respondent Maynilad Water Services, Inc. (Maynilad) alleging that she entered into an agreement with
petitioner Jesus B. Lopez, Maynilads Senior Engineering Assistant assigned in the Sampaloc area, to
repair her water meter for a fee. Despite payment of P500, petitioner allegedly never returned to fix the
defective meter.

On April 22, 1998, Maynilads Head of Technical Operations-Sampaloc Sector issued a


memorandum requiring petitioner to answer the allegations.[4]

Petitioner denied the charges against him. He claimed that he never received any amount from
Gopez and even advised her to file a proper job order for her meter concerns.[5]

Maynilad also formed an Ad-Hoc Investigation Panel which recommended petitioners dismissal
from the service based on its findings that petitioner committed serious misconduct in contracting an
unauthorized work for a fee.[6] Thus, on September 10, 1998, petitioner was served a notice of
termination.[7]

Aggrieved, petitioner filed a complaint for illegal dismissal claiming that he was dismissed
without just cause.

On January 30, 2002, the labor arbiter[8] rendered a Decision[9] holding that Lopez was illegally
dismissed as there was no proof that he promised to work on the waterline of Gopez, much less that he
received money from the latter. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered declaring the dismissal of the


complainant as illegal and ordering respondent company to immediately reinstate him
to his former position without loss of seniority rights and to pay complainant full
backwages and attorneys fees, as follows:

1. P537,030.00 representing backwages as of the date of this decision until


complainant is actually reinstated in the service; and,
2. 10% of the total judgment award in this case representing attorneys fees.

The complaint for moral and exemplary damages are hereby disallowed for want
of merit.

SO ORDERED.[10]

On appeal, the National Labor Relations Commission (NLRC) set aside the decision of the labor
arbiter. The dispositive portion of the Resolution[11] reads:

WHEREFORE, the assailed Decision of the Labor Arbiter ordering the


reinstatement of complainant with backwages and payment of attorneys fees is ordered
SET ASIDE. A new one is hereby entered declaring the dismissal of complainant legal.
However, as a measure of compassionate justice, respondent is ordered to pay
complainant the sum of P13,260.00 by way of financial assistance.

SO ORDERED.[12]

The NLRC found that petitioner entered into a contractual agreement with Gopez and that he
received money from the latter through Carreon, his conduit. However, the NLRC also held that
petitioners infraction was not tantamount to serious misconduct as Maynilad did not suffer any
pecuniary loss. If at all, petitioner violated Maynilads policy on conflict of interest which is a ground for
dismissal based on loss of trust and confidence.

Petitioners motion for reconsideration was denied,[13] hence he filed a petition for certiorari
under Rule 65 of the Rules of Court before the Court of Appeals.

On January 5, 2005, the Court of Appeals rendered a Decision [14] dismissing the petition and
affirming the resolution of the NLRC. According to the appellate court:

Petitioner entered in a contract to work for a fee with a customer (Mrs. Gopez)
contrary to company policy. Such dishonesty is tantamount to serious misconduct on
the part of the employee, a breach of trust reposed upon him by his employer. Loss of
confidence can be a ground for dismissing an employee when there is basis for the same
as it is in this case, or when the employer has reasonable ground to believe, if not,
entertain, the moral conviction that the employee is responsible for the misconduct and
that the nature of his participation therein renders him unworthy of the trust and
confidence demanded by his position.

Maynilad expected petitioner to project a credible and professional image to the


public being the head of a service team. However, contrary to expectations, petitioner
committed a misconduct by entering into a prohibited contract with a customer. Thus,
Maynilad could not be faulted in losing its trust and confidence in petitioner and in
dismissing him under the circumstances. [15]

Petitioner sought reconsideration of the appellate courts decision but the same was denied.[16]

The principal issue for our resolution is the validity of petitioners termination.

Misconduct has been defined as improper or wrong conduct. It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of judgment.[17] The misconduct to be serious must be of
such grave and aggravated character. Such misconduct, however serious, must nevertheless be in
connection with the employees work to constitute just cause for his separation.[18] Thus, for
misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must relate
to the performance of the employees duties; and, (c) must show that the employee has become unfit to
continue working for the employer.[19]

Factual findings of the NLRC and the Court of Appeals that petitioner
contracted unauthorized work and accepted money from Gopez for the repair of
the water meter deserves respect and even finality. Settled is the rule that only
questions of law may be raised in a petition for review under Rule 45 of the Rules
of Court.

When petitioner contracted with Gopez, he in effect engaged in a business that competed with
Maynilads and thus came in conflict of interest with the latter. He cannot serve himself and his
employer at the same time all at the expense of the latter.[20]

As a measure of self-preservation against acts inimical to its interests, an employer has the right
to dismiss an employee found committing acts of dishonesty and disloyalty. The employer may not be
compelled to continue to employ such a person whose continuance in the service would patently be
inimical to his employers interest.[21] The law, in protecting the rights of workers, authorizes neither
oppression nor self-destruction of the employer.[22] Thus, in Philippine Long Distance Telephone
Company v. National Labor Relations Commission,[23] a junior telephone installer was dismissed from
service for just cause when he willfully committed a serious act of misconduct by demanding money for
the repair of a telephone that was officially part of his job.

In the instant case, we find the penalty of dismissal from service reasonable and appropriate and
a valid exercise of management prerogative. Maynilad specifically prescribes that, should any employee
begin or continue to engage in conflict of interest activities despite management pronouncement or
disapproval, the appropriate disciplinary sanctions shall be imposed on him.[24] Appropriate
disciplinary sanction, such as termination, is within the purview of management imposition.

That Maynilad suffered no damage resulting from the acts of petitioner is inconsequential.
In Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA),[25] we
held that deliberate disregard or disobedience of company rules could not be countenanced, and any
justification that the disobedient employee might put forth would be deemed inconsequential. The lack
of resulting damage was unimportant, because the heart of the charge is the crooked and anarchic
attitude of the employee towards his employer. Damage aggravates the charge but its absence does not
mitigate nor negate the employees liability.[26] What is abhorrent and punishable is the act of
contracting unauthorized work for a fee, regardless of whether the act caused damage to the company.
Thus, we hold that Maynilad validly terminated the services of petitioner on the ground of serious
miconduct which resulted to the loss of trust of Maynilad upon petitioner because his credibility in doing
his job as a team leader of a repair crew has already been eroded.

As regards the amount of P13,260 awarded to petitioner by way of financial assistance, the same
must be deleted for lack of basis. Financial assistance may be given as a measure of social justice in
exceptional circumstances and as an equitable concession. It is allowed only in those instances where
the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character.[27]

WHEREFORE, the petition is DENIED. The January 5, 2005 Decision and the March 4, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 81543, areAFFIRMED with MODIFICATION. The
award of P13,260 by way of financial assistance in favor of petitioner is DELETED for lack of basis.

SO ORDERED.

SECOND DIVISION

[G.R. No. 125303. June 16, 2000]

DANILO LEONARDO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and


REYNALDOS MARKETING CORPORATION, ET. AL., respondents.

[G.R. No. 126937. June 16, 2000]

AURELIO FUERTE and DANILO LEONARDO, petitioners, vs. RAUL T. AQUINO,


VICTORIANO R. CALAYCAY and ROGELIO I. RALAYA, as Chairman and Members of the
NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION and REYNALDOS
MARKETING and/or REYNALDO PADUA,respondents.

DECISION

DE LEON, JR., J.:

Before us is a consolidation of G.R. Nos. 125303 and 126937, both petitions for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure, seeking the annulment of a Decision[1] and
Resolution[2] dated March 28, 1996 and May 29, 1996, respectively, of the public respondent in
NLRC NCR 00-02-01024-92.
The facts are:

Petitioner AURELIO FUERTE was originally employed by private respondent REYNALDOS


MARKETING CORPORATION on August 11, 1981 as a muffler specialist, receiving P45.00
per day. When he was appointed supervisor in 1988, his compensation was increased to P122.00
a day, augmented by a weekly supervisors allowance of P600.00. On the other hand, DANILO
LEONARDO was hired by private respondent on March 4, 1988 as an auto-aircon mechanic at a
salary rate of P35.00 per day. His pay was increased to P90.00 a day when he attained regular
status six months later. From such time until he was allegedly terminated, he claims to have also
received a monthly allowance equal to P2,500.00 as his share in the profits of the auto-aircon
division.

FUERTE alleges that on January 3, 1992, he was instructed to report at private respondents
main office where he was informed by the companys personnel manager that he would be
transferred to its Sucat plant due to his failure to meet his sales quota, and for that reason, his
supervisors allowance would be withdrawn. For a short time, FUERTE reported for work at the
Sucat plant; however, he protested his transfer, subsequently filing a complaint for illegal
termination.

On his part, LEONARDO alleges that on April 22, 1991, private respondent was approached by
the same personnel manager who informed him that his services were no longer needed. He, too,
filed a complaint for illegal termination.

The case was heard by Labor Arbiter Jesus N. Rodriguez, Jr. On December 15, 1994, Labor
Arbiter Emerson C. Tumanon, to whom the case was subsequently assigned, rendered judgment
in favor of petitioners. The dispositive portion of the arbiters decision[3] states:

WHEREFORE, premises considered, respondents are hereby ordered:

1. To reinstate complainant Aurelio Fuerte, to the position he was holding before the
demotion, and to reinstate likewise complainant Danilo Leogardo to his former position
or in lieu thereof, they be reinstated through payroll reinstatement without any of them
losing their seniority rights and other privileges, inclusive of allowance and to their other
benefits;

2. To pay AURELIO FUERTE, the sum of TWO HUNDRED EIGHTY THOUSAND


EIGHT HUNDRED NINETY-SIX PESOS and 72/100 (280,896.72);

3. To pay DANILO LEOGARDO, the sum of TWO HUNDRED FORTY ONE


THOUSAND NINE HUNDRED EIGHT PESOS and 67/100 (P241,908.67).

SO ORDERED.

On appeal, the respondent Commission modified the aforesaid decision as follows:


WHEREFORE, premises considered, the Decision of December 15, 1994 is hereby
modified as follows:

1. Ordering the reinstatement of complainant Aurelio Fuerte to his former position


without loss of his seniority rights but without backwages;

2. Dismissing the complaint of Danilo leonardo [sic] for lack of merit; and

3. Deleting the rests [sic] of the monetary award as well as the award of moral damages
and attorney's fees in favor of the complainants also for lack of merit.

SO ORDERED.

Petitioners filed a motion for reconsideration[4] on April 30, 1996, which the Commission denied
in its Resolution dated May 29, 1996.

On July 1, 1996, LEONARDO, represented by the Public Attorneys Office, filed G.R. No.
125303, a special civil action for certiorari assailing the Commissions decision and resolution.
However, on November 15, 1996, FUERTE, again joined by LEONARDO, filed G.R. No.
126937, a similar action praying for the annulment of the same decision and resolution.

On October 7, 1997, private respondent filed its Comment[5]to the petition in G.R. No. 125303.
On April 2, 1997, it filed its Comment[6] to the petition in G.R. No. 126937 with a motion to drop
petitioner LEONARDO and consolidate G.R. No. 126937 with G.R. No. 125303. We granted
private respondents motion in our Resolution dated June 16, 1997.[7]

The petition in G. R. No. 126937[8] raises the following issues:

I. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION


AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN THEY
GRANTED RESPONDENTS APPEAL.

II. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION


AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN THEY FOUND
FOR RESPONDENT REYNALDOS MARKETING PRONOUNCING THAT THERE
WAS NO ILLEGAL DISMISSAL DESPITE CONTRARY FINDINGS MADE BY THE
LABOR ARBITER CONTRARY TO LAW AND EXISTING JURISPRUDENCE.

Private respondent contends that it never terminated petitioners services. In FUERTEs case,
private respondent claims that the latter was demoted pursuant to a company policy intended to
foster competition among its employees. Under this scheme, private respondents employees are
required to comply with a monthly sales quota. Should a supervisor such as FUERTE fail to meet
his quota for a certain number of consecutive months, he will be demoted, whereupon his
supervisors allowance will be withdrawn and be given to the individual who takes his place.
When the employee concerned succeeds in meeting the quota again, he is re-appointed
supervisor and his allowance is restored.[9]
With regard to LEONARDO, private respondent likewise insists that it never severed the
formers employment. On the contrary, the company claims that it was LEONARDO who
abandoned his post following an investigation wherein he was asked to explain an incident of
alleged "sideline" work which occurred on April 22, 1991. It would appear that late in the
evening of the day in question, the driver of a red Corolla arrived at the shop looking for
LEONARDO. The driver said that, as prearranged, he was to pick up LEONARDO who would
perform a private service on the vehicle. When reports of the "sideline" work reached
management, it confronted LEONARDO and asked for an explanation. According to private
respondent, LEONARDO gave contradictory excuses, eventually claiming that the unauthorized
service was for an aunt. When pressed to present his aunt, it was then that LEONARDO stopped
reporting for work, filing his complaint for illegal dismissal some ten months after his alleged
termination.

Insofar as the action taken against FUERTE is concerned, private respondents justification is
well-illustrated in the record. He was unable to meet his quota for five months in 1991, from July
to November of that year.[10] Yet he insists that it could not possibly be so. He argues that he must
have met his quota considering that he received his supervisors allowance for the period
aforesaid. The Commission, however, negated this view, finding the alleged inconsistency to be
adequately explained in the record. We quite agree. As found by the Commission, placing special
emphasis on the reasoning of the labor arbiter -

We find otherwise. Complainant Fuertes failure to meet his sales quota which caused his
demotion and the subsequent withdrawal of his allowance is fully supported by Exhibit
"4" of respondents position paper showing that his performance for the months of July
1991 to November 1991 is below par. While it is the policy of the respondent company
that an employer who fails to meet his sales quota for three (3) consecutive months, he is
stripped of his supervisors designation and allowance. In the case of Fuerte, the
respondents went beyond the three (3) months period before withdrawing his allowance.
On this basis, the Labor Arbiter sweepingly concluded that the withdrawal of Fuertes
allowance is illegal since the respondents should have withdrawn the same after Fuerte
failed to meet his sales quota for three consecutive months. However, the apparent flaw
had been sufficiently reconciled by the respondents when they state that a supervisor like
Fuerte, continues to receive his allowance until he is officially stripped of his supervisors
designation and assigned to another job as ordinary employee. This is precisely the
reason why complainant Fuerte continued to receive his allowance even beyond the three
(3) consecutive months period to meet his sales quota considering that it was only on the
fifth consecutive months when the respondent company decided to strip him of his
designation as supervisor. This is corroborated by the "Sinumpaang Salaysay" (Exh. "A"
respondents position paper) of some employees of the respondent company who had
been previously demoted for failure to meet their sales quota when they unformably
stated:

"5. Na alam naming kapagka hindi namin maabot and quotang nabanggit
na may ilang buwan, kamiy maaring mademote at kapagka nagkaganoon
ang supervisor allowance sampu ng, may mataas na parte sa profit sharing
at winnings ay maalis sa amin at maibibigay sa hahalili sa amin.
Surprisingly, the Labor Arbiter failed to take into consideration this material allegations
of the respondents in his assailed decision except his sweeping statement that the
"Sinumpaang Salaysay" was purposely done with malice to justify respondents
withdrawal of Fuertes supervisors allowance. [italics supplied]

FUERTE nonetheless decries his transfer as being violative of his security of tenure, the clear
implication being that he was constructively dismissed. We have held that an employer acts well
within its rights in transferring an employee as it sees fit provided that there is no demotion in
rank or diminution in pay.[11] The two circumstances are deemed badges of bad faith, and thus
constitutive of constructive dismissal. In this regard, constructive dismissal is defined in the
following manner:

an involuntary resignation resorted to when continued employment becomes impossible,


unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when
a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.[12]

Yet here, the transfer was undertaken beyond the parameters as aforesaid. The instinctive
conclusion would be that his transfer is actually a constructive dismissal, but oddly, private
respondent never denies that it was really demoting FUERTE for cause. It should be borne in
mind, however, that the right to demote an employee also falls within the category of
management prerogatives.[13]

This arrangement appears to us to be an allowable exercise of company rights. An employer is


entitled to impose productivity standards for its workers, and in fact, non-compliance may be
visited with a penalty even more severe than demotion. Thus,

[t]he practice of a company in laying off workers because they failed to make the work
quota has been recognized in this jurisdiction. (Philippine American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners
failure to meet the sales quota assigned to each of them constitute a just cause of their
dismissal, regardless of the permanent or probationary status of their employment.
Failure to observe prescribed standards of work, or to fulfill reasonable work assignments
due to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by failing to
complete the same within the allotted reasonable period, or by producing unsatisfactory
results. This management prerogative of requiring standards may be availed of so long as
they are exercised in good faith for the advancement of the employers interest.[14]

Neither can we say that FUERTEs actions are indicative of abandonment. To constitute such a
ground for dismissal, there must be (1) failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention, as manifested by some overt acts, to sever the
employer-employee relationship.[15] We have accordingly held that the filing of a complaint for
illegal dismissal, as in this case, is inconsistent with a charge of abandonment.[16]
There remains a question regarding the manner of demotion. In Jarcia Machine Shop and Auto
Supply, Inc. v. National Labor Relations Commission,[17] we ruled that:

"Besides, even assuming arguendo that there was some basis for the demotion, as alleged
by petitioner, the case records are bereft of any showing that private respondent was
notified in advance of his impending transfer and demotion. Nor was he given an
opportunity to refute the employers grounds or reasons for said transfer and demotion.
In Gaco v. National Labor Relations Commission, it was noted that:

"While due process required by law is applied on dismissals, the same is also
applicable to demotions as demotions likewise affect the employment of a worker
whose right to continued employment, under the same terms and conditions, is
also protected by law. Moreover, considering that demotion is, like dismissal, also
a punitive action, the employee being demoted should as in cases of dismissals, be
given a chance to contest the same."

After reviewing the record, we are sufficiently persuaded that private respondent had offered
substantial proof of compliance with this procedural requisite.[18]

Accordingly, given that FUERTE may not be deemed to have abandoned his job, and neither was
he constructively dismissed by private respondent, the Commission did not err in ordering his
reinstatement but without backwages. In a case where the employees failure to work was
occasioned neither by his abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss.[19]

Neither do we discern any grave abuse of discretion in the Commissions ruling dismissing
LEONARDOs complaint. On this score, the public respondent found that:

Coming now to the case of complainant Danilo Leonardo, the evidence on record
indubitably shows that he abandoned his work with the respondents. As sufficiently
established by respondents, complainant Leonardo, after being pressed by the respondent
company to present the customer regarding his unauthorized solicitation of sideline work
from the latter and whom he claims to be his aunt, he never reported back to work
anymore. This finding is bolstered by the fact that after he left the respondent company,
he got employed with Dennis Motors Corporation as Air-Con Mechanic from October 12,
1992 to April 3, 1995 (Certification attached to respondents Manifestation filed June 5,
1996).

It must be stressed that while Leonardo alleges that he was illegally dismissed from his
employment by the respondents, surprisingly, he never stated any reason why the
respondents would want to ease him out from his job. Moreover, why did it take him ten
(10) long months to file his case if indeed he was aggrieved by respondents. All the above
facts clearly point that the filing of his case is a mere afterthought on the part of
complainant Leonardo. In the case of Flexo Mfg. Corp. vs. NLRC, et. al., 135 SCRA 145,
the Supreme Court held, thus:
"For abandonment to constitute a valid cause for termination of employment,
there must be a delibarate [sic] unjustified refusal of the employee to resume his
employment. This refusal must be clearly shown, mere absence is not sufficient, it
must be accompanied by overt acts unerringly pointing to the fatcs [sic] that the
employee simply does not want to work anymore."

LEONARDO protests that he was never accorded due process. This begs the question, for he was
never terminated;[20] he only became the subject of an investigation in which he was apparently
loath to participate. As testified to by Merlin P. Orallo, the personnel manager, he was given a
memorandum[21] asking him to explain the incident in question, but he refused to receive it.[22] In
an analogous instance, we held that an employees refusal to sign the minutes of an investigation
cannot negate the fact that he was accorded due process.[23] So should it be here. We find no
reason to disturb the Commissions ruling that LEONARDO had abandoned his position, the
instant case being a petition for certiorari where questions of fact are not entertained.[24] Whether
a worker has abandoned his employment is essentially a question of fact.[25] We reiterate that it is
not for us "to re-examine conflicting evidence, re-evaluate the credibility of witnesses, nor
substitute the findings of fact of an administrative tribunal which has gained expertise in its
special field."[26]

In concluding, we feel that it will not be amiss to point out that a petition for certiorari under
Rule 65 is intended to rectify errors of jurisdiction or grave abuse of discretion. As we held
in Philippine Advertising Counselors, Inc. v. National Labor Relations Commission,[27]

The well-settled rule confines the original and exclusive jurisdiction of the Supreme Court in the
review of decisions of the NLRC under Rule 65 of the Revised Rules of Court only to the issue
of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction. Grave abuse of
discretion is committed when the judgment is rendered in a capricious, whimsical, arbitrary or
despotic manner. An abuse of discretion does not necessarily follow just because there is a
reversal by the NLRC of the decision of the Labor Arbiter. Neither does the mere variance in the
evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a matter of course,
so warrant another full review of the facts. The NLRCs decision, so long as it is not bereft of
support from the records, deserves respect from the Court.

WHEREFORE, the petitions for certiorari in G.R. Nos. 125303 and 126937 are hereby
DISMISSED for lack of merit.

The Decision dated March 28, 1998 together with the Resolution dated May 29, 1996 of public
respondent is AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

FIRST DIVISION
[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF LUCBAN, respondent.

DECISION
PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of
management. Courts will not interfere with business judgments of employers, provided they do
not violate the law, collective bargaining agreements, and general principles of fair play and
justice. The transfer of personnel from one area of operation to another is inherently a
managerial prerogative that shall be upheld if exercised in good faith -- for the purpose of
advancing business interests, not of defeating or circumventing the rights of employees.

The Case

The Court applies these principles in resolving the instant Petition for Review [1] under Rule
45 of the Rules of Court, assailing the June 14, 2002 Decision [2] and September 25, 2002
Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision
disposed as follows:

WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit.[4]

The challenged Resolution denied petitioners Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board
Resolution Nos. 99-52 and 99-53, which read:

Board Res. No. 99-52

RESOLVED AS IT IS HEREBY RESOLVED that in line with the policy of the bank to
familiarize bank employees with the various phases of bank operations and further strengthen the
existing internal control system[,] all officers and employees are subject to reshuffle of
assignments. Moreover, this resolution does not preclude the transfer of assignment of bank
officers and employees from the branch office to the head office and vice-versa.

Board Res. No. 95-53


Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to
their new assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller


CLODUALDO ZAGALA C/A Clerk Actg. Appraiser
ELMER L. MENDOZA Appraiser Clerk-Meralco Collection
CHONA R. MENDOZA Clerk-Meralco Bank Teller[5]
Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman, directed Briccio
V. Cada, the manager of the banks Tayabas branch, to implement the reshuffle. [6] The new
assignments were to be effective on May 1, 1999 without changes in salary, allowances, and
other benefits received by the aforementioned employees.[7]
On May 3, 1999, in an undated letter addressed to Daya, Petitioner
Elmer Mendoza expressed his opinion on the reshuffle, as follows:

RE: The recent reshuffle of employees as per

Board Resolution dated April 25, 1999

Dear Sir:

This is in connection with the aforementioned subject matter and which the undersigned
received on April 25, 1999.

Needless to state, the reshuffling of the undersigned from the present position as Appraiser to
Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this action
on your part[,] the undersigned has been besieged by intrigues due to [the] malicious
machination of a certain public official who is bruited to be your good friend. These malicious
insinuations were baseless and despite the fact that I have been on my job as Appraiser for the
past six (6) years in good standing and never involved in any anomalous conduct, my being
reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to
my termination in due time. This will constitute an unfair labor practice.

Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until
the reason [for] my being reshuffled is made clear.

Your kind consideration on this request will be highly appreciated.[8]

On May 10, 1999, Daya replied:

Dear Mr. Mendoza,


Anent your undated letter expressing your resentment/comments on the recent managements
decision to reshuffle the duties of bank employees, please be informed that it was never the
intention (of management) to downgrade your position in the bank considering that your due
compensation as Bank Appraiser is maintained and no future reduction was intended.

Aside from giving bank employees a wider experience in various banking operations, the
reshuffle will also afford management an effective tool in providing the bank a sound internal
control system/check and balance and a basis in evaluating the performance of each
employee. A continuing bankwide reshuffle of employees shall be made at the discretion of
management which may include bank officers, if necessary as expressed in Board Resolution No.
99-53, dated April 25, 1999. Management merely shifted the duties of employees, their position
title [may be] retained if requested formally.

Being a standard procedure in maintaining an effective internal control system recommended by


the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of
bank management.[9]

On June 7, 1999, petitioner submitted to the banks Tayabas branch manager a letter in
which he applied for a leave of absence from work:

Dear Sir:

I wish I could continue working but due to the ailment that I always feel every now and then, I
have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.

Hoping that this request [merits] your favorable and kind consideration and
understanding.[10]

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for
twenty days effective on the same date.[11]
On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before
Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The
Complaint -- for illegal dismissal, underpayment, separation pay and damages -- was filed
against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch
manager, Briccio V. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.[12]
The labor arbiters June 14, 2000 Decision upheld petitioners claims as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of


seniority rights with full backwages from date of dismissal to actual reinstatement in the amount
of P55,000.00 as of June 30, 2000.
3. Ordering the payment of separation pay if reinstatement is not possible in the amount
of P30,000.00 in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual
bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the
amount of P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorneys fees in the amount of P18,000.00 which is 10% of
the monetary award.[13]

On appeal, the NLRC reversed the labor arbiter.[14] In its July 18, 2001 Resolution, it held:

We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its
implementation of its Board Resolution directing the reshuffle of employees at its Tayabas
branch to positions other than those they were occupying. While at first the employees thereby
affected would experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the
objective for the reshuffle is noble, as not only would the employees obtain additional
knowledge, they would also be more well-rounded in the operations of the bank and thus help
the latter further strengthen its already existing internal control system.

The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from
an appraiser he was made to perform the work of a clerk in the collection of Meralco payments,
which he may have considered as beneath him and his experience, being a pioneer
employee. But it cannot be discounted either that other employees at the Tayabas branch were
similarly reshuffled. The only logical conclusion therefore is that the Board Resolution was not
aimed solely at the [petitioner], but for all the other employees of the x x x bank as
well. Besides, the complainant has not shown by clear, competent and convincing evidence that
he holds a vested right to the position of Appraiser. x x x.

How and by what manner a business concern conducts its affairs is not for this Commission to
interfere with, especially so if there is no showing, as in the case at bar, that the reshuffle was
motivated by bad faith or ill-will. x x x.[15]

After the NLRC denied his Motion for Reconsideration, [16] petitioner brought before the CA
a Petition for Certiorari[17] assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision
ruled thus:
The so-called harassment which Mendoza allegedly experienced in the aftermath of the
reshuffling of employees at the bank is but a figment of his imagination as there is no evidence
extant on record which substantiates the same. His alleged demotion, the cold shoulder stance,
the things about his chair and table, and the alleged reason for the harassment are but allegations
bereft of proof and are perforce inadmissible as self-serving statements and can never be
considered repositories of truth nor serve as foundations of court decisions anent the resolution
of the litigants rights.

When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there
was no [diminution] of his salary benefits and rank. He could even retain his position title, had
he only requested for it pursuant to the reply of the Chairman of the banks board of directors
to Mendozas letter protesting the reshuffle. There is, therefore, no cause to doubt the reasons
which the bank propounded in support of its move to reshuffle its employees, viz:

1. to familiarize bank employees with the various phases of bank operations, and

2. to further strengthen the existing internal control system of the bank.

The reshuffling of its employees was done in good faith and cannot be made the basis of a
finding of constructive dismissal.

The fact that Mendoza was no longer included in the banks payroll for July 1 to 15, 1999 does
not signify that the bank has dismissed the former from its employ. Mendoza separated himself
from the banks employ when, on June 24, 1999, while on leave, he filed the illegal dismissal
case against his employer for no apparent reason at all.[18]

Hence, this Petition.[19]

The Issues

Petitioner raises the following issues for our consideration:

I. Whether or not the petitioner is deemed to have voluntarily separated himself from the
service and/or abandoned his job when he filed his Complaint for constructive and consequently
illegal dismissal;

II. Whether or not the reshuffling of private respondent[s] employees was done in good faith
and cannot be made as the basis of a finding of constructive dismissal, even as the [petitioners]
demotion in rank is admitted by both parties;

III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and
Isetann Department Store (323 SCRA 445)] is applicable to the case at bar;
IV. Whether or not the Court of Appeals erred in dismissing the petitioners money
claims, damages, and unpaid salaries for the period July 1-30, 1999, although this was not
disputed by the private respondent; and

V. Whether or not the entire proceedings before the Honorable Court of Appeals and the
NLRC are a nullity since the appeal filed by private respondent before the NLRC on August 5,
2000 was on the 15th day or five (5) days beyond the reglem[e]ntary period of ten (10) days as
provided for by law and the NLRC Rules of Procedure.[20]

In short, the main issue is whether petitioner was constructively dismissed from his
employment.

The Courts Ruling

The Petition has no merit.

Main Issue:
Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when continued


employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank
or a diminution of pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee.[21] Petitioner argues that he was compelled to file an action
for constructive dismissal, because he had been demoted from appraiser to clerk and not given
any work to do, while his table had been placed near the toilet and eventually removed. [22] He
adds that the reshuffling of employees was done in bad faith, because it was designed primarily
to force him to resign.[23]

Management Prerogative
to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts
often decline to interfere in legitimate business decisions of employers. [24] Indeed, labor laws
discourage interference in employers judgments concerning the conduct of their business.[25] The
law must protect not only the welfare of employees, but also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to transfer
or assign employees from one office or area of operation to another -- provided there is no
demotion in rank or diminution of salary, benefits, and other privileges; and the action is not
motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion
without sufficient cause.[26] This privilege is inherent in the right of employers to control and
manage their enterprise effectively.[27] The right of employees to security of tenure does not give
them vested rights to their positions to the extent of depriving management of its prerogative to
change their assignments or to transfer them.[28]
Managerial prerogatives, however, are subject to limitations provided by law, collective
bargaining agreements, and general principles of fair play and justice.[29] The test for
determining the validity of the transfer of employees was explained in Blue Dairy Corporation v.
NLRC[30] as follows:

[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion, bearing in mind the basic elements of
justice and fair play. Having the right should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits. Should the employer fail to
overcome this burden of proof, the employees transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in
pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the employee leaving him with no option
but to forego with his continued employment.[31]

Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has complied
with the foregoing test. In the instant case, we find no reason to disturb the conclusion of the
NLRC and the CA that there was no constructive dismissal. Their finding is supported by
substantial evidence -- that amount of relevant evidence that a reasonable mind might accept as
justification for a conclusion.[32]
Petitioners transfer was made in pursuit of respondents policy to familiarize bank
employees with the various phases of bank operations and further strengthen the existing internal
control system[33] of all officers and employees. We have previously held that employees may
be transferred -- based on their qualifications, aptitudes and competencies -- to positions in
which they can function with maximum benefit to the company. [34] There appears no
justification for denying an employer the right to transfer employees to expand their competence
and maximize their full potential for the advancement of the establishment. Petitioner was not
singled out; other employees were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his salary,
privileges and other benefits. This fact is clear in respondents Board Resolutions, the April 30,
1999 letter of Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of
Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his
allegations. Given no credence by both lower tribunals was his bare and self-serving statement
that he had been positioned near the comfort room, made to work without a table, and given no
work assignment.[35] Purely conjectural is his claim that the reshuffle of personnel was a
harassment in retaliation for an alleged falsification case filed by his relatives against a public
official.[36] While the rules of evidence prevailing in courts of law are not controlling in
proceedings before the NLRC,[37] parties must nonetheless submit evidence to support their
contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC[38] does not apply to the present factual milieu. The Court ruled therein
that the lack of notice and hearing made the dismissal of the employee ineffectual, but not
necessarily illegal.[39] Thus, the procedural infirmity was remedied by ordering payment of his
full back wages from the time of his dismissal. [40] The absence of constructive dismissal in the
instant case precludes the application of Serrano. Because herein petitioner was not dismissed,
then he is not entitled to his claimed monetary benefits.

Alleged Nullity of NLRC


and CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void, since
respondents appeal before the NLRC had allegedly been filed beyond the reglementary period.
[41]
A careful scrutiny of his Petition for Review[42] with the appellate court shows that this
issue was not raised there. Inasmuch as the instant Petition challenges the Decision of the CA,
we cannot rule on arguments that were not brought before it. This ruling is consistent with the
due-process requirement that no question shall be entertained on appeal, unless it has been raised
in the court below.[43]
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September
25, 2002 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J
PT&T vs NLRC
PT&T vs. NLRC
272 SCRA 596

FACTS:

PT&T (Philippine Telegraph & Telephone Company) initially hired Grace de Guzman specifically as
Supernumerary Project Worker, for a fixed period from November 21, 1990 until April 20, 1991 as
reliever for C.F. Tenorio who went on maternity leave. She was again invited for employment as
replacement of Erlina F. Dizon who went on leave on 2 periods, from June 10, 1991 to July 1, 1991 and
July 19, 1991 to August 8, 1991.

On September 2, 1991, de Guzman was again asked to join PT&T as a probationary employee where
probationary period will cover 150 days. She indicated in the portion of the job application form under
civil status that she was single although she had contracted marriage a few months earlier. When
petitioner learned later about the marriage, its branch supervisor, Delia M. Oficial, sent de Guzman a
memorandum requiring her to explain the discrepancy. Included in the memorandum, was a reminder
about the companys policy of not accepting married women for employment. She was dismissed from
the company effective January 29, 1992. Labor Arbiter handed down decision on November 23, 1993
declaring that petitioner illegally dismissed De Guzman, who had already gained the status of a regular
employee. Furthermore, it was apparent that she had been discriminated on account of her having
contracted marriage in violation of company policies.

ISSUE: Whether the alleged concealment of civil status can be grounds to terminate the services of an
employee.

HELD:

Article 136 of the Labor Code, one of the protective laws for women, explicitly prohibits discrimination
merely by reason of marriage of a female employee. It is recognized that company is free to regulate
manpower and employment from hiring to firing, according to their discretion and best business
judgment, except in those cases of unlawful discrimination or those provided by law.

PT&Ts policy of not accepting or disqualifying from work any woman worker who contracts marriage is
afoul of the right against discrimination provided to all women workers by our labor laws and by our
Constitution. The record discloses clearly that de Guzmans ties with PT&T were dissolved principally
because of the companys policy that married women are not qualified for employment in the company,
and not merely because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature adopted by PT&T. As stated in the labor
code:

ART. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition
of employment or continuation of employment that a woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of marriage.

The policy of PT&T is in derogation of the provisions stated in Art.136 of the Labor Code on the right of a
woman to be free from any kind of stipulation against marriage in connection with her employment and
it likewise is contrary to good morals and public policy, depriving a woman of her freedom to choose her
status, a privilege that is inherent in an individual as an intangible and inalienable right. The kind of
policy followed by PT&T strikes at the very essence, ideals and purpose of marriage as an inviolable
social institution and ultimately, family as the foundation of the nation. Such policy must be prohibited
in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the
land not only for order but also imperatively required.
SECOND DIVISION

[G.R. No. 121327. December 20, 2001]

CECILIO P. DE LOS SANTOS and BUKLOD MANGGAGAWA NG CAMARA


(BUMACA), petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION), HON. COMMISSIONERS VICTORIANO R. CALAYCAY,
RAUL T. AQUINO, and ROGELIO I. RAYALA, CAMARA STEEL INDUSTRIES
INC., JOSELITO JACINTO, ALBERTO F. DEL PILAR, DENNIS ALBANO,
MERCEDITA G. PASTRANA, TOP-FLITE and RAUL RUIZ,respondents.

DECISION
BELLOSILLO, J.:

This is a petition for certiorari under Rule 65 assailing the Decision of public respondent
National Labor Relations Commission (NLRC) which remanded this case to the Labor Arbiter
who ruled that petitioner Cecilio P. de los Santos was illegally dismissed by private respondent
Camara Steel, Inc., and as a consequence, ordered his immediate reinstatement. Specifically, the
dispositive portion of the Labor Arbiter's Decision promulgated 23 May 1999 states -

WHEREFORE, presimes considered, respondent Camara Steel Industries, Inc. is hereby ordered
to reinstate complainant Cecilio de los Santos to his former position within ten (10) days from
receipt of this Resolution without loss of seniority rights and other benefits with full back wages
from date of dismissal up to actual date of reinstatement which is hereby computed as of even
date as follows:

From 8/23/93 - 12/15/93 = 3.73 mos.

P118 x 26 days x 3.73 mos. = P11,443.64

12/16/93 - 3/29/94 = 3.43 mos.

P135 x 26 days x 3.43 mos. = 12,039.30

Total Backwages as of 3/29/94 P23,482.94

Respondent Camara Steel Industries, Inc. is also ordered to pay complainant 10% for and as
attorney's fees.

All other claims are hereby dismissed for lack of merit.

On 3 May 1991 petitioner De los Santos started working at Camara Steel Industries Inc.
(CAMARA STEEL), a company engaged in the manufacture of steel products such as LPG
cylinders and drums. He was first assigned at the LPG assembly line, then later, as operator of a
blasting machine. While performing his task as such operator, he met an accident that forced
him to go on leave for one and a half (1-1/2) months. Upon his return, he was designated as a
janitor assigned to clean the premises of the company, and occasionally, to transfer scrap and
garbage from one site to another.[1]
On 11 May 1993 petitioner was doing his usual chores as a janitor of CAMARA STEEL
when he momentarily left his pushcart to answer the call of Narciso Honrado, scrap in-charge,
who summoned him to the company clinic. There Honrado handed him a box which he placed
on top of a drum in his pushcart for transfer to the other lot of the company near gate 2. On his
way out of gate 2, however, the security guard on duty found in the box handed to him by
Honrado two (2) pieces of electric cable measuring 2.26 inches each and another piece of 1.76
meters with a total estimated value of P50.00 to P100.00. Apprehensive that he might be
charged with theft, petitioner De los Santos explained that the electric cord was declared a scrap
by Honrado whose instructions he was only following to transfer the same to the adjacent lot of
the company as scrap.
Narciso Honrado admitted responsibility for the haul and his error in declaring the electric
cables as scrap. The general manager, apparently appeased by Honrados apology, issued a
memorandum acknowledging receipt of his letter of apology and exculpated him of any
wrongdoing.
Taking an unexpected volte face, however, the company through its counsel filed on 9 July
1993 a criminal complaint for frustrated qualified theft against Honrado and herein petitioner De
los Santos. The complaint however was subsequently dismissed by the Provincial Prosecutor of
Pasig for lack of evidence.[2]
On 23 August 1993, upon request of Top-Flite, alleged manpower agency of De los Santos,
CAMARA STEEL terminated his services.
Aggrieved by his illegal termination, De los Santos sought recourse with the Labor Arbiter
who on 29 March 1994 rendered a decision ordering respondent CAMARA STEEL to reinstate
Delos Santos to his former position within ten (10) days without loss of seniority rights and other
benefits with full back wages from date of dismissal up to actual reinstatement as herein before
stated.
CAMARA STEEL went to the NLRC for recourse. Top-Flite filed a Motion for
Intervention praying that it be permitted to intervene in the appeal as co-respondent and,
accordingly, be allowed to submit its own memorandum and other pleadings.[3]
On 23 May 1995 the NLRC reversed the Labor Arbiter and ordered the return of the entire
records of the case to the arbitration branch of origin for further proceedings. In its Decision,
NLRC specified the reasons for the remand to the Labor Arbiter -[4]

First, as respondents have broadly implied, having alleged that he was an employee of Camara
Steel, it was complainants burden to prove this allegation as a fact, not merely through his
uncorroborated statements but through independent evidence. As noted by respondents, he has
not submitted one piece of evidence to support his premise on this matter except for his sworn
statement.
Secondly, the Arbiter maintained that the contract of services submitted by respondents was
insufficient to prove that complainant was an employee of Top-Flite, but he has obviously
omitted consideration of Annexes F, G, H and I which are time sheets of the complainant with
Top-Flite and the corresponding time cards which he punches in for Camara Steel.

The NLRC further noted that under the circumstances it became appropriate to conduct a
formal hearing on the particular issue of whether an employer-employee relationship existed
between the parties, which issue was determinative of the nature of petitioner's dismissal by
CAMARA STEEL. That being so, according to the NLRC, it was necessary for the Labor
Arbiter to issue the appropriate directive to summon Top-Flite as a necessary party to the case,
for the manpower agency to submit its own evidence on the actual status of petitioner.
As pointed out by petitioner, the errors in the disputed decision by the NLRC are: (a) NLRC
violated due process of law when it did not consider the evidence on record; (b) CAMARA
STEEL, and not Top-Flite, is the real employer of petitioner; (c) Contrary to the finding of
NLRC, Top-Flite was made a party respondent in the illegal dismissal case docketed as NLRC-
NCR No. 00-08-05302-93 and the NLRC was therefore in error in remanding the case to the
Labor Arbiter for further proceedings.
Petitioner De los Santos contends that NLRC was in grave error when it ruled that, with the
exception of a bare assertion on his sworn statement, he "has not submitted one piece of evidence
to support his premise"[5]that he was in fact an employee of CAMARA STEEL.
To underscore NLRC's oversight, petitioner brings to our attention and specifies the pieces
of evidence which he presented before the Labor Arbiter on 19 November 1993 - also
appended as Annexes to petitioner's "Traverse to Camaras Position Paper and Reply:" (a)
Annex E to E-1 - Approval signature of Camaras Department head, Reynaldo Narisma,
without which petitioner cannot render overtime; (b) Annex F - Petitioners daily time record
for 8/3/92 to 8/9/92; (c) Annex F-1 - Signature of private respondent Mercedita Pastrana,
approving in her capacity as Assistant Manager of Camara Steel; (d) Annex F-2 - Signature
of private respondent Dennis Albano, Personnel Manager of Camara Steel Industries Inc. also
co-signing for approval; (e) Annex F-3 - Signature of Narisma, as Department Head of Camara
Steel Industries Inc. where petitioner is working; (f) Annex G - Daily Time Record of
petitioner for 7/6/92 to 7/12/92; (g) Annex G-1 - Signature of Camara Steel Assistant Manager;
(h) Annex G-2 - Signature of Camaras Personnel Manager, Dennis Albano, approving; (i)
Annex G-3 - Signature of Camaras Department Head where petitioner is working, Mr.
Narisma, approving; (j) Annex H to H-1 - Petitioners Daily Time Card (representative
samples) with name and logo of Camara Steel Industries Inc.; and, (k) Annex J - Affidavit of
Complainant.
All these pieces of evidence which, according to petitioner De los Santos, were not properly
considered by NLRC, plainly and clearly show that the power of control and supervision over
him was exercised solely and exclusively by the managers and supervisors of CAMARA
STEEL. Even the power to dismiss was also lodged with CAMARA STEEL when it admitted in
page 3 of its Reply that upon request by Top-Flite, the steel company terminated his employment
after being allegedly caught committing theft.
Petitioner De los Santos also advances the view that Top-Flite, far from being his employer,
was in fact a "labor-only" contractor as borne out by a contract whereby Top-Flite undertook to
supply CAMARA STEEL workers with "warm bodies" for its factory needs and edifices. He
insists that such contract was not a job contract but the supply of labor only. All things
considered, he is of the firm belief that for all legal intents and purposes, he was an employee - a
regular one at that - of CAMARA STEEL.
In its comment, private respondent CAMARA STEEL avers that far from being its
employee, De los Santos was merely a project employee of Top-Flite who was assigned as
janitor in private respondent company. This much was acknowledged by Top-Flite in its Motion
for Intervention filed before the NLRC.[6] Such allegation, according to private respondent
CAMARA STEEL, supports all along its theory that De los Santos' assignment to the latter as
janitor was based on an independent contract executed between Top-Flite and CAMARA
STEEL.[7]
Respondent CAMARA STEEL further argues that crystal clear in the Motion for
Intervention of Top-Flite is its allegation that it was in fact petitioner's real employer as his
salaries and benefits during the contractual period were paid by Top-Flite; not only that, De los
Santos was dismissed by CAMARA STEEL upon the recommendation of Top-Flite. These
ineluctably show that Top-Flite was not only a job contractor but was in truth and in fact the
employer of petitioner.
In his petition, De los Santos vigorously insists that he was the employee of respondent
CAMARA STEEL which in turn was not only denying the allegation but was finger-pointing
Top-Flite as petitioner's real employer. De los Santos again objects to this assertion and claims
that Top-Flite, far from being an employer, was merely a "labor-only" contractor.
In the maze and flurry of claims and counterclaims, several contentious issues continue to
stick out like a sore thumb. Was De los Santos illegally dismissed? If so, by whom? Was his
employer respondent CAMARA STEEL, in whose premises he was allegedly caught stealing, or
was it Top-Flite, the manpower services which allegedly hired him?
Inextricably intertwined in the resolution of these issues is the determination of whether
there existed an employer-employee relationship between CAMARA STEEL and respondent De
Los Santos, and whether Top-Flite was an "independent contractor" or a "labor-only"
contractor. A finding that Top-Flite was a "labor-only" contractor reduces it to a mere agent of
CAMARA STEEL which by statute would be responsible to the employees of the "labor-
only" contractor as if such employees had been directly employed by the employer.
Etched in an unending stream of cases are the four (4) standards in determining the existence
of an employer-employee relationship, namely: (a) the manner of selection and engagement of
the putative employee; (b) the mode of payment of wages; (c) the presence or absence of power
of dismisssal; and, (d) the presence or absence of control of the putative employee's
conduct. Most determinative among these factors is the so-called "control test."
As shown by the evidence on record, De los Santos was hired by CAMARA STEEL after
undergoing an interview with one Carlos Suizo, its timekeeper who worked under the direct
supervision of one Renato Pacion, a supervisor of CAMARA STEEL. These allegations are
contained in the affidavit[8] executed by De los Santos and were never disputed by CAMARA
STEEL. Also remaining uncontroverted are the pieces of documentary evidence adduced by De
los Santos consisting of daily time records marked Annexes "F" and "G" which, although bearing
the heading and logo of Top-Flite, were signed by officers of respondent CAMARA STEEL, and
Annexes "H" and "I" with the heading and logo of CAMARA STEEL.
Incidentally, we do not agree with NLRC's submission that the daily time records serve no
other purpose than to establish merely the presence of De los Santos within the premises of
CAMARA STEEL. Contrarily, these records, which were signed by the companys officers,
prove that the company exercised the power of control and supervision over its employees,
particularly De los Santos. There is dearth of proof to show that Top-Flite was the real employer
of De los Santos other than a naked and unsubstantiated denial by CAMARA STEEL that it has
no power of control over De los Santos. Records would attest that even the power to dismiss
was vested with CAMARA STEEL which admitted in its Reply that "Top-Flite requested
CAMARA STEEL to terminate his employment after he was caught by the security guard
committing theft."
A cursory reading of the above declaration will confirm the fact that the dismissal of De los
Santos could only be effected by CAMARA STEEL and not by Top-Flite as the latter could only
"request" for De los Santos' dismissal. If Top-Flite was truly the employer of De los Santos, it
would not be asking permission from or "requesting" respondent CAMARA STEEL to dismiss
De los Santos considering that it could very well dismiss him without CAMARA STEEL's
assent.
All the foregoing considerations affirm by more than substantial evidence the existence of
an employer-employee relationship between De los Santos and CAMARA STEEL.
As to whether petitioner De los Santos was illegally terminated from his employment, we
are in full agreement with the Labor Arbiter's finding that he was illegally dismissed. As
correctly observed by the Labor Arbiter, it was Narciso Honrado, scrap in-charge, who handed
the box containing the electrical cables to De los Santos. No shred of evidence can show that De
los Santos was aware of its contents, or if ever, that he conspired with Honrado in bilking the
company of its property. What is certain however is that while Honrado admitted, in a letter of
apology, his culpability for the unfortunate incident and was unconditionally forgiven by the
company, De los Santos was not only unceremoniously dismissed from service but was charged
before the court for qualified theft (later dismissed by the public prosecutor for lack of
evidence). For sure, De los Santos cannot be held more guilty than Honrado who, being the
scrap in-charge, had the power to classify the cables concerned as scrap.
Neither can we gratify CAMARA STEEL's contention that petitioner was validly dismissed
for loss of trust and confidence. As provided for in the Labor Code:

Art. 282. Termination by employer - An employer may terminate an employment for any of the
following causes: x x x (c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative x x x x

Of course, it must be stressed that loss of confidence as a just cause for the termination of
employment is based on the premise that the employee holds a position of trust and confidence,
as when he is entrusted with responsibility involving delicate matters, and the task of a janitor
does not fall squarely under this category.
Petitioner De los Santos argues that Top-Flite was merely a "labor-only" contractor. To
fortify his stance, De los Santos brings to our attention the contract of service [9] dated 8 February
1991 between CAMARA STEEL and Top-Flite which provides:

1) The contractor (Top-Flite) shall provide workers (non-skilled) six (6) days a week for the
Clients (Camara) factory and edifices.

However, both respondent CAMARA STEEL and Top-Flite [10] are adamant in their belief that
the latter was not a "labor-only" contractor as they rely on another provision of the contract
which states -

2) The Contractor warrants the honesty, reliability, industry and cooperative disposition of the
person it employs to perform the job subject to this contract, and shall employ such persons only
as are in possession of health certificates and police clearances x x x x

The preceding provisions do not give a clear and categorical answer as regards the real
character of Top-Flite's business. For whatever its worth, the invocation of the contract of
service is a tacit admission by both parties that the employment of De los Santos was by virtue of
such contract. Be that as it may, Top-Flite, much less CAMARA STEEL, cannot dictate, by the
mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether
as "labor-only" contractor, or job contractor, it being crucial that its character be measured in
terms of and determined by the criteria set by statute. The case of Tiu v. NLRC[11]succinctly
enunciates this statutory criteria -

Job contracting is permissible only if the following conditions are met: 1) the contractor carries
on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of
his employer or principal in all matters connected with the performance of the work except as to
the results thereof; and 2) the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct
of the business.

"Labor-only contracting" as defined in Sec. 4, par. (f), Rule VIII-A, Book III, of
the Omnibus Rules Implementing the Labor Code states that a "labor-only" contractor, prohibited
under this Rule, is an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal and the following
elements are present: (a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own account or responsibility;
and, (b) The employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal.
Applying the foregoing provisions, the Court finds Top-Flite to be a "labor-only" contractor,
a mere supplier of labor to CAMARA STEEL, the real employer. Other than its open declaration
that it is an independent contractor, no substantial evidence was adduced by Top-Flite to back up
its claim. Its revelation that it provided a sweeper to petitioner would not suffice to convince
this Court that it possesses adequate capitalization to undertake an independent business.
[12]
Neither will the submission prosper that De los Santos did not perform a task directly
related to the principal business of respondent CAMARA STELL. As early as in Guarin v.
NLRC[13] we ruled that "the jobs assigned to the petitioners as mechanics, janitors, gardeners,
firemen and grasscutters were directly related to the business of Novelty as a garment
manufacturer," reasoning that "for the work of gardeners in maintaining clean and well-kept
grounds around the factory, mechanics to keep the machines functioning properly, and firemen to
look out for fires, are directly related to the daily operations of a garment factory."
In its comment respondent CAMARA STEEL empathically argues that Top-Flite, although
impleaded as respondent in NLRC-NCR Cases Nos. 00-0704761-93 and 00-0805061-93, subject
of the present appeal, was never summoned for which reason it was deprived of procedural due
process; basically the same line of argument adopted by the NLRC in its decision to remand the
case to the arbitration branch of origin. CAMARA STEEL obviously wants wants to impress
upon us that Top-flite, being a necessary party, should have been summoned and the failure to do
so would justify the remand of the case to the Labor Arbiter.
We are not persuaded. The records show that Top-Flite was not only impleaded in the
aforementioned case but was in fact afforded an opportunity to be heard when it submitted a
position paper. This much was admitted by Top-Flite in par. 5 of its Motion for
Intervention where it stated that "movant submitted its position paper in the cases mentioned in
the preceding paragraph but the Presiding Arbiter ignored the clear and legal basis of
the position of the movant."[14] In other words, the failure of Top-Flite to receive summons was
not a fatal procedural flaw because it was never deprived of the opportunity to ventilate its side
and challenge petitioner in its position paper, not to mention the comment which it submitted
through counsel before this Court.[15] It moved to intervene not because it had no notice of the
proceedings but because its position paper allegedly was not considered by the Labor
Arbiter. While jurisdiction over the person of the defendant can be acquired by service of
summons, it can also be acquired by voluntary appearance before the court which includes
submission of pleadings in compliance with the order of the court or tribunal. A fortiori,
administrative tribunals exercising quasi-judicial powers are unfettered by the rigidity of certain
procedural requirements subject to the observance of fundamental and essential requirments
of due process in justiciable cases presented before them. In labor cases, a punctilious
adherence to stringent technical rules may be relaxed in the interest of the workingman. A
remand of the case, as the NLRC envisions, would compel petitioner, a lowly worker, to tread
once again the calvary of a protracted litigation and flagellate him into submission with the lash
of technicality.
WHEREFORE, the petition is GRANTED and the appealed Decision of the NLRC is
REVERSED and SET ASIDE and the Decision of the Labor Arbiter promulgated 23 May 1999
is REINSTATED and ADOPTED as the Decision in this case.
SO ORDERED.

SECOND DIVISION

CHINA BANKING CORPORATION, G.R. No. 156515


Petitioner,
Present:
PUNO, J., Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.*

Promulgated:
MARIANO M. BORROMEO,
Respondent. October 19, 2004
x------------------------------------ --------------x

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking
the reversal of the Decision[1] dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365,
remanding to the Labor Arbiter for further hearings the complaint for payment of separation pay, mid-
year bonus, profit share and damages filed by respondent Mariano M. Borromeo against the petitioner
Bank. Likewise, sought to be reversed is the appellate courts Resolution dated January 6, 2003, denying
the petitioner Banks motion for reconsideration.
The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager
assigned at the latters Regional Office in Cebu City. He then had the rank of Manager Level
I. Subsequently, the respondent was laterally transferred to Cagayan de Oro City as Branch Manager of
the petitioner Banks branch thereat.

For the years 1989 and 1990, the respondent received a highly satisfactory performance rating
and was given the corresponding profit sharing/performance bonus. From 1991 up to 1995, he
consistently received a very good performance rating for each of the said years and again received the
corresponding profit sharing/performance bonus. Moreover, in 1992, he was promoted from Manager
Level I to Manager Level II. In 1994, he was promoted to Senior Manager Level I. Then again, in 1995, he
was promoted to Senior Manager Level II. Finally, in 1996, with a highly satisfactory performance
rating, the respondent was promoted to the position of Assistant Vice-President, Branch Banking Group
for the Mindanao area effective October 16, 1996. Each promotion had the corresponding increase in
the respondents salary as well as in the benefits he received from the petitioner Bank.
However, prior to his last promotion and then unknown to the petitioner Bank, the respondent,
without authority from the Executive Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to P2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety.
DAUD/BP is the acronym for checks Drawn Against Uncollected Deposits/Bills Purchased. Such checks,
which are not sufficiently funded by cash, are generally not honored by banks. Further, a DAUD/BP
accommodation is a credit accommodation granted to a few and select bank clients through the
withdrawal of uncollected or uncleared check deposits from their current account. Under the petitioner
Banks standard operating procedures, DAUD/BP accommodations may be granted only by a bank officer
upon express authority from its Executive Committee or Board of Directors.

As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town


checks (7 PCIB checks and 3 UCPB checks) of various dates amounting toP2,441,375 were returned
unpaid from September 20, 1996 to October 17, 1996. Each of the returned checks was stamped with
the notation Payment Stopped/Account Closed.

On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks senior
management requesting for the grant of a P2.4 million loan to Maniwan. The memorandum stated that
the loan was to regularize/liquidate subjects (referring to Maniwan) DAUD availments. It was only
then that the petitioner Bank came to know of the DAUD/BP accommodations in favor of Maniwan. The
petitioner Bank further learned that these DAUD/BP accommodations exceeded the limit granted to
clients, were granted without proper prior approval and already past due. Acting on this information,
Samuel L. Chiong, the petitioner Banks First Vice- President and Head-Visayas Mindanao Division, in his
Memorandum dated November 19, 1996 for the respondent, sought clarification from the latter on the
following matters:

1) When DAUD/BP accommodations were allowed, what efforts, if any, were


made to establish the identity and/or legitimacy of the alleged broker or drawers
of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require
that all checks accommodated for DAUD/BP should be previously verified with
the drawee bank and history if not outright balances determined if enough to
cover the checks?

3) How did the accommodations reach P2,441,375.00 when our records


indicate that the borrowers B/P-DAUD line is only for P500,000.00? When did
the accommodations start exceeding the limit of P500,000.00 and under whose
authority?
4) When did the accommodated checks start bouncing?

5) What is the status of these checks now and what has the branch done so far
to protect/ensure collectibility of the returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps
have they done to pay the checks returned? [2]

In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing

queries in seriatim and explained, thus:

1. None

2. No

3. The accommodations reach P2.4 million upon the request of Mr. Edmund
Ramos, surety, and this request was subsequently approved by
undersigned. The excess accommodations started in July 96 without higher
management approval.

4. Checks started bouncing on September 20, 1996.

5. Checks have remained unpaid. The branch sent demand letters to Messrs.
Maniwan and Ramos and referred the matter to our Legal Dept. for filing of
appropriate legal action.

6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention
to settle by Feb. 1997.

Justification for lapses committed (Item nos. 1 to 3).


The account was personally endorsed and referred to us by Mr. Edmund Ramos,
Branch Manager of Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA
account was opened jointly as &/or (Maniwan &/or Ramos). Mr. Ramos gave us his full
assurance that the checks that we intend to purchase are the same drawee that
Metrobank has been purchasing for the past one (1) year already. He even disclosed
that these checks were verified by his own branch accountant and that Mr. Maniwans
loan account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of
CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan
for P2.5MM. Corollary to this, Mr. Ramos applied for a loan with us mortgaging his
house, lot and duplex with an estimated market value of P4.508MM. The branch,
therefore, is not totally negligent as officer to officer bank checking was done. In fact, it
is also for the very same reason that other banks granted DAUD to subject account and,
likewise, the checks returned unpaid, namely:

Solidbank P1.8 Million


Allied Bank .8
Far East Bank 2.0
MBTC 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further
to this, undersigned conferred with the acting BOH VSYap if these checks are legitimate
3rd party checks.

On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped
by a broker in the total amount of P10.00 Million.

Undersigned accepts full responsibility for committing an error in judgment,


lapses in control and abuse of discretion by relying solely on the word, assurance, surety
and REM of Mr. Edmund Ramos, a friend and a co-bank officer. I am now ready to face
the consequence of my action.[3]

In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign

from the petitioner Bank and apologized for all the trouble I have caused because of the Maniwan

case.[4] The respondent, however, vehemently denied benefiting therefrom. In his Letter dated April

30, 1997, the respondent formally tendered his irrevocable resignation effective May 31, 1997.[5]

In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the

petitioner Banks Senior Vice-President and Head-Branch Banking Group, informed the former that his

approval of the DAUD/BP accommodations in favor of Maniwan without authority and/or approval of
higher management violated the petitioner Banks Code of Ethics. As such, he was directed to restitute

the amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the

petitioner Bank. However, in view of his resignation and considering the years of service in the petitioner

Bank, the management earmarked only P836,637.08 from the respondents total separation benefits or

pay. The memorandum addressed to the respondent stated:

After a careful review and evaluation of the facts surrounding the above case,
the following have been conclusively established:

1. The branch granted various BP/DAUD accommodations to clients


Joel Maniwan/Edmundo Ramos in excess of approved lines through the
following out-of-town checks which were returned for the reason
Payment Stopped/Account Closed:

1. PCIB Cebu Check No. 86256 P251,816.00


2. PCIB Cebu Check No. 86261 235,880.00
3. PCIB Cebu Check No. 8215 241,443.00
4. UCPB Tagbilaran Check No. 277,630.00
5. PCIB Bogo, Cebu Check No. 6117 267,418.00
6. UCPB Tagbilaran Check No. 216070 197,467.00
7. UCPB Tagbilaran Check No. 216073 263,920.00
8. PCIB Bogo, Cebu Check No. 6129 253,528.00
9. PCIB Bogo, Cebu Check No. 6122 198,615.00
10. PCIB Bogo, Cebu Check No. 6134 253,658.00

2. The foregoing checks were accommodated through your approval


which was in excess of your authority.

3. The branch failed to follow the fundamental and basic procedures in


handling BP/DAUD accommodations which made the accommodations
basically flawed.

4. The accommodations were attended by lapses in control consisting


of failure to report the exception and failure to cover the account of Joel
Maniwan with the required Credit Line Agreement.
Since the foregoing were established by your own admissions in your letter
explanation dated 5 December 1996, and the Audit Report and findings of the Region
Head, Management finds your actions in violation of the Banks Code of Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures


- Infraction of Bank procedures in handling any
bank transactions or work assignment which results in a loss
or probable loss.
Table 6.3., no. 6: Proper Conduct and Behavior -
Willful misconduct in the performance of duty whether or not the bank
suffers a loss, and/or
Table 6.5., no. 1: Work Responsibilities -
Dereliction of duty whether or not the Bank suffers a loss, and/or
Table 6.6., no. 2: Authority and Subordination -
Failure to carry out lawful orders or instructions of superiors.

Your approval of the accommodations in excess of your authority without prior authority
and/or approval from higher management is a violation of the above cited Rules.

In view of these, you are directed to restitute the amount of P1,507,736.79


representing 90% of the total loss of P1,675,263.10 incurred by the Bank as your
proportionate share. However, in light of your voluntary separation from the Bank
effective May 31, 1997, in view of the years of service you have given to the
Bank, management shall earmark and segregate only the amount ofP836,637.08 from
your total separation benefits/pay. The Bank further directs you to fully assist in the
effort to collect from Joel Maniwan and Edmundo Ramos the sums due to the Bank. [6]

In the Letter dated May 26, 1997 addressed to the respondent, Remedios Cruz, petitioner Banks

Vice-President of the Human Resources Division, again informed him that the management would

withhold the sum of P836,637.08 from his separation pay, mid-year bonus and profit sharing. The

amount withheld represented his proportionate share in the accountability vis--vis the DAUD/BP

accommodations in favor of Maniwan. The said amount would be released upon recovery of the sums

demanded from Maniwan in Civil Case No. 97174 filed against him by the petitioner Bank with the

Regional Trial Court in Cagayan de Oro City.

Consequently, the respondent, through counsel, made a demand on the petitioner Bank for the

payment of his separation pay and other benefits. The petitioner Bank maintained its position to
withhold the sum of P836,637.08. Thus, the respondent filed with the National Labor Relations

Commission (NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the complaint for

payment of separation pay, mid-year bonus, profit share and damages against the petitioner Bank.

The parties submitted their respective position papers to the Labor Arbiter. Thereafter, the

respondent filed a motion to set case for trial or hearing. Acting thereon, the Labor Arbiter, in the Order

dated January 29, 1999, denied the same stating that:


... This Branch views that if complainant finds the necessity to controvert the
allegations in the respondents pleadings, then he may file a supplemental position
paper and adduce thereto evidence and additional supporting documents, the soonest
possible time. All the evidence will be evaluated by the Branch to determine whether or
not a clarificatory hearing shall be conducted. [7]

On February 26, 1999, the Labor Arbiter issued another Order submitting the case for resolution

upon finding that he could judiciously pass on the merits without the necessity of further hearing.

On even date, the Labor Arbiter promulgated the Decision[8] dismissing the respondents

complaint. According to the Labor Arbiter, the respondent, an officer of the petitioner Bank, had

committed a serious infraction when, in blatant violation of the banks standard operating procedures

and policies, he approved the DAUD/BP accommodations in favor of Maniwan without authorization by

senior management. Even the respondent himself had admitted this breach in the letters that he wrote

to the senior officers of the petitioner Bank.

The Labor Arbiter, likewise, made the finding that the respondent offered to assign or convey a

property that he owned to the petitioner Bank as well as proposed the withholding of the benefits due

him to answer for the losses that the petitioner Bank incurred on account of unauthorized DAUD/BP

accommodations. But even if the respondent had not given his consent, the Labor Arbiter held that the

petitioner Banks act of withholding the benefits due the respondent was justified under its Code of
Ethics. The respondent, as an officer of the petitioner Bank, was bound by the provisions of the said

Code.

Aggrieved, the respondent appealed to the National Labor Relations Commission. After the parties

had filed their respective memoranda, the NLRC, in the Decision dated October 20, 1999, dismissed the

appeal as it affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC preliminarily

ruled that the Labor Arbiter committed no grave abuse of discretion when he decided the case on the

basis of the position papers submitted by the parties. On the merits, the NLRC, like the Labor Arbiter,

gave credence to the petitioner Banks allegation that the respondent offered to pledge his property to

the bank and proposed the withholding of his benefits in acknowledgment of the serious infraction he

committed against the bank. Further, the NLRC concurred with the Labor Arbiter that the petitioner

Bank was justified in withholding the benefits due the respondent. Being a responsible bank officer, the

respondent ought to know that, based on the petitioner Banks Code of Ethics, restitution may be

imposed on erring employees apart from any other penalty for acts resulting in loss or damage to the

bank. The decretal portion of the NLRC decision reads:

WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal is


Dismissed for lack of merit.

SO ORDERED.[9]

The respondent moved for a reconsideration of the said decision but the NLRC, in the Resolution

of December 20, 1999, denied his motion.

The respondent then filed a petition for certiorari with the Court of Appeals alleging that the

NLRC committed grave abuse of discretion when it affirmed the findings and conclusions of the Labor

Arbiter. He vehemently denied having offered to pledge his property to the bank or proposed the

withholding of his separation pay and other benefits. Further, he argued that the petitioner Bank
deprived him of his right to due process because it unilaterally imposed the penalty of restitution on

him. The DAUD/BP accommodations in favor of Maniwan allegedly could not be considered as a loss

to the bank as the amounts may still be recovered. The respondent, likewise, maintained that the Labor

Arbiter should not have decided the case on the basis of the parties position papers but should have

conducted a full-blown hearing thereon.

On July 19, 2002, the CA rendered the Decision[10] now being assailed by the petitioner

Bank. The CA found merit in the respondents contention that he was deprived of his right to due

process by the petitioner Bank as no administrative investigation was conducted by it prior to its act of

withholding the respondents separation pay and other benefits. The respondent was not informed of

any charge against him in connection with the Maniwan DAUD/BP accommodations nor afforded the

right to a hearing or to defend himself before the penalty of restitution was imposed on him. This,

according to the appellate court, was contrary not only to the fundamental principle of due process but

to the petitioner Banks Code of Ethics as well.

The CA further held that the Labor Arbiter, likewise, failed to afford the respondent due process

when it denied his motion to set case for trial or hearing. While the authority of the Labor Arbiter to

decide a case based on the parties position papers and documents is indubitable, the CA opined that

factual issues attendant to the case, including whether or not the respondent proposed the withholding

of his benefits or pledged the same to the petitioner Bank, necessitated the conduct of a full-blown

trial. The appellate court explained that:


Procedural due process, as must be remembered, has two main concerns, the
prevention of unjustified or mistaken deprivation and the promotion of participation and
dialogue by affected individuals in the decision-making process. Truly, the magnitude of
the case and the withholding of Borromeos property as well as the willingness of the
parties to conciliate, make a hearing imperative. As manifested by the bank, it did not
contest Borromeos motion for hearing or trial inasmuch as the bank itself wanted to
fully ventilate its side.[11]
Accordingly, the CA set aside the decision of the NLRC and ordered that the records of the case

be remanded to the Labor Arbiter for further hearings on the factual issues involved.

The petitioner Bank filed a motion for reconsideration of the said decision but the CA, in the

assailed Resolution of January 6, 2003, denied the same as it found no compelling ground to warrant

reconsideration.[12] Hence, its recourse to this Court alleging that the assailed CA decision is contrary to

law and jurisprudence in that:

I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE NATIONAL LABOR
RELATIONS COMMISSION ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD
HAVE BEEN ACCORDED RESPECT AND FINALITY BY THE COURT OF APPEALS IN
ACCORDANCE WITH GOVERNING JURISPRUDENCE.

II.
AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE REQUIREMENTS
OF DUE PROCESS IN THE PROCEEDINGS A QUO.

III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENTS RIGHT TO DUE
PROCESS AS NO ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE CONDUCTED ON
HIS ADMITTED MISCONDUCT.[13]

The petitioner Bank posits that the sole factual issue that remained in dispute was whether the

respondent pledged his benefits as guarantee for the losses the bank incurred resulting from the

unauthorized DAUD/BP accommodations in favor of Maniwan. On this issue, both the Labor Arbiter and

the NLRC found that the respondent had indeed pledged his benefits to
the bank. According to the petitioner Bank, this factual finding should have been accorded respect by

the CA as the same is supported by the evidence on record. By ordering the remand of the case to the

Labor Arbiter, the CA allegedly unjustifiably analyzed and weighed all over again the evidence presented.

The petitioner Bank insists that the Labor Arbiter acted within his authority when he denied the

respondents motion to set case for hearing or trial and instead decided the case on the basis of the

position papers and evidence submitted by the parties. Due process simply demands an opportunity to

be heard and the respondent was not denied of this as he was even given the opportunity to file a

supplemental position paper and other supporting documents, but he did not do so.

The petitioner Bank takes exception to the findings of the appellate court that the respondent was

not afforded the right to a hearing or to defend himself by the petitioner Bank as it did not conduct an

administrative investigation. The petitioner Bank points out that it was poised to conduct one but was

preempted by the respondents resignation. In any case, respondent himself in his Letter dated

December 5, 1996, in reply to the clarificatory queries of Chiong, admitted that the DAUD/BP

accommodations were granted without higher management approval and that he (the respondent)

accepts full responsibility for committing an error of judgment, lapses in control and abuse of discretion

... Given the respondents admission, the holding of a formal investigation was no longer necessary.

For his part, the respondent, in his Comment, maintains that the DAUD/BP accommodations in

favor of Maniwan were approved, albeit not expressly, by the senior management of the petitioner

Bank. He cites the regular reports he made to Chiong, his superior, regarding the DAUD/BP transactions

made by the branch, including that of Maniwan, and Chiong never called his attention thereto nor

stopped or reprimanded him therefor. These reports further showed that he did not conceal these

transactions to the management.


The respondent vehemently denies having offered the withholding of his benefits or pledged the

same to the petitioner Bank. The findings of the Labor Arbiter and the NLRC that what he did are

allegedly not supported by the evidence on record.

The respondent is of the view that restitution is not proper because the petitioner Bank has not,

as yet, incurred any actual loss as the amount owed by Maniwan may still be recovered from him. In

fact, the petitioner Bank had already instituted a civil case against Maniwan for the recovery of the sum

and the RTC rendered judgment in the petitioner Banks favor. The case is still pending appeal. In any

case, the respondent argues that the petitioner Bank could not properly impose the accessory penalty of

restitution on him without imposing the principal penalty of Written Reprimand/Suspension as

provided under its Code of Ethics. He, likewise, vigorously avers that, in contravention of its own Code of

Ethics, he was denied due process by the petitioner Bank as it did not conduct any administrative

investigation relative to the unauthorized DAUD/BP accommodations. He was not informed in writing of

any charge against him nor was he given the opportunity to defend himself.

The petition is meritorious.

The Court shall first resolve the procedural issue raised in the petition, i.e., whether the CA erred

in remanding the case to the Labor Arbiter. The Court rules in the affirmative. It is settled that

administrative bodies like the NLRC, including the Labor Arbiter, are not bound by the technical niceties

of the law and procedure and the rules obtaining in courts of law.[14] Rules of evidence are not strictly

observed in proceedings before administrative bodies like the NLRC, where decisions may be reached on

the basis of position papers.[15] The holding of a formal hearing or trial is discretionary with the Labor

Arbiter and is something that the parties cannot demand as a matter of right.[16] As a corollary, trial-

type hearings are not even required as the cases may be decided based on verified position papers, with

supporting documents and their affidavits.[17]


Hence, the Labor Arbiter acted well within his authority when he issued the Order dated

February 26, 1999 submitting the case for resolution upon finding that he could judiciously pass on the

merits without the necessity of further hearing. On the other hand, the assailed CA decisions directive

requiring him to conduct further hearings constitutes undue interference with the Labor Arbiters

discretion. Moreover, to require the conduct of hearings would be to negate the rationale and purpose

of the summary nature of the proceedings mandated by the Rules and to make mandatory the

application of the technical rules of evidence.[18] The appellate court, therefore, committed reversible

error in ordering the remand of the case to the Labor Arbiter for further hearings.

Before delving on the merits of the case, it is well to remember that factual findings of the NLRC

affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in matters

within their jurisdiction, when sufficiently supported by evidence on record, are accorded respect, if not

finality, and are considered binding on this Court.[19] As long as their decisions are devoid of any

arbitrariness in the process of their deduction from the evidence proffered by the parties, all that is left

is for the Court to stamp its affirmation.[20]

In this case, the factual findings of the Labor Arbiter and those of the NLRC concur on the following

material points: the respondent was a responsible officer of the petitioner Bank; by his own admission,

he granted DAUD/BP accommodations in excess of the authority given to him and in violation of the

banks standard operating procedures; the petitioner Banks Code of Ethics provides that

restitution/forfeiture of benefits may be imposed on the employees for, inter alia, infraction of the

banks standard operating procedures; and, the respondent resigned from the petitioner Bank on May

31, 1998. These factual findings are amply supported by the evidence on record.
Indeed, it had been indubitably shown that the respondent admitted that he violated the

petitioner Banks standard operating procedures in granting the DAUD/BP accommodations in favor of

Maniwan without higher management approval. The respondents replies to the clarificatory questions

propounded to him by way of the Memorandum dated November 19, 1996 were particularly

significant. When the respondent was asked whether efforts were made to establish the identity and/or

legitimacy of the drawers of the checks before the DAUD/BP accommodations were allowed,[21] he

replied in the negative.[22] To the query did the branch follow and comply with operating procedure

which require that all checks accommodated for DAUD/BP should be previously verified with the drawee

bank and history, if not outright balances, determined if enough to cover the checks?[23] again, the

respondent answered no.[24] When asked under whose authority the excess DAUD/BP

accommodations were granted,[25] the respondent expressly stated that they were approved by

undersigned (referring to himself) and that the excess accommodation was granted without higher

management approval.[26] More telling, however, is the respondents statement that he accepts full

responsibility for committing an error in judgment, lapses in control and abuse of discretion by relying

solely on the word, assurance, surety and REM of Mr. Edmundo Ramos.[27] The respondent added that

he was ready to face the consequence of [his] action.[28]

The foregoing sufficiently establish that the respondent, by his own admissions, had violated the

petitioner Banks standard operating procedures. Among others, the petitioner Banks Code of Ethics

provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES

VIOLATIONS PENALTIES
1ST 2ND 3RD 4TH
1. Infraction of Bank Written Suspension/ Dismissal*
procedures in handling any Reprimand/ Dismissal*
Bank transaction or work Suspension*
assignment which results in
a loss or probable loss
* With restitution, if warranted.

Further, the said Code states that:

7.2.5. Restitution/Forfeiture of Benefits

Restitution may be imposed independently or together with any other penalty in


case of loss or damage to the property of the Bank, its employees, clients or other
parties doing business with the Bank. The Bank may recover the amount involved by
means of salary deduction or whatever legal means that will prompt offenders to pay
the amount involved. But restitution shall in no way mitigate the penalties attached to
the violation or infraction.

Forfeiture of benefits/privileges may also be effected in cases where infractions or


violations were incurred in connection with or arising from the application/availment
thereof.

It is well recognized that company policies and regulations are, unless shown to be grossly

oppressive or contrary to law, generally binding and


valid on the parties and must be complied with until finally revised or amended unilaterally or

preferably through negotiation or by competent authority.[29] Moreover, management has the

prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant

to company rules and regulations.[30] With more reason should these truisms apply to the respondent,

who, by reason of his position, was required to act judiciously and to exercise his authority in harmony

with company policies.[31]

Contrary to the respondents contention that the petitioner Bank could not properly impose the

accessory penalty of restitution on him without imposing the principal penalty of Written

Reprimand/Suspension, the latters Code of Ethics expressly sanctions the imposition of

restitution/forfeiture of benefits apart from or independent of the other penalties. Obviously, in view of

his voluntary separation from the petitioner Bank, the imposition of the penalty of reprimand or

suspension would be futile. The petitioner Bank was left with no other recourse but to impose the

ancillary penalty of restitution. It was certainly within the petitioner Banks prerogative to impose on the

respondent what it considered the appropriate penalty under the circumstances pursuant to its

company rules and regulations.

Anent the issue that the respondents right to due process was violated by the petitioner Bank

since no administrative investigation was conducted prior to the withholding of his separation benefits,

the Court rules that, under the circumstances obtaining in this case, no formal administrative

investigation was necessary. Due process simply demands an opportunity to be heard and this

opportunity was not denied the respondent.[32]

Prior to the respondents resignation, he was furnished with the Memorandum[33] dated

November 19, 1996 in which several clarificatory questions were propounded to him regarding the

DAUD/BP accommodations in favor of Maniwan. Among others, the respondent was asked whether the
banks standard operating procedures were complied with and under whose authority the

accommodations were granted. From the tenor thereof, it could be reasonably gleaned that the said

memorandum constituted notice of the charge against the respondent.

Replying to the queries, the respondent, in his Letter[34] dated December 5, 1996,

admitted, inter alia, that he approved the DAUD/BP accommodations in favor of Maniwan and the

amount in excess of the credit limit of P500,000 was approved by him without higher management

approval. The respondent, likewise, admitted non-compliance with the banks standard operating

procedures, specifically, that which required that all checks accommodated for DAUD/BP be previously

verified with the drawee bank and history, if not outright balances determined if enough to cover the

checks. In the same letter, the respondent expressed that he


accepts full responsibility for committing an error in judgment, lapses in control and abuse of

discretion and that he is ready to face the consequence of his action.

Contrary to his protestations, the respondent was given the opportunity to be heard and

considering his admissions, it became unnecessary to hold any formal investigation.[35] More

particularly, it became unnecessary for the petitioner Bank to conduct an investigation on whether the

respondent had committed an [I]nfraction of Bank procedures in handling any Bank transaction or work

assignment which results in a loss or probable loss because the respondent already admitted the

same. All that was needed was to inform him of the findings of the management [36] and this was

done by way of the Memorandum[37] dated May 23, 1997 addressed to the respondent. His claim of

denial of due process must perforce fail.

Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor

Arbiter stressed in his decision, the separation benefits due the complainant (the respondent herein)

were merely withheld.[38] The NLRC made the same conclusion and was even more explicit as it

opined that the respondent is entitled to the benefits he claimed in pursuance to the Collective

Bargaining Agreement but, in the meantime, such benefits shall be deposited with the bank by way of

pledge.[39] Even
the petitioner Bank itself gives the assurance that as soon as the Bank has satisfied a judgment

in Civil Case No. 97174, the earmarked portion of his benefits will be released without delay.[40]

It bears stressing that the respondent was not just a rank and file employee. At the time of his

resignation, he was the Assistant Vice- President, Branch Banking Group for the Mindanao area of the

petitioner Bank. His position carried authority for the exercise of independent judgment and discretion,

characteristic of sensitive posts in corporate hierarchy.[41] As such, he was, as earlier intimated,

required to act judiciously and to exercise his authority in harmony with company policies.[42]

On the other hand, the petitioner Banks business is essentially imbued with public interest and

owes great fidelity to the public it deals with.[43] It is expected to exercise the highest degree of

diligence in the selection and supervision of their employees.[44] As a corollary, and like all other

business enterprises, its prerogative to discipline its employees and to impose appropriate penalties on

erring workers pursuant to company rules and regulations must be respected.[45] The law, in

protecting the rights of labor, authorized neither oppression nor self-destruction of an employer

company which itself is possessed of rights that must be entitled to recognition and respect.[46]
WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the Court of Appeals

and its Resolution dated January 6, 2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The

Resolution dated October 20, 1999 of the NLRC, affirming the Decision dated February 26, 1999 of the

Labor Arbiter, isREINSTATED.

SO ORDERED.
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