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III. Assignment for Nov.

11, 2017
Statutory Reference: Art. 296 and 297 ONLY and related provisions in the Omnibus
Rules

DOLE Department Order No. 147-15, series of 2015


*pdf

https://www.dole.gov.ph/files/Dept%20Order%20No_%20147-15.pdf

Cases:
Quijano vs. Bartolabac, 480 SCRA 204,
AC No. 5629, January 27, 2006

ADM. CASE No. 5649 January 27, 2006

DANDY V. QUIJANO, Complainant,


vs.
GEOBEL A. BARTOLABAC (Labor Arbiter, NLRC-NCR South), and ALBERTO R.
QUIMPO (Commissioner, NLRC-First Division), Respondents.

RESOLUTION

TINGA, J.:

On 19 March 2002, complainant Dandy Quijano filed before this Court a verified
complaint1 written in Pilipino against herein respondents Atty. Geobel A. Bartolabac
(Bartolabac), Labor Arbiter of the National Labor Relations Commission (NLRC), and
Commissioner Alberto R. Quimpo (Quimpo) of the same Commission for violating
Canon 12 and Rule 1.013 of the Code of Professional Responsibility.

According to complainant, respondents violated his constitutional right to due process in


failing to execute the final and executory judgment of this Court in G.R. No. 126561
entitled Quijano v. Mercury Drug Corporation.4

The antecedent facts are as follows:


Complainant was dismissed from service by the Mercury Drug Corporation
(corporation). He filed a complaint for illegal dismissal before the NLRC. Eventually, the
case was elevated to this Court. On 8 July 1998, the Court promulgated its Decision in
favor of herein complainant ordering, among others, his reinstatement.5 The
corporations motion for reconsideration was denied by this Court in its Resolution dated
5 July 1999.

Complainant relates that he filed with respondent Labor Arbiter Bartolabac a motion for
execution on 9 December 1998 but despite the final resolution of his case, Bartolabac
issued an order that in effect changed the tenor of the final judgment. 6 While the
decision of this Court had mandated complainants reinstatement, Bartolabac instead
awarded backwages and separation pay.

The Court, upon learning this, issued a Resolution7 on 17 November 1999 directing
Bartolabac to fully comply with its Decision dated 8 July 1998 and Resolution dated 5
July 1999 within a non-extendible period of five (5) days from receipt thereof and to
explain in writing why he should not be punished for indirect contempt for his actuations
in handling the case and defiance of the Courts directives.

Pursuant to the Resolution of this Court, Bartolabac issued an alias writ of execution on
18 February 2000. However, respondent Bartolabac allegedly again unilaterally issued
another order dated 5 April 2000, amending his previous order and assigning the
complainant to the position of self-service attendant of the corporation instead of his
original position of warehouseman. Subsequently, respondent Commissioner Quimpo
overturned the above order of Bartolabac and directed the payment of separation pay
rather than reinstatement to a substantially similar position as ordered by this Court.

Complainant adds that he had filed a motion to cite counsel for respondent corporation
in contempt8 and an answer to the order dated 5 April 2000, but these were disregarded
by Bartolabac on the ground that an appeal was already underway at the NLRC by the
corporation.

Further, he states that he was not given a copy of the appeal memorandum filed by the
corporation with the NLRC; yet, the NLRC First Division headed by Quimpo disposed of
the same. He also alleges that the corporation did not post a cash bond for the appeal
nor did they give him a temporary reinstatement or payroll reinstatement, which
according to complainant, is mandatory. Despite this, and without giving complainant
any opportunity to comment on the appeal memorandum, Quimpo nonetheless issued a
resolution dated 26 September 2000 which ordered the corporation to pay complainant
separation pay plus backwages. Complainant asserts that Quimpo should have
inhibited himself from deciding the case as he, or the NLRC First Division, was the
public respondent in the Supreme Court case.

Complainant admits having received the monetary award in the amount of P449,062.98
from the corporation in satisfaction of this Courts ruling in G.R. No. 126561 but
contends that the award cannot be considered a cash bond for the appeal
memorandum before the NLRC as the same was computed until 24 November 1999
only and he has a right to the award because his case had long become final and
executory.

Thus, complainant asserts that his constitutional right to due process has been seriously
violated by Bartolabac and Quimpo.

On 22 April 2002, this Court issued a Resolution9 requiring respondents to file their
respective comments on the complaint within ten (10) days from notice.

In his comment10 filed on 4 July 2002, Bartolabac states that the present complaint is a
rehash of several complaints against him which complainant filed before different fora,
including this Court and the Office of the Ombudsman.

As to the issue of monetary award and reinstatement due the complainant, Bartolabac
argues that the records of G.R. No. 126561 reveal that the corporation had already
released to complainant the sum of P297,930.75 as cash bond deposit. The amount
of P449,062.98 had been deposited to the cashier of the NLRC. Out of the said
remaining amount, Bartolabac directed the release of P250,660.62 to complainant. The
remaining balance of P198,402.36 was to answer for complainants MEDICARE and
SSS contributions, withholding tax, loans, etc., which had yet to be determined at that
time. Bartolabac gave both parties the opportunity to dispute or defend their respective
claims but complainant failed to cooperate either by not attending the scheduled hearing
called for that purpose on 27 March 2000, or by failing to file controverting evidence to
dispute the claimed deductions by the corporation.11

Before Bartolabac could adjudicate the proper monetary award for complainant, the
latter filed a complaint against him before the Office of the Ombudsman for oppression
and grave misconduct. Due to this supervening event, Bartolabacs sense of propriety
compelled him to inhibit himself from further participating in the adjudication of the
remaining balance of P198,402.36. But most importantly, he adds, the case was re-
raffled to Labor Arbiter Gaudencio P. Demaisip, Jr. who awarded the whole amount
of P449,062.36 which complainant has already received.
Offering another perspective of the case at bar, Bartolabac avers that after the Supreme
Court had rendered its decision in G.R. No. 126561 on 8 July 1998, the case was re-
raffled to Labor Arbiter Renell Joseph R. Dela Cruz for the satisfaction of judgment. At
that point, the exact monetary award and reinstatement aspects were raised. Both
parties submitted conflicting computations on the monetary award. The corporation also
asserted that they had abolished the position of warehouseman and there was no
substantially equivalent vacant position. Labor Arbiter Dela Cruz then ordered the
parties to submit their respective position papers but eleven (11) days thereafter, said
labor arbiter issued an order inhibiting himself from handling the case as he allegedly
could not bear with complainant dictating the rules of the proceedings.12

The labor case was re-raffled to Bartolabac on 20 April 1999. Unaware of the pending
motion for reconsideration of the corporation in G.R. No. 126561 where the feasibility of
reinstatement was at issue, he issued an order on 24 June 1999 ruling out
complainants reinstatement, awarding separation pay instead and the amount
of P573,228.00 (less necessary deductions) as backwages.

As a consequence, this Court on 17 November 1999 reproached Bartolabac for


completely disregarding the corporations motion for reconsideration with this Court,
directing him to order complainants reinstatement and payment of backwages, moral
damages, exemplary damages and attorneys fees, and requiring him to explain in
writing why he should not be punished for indirect contempt for his handling of the case
and defiance of the Courts directives. Bartolabac complied by filing his manifestation
stating that his office was not furnished with a copy of the motion for reconsideration.
His act of adjudicating the issue of reinstatement was impelled by the sense of urgency
on the matter since he received a letter signed by complainant and a Memo from the
NLRC Chairman referring the complainants letter to him for appropriate action. 13 Both
letters sought the immediate disposition of his labor case.14

Based on the foregoing, Bartolabac maintains that complainant engaged in forum-


shopping for while complainant knew of the existence of the corporations motion for
reconsideration with this Court, he remained insistent that Bartolabac resolve the
reinstatement issue.15

He also stresses that he did not incur delay in the disposition of the labor case. After he
received the 17 November 1999 Resolution of this Court on 22 November 1999, he
issued an alias writ of execution on 24 November 1999 directing the sheriff to garnish
the amount of P449,062.98 and to cause the reinstatement of complainant to a
substantially equivalent position. When the sheriff returned the writ unsatisfied for failure
of the corporation to comply with the reinstatement aspect as the open positions were
only for pharmacist, pharmacy assistant, cashier and self-service attendant, he lost no
time in resolving that, while the first three positions need college graduates, the self-
service attendant position may be sufficiently performed by complainant even though he
is not a college graduate.16

Lastly, Bartolabac declares that with the filing of the appeal from the order of
reinstatement with the NLRC, he lost jurisdiction over the issue.

For his part, Quimpo alleges that his inclusion in the present administrative case was
due to his participation in disposing of the corporations appeal on the issue of
complainants reinstatement as self-service attendant. He asserts that by law, the
Commission has exclusive appellate jurisdiction to hear and decide all decisions,
awards or orders rendered by the labor arbiter.17 He adds that said authority was even
tacitly recognized by the Court in its Resolution dated 7 June 2000 in relation to G.R.
No. 126561. The pertinent portions of the resolution read:

"On the issue of reinstatement, the Labor Arbiter issued an Order on April 5, 2000,
directing the private respondent to reinstate petitioner to the position of self-service
attendant. The reinstatement order was impugned by the private respondent as the
petitioner was allegedly not qualified for the position and there was already strained
relations between the parties. The reinstatement order is now pending appeal before
the NLRC.

As the NLRC has acquired jurisdiction over the issue of petitioners reinstatement and
the amount of deduction on petitioners monetary award is subject to proof and/or
dispute by the respective parties before the Labor Arbiter, the letter-complaints of the
petitioner are thus hereby NOTED.

IN VIEW THEREOF, Labor Arbiter Geobel A. Bartolabac is hereby directed to


determine with dispatch the amount still owning the petitioner, if any, and to see to it
that no further delay would hamper the proceedings before him. Public respondent
NLRC, on the other hand, is requested to expedite the proceedings before it on the
issue of petitioners reinstatement.18

Hence, Quimpo adds, the NLRC did not abuse its discretion when it assumed
jurisdiction over the corporations appeal.

Quimpo likewise explains that in resolving the appeal, he took judicial notice of the
various resolutions issued by this Court and with utmost good faith and fidelity tried to
implement the directive to reinstate the complainant to his former position or to a
substantially equivalent position. However, due to certain supervening events that
transpired after the resolution of the labor case and up to the time of execution,
reinstatement had become improbable and so it was the ruling of the Commission that
separation pay instead of reinstatement would be the most logical, sensible and
practical solution.19

As to complainants claim that he was not furnished a copy of the corporations appeal
memorandum, records show that a copy of the appeal memorandum was furnished his
counsel and in any event, complainant admitted his knowledge of the existing appeal
when he filed a Reiteration of Motion to Release Monetary Award dated 20 June 2000,
arguing that his monetary award should be released to him since only the issue of
reinstatement is being appealed to the Commission.20

Furthermore, Quimpo states that complainant filed a similar complaint with the Office of
the Ombudsman for neglect of duty but the same was dismissed. Complainants motion
for reconsideration was denied with finality on 21 February 2002. Complainants act of
re-filing another administrative complaint is designed primarily to harass and intimidate
him.21

He also notes that complainant already received the full satisfaction of his monetary
award which only shows that the Commission has complied in good faith with the
directive to execute the judgment award in favor of complainant.22

Without waiting for this Courts action, complainant filed his Reply to Both
Respondent[s] Comments23 on 23 July 2002. He substantially reiterates the arguments
he made in his complaint.

On 19 August 2002, this Court resolved, among others, to refer this case to the
Integrated Bar of the Philippines (IBP) for investigation, report and recommendation. On
6 May 2003, the IBP submitted its resolution adopting and approving the report and
recommendation of Investigating Commissioner Lydia A. Navarro dismissing the
complaint against respondents.24

Complainant filed a motion for reconsideration with the IBP but it was subsequently
denied since the matter had already been endorsed to this Court and the IBP no longer
had jurisdiction over the case.25

We nonetheless resolve to treat the motion for reconsideration as a petition for review
on certiorari of the IBP resolution.26

We now go to the main issue at bar, i.e., whether or not respondents are liable for their
acts in deviating from the final and executory judgment of this Court in G.R. No. 126561.
The Court is unyielding in its adjudication that complainant must be reinstated to his
former position as warehouseman or to a substantially equivalent position. This was
stated in its Decision dated 8 July 1998, reiterated in the Resolution dated 5 July 1999,
and again stressed in the Resolution dated 17 November 1999. In the latter resolution, it
was particularly expressed that:

Indeed, private respondents [Mercury Drug Corporation] contention, as erroneously


upheld by the labor arbiter, that there is no substantially equivalent position for
petitioners reinstatement has been categorically discounted by this Court. We took
judicial notice of the fact that private respondent Mercury Drug Corporation operates
nationwide and has numerous branches all over the Philippines. Petitioner, as
warehouseman, occupied a clerical/rank and file position in said company and we find it
highly inconceivable that no other substantially equivalent position exists to effect his
reinstatement.27

Clearly, the Court is unwilling to accept the corporation and respondent labor arbiters
reason that reinstatement is no longer feasible because the position of warehouseman
had already been abolished and there is no substantially equivalent position in the
corporation.

Both respondents labor arbiter and commissioner do not have any latitude to depart
from the Courts ruling. The Decision in G.R. No. 126561 is final and executory and may
no longer be amended. It is incumbent upon respondents to order the execution of the
judgment and implement the same to the letter. Respondents have no discretion on this
matter, much less any authority to change the order of the Court. The acts of
respondent cannot be regarded as acceptable discretionary performance of their
functions as labor arbiter and commissioner of the NLRC, respectively, for they do not
have any discretion in executing a final decision. The implementation of the final and
executory decision is mandatory.

As held in Siy v. National Labor Relations Commission and Embang: 28

Once the case is decided with finality, the controversy is settled and the matter is laid to
rest. The prevailing party is entitled to enjoy the fruits of his victory while the other party
is obliged to respect the courts verdict and to comply with it. We reiterate our
pronouncement in Salicdan v. Court of Appeals:29

well-settled is the principle that a decision that has acquired finality becomes
immutable and unalterable and may no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will
be made by the court that rendered it or by the highest court of the land.
The reason for this is that litigation must end and terminate sometime and somewhere,
and it is essential to an effective and efficient administration of justice that, once a
judgment has become final, the winning party be not deprived of the fruits of the verdict.
Courts must guard against any scheme calculated to bring about that result and must
frown upon any attempt to prolong the controversies.

The Court recognizes Bartolabacs efforts to adjudicate and advance the cause of
complainant, albeit erroneously. In his desire to settle the issue of reinstatement, he
determined that complainant, a high school graduate, be appointed to the position of
self-service attendant which requires the appointee to hold a college degree, since the
corporation "failed to rationalize the need for a college graduate for the position of self-
service attendantandcomplainant has exhibited before [the NLRC] that he has a
reasonable degree of comprehension to understand and perform the functions of a self-
service attendant."30 Complainant had pointed out several job openings31 in the
corporation to which he would be qualified, but respondent made no effort to verify it.
Instead, he took at face value the corporations representation that there were limited
vacancies. It is inconceivable that a company as large as the corporation, operating
nationwide, could not accommodate complainant and appoint him to one of its
numerous rank and file positions.

Again, we are unceasing in emphasizing that the decision in the labor case has become
final and executory since 1999. There can be no justification for the overturning of the
Courts reinstatement order by the NLRC First Division and full satisfaction of the
monetary award of only three (3) years after the finality of the judgment.lawphil.net

The Court is not wont to compel the corporation to instantly restore the position of
warehouseman if it has been already abolished. Indeed, the Court granted that
complainant could be reinstated to a substantially equivalent or similar position as a
viable alternative for the corporation to carry out.lavvphil.net

Our Constitution mandates that no person shall be deprived of life, liberty, and property
without due process of law.32 It should be borne in mind that employment is considered
a property right and cannot be taken away from the employee without going through
legal proceedings. In the instant case, respondents wittingly or unwittingly dispossessed
complainant of his source of living by not implementing his reinstatement. In the
process, respondents also run afoul of the public policy enshrined in the Constitution
ensuring the protection of the rights of workers and the promotion of their welfare. 33

As a final word, we note that the IBPs report and recommendation falls far short of the
Courts expectations. After a lengthy account of the allegations of the parties, the
investigating commissioner concluded its report with a two-paragraph uncommendably
bare exoneration, thus:

A detailed examination and evaluation of the evidence submitted by the parties showed
that respondents Labor Arbiter Geobel A. Bartolabac and Commissioner Alberto R.
Quimpo only performed the duties required of them under the Rules and Procedure of
Law particularly that pertaining to the NLRC Rules and Procedures and the Labor Code;
as Labor Arbiter and Commissioner.

In fact, complainants complaints against them before the Ombudsman relative to the
same case were dismissed with finality which office has jurisdiction over respondents
relative to the performance of their duties as Labor Arbiter and Commissioner and not
on a lawyer-client relationship nor on the practice of the professions as lawyer or
members of the Bar.34

How the IBP investigating commissioner arrived at that supposition or in what manner
were the acts of herein respondents regularly done cannot be extracted from its scanty
determination.

WHEREFORE, premises considered, the Court finds respondents liable for violating
Canon 1 and Rule 1.01 of the Code of Professional Responsibility. Respondents Labor
Arbiter Geobel A. Bartolabac and Commissioner Alberto R. Quimpo are hereby
SUSPENDED from the practice of law for a period of THREE (3) months.

Let a copy of this Resolution be furnished the Bar Confidant for appropriate annotation
on the records of the respondents.

SO ORDERED.

DANTE O. TINGA
Associate Justice

Central Pangasinan Elec. Corp vs. Macaraeg, 395 SCRA 720,


GR No. 145800, Jan. 22, 2003
THIRD DIVISION

[G.R. No. 145800. January 22, 2003]


CENTRAL PANGASINAN ELECTRIC COOPERATIVE, INC., petitioner, vs. GERONIMA
MACARAEG and MARIBETH DE VERA, respondents.

DECISION
PUNO, J.:

In this petition for review on certiorari, petitioner Central Pangasinan Electric


Cooperative, Inc. challenges the decision of the Court of Appeals in CA-G.R. SP No.
55128 affirming the decision of the voluntary arbitrator in NCMB-RBI-PM-VA-5-03-99
ordering the reinstatement of respondents to petitioners employ and payment of their
backwages.
Petitioner is an electric cooperative duly organized and existing under Philippine
laws. Respondent Geronima Macaraeg and Maribeth de Vera are employees of petitioner
at its office in Area V, Bayambang, Pangasinan. Respondent de Vera was employed as
teller whose primary duty was to accept payments from petitioners consumers in
Bayambang and remit her collections to the cashier, herein co-respondent Geronima
Macaraeg. Respondent Macaraegs duty was to deposit the daily collections of the office
to petitioners account at the Rural Bank of Central Pangasinan in Bayambang.
From January 1998 to January 1999, respondent de Vera accommodated and
encashed the crossed checks of her sister, Evelyn Joy Estrada. Evelyn issued two
hundred eleven (211) crossed checks amounting to P6,945,128.95 payable to petitioner
cooperative despite the absence of any transaction or any outstanding obligation with
petitioner. In turn, respondent de Vera, with the knowledge and consent of respondent
Macaraeg, paid the full value of these checks from the cash collections of petitioner. At
the end of the day, respondents credited the checks as part of their collection and
deposited the same together with their cash collection to the account of petitioner at the
Rural Bank of Central Pangasinan.
Sometime in January 1999, petitioner, through its Finance Department, noticed that
several checks payable to petitioner from the collections in the Area V office were returned
due to insufficiency of funds.
On January 19, 1999, Josefina Mandapat, Sandra Frias and Marites Radac,
petitioners Finance Manager, Chief Accountant and Legal Assistant, respectively,
confronted respondents with their discovery. Respondent de Vera admitted that the
checks were issued by her sister and that she encashed them from the money collected
from petitioners customers.
On January 21, 1999, Mrs. Josefina Mandapat submitted a memorandum to
petitioners General Manager, Salvador M. de Guzman, detailing their findings about the
bounced checks. On February 2, 1999, she submitted an addendum to her memorandum.
On February 4, 1999, petitioner, through de Guzman, issued a memorandum to
respondents placing them under preventive suspension and requiring them to explain in
writing within forty-eight (48) hours why they misappropriated cooperative funds. In the
same communication, a hearing was set on February 13, 1999 at 9:30 a.m. at the Board
Room of petitioner before Atty. Teodoro Fernandez.
In their respective Answers/Explanations, respondents denied having
misappropriated the funds of petitioner cooperative. They alleged that: (1) the checks that
bounced were redeposited with the Rural Bank of Central Pangasinan; (2) the amount
representing the face value of the checks had been used by petitioner as of December
15, 1998; (3) there was never any shortage in the cooperative money or funds in their
possession; and (4) they never violated any policy of the cooperative and on the contrary,
they have been very religious in remitting the funds and money of petitioner.[1]
At the scheduled hearing on February 13, 1999, respondents, with assistance of
counsel, appeared before Atty. Teodoro Fernandez. Respondent de Vera testified and
admitted that she encashed the checks of Evelyn Joy Estrada because the latter is her
older sister and that she has a soft spot for her; that Mrs. Estrada owns a sash factory
and that she merely wanted to help her sister meet her business obligations; that
sometime in November 1998, Mrs. Marites Radoc, Chief Accountant of petitioner, called
her attention to one check which bounced thrice; that this check was eventually replaced
by her sister with cash; that despite the bouncing of some other checks, all checks were
eventually funded and paid to petitioner, hence, petitioner incurred no losses in its
collections; that she has worked for petitioner for nineteen (19) years and this is the first
time she has been charged administratively by petitioner.
Respondent Macaraeg admitted that she knew of the accommodations given by
respondent de Vera to her sister; that she allowed her subordinate to do it because
respondent de Vera is her kumare, and that she knew that Mrs. Estradas checks were
sufficiently funded. She worked for petitioner for twenty-two (22) years and has never had
an administrative charge.
Mrs. Josefina Mandapat, Finance Manager of petitioner, testified as petitioners
witness. She stated that she prepared a report on the findings of their accountant
regarding the encashment of Evelyn Joy Estradas checks, and that the encashment of
said checks is prohibited under an office memorandum.
On March 10, 1999, Atty. Fernandez submitted his findings to the General Manager
of petitioner. On March 19, 1999, on the basis of said findings and recommendation, the
General Manager issued to respondents separate notices of termination, effective April
9, 1999, for serious misconduct, and breach of trust and confidence reposed on them by
management.[2]
Respondents, with the help of the President and representative of the Union, Central
Pangasinan Electric Cooperative (CENPELCO) Employees Association-Tupas Local
Chapter No. R01-0012, questioned their dismissal before the National Conciliation and
Mediation Board (NCMB). They claimed that their dismissal was without just cause and
in violation of the Collective Bargaining Agreement (CBA), which requires that the case
should first be brought before a grievance committee. Eventually, the parties agreed to
submit the case to a voluntary arbitrator for arbitration.
On August 12, 1999, the voluntary arbitrator rendered a decision in favor of
respondents, viz.:

WHEREFORE, in view of the foregoing, the undersigned arbitrator finds and so holds:

(1) That the parties failed to comply with the provisions of the GRIEVANCE
PROCEDURE of the Collective Bargaining Agreement;

(2) Reinstate immediately upon receipt of the Decision complainants GERONIMA


MACARAEG and MARIBETH DE VERA to their former positions without loss of
seniority rights;

(3) Pay complainants their backwages to be reckoned from the time their employment
has been [sic] illegally terminated up to their actual reinstatement based on their last
salary.

Parties are hereby enjoined to be faithful with their commitment to abide by this
Decision which under their Collective Bargaining Agreement is final, executory and not
subject to appeal.

SO ORDERED.[3]

Petitioner appealed to the Court of Appeals via a petition for review. On August 17,
2000, the Court of Appeals rendered a decision dismissing the petition and affirming the
decision of the voluntary arbitrator. Hence, the present course of action.
Petitioner claims that:

(1) The Honorable Court of Appeals gravely abused its discretion in finding that the
procedure leading to the termination of respondents Maribeth de Vera and Geronima
Macaraeg was in violation of the provisions of the Collective Bargaining Agreement
(CBA) particularly Steps 1-4, Article XIII of the said Agreement.

(2) The Honorable Court of Appeals gravely abused its discretion in holding that
petitioner illegally terminated the services of herein private respondents. [4]
The petition is impressed with merit.
At the outset, we hold that the first issue raised in the petition pertaining to the alleged
violation of the CBA grievance procedure is moot and academic. The parties active
participation in the voluntary arbitration proceedings, and their failure to insist that the
case be remanded to the grievance machinery, shows a clear intention on their part to
have the issue of respondents illegal dismissal directly resolved by the voluntary
arbitrator. We therefore find it unnecessary to rule on the matter in light of their preference
to bring the illegal dismissal dispute to voluntary arbitration without passing through the
grievance machinery.
This leads us to the next issue of whether respondents were validly dismissed. To
constitute a valid dismissal from employment, two requisites must be met, namely: (1) it
must be for a just or authorized cause, and (2) the employee must be afforded due
process.[5]
We hold that there exist a valid reason to dismiss both employees. Article 282(c) of
the Labor Code allows an employer to dismiss employees for willful breach of trust or loss
of confidence.[6] Proof beyond reasonable doubt of their misconduct is not required, it
being sufficient that there is some basis for the same or that the employer has reasonable
ground to believe that they are responsible for the misconduct and their participation
therein rendered them unworthy of the trust and confidence demanded of their position.[7]
To be sure, the acts of the respondents were clearly inimical to the financial interest
of the petitioner. During the investigation, they admitted accommodating Evelyn Joy
Estrada by encashing her checks from its funds. They did so without petitioners
knowledge, much less its permission. These inimical acts lasted for more than a year,
and probably would have continued had it not been discovered in time. All along, they
were aware that these acts were prohibited by the Coop Checks Policy. [8] Clearly, there
was willful breach of trust on the respondents part, as they took advantage of their highly
sensitive positions to violate their duties.
Moreover, the acts of the respondents caused damage to the petitioner. During those
times the checks were illegally encashed, petitioner was not able to fully utilize the
collections, primarily in servicing its debts. In her memorandum[9] dated January 21, 1999,
Finance Manager Josefina Mandapat reported how petitioner is prejudiced, thus:
Though the checks were funded, it constitutes a violation of Coop Policy. Checks that
are covered even by local clearing only take three days to be converted to cash and when
returned another three (3) days to retry clearing. The cooperative is deprived of the
privilege to maximize use of its collections primarily in servicing its debts considering the
state of calamity and even at the moment wherein we worry every time if we can
payoff (sic) our NAPOCOR power bill.[10]
It is not material that they did not misappropriate any amount of money, nor incur any
shortage relative to the funds in their possession.[11] The basic premise for dismissal on
the ground of loss of confidence is that the employees concerned hold positions of
trust. The betrayal of this trust is the essence of the offence for which an employee is
penalized.[12] In the case at bar, the respondents held positions of utmost trust and
confidence. As teller[13] and cashier,[14] respectively, they are expected to possess a high
degree of fidelity. They are entrusted with a considerable amount of cash. Respondent
de Vera accepted payments from petitioners consumers while respondent Macaraeg
received remittances for deposit at petitioners bank. They did not live up to their duties
and obligations.
Nor is there any doubt that petitioner observed procedural due process in dismissing
the respondents. In separate memoranda dated February 4, 1999 and signed by the
General Manager ( de Guzman), the respondents were both appraised of the particular
acts or omissions constituting the charges against them. They gave their own
answer/explanation to the charges. They participated in the investigation conducted at
petitioners board room on February 13, 1999 at 11:30 a.m. They were represented by
counsel during the investigation. Finally, notices were sent to them on March 19, 1999,
informing them of the basis of their termination. In fine, private respondents were given
due process before they were dismissed. Time and again, we have stressed that due
process is simply an opportunity to be heard.[15]
We are aware that the respondents Macaraeg and de Vera have been employed with
the petitioner for 22 and 19 years of continuous service, respectively, and this is the first
time that either of them has been administratively charged. Nonetheless, it is our
considered view that their dismissal is justified considering the breach of trust they have
committed. Well to emphasize, the longer an employee stays in the service of the
company, the greater is his responsibility for knowledge and compliance with the norms
of conduct and the code of discipline in the company. [16] Considering that they have
mishandled the funds of the cooperative and the danger they have posed to its members,
their reinstatement is neither sound in reason nor just in principle. It is irreconcilable with
trust and confidence that has been irretrievably lost.[17]
IN VIEW WHEREOF, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 55128 (affirming the decision of the voluntary
arbitrator in NCMB-RBI-PM-VA-5-03-99) are reversed and set aside.
SO ORDERED
Panganiban, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.
Azcor Manufacturing vs. NLRC, 303 SCRA 26,
GR 122046, January 16, 1998

SECOND DIVISION

[G.R. No. 117963. February 11, 1999]

AZCOR MANUFACTURING INC., FILIPINAS PASO and/or ARTURO


ZULUAGA/Owner, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC) AND CANDIDO CAPULSO, respondents.

DECISION
BELLOSILLO, J.:

AZCOR MANUFACTURING, INC., Filipinas Paso and Arturo Zuluaga instituted this
petition for certiorari under Rule 65 of the Rules of Court to assail, for having been
rendered with grave abuse of discretion amounting to lack or excess of jurisdiction, the
Decision of the National Labor Relations Commission which reversed the decision of the
Labor Arbiter dismissing the complaint of respondent Candido Capulso against
petitioners.[1]
Candido Capulso filed with the Labor Arbiter a complaint for constructive illegal
dismissal and illegal deduction of P50.00 per day for the period April to September
1989. Petitioners Azcor Manufacturing, Inc. (AZCOR) and Arturo Zuluaga who were
respondents before the Labor Arbiter (Filipinas Paso was not yet a party then in that case)
moved to dismiss the complaint on the ground that there was no employer-employee
relationship between AZCOR and herein respondent Capulso; that the latter became an
employee of Filipinas Paso effective 1 March 1990 but voluntarily resigned therefrom a
year after. Capulso later amended his complaint by impleading Filipinas Paso as
additional respondent before the Labor Arbiter.
On 14 January 1992, Labor Arbiter Felipe T. Garduque II denied the motion to dismiss
holding that the allegation of lack of employer-employee relationship between Capulso
and AZCOR was not clearly established. Thereafter, the Labor Arbiter ordered that
hearings be conducted for the presentation of evidence by both parties.
The evidence presented by Capulso showed that he worked for AZCOR as ceramics
worker for more than two (2) years starting from 3 April 1989 to 1 June 1991 receiving a
daily wage of P118.00 plus other benefits such as vacation and sick leaves. From April
to September 1989 the amount of P50.00 was deducted from his salary without informing
him of the reason therefor.
In the second week of February 1991, upon his doctors recommendation, Capulso
verbally requested to go on sick leave due to bronchial asthma. It appeared
that his illness was directly caused by his job as ceramics worker where, for lack of the
prescribed occupational safety gadgets, he inhaled and absorbed harmful ceramic
dusts. His supervisor, Ms. Emily Apolinaria, approved his request. Later, on 1 June 1991,
Capulso went back to petitioner AZCOR to resume his work after recuperating from his
illness. He was not allowed to do so by his supervisors who informed him that only the
owner, Arturo Zuluaga, could allow him to continue in his job. He returned five (5) times
to AZCOR but when it became apparent that he would not be reinstated, he immediately
filed the instant complaint for illegal dismissal.[2]
Capulso presented the following documentary evidence in support of his claim: (a)
His affidavit and testimony to prove that he was terminated without just cause and without
due process;[3] (b) Identification card issued by AZCOR which he continued to use even
after his supposed employment by Filipinas Paso;[4] (c) Certification of SSS premium
payments;[5](d) SSS Member Assistance Form wherein he stated that he worked with
AZCOR from March 1989 to April 1991;[6] (e) Certification of Employee Contribution with
SSS;[7] and, (f) Payslips issued by AZCOR.[8]
On the other hand, petitioners alleged that Capulso was a former employee of
AZCOR who resigned on 28 February 1990 as evidenced by a letter of resignation and
joined Filipinas Paso on 1 March 1990 as shown by a contract of employment; in February
1991 Capulso allegedly informed his supervisor, Ms. Emilia Apolinaria, that he intended
to go on terminal leave because he was not feeling well; on 1 March 1991 he submitted
a letter of resignation addressed to the President of Filipinas Paso, Manuel Montilla; and,
in the early part of June 1991 Capulso tried to apply for work again with Filipinas Paso but
there was no vacancy.
Petitioners submitted the following documentary evidence: (a) Sworn Statement of
Ms. Emilia Apolinaria and her actual testimony to prove that respondent indeed resigned
voluntarily from AZCOR to transfer to Filipinas Paso, and thereafter, from Filipinas Paso
due to failing health;[9] (b) Contract of Employment between Filipinas Paso and
respondent which took effect 1 March 1991;[10] (c) Letter of resignation of respondent from
AZCOR dated 28 February 1990, to take effect on the same date;[11] (d) Undated letter of
resignation of respondent addressed to Filipinas Paso to take effect 1 March 1991;[12] (e)
BIR Form No. W-4 filed 6 June 1990;[13] (f) Individual Income Tax Return of respondent
for 1990;[14] and, (g) BIR Form 1701-B which was an alphabetical list of employees of
Filipinas Paso for the year ending 31 December 1990.[15]
On 29 December 1992 the Labor Arbiter rendered a decision dismissing the
complaint for illegal dismissal for lack of merit, but ordered AZCOR and/or Arturo Zuluaga
to refund to Capulso the sum of P200.00 representing the amount illegally deducted from
his salary.
On appeal by Capulso, docketed as NLRC CA No. 004476-93 (NLRC NCR 00-09-
05271-91), "Capulso v. Azcor Manufacturing Inc., Filipinas Paso and/or Arturo
Zuluaga/owner," the NLRC modified the Labor Arbiters decision by: (a) declaring the
dismissal of Capulso as illegal for lack of just and valid cause; (b) ordering petitioners to
reinstate Capulso to his former or equivalent position without loss of seniority rights and
without diminution of benefits; and, (c) ordering petitioners to jointly and solidarily pay
Capulso his back wages computed from the time of his dismissal up to the date of his
actual reinstatement. The NLRC held in part -

x x x x the contract of employment (Exh. 2, p. 187, Rollo) issued to complainant


indicates that the work to be done during the period was contracted with Filipinas Paso.
The said contract was signed by the Personnel Officer of Ascor Manufacturing Inc.
Likewise, the contract period is for six (6) months, which establishes a presumption that
the said contract could pass either as to cover the probationary period, or job
contracting, the completion of which automatically terminates employment, whichever
will work to respondents advantage should the case be filed. However, appellant
continued working with respondent after the lapse of the contract and until the alleged
termination of employment of appellant.

Secondly, the two resignation letters allegedly executed by appellant are exactly
worded, which only shows that the same were prepared by respondents-appellees plus
after the fact that complainant denied having executed and signed the same.

x x x x the letter of resignation (Exh. 3, p. 188, Rollo) supposed to have been executed
by complainant-appellant shows that he resigned from Ascor Mfg., Inc. on February 28,
1990 while Exhibit 2, page 187, Rollo, which was the contract of Employment issued to
Candido Capulso by the personnel officer of Ascor Mfg., Inc. shows that appellant was
being hired from March 1, 1990 to August 31, 1990 by respondent Ascor Mfg., Inc. to do
jobs for Filipinas Paso. A run-around of events and dates.

The events that transpired clearly show that there was no interruption in the service of
complainant with Ascor Mfg., Inc. from April 13 1989 up to June 1, 1991 when
complainant was unceremoniously dismissed.

Considering that Ascor Mfg., Inc. and Filipinas Paso orchestrated the events that
appeared to be in order with the alleged execution of resignation letters which was
disputed by complainant and confirmed spurious as explained above, likewise
overwhelmingly show the bad faith of respondents in the treatment of their employees.

Petitioners motion for reconsideration was denied by the NLRC through its Resolution
of 14 October 1994; hence, the instant petition. Meanwhile, during the pendency of the
case before this Court, Capulso succumbed to asthma and heart disease.
The issue to be resolved is whether the NLRC committed grave abuse of discretion
in declaring that private respondent Capulso was illegally dismissed and in holding
petitioners jointly and solidarily liable to Capulso for back wages.
As a rule, the original and exclusive jurisdiction to review a decision or resolution of
respondent NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not
include a correction of its evaluation of the evidence but is confined to issues of jurisdiction
or grave abuse of discretion. The NLRCs factual findings, if supported by substantial
evidence, are entitled to great respect and even finality, unless petitioner is able to show
that it simply and arbitrarily disregarded the evidence before it or had misappreciated the
evidence to such an extent as to compel a contrary conclusion if such evidence had been
properly appreciated.[16] We find no cogent reason to disturb the findings of the NLRC.
Petitioners insist that Capulso was not really dismissed but he voluntarily resigned
from AZCOR and Filipinas Paso, and that there was nothing illegal or unusual in the
letters of resignation he executed.
We disagree. To constitute a resignation, it must be unconditional and with the
intent to operate as such. There must be an intention to relinquish a portion of the term
of office accompanied by an act of relinquishment.[17] In the instant case, the fact that
Capulso signified his desire to resume his work when he went back to petitioner AZCOR
after recuperating from his illness, and actively pursued his case for illegal dismissal
before the labor courts when he was refused admission by his employer, negated any
intention on his part to relinquish his job at AZCOR.
Moreover, a closer look at the subject resignation letters readily reveals the
following: (a) the resignation letter allegedly tendered by Capulso to Filipinas Paso was
identically worded with that supposedly addressed by him to AZCOR; (b) both were pre-
drafted with blank spaces filled up with the purported dates of effectivity of his resignation;
and, (c) it was written in English, a language which Capulso was not conversant with
considering his low level of education. No other plausible explanation can be drawn from
these circumstances than that the subject letters of resignation were prepared by a
person or persons other than Capulso. And the fact that he categorically disowned the
signatures therein and denied having executed them clearly indicates that the resignation
letters were drafted without his consent and participation.
Even assuming for the sake of argument that the signatures were genuine, we still
cannot give credence to those letters in the absence of any showing that Capulso
was aware that whathe was signing then were in fact resignation letters or that he fully
understood the contents thereof. Having introduced those resignation letters in evidence,
it was incumbent upon petitioners to prove clearly and convincingly their genuineness
and due execution, especially considering the serious doubts on their
authenticity. Petitioners miserably failed in this respect.
The Labor Arbiter held that Capulsos repudiation of the signatures affixed in the
letters of resignation was weakened by the fact that he filed the case only after almost
four (4) months from the date of his dismissal. But it should be noted that private
respondent still wanted his job and thus, understandably, refrained from filing the illegal
dismissal case against his employer so as not to jeopardize his chances of continuing
with his employment. True enough, when it became apparent that he was no longer
welcome at AZCOR he immediately instituted the instant case.
In addition, an action for reinstatement by reason of illegal dismissal is one based on
an injury which may be brought within four (4) years from the time of dismissal pursuant
to Art. 1146 of the Civil Code. Hence, Capulsos case which was filed after a measly delay
of four (4) months should not be treated with skepticism or cynicism. By law and settled
jurisprudence, he has four (4) years to file his complaint for illegal dismissal. A delay of
merely four (4) months in instituting an illegal dismissal case is more than sufficient
compliance with the prescriptive period. It may betray an unlettered mans lack of
awareness of his rights as a lowly worker but, certainly, he must not be penalized for his
tarrying.
In illegal dismissal cases like the present one, the onus of proving that the dismissal
of the employee was for a valid and authorized cause rests on the employer[18] and failure
to discharge the same would mean that the dismissal is not justified and therefore
illegal.[19] Petitioners failed in this regard.
Petitioners also contend that they could not be held jointly and severally liable to
Capulso for back wages since AZCOR and Filipinas Paso are separate and distinct
corporations with different corporate personalities; and, the mere fact that the businesses
of these corporations are interrelated and both owned and controlled by a single
stockholder are not sufficient grounds to disregard their separate corporate entities.
We are not persuaded. The doctrine that a corporation is a legal entity or a person in
law distinct from the persons composing it is merely a legal fiction for purposes of
convenience and to subserve the ends of justice. This fiction cannot be extended to a
point beyond its reason and policy.[20] Where, as in this case, the corporate fiction was
used as a means to perpetrate a social injustice or as a vehicle to evade obligations or
confuse the legitimate issues, it would be discarded and the two (2) corporations would
be merged as one, the first being merely considered as the
instrumentality, agency, conduit or adjunct of the other.[21]
In this particular case, there was much confusion as to the identity of Capulsos
employer - whether it was AZCOR or Filipinas Paso; but, for sure, it was petitioners' own
making, as shown by the following: First, Capulso had no knowledge that he was already
working under petitioner Filipinas Paso since he continued to retain his AZCOR
Identification card; Second, his payslips contained the name of AZCOR giving the
impression that AZCOR was paying his salary; Third, he was paid the same salary and
he performed the same kind of job, in the same work area, in the same location, using
the same tools and under the same supervisor; Fourth, there was no gap in his
employment as he continued to work from the time he was hired up to the last day of his
work; Fifth, the casting department of AZCOR where Capulso was working was abolished
when he, together with six (6) others, transferred to Filipinas Paso; and Sixth, the
employment contract was signed by an AZCOR personnel officer, which showed that
Capulso was being hired from 1 March 1990 to 31 August 1990 by AZCOR to do jobs for
Filipinas Paso. The employment contract provided in part:

The contract is for a specific job contract only and shall be effective for the period
covered, unless sooner terminated when the job contract is completed earlier or
withdrawn by client, or when the employee is dismissed for just and lawful causes
provided by law and the companys rules and regulations, in which case the employment
contract will automatically terminate.

As correctly observed by the NLRC, the contract was only for six (6) months, which
could pass either as a probationary period or a job contracting, the completion of which
automatically terminated the employment. Observe further, however, that respondent
continued working even after the lapse of the period in the contract - for whom it was not
clear. It may be asked: Was the six (6)-month period probationary in
nature, in which case, after the lapse of the period he became a regular employee of
Filipinas Paso? Or was the period job-contracting in character, in which case, after the
period he was deemed to have come back to AZCOR?
Interestingly, petitioners likewise argue that it was grave abuse of discretion for the
NLRC to hold them solidarily liable to Capulso when the latter himself testified that he
was not even an employee of Filipinas Paso.[22] After causing much confusion, petitioners
have the temerity to use as evidence the ignorance of Capulso in identifying his true
employer. It is evident from the foregoing discussion that Capulso was led into believing
that while he was working with Filipinas Paso, his real employer was AZCOR. Petitioners
never dealt with him openly and in good faith, nor was he informed of the developments
within the company, i.e., his alleged transfer to Filipinas Paso and the closure of AZCORs
manufacturing operations beginning 1 March 1990.[23] Understandably, he sued AZCOR
alone and was constrained to implead Filipinas Paso as additional respondent only when
it became apparent that the latter also appeared to be his employer.
In fine, we see in the totality of the evidence a veiled attempt by petitioners to deprive
Capulso of what he had earned through hard labor by taking advantage of his low level
of education and confusing him as to who really was his true employer - such a callous
and despicable treatment of a worker who had rendered faithful service to their company.
However, considering that private respondent died during the pendency of the case
before this Court, reinstatement is no longer feasible. In lieu thereof, separation pay shall
be awarded.With respect to the amount of back wages, it shall be computed from the time
of private respondents illegal dismissal up to the time of his death.
WHEREFORE, the petition is DISMISSED. The NLRC Decision of 12 September
1994 is MODIFIED. Petitioners AZCOR MANUFACTURING, INC., FILIPINAS PASO and
ARTURO ZULUAGA are ORDERED to pay, jointly and solidarily, the heirs of private
respondent Candido Capulso the amounts representing his back wages, inclusive of
allowances and other benefits, and separation pay to be computed in accordance with
law.
SO ORDERED.
Puno, Mendoza, Quisumbing, and Buena, JJ., concur.

Molina vs. Pacific Plans, 484 SCRA 498,

GR 165476, March 10, 2006


G.R. No. 165476 March 10, 2006

AGRIPINO V. MOLINA, Petitioner,


vs.
PACIFIC PLANS, INC., Respondent.

DECISION

CALLEJO, SR.,J.:

Before us is a Petition for Review on Certiorari assailing the Decision1 and


Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 81298 reversing the
Decision3 of the National Labor Relations Commission (NLRC) in NLRC-NCR (South)
Case No. 30-07-03393-01.
Pacific Plans, Inc. (PPI) is a domestic corporation engaged in the business of selling
pre-need plans, such as educational, pension, and memorial plans.4 It maintains
regional offices throughout the Philippines. At the time material to this case, Metro
Manila regional offices were divided into two sales divisions - the South Sales Division
and the North Sales Division. Metro Manila VI was part of the North Sales
Division.5 Among the corporate officers of PPI were Geoffrey Martinez, Executive Vice-
President for Finance; Luciano Abia, Senior Assistant Vice-President, Metro Manila
Marketing Division; and Atty. Manuel Reyes, the Head of the Legal Department.6 Roy
Padiernos then occupied the position of Regional Manager of Metro Manila VI. 7

PPI solicited subscribers and buyers of its pre-need plans through clusters of sales
associates. One of them was Ruth Padiernos, wife of Roy Padiernos.8

Sometime in October 1994, PPI hired Agripino Molina as Regional Manager of Metro
Manila VI, replacing Roy Padiernos who was promoted as First Vice-President for
Marketing Operations. As Regional Manager, Molina performed both administrative and
marketing functions, whose duties and responsibilities included the following:

a. formulating and recommending short and long range marketing plans for the
Region and executing approved plans;

b. generating new and conserving existing pre-need plan businesses;

c. motivating, training, and developing a dedicated and effective counselor force;

d. conducting researches to determine sales potentials and share of the market,


pricing, and profitability of Company's products, competition and the directing of
product development for the Region;

e. hiring and terminating counselors, unit managers or group managers in


accordance with policies previously laid out;

f. recommending the creation of additional positions or termination of services of


any employee within the Region;

g. recommending promotions or changes in salaries of personnel within the


Region and lateral shifts of supervisor, their assistants, understudies of positions
of equal rank;

h. training and developing understudies for each position within the Region to
provide immediate replacement whenever vacated;
i. changing methods and procedures not affecting the other Regions, provided,
however, that radical changes should first be cleared with [the] superior;

j. controlling the operations of the Region and establishing a system of periodic


work reporting;

k. coordinating the Regions activities with those of the other Regions;

l. keeping [the] superior informed of [the] Region's activities and specially of [the]
decision on matters for which he may be held responsible;

m. realizing the Companys objective for service, growth, and profit;

n. establishing and maintaining harmonious and dignified relationship with plan


holders, counselors, employees, the public, government instrumentalities, other
pre-need plan companies; [and]

o. further enhancing the prestige of the Company and maintaining its position of
leadership in its field.9

Since Metro Manila VI was consistently on top in terms of nationwide sales and
productivity, Molina was promoted Assistant Vice-President with the same functions as
those of a regional manager of the same sales region.10

Caritas Health Shield, Inc. (Caritas for brevity), a health maintenance organization
(HMO) engaged in selling health and hospitalization plans, was established on
December 16, 1998. Geoffrey Martinez resigned as Executive Vice-President of PPI
and became the President and Chief Executive Officer of Caritas. 11 Among the
incorporators and members of the Board of Directors were Luciano Abia and Atty.
Manuel Reyes.12 Molina was hired as Assistant Vice-President and Marketing Head of
Area 10. His wife, Fe Molina, was the head of a sales agency of Caritas.

In the meantime, from February 2000, there was a considerable decrease in the sales
output production of PPIs Metro Manila Region VI.13

On March 21, 2000, Molina received a Memorandum from PPI, through its Senior
Assistant Vice-President for Human Relations, Patricio A. Picazo, informing him that,
based on written reports, he committed the following: 1) recruiting and pirating activities
in favor of Caritas, in particular, initiating talks and enticing associates to join Caritas,
and a number of associates have already signed up; 2) he called for a meeting with his
associates sometime in November 1999, and solicited contributions from them for the
bill but later asked for reimbursement from the company; and 3) acts of misdemeanor
on several occasions, such as coming to the office under the influence of liquor,
initiating a smear campaign against PPI, and other acts inimical to the companys
interest.14 Molina was also required to submit, on March 23, 2000, a written explanation
why he should not be held administratively liable for said acts which, it opined, might
constitute conduct unbecoming of an officer, conflict of interest, and breach of trust and
confidence. Molina was also informed that he was preventively suspended pending
formal investigation effective immediately until April 24, 2000.15

In a letter addressed to Picazo dated March 22, 2000, Molina categorically denied the
acts attributed to him. He, however, requested that he be furnished with copies of the
alleged written reports to enable him to prepare the required written
explanation.16 However, instead of acceding to the request of copies of the written
reports, Picazo wrote a letter dated April 3, 2000, citing the particulars of the charges
against Molina, thus:

I. Conflict of Interest

1. Recruiting and pirating activities in favor of Caritas Health Shield, Inc.

* You have acted as conduit for Caritas in recruiting/pirating Mr.


Restie Acosta on March 04, 2000 and Ms. Eppie Acosta on March
06, 2000.

*Your failure to stop and/or tolerating your wife's activities in


recruiting for Caritas Ms. Lennie Gatmaitan who belongs to Ms.
Celeste Villena, a PPI GA.

II. Misappropriation of Funds

1. Solicitation of associates' personal funds in the amount of P200.00 per


person, to which 12 persons contributed for a total P2,400.00, for payment
of official function during the meeting held at Barrio Fiesta last November
27, 1999. Amount solicited was subsequently reimbursed from the
company but not returned to the associates concerned.

III. Dereliction of Duties

1. You failed to prevent associates from leaving the company in favor of


competitors, thus causing demoralization among your sales associates.

2. You even encouraged associates to transfer to Caritas.


IV. Conduct unbecoming of a Company Officer

1. Often reporting to office under the influence of liquor.

2. Sowing intrigue in the case of Vilma del Rosario which almost caused
her early retirement from the company and transfer to Caritas.

3. Sowing intrigues between Mr. Roy Padiernos and Mr. Abia.

4. Showing disrespect to immediate superior, Mr. Roy Padiernos, by


shouting at him and walking out in one of the meetings called by him after
the retirement of Atty. Haceta.17

During the investigation the following day, April 4, 2000, Molina reiterated his request to
be provided with a copy of the written reports.18 Picazo denied the request in a
Memorandum dated April 6, 2000, and reiterated his order for Molina to submit his
written explanation on April 11, 2000, and to address his concerns during the
investigation scheduled on April 14, 2000.19 Molina failed to submit any written
explanation. On April 24, 2000, PPI issued a Memorandum advising Molina that he
would be reinstated in the payroll effective April 25, 2000 without requiring him to report
for work during the pendency of his investigation.20

Molina filed a "Motion to Dismiss Complaints and Motion for Full Reinstatement" on May
2, 2000.21 He asserted that the charges should be dismissed since he was compelled to
prepare a written explanation on the basis of "summarized specific acts," denying him
the right to be informed of the exact charges and to confront those who made written
reports against him. As to the issue of reinstatement, he alleged that he should be
allowed to report for work, conformably with Rule XIV, Section 4 of the Implementing
Rules of the Labor Code.22

On May 11, 2000, Picazo wrote Molina that his motion to dismiss the charges would be
resolved after the investigation. He was warned that his non-appearance at the
investigation would be considered a waiver of his right to be heard. 23

On the same day, May 11, 2000, Abia issued an inter-office Memorandum announcing
the appointment of Sercy F. Picache as the Officer-In-Charge (OIC) for Metro VI and
XVI effective May 6, 2000.24

Molina and his counsel attended the May 19, 2000 investigation and filed a Motion to
Suspend Proceedings,25praying that the administrative investigation be deferred until
the resolution of the "prejudicial" issues raised in his previous motion.26
When Picazo failed to respond, Molina filed, on June 1, 2000, a complaint for damages
with a prayer for a temporary restraining order and preliminary injunction based on
Article 19 of the New Civil Code. PPI filed a Motion to Dismiss, maintaining that the
courts have no jurisdiction over matters arising from employee-employer relationship.
The trial court denied the motion as well as PPIs motion for reconsideration. 27

Meanwhile, in letter dated June 13, 2000, Molina was notified of the termination of
administrative investigation. PPI considered his failure to submit a written explanation
as a waiver of his right to be heard, and as such, the investigating committee had
evaluated the evidence at hand and submitted its recommendations to the "higher
management" for decision. Also, it confirmed the denial of his Motion to Suspend
Proceedings.28

On June 23, 2000, the trial court issued an Order granting Molina's prayer for temporary
restraining order, which was later made permanent per its Order dated July 12, 2000.
The motion for reconsideration filed by PPI on July 26, 2000 was likewise denied.
Thereafter, it filed a petition for certiorari before the CA, assailing the writ of preliminary
injunction issued by the RTC and its order denying the motion to dismiss the complaint.
On July 16, 2001, the CA rendered judgment in favor of PPI and nullified the writ of
preliminary injunction issued by the RTC as well as the order denying the motion of PPI
for the dismissal of the complaint.29

On July 30, 2001, PPI resolved to dismiss Molina from employment on its finding that
the latter violated its standard operating procedure.30

Molina forthwith filed a complaint with the NLRC against PPI and Alfredo C. Antonio,
Patricio A. Picazo, and Certerio B. Uy, in their capacity as President, Senior Assistant
Vice-President of Human Resources Development, and Division Head, respectively, for
illegal dismissal and illegal suspension with claim for monetary benefits.

In his Position Paper,31 Molina principally argued that he was denied the right to due
process due to the failure of PPI to furnish him a copy of the written reports of the sales
associates and co-employees, the basis of the accusations against him. Since an OIC
for his position was already appointed even before all his pending motions were
resolved, he surmised that there were really no such reports, and that the alleged
accusations were merely concocted in order to replace him with someone close to
Picazo. Molina maintained that since he was denied the opportunity to dispute the
authenticity and substantive contents of the reports, his alleged violations of company
rules and policies were hearsay and, therefore, lacked probative value. Besides, the
termination of his employment was made without the 30-day prior notice; his dismissal
from employment took effect immediately, only six days after PPI received the CA
decision decreeing that the NLRC has the rightful jurisdiction over the case. Thus, he
prayed for the following relief:

1. Total Money Claims

a) Salary with (overriding) commission from March 21 to April 24, 2000 -


suspended w/o pay - P45,000.00 (P25,000[.00] mo. salary & P20,000[.00]
[overriding])

b) Unpaid (overriding) commission from April 25, 2000 to present


- P400,000[.00]

c) Unpaid salary from August 1, 2001 to present - P125,000[.00]

d) One mo. salary for every yr. of service in lieu of reinstatement - 7 years
= P175,000.00

2. Leave Credits - P100,000.00 for 7 years

3. Profit Bonus for Year 2000 & 2001 - P400,000.00

4. Moral Damages - P300,000.00

5. Exemplary Damages - P500,000.00

6. Actual Damages - for lifetime medical attendance and medicines at 16 more


years life expectancy - P1,249,384.00

7. Attorney's Fees - P300,000.00

8. Amount debited from complainant's ATM [as partial payment for hospitalization
expenses incurred by him which PPI had advanced] - P12,000.00

9. Retention of complainant's car, as additional penalty for illegal dismissal.32

For its part, PPI stressed that Caritas was its competitor in the pre-need plans business,
and that Molina and his wife recruited and enticed some of the sales associates of PPI
to work for Caritas, in violation of its policy against conflict of interest. Some of these
sales associates were the spouses Eppie and Restie Acosta, Lenita Gatmaitan, Lolita
Casaje, Lydia Magalso, Lydia San Miguel, and Alice Halili, and including Vilma del
Rosario, the secretary of Roy Padiernos. PPI, likewise, averred that Molina had the
habit of coming to the office under the influence of liquor; he constantly shouted to lady
employees and solicited money from his sales associates in connection with an official
company function without returning the same after PPI reimbursed him for the expenses
incurred; disseminated intrigues and created divisiveness among the employees and
PPIs senior officers; and disrespected Padiernos, his superior, by shouting at him
during one of the meetings with other senior officers, and walked out of the meeting
afterwards. Supporting its claims that Molina committed breach of trust, serious
misconduct, fraud, and gross neglect of duty by reason thereof, PPI appended to its
position paper the statements/affidavits of Marivic Uy, Ruth and Roy Padiernos, Eppie
and Restie Acosta, Celeste Villena, and Vilma del Rosario.33

On the claim of Molina that he was denied due process, PPI averred that he was given
sufficient opportunity to present his personal submissions before finally issuing the
notice of dismissal but Molina persistently refused to submit his explanation. 34 PPI
further argued that he was not entitled to the payment of 13th and 14th month salaries,
overriding commission, profit bonus, actual, moral or exemplary damages, and
attorneys fees. PPI maintained that, under Article 217(a) of the Labor Code, as
amended, and the ruling of this Court in Baez v. Valdevilla,35 Molina should be held
liable for P1,000,000 as moral damages and an amount not less than P428,400.00 for
the salary he received during the time when the restraining order/ writ of injunction was
erroneously enforced.36

In his Reply, Molina averred that the affidavits submitted by PPI were antedated since
he was never furnished copies of said reports/affidavits despite demands. PPI even
failed to present the reports/affidavits before the RTC where his complaint for damages
against PPI and its officers was pending. He and Roy Padiernos had been at odds
because the latter appointed his brother and wife as agency manager and group
manager of PPI to which he objected. Molina averred that the P200.00 collected from
each of the employees of PPI during their luncheon meeting was a voluntary
contribution, and that they spent P4,000.00, more than the amount collected from the
employees. He contended that he had no motive to recruit sales associates or
employees of PPI to be employed by Caritas because the depletion of sales associates
would diminish his effectiveness as an area manager, including his overriding
commission, profit bonus and fringe benefits. He admitted that he may have raised his
voice in the heat of arguing a point during meetings, but averred that it should not be
considered as disrespect or misdemeanor.

Molina further emphasized that Caritas was not a competitor of PPI, as the former was
engaged in selling health care and is supervised by the Department of Health (DOH),
while the latter is into the business of selling pre-need plans and supervised by the
Securities and Exchange Commission (SEC). Finally, he averred that the so-called
"associates" of PPI were not actually employees but "independent journeymen" who
derived income on commission basis, free to engage in any kind of selling activities not
in direct competition with PPI.

Molina admitted having had drinking sessions with Certerio Uy, Ilustre Acosta and
Reynaldo Villena, who provided the hard liquor and pulutan, but only after office hours.
He claimed that his officemates mistook him for being drunk when he went to his office
even after office hours because of his "mestizo complexion."

In its response, PPI averred that, based on the sales data, the acts of Molina caused
demoralization of the sales associates, resulting in a sudden decrease of the region's
output from P343,009,643.00 in 1998 to P263,099,773.00 in 1999,
and P228,752,090.00 in 2000.37 PPI insisted that he should be held liable for not less
than P507,348.00, P2,000,000, and P1,000,000 as actual, moral and exemplary
damages, and attorney's fees, respectively, and P273,600.00 which was the balance on
his car plan agreement with PPI.38

In his Rejoinder39 and Sur-Rejoinder40 Molina submitted the affidavit of Geoffrey


Martinez, who belied the reports of Uy, Villena, Del Rosario, and the spouses Padiernos
and Acosta.41 He also appended the affidavits of Natividad Gatchalian,42 San
Miguel,43 Gatmaitan,44 and Magalso,45 who all disputed, in one way or another, Molina's
alleged violations. To counter the imputations of conflict of interest, Molina also alleged
that Abia and Atty. Reyes were incorporators of Caritas,46 and that Villena had in her
possession a license to sell Caritas products.47 With regard to the declining sales output
of his region, Molina attributed the same to the Asian regional crisis that hit the
Philippines sometime in 1997. He noted, however, that the same records revealed that
despite the financial bane, Metro VI still managed to be on top from 1998 up to 2000 in
terms of its sales relative to the other regions.

Molina denied any liability for the car plan, claiming that he already settled the obligation
when PPI demanded full payment as, in fact, all the papers related thereto, including the
Release of Mortgage, were already in his possession.

In its Sur-Rejoinder,48 PPI stressed its claim that Caritas was a business competitor, as
may be inferred from the benefits available under its health care agreement and the pre-
need contract of PPI. Particularly with regard to the pension plan contract, it noted the
following similarities: (a) Caritas also provides Term Life Insurance, Accidental Death
Insurance, Credit Life Insurance, and Waiver of Installment Due to Disability; (b) there
are similarities in the provisions on contract price, grace period, cancellation,
reinstatement, and transfer and termination; and (c) unlike other health care programs
that provide a one-year coverage, renewable every year thereafter, Caritas offers a
continuous five year coverage and sells the same in units payable in five-year
installment basis, with maturity period and guaranteed return of investment in the form
of Full-Term Medical Expense Fund computed at P10,000.00 for every unit purchased
with increment of 10% yearly after the maturity period, which may be withdrawn in cash
by its member. It stressed that this was similar to the pension program offered by PPI
which was also sold in per unit basis, payable by installment in certain number of years
or lump sum payment, and upon maturity also gives P10,000.00 pension benefit per unit
purchased by the plan holder. With respect to the alleged interest of Atty. Reyes with
Caritas, PPI adduced in evidence a Deed of Sale to prove that as early as February
1999 he had already divested his stockholdings in Caritas.49

On November 18, 2002, Labor Arbiter Roma C. Asinas rendered a


Decision50 dismissing the complaint and the counterclaims for lack of merit. The labor
arbiter ruled that Molina was lawfully dismissed from his employment for serious
misconduct in office and fraud or willful breach of trust and confidence. It declared that
Molinas mere denial of the charges against him did not overthrow the overwhelming
evidence against him tending to show that he committed the allegations against him.
Moreover, his wife was then an agency manager of Caritas, and some PPI sales
associates were with Caritas because they were recruited by Molina. The labor arbiter
also ruled that other employees of respondent attested to the fact that they were being
recruited and enticed by the complainant to join Caritas. This act of pirating constituted
serious misconduct in office, fraud or willful breach of trust and confidence, which are
just causes for termination of employment under Article 282 of the Labor Code, as
amended. As such, PPI could not legally be compelled to continue Molinas employment
due to breach of trust.

The labor arbiter likewise held that Molina was afforded his right to due process, but that
he refused to give an answer to the charges leveled against him, and instead insisted
that he be furnished a copy of the alleged reports against him. Since he was given
ample opportunity to answer the charges and explain his side during the investigation,
and a formal or trial-type hearing is not at all times essential, Molinas right to due
process was not violated. The labor arbiter stressed that the requirements of due
process are satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy at hand.51

Molina appealed the decision to the NLRC, which rendered judgment in his favor. The
NLRC reversed the decision of the Labor Arbiter and ordered Molinas immediate
reinstatement to his former position as Assistant Vice President without demotion in
rank and salary; and the payment of his backwages from August 1, 2001 up to his
actual reinstatement, and other accrued monetary benefits. However, the NLRC denied
all other claims for damages.52
According to the NLRC, the charges of coming to the office under the influence of liquor
and making PPI reimburse the expenses already paid by Molina's co-employees were
not supported by the records. The "loss of trust and confidence" had no factual basis
since the alleged acts of Molina did not result to any loss in favor of PPI.

Anent Molinas recruitment activities, the NLRC ratiocinated that PPI failed to show that
Caritas was a competitor of PPI. Caritas caters to the health care needs of its clients
while PPI to the pre-need (pension, educational, and memorial) requirements of its plan
holders. Any similarity between PPI and Caritas extra features like term life insurance,
accidental death insurance, credit life insurance, and waiver of installment due to
disability, did not ipso facto make Caritas a competitor of PPI. Thus, there was no
conflict of interest in Molinas act of trying to recruit counselors for Caritas to help his
wife. Moreover, PPI failed to establish that recruiting for Caritas affected Molinas
decisions in the performance of his duties with PPI. According to the NLRC, the drop in
the sales and productivity of complainants area of responsibility may be due to market
forces and depressed economic condition at that time; absent any clear and convincing
proof, it cannot be attributed to the alleged acts of Molina which constituted willful
breach of trust or confidence.53

PPI filed a motion for reconsideration, and appended a Letter dated June 13, 2002 from
the SEC to Caritas, indicating that its HMO Plan was similar to the previous plans
offered by pre-need companies, hence, under the regulatory suspension of the
SEC;54 another letter of SEC ordering Caritas to immediately desist from selling its HMO
plan with the full term medial expense fund;55 and the letter of Caritas, through counsel,
endorsing the objectionable features of the HMO plan.56

The NLRC, however, was not persuaded, and resolved to deny PPIs motion in its Order
dated September 30, 2003.57 On November 19, 2003, the NLRC declared its Decision
final and executory as of November 14, 2003.58

PPI filed a Petition for Certiorari with the CA for the nullification of the decision and
resolution of the NLRC and the reinstatement of the decision of the Labor Arbiter. 59

On August 13, 2004, the CA rendered a decision reversing the Decision and Resolution
of the NLRC, and reinstating the November 18, 2002 Decision of the Labor
Arbiter.60 Later, the CA denied Molinas Motion for Reconsideration61 in its Resolution
dated September 27, 2004.62

The issues for resolution are the following: whether the decision of the NLRC was
already final and executory when PPI filed its petition for certiorari in the CA; and
whether the NLRC committed grave abuse of discretion amounting to excess or lack of
jurisdiction in issuing the assailed decision and resolution.

On the first issue, we find and so hold that the decision of the NLRC had become final
and executory when PPI filed its Petition for Certiorari in the CA. PPI received a copy of
the NLRC Decision on July 11, 2003 and filed the Motion for Reconsideration thereof on
July 18, 2003, which motion was denied on September 30, 2003. Under Rule VII,
Section 2 of the NLRC Omnibus Rules of Procedure, the decision of the NLRC
becomes final and executory after ten (10) calendar days from receipt of the same. PPI
received a copy of the NLRC decision on November 30, 2003; hence, such decision
became final and executory on December 3, 2003. Nonetheless, the Court ruled in St.
Martin Funeral Home v. NLRC63 that, although the 10-day period for finality of the NLRC
decision may have elapsed as contemplated in the last paragraph of Section 223 of the
Labor Code, the CA may still take cognizance of and resolve a petition for certiorari for
the nullification of the decision of the NLRC on jurisdictional and due process
considerations. Indeed, the remedy of the aggrieved party from an adverse decision of
the NLRC is to timely file a motion for reconsideration as a precondition for any further
or subsequent remedy, and if the motion is denied, such party may file a special civil
action in accordance with law and jurisprudence considering that these matters are
inseparable in resolving the main issue of whether the NLRC committed grave abuse of
discretion.

The Labor Arbiter and the NLRC act in quasi-judicial capacity in resolving cases after
hearing and on appeal, respectively. On the presumption that they have already
acquired expertise in their jurisdiction, which is confined on specific matters, their
findings of facts are oftentimes accorded not only with respect but even finality if
supported by substantial evidence. However, in spite of the statutory provision making
"final" the decision of the NLRC, the Court has taken cognizance of petitions
challenging such decision where there is a clear showing that there is want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of law.64

In this case, the Labor Arbiter declared that there is substantial evidence on record
warranting the dismissal of petitioner as Assistant Vice President for serious misconduct
in office, fraud or willful breach of trust and confidence. The NLRC disagreed with the
Labor Arbiter and reversed the latters findings. The CA, for its part, concurred with the
findings of the Labor Arbiter. In view of the discordance between the findings of the
Labor Arbiter and the CA on one hand, and the NLRC on the other, there is a need for
the Court to review the factual findings and the conclusions based on the said findings.
As this Court held in Diamond Motors Corporation v. Court of Appeals:65
A disharmony between the factual findings of the Labor Arbiter and the National Labor
Relations Commission opens the door to a review thereof by this Court. Factual findings
of administrative agencies are not infallible and will be set aside when they fail the test
of arbitrariness. Moreover, when the findings of the National Labor Relations
Commission contradict those of the labor arbiter, this Court, in the exercise of its equity
jurisdiction, may look into the records of the case and reexamine the questioned
findings.66

Article 282 of the Labor Code of the Philippines 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;

b. Gross and habitual neglect by the employee of his duties;

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

d. Commission of a crime or offense by the employee against the person of his


employer or any immediate member of his family or his duly authorized
representative; and

e. Other causes analogous to the foregoing.

Misconduct has been defined as improper or wrong conduct; the transgression of some
established and definite rule of action; a forbidden act, a dereliction of duty, unlawful in
character and implies wrongful intent and not mere error of judgment. The misconduct
to be serious must be of such grave and aggravated character and not merely trivial and
unimportant. Such misconduct, however, serious, must nevertheless, be in connection
with the employees work to constitute just cause for his separation.67

The loss of trust and confidence, in turn, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary breach will not suffice. A breach of
trust is willful if it is done intentionally, knowingly and purposely without justifiable
excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.68

The Court has laid down the guidelines for the application of the doctrine for loss of
confidence, thus:
1. the loss of confidence must not be simulated;

2. it should not be used as a subterfuge for causes which are illegal, improper or
unjustified;

3. it may not be arbitrarily asserted in the face of overwhelming evidence to the


contrary;

4. it must be genuine, not a mere afterthought, to justify earlier action taken in


bad faith; and

5. the employee involved holds a position of trust and confidence. 69

In Samson v. Court of Appeals,70 the Court enumerated the conditions for one to be
considered a managerial employee:

(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof;

(2) They customarily and regularly direct the work of two or more employees
therein;

(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the
promotion or any other change of status of other employees are given particular
weight.71

As a general rule, employers are allowed wide latitude of discretion in terminating the
employment of managerial personnel.72 The mere existence of a basis for believing that
such employee has breached the trust and confidence of his employer would suffice for
his dismissal.73

In this case, petitioner was not a mere employee of respondent. He was the Assistant
Vice-President with the same functions of a regional manager of the same sales region,
Metro Manila VI. Taking into account his job description, he was one of the top
managers of the respondent, tasked to perform key and sensitive functions in the
interest of his employer and, thus, bound by the more exacting work ethic.

We find, however, that the charge of misappropriation of funds was not proven with
substantial evidence. As gleaned from the handwritten statement of Ilustre Acosta, the
General Manager of the Springs and Blessings General Agency under Metro Manila VI,
it appears that, aside from him and petitioner, there were 10 other attendees during the
luncheon conference on November 27, 1999 at the Barrio Fiesta, Cubao, Quezon City.
Petitioner received the amount of only P2,386.00 from respondent to pay for the cost of
the luncheon for the conference, based on Petty Cash Voucher signed by
petitioner,74 but the conferees spent more than P4,000.00. Upon petitioners suggestion,
the conferees agreed to contribute P200.00 each, or the total amount of P2000.00 to
answer for the difference. Petitioner had no obligation to return the contributions of the
conferees, nor was he liable for said amount. Significantly, except for Ilustre Acosta, the
other attendees in the conference never complained against petitioner or requested him
to return their respective contributions of P200.00.

Regarding the charge that the petitioner peddled false and malicious informations
against Abia and Padiernos, Abia has not executed any affidavit to confirm paragraph 9
of the affidavit of Roy Padiernos. As admitted by del Rosario, the informations allegedly
relayed to her by the petitioner pertaining to Roy Padiernos were confirmed by Zita
Domingo.75

The petitioner does not deny having had a heated exchange of words with Roy
Padiernos in the course of a meeting. However, such incident does not constitute proof
that the petitioner thereby showed disrespect to Roy Padiernos, nor a valid cause for
petitioners dismissal. It does happen that in the course of exchange of views during a
meeting, participants may become so assertive to the point of being overbearing or
unyielding and in the process lose their temper, on their sincere belief of being right.
There is no evidence on record that petitioner committed the same or similar acts
thereafter.

To prove its charge of conduct unbecoming of a company officer, more specifically of


drinking alcoholic beverages within the premises of the company during office hours or
going to work drunk, respondent relied on the statement/affidavit of Celeste Villena, the
Agency Manager of the Wondrous and Miraculous General Agency under Metro Manila
VI;76 and Marivic Uy, the General Manager of the DMBP General Agency under Metro
Manila VI. Both claimed that they always saw petitioner drunk during office hours, most
especially during cut-offs when many sales counselors were present.77 Petitioner
admitted having had drinking sessions with Certerio Uy, the husband of Marivic Uy,
Ilustre Acosta and Reynaldo Villena, the husband of Celeste Villena, and who,
according to petitioner, provided the hard liquor and the pulutan. 78 He, however, denied
reporting to office drunk and insisted that he reported for work sober.

We are inclined to give credence to petitioners claim, noting that in her handwritten
letter-report to Norman Gonzales dated March 10, 2000, Villena made no mention of the
petitioner going to office drunk.79 It was only in her affidavit dated January 16, 2002 that
Villena made such declaration.80 Villena did not explain her failure to report the matter to
Gonzales on March 10, 2000, and why she made the charge for the first time in her
Affidavit dated January 16, 2002. Uy is the wife of no less than Certerio Uy, the Senior
Vice-President of the Manila North Sales Division of respondent. If petitioners "drinking
problem" had any ring of truth, she should have immediately reported the matter to her
husband or to other officials concerned. Uys unexplained silence until March 10, 2000
thus renders her report implausible.

Respondent avers that petitioner served directly as agent of Caritas, a business


competitor of the respondent, when he connived with his wife in recruiting Sales
Associates of the Metro Sales Division VI to transfer to Caritas as sales associates.
Respondent claims that, by his acts, petitioner failed to dedicate his full time on the job
with respondent and prevented said sales associates from doing the same. Aside from
violating its policy against conflict of interest, petitioners acts adversely affected his
decisions in the performance of his duties and obligations to respondent. 81

Loyalty of an employee to his employer consists of certain very basic and common
sense obligations. An employee must not, while employed, act contrary to the
employers interest.82 The scope of the duty of loyalty that an employee owes to his
employer may vary with the nature of their relationship. Employees occupying a position
of trust and confidence owe a higher duty than those performing low-level tasks.
Assisting an employees competitor can even constitute a breach of the employees
duty of loyalty. An employees self-dealing may breach that duty.83However, it has been
ruled that

A reality of contemporary life is that many families will consist of two wage earners, one
wage earner with two jobs, or both. For some employees, particularly those earning low
or modest incomes, second sources of income are an economic necessity. For them, a
second job or "moonlighting" is the only way to make ends meet. Conversely,
employers need the assurance that employees will not disserve them by furthering their
own interests or those of competitors at the employers expense. 84

A slight assistance to a direct competitor could constitute a breach of the employees


duty of loyalty. However, when competition is indirect or minimal, the employer may be
required to show that the employee received substantial assistance from the competitor.
If an employee usurped a corporate opportunity or secretly profited from a competitive
activity, the employer may receive the value of the lost opportunity or the secret profit.85

An employees skill, aptitude, and other subjective knowledge obtained in the course of
employment are not the property of his employer.86 However, an employee occupying a
managerial position or office is obliged to protect the trade secret of his employer
consisting of formula, process, device or compilation which it uses in its business and
gives it an opportunity to obtain an advantage over competitors who do not know of
such trade secret. However, the rule does not apply to a matter of public knowledge or
of general knowledge within the industry.87 Moreover, an employer has a protectible
interest in the customer relationships of its former employee established and/or nurtured
while employed by the employer, and is entitled to protect itself from the risk that a
former employee might appropriate customers by taking unfair advantage of the
contract developed while working for the employer.88 While acting as an agent of his
employer, an employee owes the duty of fidelity and loyalty. Being a fiduciary, he
cannot act inconsistently with his agency or trust. He cannot solicit his employers
customers or co-employees for himself or for a business competitor of his employer. If
such employee or officer connives with and induces another to betray his employer in
favor of a business competitor of his employer, he is held accountable for his mischief. 89

In this case, we are not persuaded that Caritas is the business competitor of
respondent. The evidence on record shows that while Abia, the Senior Vice-President of
respondents Metro Manila Marketing, is one of the incorporators of Caritas and is even
a member of the Board of Directors, respondent did not dismiss him from employment.
The Head of the Legal Division of the respondent, Atty. Reyes, was also an incorporator
of Caritas and a member of its Board of Directors, and although he appears to have
sold his shares to Herminigildo C. Belen for P127,312.34, he only did so on March 7,
1999. There is no evidence on record whether the transfer of such shares of stocks has
already been reflected in the books of Caritas. Celeste Villena, one of the Sales
Associates of respondent, is herself licensed by Caritas to sell plans for the latter.
Villena has likewise not been prohibited from selling pre-need plans for Caritas. Fe
Molina, who is the head of a sales agency of Caritas, is also a sales agency head of
respondent. Petitioner, his wife, and Villena were not charged nor meted any sanction
by the respondent for conflict of interest. Petitioner was the Assistant Vice-President,
Marketing Head, Area 10, of Caritas, and for a while, without any protest from
respondent. If Caritas is a business competitor of the respondent, it should have meted
sanctions not only on petitioner but also on Abia, Reyes, Fe Molina and Villena as well.

The truth of the matter is that, as averred by Caritas President Geoffrey Martinez,
Caritas is engaged in health care and hospitalization package, whereas respondent
sells educational, pension, and pre-need plans. Caritas is an HMO and is directly
supervised by the DOH, while respondent is under the supervision of the SEC. The so-
called sales associates of the respondent are non-salaried employees and are paid on
commission basis only. Their commissions are based on their individual initiative and
industry. That the contracts executed by the beneficiaries of both corporations have
similar provisions regarding contract price, grace period, cancellation, reinstatement,
transfer and termination, do not constitute proof that Caritas and respondent are
business competitors. There is also no proof that the two corporations compete with
each other in the same or similar business; in fact, the business of Caritas and that of
the respondent complement each other.

Respondent relied on the declarations of Ruth Padiernos, Spouses Eppie and Ilustre
Acosta, Celeste Villena, and Marivic Uy to prove its charge that Fe Molina pirated sales
associates working for respondent and that petitioner tolerated the actuations of his wife
and even connived with her.

The Court finds, however, that the evidence adduced by respondent insufficient to
warrant the petitioners dismissal from employment.

Ruth Padiernos, wife of Roy Padiernos, averred in her written statement dated March 8,
2000, that as far back as July 1999, she had a conference with her husband and Abia
where she reported that petitioner connived with his wife in pirating sales associates.
She was assured that something would be done to arrest the problem. 90 However, Ruth
Padiernos failed to name any such sales associate who was recruited by Fe Molina.
There is likewise no evidence that Abia ever confronted petitioner relative to the charge.
Roy Padiernos confronted petitioner, but the latter denied the charge. Since then, no
further action was taken against the petitioner by respondent, until the letter of Picazo
dated March 21, 2000 was sent to him. Roy Padiernos did not explain why he executed
his affidavit regarding the matter almost three years later, only on January 18, 2002. In
an Affidavit dated January 18, 2002, it was made to appear that Ruth Padiernos claimed
that petitioners wife, the Unit Manager of the Ark Group under Metro Manila Sales
Group VI and also an Agency Manager of Caritas, recruited sales associates under
respondent to work for Caritas, and that petitioner did the same; and that she
(Padiernos) learned that almost all the productive Sales Associates in Metro Manila VI
were already connected with Caritas, using "different names."91 Although notarized, the
affidavit has no probative weight because it was unsigned.

Celeste Villena, for her part, declared in her handwritten statement dated March 10,
2000 that Fe Molina recruited Lenie Gatmaitan to join Caritas and that she confronted
petitioner.92 In her Affidavit dated January 16, 2002, she alleged that petitioner and his
wife, Fe Molina, recruited Gatmaitan to join Caritas.93 However, the signature of the
notary public does not appear in said affidavit. For his part, Ilustre Acosta, averred in his
handwritten statement dated March 11, 2000, that on March 4, 2000, petitioner informed
him that Geoffrey Martinez called petitioner to inquire if petitioner would have no
objection for him (Ilustre) to be with Caritas and that petitioner replied that he had no
objection if that was Ilustres decision.94 Ilustre maintained this claim in his Affidavit
dated January 16, 2002.95Eppie Acosta, the wife of Ilustre Acosta, averred in her
handwritten statement of March 12, 2000, that on March 6, 2000, petitioner commented
about their low sales production, and she retorted that he was the cause, hence, may
have grudges against him. Petitioner replied that he and his wife did not interfere with
each others business dealings, and that petitioner even declared "Mare, for all you
know, ikaw na lang ang hindi nag-ca-Caritas." She reiterated her claim in her affidavit
dated January 16, 2000.96 Marivic Uy averred that the wife of petitioner had been
pirating sales associates of respondent since 1999 to join Caritas and that she tried to
recruit Morena Siasoco, one of the Group Managers. Petitioner failed to stop his wife,
but rather tolerated her actuations.97 She reiterated her claim in her Affidavit dated
January 16, 2002.98

However, there is no evidence on record to prove that respondent expressly prohibited


its Sales Associates from selling for Caritas. Neither is there evidence on record to
prove that Caritas prohibited its sales associates from selling pre-need plans of
respondent.

Respondent likewise failed to present the affidavits of Siasoco, Casaje, Magalso, San
Miguel and Halili. In contrast to the evidence of respondent, Gatchalian, San Miguel,
Siasoco, and Gatmaitan executed their respective affidavits declaring that neither
petitioner nor his wife ever recruited them.99 They admitted that they sold plans for
Caritas, but without any prodding from petitioner and his wife. Geoffrey Martinez
declared, in his affidavit, that Siasoco, San Miguel, Casaje, Magalso, and Halili joined
Caritas voluntarily and individually, through him, and he was not aware that petitioner
and his wife recommended them to Caritas. Lenita Gatmaitan called him and inquired if
she could join Caritas, and he replied in the affirmative. He never called petitioner
concerning Ilustre Acosta; on the contrary, it was the latter who called to inquire if he
was entitled to a discount if he purchased a Caritas health plan. He talked to Vilma Del
Rosario and convinced her to apply as Branch Manager of Caritas, which she did, but
backed out later on.

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The
August 13, 2004 Decision and September 27, 2004 Resolution of the Court of Appeals
are REVERSED AND SET ASIDE. The decision and resolution of the NLRC are
reinstated.

SO ORDERED.

ROMEO J. CALLEJO, SR.


Associate Justice

WE CONCUR:
Microsales vs. NLRC, 472 SCRA 328,
GR 155279, Oct. 11, 2005
FIRST DIVISION

MICRO SALES OPERATION NETWORK G.R. No. 155279


and WILLY BENDOL,
Petitioners,
Present:

Davide, Jr., C.J.,


(Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

THE NATIONAL LABOR RELATIONS


COMMISSION (SECOND DIVISION), Promulgated:
LARRY HERMOSA, LEONARDO G. DE
CASTRO and RAMIL BASINILLO, October 11, 2005
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

For review on certiorari are the Resolutions[1] dated November 28, 2001 and September
3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755. The said
Resolutions dismissed petitioners special civil action for certiorari against the National
Labor Relations Commission (NLRC) Resolution,[2] which affirmed the Labor Arbiters
Decision[3] finding petitioners herein liable for illegal dismissal.

The antecedent facts are as follows:

Petitioner Micro Sales Operation Network (company for brevity) is a domestic corporation
engaged in local transportation of goods by land. Petitioner Willy[4] Bendol was the
companys operations manager at the time of the controversy.
Private respondents Larry Hermosa, Leonardo de Castro, and Ramil Basinillo were
employed by the company as driver, warehouseman, and helper, respectively. Hermosa
was hired on November 17, 1997, de Castro on February 1, 1996, and Basinillo on
February 4, 1998.

Hermosa failed to promptly surrender the ignition key of the companys vehicle after
discharging his duties. Such failure was allegedly contrary to the companys standard
operating procedure. Thus, he was asked to explain within 24 hours why disciplinary
action should not be meted on him. He explained that he kept the ignition key because
the vehicle was stalled when its battery broke down. [5] Unsatisfied with Hermosas
explanation, the company dismissed him on January 9, 1999.

De Castro was suspected of firing a gun during the blessing of the companys warehouse
on December 10, 1998. The next day, he was placed under preventive suspension and
temporarily banned from entering the companys premises. He was also asked to explain
within 24 hours why he should not be terminated. He explained that he had no knowledge
of the said incident.[6] As his suspension was indefinite and he received no recall order
from petitioners, he no longer reported for work.

Basinillo alleged that sometime in September 1998, the companys security guard scolded
him for not wearing the employee ID. On October 17, 1998, he was dismissed.

Thus, on February 10, 1999, Hermosa, de Castro, and Basinillo collectively filed a
Complaint[7] for illegal dismissal before the Regional Arbitration Branch No. IV, docketed
as NLRC Case No. RAB-IV-2-10765-99-C.

In his Decision[8] dated February 21, 2000, Labor Arbiter Antonio R. Macam found
that private respondents were illegally dismissed. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring the dismissal of all complainants herein illegal and ordering
respondents to reinstate them to their former or equivalent positions and to
pay them full backwages, plus ten percent (10%) attorneys fees, computed
as follows:

LARRY HERMOSA

From January 9, 1999 to Feb. 21, 2000


= 1 yr. 1 mo. & 12 days or 13.36 mos.

P220.00 x 26 x 13.36 = P76,419.20


P76,419.20/12 = 6,368.27
P220.00 x 5 = 1,100.00 P83,887.47
----------------
LEONARDO DE CASTRO

From Dec. 12, 1998 to Feb. 21, 2000


= 1 yr. 2 mos. & 9 days or 14.30 mos.
P7,280.00 x 14.30 = P104,104.00
P104,104.00/12 = 8,675.33
P7,280.00/26 x 5 = 1,400.00 P114,179.33
----------------

RAMIL BASINILLO

From Oct. 17, 1998 to Feb. 21, 2000


= 1 yr., 4 mos. & 4 days or 16.13 mos.

P200.00 x 26 x 16.13 = P83,876.00


P83,876.00/12 = 6,989.67
P200.00 x 5 = 1,000.00 P 91,865.67
---------------- ---------------
Total Full Backwages = P289,932.47
Plus 10% Attorneys Fees = 28,993.25
---------------
GRAND TOTAL = P318,925.72

SO ORDERED.[9]

On appeal, the NLRC affirmed the Labor Arbiters decision. It also denied
petitioners motion for reconsideration.
Undaunted, petitioners filed with the Court of Appeals a special civil action for
certiorari. However, the appellate court dismissed the petition for being defective in form.
It found that only the company signed the verification and certification on non-forum
shopping. Petitioner Willy Bendol did not sign the same.
Petitioners motion for reconsideration was denied. The appellate court reasoned
that even if petitioner Willy Bendol was not impleaded as a real party in interest, records
showed that he was impleaded as a co-respondent before the Labor Arbiter. Thus, the
appellate court ruled, his failure to sign the verification and certification on non-forum
shopping is a ground for the dismissal of the petition.

Hence, the instant petition anchored on the following grounds:


A. THE HONORABLE COURT OF APPEALS PLAINLY
ERRED AND ACTED CONTRARY TO EXISTING LAW AND
JURISPRUDENCE IN DISMISSING THE PETITION
FOR CERTIORARI ON A MERE TECHNICALITY CONSIDERING
THAT WILLY BENDOL WAS JOINED MERELY AS A NOMINAL
PARTY TO THE PETITION.

B. MORE IMPORTANTLY, JUSTICE WOULD BE BEST


SERVED IF THE PETITION WAS GIVEN DUE COURSE
CONSIDERING THAT THE PUBLIC RESPONDENT COMMISSION
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE
DECISION OF LABOR ARBITER MACAM CONSIDERING THAT:

1. THERE IS NO FACTUAL OR EVIDENTIARY BASIS TO


SUPPORT THE FINDING OF ILLEGAL DISMISSAL. DUE
PROCESS AND FAIR PLAY DICTATE THAT THE PUBLIC
RESPONDENT COMMISSION POINT OUT THE
PARTICULAR FACTUAL FINDING OF THE LABOR
ARBITER WHICH JUSTIFIED THE FINDING OF ILLEGAL
DISMISSAL.

2. THE PUBLIC RESPONDENT COMMISSION IGNORED THE


FACT THAT THE LABOR ARBITERS FINDING OF ILLEGAL
DISMISSAL RESTS ON PURE SPECULATION,
CONJECTURE AND SURMISES.

3. PRIVATE RESPONDENT BASINILLO HIMSELF DENIED


THAT HE WAS DISMISSED BY PETITIONERS.

4. THE ACTS OF HERMOSA CONSTITUTE WILLFUL


DISOBEDIENCE JUSTIFYING HIS DISMISSAL.

5. THE HONORABLE COMMISSION COMPLETELY


IGNORED THE FACT THAT PRIVATE RESPONDENTS
SINGULAR CAUSE OF ACTION IS THAT FOR ILLEGAL
DISMISSAL. THUS, THE LABOR ARBITERS AWARD OF
SEPARATION PAY AND ATTORNEYS FEES WAS
UTTERLY WITHOUT BASIS.[10]
Petitioners insist Willy Bendol was impleaded merely because he was the
immediate supervisor of private respondents. They argue that the real party in interest in
this case is the company. In any case, petitioners point out that Bendol was no longer
connected with the company when the special civil action for certiorari was filed.

Private respondents, however, maintain that formal requirements must be strictly


complied with. Thus, they posit, the Court of Appeals correctly dismissed the petition for
failure of one of the petitioners to sign the verification and certification on non-forum
shopping.

Further, petitioners contend that Hermosas omission constituted willful


disobedience justifying his dismissal. With respect to de Castro, petitioners claim that he
was merely suspended. As for Basinillo, petitioners point to an unsworn
statement,[11] where he denied filing any complaint for illegal dismissal against the
company.

Private respondents, however, counter that petitioners failed to prove willful


disobedience as a just cause for Hermosas termination. Moreover, they posit that de
Castros preventive suspension constituted constructive dismissal because it was for an
indefinite period and no recall order was issued by the company. Private respondents
also argue that Basinillos purported unsworn statement has no probative value.

Lastly, petitioners contend the Labor Arbiter erroneously awarded separation pay
and attorneys fees not prayed for. On this point, private respondents quickly point out
that, contrary to petitioners claim, separation pay was not awarded at all. They also claim
that the award of attorneys fees was in accordance with law.

We resolve to give due course to the petition.

The requirement regarding verification of a pleading is not jurisdictional. Such


requirement is simply a condition affecting the form of the pleading, non-compliance with
which does not necessarily render the pleading fatally defective. [12]

The Court of Appeals relied on Loquias v. Office of the Ombudsman,[13] which held
that a certification on non-forum shopping signed by only one of two or more petitioners
is defective, unless he was duly authorized by his co-petitioner. However, the said ruling
applies when the co-parties are being sued in their individual capacities. Note that the
petitioners in Loquias[14] are the mayor, vice-mayor, and three members of the municipal
board of San Miguel, Zamboanga del Sur. The said co-parties were charged with violation
of Republic Act No. 3019[15] in their various capacities.
In the instant case, the petitioners are the company and its operations manager,
Willy Bendol. The latter was impleaded simply because he was a co-respondent in the
illegal dismissal complaint. He has no interest in this case separate and distinct from the
company, which was the direct employer of private respondents. Any award of
reinstatement, backwages, and attorneys fees in favor of private respondents will be
enforced against the company as the real party in interest in an illegal dismissal case.
Petitioner Bendol is clearly a mere nominal party in the case. His failure to sign the
verification and certification on non-forum shopping is not a ground for the dismissal of
the petition. The appellate court erred in dismissing outright petitioners special civil action
for certiorari solely on that ground.

The logical course of action now is to direct the Court of Appeals to give due course to
the special civil action for certiorari. However, to obviate further delay in the resolution of
this case, we shall bring the present controversy to rest.

After weighing the parties arguments and carefully reviewing the records of this
case, we agree with the findings and conclusions of the Labor Arbiter as affirmed by the
NLRC.

Hermosa was unjustly dismissed. For willful disobedience to be a valid cause for
dismissal, the following twin elements must concur: (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. [16]

Both elements are lacking. We find no hint of perverse attitude in Hermosas written
explanation.[17] On the contrary, it appears that the alleged company procedure for leaving
the ignition key of the companys vehicles within office premises was not even made
known to him.[18] Petitioners failed to prove Hermosa willfully disobeyed the said company
procedure. At any rate, dismissal was too harsh a penalty for the omission imputed to
him.

De Castro was likewise unlawfully terminated. Contrary to petitioners claim, records show
that de Castro was not merely suspended. He was dismissed for alleged abandonment
of work.[19] To constitute abandonment as a just cause for dismissal, there must be: (a)
absence without justifiable reason; and (b) a clear intention, as manifested by some overt
act, to sever the employer-employee relationship.[20]

Petitioners failed to prove that de Castro abandoned his job. A clear intention to
end the employer-employee relationship is missing. He did not report for work simply
because he was indefinitely suspended. Moreover, the fact that de Castro filed a case for
illegal dismissal against petitioners belies abandonment.[21]
In the case of Basinillo, petitioners rely solely on his purported unsworn statement
alleging he was never dismissed. However, not having been sworn to, the said document
has no probative value. While the Court is liberal in the conduct of proceedings for labor
cases, proof of authenticity as a condition for the admission of documents is nonetheless
required.[22]

Petitioners failed to present evidence of Basinillos continuous contribution to SSS


or uninterrupted pay slips to prove he remained under the companys employ. Hence, the
complaint[23] for illegal dismissal filed by Basinillo stands and speaks for itself. Once a
case for illegal dismissal is filed, the burden is on the employer to prove that the
termination was for valid cause.[24] Petitioners failed to discharge this burden
persuasively.

Finally, petitioners lament that the Labor Arbiter erred in granting respondents
separation pay and attorneys fees. We note, however, that separation pay was not
awarded at all; thus, any discussion on this matter would be futile. On the other hand, the
award of attorneys fees, though not prayed for, is sanctioned by law[25] and must be
upheld.

WHEREFORE, the assailed Resolutions dated November 28, 2001 and


September 3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755,
are SET ASIDE. The NLRC Resolution affirming the Labor Arbiters Decision, finding
petitioners liable for illegal dismissal, is AFFIRMED. Costs against petitioners.

SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

Valiao vs. CA, 435 SCRA 543,


GR 146621, July 30, 2004

[G.R. No. 146621. July 30, 2004]


RENE P. VALIAO, petitioner, vs. HON. COURT OF APPEALS, NATIONAL LABOR
RELATIONS COMMISSION-FOURTH DIVISION (Cebu City), WEST NEGROS
COLLEGE, respondents.

DECISION
QUISUMBING, J.:

For review on certiorari is the Decision[1] dated August 22, 2000 of the Court of
Appeals in CA-G.R. SP No. 55133, and its Resolution[2] dated November 22, 2000
denying the motion for reconsideration. The Court of Appeals dismissed the petition for
certiorari filed by petitioner and affirmed the Resolution dated July 7, 1999 of the National
Labor Relations Commission (NLRC)-Fourth Division in NLRC Case No. V-000134-98
(RAB Case No. 06-01-10026-95), which sustained the Decision of Labor Arbiter Benjamin
E. Pelaez, directing private respondent West Negros College (WNC) to pay petitioner
Rene P. Valiaos salary during the period of his preventive suspension and attorneys fees,
while dismissing all other claims.
The facts, as culled from records, are as follows:
On February 5, 1990, petitioner Rene Valiao was appointed by private respondent
West Negros College (WNC) as Student Affairs Office (SAO) Director, with a starting
salary of P2,800 per month. On May 14, 1990, he was assigned as Acting Director,
Alumni Affairs Office.
On July 29, 1990, petitioner was transferred to a staff position and designated as
Records Chief at the Registrars Office but was again re-assigned as a typist on June 24,
1991.
The latest re-assignment was due to his tardiness and absences, as reflected in the
summary of tardiness and absences report, which showed him to have been absent or
late for work from a minimum of seven (7) to a maximum of seventy-five (75) minutes for
the period March to October 31, 1991, and to have reported late almost every day for the
period November to December 1991.
Copies of his tardiness/absences reports were furnished petitioner, along with
memoranda requiring him to explain but his explanations were either unacceptable or
unsatisfactory. Subsequent reports also showed that he did not change his habits
resulting in tardiness and absences. He was even caught one time manipulating the
bundy clock, thus necessitating another memorandum to him asking him to explain his
dishonest actuations in accomplishing the daily attendance logbook and in using the
bundy clock.
On December 10, 1991, petitioner received a suspension order without pay for fifteen
(15) days effective January 1, 1992, because of dishonesty in reporting his actual
attendance. After serving the suspension, the petitioner reported back to office on
January 16, 1992.
On June 15, 1992, another adverse report on tardiness and absences from the
Registrar was made against the petitioner prompting WNC to send him another
memorandum with an attached tardiness and absences report, calling his attention on his
tardiness and absences for the period February to April 1992.
On June 20, 1992, petitioner sent a letter of appeal and explained his side to the new
college president, Suzette Arbolario-Agustin, who gave petitioner another chance.The
petitioner was then appointed as Information Assistant effective immediately. However,
the petitioner did not immediately assume the post of Information Assistant prompting the
President of private respondent WNC to call his attention. When the petitioner finally
assumed his post, he was allowed a part-time teaching job in the same school to augment
his income.
Sometime in December 1992, WNC won a case against the officials of the union
before the NLRC. Petitioner was ordered to prepare a media blitz of this victory but the
petitioner did not comply with the order on the ground that such a press release would
only worsen the already aggravated situation and strained relations between WNC
management and the union officials.
When petitioner reported for work on the first day of January 1993, he was relieved
from his post and transferred to the College of Liberal Arts as Records Evaluator.Not for
long, the Dean of the Liberal Arts sent a letter to the Human Resources Manager
complaining about the petitioners poor performance and habitual absenteeism, as shown
in the daily absence reports.
On January 18, 1993, petitioner was again absent from work without permission or
notice to his immediate superior. It turned out that he went to Bacolod City and on January
28, 1993, the petitioner was one of those arrested during a raid in the house of one Toto
Ruiz, a suspected drug pusher and was brought to the Bacolod Police Station along with
four (4) other suspects. Upon further search and investigation by the Narcotics Control
Division, the petitioner was found possessing two (2) suspected marijuana roaches (butts)
which were placed inside his left shoe. The event was widely publicized, focusing on
petitioners position as an Economics teacher of WNC, and considering further that one
of his fellow suspects was a member of the Philippine Army, who was caught with an
unlicensed firearm, a tooter and other shabuparaphernalia. The petitioner and other
suspects were then charged with violation of the Dangerous Drugs Act of 1972 (Republic
Act No. 6425, as amended).
Petitioner was asked to explain within 24 hours why he should not be terminated as
a result of the raid and the charges against him for violation of Rep. Act No. 6425 as
amended. Petitioner allegedly was not able to answer immediately since he was in jail
and received said memorandum only on January 30, 1993, although his wife had earlier
received the memorandum on January 28, 1993.
On January 29, 1993, the petitioner was dismissed for failure to answer said
memorandum.
On February 1, 1993, the petitioner wrote to the President of WNC explaining his side
and asking for due process. WNC cancelled its Notice of Termination dated January 29,
1993, and granted the petitioners request. The petitioner was notified through a
memorandum about the grant of his request and that a hearing would be conducted. He
was then placed under preventive suspension and an investigation committee was
organized to conduct the probe. On March 6, 1993, a notice of hearing/investigation was
sent to the petitioner.
After the investigation attended by the petitioner and his counsel, with proceedings
duly recorded, the investigation committee recommended the dismissal of petitioner.A
notice of termination was then sent to petitioner informing him of his termination from the
service for serious misconduct and gross and habitual neglect of duty. The petitioner
received the notice on March 25, 1993, but did not file a grievance concerning the notice
of termination.
On January 19, 1995, petitioner filed a Complaint against WNC for illegal suspension,
illegal dismissal, backwages, salary differential for salary increases and other benefits
granted after his dismissal as well as for moral and exemplary damages and attorneys
fees.
In its Answer, WNC alleged that petitioner was dismissed on charges of serious
misconduct, and gross and willful neglect of duty. WNC said his dismissal was effected
after due notice and prior hearing. It claimed also that since petitioner was terminated for
a valid cause after a due hearing, the latters claim for moral and exemplary damages,
and attorneys fees had no basis in fact and in law.
After due proceedings, the Labor Arbiter rendered a decision, the decretal portion of
which reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered DIRECTING


respondent West Negros College to pay complainant Rene P. Valiao (a) P3,300.00 as
salary for the period of his preventive suspension, and (b) P330.00 as attorneys fees, or
the total amount of THREE THOUSAND SIX HUNDRED THIRTY PESOS (P3,630.00).

Further, all other claims are DISMISSED for lack of merit.


SO ORDERED.[3]

The Labor Arbiter found no justifiable reason to place the petitioner under preventive
suspension as there was no serious or imminent threat to the life or property of his
employer or co-workers.
However, the Labor Arbiter found the dismissal of the petitioner from WNC to be valid
due to absenteeism and tardiness and after he was accorded the procedural due process
aspect of the law as reflected in the records showing that the petitioner was formally
investigated and given the opportunity to refute the alleged findings by the management
of WNC. The Labor Arbiter held that frequent absenteeism and tardiness of the petitioner
constituted not only willful disobedience but also gross and habitual neglect of duties,
which are valid grounds for termination of employment. He stressed that the petitioners
frequent absences without proper leave of absence was not only unfair to WNC and the
petitioners co-employees but also set an undesirable example to the employees under
his supervision, considering that the petitioner was not a mere rank-and-file employee but
one who owed more than the usual fealty to the organization.
On appeal to the NLRC, the latter affirmed the decision of the Labor Arbiter, sustained
the latters findings of facts, and made its own findings on the apprehension of the
petitioner for possession of prohibited drugs. The decretal portion of the decision reads
as follows:

WHEREFORE, premises considered, the appeal is DISMISSED and the decision of the
Executive Labor Arbiter is AFFIRMED in its entirety.

SO ORDERED.[4]

Petitioner then filed a Petition for Certiorari under Rule 65 before the Court of Appeals
but this was dismissed for lack of merit. The decretal portion of the decision reads as
follows:

WHEREFORE, the questioned Decision and Resolution dated December 11, 1998 and
July 7, 1999, respectively, of public respondent National Labor Relations Commission
are hereby AFFIRMED.

SO ORDERED.[5]

The Court of Appeals held that the petitioner was validly dismissed for serious
misconduct and gross habitual neglect of duties, which was aggravated by his arrest for
violation of Rep. Act No. 6425, as amended [the January 28, 1993 incident] and that he
was afforded the twin requirements of notice and hearing and the opportunity to defend
himself by the investigating committee. The appellate court noted that WNC had
presented sufficient evidence to support petitioners termination from employment after
taking into consideration the totality of the infractions or the number of violations
committed by petitioner during the period of employment and stressed that it properly
exercised its management prerogative by observing due process. Finally, the Court of
Appeals ruled that the NLRC correctly denied the claim for damages and attorneys fees
for lack of evidentiary support.
Petitioner duly filed a Motion of Reconsideration, which was denied by the Court of
Appeals.
Hence, this petition alleging that:
A. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS ERRED
IN HOLDING THAT THE DISMISSAL OF PETITIONER WAS VALID,
DESPITE THE FACT THAT THERE IS CLEAR AND BLATANT VIOLATION
OF THE BASIC CONSTITUTIONAL RIGHTS OF THE HEREIN PETITIONER
BOTH SUBSTANTIVE AND PROCEDURAL DUE PROCESS.
B. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS IN (SIC)
DISMISSING THE RELIEFS FOR MORAL AND EXEMPLARY DAMAGES
AND ATTORNEYS FEES.[6]
In our view, the only relevant issue for our resolution is whether or not the petitioner
was validly dismissed from employment on the ground of serious misconduct and gross
habitual neglect of duties, including habitual tardiness and absenteeism.
Petitioner claims that his outright dismissal from employment was not valid and too
harsh and that he was not dismissed from employment because of tardiness or absences
but because he was among those apprehended in a raid. Also, he was not accorded due
process because although his wife received the show cause notice, he did not have the
proper mind to reply as he was in jail and was psychologically disturbed.
Considering the submissions of the parties as well as the records before us, we find
the petition without merit. Petitioners dismissal from employment is valid and justified.
For an employees dismissal to be valid, (a) the dismissal must be for a valid cause
and (b) the employee must be afforded due process.[7]
Serious misconduct and habitual neglect of duties are among the just causes for
terminating an employee under the Labor Code of the Philippines. Gross negligence
connotes want of care in the performance of ones duties. Habitual neglect implies
repeated failure to perform ones duties for a period of time, depending upon the
circumstances.[8] The Labor Arbiters findings that petitioners habitual absenteeism and
tardiness constitute gross and habitual neglect of duties that justified his termination of
employment are sufficiently supported by evidence on record. Petitioners repeated acts
of absences without leave and his frequent tardiness reflect his indifferent attitude to and
lack of motivation in his work. More importantly, his repeated and habitual infractions,
committed despite several warnings, constitute gross misconduct unexpected from an
employee of petitioners stature. This Court has held that habitual absenteeism without
leave constitute gross negligence and is sufficient to justify termination of an employee. [9]
However, petitioner claims that he was dismissed not for his tardiness or absences
but for his arrest as a suspected drug user. His claim, however, is merely speculative. We
find such contention devoid of basis. First, the decisions of the Labor Arbiter, the NLRC,
and the Court of Appeals are indubitable. They show that indeed petitioner had incurred
numerous and repeated absences without any leave. Moreover, he was not punctual in
reporting for work. These unexplained absences and tardiness were reflected on the
summary reports submitted by WNC before the labor arbiter, but petitioner failed to
controvert said reports. Second, contrary to petitioners assertion, the NLRC did not base
its conclusions on the fact of the arrest of petitioner for violation of Rep. Act No. 6425 but
on the totality of the number of infractions incurred by the petitioner during the period of
his employment in different positions he occupied at WNC. Thus:

In the case of petitioner Valiao, his services were terminated by private respondent after
having been found guilty of serious misconduct and gross habitual neglect of duty which
was aggravated by the January 28, 1993 incident. In exercising such management
prerogative, due process was properly observed. Private respondent presented
sufficient evidence to support its act in terminating the services of petitioner. Private
respondent took into consideration the totality of the infractions or the number of
violations committed by petitioner during the period of employment. Furthermore, it
hardly needs reminding that, in view of petitioners position and responsibilities, he must
demonstrate a scrupulous regard for rules and policies befitting those who would be role
models for their young charges.[10] (Emphasis and italics supplied)

Indeed, even without the arrest incident, WNC had more than enough basis for
terminating petitioner from employment. It bears stressing that petitioners absences and
tardiness were not isolated incidents but manifested a pattern of habituality. In one case,
we held that where the records clearly show that the employee has not only been charged
with the offense of highgrading but also has been warned 21 times for absences without
official leave, these repeated acts of misconduct and willful breach of trust by an employee
justify his dismissal and forfeiture of his right to security of tenure. [11] The totality of
infractions or the number of violations committed during the period of employment shall
be considered in determining the penalty to be imposed upon an erring employee. The
offenses committed by him should not be taken singly and separately but in their
totality. Fitness for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct, and ability separate and independent of each
other.[12]
Needless to say, so irresponsible an employee like petitioner does not deserve a
place in the workplace, and it is within the managements prerogative of WNC to terminate
his employment. Even as the law is solicitous of the welfare of employees, it must also
protect the rights of an employer to exercise what are clearly management
prerogatives. As long as the companys exercise of those rights and prerogative is in good
faith to advance its interest and not for the purpose of defeating or circumventing the
rights of employees under the laws or valid agreements, such exercise will be upheld. [13]
Still, petitioner claims that he was not afforded due process so that his dismissal from
employment should be declared invalid. This contention deserves scant
consideration. The Court of Appeals held that the records reveal that petitioner was
afforded the twin requirements of notice and hearing and was likewise given the
opportunity to defend himself before the investigating committee. We find no reason to
set aside these factual findings of the Court of Appeals as they are supported by evidence
on record. Besides, we may not review the appellate courts findings of fact in an appeal
via certiorari,[14] since as a rule, the Supreme Courts review is limited to errors of law
allegedly committed by the appellate court.[15] Judicial review of labor cases does not go
as far as to evaluate the sufficiency of evidence upon which the Labor Arbiter and National
Labor Relations Commission based their determinations.[16]
In this case, petitioner was asked to explain his several absences and tardiness on many
occasions. A notice to explain was sent to him regarding the arrest incident wherein he was
able to reply. An investigation committee was formed by WNC to investigate the arrest
incident and the absences and tardiness of petitioner. It must be emphasized that
proceedings of the committee were duly recorded, and petitioner actively participated therein
by answering the various questions interposed by the panel members. Finally, a notice of his
termination was sent to petitioner, although he claims to have received it late as he was in
jail. It is an undeniable fact, however, that his wife had actually received the notice in his
house earlier, even before petitioners termination and this matter was later communicated to
him.
At any rate, petitioner was given enough opportunity to be heard, and his dismissal
was based on valid grounds. The essence of due process is simply an opportunity to be
heard, or as applied to administrative proceedings, an opportunity to explain ones side or
an opportunity to seek a reconsideration of the action or ruling complained of.A formal or
trial-type hearing is not at all times and in all instances essential, as the due process
requirements are satisfied where the parties are afforded fair and reasonable opportunity
to explain their side of the controversy at hand. What is frowned upon is the absolute lack
of notice and hearing.[17]
Finally, the Labor Arbiter found that petitioner is entitled to salary differentials for the
period of his preventive suspension, as there is no sufficient basis shown to justify his
preventive suspension. During the pendency of the investigation, the employer may place
the worker concerned under preventive suspension if his continued employment poses a
serious and imminent threat to life or property of the employer or of his co-workers.[18] But
in this case, there is no indication that petitioner posed a serious threat to the life and
property of the employer or his co-employees. Neither was it shown that he was in such
a position to unduly influence the outcome of the investigation. Hence, his preventive
suspension could not be justified, and the payment of his salary differentials is in order.
However, the award of attorneys fees to him cannot be sustained, in view of our
findings that petitioner was validly dismissed from employment. Said award lacks legal
basis and could not be granted properly in this case.
WHEREFORE, the assailed Decision dated August 22, 2000 and Resolution dated
November 22, 2000 of the Court of Appeals in CA-G.R. SP No. 55133 are AFFIRMED
with MODIFICATION in that the award of attorneys fees is deleted. No pronouncement
as to costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Challenge Socks vs. CA, 474 SCRA 356,


GR 165268, November 8, 2005
IRST DIVISION

CHALLENGE SOCKS G.R. No. 165268


CORPORATION,
Petitioner, Present:
Davide, Jr., C.J. (Chairman),*
- versus - Quisumbing,**
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
COURT OF APPEALS (Former
First Division), NATIONAL LABOR
RELATIONS COMMISSION
(First Division), HON. ANTONIO
R. MACAM, in his capacity as Promulgated:
Labor Arbiter and ELVIE BUGUAT,
Respondents. November 8, 2005
x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court assails the May
11, 2004 Decision[1] of the Court of Appeals in CA-G.R. SP No. 75761, and its September
13, 2004 Resolution[2] denying the motion for reconsideration.

The antecedent facts show that respondent Elvie Buguat was hired on January 17,
1997 by petitioner Challenge Socks Corporation as knitting operator. [3] In the course of
her employment, she incurred absences and tardiness without prior approval and had
been neglectful of her duties.[4] On May 25, 1998, she failed to check the socks she was
working on causing excess use of yarn and damage to the socks design. She was
suspended for five days and warned that a repetition of the same act would mean
dismissal from the service.[5] On February 2, 1999, she committed the same infraction
and was given a warning.[6] Despite the previous warnings, Buguat continued to be
habitually absent and inattentive to her task. On March 1, 1999, she again failed to
properly count the bundle of socks assigned to her. Thus, on March 2, 1999, petitioner
terminated her services on grounds of habitual absenteeism without prior leave, tardiness
and neglect of work.[7]

Thereafter, Buguat filed a complaint for illegal dismissal.[8]

On February 11, 2000, the labor arbiter[9] rendered a Decision[10] holding that Buguat was
illegally dismissed. The dispositive portion of the decision reads:

WHEREFORE, following the pronouncement in the case of ALU-


TUCP v. NLRC (G.R. No. 120450, February 10, 1999), judgment is hereby
rendered ordering respondents to reinstate complainants without loss of
seniority rights and benefits, but without backwages.

SO ORDERED.[11]
The labor arbiter found Buguats dismissal too harsh and disproportionate to the
infraction committed. It was observed that counting volumes of socks is tedious and the
worker is prone to commit mistakes especially if the counting is done on a regular basis.
The labor arbiter ruled that mistake in counting bundles of socks is tolerable and should
be punished by suspension only.[12]

The National Labor Relations Commission (NLRC) adopted the findings of the labor
arbiter. It denied[13] petitioners appeal and motion for reconsideration.

Petitioner filed a petition for certiorari before the Court of Appeals which rendered a
Decision on May 11, 2004 reversing and setting aside that of the labor arbiter and the
NLRC, the dispositive portion of which provides:

WHEREFORE, the Decision dated October 30, 2001 and the Order of
December 19, 2002 of the National Labor Relations Commission are hereby
REVERSED and SET ASIDE and a new one entered herein.

CHALLENGE SOCKS CORPORATION, having terminated private


respondent with just and valid cause but without observing the proper
procedure in terminating private respondents services, is ordered to pay
ELVIE BUGUAT full backwages from the time her employment was
terminated on March 2, 1999 up to the time the herein decision becomes
final. For this purpose, this case is REMANDED to the Regional Labor
Arbiter for the computation of the backwages due private respondent.

SO ORDERED.[14]
The appellate court found that there was just cause for terminating the services of Buguat
considering the series of infractions she committed.[15] However, it was noted that
petitioner failed to comply with the twin-notice requirement in terminating an employee
hence, the dismissal was considered ineffectual.[16] Petitioner was ordered to pay Buguat
her back wages computed from the time of her dismissal up to the finality of the
decision.[17]

Petitioner sought reconsideration of the appellate courts decision but the same was
denied on September 13, 2004.

Hence, this petition.

The issue for resolution is the validity of Buguats termination.


One of the just causes for terminating an employment under Article 282 of the Labor Code
is gross and habitual neglect by the employee of her duties. This cause includes gross
inefficiency, negligence and carelessness. Such just causes is derived from the right of
the employer to select and engage his employees.[18]

In the instant case, there is no doubt that Buguat was habitually absent, tardy and
neglectful of her duties. We agree with the Court of Appeals that:

Elvies commission of three (3) violations of the companys rules and


regulations, including her unauthorized absences and tardiness, all
committed in the span of two years, shows that she did not only fail to
observe due diligence in performing her job, but she has little regard for the
consequences of her acts and inactions. She repeatedly committed error in
counting the socks to be given to the Looping Section. As a knitting
operator, Elvie was required to check the socks she was working on and to
count the bundles of socks she had to pack to be forwarded to the Looping
Section. Elvie did not question the authenticity of the May 25, 1998
suspension letter and the February 2, 1999 memorandum.

While a first violation could be considered excusable, repeated commission


of the same offense could be considered willful disobedience. Elvie, despite
the suspension and warning, continued to disregard the company rules and
regulations.[19]

Habitual neglect implies repeated failure to perform ones duties for a period of time.
Buguats repeated acts of absences without leave and her frequent tardiness reflect her
indifferent attitude to and lack of motivation in her work. Her repeated and habitual
infractions, committed despite several warnings, constitute gross misconduct. Habitual
absenteeism without leave constitute gross negligence and is sufficient to justify
termination of an employee.[20]

We find the penalty of dismissal from the service reasonable and appropriate to
Buguats infraction. Her repeated negligence is not tolerable; neither should it merit the
penalty of suspension only. The record of an employee is a relevant consideration in
determining the penalty that should be meted out. [21] Buguat committed several
infractions in the past and despite the warnings and suspension, she continued to display
a neglectful attitude towards her work. An employees past misconduct and present
behavior must be taken together in determining the proper imposable penalty. [22] The
totality of infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be imposed upon an erring
employee. The offenses committed by him should not be taken singly and separately but
in their totality. Fitness for continued employment cannot be compartmentalized into tight
little cubicles of aspects of character, conduct, and ability separate and independent of
each other.[23] It is the totality, not the compartmentalization, of such company infractions
that Buguat had consistently committed which justified her dismissal.[24]

Besides, terminating an employment is one of petitioners prerogatives. As the


employer, petitioner has the right to regulate, according to its discretion and best
judgment, all aspects of employment, including work assignment, working methods,
processes to be followed, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of workers. Management has
the prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations.[25]

This Court has upheld a companys management prerogatives so long as they are
exercised in good faith for the advancement of the employers interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements.[26]

In the case at bar, petitioner exercised in good faith its management prerogative
as there is no dispute that Buguat had been habitually absent, tardy and neglectful of her
work, to the damage and prejudice of the company. Her dismissal was therefore proper.

The law imposes many obligations on the employer such as providing just compensation
to workers, observance of the procedural requirements of notice and hearing in the
termination of employment. On the other hand, the law also recognizes the right of the
employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the service will patently be
inimical to his interests.[27]

The employer has the burden of proving that the dismissed worker has been
served two notices: (1) one to apprise him of the particular acts or omissions for which
his dismissal is sought, and (2) the other to inform him of his employers decision to
dismiss him.[28]

As found by the Court of Appeals, petitioner failed to comply with this requirement, thus:
A review of the records shows that private respondent was served a
written termination notice on the very day she was actually dismissed from
the service. The case records are bereft of any showing that Challenge
Socks Corporation notified Elvie in advance of the charge or charges
against her. Likewise, she was not given an opportunity to refute the
charges made against her, thus, depriving her of the right to defend herself.
In other words, petitioner fell short in observing the two-notice rule required
by law.[29]

In Agabon v. National Labor Relations Commission,[30] we upheld as valid the dismissal


for just cause although it did not comply with the requirements of procedural due process.
We ruled that while the procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for non-compliance with the
procedural requirements of due process.[31] The violation of Buguats right to statutory due
process by the petitioner warrants the payment of indemnity in the form of nominal
damages in the amount of P30,000, which is appropriate under the circumstances. [32]

Conformably, the award of backwages in the present case should be


deleted. Instead, private respondent should be indemnified in the amount of P30,000.00
as nominal damages.[33]

WHEREFORE, the May 11, 2004 Decision and the September 13, 2004 Resolution
of the Court of Appeals in CA-G.R. SP No. 75761, which declared that petitioner
Challenge Socks Corporation did not comply with the statutory due process requirements
in terminating the employment of private respondent Elvie Buguat, are AFFIRMED with
the MODIFICATION that the award of backwages is DELETED. Petitioner is ordered to
pay private respondent Elvie Buguat nominal damages in the amount of P30,000.00.

No costs.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

Standard Electric vs. Standard Electric Union, 468 SCRA 316,


GR 166111, August 25, 2005
ECOND DIVISION

STANDARD ELECTRIC G.R. No. 166111


MANUFACTURING
CORPORATION,
Petitioner, Present:

PUNO, J., Chairman,


AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

STANDARD ELECTRIC
EMPLOYEES UNION-NAFLU- Promulgated:
KMU and ROGELIO JAVIER,
Respondents. August 25, 2005

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

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari seeking to review the Decision[1] and
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 76657, which annulled and
set aside the Resolution of the National Labor Relations Commission (NLRC) affirming
the Labor Arbiters Decision[3] in NLRC NCR Case No. 00-08-04760-96.

Rogelio Javier was employed by the Standard Electric Manufacturing Corporation


(SEMC) on January 15, 1973 as radial spot machine operator in its Production
Department. Javier was a member of the Standard Electric Employees Union-NAFLU
(Union).[4]
On July 31, 1995, Javier failed to report for work. He failed to notify the SEMC of the
reason for his absences. On August 9, 1995, he was arrested and detained for the charge
of rape upon complaint of his neighbor, Genalyn Barotilla. After the requisite preliminary
investigation, an Information for rape was filed in the Regional Trial Court (RTC) of Pasig,
docketed as Criminal Case No. 108593.[5]

On January 13, 1996, the SEMC received a letter[6] from Javier, through counsel,
informing the SEMC that Javier was detained for the charge of rape and for that reason
failed to report for work. He requested the SEMC to defer the implementation of its
intention to dismiss him, citing the ruling of this Court in Magtoto v. NLRC.[7] The SEMC
denied Javiers request and issued a Memorandum terminating his employment for (a)
having been absent without leave (AWOL) for more than fifteen days from July 31, 1995;
and (b) for committing rape.[8]

On May 17, 1996, the RTC issued an Order[9] granting Javiers demurrer to evidence and
ordered his release from jail. Shortly thereafter, Javier reported for work, but the SEMC
refused to accept him back.

A grievance meeting between the Union, Javier and the SEMC was held, but SEMC
refused to re-admit Javier. On August 2, 1996, the Union and Javier filed a
Complaint[10] for illegal dismissal against the SEMC before the NLRC. He averred that
since the reason for his detention for rape was non-existent, the termination of his
employment was illegal. Javier cited the ruling of this Court in Magtoto v. NLRC.[11]

For its part, the SEMC averred that Javiers prolonged absences caused
irreparable damages to its orderly operation; he had to be replaced so that the continuity
and flow of production would not be jeopardized. It could not afford to wait for Javiers
indefinite return from detention, if at all. The SEMC insisted that conformably with its Rules
and Regulations, it was justified in dismissing Javier for being absent without leave for
fifteen days or so.

On January 14, 1997, the Labor Arbiter rendered judgment ordering the dismissal
of the complaint.[12] The Labor Arbiter ruled that the complaint was within the exclusive
jurisdiction of the Voluntary Arbitrators or Panel of Arbitrators. On appeal, the NLRC
reversed the Labor Arbiters decision
and ruled that the latter had jurisdiction over the complaint; it thus ordered the remand of
the case to the Labor Arbiter for resolution on the merits.[13]
On August 16, 1999, the Labor Arbiter rendered judgment ordering the dismissal of the
complaint.[14] However, the SEMC was ordered to pay separation pay to the complainant.
The dispositive portion reads:

WHEREFORE, in view of the foregoing, the complaint for illegal


dismissal is hereby ordered DISMISSED for lack of merit.

The respondents Standard Electric Manufacturing Corporation and


Mr. Jose Uy are, however, ordered to pay complainant Rogelio Javier the
amount of SEVENTY-ONE THOUSAND SEVEN HUNDRED SIXTY
PESOS (P71,760.00) representing his financial assistance/separation pay.

SO ORDERED.[15]

On appeal, the NLRC affirmed the Labor Arbiters ruling in its Resolution of September
24, 2002. The NLRC declared that:

Appellants contention is baseless. A perusal of the evidence on record


clearly shows that prior to his dismissal from his job by respondents-
appellees, he was made to explain his side (Exhibit 5, respondents Formal
Offer of Evidence). Evidence on record further shows that a grievance
machinery as provided for in the CBA was activated by respondents-
appellees for the purpose of affording complainant a chance to present his
side prior to his dismissal. (Exhibits 4 to 4-b, respondents Formal Offer of
Evidence).

Considering the adequate evidence presented by respondents-appellants


on which the findings of the Labor Arbiter were based, this Commission
finds no merit on complainants-appellants contention that the Labor Arbiter
had committed serious errors in his findings of facts and the law in this
instant case.

Hence, the assailed decision must stand for the matter of evaluating the
merits and demerits of the case, as long as the Decision is supported by the
facts and the evidence, is left to the sound discretion of the Labor Arbiter.
(Metropolitan Bank and Trust Company vs. NLRC, et al., 235 SCRA 400,
403).
WHEREFORE, in the light of the foregoing premises, [the] Decision of the
Labor Arbiter dated August 16, 1999 is hereby AFFIRMED.

SO ORDERED.[16]

When the NLRC denied the motion for reconsideration of the said decision, Javier and
the Union filed a petition for certiorari with the CA, questioning such ruling, as follows:

I
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION
IN NOT HOLDING THAT RESPONDENT COMPANY VIOLATED
PETITIONER ROGELIO JAVIERS RIGHT TO PRIOR NOTICE RELATIVE
TO THE LATTERS DISMISSAL.

II
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
IN HOLDING THAT PETITIONER ROGELIO JAVIER WENT AWOL
(ABSENCE WITHOUT LEAVE) FROM HIS JOB.

III
PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN NOT
APPLYING THE RULING IN MAGTOTO VS. NLRC TO THE INSTANT
CASE.[17]

In the Decision[18] dated August 19, 2004, the CA reversed the findings of the Labor
Arbiter and the NLRC. The fallo of the decision reads:

WHEREFORE, the NLRCs Resolution dated September 24, 2002


is ANNULLED and SET ASIDE. Private respondent Standard Electric
Manufacturing Corporation is hereby ORDERED to REINSTATE Rogelio
Javier to his former position, without loss of seniority rights and other
privileges appurtenant thereto, with full backwages from the time of his
dismissal until he is actually reinstated, or to pay him separation pay, if
reinstatement is no longer feasible.

SO ORDERED.
The appellate court cited the rulings of this Court in Magtoto v. NLRC[19] and City
Government of Makati City v. Civil Service Commission[20] as precedents. It declared that
it was not Javiers intention to abandon his job; his incarceration reasonably justified his
failure to report for work and negated the theory that he was on AWOL. Likewise, the CA
held that Javier could not be terminated on the ground of commission of a crime, as when
he was acquitted of the rape charges, the second ground relied upon by the
SEMC ceased to have factual basis. Hence, despite the fact that Javier was allegedly
afforded the opportunity to explain his side, the same was unnecessary since, in the first
place, there was no just or authorized cause for the dismissal.

The motion for reconsideration seasonably filed by the SEMC on August 19,
2004 was denied by the CA in its November 23, 2004 Resolution.[21] Hence, this
recourse.

The issues posed by the petitioner are the following:

I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN APPLYING THE
CASE OF MAGTOTO VS. NLRC IN THIS CASE.

II
WHETHER OF NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN APPLYING THE
CASE OF CITY GOVERNMENT OF MAKATI CITY IN THIS CASE.

III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN REINSTATING
[RESPONDENT] ROGELIO JAVIER AND GRANTING HIM FULL
BACKWAGES.

IV
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN TOTALLY
DISREGARDING THE FINDINGS OF THE NATIONAL LABOR
RELATIONS COMMISSION AND THE LABOR ARBITER A QUO.[22]
The Court finds that the petition is bereft of merit.

The petitioner asserts that the ruling of the Court in Magtoto finds no application in
the present case. It argues that in Magtoto, no criminal information was filed in the regular
court against the employee, as the city prosecutor found no probable cause to hold the
respondent therein for trial. The petitioner argues that respondent Javier was indicted for
the crime of rape in the RTC. Another difference, the petitioner points out, is that the
employee in the cited case was dismissed solely on account of his absences during his
imprisonment; respondent Javier was terminated due to truancy prior to his detention
from July 31, 1995, to his detention for rape on August 9, 1995, until his release on May
24, 1996. Respondent Javier never informed the petitioner why he was absent on the
said dates, and subsequent thereto. It was only on January 13, 1996 that respondent
Javier, through his counsel, informed the petitioner of his detention for rape for the first
time.

The petitioner avers that the ruling of this Court in City Government of Makati
City is not applicable because respondent Javier was dismissed on a demurrer to
evidence, and not because he did not commit the offense alleged. The case was
dismissed because of the prosecutions failure to prove his guilt beyond reasonable doubt.
In marked contrast, the petitioner notes, the employee in City Government of Makati
City was acquitted by reason of the prosecutions failure to prove her complicity in the
crime.

The petitioner maintains that the mere filing of the Information for the crime of rape
against respondent Javier rendered its Rules and Regulations operational, particularly
Serious Offense No. 7. It avers that substantial proof, not clear and convincing evidence
or proof beyond reasonable doubt, is sufficient basis for the imposition of any disciplinary
action over an erring employee.

The petitioners contentions are wrong.

Respondent Javier was dismissed by the petitioner effective February 5, 1996 for
(a) being AWOL from July 31, 1995 up to January 30, 1996; and (b) committing rape.
However, on demurrer to evidence, respondent Javier was acquitted of the charge. With
respondent Javiers acquittal, the cause of his dismissal from his employment turned out
to be non-existent.
In the Magtoto case, Alejandro Jonas Magtoto was arrested by virtue of an Arrest,
Search and Seizure Order dated September 1, 1980. He was
charged with violation of Article 136 (Conspiracy and Proposal to Commit Rebellion) and
Article 138 (Inciting to Rebellion or Insurrection) of the Revised Penal Code (RPC).
Although Magtoto informed his employer and pleaded that he be considered as on leave
until released, his employer denied the request. On April 10, 1981, or about seven (7)
months after his arrest, Magtoto was released after the City Fiscal dismissed the criminal
charges for lack of evidence. On the same date, he informed his employer of his intent to
start working again, but the employer rejected the offer. In ruling that his termination was
illegal, the Supreme Court ruled as follows:

The employer tries to distance itself from the detention by stressing


that the petitioner was dismissed due to prolonged absence. However, Mr.
Magtoto could not report for work because he was in a prison cell. The
detention cannot be divorced from prolonged absence. One caused the
other. Since the causes for the detention, which in turn gave the employer
a ground to dismiss the petitioner, proved to be non-existent, we rule that
the termination was illegal and reinstatement is warranted. A non-existent
cause for dismissal was explained in Pepito v. Secretary of Labor (96 SCRA
454).

... A distinction, however, should be made between a dismissal


without cause and a dismissal for a false or non-existent cause. In the
former, it is the intention of the employer to dismiss his employee for no
cause whatsoever, in which case the Termination Pay Law would apply. In
the latter case, the employer does not intend to dismiss the employee but
for a specific cause which turns out to be false or non-existent. Hence,
absent the reason which gave rise to his separation from employment, there
is no intention on the part of the employer to dismiss the employee
concerned. Consequently, reinstatement is in order. And this is the situation
here. Petitioner was separated because of his alleged involvement in the
pilferage in question. However, he was absolved from any responsibility
therefor by the court. The cause for his dismissal having been proved non-
existent or false, his reinstatement is warranted. It would be unjust and
unreasonable for the Company to dismiss petitioner after the latter had
proven himself innocent of the cause for which he was dismissed. [23]
The facts in Pedroso v. Castro[24] are similar to the set of facts in the present case.
The petitioners therein were arrested and detained by the military authorities by virtue of
a Presidential Commitment Order allegedly for the commission of Conspiracy to Commit
Rebellion under Article 136 of the RPC. As a result, their employer hired substitute
workers to avoid disruption of work and business operations. They were released when
the charges against them were not proven. After incarceration, they reported back to
work, but were refused admission by their employer. The Labor Arbiter and the NLRC
sustained the validity of their dismissal. Nevertheless, this Court again held that the
dismissed employees should be reinstated to their former positions, since their separation
from employment was founded on a false or non-existent cause; hence, illegal.

Respondent Javiers absence from August 9, 1995 cannot be deemed as an


abandonment of his work. Abandonment is a matter of intention and cannot lightly be
inferred or legally presumed from certain equivocal acts. To constitute as such, two
requisites must concur: first, the employee must have failed to report for work or must
have been absent without valid or justifiable reason; and second, there must have been
a clear intention on the part of the employee to sever the employer-employee relationship
as manifested by some overt acts, with the second element being the more determinative
factor. Abandonment as a just ground for dismissal requires clear, willful, deliberate, and
unjustified refusal of the employee to resume his employment. Mere absence or failure to
report for work, even after notice to return, is not tantamount to abandonment.[25]

Moreover, respondent Javiers acquittal for rape makes it more compelling to view
the illegality of his dismissal. The trial court dismissed the case for insufficiency of
evidence, and such ruling is tantamount to an acquittal of the crime charged, and proof
that respondent Javiers arrest and detention were without factual and legal basis in the
first place.

The petitioner acted with precipitate haste in terminating respondent Javiers


employment on January 30, 1996, on the ground that he had raped the complainant
therein. Respondent Javier had yet to be tried for the said charge. In fine, the petitioner
prejudged him, and preempted the ruling of the RTC. The petitioner had, in effect,
adjudged respondent Javier guilty without due process of law. While it may be true that
after the preliminary investigation of the complaint, probable cause for rape was found
and respondent Javier had to be detained, these cannot be made as legal bases for the
immediate termination of his employment.

Moreover, the petitioner did not accord respondent Javier an opportunity to explain
his absences from July 31, 1995. The petitioners reliance on the alleged Letter
dated August 17, 1995 is misplaced. There is no evidence on record that respondent
Javier received such letter, and its
sudden presence is highly suspect. The Court agrees with respondent Javiers
observation that the letter was not mentioned nor annexed in the petitioners Position
Paper, Rejoinder and even in its Opposition to the Appeal. The letter surfaced only on a
much later date, in 1999, when it was formally offered in evidence [26] and referred to in
the petitioners Memorandum[27] before the Labor Arbiter a clear inference that the said
letter was but an afterthought to justify petitioners termination of respondent Javiers
employment.

Further, we cannot subscribe to the petitioners contention that the due process
requirement relative to the dismissal of respondent Javier was duly complied with when
he was allowed to explain his side during the grievance machinery conferences. Indeed,
in the case at bar, the petitioner did not conduct any investigation whatsoever prior to his
termination, despite being informed of respondent Javiers predicament by the latters
siblings, his Union and his counsel.[28] The meetings held pursuant to the grievance
machinery provisions of the collective bargaining agreement were only done after his
dismissal had already taken effect on February 5, 1996. Clearly, well-meaning these
conferences might be, they can not cure an otherwise unlawful termination.

It bears stressing that for a dismissal to be validly effected, the twin requirements
of due process notice and hearing must be observed. In dismissing an employee, an
employer has the burden of proving that the
former worker has been served two notices: (1) one to apprise him of the particular acts
or omissions for which his dismissal is sought; and (2) the other to inform him of his
employers decision to dismiss him. As to the requirement of a hearing, the essence of
due process lies in an opportunity to be heard, and not always and indispensably in an
actual hearing.[29]

Finally, in line with the rulings of this Court in Magtoto and Pedroso on the matter
of backwages, respondent Javier is not entitled to any salary during the period of his
detention. His entitlement to full backwages commenced from the time the petitioner
refused his reinstatement. In the instant case, when respondent Javier was freed on May
24, 1996 by virtue of the judgment of acquittal dated May 17, 1996, he immediately
proceeded to the petitioner but was not accepted back to work; hence, the reckoning point
for the grant of backwages started therefrom.

IN LIGHT OF ALL THE FOREGOING, the instant petition is


hereby DISMISSED for lack of merit. The assailed Decision of the Court of Appeals
is AFFIRMED WITH MODIFICATION. Petitioner is hereby ORDERED to
reinstate respondent Rogelio Javier to his former position or, if no longer possible, a
substantially equivalent position without loss of seniority rights and other privileges
appurtenant thereto, with full backwages from the time it refused to allow his
reinstatement on May 24, 1996 until actually reinstated; or, if reinstatement is no longer
feasible, to pay him separation pay equivalent to one (1) month salary for every year of
service.

Costs against the petitioner.

SO ORDERED.

ROMEO J. CALLEJO, SR.


Associate Justice

Floren Hotel vs NLRC, 458 SCRA 128,

GR 155264, May 6, 2005


[G.R. No. 155264. May 6, 2005]

FLOREN HOTEL and/or LIGAYA CHU, DELY LIM and JOSE CHUA LIM, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION, RODERICK A. CALIMLIM,
RONALD T. RICO, JUN A. ABALOS, LITO F. BAUTISTA and GLORIA B.
LOPEZ, respondents.

DECISION
QUISUMBING, J.:

Petitioners Floren Hotel, Ligaya Chu, Dely Lim and Jose Chua Lim seek to annul the
Decision,[1] dated September 10, 2002, of the Court of Appeals in CA-G.R. SP No. 60685
insofar as it ruled that petitioners had constructively dismissed private respondents
Roderick A. Calimlim and Ronald T. Rico, hence the petitioners are liable to the private
respondents for their proportionate 13th month pay, service incentive leave pay, and
indemnity.
At the time of their termination, private respondents Roderick A. Calimlim, Ronald T.
Rico and Jun A. Abalos were working in the hotel as room boys, private respondent Lito
F. Bautista as front desk man, and private respondent Gloria B. Lopez as waitress. They
all started working for the hotel in 1993, except for Jun A. Abalos who started only in
1995.
In the afternoon of June 6, 1998, petitioner Dely Lim randomly inspected the hotel
rooms to check if they had been properly cleaned. When she entered Room 301, she
found private respondent Lito F. Bautista sleeping half-naked with the air-conditioning on.
Lim immediately called the attention of the hotels acting supervisor, Diosdado Aquino,
who had supervision over Bautista. Lim admonished Aquino for not supervising Bautista
more closely, considering that it was Bautistas third offense of the same nature.
When she entered Room 303, she saw private respondents Calimlim and Rico
drinking beer, with four bottles in front of them. They had taken these bottles of beer from
the hotels coffee shop. Like Bautista, they had switched on the air conditioning in Room
303.
That same afternoon, Dely Lim prepared a memorandum for Bautista, citing the latter
for the following incidents: (1) sleeping in the hotel rooms; (2) entertaining a brother-in-
law for extended hours during duty hours; (3) use of hotel funds for payment of SSS loan
without management consent; (4) unauthorized use of hotels air-con; and (5) failure to
pay cash advance in the amount of P4,000.[2]
In the presence of Acting Supervisor Aquino as well as workers Jennifer Rico, Romel
Macaraeg, Mario Resquino and Charie Chua, Dely Lim tried to give Bautista a copy of
the memorandum but Bautista refused to receive it. Bautista then went on absence
without leave. Calimlim and Rico, embarrassed by the incident, went home. When they
returned to work the next day, they were served with a notice [3] of suspension for one
week.
Like Bautista, they refused to receive the notice of suspension, but opted to serve the
penalty. Upon their return on June 15, 1998, they saw a memorandum [4] dated June 13,
1998 on the bulletin board announcing (a) the suspension as room boys of Calimlim and
Rico, or alternately, (b) returning to work on probation as janitors for the following reasons:
unsatisfactory work, having a drinking spree inside the hotels rooms, cheating on the
Daily Time Record, being absent without valid reason, leaving work during duty time,
tardiness, and sleeping on the job. The memorandum also included Calimlim and Ricos
new work schedule.
Calimlim and Rico submitted handwritten apologies[5] and pleaded for another
chance, before they went AWOL (absent without leave).
On June 25, 1998,[6] Calimlim, Rico and Bautista filed separate complaints, for illegal
dismissal and money claims, before the Labor Arbiter in Dagupan City. Calimlim and Rico
claimed they were constructively dismissed, while Bautista claimed that Dely Lim orally
told him not to go back to work because he was already dismissed. Abalos and Lopez
later also filed separate complaints for underpayment of wages, non-payment of their
13th month pay, and service incentive leave pay. On July 7, 1998, after they stopped
working, Abalos and Lopez amended their complaints. They claimed that petitioners orally
dismissed them when they refused to withdraw their complaints.
Petitioners for their part, alleged that they did not dismiss private respondents but that
private respondents had abandoned their jobs.[7]
Private respondents filed a manifestation and motion [8] dated November 24, 1998,
praying that petitioners be ordered to reinstate them to their former positions since after
all, according to petitioners, they were not dismissed.
Petitioners opposed the motion and argued that private respondents cannot be
reinstated since they were not illegally dismissed but they had abandoned their jobs and
management simply considered them dismissed for abandonment.[9] There is no record,
however, that the Labor Arbiter resolved said motion.
On March 19, 1999, the Labor Arbiter dismissed the complaints but ordered
petitioners to pay private respondents their proportionate 13 th month pay, and service
incentive leave pay. He likewise ordered petitioners to pay Calimlim and Rico indemnity.
He decreed:

IN VIEW OF THE FOREGOING PREMISES, judgment is hereby rendered as follows:

1. Declaring that the five complainants in these consolidated cases were not
dismissed illegally from their work but they abandoned their work.

2. Ordering respondents Floren Hotel and/or Ligaya [Chu] and Dely Joson Lim to
pay the complainants proportionate 13th month pay for 1998 and incentive
leave pay equivalent to two and one half days salary (January to June 1998),
computed as follows:

Proportionate 13th month pay:

a) Roderick Calimlim (daily wage as of June 4, 1998 = P148.00 x


30 days [=] P4,440 x 6 months (Jan. to June 1998) = P26,640
divided by 12 (one year) = P2,220.00;
b) Ronald Rico = P2,220.00
c) Jun Abalos = P2,220.00
d) Lito Bautista = P2,220.00
e) Gloria Lopez = P2,220.00

Service Incentive Leave:

R. Calimlim (2 days salary) = P 369.00


R. Rico = 369.00
J. Abalos = 369.00
L. Bautista = 369.00
G. Lopez = 369.00

3. Ordering the same respondents to pay Roderick Calimlim and Ronald Rico one
thousand five hundred pesos each as indemnity;

Summary:

R. Calimlim = P4,089.00
R. Rico = 4,089.00
J. Abalos = 2,589.00
L. Bautista = 2,589.00
G. Lopez = 2,589.00
TOTAL AWARD = P15,945.00

All other claims of the complainants including moral and exemplary damages are
hereby denied/dismissed for want of merit.

SO ORDERED.[10]

The Labor Arbiter found that Calimlim, Rico, and Bautista did not report for work and
they did not show any order of dismissal, thus constructively, they abandoned their work
and were not illegally dismissed. The Labor Arbiter also ruled that Calimlim and Ricos
demotion and reassignment were valid exercises of management prerogatives. The
reassignment was intended to enable management to supervise them more closely and,
in any event, did not involve a diminution of wages. [11] The Labor Arbiter, however, held
petitioners liable for indemnity to Calimlim and Rico for not observing the twin notices
rule.
On the absence of any suspension order or notice of dismissal[12] concerning Abalos
and Lopez, the Labor Arbiter held that the allegation that they were orally dismissed was
insufficient, self-serving, and baseless.
Private respondents appealed to the National Labor Relations Commission (NLRC).
They averred that the Labor Arbiter committed grave abuse of discretion in ruling (1) that
they abandoned their work, and (2) that the immediate filing of their complaints for illegal
dismissal where they prayed for reinstatement, did not mean they abandoned their jobs.
They stressed that the two elements of abandonment were not proven and that petitioners
failed to comply with the two-notice rule.[13] Private respondents likewise insisted that
damages were due them, because their dismissal was attended with bad faith and
malice.[14]
On March 22, 2000, the NLRC rendered its decision.[15] It reversed the decision of
the Labor Arbiter and ordered the hotel management to immediately reinstate
complainants-appellants to their former positions without loss of seniority rights, with full
backwages and other benefits until they are actually reinstated. In the event that
reinstatement was no longer possible, the respondent-appellees should pay herein
private respondents their separation pay in addition to the payment of their full
backwages; their incentive leave pay and their 13 th month pay, together with P1,000 to
each of them as indemnity.[16]
The NLRC concluded that petitioners failed to prove that private respondents had
abandoned their work. Petitioners likewise failed to serve private respondents notices of
termination based on abandonment. The NLRC added that Calimlim and Rico were
constructively dismissed when they were demoted from room boys to janitors and
reclassified as probationary employees.[17] However, the NLRC denied private
respondents claim for damages and attorneys fees. It found no evidence that petitioners
acted maliciously or in bad faith in dismissing the five private respondents. [18]
Later, the NLRC also denied petitioners motion for reconsideration. [19] Hence, the
petitioners appealed to the Court of Appeals.[20]
On September 10, 2002, the Court of Appeals decided the petition as follows:

WHEREFORE, premises considered, the Court MODIFIES the Decision of the


respondent NLRC in this wise: (1) The Court declares that the private respondents
Roderick A. Calimlim and Jose Abalos [should be Ronald T. Rico] were illegally
dismissed by petitioner Floren Hotel/Ligaya Chu who is ORDERED to reinstate them to
their former positions without loss of [seniority] rights, with full backwages and other
benefits until they are actually reinstated; but if reinstatement is no longer possible,
Floren Hotel/Ligaya Chu shall pay their separation pay in addition to their backwages.
(2) Declaring private respondents Lito Bautista, Jun Abalos and Gloria Lopez to have
abandoned their employment, and, therefore, not entitled to either backwages nor
separation pay; and (3) ORDERING Floren Hotel/Ligaya Chu to pay all the private
respondents their 13th month pay and incentive leave pay as computed in the Decision
of the Labor Arbiter, to wit:

Proportionate 13th month pay:


a) Roderick Calimlim (daily wage as of June 4, 1998 = plus
P148.00 x 30 days
P4,440 x 6 months (Jan. to June 1998)
P26,640 divided by 12 (one year) = P2,220.00;
b) Ronald Rico = P2,220.00
c) Jun Abalos = P2,220.00
d) Lito Bautista = P2,220.00
e) Gloria Lopez = P2,220.00

Service Incentive Leave:

R. Calimlim (2 days salary) = P 369.00


R. Rico = 369.00
J. Abalos = 369.00
L. Bautista = 369.00
G. Lopez = 369.00

3. Ordering the same respondents to pay Roderick Calimlim and Ronald Rico
one thousand five hundred pesos each as indemnity;

Summary:

R. Calimlim = P4,089.00
R. Rico = 4,089.00
J. Abalos = 2,589.00
L. Bautista = 2,589.00
G. Lopez = 2,589.00
TOTAL AWARD = P15,945.00

SO ORDERED.[21]

The Court of Appeals agreed with the NLRC that the June 13, 1998, memorandum
demoting Calimlim and Rico to janitors and reclassifying them as probationary employees
constituted constructive discharge. The Court of Appeals likewise ruled that their right to
due process was violated when they were imposed the additional penalties of demotion
from room boys to janitors, reassignment as part-time employees, and change of their
status from regular to probationary for other alleged offenses for which they were not
given notice.[22]
But the Court of Appeals held that the NLRC committed grave abuse of discretion in
declaring that Bautista, Abalos and Lopez were illegally dismissed, since they presented
no other piece of evidence besides the allegations in their position papers. [23] The
appellate court brushed aside the issue that petitioners failure to serve notices of
termination was due to the immediate filing of the complaints for illegal dismissal which
made the service of such notices superfluous.[24]
Petitioners received a copy of the decision on September 20, 2002. On October 3,
2002, they filed the instant appeal, raising the following errors:
(a)

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN


UPHOLDING THE FINDINGS OF THE RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION DECLARING RESPONDENTS CALIMLIM AND RICO TO
HAVE BEEN CONSTRUCTIVELY DISMISSED FROM THE SERVICE, SOLELY ON
THE BASIS OF THE MEMORANDUM DATED JUNE 13, 1998. THE COURT OF
APPEALS MISINTERPRETED AND MISAPPRECIATED THE IMPORT OF THE SAID
MEMORANDUM VIS--VIS THE RULING OF THE HONORABLE COURT ON
CONSTRUCTIVE DISMISSAL.

(b)

THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONERS TO PAY THE


RESPONDENTS-EMPLOYEES THEIR PROPORTIONATE 13TH MONTH PAY AND
SERVICE INCENTIVE LEAVE AND IN ORDERING THE PETITIONERS TO PAY
RESPONDENTS CALIMLIM AND RICO P1,500.00 EACH AS INDEMNITY.[25]

Private respondents, for their part, received a copy of the decision on September 23,
2002. On October 7, 2002, the private respondents except Calimlim filed a motion for
reconsideration. They pointed out the typographical error in the dispositive portion of the
Court of Appeals decision which declared that it was Calimlim and a certain Jose Abalos
who were constructively dismissed.[26]
They raised the following errors:

...

II. The Honorable Court gravely erred in holding that Lito Bautista, Gloria Lopez
and Jun Abalos were not illegally dismissed as they abandoned their jobs.
III The Honorable Court gravely erred in giving due course to the petition despite
the fact that it was not sufficient in form as it was not accompanied by copies
of all pleadings and documents relevant and pertinent thereto.[27]
On November 20, 2002, the Court of Appeals required management, herein
petitioners, to comment on the motion. Upon receipt of petitioners comment, however,
the Court of Appeals issued a resolution on March 29, 2004, holding in abeyance the
action on said motion for reconsideration by the concerned employees, herein private
respondents, pending final resolution by this Court of the instant petition.[28]
In this petition now before us, we find four issues for our resolution: (1) whether the
Court of Appeals erred in giving due course to the petition for certiorari filed before the
appellate court; (2) whether the private respondents were illegally dismissed; (3) whether
the Court of Appeals erred in ordering petitioners to pay Calimlim and Rico indemnity
of P1,500; and (4) whether the appellate court erred in ordering petitioners to pay all of
private respondents their proportionate 13th month pay and incentive leave pay.
On the first issue, private respondents argue that the failure of petitioners to attach
copies of the position papers to their petition for certiorari before the Court of Appeals
was fatal to their cause. Private respondents point out that petitioners allegation (that the
NLRC decision holding that Bautista, Abalos and Lopez had been illegally dismissed) was
not supported by substantial evidence. They add that the NLRC erred in disregarding the
material evidence adduced by petitioners. Hence, it was essential that the evidence for
the parties contained in their position papers be attached to the petition as required by
Section 1, Rule 65 of the Rules of Court.[29]
We find no merit in private respondents insistence on procedural flaws. Acceptance
of a petition for certiorari as well as the grant of due course thereto is addressed to the
sound discretion of the court.[30] Section 1, Rule 65 of the Rules of Court in relation to
Section 3, Rule 46 of the same rules does not specify the precise documents, pleadings
or parts of the records that should be appended to the petition other than the judgment,
final order, or resolution being assailed. The Rules only state that such documents,
pleadings or records should be relevant or pertinent to the assailed resolution, judgment
or orders.[31] Here the pieces of evidence, which petitioners alleged had been arbitrarily
disregarded, were duly annexed to the petition. Also, the material allegations of the
position papers were summarized and discussed extensively in the decision of the Labor
Arbiter, a copy of which was also made part of the petition. It does not appear in this case
that in deciding to give due course to the petition for certiorari, the Court of Appeals
committed any error that prejudiced the substantial rights of the parties. There is,
therefore, no reason for this Court to disturb the appellate courts determination that the
copies of the pleadings and documents attached to the petition were sufficient to make
out a prima facie case.
Nonetheless, on the second issue, we find that the Court of Appeals erred in reversing
the NLRC decision and in holding that Bautista, Abalos and Lopez were not illegally
dismissed, but had abandoned their jobs.
Petitioners claimed that all five private respondents were guilty of abandoning their
jobs. Thus, it was incumbent upon petitioners to show that the two requirements for a
valid dismissal on the ground of abandonment existed in this case. Specifically,
petitioners needed to present, for each private respondent, evidence not only of the failure
to report for work or that absence was without valid or justifiable reasons, but also of some
overt act showing the private respondents loss of interest to continue working in his or
her job.[32]
In our view, petitioners failed to adduce sufficient evidence to prove the charge of
abandonment. Petitioners merely presented joint affidavits from hotel supervisors Agustin
Aninag and Lourdes Cantago and other hotel employees showing that Calimlim, Rico,
and Bautista simply went on absence without leave after they were confronted with certain
irregularities, and that Abalos and Lopez likewise just left their employment, also without
filing leaves of absence.[33] Those joint affidavits, however, are insufficient as they do not
show that the absence of Calimlim, Rico, Bautista, Abalos and Lopez were unjustified.
More important, they do not show any overt act that proves that private respondents
unequivocally intended to sever their working relationship with the petitioners. We have
held that mere absence from work does not constitute abandonment. [34]
If it was true that private respondents abandoned their jobs, then petitioners should
have served them with a notice of termination on the ground of abandonment as required
under Sec. 2, Rule XIV, Book V, Rules and Regulation Implementing the Labor Code, in
effect at that time. Said Section 2 provided that:

Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the workers
last known address.

But petitioners failed to comply with the foregoing requirement, thereby bolstering
further private respondents claim that they did not abandon their work but were illegally
dismissed.[35]
Indeed, we find that none of the private respondents in this case had any intention to
sever their working relationship. Just days after they were dismissed, private respondents
Calimlim, Rico, Bautista, Abalos and Lopez filed complaints to protest their dismissals.
The well-established rule is that an employee who takes steps to protest his layoff cannot
be said to have abandoned his work.[36]
That private respondents all desired to work in the hotel is further shown by the fact
that during the proceedings before the Labor Arbiter, shortly after private respondents
received petitioners position paper where the latter averred that private respondents were
never terminated, private respondents filed a manifestation and motion asking that
petitioners be ordered to allow them back to work. This is nothing if not an unequivocal
expression of eagerness to resume working.
We reiterate here the settled rule that in illegal dismissal cases, the employer bears
the burden of showing that the dismissal was for a just or authorized cause. [37]Failure by
the employer to discharge this burden, as in this case, would necessarily mean that the
dismissal is not justified, and therefore illegal.[38]
As regards Calimlim and Rico, the NLRC further found that petitioners constructively
dismissed both. Before us, petitioners now argue that the Court of Appeals misconstrued
the memorandum of June 13, 1998. They insist that they had no intention of dismissing
Calimlim and Rico, as shown by the very fact that the memorandum itself expressly allows
Calimlim and Rico to return to work after they submit their written explanations for the
drinking incident which happened on June 6, 1998.[39]Rather than a constructive
dismissal, petitioners argue that the temporary transfer of Calimlim and Rico to janitorial
positions was a valid exercise of the management prerogative to assign their employees
to where they would be of the most benefit to the hotel. This temporary reassignment,
according to the management, was intended solely to prevent Calimlim and Rico from
repeating their infractions by denying them access to the hotel rooms and keeping them
busy and easier to supervise in their new area assignments.[40]
Petitioners further argue that the terms of employment imposed in the memorandum
did not render continued employment impossible, unreasonable or unlikely because,
according to them, there was neither diminution of pay nor demotion involved. They
maintain that room boys and janitors receive the same wages and that the only difference
between the two is that room boys clean the rooms while janitors clean the common
areas.[41]
We are not persuaded by petitioners contention. For the transfer of the employee to
be considered a valid exercise of management prerogatives, the employer must show
that the transfer is not unreasonable, inconvenient or prejudicial to the employee; neither
would it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits. Should the employer fail to discharge 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 in an offer involving a demotion in rank and diminution in pay.[42]
In this case, Calimlim and Rico were being forced to accept alternate work periods in
their new jobs as janitors, otherwise they would be unemployed. Not only did their new
schedule entail a diminution of wages, because they would only be allowed to work every
other week, the new schedule was also clearly for an undefined period. The June 13,
1998, memorandum did not state how long the schedule was to be effective. Indeed, it
appears that the period could continue for as long as management desired it. These
unreasonable new terms of employment were imposed in the memorandum of June 13,
1998, which was issued two days before Calimlim and Rico returned from their week-long
suspension. They were imposed for alleged past infractions for which neither Calimlim
nor Rico was given the chance to be heard. Under the circumstances, we fail to see how
the temporary transfer of Calimlim and Rico could be a valid exercise of management
prerogatives. Even the employers right to demote an employee requires the observance
of the twin-notice requirement.[43]
As to the third issue, Article 279 of the Labor Code gives to Calimlim and Rico the
right to reinstatement without loss of seniority rights and other privileges or separation
pay in case reinstatement is no longer possible, and to his full backwages, inclusive of
allowances and other benefits. It was thus error for the Court of Appeals to affirm the
NLRC decision to award Calimlim and Rico indemnity in addition to the measure of
damages provided in Article 279. The award of indemnity is a penalty awarded only when
the dismissal was for just or authorized cause but where the twin-notice requirement was
not observed.[44]
With respect to the fourth issue, petitioners fault the appellate court for failing to state
why petitioners should pay respondents their proportionate 13th month pay and service
incentive leave pay.[45] On this matter, we find that the appellate court committed no error.
Petitioners did not question the propriety of the award of proportionate 13th month pay
and service incentive leave in the Court of Appeals. They assailed the NLRC decision on
only one ground: Respondent NLRC committed grave abuse of discretion in reversing the
Labor Arbiters decision insofar as it relates to the issues of illegal dismissal. Hence, the
correctness of the cited award in the NLRC ruling was never brought before the appellate
court and is deemed to have been admitted by petitioners. It cannot therefore be raised
anymore in this petition. The office of a petition for review under Rule 45 is to review the
decision of the Court of Appeals, not the NLRC. The decision of the NLRC as regards the
award of 13th month pay and service incentive leave pay became binding on petitioners
because the failure to question it before the Court of Appeals amounts to an acceptance
of the ruling. In any event, the award appears to us amply supported by evidence and in
accord with law.
WHEREFORE, the Decision dated September 10, 2002, of the Court of Appeals in
CA-G.R. SP No. 60685 is hereby MODIFIED. Petitioners Floren Hotel/Ligaya Chu, Dely
Lim, and Jose Chua Lim are held liable for illegally dismissing private respondents
Roderick A. Calimlim, Ronald T. Rico, Jun A. Abalos, Lito F. Bautista and Gloria B. Lopez.
Petitioners are ordered, (1) to reinstate private respondents to their former positions
without loss of seniority rights, with full backwages and other benefits until they are
actually reinstated or to pay their separation pay in addition to their backwages, if
reinstatement is no longer feasible; (2) to jointly and solidarily pay P2,589.00 to each of
the private respondents as proportionate 13th month pay and service incentive leave pay
for the period January to June 1998, as computed in the decision dated March 19, 1999,
of the Labor Arbiter. No pronouncement as to costs.
SO ORDERED.

Stellar Industries vs. NLRC, 252 SCRA 323,


GR 117418, January 24, 1996

[G.R. No. 117418. January 24, 1996]

STELLAR INDUSTRIAL SERVICES, INC., petitioner, vs. NATIONAL LABOR


RELATIONS COMMISSION and ROBERTO H. PEPITO, respondents.

DECISION
REGALADO, J.:

Imputing grave abuse of discretion by public respondent as its cause of concern in


this special civil action for certiorari, petitioner Stellar Industrial Services, Inc. (Stellar)
seeks the annulment of the decision,1 dated May 31, 1994, of the National Labor
Relations Commission in NLRC NCR CA No. 004326-93 and its resolution of July 21,
1994 denying petitioners motion for reconsideration. Interestingly, this recourse is the
culmination of petitioners sustained corporate and legal efforts directed against a mere
janitor who was formerly employed by it.
Stellar Industrial Services, Inc., an independent contractor engaged in the business
of providing manpower services, employed private respondent Roberto H. Pepito as a
janitor on January 27, 1975 and assigned the latter to work as such at the Maintenance
Base Complex of the Philippine Airlines (MBC-PAL) in Pasay City. There, Pepito toiled
for a decade and a half. According to petitioner, private respondents years of service at
MBC-PAL were marred by various infractions of company rules ranging from tardiness to
gambling, but he was nevertheless retained as a janitor out of humanitarian consideration
and to afford him an opportunity to reform.2
Stellar finally terminated private respondents services on January 22, 1991 because
of what it termed as Pepitos being Absent Without Official Leave (AWOL)/Virtual
Abandonment of Work -Absent from November 2 - December 10, 1990. Private
respondent had insisted in a letter to petitioner dated December 2, 1990, to which was
attached what purported to be a medical certificate, that during the period in question he
was unable to report for work due to severe stomach pain and that, as he could hardly
walk by reason thereof, he failed to file the corresponding official leave of absence.3
As petitioner disbelieved private respondents explanation regarding his absences,
the latter contested his severance from employment before the Arbitration Branch of the
National Labor Relations Commission (NLRC) in Manila in a complaint docketed as
NLRC NCR-00-03-01869-91 for illegal dismissal, illegal deduction and underpayment of
wages under Wage Order NCR-001, with prayer for moral and exemplary damages and
attorneys fees. While the labor arbiter was of the view that Pepito was not entitled to
differential pay under said wage Order, or to moral and exemplary damages for lack of
bad faith on the part of petitioner, he opined that private respondent had duly proved that
his 39-day absence was justified on account of illness and that he was illegally dismissed
without just cause.4
Thus the decision rendered on December 28, 1992 by Labor Arbiter Manuel R. Caday
decreed:

WHEREFORE, judgment is hereby rendered declaring the dismissal of the complainant


as illegal and ordering the respondent to immediately reinstate complainant to his
former position as Utilityman, without loss of seniority rights and with full backwages
and other rights and privileges appurtenant to his position until he is actually reinstated.
As computed, the judgment award in favor of the complainant is stated hereunder:

Backwages

1/27/91 - 12/27/92
at P118. 00 per day P82,550.83
Refund of amount
illegally deducted
(3 years) 288.00

Grand Total P82,838.83

The respondent is further ordered to pay the complainant reasonable attorneys fees
equivalent to 10% of the amount recoverable by the complainant.5
As hereinbefore stated, said judgment of the labor arbiter was affirmed by respondent
commission. Petitioners subsequent motion for reconsideration was likewise rebuffed by
the NLRC, hence the present remedial resort to this Court.
Petitioner contends that public respondent acted with grave abuse of discretion when
it discussed and resolved the issue of abandonment which petitioner had not, at any time,
raised before it for resolution. Further, petitioner considers it patently erroneous for public
respondent to rule that the medical certificate adduced by Pepito sufficiently established
the fact of sickness on his part which thereby justified his absences. Additionally, it claims
that respondent commission gravely erred when it did not carefully examine the evidence,
pointing out Pepitos errant behavior and conduct.6
Petitioner argues, moreover, that the award of back wages and attorneys fees was
not justified considering that Pepito was validly dismissed due to serious misconduct on
his part. Lastly, petitioner insists that the deductions it imposed upon and collected from
Pepitos salary was authorized by a board resolution of Stellar Employees Association, of
which private respondent was a member.7 The Court, however, is unable to perceive or
deduce facts constitutive of grave abuse of discretion in public respondents disposition of
the controversy which would suffice to overturn its affirmance of the labor arbiters
decision.
On the initial issue posed by petitioner, respondent commission should indeed have
refrained from passing upon the matter of abandonment, much less from considering the
same as the ground for petitioners termination of private respondents services. The
records of the case indicate that Pepito s employment was cut short by Stellar due to his
having violated a company rule which requires the filing of an official leave of absence
should an employee be unable to report for work, aside from the circumstance that Stellar
did not find credible Pepitos explanation that he was then suffering from severe stomach
and abdominal pains.
To be sure, public respondent may well have been misled by the fact that petitioner,
in dismissing Pepito, labelled his violation as Absent Without Official Leave
(AWOL)/Virtual Abandonment.8 Respondent NLRC should have noted that the matter of
abandonment was never brought up as an issue before it and that Stellar never
considered Pepito as having abandoned his job. As a matter of fact, private respondent
was only considered by petitioner as absent until December 10, 1990.9 Pepito was
dismissed from work simply for going on leave without prior official approval and for failing
to justify his absence. This is evident from the fact that petitioner did not assail Pepitos
allegations that, at the start of his extended absence, he had informed Stellar, through
telephone calls to his superior at MBC-PAL, that he could not report for work due to
illness. Thus, while abandonment is indisputably a valid legal ground for terminating ones
employment,10 it was a non-issue in this dispute. Be that as it may, that misapprehension
of the NLRC on this particular issue is not to be considered an abuse of discretion of such
gravity as to constitute reversible error.
In the main, therefore, what is truly at issue here is whether or not serious misconduct
for non-observance of company rules and regulations may be attributed to Pepito and, if
so, whether or not the extreme penalty of dismissal meted to him by Stellar may be
justified under the circumstances. We resolve both issues in the negative.
Stellars company rules and regulations on the matter could not be any clearer, to wit:

Absence Without Leave

Any employee who fails to report for work without any prior approval from his superior(s)
shall be considered absent without leave.

In the case of an illness or emergency for an absence of not more than one (1) day, a
telephone call or written note to the head office, during working hours, on the day of his
absence, shall be sufficient to avoid being penalized.

In the case of an illness or an emergency for an absence of two (2) days or more, a
telephone call to the head office, during regular working hours, on the first day of his
absence, or a written note to the head office, (ex. telegram) within the first three (3)
days of his absence, and the submission of the proper documents (ex. medical
certificate) on the first day he reports after his absence shall be sufficient to avoid being
penalized.

1st offense - three (3) days suspension

2nd offense - seven (7) days suspension

3rd offense - fifteen (15) days suspension

4th offense - dismissal (with a period of one (1) year.11

There was substantial compliance with said company rule by private respondent. He
immediately informed his supervisor at MBC-PAL of the fact that he could not report for
work by reason of illness. At the hearing, it was also established without contradiction that
Pepito was able to talk by telephone to one Tirso Pamplona, foreman at MBC-PAL, and
he informed the latter that he would be out for two weeks as he was not feeling
well.12 Added to this is his letter to the chief of personnel which states that, on November
2, 1990, he relayed to his supervisor at MBC-PAL his reason for not reporting for work
and that, thereafter, he made follow-up calls to their office when he still could not render
services.13 As earlier noted, these facts were never questioned nor rebutted by petitioner.
While there is no record to show that approval was obtained by Pepito with regard to
his absences, the fact remains that he complied with the company rule that in case of
illness necessitating absence of two days or more, the office should be informed
beforehand about the same, that is, on the first day of absence. Since the cause of his
absence could not have been anticipated, to require prior approval would be
unreasonable. On this score, then, no serious misconduct may be imputed to Pepito.
Necessarily, his dismissal from work, tainted as it is by lack of just cause, was clearly
illegal.
More importantly, private respondent duly presented the requisite medical certificate.
True, Stellar did not accept the veracity of the same, but it did so quite erroneously. Carlos
P. Callanga, petitioners vice-president for operations, interpreted the certificate submitted
by Pepito in the following strained and nitpicking manner:

a) The medical certificate merely states that Pepito suffered from alleged abdominal
pain from November 2, 1990 to December 14, 1990. It does not state that the
abdominal pain was so severe as to incapacitate him for (sic) work.

b) Because the medical certificate states that the abdominal pain was merely alleged, I
had reason to believe that the doctor who issued it did not personally know if such
abdominal pain really existed for the period in question.

c) From the medical certificate, I gathered that the doctor who signed it examined Pepito
only on December 14, 1990, which is the date it appears to have been issued. It does
not state that said doctor actually treated Pepito for the period of his absence.

d) The medical certificate also says Pepito was suffering from alleged abdominal pains
until December 14, 1990, but that he could resume work anytime thereafter. This
implies that he was physically fit to resume work anytime thereafter. However, our
records show that Pepito was absent only until December 10, 1990. If it is true that
Pepitos abdominal pains incapacitated him for (sic) work, he should have been absent
until December 14, 1990. These give me reason to believe that the medical certificate
was secured only as an afterthought and does not satisfactorily explain Pepito s
protracted absence.14

A careful perusal and objective appreciation of the medical certificate in question,


which was properly signed by a physician whose existence and professional license
number was not questioned by petitioner, convince us to conclude otherwise. Handwritten
by the issuing doctor, it states in no uncertain terms:

This is to inform that I had examined Roberto Pepito. He has already recovered from his
intestinal abdominal pains suffered last Nov. 2/90 to Dec. 14/90.

He may resume his work anytime.15

Thus, nowhere in said certificate is there any indication that the abdominal pain
suffered by Pepito was only as alleged by him. It definitely states that Pepito was
personally examined by the physician and it can be clearly deduced from the affirmative
statements (h)e has already recovered x x x and (h)e may resume his work anytime that
Pepito was really not in a position to report for work from November 2 to December 14,
1990 on account of actual, and not merely alleged, intestinal abdominal pains. The
certificate further confirms Pepitos earlier information given by him on November 2,
1990 and which he duly relayed to his supervisor as the true reason for his inability to
work. Callanga obviously misread, we hope unwittingly, intestinal abdominal pain as
alleged abdominal pain.
Again, there is no logic in Callangas assumption that the certificate was obtained only
as an afterthought. It should be noted that Callanga required Pepito to make a written
explanation regarding his absences only on December 18, 1990.16 Pepito accordingly
complied with the same and he attached therewith the medical certificate which showed
its date of issuance as December 14, 1990.17 Thus, even before he was made to explain
his absences, he already had the medical certificate to prove the reason therefor. To
characterize the procurement of the certificate as an afterthought is consequently
baseless, especially considering that it bears all the earmarks of regularity in its issuance.
Labor is entitled to at least elementary fairness from management.
Petitioners reliance on Pepitos past infractions as sufficient grounds for his eventual
dismissal, in addition to his prolonged absences, is likewise unavailing. The correct rule
is that previous infractions may be used as justification for an employees dismissal from
work in connection with a subsequent similar offense.18 That is not the case here. Stellar
contends that Pepitos service record shows that he was under preventive suspension in
October, 1979 due to gambling and that, at various days of certain months in 1986, 1987,
and 1988, he was issued several warnings for habitual tardiness. Then, in October, 1988,
he was asked to explain why he was carrying three sacks of rice in violation of company
rules.
In the present case, private respondents absences, as already discussed, were
incurred with due notice and compliance with company rules and he had not thereby
committed a similar offense as those he had committed in the past. Furthermore, as
correctly observed by the labor arbiter, those past infractions had either been
satisfactorily explained, not proven, sufficiently penalized or condoned by the respondent.
In fact, the termination notice furnished Pepito only indicated that he was being dismissed
due to his absences from November 2, 1990 to December 10, 1990 supposedly without
any acceptable excuse therefor. There was no allusion therein that his dismissal was due
to his supposed unexplained absences on top of his past infractions of company rules. To
refer to those earlier violations as added grounds for dismissing him is doubly unfair to
private respondent. Significantly enough, no document or any other piece of evidence
was adduced by petitioner showing previous absences of Pepito, whether with or without
official leave.
Regarding the amount deducted from Pepitos salary, Stellar stresses that said
deduction concerning death aid benefits is lawful since these were made in accordance
with Board Resolution No. 02-85 adopted on August 17, 1988 by the board of directors
of the Stellar Employees Association. However, Article 24 1(n) of the Labor Code and the
implementing rules thereon in Section 13(a), Rule VIII, Book III disallow such deductions.
Article 241(n) states that (n)o special assessment or other extraordinary fees may be
levied upon the members of a labor organization unless authorized by a written resolution
of a majority of all the members of a general membership meeting duly called for the
purpose. x x x.
The deduction could be characterized as a special assessment for a Death Aid
Program. Consequently, a mere board resolution of the directors, and not by the majority
of all the members, cannot validly allow such deduction. Also, a written individual
authorization duly signed by the employee concerned is a condition sine qua
non therefor. Employees are protected. by law from unwarranted practices that have for
their object the diminution of the hard-earned compensation due them.19 Private
respondent herein must be extended that protection, especially in view of his lowly
employment status.
IN VIEW OF THE FOREGOING, no grave abuse of discretion having been committed
by respondent National Labor Relations Commission in its decision and resolution
assailed in the case at bar, the instant petition of Stellar Industrial Services, Inc. is
hereby DISMISSED for lack of merit.
SO ORDERED.
Romero, Puno, and Mendoza, JJ., concur.

Chua-qua vs. Clave, 189 SCRA 117,

GR L-49549, August 30, 1990


G.R. No. 49549 August 30, 1990

EVELYN CHUA-QUA, petitioner,


vs.
HON. JACOBO C. CLAVE, in his capacity as Presidential Executive Assistant, and TAY
TUNG HIGH SCHOOL, INC., respondents.

William C. Gunitang and Jaime Opinion for petitioner.

Laogan Law Offices for private respondent.


REGALADO, J.:

This would have been just another illegal dismissal case were it not for the controversial
and unique situation that the marriage of herein petitioner, then a classroom teacher, to
her student who was fourteen (14) years her junior, was considered by the school
authorities as sufficient basis for terminating her services.

Private respondent Tay Tung High School, Inc. is an educational institution in Bacolod
City. Petitioner had been employed therein as a teacher since 1963 and, in 1976 when
this dispute arose, was the class adviser in the sixth grade where one Bobby Qua was
enrolled. Since it was the policy of the school to extend remedial instructions to its
students, Bobby Qua was imparted such instructions in school by petitioner. 1 In the
course thereof, the couple fell in love and on December 24, 1975, they got married in a
civil ceremony solemnized in Iloilo City by Hon. Cornelio G. Lazaro, City Judge of
Iloilo.2 Petitioner was then thirty (30) years of age but Bobby Qua being sixteen (16)
years old, consent and advice to the marriage was given by his mother, Mrs.
Concepcion Ong.3 Their marriage was ratified in accordance with the rites of their
religion in a church wedding solemnized by Fr. Nick Melicor at Bacolod City on January
10, 1976. 4

On February 4, 1976, private respondent filed with the sub-regional office of the
Department of Labor at Bacolod City an application for clearance to terminate the
employment of petitioner on the following ground: "For abusive and unethical conduct
unbecoming of a dignified school teacher and that her continued employment is inimical
to the best interest, and would downgrade the high moral values, of the school." 5

Petitioner was placed under suspension without pay on March 12, 1976. 6 Executive
Labor Arbiter Jose Y. Aguirre, Jr. of the National Labor Relations Commission, Bacolod
City, to whom the case was certified for resolution, required the parties to submit their
position papers and supporting evidence. Affidavits 7 were submitted by private
respondent to bolster its contention that petitioner, "defying all standards of decency,
recklessly took advantage of her position as school teacher, lured a Grade VI boy under
her advisory section and 15 years her junior into an amorous relation." 8 More
specifically, private respondent raised issues on the fact that petitioner stayed alone
with Bobby Qua in the classroom after school hours when everybody had gone home,
with one door allegedly locked and the other slightly open.

On September 17, 1976, Executive Labor Arbiter Jose Y. Aguirre, Jr., without
conducting any formal hearing, rendered an "Award" in NLRC Case No. 956 in favor of
private respondent granting the clearance to terminate the employment of petitioner. It
was held therein that

The affidavits . . . although self-serving but were never disputed by the


respondent pointed out that before the marriage of respondent to Bobby
Qua, fourteen (14) years her junior and during her employment with
petitioner, an amorous relationship existed between them. In the absence
of evidence to the contrary, the undisputed written testimonies of several
witnesses convincingly picture the circumstances under which such
amorous relationship was manifested within the premises of the school,
inside the classroom, and within the sight of some employees. While no
direct evidences have been introduced to show that immoral acts were
committed during these times, it is however enough for a sane and
credible mind to imagine and conclude what transpired and took place
during these times. . . . 9

Petitioner, however, denied having received any copy of the affidavits referred to. 10

On October 7, 1976, petitioner appealed to the National Labor Relations Commission


claiming denial of due process for not having been furnished copies of the aforesaid
affidavits relied on by the labor arbiter. She further contended that there was nothing
immoral, nor was it abusive and unethical conduct unbecoming of a dignified school
teacher, for a teacher to enter into lawful wedlock with her student. 11

On December 27, 1976, the National Labor Relations Commission unanimously


reversed the Labor Arbiter's decision and ordered petitioner's reinstatement with
backwages, with the following specific findings:

Affiant Maselliones deposed and said that he saw appellant and Qua
sitting on the student desk inside a classroom after classes. The
depositions of affiants Despi and Chin are of the same tenor. No
statements whatever were sworn by them that they were eyewitnesses to
immoral or scandalous acts.

xxx xxx xxx

Even if we have to strain our sense of moral values to accommodate the


conclusion of the Arbiter, we could not deduce anything immoral or
scandalous about a girl and a boy talking inside a room after classes with
lights on and with the door open.
xxx xxx xxx

Petitioner-appellee naively insisted that the clearance application was


precipitated by immoral acts which did not lend dignity to the position of
appellant. Aside from such gratuitous assertions of immoral acts or
conduct by herein appellant, no evidence to support such claims was
introduced by petitioner-appellee. We reviewed the the sequence of
events from the beginning of the relationship between appellant Evelyn
Chua and Bobby Qua up to the date of the filing of the present application
for clearance in search of evidence that could have proved detrimental to
the image and dignity of the school but none has come to our attention. . .
. 12

The case was elevated by private respondent to the Minister of Labor who, on March
30, 1977, reversed the decision of the National Labor Relations Commission. The
petitioner was, however, awarded six (6) months salary as financial assistance. 13

On May 20, 1977, petitioner appealed the said decision to the Office of the President of
the Philippines. 14 After the corresponding exchanges, on September 1, 1978 said
office, through Presidential Executive Assistant Jacobo C. Clave, rendered its decision
reversing the appealed decision. Private respondent was ordered to reinstate petitioner
to her former position without loss of seniority rights and other privileges and with full
back wages from the time she was not allowed to work until the date of her actual
reinstatement. 15

Having run the gamut of three prior adjudications of the case with alternating reversals,
one would think that this decision of public respondent wrote finis to petitioner's calvary.
However, in a resolution dated December 6, 1978, public respondent, acting on a
motion for reconsideration 16 of herein private respondent and despite opposition
thereto, 17 reconsidered and modified the aforesaid decision, this time giving due course
to the application of Tay Tung High School, Inc. to terminate the services of petitioner
as classroom teacher but giving her separation pay equivalent to her six (6) months
salary. 18

In thus reconsidering his earlier decision, public respondent reasoned out in his
manifestation/comment filed on August 14, 1979 in this Court in the present case:

That this Office did not limit itself to the legal issues involved in the case,
but went further to view the matter from the standpoint of policy which
involves the delicate task of rearing and educating of children whose
interest must be held paramount in the school community, and on this
basis, this Office deemed it wise to uphold the judgment and action of the
school authorities in terminating the services of a teacher whose
actuations and behavior, in the belief of the school authorities, had
spawned ugly rumors that had cast serious doubts on her integrity, a
situation which was considered by them as not healthy for a school
campus, believing that a school teacher should at all times act with utmost
circumspection and conduct herself beyond reproach and above
suspicion; 19

In this petition for certiorari, petitioner relies on the following grounds for the reversal of
the aforesaid resolution of public respondent, viz.:

1. The dismissal or termination of petitioner's employment, despite Tay


Tung's claim to the contrary, was actually based on her marriage with her
pupil and is, therefore, illegal.

2. Petitioner's right to due process under the Constitution was violated


when the hearsay affidavits of Laddy Maselliones, Eleuterio Despi, Pina D.
Chiu, and Ong Lee Bing, were admitted and considered in evidence
without presenting the affiants as witnesses and affording the petitioner
the right to confront and cross-examine them.

3. No sufficient proofs were adduced to show that petitioner committed


serious misconduct or breached the trust reposed on her by her employer
or committed any of the other grounds enumerated in Article 283 (Now
Article 282) of the Labor Code which will justify the termination of her
employment. 20

We first dispose of petitioner's claim that her right to due process was violated. We do
not agree. There is no denial of due process where a party was afforded an opportunity
to present his side. Also, the procedure by which issues are resolved based on position
papers, affidavits and other documentary evidence is recognized as not violative of such
right. Moreover, petitioner could have insisted on a hearing to confront and cross-
examine the affiants but she did not do so, obviously because she was convinced that
the case involves a question of law. Besides, said affidavits were also cited and
discussed by her in the proceedings before the Ministry of Labor.

Now, on the merits. Citing its upright intention to preserve the respect of the community
toward the teachers and to strengthen the educational system, private respondent
submits that petitioner's actuations as a teacher constitute serious misconduct, if not an
immoral act, a breach of trust and confidence reposed upon her and, thus, a valid and
just ground to terminate her services. It argues that as a school teacher who exercises
substitute parental authority over her pupils inside the school campus, petitioner had
moral ascendancy over Bobby Qua and, therefore, she must not abuse such authority
and respect extended to her. Furthermore, it charged petitioner with having allegedly
violated the Code of Ethics for teachers the pertinent provision of which states that a
"school official or teacher should never take advantage of his/her position to court a
pupil or student." 21

On the other hand, petitioner maintains that there was no ground to terminate her
services as there is nothing wrong with a teacher falling in love with her pupil and,
subsequently, contracting a lawful marriage with him. She argued that she was
dismissed because of her marriage with Bobby Qua This contention was sustained in
the aforesaid decision of the National Labor Relations Commission thus:

. . . One thing, however, has not escaped our observation: That the
application for clearance was filed only after more than one month elapsed
from the date of appellant's marriage to Bobby Qua Certainly, such
belated application for clearance weakens instead of strengthening the
cause of petitioner-appellee. The alleged immoral acts transpired before
the marriage and if it is these alleged undignified conduct that triggered
the intended separation, then why was the present application for
clearance not filed at that time when the alleged demoralizing effect was
still fresh and abrasive?22

After a painstaking perusal of the records, we are of the considered view that the
determination of the legality of the dismissal hinges on the issue of whether or not there
is substantial evidence to prove that the antecedent facts which culminated in the
marriage between petitioner and her student constitute immorality and/or grave
misconduct. To constitute immorality, the circumstances of each particular case must be
holistically considered and evaluated in the light of prevailing norms of conduct and the
applicable law. Contrary to what petitioner had insisted on from the very start, what is
before us is a factual question, the resolution of which is better left to the trier of facts.

Considering that there was no formal hearing conducted, we are constrained to review
the factual conclusions arrived at by public respondent, and to nullify his decision
through the extraordinary writ of certiorari if the same is tainted by absence or excess of
jurisdiction or grave abuse of discretion. The findings of fact must be supported by
substantial evidence; otherwise, this Court is not bound thereby.23

We rule that public respondent acted with grave abuse of discretion. As vividly and
forcefully observed by him in his original decision:
Indeed, the records relied upon by the Acting Secretary of Labor (actually
the records referred to are the affidavits attached as Annexes "A" to "D" of
the position paper dated August 10, 1976 filed by appellee at the
arbitration proceedings) in arriving at his decision are unbelievable and
unworthy of credit, leaving many question unanswered by a rational mind.
For one thing, the affidavits refer to certain times of the day during off
school hours when appellant and her student were found together in one
of the classrooms of the school. But the records of the case present a
ready answer: appellant was giving remedial instruction to her student and
the school was the most convenient place to serve the purpose. What is
glaring in the affidavits is the complete absence of specific immoral acts
allegedly committed by appellant and her student. For another, and very
important at that, the alleged acts complained of invariably happened from
September to December, 1975, but the disciplinenary action imposed by
appellee was sought only in February, 1976, and what is more, the
affidavits were executed only in August, 1976 and from all indications,
were prepared by appellee or its counsel. The affidavits heavily relied
upon by appellee are clearly the product of after-thought. . . . The action
pursued by appellee in dismissing appellant over one month after her
marriage, allegedly based on immoral acts committed even much earlier,
is open to basis of the action sought seriously doubted; on the question.
The basis of the action sought is seriously doubted; on the contrary, we
are more inclined to believe that appellee had certain selfish, ulterior and
undisclosed motives known only to itself. 24

As earlier stated, from the outset even the labor arbiter conceded that there was no
direct evidence to show that immoral acts were committed. Nonetheless, indulging in a
patently unfair conjecture, he concluded that "it is however enough for a sane and
credible mind to imagine and conclude what transpired during those times." 25 In
reversing his decision, the National Labor Relations Commission observed that the
assertions of immoral acts or conducts are gratuitous and that there is no direct
evidence to support such claim, 26 a finding which herein public respondent himself
shared.

We are, therefore, at a loss as to how public respondent could adopt the volte-face in
the questioned resolution, which we hereby reject, despite his prior trenchant
observations hereinbefore quoted. What is revealing however, is that the reversal of his
original decision is inexplicably based on unsubstantiated surmises and non
sequiturs which he incorporated in his assailed resolution in this wise:
. . . While admittedly, no one directly saw Evelyn Chua and Bobby Qua
doing immoral acts inside the classroom it seems obvious and this Office
is convinced that such a happening indeed transpired within the solitude of
the classrom after regular class hours. The marriage between Evelyn
Chua and Bobby Qua is the best proof which confirms the suspicion that
the two indulged in amorous relations in that place during those times of
the day. . . . 27

With the finding that there is no substantial evidence of the imputed immoral acts, it
follows that the alleged violation of the Code of Ethics governing school teachers would
have no basis. Private respondent utterly failed to show that petitioner took advantage
of her position to court her student. If the two eventually fell in love, despite the disparity
in their ages and academic levels, this only lends substance to the truism that the heart
has reasons of its own which reason does not know. But, definitely, yielding to this
gentle and universal emotion is not to be so casually equated with immorality. The
deviation of the circumstances of their marriage from the usual societal pattern cannot
be considered as a defiance of contemporary social mores.

It would seem quite obvious that the avowed policy of the school in rearing and
educating children is being unnecessarily bannered to justify the dismissal of petitioner.
This policy, however, is not at odds with and should not be capitalized on to defeat the
security of tenure granted by the Constitution to labor. In termination cases, the burden
of proving just and valid cause for dismissing an employee rests on the employer and
his failure to do so would result in a finding that the dismissal is unjustified.

The charge against petitioner not having been substantiated, we declare her dismissal
as unwarranted and illegal. It being apparent, however, that the relationship between
petitioner and private respondent has been inevitably and severely strained, we believe
that it would neither be to the interest of the parties nor would any prudent purpose be
served by ordering her reinstatement.

WHEREFORE, the petition for certiorari is GRANTED and the resolution of public
respondent, dated December 6, 1978 is ANNULLED and SET ASIDE. Private
respondent Tay Tung High School, Inc. is hereby ORDERED to pay petitioner
backwages equivalent to three (3) years, without any deduction or qualification, and
separation pay in the amount of one (1) month for every year of service.

SO ORDERED.

Melencio-Herrera (Chairman), Paras and Padilla, JJ., concur.


Sarmiento, J., is on leave.

Ramos vs. NLRC, 298 SCRA 225,


GR 130473, October 21, 1988

[G.R. No. 130473. October 21, 1998]

ELIZABETH RAMOS, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION


(Third Division) LABOR ARBITER JOSE G. DE VERA AND U.S. EMBASSY
FILIPINO EMPLOYEES CREDIT COOPERATIVE (USECO) and its President,
MARVIN RAMOS, respondents.

DECISION
PUNO, J.:

This is a petition for certiorari filed by Elizabeth Ramos to reverse the ruling of the
National Labor Relations Commission[1] affirming her suspension and dismissal from
employment for loss of trust and confidence.
In 1978, petitioner was employed as a bookkeeper-accountant by respondent United
States Embassy Filipino Employees Credit Cooperative (USECO).[2] Nine years later, she
was promoted to the position of Management Assistant. Her latest salary was P18,278.46
per month.
In 1993, the members of USECO elected a new set of Board of Directors. The Board,
led by its President, respondent Marvin Santos, created an Audit and Inventory
Committee (AIC) to determine whether USECO has a sound financial management and
control mechanism.
The committee unearthed anomalies in USECOs lending transactions. Its findings
were taken up in the June 4, 1993 meeting of the Board of Directors. Petitioner and her
co-employees, Luz Coronel and Nanette Legaspi, were called to shed light on some items
in the Audit Committee Report, to wit:

1. Unrecorded Loans

xx xx xx xx
The case of Aida Halasan (former USECO Assistant Treasurer) was particularly
discussed in regard to her previous loan amounting to P76,140 which the AIC
discovered as unrecorded in her ledger. The transaction was recorded in the
Cash Disbursement book and the check was issued for the net amount
of P74,417. Her ledger also showed no record of payment in any manner.

2. Fabricated Ledger

Alex Lopez and Steve Roldans true ledgers were hidden by Beth Ramos
(herein petitioner) and Luz Coronel and new ones were fabricated to conceal
their loans amounting to more than the P120,000 limit. x x x Luz explained that
she was given instructions to keep them from the Audit Committees knowledge.
xxx

3. Falsification of documents

Beth admitted her serious offense in regard to falsification of documents.

4. Accommodations of Payroll Checks

USECO staff granted a special privilege to certain employees regarding the


encashment of payroll checks one day in advance of the date on the check. It
was stopped earlier in the past as it added to the normal workload and was
deemed to be disadvantageous for the USECO because the interest to be
earned by the money for that day has been lost.

5. Encashment of Check/CPAs

Why was Beths signature/initial needed for Citibank to encash the check when
the signatures of the authorized officers already appear on the check?

Why were CPAs in the past released and encashed without the authorized signatures?

6. Resigned Members

When asked by the Board to explain how recently resigned members and other
resigned employees in the past were able to secure loans, Beth replied that she
just wanted to help members without regard to existing policies.

- Raquel Maniquiz case Raquel was able to make a loan amounting to P80,000
after she resigned and her loan application was approved only by Aida Halasan
(?). Beth Ramos indicated that Raquel intended to pay said loan thru her CSR
payment and terminal leave pay. x x x

Aside from granting Raquel the loan of P80,000 she was allowed to withdraw
her remaining deposit with the USECO. Beth Ramos was asked to explain how
this withdrawal was made possible. As she was unable to give the answer
during the meeting, she was asked to include it in her written reply.

xx xx xx xx

8. Unrecorded Loan of Resigned Members

Batoys case was classified under this irregularity which the AIC discovered
during the internal audit. Batoys loan was recorded in the cash disbursement
book in the name of E. Ramos. However, E. Ramos ledger does not show a
record of said loan. Beth Ramos was required by the board to include her
explanation of this case in her written explanation.

9. Withdrawal of more than the deposits.

Paladays case was mentioned under this irregularity. It was mentioned,


however, that there could have been an error in the running balance.

Another case is Rafael Tans over withdrawal which AIC considers not in error in
the running balance but an accommodation since he made a deposit of the
same amount the following day. (emphasis ours)

On June 17, 1993, respondent Ramos directed petitioner to submit her written
explanation on the aforementioned irregularities.
In her letter, dated June 18, 1993, petitioner made the following explanation:

x x x I believe that the President was then, as he is now fully aware of the prevailing
conditions in USECUs (sic) operations with respect to loan processing and approval. To
support my statement that the loans are approved based on prerogatives of individuals
in authority, I respectfully invite the Presidents attention to the letter of Mr. Franco dated
March 15, 1993, in which he very succinctly expressed his views about loans and I
quote Personally, I would rather violate an existing rule that jeopardize (sic) the welfare
of USECU members since most of their reasons were to defray their medical/hospital
expenses (and) of that of their dependents. This view is not restricted to Mr. Franco, but
(was) likewise held and maintained by previous Boards these past many, many years.
Given in the context of our culture the terms of employer-employee relationship, it is
unfortunate that the USECU Staff had to resort to creating dummy records. But since
the loans are duly acknowledged by the borrowers in other legitimate documents, it is
readily apparent that the records were made simply to accommodate those borrowers
beyond the authorized limits, but never, never to defraud USECU. In this regard, the
President is respectfully urged to consider the positions held by the concerned
borrowers not only in the USECU hierarchy when the loans were obtained, but also their
positions in their respective places of work within the U.S. Mission. It would have been
the height of naivete for the USECU Staff to impose the USECU rules and act holier
than thou in contravention of prevailing practice as very well expressed in Mr. Francos
letter. It is pointed out that these borrowers exceeding the prescribed limits must be fully
aware of their financial status each and every time they submitted applications for
additional loans. And in the absence of authority superior to the Board and mere
employees of the Board, where could the USECU Staff go, assuming that for a moment
for the sake of discussion, that the staff did not subscribe to the practice?

On July 20, 1993, petitioner was preventively suspended for thirty (30) days. On
August 19, 1993, petitioner was placed on forced leave with pay, pending the completion
of the investigation.
USECO also commissioned an external auditing firm, J.D. Cayetano & Associates,
to examine the irregularities discovered in its lending practices. The external auditor not
only confirmed the irregularities but also discovered shortages in bank deposits
by P360,964.38.
The Board of Directors held another meeting to study the report of the external
auditor. It noted overages in the loan receivables in the amount of P2,275,544.38. The
overages were attributed to several factors, i.e., non-recording of loan payments and/or
unauthorized or fictitious loans which were entered in the Cash Disbursement Book but
not in the individual subsidiary ledgers.
On September 17, 1993, USECO dismissed the petitioner for loss of trust and
confidence. Petitioner countered with a complaint[3] against USECO for illegal dismissal,
illegal suspension, underpayment of salary, moral damages and attorneys fees. She
prayed for her reinstatement with backwages, or in the alternative, for the payment of
separation pay.
In a Decision[4] dated April 24, 1995, Labor Arbiter Jose G. De Vera sustained the
suspension and dismissal of petitioner but ordered the payment of her unpaid salary. Its
dispositive portion reads:

WHEREFORE, all the foregoing premises being considered, judgment is hereby


rendered declaring the complainants (petitioners) preventive suspension and dismissal
from employment as just and valid and perforce the complaint for
reinstatement/separation pay, moral damages and attorneys fees is dismissed for lack
of merit. And on the complaint for unpaid salaries, the respondent company is hereby
ordered to pay complainant the sum of P18,278.46.

Petitioner appealed to the National Labor Relations Commission (NLRC). In a


Decision[5] dated February 18, 1997, the NLRC reversed the labor arbiter. USECOs first
motion for reconsideration was denied for lack of merit.[6] Undaunted, USECO filed a
Second Motion for Reconsideration.[7] In its Resolution dated May 6, 1997, the NLRC
granted the motion and reinstated the decision of the labor arbiter.[8] The relevant portion
of the resolution reads:

x x x (w)e cannot blame respondents from suspending complainant (petitioner).


Obviously, the provision of law for the immediate suspension of what is believed to be a
dishonest employee is an appropriate measure of self-preservation, for the continuance
in office of such an employee poses grave danger to the viability and continued
existence of the cooperative.

In view of all the foregoing circumstances, we find that there is indeed justifiable cause
for complainants dismissal on the ground of breach of trust. There can be no doubt that
complainants continuance in the clearly sensitive and fiduciary position of Management
Assistant would patently inimical to the cooperatives interest. It would be oppressive
and unjust to order the respondent to take her back; for the law, in protecting the rights
of the worker, authorizes neither oppression nor self-destruction of the employer.

WHEREFORE, the instant motion is hereby GIVEN DUE COURSE. The Decision of 18
February 1997 as well as the Resolution of 26 March 1997 of this Commission are
hereby SET ASIDE and the 24 April 1995 decision of the Labor Arbiter, REINSTATED
and AFFIRMED.

It was petitioners turn to move for a reconsideration on the ground that a second
motion for reconsideration is not allowed under the New Rules of Procedure of the NLRC.
The motion was denied in a Resolution dated August 29, 1997. [9] The NLRC ruled:

Indeed, the rule is always in favor of liberality in the construction of procedural laws so
that the real matter in dispute, as in the instant case, may be submitted and decided
properly and in accordance with the law and established jurisprudence. Rigid
specifications (Rules of Procedure) set by the human mind may, at times, be relaxed so
as to give way to the sense of fair play as recognized by equity when the peculiar
circumstances of a case, like the one at bench, so warrant. After all, the Rules of
Procedure were never intended to override the ends of justice.
xxx xxx xxx

WHEREFORE, premises considered, the Motion for Reconsideration is hereby


DENIED.

SO ORDERED.

Hence, the present petition which poses two (2) important issues: one is substantive,
whether there is just cause for petitioners suspension and dismissal, and the other is
procedural, whether the NLRC committed grave abuse of discretion in granting private
respondents second motion for reconsideration.
We dismiss the petition.
There is no question that the position of petitioner as Management Assistant requires
a high degree of trust and confidence. Her duties involve the following:

1. Independently conceives and prepares monthly financial statements and


bank reconciliation statements;

2. Renders budgetary advices to the Board of Directors and monitors the


Unions marketable securities and investments.

3. Pre-audits loan applications and vouchers, prepares checks, effects deposits


to the bank and performs USECUs (sic) small scale payroll.

4. Reconciles ledgers, maintains the Cash Disbursement books, prepares


correspondences and supervises the activities of the U.S. Embassy Credit
Union.

5. Supervises the accounting system and is responsible for overall general


upkeep of the USECU office and oversees the Unions central record files.

Loss of confidence is a valid ground for dismissal of an employee. [10] In the case at
bar, USECO proved that its loss of confidence on petitioner has a rational basis. The
findings of the labor arbiter on this factual issue are supported by the evidence and we
quote:

The evidence of irregular and anomalous transactions in the lending operations of


USECO is quite insurmountable. These were initially discovered by the Audit and
Inventory Committee when it embarked on the examination of pertinent records, books
of accounts, reports and other papers covering transactions for the period from
November 1, 1991 up to March 31, 1993. Due to these irregularities and anomalies, not
only were established policies of USECO violated but also the specter of huge losses
looms inasmuch as there is no assurance that outstanding loans granted to some
fortyfour (44) resigned members amounting to P1,047,015.45 may be collected.

Foremost among the policies that were ignored are those enumerated in USECO
Circular No. 91-02, as amended by USECO Circular No. 92-03 (Exh. 1 and 2)
specifying the following criteria before any loan may be extended:

1. Loans are available to all members regardless of grade, level, provided, the
borrower-members application is equivalent to 120% of his/her total gross annual
salary, fringe benefits included, but not to exceed P120,000.00, provided further , that
his/her pay check should not be less than 50% of his/her gross pay per pay period.

2. A borrower-members savings (including his share capital) must be no less than 50%
of the amount being loaned, prior to the submission of the loan application (with
guarantor) or 75% (without guarantor).x x x.

xx xx xx xx

4. Withdrawals will be authorized, provided that at least 50% of the loan balance (with
guarantor) will remain in his/her savings deposit or at least 75% if without guarantor.

5. No new loans may be granted unless 50% of the loan has been paid.

6. Loan applications from over P50,000.00 to P120,000.00 must be pre-audited by the


management staff, recommended for approval by the Credit Committee and must be
approved by all members of the Board of Directors. Loan applications of P50,000.00
and below must be approved by the Credit Committee.

7. Loans shall be extended only to members who have subscribed and fully paid the
required 100 shares or Pl,000.00 share capital.

Based on the report of the Audit and Inventory Committee (Exh. "3") as well as the
report of the external auditor, J.D. Cayetano & Associates (Exh. "9"), there were six (6)
cooperative members who were extended loans more than the allowed maximum
of P120,000.00, namely, Luz Coronel - P278,500.00; Myrna Legaspi - P153,275.00;
Primitivo Roldan P336,855.00; Cipriano Beltran - P135,000.00; Guillermo Corospe
- P175,511.00; and Alejandro Lopez - P1,331,725.00. Of their total loan
of P2,410,866.00, there is an excess of P1,690,866.0 over the maximum allowable loan
limit. One of the established control measures provided in the USECO Circulars
aforementioned is the pre-audit of loan applications by the complainant in her capacity
as management assistant. Apparently, she failed in her duty as such.
"The audit reports also show that there are thirty-three (33) borrowers who were able to
make out loans although their paid-in shares were less than 50% of the amount
borrowed. Of the total loans of P3,985,830.00, the required paid-in shares should have
been P1,992,916.00, but these thirty-three (33) member-borrowers only have a
cumulative deposit of P584,362.00. Again, there appears to be a failure on, the part of
the complainant in the exercise of her pre-audit functions.

"Further, it appears from the audit reports that there are twenty-nine (29) loan
applications with a total of P107,740.00 that were granted without the required approval
from the majority of the Board of Directors. Certainly, as a pre-auditor the complainant
may not pretend not to know this.

"More serious violation appears in the grant of loans to resigned employees who
automatically became non-members upon their resignation. There are forty-four (44) of
them with an aggregate loan of P1,047,015.45. Collecting this amount from said
borrowers is quite difficult at this point.

"The irregularities, deficiencies, or nonconformity with established rules or policies that


attended the abovementioned loans could not have escaped the complainant's notice
being the designated pre-audit personnel. Had she diligently stuck to her, role as such,
these questionable loans could not have been extended for she may deny the pre-audit
of the subject loan applications for failure to comply with established policies. Or better
still, she could always bring her observations to the board and recommend denial of
said loan applications. The conclusion of this Arbitration Branch is that nothing of this
sort was done by the complainant.

"Complainant was also found on audit that she signed without authority cash payment
advices (CPAS) on five (5) occasions, instead of the authorized signatories.

"There are cases of unrecorded loans such as that obtained by Adelaida Halasan on
December 12, 1991 in the amount of P76,417.00; it was found out that the transaction
was not posted in the ledger of Ms. Halasan and there was no record of subsequent
payments. Another unrecorded loan is that made out in the name of Benedicto Batoy
which stirs (sic) a mystery on the matter of how the loan was granted. We quote the
Committee Report (Exh. "3", p. 19), as follows:

'This member resigned June 23, 1986. he was granted a loan amount to
(sic) P5,000.00 on March 4, 1993 per Vou. no. C-131 and Check no. 651991 was
issued (Exhibit 17).
'A review of the application shows that it was not signed by Mr. Batoy. There were (sic)
no approval from any of the Board of Directors. A name of the company (PCC
Construction Company) was written on the bottom part of the application.

'This particular transaction was recorded in the Cash Disbursement Book under the
name of E. Ramos. However, this was not posted on E. Ramos' ledger nor was there a
record of payment. There was no ledger made for Mr. Batoy during FY 1992 to post this
transaction.

'Further, review of pertinent records shows that Ch #651991 is missing on the file of
paid checks. The bank statement, however, shows that the check was
presented/cleared to the bank.'

The Complainant was also found to have fabricated ledgers to conceal the correct
balance of a borrower. The Audit report states:

'During the time that audit is ongoing, it was discovered that Mr. Lopez has an
additional two (2) sets of ledgers. The first ledger has a deposit balance of P56,920.00,
loan balance of P585,800.00 as of March 4, 1993. The second ledger has a zero
deposit and a loan balance of P835,620.00 for the same date.

'When questioned, Beth Ramos and Luz Coronel admitted that the last two ledgers are
the correct account balances of Mr. Lopez. The first ledger which was presented during
the audit was a fabricated one. They confessed that they attempted to conceal the
correct balance of Mr. Lopez by creating another ledger.

'Further investigation revealed that USECO staff also fabricated the 1992 ledger of Mr.
Lopez. A review of 1992 records shows the existence of two (2) ledgers. The first ledger
has a deposit of P58,980.58 and loan balance of P623,800.00. The second ledger has a
zero deposit and loan balance of P844.620.00 (Exh. 131, p. 22).

Capping the foregoing irregularities abovestated is the finding of the external auditor of
a shortage in the cash in bank in the amount of P360,964.61, not to mention overages
in loans receivable in the sum of P2,275,544.38." (emphasis ours)

Petitioner's explanation that the "loan practices" were made for the benefit of the
borrowing members and not to defraud USECO cannot exonerate her. As aptly pointed
out by the Solicitor General, her unsound practices endangered the financial condition of
USECO because of the possibility that the loans could not be collected at all.
We also do not agree that petitioner was denied due process before she was
suspended and later dismissed. The records show that on June 4, 1993, petitioner was
called by the USECO Board of Directors and confronted with the findings of the Audit,
and Inventory Committee showing the irregularities she committed. On June 17, 1993,
she was asked to explain in writing these irregularities. The next day, petitioner submitted
her written explanation. Thus, petitioner cannot complain that she did not understand the
charges against her. She is educated and she immediately explained her side. Due
process simply demands an opportunity to be heard and this opportunity was not denied
her.
We also hold that the NLRC did not commit grave abuse of discretion in entertaining
the second motion for reconsideration filed by USECO. Section 14 of the Rules of the
NLRC provides:

"Section. 14. Motions for Reconsideration.--Motions for reconsideration of any order,


resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten (10)
calendar days from receipt of the order, resolution or decision, with proof of service that
a copy of the same has been furnished, within the reglementary period, the adverse
party, and provided further that only one such motion from the same party shall be
entertained."

The NLRC initially reversed the ruling of the labor arbiter on the grounds that: (1)
petitioner was denied procedural due process and (2) the criminal case for estafa filed
against her has been dismissed by the Manila Prosecutor's Office for insufficiency of
evidence, particularly, for lack of proof that the USECO was damaged by the acts
attributed to petitioner.
These are patent errors. As discussed above, petitioner was not denied due
process. Similarly, it is a well established rule that the dismissal of the criminal case
against an employee shall not necessarily be a bar to his dismissal from employment on
the ground of loss of trust and confidence.[11] The NLRC corrected these patent errors
when it granted private respondent's second motion for reconsideration. Section 14 of the
NLRC rules cannot be construed as to prevent the NLRC from relieving itself from patent
errors in order to render justice. Technical rules of procedure are not meant to frustrate
but to facilitate justice. This norm finds more application in administrative agencies which
were created to dispense justice with greater freedom from the strictures of technical rules
of procedure.
WHEREFORE, premises considered, the petition is dismissed for lack of merit. No
costs.
SO ORDERED.
Melo, (Acting Chairman), Mendoza, and Martinez, JJ., concur.
Globe vs. Florendo, 390 SCRA 201,
GR 150092, September 27, 2002

[G.R. No. 150092. September 27, 2002]

GLOBE TELECOM, INC., DELFIN LAZARO, JR., and ROBERTO GALANG, petitioners,
vs. JOAN FLORENDO-FLORES, respondent.

DECISION
BELLOSILLO, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking to annul and
set aside the Decision[1] of the Court of Appeals of 25 May 2001 in CA-G.R. SP No. 60284
which affirmed the Decision of the National Labor Relations Commission of 28 January
2000 in NLRC RAB-CAR 05-0170-98, NLRC NCR CA No. 020270-99.[2]
Petitioner GLOBE TELECOM, INC. (GLOBE) is a corporation duly organized and
existing under the laws of the Philippines. Petitioners Delfin Lazaro Jr. was its President
and Roberto Galang its former Director-Regional Sales. Respondent Joan Florendo-
Flores was the Senior Account Manager for Northern Luzon.
On 1 July 1998 Joan Florendo-Flores filed with the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC) an amended complaint for constructive
dismissal against GLOBE, Lazaro, Galang, and Cacholo M. Santos, her immediate
superior, Luzon Head-Regional Sales. In her affidavit submitted as evidence during the
arbitration proceedings, Florendo-Flores bared that Cacholo M. Santos never
accomplished and submitted her performance evaluation report thereby depriving her of
salary increases, bonuses and other incentives which other employees of the same rank
had been receiving; reduced her to a house-to-house selling agent (person-to-person
sales agent or direct sales agent) of company products ("handyphone") despite her rank
as supervisor of company dealers and agents; never supported her in the sales programs
and recommendations she presented; and, withheld all her other benefits, i.e., gasoline
allowance, per diems, representation allowance, and car maintenance, to her extreme
pain and humiliation.[3]
GLOBE and its co-petitioners claimed that after receiving her salary in the second
week of May 1998 Florendo-Flores went AWOL (Absent Without Leave) without signifying
through letter or any other means that she was resigning from her position; that
notwithstanding her absence and the filing of her case, respondent Florendo-
Flores' employment was not terminated as shown by the fact that salary was still provided
her until July 1998 to be released upon her presentation of the attendance-record sheet
indicating that she already returned and reported for work; that she continued to have the
use a of company car and company "handyphone" unit; that she was replaced only when
her absence became indefinite and intolerable as the marketing operations in Northern
Luzon began to suffer; that during the pre-trial conference it was learned that Florendo-
Flores' complaint rested on her alleged personal and private disagreement with her
immediate superior Cacholo M. Santos; that there was no official act from GLOBE or from
other officers of the company, including respondents Lazaro and Galang, which called for
Florendo-Flores' termination, diminution in rank, seniority and benefits, or would imply,
even remotely, any of the same; and, that Florendo-Flores filed the complaint without
going through the grievance process of GLOBE's Human Resources Department and
without informing its officers of her problems with Cacholo M. Santos.
Labor Arbiter Monroe C. Tabingan declared Florendo-Flores to have been illegally
dismissed and ordered petitioners to reinstate her without loss of seniority rights and full
benefits; and to pay full back wages, inclusive of basic pay, allowances and bonuses as
prayed for in the complaint amounting to P307,625.00, exemplary damages in the sum
of P200,000.00, and ten percent (10%) of the total monetary award as attorney's
fees. However, the Labor Arbiter set aside the claim of abandonment as the company
failed to send the requisite notice to Florendo-Flores,[4] hence, there was no adherence to
procedural due process. Although he recognized that the problem brewed and eventually
boiled over due to the acts of Cacholo M. Santos, GLOBE's former Head of Regional
Sales, Luzon Area, the Labor Arbiter found the company negligent in monitoring all its
key personnel, and thus assessed against it exemplary damages at the same time
deleting actual and moral damages.[5]
Petitioners appealed the decision to the NLRC which modified the judgment of the
Labor Arbiter. The NLRC ruled that petitioners did not dismiss Florendo-Flores but that
the latter actually abandoned her employment because of a disagreement with her
immediate superior which she failed to bring to the attention of GLOBE and its officers,
particularly petitioners Lazaro and Galang.[6] However, the NLRC declared that if only as
an act of grace for the latter's past services with the company, GLOBE, Lazaro and
Galang should be held accountable for the back wages of Florendo-Flores amounting
to P307,625.00 minus the amount of P63,000.00 for the value of the company car in
Florendo-Flores' possession, or the net amount of P244,625.00.[7]
Both parties elevated the NLRC decision to the Court of Appeals, each side through
a petition for certiorari. In its Resolution of 2 September 2000 the appellate court
dismissed the petition of Florendo-Flores for failure to append the required verification
and certification of non-forum shopping,[8] while it gave due course to the petition of
GLOBE, Lazaro and Galang.
In their petition before the appellate court, GLOBE, Lazaro and Galang averred that
the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction
when it ordered them to pay Florendo-Flores full back wages and damages despite its
express finding that they did not cause the dismissal of Florendo-Flores as the latter had
actually abandoned her employment on account of her personal differences with her
superior.
In its Decision of 25 May 2001 the Court of Appeals found that Florendo-Flores was
constructively dismissed and that payment of back wages and damages was in order. On
21 June 2001 GLOBE, Lazaro and Galang filed a motion for reconsideration but the
motion was denied in the appellate court's Resolution of 19 September 2001.
Petitioners pose the following questions in this petition: In a special civil action for
certiorari where factual findings are deemed to be final and conclusive, can the Court of
Appeals alter or substitute the findings of fact of the lower court/tribunal? In the face of
the finding of the NLRC that respondent abandoned her employment because of a
personal squabble with her immediate superior, and that petitioners had nothing to do
with the severance of Flores' employment, can petitioners be held legally liable for back
wages while the guilty party Cacholo M. Santos is legally absolved of liability?
Petitioners submit that the answers to both questions must be in the negative. They
argue that the appellate court can neither alter nor substitute the factual findings of the
NLRC as they are legally deemed to be final and conclusive in a
certiorari proceeding. They contend that a special civil action for certiorari is an
extraordinary remedy created not to correct mistakes in the factual findings or conclusions
of the lower court or tribunal, but a remedy intended to rectify jurisdictional errors and
grave abuse of discretion. Thus, the Court of Appeals cannot make its own factual
findings and substitute them for the factual findings of the NLRC, and on such basis
render a decision.
Petitioners further note that the appellate court failed to address the issues raised in
their petition. They reiterate their position that they cannot be held liable for payment of
back wages as an act of grace in view of the express finding by the NLRC that respondent
abandoned her employment because of a personal rift with her immediate superior and
not due to any act attributable to them. They stress that there can be no liability in the
absence of any wrongful act.
Invoking the principle of res inter alios acta declaring that the rights of a party cannot
be prejudiced by the act, declaration or omission of another, petitioners insist that since
the NLRC found that respondent's problems arose from the acts and deeds of Santos, he
alone should be held liable. Petitioners find special exception to the NLRC's application
of the concept of "act of grace" to justify the award since an "act of grace is not a source
of demandable obligation. They argue that it is not within the power of any judicial or
administrative agency to compel an employer to be liberal.
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion on the
part of the labor tribunal.[9] Hence, the Court refrains from reviewing factual assessments
of lower courts and agencies exercising adjudicative functions, such as the
NLRC.Occasionally, however, the Court is constrained to delve into factual matters
where, as in the instant case, the findings of the NLRC contradict those of the Labor
Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings.[10] As a corollary, this Court
is clothed with ample authority to review matters, even if they are not assigned as errors
in their appeal, if it finds that their consideration is necessary to arrive at a just decision
of the case.[11] The same principles are now necessarily adhered to and are applied by
the Court of Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a factual
determination of the matters and on that basis reversed the ruling of the NLRC.
Glaring however is the discrepancy between the text of the decision of the appellate
court which declares that respondent Florendo-Flores "was unlawfully constructively
dismissed" from employment,[12] and its dispositive portion which declares that "the
assailed judgment is affirmed."[13] It should be noted that the "assailed judgment" referred
to the NLRC Decision which declared that respondent was not illegally dismissed but that
she abandoned her employment. Even in the award of back wages and exemplary
damages the two (2) decisions are at odds: The award of back wages made by the NLRC
was a gratuity or an act of grace from petitioners while the award made by the Court of
Appeals could be assumed to be anchored on its finding of illegal dismissal. How should
the inconsistency be reconciled?
Where there is conflict between the dispositive portion of the decision and the body
thereof, the dispositive portion controls irrespective of what appears in the body. [14]While
the body of the decision, order or resolution might create some ambiguity in the manner
the court's reasoning preponderates, it is the dispositive portion thereof that finally invests
rights upon the parties, sets conditions for the exercise of those rights, and imposes the
corresponding duties or obligations.[15] Hence, for the Court of Appeals to have affirmed
the assailed judgment is to adopt and uphold the NLRC finding of abandonment and its
award of full back wages to respondent as an "act of grace" from petitioners.
However, we believe this is not the proper view as the records reveal that respondent
was constructively dismissed from service.
Constructive dismissal exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer
involving ademotion in rank and a diminution in pay."[16] All these are discernible in
respondent's situation. She was singularly edged out of employment by the unbearable
or undesirable treatment she received from her immediate superior Cacholo M. Santos
who discriminated against her without reason - not preparing and submitting her
performance evaluation report that would have been the basis for her increased salary;
not forwarding her project proposals to management that would have been the source of
commendation; diminishing her supervisor stature by assigning her to house-to-house
sales or direct sales; and withholding from her the enjoyment of bonuses, allowances and
other similar benefits that were necessary for her efficient sales performance. Although
respondent continued to have the rank of a supervisor, her functions were reduced to a
mere house-to-house sales agent or direct sales agent. This was tantamount to a
demotion. She might not have suffered any diminution in her basic salary but petitioners
did not dispute her allegation that she was deprived of all benefits due to another of her
rank and position, benefits which she apparently used to receive.
Far from pointing to Santos alone as the source of her woes, respondent attributes
her degraded state to petitioners as well. Florendo-Flores cited petitioners' apathy or
indifference to her plight as she was twice left out in a salary increase in August 1987 and
May 1998, without petitioners giving her any reason.[17] It eludes belief that petitioners
were entirely in the dark as the salary increases were granted to all employees across-
the-board but respondent was the only one left receiving a P19,100.00 per month basic
salary while the rest received a basic salary of almost P35,000.00 per month.[18] It is
highly improbable that the exclusion of respondent had escaped petitioners' notice. The
absence of an evaluation report from Santos should have been noted by petitioners and
looked into for proper action to have been made. If a salary increase was unwarranted,
then it should have been sufficiently explained by petitioners to respondent.
Petitioners argue that respondent Florendo-Flores could have brought to their
attention the deplorable treatment she received from Santos by resorting to the
company's grievance machinery so that the problems in her relationship with Santos
could then have been easily ironed out, but she did not. It remains uncontroverted that
respondent had inquired from petitioners the reason why her other benefits had been
withheld and sought clarification for her undeserved treatment but petitioner company and
Santos remained mum.[19]
Thus, contrary to the observation of the NLRC, the dispute was not a mere private
spat between respondent Florendo-Flores and her immediate superior Santos.Granting
that this was the case, it had exceeded the periphery of simple personal affairs that
overflowed into the realm of respondent's employment.
Respondent narrates that sometime in June 1997 Santos wrote her a baseless
accusatory letter, and he together with GLOBE Sales Director Roberto Galang, one
ofpetitioners herein, verbally told her that she should resign from her job, but she
refused.[20] Thereafter, in July 1997 and the months subsequent thereto all of
respondent's other benefits were withheld without any reason nor explanation from the
company.[21] Even as petitioners endeavored to lay the blame on Santos alone, he would
not have been able to single-handedly mastermind the entire affair as to influence Sales
Director Galang and manipulate the payroll. It only stands to reason that Santos was
acting pursuant to a management directive, or if not, then petitioners had condoned it, or
at the very least, were negligent in supervising all of their employees. As aptly observed
by the Labor Arbiter -

x x x x it would appear however that the respondent company was negligent in


monitoring all its key personnel. For it is the bounden duty of the corporate officialdom
to constantly monitor their managerial staff if only to ascertain the smooth flow of work
and operations, which includes the inter-personal relations of each and every key
segment of the corporate machinery. For such, it must be assessed with just and
reasonable exemplary damages.[22]

The unauthorized absence of respondent should not lead to the drastic conclusion
that she had chosen to abandon her work. To constitute abandonment, there must be: (a)
failure to report for work or absence without valid or justifiable reason; and, (b) a clear
intention, as manifested by some overt act, to sever the employer-employee
relationship,[23] requisites that are negated by the immediate filing by respondent
Florendo-Flores of a complaint for constructive dismissal against petitioners. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal
dismissal; more so, when it includes a prayer for reinstatement.[24]
The reduction of respondent's functions which were originally supervisory in nature
to a mere house-to-house sales agent or direct sales agent constitutes a demotion in
rank. For this act of illegal dismissal, she deserves no less than full back wages starting
from the time she had been illegally dismissed until her actual reinstatement to her former
position without loss of seniority rights and other benefits - earned, accrued and
demandable. She shall continue to enjoy her benefits, privileges and incentives including
the use of the company car and "handyphone."
The managerial prerogative to transfer personnel must be exercised without grave
abuse of discretion. It must always bear in mind the basic elements of justice and fair
play. Having the right should not be confused with the manner that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker.[25]
In constructive dismissal, the employer has the burden of proving that the transfer
and demotion of an employee are for just and valid grounds such as genuine business
necessity.[26] The employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee. It must not involve a demotion in rank or a
diminution of salary and other benefits. If the employer cannot overcome this burden of
proof, the employee's demotion shall be tantamount to unlawful constructive dismissal.
It should be noted that the award of back wages in the instant case is justified upon
the finding of illegal dismissal, and not under the principle of "act of grace" for past
services rendered. There are occasions when the Court exercises liberality in granting
financial awards to employees, but even then they contemplate only the award of
separation pay and/or financial assistance, and only as a measure of social justice when
the circumstances of the case so warrant, such as instances of valid dismissal for causes
other than serious misconduct or those reflecting on the employees' moral
character.[27] Proper regard for the welfare of the labor sector should not dissuade us from
protecting the rights of management such that an award of back wages should be
forthcoming only when valid grounds exist to support it.
An award of actual and moral damages is not proper as the dismissal is not shown to
be attended by bad faith, or was oppressive to labor, or done in a manner contrary to
morals, good customs or public policy.[28] Exemplary damages are likewise not proper as
these are imposed only if moral, temperate, liquidated or compensatory damages are
awarded.[29]
WHEREFORE, the judgment appealed from is MODIFIED. The Decision of the Court
of Appeals of 25 May 2001 in CA-G.R. SP No. 60284 affirming the Decision of the
National Labor Relations Commission of 28 January 2000 declaring that respondent Joan
Florendo-Flores had abandoned her work is SET ASIDE. Petitioners Globe Telecom, Inc.,
Delfin Lazaro, Jr., and Roberto Galang are ordered to pay respondent Joan Florendo-
Flores full back wages from the time she was constructively dismissed on 15 May 1998
until the date of her effective reinstatement, without qualification or
deduction. Accordingly, petitioners are ordered to cause the immediate reinstatement of
respondent to her former position, without loss of seniority rights and other benefits. No
pronouncement as to costs.
SO ORDERED.
Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.
Mendoza, J., on official leave.

IV. Assignment for Nov. 25, 2017

Statutory Reference: Arts. 298 to 301 of the Labor Code and related provisions in the
Omnibus Rules
Cases:

Escareal vs. NLRC, 213 SCRA 472,


GR 99359, Sep. 2, 1992
[G.R. No. 99359. September 2, 1992.]

ORLANDO M. ESCAREAL, Petitioner, v. NATIONAL LABOR RELATIONS


COMMISSION, HON. MANUEL P. ASUNCION, Labor Arbiter, NLRC, National Capital
Region, PHILIPPINE REFINING COMPANY, INC., CESAR BAUTISTA and GEORGE
B. DITCHING, Respondents.

R.S. Arlanza & Associates for Petitioner.

Siguion Reyna, Montecillo & Ongsiako for Private Respondents.

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;


REDUNDANCY IN PERSONNEL FORCE AS A GROUND; DEFINED. In Wiltshire
File Co., Inc. v. NLRC, (193 SCRA 665 [1991]) this Court held that redundancy, for
purposes of the Labor Code, exists where the services of an employee are in excess of
what is reasonably demanded by the actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as the overhiring of workers, a decreased volume
of business or the dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. Redundancy in an employers personnel
force, however, does not necessarily or even ordinarily refer to duplication of work. That
no other person was holding the same position which the dismissed employee held prior
to the termination of his services does not show that his position had not become
redundant.

2. ID.; ID.; ID.; NOT JUSTIFIED IN CASE AT BAR; REASON THEREFOR. Private
respondent PRC had no valid and acceptable basis to declare the position of Pollution
Control and Safety Manager redundant as the same may not be considered as
superfluous; by the express mandate of the provisions earlier cited, said positions are
required by law. Thus, it cannot be gainsaid that the services of the petitioner are in
excess of what is reasonably required by the enterprise. Otherwise, PRC would not
have allowed ten (10) long years to pass before opening its eyes to that fact; neither
would it have increased the petitioners salary to P23,100.00 a month effective 1 April
1988. The latter by itself is an unequivocal admission of the specific and special need
for the position and an open recognition of the valuable services rendered by the
petitioner. Such admission and recognition are inconsistent with the proposition that
petitioners positions are redundant. If based on the ground of redundancy, a
substitution of the petitioner by Miguelito S. Navarro would be invalid as the creation of
said position is mandated by the law; the same cannot therefore be declared redundant.
If the change was effected to consolidate the functions of the pollution control and
safety officer with the duties of the Industrial Engineering Manager, as private
respondent postulates, such substitution was done in bad faith for as had already been
pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was to
generate savings in terms of the salaries that PRC would not be paying the petitioner
any more as a result of the streamlining of operations for improved efficiency, such a
move could hardly be justified in the face of PRCs hiring of ten (10) fresh graduates for
the position of Management Trainee and advertising for vacant positions in the
Engineering/Technical Division at around the time of the termination. Besides, there
would seem to be no compelling reason to save money by removing such an important
position. As shown by their recent financial statements, PRCs year-end net profits had
steadily increased from 1987 to 1990. While concededly, Article 283 of the Labor Code
does not require that the employer should be suffering financial losses before he can
terminate the services of the employee on the ground of redundancy, it does not mean
either that a company which is doing well can effect such a dismissal whimsically or
capriciously. The fact that a company is suffering from business losses merely provides
stronger justification for the termination.

3. ID.; ID.; RIGHT OF EMPLOYEE ILLEGALLY DISMISSED; RULE; CASE AT BAR.


Since We have concluded that the petitioners dismissal was illegal and can not be
justified under a valid redundancy initiative, Article 283 of the Labor Code, as amended,
on the benefits to be received by the dismissed employee in the case of redundancy,
retrenchment to prevent losses, closure of business or the installation of labor saving
devices, is not applicable. Instead, We apply Article 279 thereof which provides, in part,
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.

4. ID.; RIGHT OF EMPLOYEE TO SECURITY OF TENURE; CONSTRUED IN CASE


AT BAR. It is evident that petitioners right to security of tenure was violated by the
private respondent PRC. Both the Constitution (Section 3, Article XIII) and the Labor
Code (Article 279, P.D. 442, as amended) enunciate this right as available to an
employee. In a host of cases, this Court has upheld the employees right to security of
tenure in the face of oppressive management behavior and management prerogative.
(Dosch v. NLRC, 123 SCRA 296 [1983]; Tolentino v. NLRC, 152 SCRA 717 [1987];
Cebu Royal Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987]; PT&T v. NLRC,
183 SCRA 451 [1990]; Filipinas Manufacturers Bank v. NLRC, 182 SCRA 848 [1990];
Batongbacal v. Associated Bank, 168 SCRA 600 [1988]; International Harvester
Macleod v. NLRC, 149 SCRA 641 [1987]; Remerco Garments v. Minister of Labor, 135
SCRA 167 [1985]; Cebu Royal Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987])
Security of tenure is a right which may not be denied on mere speculation of any
unclear and nebulous basis. (Tolentino v. NLRC, 152 SCRA 717 [1987]) In this regard,
it could be concluded that the respondent PRC was merely in a hurry to terminate the
services of the petitioner as soon as possible in view of the latters impending
retirement; it appears that said company was merely trying to avoid paying the
retirement benefits the petitioner stood to receive upon reaching the age of sixty (60).
PRC acted in bad faith.

5. ID.; EMPLOYMENT CONTRACT; PERIOD OF EMPLOYMENT STIPULATED


THEREIN; EXPLAINED; CASE AT BAR. An examination of the contents of the
contract of employment yields the conclusion arrived at by the Solicitor General. There
is no indication that PRC intended to offer uninterrupted employment until the petitioner
reached the mandatory retirement age; it merely informs the petitioner of the
compulsory retirement age and the terms pertaining to the retirement. In Brent School,
Inc. v. Zamora, (181 SCRA 702 [1990]) this Court, in upholding the validity of a contract
of employment with a fixed or specific period, declared that the "decisive determinant in
term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that
which must necessarily come, although it may not be known when." (Id., citing Article
1193 (third paragraph), Civil Code) The term period was further defined to be, "Length
of existence; duration. A point of time marking a termination as of a cause or an activity;
an end, a limit, a bound; conclusion; termination. A series of years, months or days in
which something is completed. A time of definite length. . . . the period from one fixed
date to another fixed date . . . ." (Id., citing Capiral v. Manila Electric Co., 119 Phil. 124
[1963], cited in MORENO, Philippine Law Dictionary, 3rd ed.)
6. ID.; SEPARATION PAY; DISTINGUISHED FROM BACKWAGES. In Torillo v.
Leogardo, Jr., (197 SCRA 471 [1991]) an amplification was made on Article 279 of the
Labor Code and the distinction between separation pay and backwages. Citing the case
of Santos v. NLRC, (154 SCRA 166 [1987]), We held in the former: "The normal
consequences of a finding that an employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement to his former position without loss
of seniority rights and, secondly, the payment of backwages corresponding to the period
from his illegal dismissal up to actual reinstatement . . . Though the grant of
reinstatement commonly carries with it an award to backwages, the inappropriateness
or non-availability of one does not carry with it the inappropriateness or non-availability
the other . . . Put a little differently, payment of backwages is a form of relief that
restores the income that was lost by reason of unlawful dismissal; separation pay, in
contrast, is oriented towards the immediate future, the transitional period the dismissed
employee must undergo before locating a replacement job."

DECISION

DAVIDE, JR., J.:

Petitioner seeks to set aside the Decision 1 dated 14 January 1991 and the Resolution
2 dated 13 May 1991 of the respondent National Labor Relations Commission
(hereinafter, NLRC) in NLRC Case No. 00-08-03412-88 entitled Orlando M. Escareal v.
Philippine Refining Company, Inc. The said Decision affirmed with modification the 19
February 1990 Decision 3 of the respondent Labor Arbiter Manuel P. Asuncion while the
Resolution denied the motion for a reconsideration of the former.cralawnad

The dispositive portion of the respondent Labor Arbiters Decision


reads:jgc:chanrobles.com.ph

"WHEREFORE, the respondent is hereby ordered to pay the complainant his


redundancy pay in accordance with existing company policy on the matter. This is
without prejudice to the grant of additional benefits offered by the respondent during the
negotiation stage of the case, though it never materialized for failure of the parties to
reach an agreement.

SO ORDERED."cralaw virtua1aw library


The controversy stemmed from the dismissal of the petitioner from the private
respondent Philippine Refining Company, Inc. (hereinafter, PRC) after almost eleven
(11) years of gainful employment.

Petitioner was hired by the PRC for the position of Pollution Control Manager effective
on 16 September 1977 with a starting monthly pay of P4,230 00; 4 the employment was
made permanent effective on 16 March 1978. 5 The contract of employment provides,
inter alia, that his "retirement date will be the day you reach your 60th birthday, but there
is provision (sic) for voluntary retirement when you reach your 50th birthday. Bases for
the hiring of the petitioner are Letter of Instruction (LOI) No. 588 implementing the
National Pollution Control Decree, P.D No. 984, dated 19 August 1977, the pertinent
portion of which reads:jgc:chanrobles.com.ph

"1. All local governments, development authorities, government-owned or controlled


corporations, industrial, commercial and manufacturing establishments, and all other
public and private entities, whose functions involve the discharge or emission of
pollutants into the water, air and/or land resources or the operation, installation or
construction of any anti-pollution device, treatment work or facility, sewerage or
sewerage disposal system, shall each appoint and/or designate a Pollution Control
Officer." chanrobles law library

and Memorandum Circular No. 02, 6 dated 3 August 1981 and implementing LOI No.
588, which amended Memorandum Circular No. 007, Series of 1977, issued by the
National Pollution Control Commission (NPCC), the pertinent portions of which
read:jgc:chanrobles.com.ph

"Section 3. Appointment/Designation of Pollution Control Officer. All local


governments, development authorities, government-owned or controlled corporations,
industrial and manufacturing establishments, and public and private entities falling
within the purview of Letter of Instruction No. 588, shall each appoint and/or designate a
Pollution Control Officer.

x x x

Section 6. Employment Status-In the employment of Pollution Control Officer, the


following additional requirements shall be observed:chanrob1es virtual 1aw library

x x x
(b) Private Entities

1. Industrial and Manufacturing establishment and other private entities with


capitalization of one million pesos and above shall employ a full time pollution control
officer.

x x x

Section 9. Accreditation of Pollution Control Officer. A (sic) duly appointed and/or


designated pollution control officers shall submit copies of their designation and/or
appointments to the Commission within thirty (30) days from the date of such
designation/appointment together with their biodata and curriculum vitae for
accreditation purposes. In case of the termination of the appointment/designation of a
pollution control officer for any reason whatsoever, it shall be the responsibility of his
employer to inform the Commission of the same immediately to appoint/designate his
successor within thirty (30) days after said termination. (Emphasis supplied)"

On 1 April 1979, petitioner was also designated as Safety Manager pursuant to Article
162 of the Labor Code (P.D. 442, as amended) and the pertinent implementing rule
thereon. At the time of such designation, petitioner was duly accredited as a Safety
Practitioner by the Bureau of Labor Standards, Department of Labor and Employment
(DOLE) and the Safety Organization of the Philippines. Article 162 of the Labor Code,
as amended, provides:chanrobles virtual lawlibrary

ARTICLE 162. Safety and Health Standard. The Secretary of Labor shall, by
appropriate orders, set and enforce mandatory occupational safety and health
standards to eliminate or reduce occupational safety and health hazards in all
workplaces and institute new, and update existing, programs to ensure safe and
healthful working conditions in all places of employment."cralaw virtua1aw library

In addition, the pertinent rules on Occupational Health and Safety implementing the
Labor Code provide for the designation of full-time safety men to ensure compliance
with the safety requirements prescribed by the Bureau of Labor Standards. 7
Consequently, petitioners designation was changed to Pollution Control and Safety
Manager.

In the course of his employment, petitioners salary was regularly upgraded; the last pay
hike was granted on 28 March 1988 when he was officially informed 8 that his salary
was being increased to P23,100.00 per month effective 1 April 1988. This last increase
is indisputably a far cry from his starting monthly salary of P4,230.00.

Sometime in the first week of November 1987, private respondent George B. Ditching,
who was then PRCs Personnel Administration Manager, informed petitioner about the
companys plan to declare the position of Pollution Control and Safety Manager
redundant. Ditching attempted to convince petitioner to accept the redundancy offer or
avail of the companys early retirement plan. Petitioner refused and instead insisted on
completing his contract as he still had about three and a half (3 1/2) years left before
reaching the mandatory retirement age of sixty (60).

On 15 June 1988, Jesus P. Javelona, PRCs Engineering Department Manager and


petitioners immediate superior, formally informed the petitioner that the position of
"Safety and Pollution Control Manager will be declared redundant effective at the close
of work hours on 15th July 1988." 9 Petitioner was also notified that the functions and
duties of the position to be declared redundant will be absorbed and integrated with the
duties of the Industrial Engineering Manager; as a result thereof, the petitioner "will
receive full separation benefits provided under the PRC Retirement Plan and additional
redundancy payment under the scheme applying to employees who are 50 years old
and above and whose jobs have been declared redundant by Management." chanrobles
law library : red

Petitioner protested his dismissal via his 22 June 1988 letter to Javelona. 10 This
notwithstanding, the PRC unilaterally circulated a clearance 11 dated 12 July 1988, to
take effect on 15 July 1988, indicating therein that its purpose is for the petitioners
"early retirement" and not redundancy. Petitioner confronted Javelona; the latter, in
his letter dated 13 July 1988, advised the former that the employment would be
extended for another month, or up to 15 August 1988. 12 Petitioner responded with a
letter dated 25 July 1988 threatening legal action. 13

Subsequently, or on 14 July 1988, Bernardo N. Jambalos III, respondent companys


Industrial Relations Manager, sent a Notice of Termination 14 to the Ministry of Labor
and Employment (MOLE) informing the latter that the petitioner was being terminated
on the ground of redundancy effective 15 August 1988.

On 5 August 1988, petitioner had a meeting with private respondent Cesar Bautista and
Dr. Reynaldo Alejandro, PRCs President and Corporate Affairs Director, respectively.
To his plea that he be allowed to finish his contract of employment as he only had three
(3) years left before reaching the mandatory retirement age, Bautista retorted that the
termination was final.

On 8 August 1988, petitioner presented to Javelona a computation 15 showing the


amount of P2,436,534.50 due him (petitioner) by way of employee compensation and
benefits.

On the date of the effectivity of his termination, petitioner was only fifty-seven (57) years
of age. He had until 21 July 1991, his sixtieth (60th) birth anniversary, before he would
have been compulsorily retired.

Also, on the date of effectivity of petitioners termination, 16 August 1988, Miguelito S.


Navarro, PRCs Industrial Engineering Manager, was designated as the Pollution
Control and Safety Officer. Such appointment is evidenced by two (2) company
correspondences. In its letter dated 6 September 1988 to the Laguna Lake
Development Authority, 16 PRC informed the said Authority, to
wit:jgc:chanrobles.com.ph

"With effect from 16 August 1988 the functions and duties of our Safety and Pollution
Control Officer has (sic) been integrated and absorbed with those of our Industrial
Engineering Manager.

x x x

The main tasks of our Industrial Engineering Manager, Mr. Miguelito S. Navarro, now
includes (sic) safety and pollution control.chanrobles.com:cralaw:red

Attached to (sic) the bio-data of Mr. Navarro for your accreditation as our designated
Pollution Control Officer."cralaw virtua1aw library

In its letter to the Safety Organization of the Philippines 17 dated 14 December 1988,
PRC articulated Mr. Miguelito S. Navarros designation as "Safety Officer of Phil.
Refining Company."cralaw virtua1aw library

In view of all this, petitioner filed a complaint for illegal dismissal with damages against
the private respondent PRC before the Arbitration Branch, NLRC, National Capital
Region; the case was docketed as NLRC-NCR Case No. 00-08-03412-88. 18 After trial,
respondent Labor Arbiter Manuel P. Asuncion rendered a decision dated 19 February
1990, the dispositive portion of which was quoted earlier.
Petitioner appealed the said decision to the NLRC which, in its decision of 14 January
1991, made the following findings:jgc:chanrobles.com.ph

"Respondent contended that complainant Orlando M. Escareal was employed as Safety


and Pollution Control Engineer on September 16, 1977; that as part of the Companys
policy to streamline the work force and to keep the Organization more effective, it
allegedly declared redundant several positions from all levels and departments of the
company; that the position of Safety and Pollution Control Manager which the herein
complainant was holding at the time of dismissal, is one of those that were affected; that
the functions of Mr. Escareal were fused with the Industrial Engineering Department, the
latter being under the control and supervision of Mr. Miguelito S. Navarro; that no
replacement and/or new appointment to said questioned position have (sic) been made;
that respondent terminated complainant on the ground of redundancy and offered him
P458,929.00 a separation pay; and that the above mentioned amount, is far above what
complainant can get under the Labor Code, as amended.

x x x

The determination as to the usefulness of a particular department or section as an


integral aspect of company prerogative, may not be questioned, the objective of which
being to (sic) achieve profitability. (Special Events Control Shipping Office Workers
Union v. San Miguel Corporation, 122 SCRA 557).

x x x

To submit to the argument of herein Complainant that there is no basis in the


managements decision to declare his position redundant is to deny the company of its
inherent prerogative, without due process of law.

x x x

Turning to another issue of whether or not a fixed period of employment has been
concluded, suffice it to say that it lacks legal and factual basis.chanrobles virtual
lawlibrary

x x x
If indeed, a fixed period of contract of employment has been concluded under the
circumstances, the complainant would not have acceded to have undergone a
probationary period. The (sic) latter being a condition sine-qua non before he became a
regular worker. Consequently, the averment of breach of Contract pursuant to Article
1159, 1306 and 1308 of the New Civil Code of the Phils., is not in point. Additionally, to
subscribe to the protestation of herein complainant that the reference of the retirement
age at 60 in the companys letter dated August 22, 1977 meant fixed duration is to tie
the hands of management in doing what is necessary to meet the exigencies of the
business . . ."cralaw virtua1aw library

and then ruled that:jgc:chanrobles.com.ph

"WHEREFORE, the appealed decision is hereby Affirmed, with modification ordering


respondent-company to pay complainant his retirement pay in accordance with the
company policy and other benefits granted to him thereunder, less outstanding
obligations of the complainant with the company at the time of his dismissal." 19

Undaunted by this second setback, the petitioner filed a Motion for Reconsideration 20
of this decision on 25 January 1991. Private respondent PRC also filed its own motion
for reconsideration on the ground that petitioner is entitled to only one (1) benefit, and
not to both. In a Resolution promulgated on 13 May 1991, the NLRCs First Division 21
ruled as follows:jgc:chanrobles.com.ph

"WHEREFORE, in view thereof, the complainants motion for reconsideration other than
his pecuniary interest is hereby Dismissed for lack of merit. Accordingly, respondent-
company (PRC) is ordered to pay Mr. Escareals redundancy benefits in accordance
with the company policy on the matter as follows:chanrob1es virtual 1aw library

(a) Retirement credit of 1.5 months pay for every year of service in the amount of
P363,825.00; and

(b) Ex-gratia, amounting to:chanrob1es virtual 1aw library

P81,496.80

TOTAL P445,321.80"
As a consequence thereof, the instant petition was filed on 29 May 1991. 22 Private
respondent PRC filed its Comment on 21 August 1991 23 while the public respondent,
through the Office of the Solicitor General, filed its Comment on 10 October 1991. 24

On 16 October 1991, 25 this Court resolved, inter alia, to give due course to the petition
and require the parties to file their respective Memoranda Petitioner complied with this
Resolution on 12 December 1991; 26 public respondent NLRC, on the other hand, filed
its Memorandum only on 24 March 1992. 27

In his thorough and exhaustive Memorandum, herein petitioner makes the following
assignment of errors:chanrobles law library : red

"I

RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING


TO LACK OR IN (sic) EXCESS OF JURISDICTION IN AFFIRMING THE DECISION OF
THE RESPONDENT LABOR ARBITER THAT PETITIONERS TERMINATION AS
POLLUTION CONTROL AND SAFETY MANAGER OF RESPONDENT PRC ON THE
GROUND OF REDUNDANCY WAS VALID TOTALLY IGNORING THE FACT THAT
PETITIONERS POSITION WAS NEVER ABOLISHED BUT WAS MERELY GIVEN TO
ANOTHER EMPLOYEE (MIGUELITO S. NAVARRO) WHO WAS IMMEDIATELY
DESIGNATED AS A REPLACEMENT.

II

RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING


TO LACK OR IN (sic) EXCESS OF JURISDICTION IN DECLARING THAT
PETITIONERS WRITTEN CONTRACT OF EMPLOYMENT WITH RESPONDENT PRC
WAS NOT FOR A DEFINITE PERIOD, AND THAT IT IS NOT VIOLATED
NOTWITHSTANDING THE FACT THAT RESPONDENT PRC PREMATURELY
SHORTENED PETITIONERS RETIREMENT AGE AT 57 INSTEAD OF 60.

III

RESPONDENT NLRC COMMITTED A VERY SERIOUS ERROR AMOUNTING TO


LACK OR IN (sic) EXCESS OF JURISDICTION IN DECLARING THAT THE
PETITIONER IS NOT ENTITLED TO ANY SEPARATION PAY SUCH AS CASH
EQUIVALENT OF HIS ACCUMULATED VACATION AND SICK LEAVE CREDITS,
REDUNDANCY PAY, BONUSES, ETC., BUT ONLY TO HIS RETIREMENT BENEFITS
UNDER THE PRC RETIREMENT PLAN UP TO AUGUST 16, 1988 (DATE OF HIS
TERMINATION).

IV

RESPONDENT NLRC SERIOUSLY ERRED IN DECLARING THAT PETITIONER IS


NOT ENTITLED TO DAMAGES, NOTWITHSTANDING RESPONDENT PRCS AND
ITS OFFICERS EVIDENT BAD FAITH, WANTON AND PATENT VIOLATION OF
PETITIONERS WRITTEN CONTRACT OF EMPLOYMENT.

RESPONDENT NLRC GRAVELY ERRED IN NOT AWARDING PETITIONER AN


AMOUNT FOR ATTORNEYS FEE EQUIVALENT TO TEN (10%) PERCENT OF THE
AMOUNT DUE, NOTWITHSTANDING THAT PETITIONER WAS COMPELLED TO
LITIGATE BY REASON OF HIS ILLEGAL DISMISSAL AND OF RESPONDENT PRCS
AND ITS OFFICERS MALICIOUS AND WANTON ACTS." 28

We find for the petitioner.chanrobles law library : red

Article 283 of the Labor Code provides:jgc:chanrobles.com.ph

"ARTICLE 283. Closure of establishment and reduction of personnel. The employer


may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher A fraction of at least six (6) months shall be considered one (1) whole
year."cralaw virtua1aw library

In Wiltshire File Co., Inc. v. NLRC, 29 this Court held that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as the overhiring of workers, a decreased volume
of business or the dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. 30 Redundancy in an employers
personnel force, however, does not necessarily or even ordinarily refer to duplication of
work. That no other person was holding the same position which the dismissed
employee held prior to the termination of his services does not show that his position
had not become redundant.

Private respondent PRC had no valid and acceptable basis to declare the position of
Pollution Control and Safety Manager redundant as the same may not be considered as
superfluous; by the express mandate of the provisions earlier cited, said positions are
required by law. Thus, it cannot be gainsaid that the services of the petitioner are in
excess of what is reasonably required by the enterprise. Otherwise, PRC would not
have allowed ten (10) long years to pass before opening its eyes to that fact; neither
would it have increased the petitioners salary to P23,100.00 a month effective 1 April
1988. The latter by itself is an unequivocal admission of the specific and special need
for the position and an open recognition of the valuable services rendered by the
petitioner. Such admission and recognition are inconsistent with the proposition that
petitioners positions are redundant. It cannot also be argued that the said functions
were duplicative, and hence could be absorbed by the duties pertaining to the Industrial
Engineering Manager. If indeed they were, and assuming that the Industrial Engineering
department of the PRC had been created earlier, petitioners positions should not have
been created and filled up. If, on the other hand, the department was created later, and
there is no evidence to this effect, and it was to absorb the petitioners positions, then
there would be no reason for the unexplained delay in its implementation, the
restructuring then should have been executed long before the salary increases in
petitioners favor. That petitioners positions were not duplicitous is best evidenced by
the PRCs recognition of their imperative need thereof, this is underscored by the fact
that Miguelito S. Navarro, the companys Industrial Engineering Manager, was
designated as Pollution Control and Safety Manager on the very same day of
petitioners termination. While the petitioner had over ten (10) years of experience as a
pollution control and safety officer, Navarro was a virtual greenhorn lacking the requisite
training and experience for the assignment. A cursory perusal of his bio-data 31 reveals
that it was only several months after his appointment that he attended his first
Occupational Safety & Health Seminar (14-17 November 1988), moreover, it was only
after his second seminar (Loss Control Management Seminar 6-9 December 1988)
that the PRC requested his accreditation with the Safety Organization of the Philippines.
32 In trying to prop up Navarros competence for the position, PRC alleges that the
former finished from the University of the Philippines with a degree in Chemical
Engineering, took some units in pollution in the process and had "undergone job training
in pollution in cement firms through the Bureau of Mines." 33 Compared to the training
and experience of the petitioner, Navarros orientation would seem to pale.chanrobles
virtual lawlibrary

The private respondent alleges further 34 that its decision to declare petitioners position
as redundant "stemmed from its well-considered view that in order for the corporations
safety and pollution program to be more effective, such program would have to be tied
up with the functions of the Industrial Engineering Manager." It is further posited that
since the job of safety and pollution engineer "requires coordination with operating
departments, knowledge of the manufacturing processes, and adequate presence in
plant areas, a task which the companys safety and pollution control officer would not be
up to as he works singlehandedly, it is only the Industrial Engineer, commanding a
department of five (5) engineers and one (1) clerk, who can live up to corporate
expectations. Indeed, the proposition that a department manned by a number of
engineers presumably because of the heavy workload, could still take on the additional
responsibilities which were originally reposed in an altogether separate section headed
by the petitioner, is difficult to accept. It seems more reasonable to view the set-up
which existed before the termination as being more conducive to efficient operations.
And even if We were to sustain PRCs explanation, why did it so suddenly incorporate
functions after the separate position of Pollution and Safety Control Manager had
existed for over ten (10) years? No effort whatsoever was undertaken to gradually
integrate both functions over this span of time. Anent this specific point, all that the
private respondent has to say is that the declaration of redundancy was made pursuant
to its continuing program, which has been ongoing for the past ten (10) years, of
streamlining the personnel complement and maintaining a lean and effective
organization. 35

Furthermore, if PRC felt that either the petitioner was incompetent or that the task could
be performed by someone more qualified, then why is it that the person designated to
the position hardly had any experience in the field concerned? And why reward the
petitioner, barely five (5) months before the dismissal, with an increase in salary?
Assuming PRCs good faith, it would still seem quite surprising that it did not at least
provide a transition period wherein the Industrial Engineering Manager would be
adequately trained for his new assignment; such reckless conduct is not the expected
behavior of a well-oiled and progressive multinational company. Petitioner himself could
have very well supervised a training and familiarization program which could have taken
the remaining three (3) years of his employment. But no such move was initiated.
Instead, a clever scheme to oust the petitioner from a position held for so long was
hatched and implemented. On the very same day of petitioners termination, the position
vacated was resurrected and reconstituted as a component of the position of Industrial
Engineering Manager. After more than ten (10) years of unwavering service and loyalty
to the company, the petitioner was so cruelly and callously
dismissed.chanrobles.com:cralaw:red

What transpired then was a substitution of the petitioner by Miguelito S. Navarro. If


based on the ground of redundancy, such a move would be invalid as the creation of
said position is mandated by the law; the same cannot therefore be declared redundant.
If the change was effected to consolidate the functions of the pollution control and
safety officer with the duties of the Industrial Engineering Manager, as private
respondent postulates, such substitution was done in bad faith for as had already been
pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was to
generate savings in terms of the salaries that PRC would not be paying the petitioner
any more as a result of the streamlining of operations for improved efficiency, such a
move could hardly be justified in the face of PRCs hiring of ten (10) fresh graduates for
the position of Management Trainee 36 and advertising for vacant positions in the
Engineering/Technical Division at around the time of the termination. 37 Besides, there
would seem to be no compelling reason to save money by removing such an important
position. As shown by their recent financial statements, PRCs year-end net profits had
steadily increased from 1987 to 1990. 38 While concededly, Article 283 of the Labor
Code does not require that the employer should be suffering financial losses before he
can terminate the services of the employee on the ground of redundancy, it does not
mean either that a company which is doing well can effect such a dismissal whimsically
or capriciously. The fact that a company is suffering from business losses merely
provides stronger justification for the termination.

The respondent NLRC 39 relied on Wiltshire File Co., v. NLRC 40 in declaring that the
employer has no legal obligation to keep in its payroll more employees than are
necessary for the operation of its business. Aside from the fact that in the case at bar,
there was no compelling reason to dismiss the petitioner as the company was not
incurring any losses, the position declared redundant in the Wiltshire case was that of a
Sales Manager, a management created position. In the case at bar, petitioners position
is one created by law.
The NLRC adds further that the termination was effected in the exercise of
management prerogative and that account should also be taken of the "life of the
company which is . . . an active pillar of our economy and upon whose existence still
depends the livelihood of a great number of workers." 41 It goes on to observe that"
[t]he records are bereft of proof which could have been the basis of vengeful termination
other than the companys legitimate objective to trim its work force." 42 In the face of the
circumstances surrounding the dismissal, this Court finds it extremely difficult to give
credence to such conclusions.

Thus, it is evident from the foregoing that petitioners right to security of tenure was
violated by the private respondent PRC. Both the Constitution (Section 3, Article XIII)
and the Labor Code (Article 279, P.D. 442, as amended) enunciate this right as
available to an employee. In a host of cases, this Court has upheld the employees right
to security of tenure in the face of oppressive management behavior and management
prerogative. 43 Security of tenure is a right which may not be denied on mere
speculation of any unclear and nebulous basis. 44

In this regard, it could be concluded that the respondent PRC was merely in a hurry to
terminate the services of the petitioner as soon as possible in view of the latters
impending retirement; it appears that said company was merely trying to avoid paying
the retirement benefits the petitioner stood to receive upon reaching the age of sixty
(60). PRC acted in bad faith.chanrobles law library : red

Both the Labor Arbiter and the respondent NLRC clearly acted with grave abuse of
discretion in disregarding the facts and in deliberately closing their eyes to the unlawful
scheme resorted to by the PRC.

We cannot, however, subscribe to the theory of petitioner that his employment was for a
fixed definite period to end at the celebration of his sixtieth (60th) birthday because of
the stipulation as to the retirement age of sixty (60) years. The Solicitor Generals
refutation, to wit:jgc:chanrobles.com.ph

"A perusal of the provision in the August 22, 1977 letter cited by petitioner merely
informs him of the company policy which pegs the compulsory retirement age of its
employees at 60 and which commences on the date of the employees 60th birthday. It
likewise informs him that the company recognizes the right of the employee to retire
voluntarily, which option can be availed of when the employee reaches his 50th
birthday. Clearly, the cited provision is limited solely to the pertinent issue of retirement."
45
is correct.

An examination of the contents of the contract of employment 46 yields the conclusion


arrived at by the Solicitor General. There is no indication that PRC intended to offer
uninterrupted employment until the petitioner reached the mandatory retirement age, it
merely informs the petitioner of the compulsory retirement age and the terms pertaining
to the retirement.

In Brent School, Inc. v. Zamora, 47 this Court, in upholding the validity of a contract of
employment with a fixed or specific period, declared that the "decisive determinant in
term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that
which must necessarily come, although it may not be known when." 48 The term
period was further defined to be, "Length of existence; duration. A point of time marking
a termination as of a cause or an activity; an end, a limit, a bound; conclusion;
termination. A series of years, months or days in which something is completed. A time
of definite length. . . . the period from one fixed date to another fixed date . . ." 49

The letter to the petitioner confirming his appointment does not categorically state when
the period of employment would end. It stands to reason then that petitioners
employment was not one with a specific period.chanrobles law library

Coming to the third assigned error, since We have concluded that the petitioners
dismissal was illegal and can not be justified under a valid redundancy initiative, Article
283 of the Labor Code, as amended, on the benefits to be received by the dismissed
employee in the case of redundancy, retrenchment to prevent losses, closure of
business or the installation of labor saving devices, is not applicable. Instead, We apply
Article 279 thereof which provides, in part, 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."cralaw virtua1aw library

In Torillo v. Leagardo, Jr., 50 an amplification was made on Article 279 of the Labor
Code and the distinction between separation pay and backwages. Citing the case of
Santos v. NLRC, 51 We held in the former:jgc:chanrobles.com.ph

"The normal consequences of a finding that an employee has been illegally dismissed
are, firstly, that the employee becomes entitled to reinstatement to his former position
without loss of seniority rights and, secondly, the payment of backwages corresponding
to the period from his illegal dismissal up to actual reinstatement.

x x x

Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness
or non-availability of the other.

x x x

Put a little differently, payment of backwages is a form of relief that restores the income
that was lost by reason of unlawful dismissal, separation pay, in contrast, is oriented
towards the immediate future, the transitional period the dismissed employee must
undergo before locating a replacement job."cralaw virtua1aw library

Reinstatement then of the petitioner would have been proper. However, since he
reached the mandatory retirement age on 21 July 1991, reinstatement is no longer
feasible. He should thus be awarded his backwages from 16 August 1988 to 21 July
1991, inclusive of allowances and the monetary equivalent of the other benefits due him
for that period, plus retirement benefits under the PRCs compulsory retirement scheme
which he would have been entitled to had he not been illegally dismissed.

Finally, anent the last two (2) assigned errors, this Court notes that in his complaint and
the attached Affidavit-Complaint, 52 petitioner does not mention any claim for damages
and attorney s fees; furthermore, no evidence was offered to prove them. An award
therefor would not be justified.chanroblesvirtualawlibrary

WHEREFORE, judgment is hereby rendered GRANTING the petition, SETTING ASIDE


the Decision and Resolution of respondent National Labor Relations Commission, dated
14 January 1991 and 13 May 1991, respectively in Labor Case No. NLRC-NCR-00-08-
03412-88 and ORDERING private respondent Philippine Refining Co., Inc. to pay
petitioner Orlando M. Escareal his backwages from 16 August 1988 to 21 July 1991
inclusive of allowances and the monetary equivalent of other benefits due him for that
period, as well as his retirement pay and other benefits provided under the formers
compulsory retirement scheme. The respondent Labor Arbiter or his successor is
hereby directed to make the appropriate computation of these awards within twenty (20)
days from receipt of a copy of this Decision, which respondent Philippine Refining Co.,
Inc. shall pay to the petitioner within ten (10) days from notice thereof.

Costs against private respondent Philippine Refining Co., Inc.chanrobles.com : virtual


law library

SO ORDERED.

Gutierrez, Jr., Bidin and Romero, JJ., concur.

Feliciano, J., is on leave.

Asian Alcohol vs. NLRC, 305 SCRA 416,


GR 131108, Mar. 25, 1999

G.R. No. 131108. March 25, 1999]

ASIAN ALCOHOL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS


COMMISSION, FOURTH DIVISION, CEBU CITY and ERNESTO A. CARIAS,
ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO,
LEANDRO O. VERAYO and ERENEO S. TORMO, respondents.

DECISION
PUNO, J.:

Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C.


Martinez, Rafael H. Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo,
was valid on the twin grounds of redundancy and retrenchment to prevent business
losses, petitioner Asian Alcohol Corporation (hereinafter referred to as Asian Alcohol) filed
this petition for certiorari. Asian Alcohol ascribes grave abuse of discretion to public
respondents National Labor Relations Commission[1] (hereinafter referred to as NLRC)
when, on May 30, 1997, it set aside[2] the decision[3] of the Executive Labor Arbiter
dismissing the illegal termination complaints filed by private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks
in Asian Alcohol, were driven by mounting business losses to sell their majority rights to
prior Holdings, Inc. (hereinafter referred to as Prior Holdings). The next month, Prior
Holdings took over its management and operation.[4]
To thwart further losses, Prior Holdings implemented a reorganizational plan and
other cost-saving measures. Some one hundred seventeen (117) employees out of a total
workforce of three hundred sixty (360) were separated. Seventy two (72) of them
occupied redundant positions that were abolished. Of these positions, twenty one (21)
were held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members [5] whose positions
were abolished due to redundancy. Private respondents Carias, Martinez, and Sendon
were water pump tenders; Amacio was a machine shop mechanic; Verayo was a
briquetting plant operator while Tormo was a plant helper under him. They were all
assigned at the Repair and Maintenance Section of the Pulupandan plant.[6]
In October, 1992, they received individual notices of termination effective November
30, 1992.[7] They were paid the equivalent of one month salary for every year of service
as separation pay, the money value of their unused sick, vacation, emergency and
seniority leave credits, thirteenth (13th) month pay for the year 1992, medicine allowance,
tax refunds, and goodwill cash bonuses for those with at least ten (10) years of
service.[8] All of them executed sworn releases, waivers and quitclaims. [9] Except for
Verayo and Tormo, they all signed sworn statements of conformity to the company
retrenchment program.[10] And except for Martinez, they all tendered letters of
resignation.[11]
On December 18, 1992, the six (6) private respondents files with the NLRC Regional
Arbitration Branch VI, Bacolod City, complaints for illegal dismissal with a prayer for
reinstatement with backwages, moral damages and attorneys fees. They alleged that
Asian Alcohol used the retrenchment program as a subterfuge for the union busting. They
claimed that they were singled out for separation by reason for their active participation
in the union. They also asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring.
The Executive Labor Arbiter dismissed the complaints. He explained, thus:

The fact that respondents AAC incurred losses in its business operations was not
seriously challenged by the complainants. The fact that it incurred substantial losses in
its business operations prior to the implementation of its retrenchment program is amply
supported by the documents on records, (sic) namely: (1) Balance Sheet of AAC as of
December 31, 1991 x x x, (2) Statement of Income and Deficit for the year ended
December 31, 1991 x x x, (3) Income Tax Return for Fiscal Year ending September 30,
1989 x x x, (4) Income Tax Return for the Fiscal Year ending December 31, 1989 x x x,
(5) Income Tax Return for Fiscal Year ending December 31, 1990 x x x, and (6) Income
Tax Return for the Fiscal Year ending December 31, 1991 x x x, indicating an
accumulated deficit of P26,117,889.00.

It has to be emphasized that the law allows an employer to retrench some of its
employees to prevent losses. In the case of respondent AAC, it implemented its
retrenchment program not only to prevent losses but to prevent further losses as it was
then incurring huge losses in its operations.

Complainants would want us to believe that their positions were abolished because they
are union members, and that they were replaced by casual employees. Complainants
pretense is rather untenable. For one thing, the retrenchment program of AAC affected
not only union members but also the non-union members. As earlier said, there were
117 employees of AAC who were affected by the reorganization. Of the 117 positions,
72 positions were abolished due to redundancy, 21 of which were occupied by union
members, while 51 were held by non-union members. Thus, the theory of complainants
that they were terminated from work on ground of their union membership is far from the
truth.

On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael
Sendon who were all Water Pump Tenders assigned to AACs water wells in Ubay,
Pulupandan, Negros Occidental which were drilled and operated before under the old
management by virtue of right-of-way with the landowner, were retrenched as an
offshoot to the termination of the lease agreement as the water thereunder had become
salty due to extensive prawn farming nearby, so that AAC could no longer use the water
for its purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez
and Rafael Sendon had become unnecessary, redundant and superfluous.

As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by
respondent AAC in support of its decision to retrench them are too convincing to be
ignored.Accordingly to respondent AAC, its boiler before was 100% coal fired. The
boiler was manned by a briquetting plant operator in the person of Leandro Verayo and
three (3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy
Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire its
boiler, its usage of coal had been drastically reduced to only 30% of its total fuel usage
in its production plant, thereby saving on fuel cost. For this reason, there was no more
need for the position of briquetting plant operator and the services for only two
briquetting helpers were determined to be adequate for the job of briquetting coal. Of
the three (3) briquetting helpers, Ereneo Tormo was the oldest, being already 41 years
old, the other two, Javier and Songaling, being only 28 and 35 respectively. Considering
the manual nature of the work of coal briquetting, younger workers are always preferred
for reasons of efficiency [sic]. Hence the abolition of the position of Ereneo Tormo. We
have to stress that Eriberto Songaling, Jr. and Rudy Javier, Jr. are also union members.
xxx

With respect to Carlos Amacio, he was retrenched not because of his being a union
member but because of his poor health condition which greatly affect[ed] his work
efficiency. Records show that Carlos Amacio was among the ten machine shop
mechanics employed by respondent AAC. Under AACs reorganization plan, it needs
only nine mechanics.

xxx

On the whole, therefore, the dismissal of complainants on ground of


redundancy/retrenchment was perfectly valid or legal.[12]

Private respondents appealed to the NLRC.


On May 30, 1997, the NLRC rendered the challenged decision. It rejected the
evidence proffered by Asian Alcohol to prove its business reversals. It ruled that the
positions of private respondents were not redundant for the simple reason that they were
replaced by casuals. The NLRC essayed this explanation:

In this case, [that] the respondent terminated complainants to protect the company from
future losses, does not create an impression of imminent loss. The company at the time
of retrenchment was not then in the state of business reverses. There is therefore no
reason to retrench. x x x

The alleged deficits of the corporations did not prove anything for the respondent. The
financial status as shown in the Statement of Income and Deficits and Income Tax
Returns from 1989 to 1991, submitted by respondent was before the respondent, new
management of Prior Holdings, Inc., took over the operation and management of the
corporation in October, 199[1]. This is no proof that on November 30, 1992 when the
termination of complainant[s] took effect the company was experiencing losses or at
least imminent losses. Possible future losses do not authorize retrenchment.

Secondly in the case of REDUNDANCY.

Redundancy exist where the service[s] of x x x employee[s] are in excess of what is


reasonably demanded by the actual requirements of the enterprise. The evidence,
however, proved that, in truth and in fact, the positions of the complainants were not
redundant for the simple reason that they were replaced by casuals.
xxx

Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were
operated by contractors. Otherwise stated, complainant[s] who are regular workers of
the respondent, performing jobs necessary and desirable to the business of the
company, were eased out in the guise of retrenchment or redundancy [so that] their jobs
[will] be performed by workers belonging to a contractor.

In summation, retrenchment and/or redundancy not having been proved, complainants,


therefore, were illegally dismissed.[13]

The dispositive portion of the decision of the NLRC provides as follows:

WHEREFORE, premises considered, the Decision appealed from is hereby ordered


SET ASIDE and VACATED and in lieu thereof, the respondent Asian Alcohol
Corporation is hereby ordered to reinstate complainants with full backwages from the
time they were dismissed on November 30, 1992 and up to actual reinstatement. Plus
10% attorneys fees.

SO ORDERED.[14]

On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing


decision. On September 25, 1997, the NLRC denied the motion.[15]
On January 12, 1998, Asian Alcohol filed in this Court a petition for certiorari assailing
both the decision of the NLRC and the resolution denying its reconsideration. It invoked
the following grounds:

6. GROUNDS FOR THE PETITION

6.1 Public respondent has committed, as hereinafter shown, a manifest grave abuse of
discretion amounting to lack or excess of jurisdiction in declaring in its assailed Decision
x x x and Resolution x x x that the termination of the employment of private respondents
by the petitioner herein is illegal and ordering their reinstatement with full backwages
from the time they were dismissed on November 30, 1992 up to their actual
reinstatement, plus 10% attorneys fees, said Decision and Resolution of the public
respondents being contrary to the established facts of the case, well-settled
jurisprudence and the law on the matter.

6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave
abuse of discretion amounting to lack or excess of jurisdiction by totally disregarding
and refusing to consider the factual findings of the Executive Labor Arbiter with respect
to the circumstances which rendered the positions of the private respondents
unnecessary, redundant and superfluous, thereby justifying the termination of their
employment.

6.3 Public respondents has furthermore committed, as hereinafter shown, a manifest


grave abuse of discretion amounting to lack or excess of jurisdiction in giving full credit
to the oral testimonies quoted in its assailed Decision x x x and taking them as
conclusive proof of the alleged replacement of the private respondents with casual
workers despite the fact that said quoted testimonies clearly amount to nothing but
speculations, surmises and conjectures.[16]

On March 25, 1998, we issued a Temporary Restraining Order[17] enjoining the NLRC
from enforcing its Decision and Resolution dated May 30, 1997 and September 25, 1997,
respectively.
We find the petition meritorious.
Out of its concern for those with less privilege in life, this Court has inclined towards
the worker and upheld his cause in his conflicts with the employer. [18] This favored
treatment is directed by the social justice policy of the Constitution.[19] But while tilting the
scales of justice in favor of workers, the fundamental law also guarantees the right of the
employer to reasonable returns from his investments.[20] Corollarily, the law allows an
employer to downsize his business to meet clear and continuing economic
threats.[21] Thus, this Court has upheld reductions in the work force to forestall business
losses or stop the hemorrhaging of capital.[22]
The right of management to dismiss workers during periods of business recession
and to install labor saving devices to prevent losses is governed by Art. 283 of the Labor
Code, as amended. It provides, viz.:

Art. 283. Closure of establishment and reduction of personnel.--The employer may also
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in case of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole
year.[emphasis ours]

Under the foregoing provisions, retrenchment and redundancy are just causes for the
employer to terminate the services of workers to preserve the viability of the business. In
exercising its right, however, management must faithfully comply with the substantive and
procedural requirements laid down by law and jurisprudence.[23]
The requirements for valid retrenchment which must be proved by clear and
convincing evidence are: (1) that the retrenchment is reasonably necessary and likely to
prevent business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer; [24] (2) that the employer served
written notice both to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment;[25] (3) that the employer pays
the retrenched employees separation pay equivalent to one month pay or at least month
pay for every year of service, whichever is higher;[26](4) that the employer exercises its
prerogative to retrench employees in good faith for the advancement of its interest and
not to defeat or circumvent the employees right to security of tenure; [27] and (5) that the
employer used fair and reasonable criteria[28] in ascertaining who would be dismissed and
who would be retained among the employees, such as status (i.e., whether they are
temporary, casual, regular or managerial employees), efficiency, seniority,[29] physical
fitness, age, and financial hardship for certain workers.[30]
The condition of business losses is normally shown by audited financial documents
like yearly balance sheets and profit and loss statements as well as annual income tax
returns.[31] It is our ruling that financial statements must be prepared and signed by
independent auditors.[32] Unless duly audited, they can be assailed as self-serving
documents.[33] But it is not enough that only the financial statements for the year during
which retrenchment was undertaken, are presented in evidence. For it may happen that
while the company has indeed been losing, its losses may be on a downward trend,
indicating that business is picking up and retrenchment, being a drastic move, should no
longer be resorted to.[34] Thus, the failure of the employer to show its income or loss for
the immediately preceding year or to prove that it expected no abatement of such losses
in the coming years, may bespeak the weakness of its cause. [35] It is necessary that the
employer also show that its losses increased through a period of time and that the
condition of the company is not likely to improve in the near future. [36]
In the instant case, private respondents never contested the veracity of the audited
financial documents proffered by Asian Alcohol before the Executive Labor
Arbiter. Neither did they object their admissibility. They show that petitioner has
accumulated losses amounting to P306,764,349.00 and showing nary sign of abating in
the near future. The allegation of union busting is bereft of proof. Union and non-union
members were treated alike. The records show that the positions of fifty one (51) other
non-union members were abolished due to business losses.
In rejecting petitioners claim of business losses, the NLRC stated that the alleged
deficits of the corporation did not prove anything for the [petitioners] [37] since they were
incurred before the take over of Prior Holdings. Theorizing that proof of losses before the
take over is no proof of losses after the take over, it faulted Asian Alcohol for retrenching
private respondent on the ground of mere possible future losses[38].
We do not agree. It should be observed that Article 283 of the Labor Code uses the
phrase retrenchment to prevent losses. In its ordinary connotation, this phrase means
that retrenchment must be undertaken by the employer before losses are actually
sustained.[39] We have, however, interpreted the law to mean that the employer need not
keep all his employees until after his losses shall have materialized.[40] Otherwise, the law
could be vulnerable to attack as undue taking of property for the benefit of another. [41]
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October
1991. Plain to see, the last quarter losses in 1991 were already incurred under the new
management. There were no signs that these losses would abate. Irrefutable was the fact
that losses have bled Asian Alcohol incessantly over a span of several years. They were
incurred under the management of the Parsons family and continued to be suffered under
the new management of Prior Holdings. Ultimately, it is Prior Holding that will absorb all
the losses, including those incurred under the former owners of the company. The law
gives the new management every right to undertake measures to save the company from
bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to
turn the business around were nor designed to bust the union of the private
respondent. Retrenched were one hundred seventeen (117) employees. Seventy two
(72) of them including private respondent were separated because their positions had
become redundant. In this context, what may technically be considered as redundancy
may verily be considered as retrenchment measures. [42] Their positions had to be
declared redundant to cut losses.
Redundancy exist when the service capability of the work is in excess of what is
reasonably needed to meet the demands on the enterprise. A redundant position is one
rendered superfluous by any number of factors, such as overhiring of workers, decreased
volume of business, dropping of a particular product line previously manufactured by the
company or phasing out of a service activity priorly undertaken by the business. [43] Under
these conditions, the employer has no legal obligation to keep in its payroll more
employees than are necessary for the operation of its business.[44]
For the implementation of a redundancy program to be valid, the employer must
comply with the following requisites: (1) written notice served on both the employees and
the Department of Labor and Employment at least one moth prior to the intended date of
retrenchment;[45] (2) payment of separation pay equivalent to at least one month pay or
at least one month pay for every year of service whichever is higher; (3) good faith in
abolishing the redundant positions;[46] and (4) fair and reasonable criteria in ascertaining
what positions are to be declared redundant and accordingly abolished.[47]
In the case at bar, private respondent Carias, Martinez and Sendon were water pump
tenders. They tended the water wells of Asian Alcohol located in Ubay, Pulupandan,
Negros Occidental. However, Asian Alcohol did not own the land where the wells stood. It
only leased them.
In 1992, the lease contract which also provided for a right of way leading to the site
of the wells, was terminated. Also, the water from the wells had become salty due to
extensive prawn farming nearby and could no longer be used by Asian Alcohol for its
purpose. The wells had to be closed and needless to say, the services of Carias, Martinez
and Sendon had to be terminated on the twin grounds of redundancy and retrenchment.
Private respondent Verayo was the briquetting plant operator in charge of the coal-
fired boiler. Private respondent Tormo was one of the three briquetting helpers. To
enhance production efficiency, the new management team shifted to the use of bunker
fuel by about seventy percent (70%) to fire its boiler. The shift meant substantial fuel cost
savings. In the process, however the need for a briquetting plant operator ceased as the
services of only two (2) helpers were all that was necessary to attend to the much lesser
amount of coal required to run the boiler. Thus, the positions of private respondent Verayo
had to be abolished. Of the three (3) briquetting helpers, Tormo, was the oldest, being
already 41 years old. The other two, Rudy Javier Jr. and Eriberto Songaling, Jr., were
younger, being only 28 and 35, respectively. Age, with the physical strength that comes
with it, was particularly taken into consideration by the management team in deciding
whom to separate. Hence, it was private respondent Tormo who was separated from
service. The management choice rested on a rational basis.
Private respondent Amacio was among the ten (10) mechanics who manned the
machine shop at the plant site. At their current production level, the new management
found that it was more cost efficient to maintain only nine (9) mechanics. In choosing
whom to separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient among them. It was
private respondent Amacio who appeared the least efficient because of his poor health
conditions.
Not one of the private respondents refuted the foregoing facts. They only contend
that the new management should have followed the policy of first in, last out in choosing
which positions to declare as redundant or whom to retrench to prevent further business
losses. No law mandates such a policy. And the reason is simple enough. A host of
relevant factors come into play in determining cost efficient measures and in choosing the
employees who will be retained or separated to save the company from closing shop. In
determining these issues, management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an exercise of business judgment on the part
of the employer.[48] It will be upheld as long as it passes the test of arbitrariness.[49]
Private respondents call our attention to their allegation that casuals were hired to
replace Carias, Martinez and Sendon as water pump tenders at the Ubay wells. They rely
on the testimony of Engr. Federico Palmares, Jr., the head of the Mechanical Engineering
Department who admitted the engagement of independent contractors to operate the
wells. A reading of the testimony of Engr. Palmares, however, will reveal that he referred
not to the Ubay wells which were tended by private respondents Carias, Martinez and
Sendon, but to the Laurawells. Thus, he declared in cross examinations:
ATTY. YMBALLA: (cross-examination of respondent witness, Federico Palmares)
Q But in the Laura well?
WITNESS:
A Mansteel was hired as contractor.
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of independent contractors?
WITNESS:
A I am not sure, maybe.[50]
In any event, we have held that an employers good faith in implementing a
redundancy program is not necessarily destroyed by availment of the services of an
independent contractor to replace the services of the terminated employees. We have
previously ruled that the reduction of the number of workers in a company made
necessary by the introduction of the services of an independent contractor is justified
when the latter is undertaken in order to effectuate more economic and efficient methods
of production.[51] In the case at bar, private respondent failed to proffer any proof that the
management acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells. Absent such proof, the Court has no
basis to interfere with the bona fide decision of management to effect more economic and
efficient methods of production.
Finally, private respondents now claim that they signed the quitclaims, waivers and
voluntary resignation letters only to get their separation package. They maintain that in
principle, they did not believe that their dismissal was valid.
It is true that this court has generally held that quitclaims and releases are contrary
to public policy and therefore, void. Nonetheless, voluntary agreements that represents a
reasonable settlement are binding on the parties and should not later be disowned. It is
only where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable, that the law will step in to
bail out the employees. While it is our duty to prevent the exploitation of employees, it is
also behooves us to protect the sanctity of contracts that do not contravene our laws.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary
resignation letters were executed by the private respondents under force or duress. In
truth, the documents embodied separation benefits that were well beyond what the
company was legally required to give private respondents. We note that out of more than
one hundred workers that were retrenched by Asian Alcohol, only these six (6) private
respondents were not impressed by the generosity of their employer. Their late
complaints have no basis and deserve our scant consideration.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor
Relations Commission dated May 30, 1997 and its Resolution dated September 25, 1997
are ANNULED AND SET ASIDE. The Decision of the Executive Labor Arbiter dated
January 10, 1996 in RAB Case No. 06-12-10893-92 is ORDERED REINSTATED. The
complaints for illegal dismissal filed by private respondents against Asian Alcohol
Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No cost.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena , JJ., concur.

Mayon Hotel vs. Adana, 458 SCRA 609,

GR 157634, May 16, 2005


[G.R. No. 157634. May 16, 2005]

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,


vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO
ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES
CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE
ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROOLA, respondents.

DECISION
PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the
Court of Appeals (CA)[1] in CA-G.R. SP No. 68642, entitled Rolando Adana, Wenefredo
Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel &
Restaurant/Pacita O. Po, et al., and the Resolution[2] denying petitioners motion for
reconsideration. The assailed CA decision reversed the NLRC Decision which had
dismissed all of respondents complaints,[3] and reinstated the Joint Decision of the Labor
Arbiter[4] which ruled that respondents were illegally dismissed and entitled to their money
claims.
The facts, culled from the records, are as follows:[5]
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po,[6] whose mother, petitioner Josefa Po Lam, manages the
establishment.[7] The hotel and restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant
hired the following people, all respondents in this case, with the following jobs: [8]

1. Wenefredo Loveres Accountant and Officer-in-charge


2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. SantosBroola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. LourdesCamigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space
occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the
business were suspended on March 31, 1997.[9] The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the
construction of a new Mayon Hotel & Restaurant at Pearanda
[10]
Street, Legazpi City. Only nine (9) of the sixteen (16) employees continued working in
the Mayon Restaurant at its new site.[11]
On various dates of April and May 1997, the 16 employees filed complaints for
underpayment of wages and other money claims against petitioners, as follows: [12]

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal
dismissal, underpayment of wages, nonpayment of holiday and rest day pay; service
incentive leave pay (SILP) and claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment
of wages; nonpayment of cost of living allowance (COLA) and overtime pay; premium
pay for holiday and rest day; SILP; nightshift differential pay and separation pay plus
damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages;
nonpayment of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and
SILP and night shift differential pay;

Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay,
holiday pay, SILP, and damages;[13] and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime


pay; premium pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint
Decision in favor of the employees. The Labor Arbiter awarded substantially all of
respondents money claims, and held that respondents Loveres, Macandog and Llarena
were entitled to separation pay, while respondents Guades, Nicerio and Alamares were
entitled to their retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the
complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was
denied, they filed a petition for certiorari with the CA which rendered the now assailed
decision.
After their motion for reconsideration was denied, petitioners now come to this Court,
seeking the reversal of the CA decision on the following grounds:
I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE
NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE
AMPLE AND SUFFICIENT EVIDENCE SHOWING THAT THE NLRC
DECISION IS INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;
II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT
PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR
EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY PRIVATE
RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT OF
PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF
PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS
JOINT DECISION IN FAVOR OF THE PRIVATE RESPONDENTS,
INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE
RESPONDENTS, DESPITE THE FACT THAT THE PRIVATE
RESPONDENTS HAVE NOT PROVEN BY SUBSTANTIAL EVIDENCE
THEIR ENTITLEMENT THERETO AND ESPECIALLY THE FACT THAT
THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS.
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT,
PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING
THE CERTIFICATE OF REGISTRATION OF THE BUSINESS
ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A
PUBLIC DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF
COMPLAINANTS-PRIVATE RESPONDENTS.[14]
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of
petitioner Mayon Hotel & Restaurant, and the proper respondent in this
case?

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and


Nicerio illegally dismissed?

3. Are respondents entitled to their money claims due to underpayment of


wages, and nonpayment of holiday pay, rest day premium, SILP, COLA,
overtime pay, and night shift differential pay?

It is petitioners contention that the above issues have already been threshed out
sufficiently and definitively by the NLRC. They therefore assail the CAs reversal of the
NLRC decision, claiming that based on the ruling in Castillo v. NLRC,[15] it is non
sequitur that the CA should re-examine the factual findings of both the NLRC and the
Labor Arbiter, especially as in this case the NLRCs findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRCs competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latters
findings.[16] But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.[17] And when the factual findings of the Labor Arbiter and
the NLRC are diametrically opposed and this disparity of findings is called into question,
there is, necessarily, a re-examination of the factual findings to ascertain which opinion
should be sustained.[18] As ruled in Asuncion v. NLRC,[19]

Although, it is a legal tenet that factual findings of administrative bodies are entitled to
great weight and respect, we are constrained to take a second look at the facts before
us because of the diversity in the opinions of the Labor Arbiter and the NLRC. A
disharmony between the factual findings of the Labor Arbiter and those of the NLRC
opens the door to a review thereof by this Court.[20]

The CA, therefore, did not err in reviewing the records to determine which opinion
was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC[21] that factual findings of administrative
bodies like the NLRC are affirmed only if they are supported by substantial evidence that
is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a
decision of a Labor Arbiter. Mere variance in evidentiary assessment between the
NLRC and the Labor Arbiter does not automatically call for a full review of the facts by
this Court. The NLRCs decision, so long as it is not bereft of substantial support from
the records, deserves respect from this Court. As a rule, the original and exclusive
jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its
evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of
discretion. Thus, the NLRCs factual findings, if supported by substantial evidence, are
entitled to great respect and even finality, unless petitioner is able to show that it simply
and arbitrarily disregarded the evidence before it or had misappreciated the evidence to
such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated. (citations omitted)[22]

After careful review, we find that the reversal of the NLRCs decision was in order
precisely because it was not supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa
Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed
this decision, the CA, on review, agreed with the Labor Arbiter that notwithstanding the
certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the
complaints filed by the employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we
cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject
hotel and restaurant. There were conflicting documents submitted by Josefa
herself. She was ordered to submit additional documents to clearly establish ownership
of the hotel and restaurant, considering the testimonies given by the [respondents] and
the non-appearance and failure to submit her own position paper by Pacita Po. But
Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme
Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po
Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party,
and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the evidence[,] if produced, would
operate to his prejudice, and support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant,
the labor arbiter relied also on the testimonies of the witnesses, during the hearing of
the instant case. When the conclusions of the labor arbiter are sufficiently corroborated
by evidence on record, the same should be respected by appellate tribunals, since he is
in a better position to assess and evaluate the credibility of the contending
parties.[23] (citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that
petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the
documents they submitted to the Labor Arbiter sufficiently and clearly establish the fact
of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lams participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared
and submitted by respondent Loveres; and (c) visitation of the premises. [24] They also put
emphasis on the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.[25] This, they claim, is a judicial admission and is binding on respondents. They
protest the reliance the Labor Arbiter and the CA placed on their failure to submit
additional documents to clearly establish ownership of the hotel and restaurant, claiming
that there was no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary evidence of
ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that
petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the
Labor Arbiter. Despite receipt of the Labor Arbiters notice and summons, other notices
and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the Labor
Arbiter in these cases, nor file her position paper.[26] It was only on appeal with the NLRC
that Pacita Po signed the pleadings.[27] The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an establishment
would naturally be concerned when ALL her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lams claim that she is
merely an overseer. The findings of the Labor Arbiter on this question were based on
credible, competent and substantial evidence. We again quote the Joint Decision on this
matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner]
Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and
restaurant when the latter purchased the same from one Palanos in 1981, Josefa failed
to submit the document of sale from said Palanos to Pacita as allegedly the sale was
only verbal although the license to operate said hotel and restaurant is in the name of
Pacita which, despite our Order to Josefa to present the same, she failed to comply (p.
38, tsn. August 13, 1998). While several documentary evidences were submitted by
Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64,
65, 67 to 69; vol. I, rollo)[,] there were documentary evidences also that were submitted
by Josefa showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While
Josefa explained her participation and interest in the business as merely to help and
assist her daughter as the hotel and restaurant was near the formers store, the
testimonies of [respondents] and Josefa as well as her demeanor during the trial in
these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam previously
owned; it is Josefa to whom the employees submits (sic) reports, draws money for
payment of payables and for marketing, attending (sic) to Labor Inspectors during
ocular inspections. Except for documents whereby Pacita Po appears as the owner of
Mayon Hotel and Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The least
that can be said is that it is absurd for a person to purchase a hotel and restaurant in the
very heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners],
particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the
hotel and restaurant, considering the testimonies of [respondents], the former should
[have] submitted the lease contract between the owner of the building where Mayon
Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly
establish ownership by the latter of said enterprise. Josefa failed. We are not surprised
why some employers employ schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and
Restaurant and the proper respondent in these cases.[28]

Petitioners reliance on the rules of evidence, i.e., the certificate of registration being
the best proof of ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lams involvement in the
enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice.[29] The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and intention of the Labor Code
that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.[30] Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.[31]
Similarly, the fact that the respondents complaints contained no allegation that
petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial
admissions to respondents who are but lowly employees - would be to exact compliance
with technicalities of law that is contrary to the demands of substantial justice. Moreover,
the issue of ownership was an issue that arose only during the course of the proceedings
with the Labor Arbiter, as an incident of determining respondents claims, and was well
within his jurisdiction.[32]
Petitioners were also not denied due process, as they were given sufficient
opportunity to be heard on the issue of ownership. [33] The essence of due process in
administrative proceedings is simply an opportunity to explain ones side or an opportunity
to seek reconsideration of the action or ruling complained of. [34] And there is nothing in
the records which would suggest that petitioners had absolute lack of opportunity to be
heard.[35] Obviously, the choice not to present evidence was made by petitioners
themselves.[36]
But more significantly, we sustain the Labor Arbiter and the CA because even when
the case was on appeal with the NLRC, nothing was submitted to negate the Labor
Arbiters finding that Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor
with this Court. Considering that petitioners vehemently deny ownership by petitioner
Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to submit could
only mean that if produced, it would have been adverse to petitioners case.[37]
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam
is the owner of petitioner Mayon Hotel & Restaurant.

2. Illegal Dismissal: claim for separation pay


Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broola. [38]
The Labor Arbiter found that there was illegal dismissal, and granted separation pay
to respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and
Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal,
the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code
as amended.[39] The Labor Arbiter ruled that respondent Atractivo was not entitled to
separation pay because he had been transferred to work in the restaurant operations
in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio,
Macandog and Guades were also awarded damages.[40]
The NLRC reversed the Labor Arbiter, finding that no clear act of termination is
attendant in the case at bar and that respondents did not submit any evidence to that
effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own
surmises and conjectures.[41] In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that
none of the above-named respondents were illegally dismissed, or entitled to separation
or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that
when the illegal dismissal case was filed by respondents on April 1997, they had as yet
no cause of action. Petitioners therefore conclude that the filing by respondents of the
illegal dismissal case was premature and should have been dismissed outright by the
Labor Arbiter.[42] Petitioners also claim that since the validity of respondents dismissal is
a factual question, it is not for the reviewing court to weigh the conflicting evidence.[43]
We do not agree. Whether respondents are still working for petitioners IS a factual
question. And the records are unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and
Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the
other hand, was also laid-off when the Elizondo Street operations closed, as were all the
other respondents. Since then, respondents have not been permitted to work nor
recalled, even after the construction of the new premises at Pearanda Street and the
reopening of the hotel operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the
complaint was filed:[44]

[F]rom the records, more than six months had lapsed without [petitioner] having
resumed operation of the hotel. After more than one year from the temporary closure of
Mayon Hotel and the temporary transfer to another site of Mayon Restaurant, the
building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be
transferred has been finally constructed and the same is operated as a hotel with bar
and restaurant nevertheless, none of [respondents] herein who were employed at
Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other
respondents as they had not filed an amended complaint to question the cessation of
their employment after the closure of Mayon Hotel & Restaurant on March 31, 1997.[45]
The above factual finding of the Labor Arbiter was never refuted by petitioners in their
appeal with the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly
treated this uncontroverted factual finding by ruling that respondents have not introduced
any evidence to show that they were illegally dismissed, and that the Labor Arbiters
finding was based on conjecture.[46] It was a serious error that the NLRC did not inquire
as to the legality of the cessation of employment. Article 286 of the Labor Code is clear
there is termination of employment when an otherwise bona fide suspension of work
exceeds six (6) months.[47] The cessation of employment for more than six months was
patent and the employer has the burden of proving that the termination was for a just or
authorized cause.[48]
Moreover, we are not impressed by any of petitioners attempts to exculpate
themselves from the charges. First, in the proceedings with the Labor Arbiter, they
claimed that it could not be illegal dismissal because the lay-off was merely temporary
(and due to the expiration of the lease contract over the old premises of the
hotel). They specifically invoked Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual basis.[49] Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had
exceeded the six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the
Labor Code is misplaced, considering that the reason why private respondents were out
of work was not due to the fault of petitioners. The failure of petitioners to reinstate the
private respondents to their former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any evidence to prove their alleged
illegal dismissal. The petitioners cannot discern why they should be made liable to the
private respondents for their failure to be reinstated considering that the fact that they
were out of work was not due to the fault of petitioners but due to circumstances beyond
the control of petitioners, which are the termination and non-renewal of the lease
contract over the subject premises. Private respondents, however, argue in their
Comment that petitioners themselves sought the application of Article 286 of the Labor
Code in their case in their Position Paper filed before the Labor Arbiter. In refutation,
petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the
fact remains, and this bears stress and emphasis, that the temporary suspension of the
operations of the establishment arising from the non-renewal of the lease contract did
not result in the termination of employment of private respondents and, therefore, the
petitioners cannot be faulted if said private respondents were out of work, and
consequently, they are not entitled to their money claims against the petitioners. [50]

It is confounding how petitioners have fashioned their arguments. After having


admitted, in effect, that respondents have been laid-off since April 1997, they would have
this Court excuse their refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven the illegality of their
dismissal.
Petitioners arguments reflect their lack of candor and the blatant attempt to use
technicalities to muddle the issues and defeat the lawful claims of their employees. First,
petitioners admit that since April 1997, when hotel operations were suspended due to the
termination of the lease of the old premises, respondents Loveres, Macandog, Llarena,
Nicerio and Guades have not been permitted to work. Second, even after six months of
what should have been just a temporary lay-off, the same respondents were still not
recalled to work. As a matter of fact, the Labor Arbiter even found that as of the time
when he rendered his Joint Decision on July 2000 or more than three (3) years after the
supposed temporary lay-off, the employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been completed and the same
operated as a hotel with bar and restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the service on the initiative of the
employer regardless of the reasons therefor.[51]
On this point, we note that the Labor Arbiter and the CA are in accord that at the time
of the filing of the complaint, respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-off of the respondents was
merely temporary, pending construction of the new building at Pearanda Street.[52]
While the closure of the hotel operations in April of 1997 may have been temporary,
we hold that the evidence on record belie any claim of petitioners that the lay-off of
respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the
complaint for illegal dismissal immediately after the closure of the hotel operations
in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners allegations that the employees assigned to the hotel
operations knew about this beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the
employer-employee relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis. [53] But they made no
mention of any intent to recall these respondents to work upon completion of the new
premises. Third, the various pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lams affidavit on July 21, 1998, for
example, squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for
abusing her leniency and causing petitioner Mayon Hotel & Restaurant to sustain
continuous losses until it is closed. She then asserts that respondents are not entitled to
separation pay for they were not terminated and if ever the business ceased to operate it
was because of losses.[54] Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged that three (3) years prior to
the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially
due to Loveress mismanagement and abuse of petitioners trust and confidence.[55] Even
the petition filed in this court made reference to the separation of the respondents due to
severe financial losses and reverses, again imputing it to respondents
mismanagement.[56] The vehemence of petitioners accusation of mismanagement
against respondents, especially against Loveres, is inconsistent with the desire to recall
them to work. Fourth, petitioners memorandum on appeal also averred that the case was
filed not because of the business being operated by them or that they were supposedly
not receiving benefits from the Labor Code which is true, but because of the fact that the
source of their livelihood, whether legal or immoral, was stopped on March 31, 1997,
when the owner of the building terminated the Lease Contract. [57] Fifth, petitioners had
inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to
the closure,[58] i.e., in the petition filed with this court, they assert that there is no illegal
dismissal because there was only a temporary cessation or suspension of operations of
the hotel and restaurant due to circumstances beyond the control of petitioners, and that
is, the non-renewal of the lease contract...[59] And yet, in the same petition, they also
assert that: (a) the separation of respondents was due to severe financial losses and
reverses leading to the closure of the business; and (b) petitionerPacita Po had to close
shop and was bankrupt and has no liquidity to put up her own building to house Mayon
Hotel & Restaurant.[60] Sixth, and finally, the uncontroverted finding of the Labor Arbiter
that petitioners terminated all the other respondents, by not employing them when the
Hotel and Restaurant transferred to its new site on Pearanda Street.[61] Indeed, in this
same memorandum, petitioners referred to all respondents as former employees of
Mayon Hotel & Restaurant.[62]
These factors may be inconclusive individually, but when taken together, they lead
us to conclude that petitioners really intended to dismiss all respondents and merely used
the termination of the lease (on Rizal Street premises) as a means by which they could
terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997
was merely temporary, it became dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the
Labor Code.
We are not impressed by petitioners claim that severe business losses justified their
failure to reinstate respondents. The evidence to prove this fact is inconclusive. But more
important, serious business losses do not excuse the employer from complying with the
clearance or report required under Article 283 of the Labor Code and its implementing
rules before terminating the employment of its workers.[63] In the absence of justifying
circumstances, the failure of petitioners to observe the procedural requirements set out
under Article 284, taints their actuations with bad faith, especially since they claimed that
they have been experiencing losses in the three years before 1997. To say the least, if it
were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the giving of notices
was intended not only to enable the employees to look for another employment and
therefore ease the impact of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the opportunity to
ascertain the verity of the alleged authorized cause of termination.[64]
And even assuming that the closure was due to a reason beyond the control of the
employer, it still has to accord its employees some relief in the form of severance pay.[65]
While we recognize the right of the employer to terminate the services of an employee
for a just or authorized cause, the dismissal of employees must be made within the
parameters of law and pursuant to the tenets of fair play. [66] And in termination disputes,
the burden of proof is always on the employer to prove that the dismissal was for a just
or authorized cause.[67] Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal dismissal. [68]
Under these circumstances, the award of damages was proper. As a rule, moral
damages are recoverable where the dismissal of the employee was attended by bad faith
or fraud or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.[69] We believe that the dismissal of the
respondents was attended with bad faith and meant to evade the lawful obligations
imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from
employment in 1997 as a matter of fact, but without legal redress. This runs counter to
notions of fair play, substantial justice and the constitutional mandate that labor rights
should be respected. If doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter the employer
must affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause.[70] It is a time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the formers favor.[71] The policy is to extend
the doctrine to a greater number of employees who can avail of the benefits under the
law, which is in consonance with the avowed policy of the State to give maximum aid and
protection of labor.[72]
We therefore reinstate the Labor Arbiters decision with the following modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog
and Llarena; (Santos Broola cannot be granted separation pay as he made
no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at
the time of dismissal were entitled to their retirement benefits pursuant to
Article 287 of the Labor Code as amended;[73] and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio,


Atractivo, and Broola.

3. Money claims

The CA held that contrary to the NLRCs ruling, petitioners had not discharged the
burden of proving that the monetary claims of the respondents have been paid.[74]The CA
thus reinstated the Labor Arbiters grant of respondents monetary claims, including
damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as
there was no illegal dismissal, then respondents are not entitled to their monetary claims
or separation pay and damages. Petitioners arguments are not only tiring, repetitive and
unconvincing, but confusing and confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other documents the labor
standard benefits they are entitled to, and which they alleged that petitioners have failed
to pay them. It was therefore petitioners burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non payment. [75] This
petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners
submitted, i.e., affidavits executed by some of respondents during an ocular inspection
conducted by an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove payment.[76] Despite
repeated orders from the Labor Arbiter,[77] petitioners failed to submit the pertinent
employee files, payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for overtime work, night
shift differential, premium pay for work on holidays and rest day, and payment of these
as well as the COLA and the SILP documents which are not in respondents possession
but in the custody and absolute control of petitioners. [78] By choosing not to fully and
completely disclose information and present the necessary documents to prove payment
of labor standard benefits due to respondents, petitioners failed to discharge the burden
of proof.[79] Indeed, petitioners failure to submit the necessary documents which as
employers are in their possession, inspite of orders to do so, gives rise to the presumption
that their presentation is prejudicial to its cause.[80] As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party,
and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the evidence, if produced, would
operate to his prejudice, and support the case of his adversary.[81]

Petitioners next claim that the cost of the food and snacks provided to respondents
as facilities should have been included in reckoning the payment of respondents
wages. They state that although on the surface respondents appeared to receive minimal
wages, petitioners had granted respondents other benefits which are considered part and
parcel of their wages and are allowed under existing laws. [82] They claim that these
benefits make up for whatever inadequacies there may be in
[83]
compensation. Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an appropriate Facility Evaluation
Order issued by the Regional Director of the DOLE.[84] Petitioners also aver that they give
five (5) percent of the gross income each month as incentives. As proof of compliance of
payment of minimum wages, petitioners submitted the Notice of Inspection Results issued
in 1995 and 1997 by the DOLE Regional Office.[85]
The cost of meals and snacks purportedly provided to respondents cannot be
deducted as part of respondents minimum wage. As stated in the Labor Arbiters
decision:[86]
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo)
issued by the DOLE Regional Office whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the same as part of their
wages, We cannot consider the cost of meals in the Orders as applicable to
[respondents]. [Respondents] were not interviewed by the DOLE as to the quality and
quantity of food appearing in the applications of [petitioners] for facility evaluation prior
to its approval to determine whether or not [respondents] were indeed given such kind
and quantity of food. Also, there was no evidence that the quality and quantity of food
in the Orders were voluntarily accepted by [respondents]. On the contrary; while some
[of the respondents] admitted that they were given meals and merienda, the quality of
food serve[d] to them were not what were provided for in the Orders and that it was only
when they filed these cases that they came to know about said Facility Evaluation
Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa
herself, who applied for evaluation of the facility (food) given to [respondents], testified
that she did not inform [respondents] concerning said Facility Evaluation Orders (p. 34,
tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities,
such facilities could not be deducted without compliance with certain legal requirements.
As stated in Mabeza v. NLRC,[87] the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents written authorization. Indeed, the
Labor Arbiter found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was provided for in the
Facility Evaluation Orders and it was only when they filed the cases that they came to
know of this supposed Facility Evaluation Orders.[88]Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she had applied
for.[89]
Considering the failure to comply with the above-mentioned legal requirements, the
Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided
to respondents should be deducted as part of their salaries, on the ground that
respondents have availed themselves of the food given by petitioners. [90] The law is clear
that mere availment is not sufficient to allow deductions from employees wages.
More important, we note the uncontroverted testimony of respondents on record that
they were required to eat in the hotel and restaurant so that they will not go home and
there is no interruption in the services of Mayon Hotel & Restaurant. As ruled in Mabeza,
food or snacks or other convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose.[91] Considering, therefore, that hotel workers are required
to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners
business.[92] The deduction of the cost of meals from respondents wages, therefore,
should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of
the establishment can be considered as part of the respondents wages. We quote with
approval the Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as
profit share, the same cannot be considered as part of their wages in determining their
claims for violation of labor standard benefits. Although called profit share[,] such is in
the nature of share from service charges charged by the hotel. This is more explained
by [respondents] when they testified that what they received are not fixed amounts and
the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had been agreed by them prior
to their employment. Further, how can the amounts receive[d] by [respondents] be
considered as profit share when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross receipt of an
enterprise. Profits are realized after expenses are deducted from the gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the
Labor Arbiter. We note that petitioners themselves have admitted that the establishment
employs more or less sixteen (16) employees,[93] therefore they are estopped from
claiming that the applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that
this is not a defense to payment of labor standard benefits. The employer cannot exempt
himself from liability to pay minimum wages because of poor financial condition of the
company. The payment of minimum wages is not dependent on the employers ability to
pay.[94]
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents employment in an underhanded
manner, and have used and abused the quasi-judicial and judicial processes to resist
payment of their employees rightful claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances of this case
would have called for exemplary damages, as the dismissal was effected in a wanton,
oppressive or malevolent manner,[95] and public policy requires that these acts must be
suppressed and discouraged.[96]
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages
of P10,000.00 each to all respondents. While it is true that other forms of damages under
the Civil Code may be awarded to illegally dismissed employees, [97] any award of moral
damages by the Labor Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.[98] And the law is clear that exemplary damages can only be
awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory
damages.[99]
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and
Broola specifically claimed damages from petitioners, then only they are entitled to
exemplary damages.[sjgs1]
Finally, we rule that attorneys fees in the amount to P10,000.00 should be granted to
each respondent. It is settled that in actions for recovery of wages or where an employee
was forced to litigate and incur expenses to protect his rights and interest, he is entitled
to an award of attorney's fees.[100] This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17,
2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision
of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97
is AFFIRMED, with the following MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to
respondents Loveres, Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all
respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres,


Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents
except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
and

(6) Granting attorneys fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total
monetary benefits awarded and due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty
(30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.
Austria-Martinez, Callejo Sr., Tinga, and Chico-Nazario, JJ., concur.

Industrial Timber vs. Ababon, 480 SCRA 171,


GR 164518, January 25, 2006
NDUSTRIAL TIMBER G.R. No. 164518
CORPORATION, INDUSTRIAL
PLYWOOD GROUP CORPORATION,
TOMAS TANGSOC, JR., LORENZO
TANGSOC and TOMAS TAN,
Petitioners, Present:
Panganiban, C.J. (Chairman),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
VIRGILIO ABABON, IGNACIO ABACAJEN,
ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL
ABREA, BIENVENIDO ACILO, RODRIGO ACILO,
VICTOR ACILO, ARTURO ADVINCULA,
GERTRUDES AMPARO, VIRGILIO ANTONIO, MILA
ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON,
WARLITA AUTIDA, ALICIA AWITAN, LEOPOLDO
AYATON, ARTURO BALBOTEN, DANILO BANATE,
LOLITA BATAN, RAMIL BUTALON, CARMILITA
CAINGLES, VICENTE CAHARIAN, BENEDICTA
CAJIPE, FELIPE CALLANO, ALFREDO CARILLO,
NILA CARILLO, ALGER CORBETA, GREGORIO
DABALOS, TERESITA DABALOS, VENERANDO
DALAUTA, RICARDO DANGCULOS, MONTANO
DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO,
EDITHA DUMANON, ALFREDO FAELNAR, RAUL
FORTUN, MAXIMO GALLA,

ANGELES GALUPO, PERFECTO GAMBE,


VERGINITA GANGCA, RUPERTO GORGONIO,
ROMEO HERRERO, SERGIO HORO-HORO,
FRANCISCO IBARRA, ABRAHAM JALE, DANDY
LABITAD, ANTONINA LAMBANG, ERNESTO
LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR.,
ESCARLITO MADLOS, MARCOS MAKINANO,
REMEGIO MAKINANO, VICENTE MAKINANO,
REYNALDO MASUHAY, HELEN MARATAS,
ELIZABETH MENDOZA, GUILBERTA MONTEROSO,
GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO
NUEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA,
BALDEMAR PAGALAN, BARTOLOME PAGALAN,
DAMASO PALOMA, MANALO PLAZA, JEREMIAS
PELAEZ, FRANCISCO PICARDAL, HERMINIA
PUBLICO, ROMULO QUINTOS, FIDEL QUITA,
FELICIANO RANADA, RODOLFO RARU, LEAN
CILDRIC RODRIGUEZ, SAMUEL SAROMINES,
NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL
TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO,
PEDRO TABANAO, ROBERTO TABANAO, MARIA
TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO
TAMADA, MINDA TUMAOB and ROBERTO TUTOR,
Respondents.

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

VIRGILIO ABABON, IGNACIO G.R. No. 164965


ABACAJEN, ANGELINA ABAY-ABAY, EDITH
ABREA, SAMUEL ABREA, BIENVENIDO ACILO,
RODRIGO ACILO, VICTOR ACILO, ARTURO
ADVINCULA, GERTRUDES AMPARO, MILA
ARQUITA, VIRGILIO ANTONIO, PRUDENCIO
ARQUITA,
ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN,
LEOPOLDO AYATON, ARTURO BALBOTEN,
DANILO BANATE, LOLITA BATAN, RAMIL
BUTALON, CARMELITA CAINGLES, VICENTE
CAHARIAN, BENEDICTA CAJIPE, FELIPE
CALLANO, ALFREDO CARILLO, NILA CARILLO,
ALGIER CORBETA, GREGORIO DABALOS,
TERESITA DABALOS, VENERANDO DALAUTA,
RICARDO DANGCULOS, MONTANO DAPROSA,
LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA
DUMANON, ALFREDO FAELNAR, RAUL FORTUN,
MAXIMO GALLA, ANGELES GALUPO, PERFECTO
GAMBE, VIRGINITA GANGCA, RUPERTO
GORGONIO, ROMEO HERRERO, SERGIO HOR-
HORO, FRANCISCO IBARRA, ABRAHAM JALE,
DANDY LABITAD, ANTONINA LAMBANG, ERNESTO
LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR.,
ESCARLITO MADLOS, MARCOS MAKINANO,
REMEGIO MAKINANO, VICENTE MAKINANO,
REYNALDO MAHUSAY, HELEN MARATAS,
ELIZABETH MENDOZA, GUILBERTA MONTEROSO,
GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO
NUEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA,
BALDEMAR PAGALAN, BARTOLOME PAGALAN,
DAMASO PALOMA, MANALO PLAZA, JEREMIAS
PELAEZ, FRANCISCO PICARDAL, HERMINIA
PUBLICO, ROMULO QUINTOS, FIDEL QUITA,
FELICIANO RANADA, RODOLFO RARU, LEAN
CILDRIC RODRIGUEZ, SAMUEL SAROMINES,
NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL
TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO,
PEDRO TABANAO, ROBERTO TABANAO,

MARIA TAN, RONNIE TAN, TOLENTINO TEE,


ROGELIO TAMADA, MINDA TUMAOB, and
ROBERTO TUTOR,
Petitioners,

- versus -
THE HONORABLE COURT OF APPEALS,
INDUSTRIAL TIMBER CORPORATION,
INDUSTRIAL PLYWOOD GROUP
CORPORATION, TOMAS TANGSOC,
JR., LORENZO TANGSOC and Promulgated:
TOMAS TAN,
Respondents. January 25, 2006

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

DECISION

YNARES-SANTIAGO, J.:

Before us are two petitions for review under Rule 45 of the Rules of Court. G.R. No.
164518 assails the October 21, 2002 Decision[1] of the Court of Appeals, in CA-GR. SP
No. 51966, which set aside the May 24, 1995 Decision[2] of the National Labor Relations
Commission (NLRC), as well as the July 16, 2004 Resolution[3] denying its motion for
reconsideration. G.R. No. 164965 assails only the July 16, 2004 Resolution of the Court
of Appeals which denied their partial motion for reconsideration. These cases were
consolidated because they arose out of the same facts set forth below.

Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at
Agusan, Pequeo, Butuan City, leased to Industrial Timber Corporation (ITC) on August
30, 1985 for a period of five years.[4] Thereafter, ITC commenced operation of the plywood
plant and hired 387 workers.

On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and
its workers that effective March 19, 1990 it will undergo a no plant operation due to lack
of raw materials and will resume only after it can secure logs for milling. [5]

Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and
its intention not to renew the same.

On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown
due to the non-renewal of anti-pollution permit that expired in April 1990.[6] This fact and
the alleged lack of logs for milling constrained ITC to lay off all its workers until further
notice. This was followed by a final notice of closure or cessation of business operations
on August 17, 1990 with an advice for all the workers to collect the benefits due them
under the law and CBA.[7]

On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood
Processing Plant Permit No. WPR-1004-081791-042,[8] which included the anti-pollution
permit, by the Department of Environment and Natural Resources (DENR) coincidentally
on the same day the ITC ceased operation of the plant.

This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for
illegal dismissal, unfair labor practice and damages. They alleged, among others, that the
cessation of ITCs operation was intended to bust the union and that both corporations
are one and the same entity being controlled by one owner.

On January 20, 1992, after requiring both parties to submit their respective position
papers, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil
of corporate fiction for lack of evidence to prove that it was used to perpetuate fraud or
illegal act; upheld the validity of the closure; and ordered ITC to pay separation pay of
month for every year of service. The dispositive portion of the decision reads:

PREMISES CONSIDERED, judgment is hereby rendered ordering


respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven
individual complainants their separation pay at the rate of one-half (1/2)
months pay for every year of service, a fraction of at least six (6) months to
be considered as one whole year, reckoned until August 1990.

All other claims of complainants are hereby ordered DISMISSED for


want of merit.

SO ORDERED.[9]
Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision
of the Labor Arbiter and ordered the reinstatement of the employees to their former
positions, and the payment of full back wages, damages and attorneys fees. [10]

ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June
24, 1993.[11] However, it was dismissed for being filed out of time having been filed only
on the date of actual receipt by the NLRC on June 29, 1993, three days after the last day
of the reglamentary period.[12] Thus, they filed a Petition for Relief from
Resolution,[13] which was treated as a second motion for reconsideration by the NLRC
and dismissed for lack of merit in a Resolution dated September 29, 1994. [14]
From said dismissal, petitioners filed a Notice of Appeal with the Supreme
Court.[15] Subsequently, they filed a Motion for Reconsideration/Second Petition for Relief
with the NLRC.[16]

On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for
being a wrong mode of appeal from the NLRC decision.[17] On the other hand, the NLRC
granted the Second Petition for Relief and set aside all its prior decision and resolutions.
The dispositive portion of the May 24, 1995 decision reads:

WHEREFORE, the decision of this Commission dated May 10, 1993 and
its subsequent resolutions dated June 22, 1994 and September 29, 1994
are Set Aside and Vacated. Accordingly, the appeal of complainants is
Dismissed for lack of merit and the decision of the Labor Arbiter dated
January 20, 1992 is Reinstated and hereby Affirmed.

SO ORDERED.[18]
On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme
Court, which was docketed as G.R. No. 121977.[19] However, pursuant to our ruling in St.
Martins Funeral Home v. NLRC, we referred the petition to the Court of Appeals for
appropriate action and disposition.[20]

On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24,
1995 decision of the NLRC and reinstated its May 20, 1993 decision and September 29,
1993 resolution, thus:

WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995
of the National Labor Relations Commission is ANNULLED and SET
ASIDE, with the result that its decision dated May 20, 1993 and resolution
dated September 29, 1994 are REINSTATED.

SO ORDERED.[21]
Both parties filed their respective motions for reconsideration which were denied, hence,
the present consolidated petitions for review based on the following assigned errors:

In G.R. No. 164518

THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE


RULES OF PROCEDURE WITH RESPECT TO RESPONDENTS BUT
BEING RIGID IN ITS APPLICATION AS REGARDS PETITIONERS.[22]
In G.R. No. 164965

WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A


REVERSIBLE ERROR WHEN IT REFUSED TO APPLY SECTION 279 OF
THE LABOR CODE AS AMENDED BY RA 6715 TO MODIFY THE
DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES FOR
PETITIONERS.[23]

ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995
decision of the NLRC since its May 20, 1993 decision had become immutable for their
failure to file motion for reconsideration within the reglementary period. While they admit
filing their motion for reconsideration out of time due to excusable negligence of their
counsels secretary, however, they advance that the Court of Appeals should have relaxed
the rules of technicality in the paramount interest of justice, as it had done so in favor of
the employees, and ruled on the merits of the case; after all, the delay was just three
days.

Ordinarily, once a judgment has become final and executory, it can no longer be
disturbed, altered or modified. However, this rule admits of exceptions in cases of special
and exceptional nature as we held in Industrial Timber Corporation v. National Labor
Relations Commission:[24]

It is true that after a judgment has become final and executory, it can
no longer be modified or otherwise disturbed. However, this principle admits
of exceptions, as where facts and circumstances transpire which render its
execution impossible or unjust and it therefore becomes necessary, in the
interest of justice, to direct its modification in order to harmonize the
disposition with the prevailing circumstances.

A careful scrutiny of the facts and circumstances of these consolidated cases


warrants liberality in the application of technical rules and procedure. We agree with the
NLRC that substantial justice is best served by allowing the petition for relief despite
procedural defect of filing the motion for reconsideration three days late, for to rule
otherwise, a greater injustice would be done to ITC by ordering it to reinstate the
employees to their former positions that no longer exist due to valid and legitimate
cessation of business and pay huge judgment award.[25]

Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise
of its appellate powers, correct, amend, or waive any error, defect or irregularity whether
in substance or in form. Further, Article 221 of the same code provides that in any
proceeding before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention
of this Code that the Commission and its members and the Labor Arbiters shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process.[26]
Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC
that a motion for reconsideration of any order, resolution or decision of the Commission
shall not be entertained except when based on palpable or patent errors, provided that
the motion is under oath and filed within 10 calendar days from receipt of the order,
resolution or decisionshould not be interpreted as to sacrifice substantial justice to
technicality. It should be borne in mind that the real purpose behind the limitation of the
period is to forestall or avoid an unreasonable delay in the administration of justice, from
which the NLRC absolved ITC and IPGC because the filing of their motion for
reconsideration three days later than the prescribed period was due to excusable
negligence. Indeed, the Court has the power to except a particular case from the
operation of the rule whenever the purposes of justice requires it because what should
guide judicial action is that a party is given the fullest opportunity to establish the merits
of his action or defense rather than for him to lose life, honor, or property on mere
technicalities.[27]

We now come to the main issues of whether Ababon, et al. were illegally dismissed due
to the closure of ITCs business; and whether they are entitled to separation pay,
backwages, and other monetary awards.

Work is a necessity that has economic significance deserving legal protection. The
social justice and protection to labor provisions in the Constitution dictate so. On the other
hand, employers are also accorded rights and privileges to assure their self-determination
and independence, and reasonable return of capital. This mass of privileges comprises
the so-called management prerogatives. Although they may be broad and unlimited in
scope, the State has the right to determine whether an employer's privilege is exercised
in a manner that complies with the legal requirements and does not offend the protected
rights of labor. One of the rights accorded an employer is the right to close an
establishment or undertaking.[28]

The right to close the operation of an establishment or undertaking is one of the


authorized causes in terminating employment of workers, the only limitation being that
the closure must not be for the purpose of circumventing the provisions on termination of
employment embodied in the Labor Code.
Article 283 of the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. The


employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

A reading of the foregoing law shows that a partial or total closure or cessation of
operations of establishment or undertaking may either be due to serious business losses
or financial reverses or otherwise. Under the first kind, the employer must sufficiently and
convincingly prove its allegation of substantial losses,[29] while under the second kind, the
employer can lawfully close shop anytime[30] as long as cessation of or withdrawal from
business operations was bona fide in character and not impelled by a motive to defeat or
circumvent the tenurial rights of employees,[31] and as long as he pays his employees
their termination pay in the amount corresponding to their length of service.[32] Just as no
law forces anyone to go into business, no law can compel anybody to continue the same.
It would be stretching the intent and spirit of the law if a court interferes with
management's prerogative to close or cease its business operations just because the
business is not suffering from any loss or because of the desire to provide the workers
continued employment.[33]
In sum, under Article 283 of the Labor Code, three requirements are necessary for
a valid cessation of business operations: (a) service of a written notice to the employees
and to the DOLE at least one month before the intended date thereof; (b) the cessation
of business must be bona fide in character; and (c) payment to the employees of
termination pay amounting to one month pay or at least one-half month pay for every year
of service, whichever is higher.
In these consolidated cases, we find that ITCs closure or cessation of business
was done in good faith and for valid reasons.

The records reveal that the decision to permanently close business operations was
arrived at after a suspension of operation for several months precipitated by lack of raw
materials used for milling operations, the expiration of the anti-pollution permit in April
1990, and the termination of the lease contract with IPGC in August 1990 over the
plywood plant at Agusan, Pequeo, Butuan City. We quote with approval the observation
of the Labor Arbiter:

As borne out from the records, respondent ITC actually underwent no plant
operation since 19 March 1990 due to lack of log supply. This fact is
admitted by complainants (Minutes of hearing, 28 October 1991). Since
then several subsequent incidents prevented respondent ITC to resume its
business operations e.g. expiration and non-renewal of the wood
processing plant permit, anti-pollution permit, and the lease contract on the
plywood plant. Without the raw materials respondent ITC has nothing to
produce. Without the permits it cannot lawfully operate the plant. And
without the contract of lease respondent ITC has no option but to cease
operation and turn over the plant to the lessor.[34] (Emphasis supplied)

Moreover, the lack of raw materials used for milling operations was affirmed in Industrial
Timber Corporation v. National Labor Relations Commission[35] as one of the reasons for
the valid closure of ITCs Butuan Logs Plant in 1989. In said case, we upheld the
management prerogative to close the plant as the only remedy available in order to
prevent imminent heavy losses on account of high production costs, erratic supply of raw
materials, depressed prices and poor market conditions for its wood products.

In Shoppers Gain Supermarket v. National Labor Relations Commission, [36] we held that
the non-renewal of petitioner corporations lease contract and its consequent closure and
cessation of operations may be considered an event beyond petitioners control, in the
nature of a force majeure situation. As such, it amounts to an authorized cause for
termination of the private respondents.

Having established that ITCs closure of the plywood plant was done in good faith
and that it was due to causes beyond its control, the conclusion is inevitable that said
closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to
be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue
regarding the computation of their backwages. However, they are entitled to separation
pay equivalent to one month pay or at least one-half month pay for every year of service,
whichever is higher.
Although the closure was done in good faith and for valid reasons, we find that ITC did
not comply with the notice requirement. While an employer is under no obligation to
conduct hearings before effecting termination of employment due to authorized
cause,[37] however, the law requires that it must notify the DOLE and its employees at
least one month before the intended date of closure.

In the case at bar, ITC notified its employees and the DOLE of the no plant operation on
March 16, 1990 due to lack of raw materials. This was followed by a shut down notice
dated June 26, 1990 due to the expiration of the anti-pollution permit. However, this
shutdown was only temporary as ITC assured its employees that they could return to
work once the renewal is acted upon by the DENR. On August 17, 1990, the ITC sent its
employees a final notice of closure or cessation of business operations to take effect on
the same day it was released. We find that this falls short of the notice requirement for
termination of employment due to authorized cause considering that the DOLE was not
furnished and the notice should have been furnished both the employees and the DOLE
at least one month before the intended date of closure.

In Ariola v. Philex Mining Corporation,[38] we held:

In Agabon v. National Labor Relations Commission and Jaka Food


Processing Corporation v. Pacot, the Court sustained the dismissals for just
cause under Article 282 and for authorized cause under Article 283 of the
Labor Code, respectively, despite non-compliance with the statutory
requirement of notice and hearing. The grounds for the dismissals in those
cases, namely, neglect of duty and retrenchment, remained valid because
the non-compliance with the notice and hearing requirement in the Labor
Code did not undermine the validity of the grounds for the dismissals.
Indeed, to invalidate a dismissal merely because of a procedural defect
creates absurdity and runs counter to public interest. We explained
in Agabon:

The unfairness of declaring illegal or ineffectual dismissals for


valid or authorized causes but not complying with statutory
due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most


notorious violators of company policy are rewarded by
invoking due process. This also creates absurd situations
where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or
threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious
business losses demand that operations be ceased in less
than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can
generate employment in the local economy.

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code
but the employer failed to comply with the notice requirement, the sanction should be stiff
as the dismissal process was initiated by the employers exercise of his management
prerogative, as opposed to a dismissal based on a just cause under Article 282 with the
same procedural infirmity where the sanction to be imposed upon the employer should
be tempered as the dismissal process was, in effect, initiated by an act imputable to the
employee.[39]

In light of the factual circumstances of the cases at bar, we deem it wise and reasonable
to award P50,000.00 to each employee as nominal damages.

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of
Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision of the
NLRC, as well as the July 16, 2004 Resolution denying ITCs motion for reconsideration,
are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision
of the Labor Arbiter finding the closure or cessation of ITCs business valid, is AFFIRMED
with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one
month pay or to at least one-half month pay for every year of service, whichever is higher,
and P50,000.00 as nominal damages to each employee.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

JAT General Services vs. NLRC, 421 SCRA 78,


GR 148340, Jan. 26, 2004

[G.R. No. 148340. January 26, 2004]


J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and JOSE F.
MASCARINAS, respondents.

DECISION
QUISUMBING, J.:

For review are the Decision[1] dated February 27, 2001 of the Court of Appeals in CA-
G.R. SP No. 60337, and its Resolution[2] dated May 28, 2001, denying the motion for
reconsideration. The Court of Appeals dismissed the petition for certiorari filed by
petitioners and affirmed the Resolution[3] of the National Labor Relations Commission
(NLRC), Third Division, which affirmed the Decision[4] of Labor Arbiter Jose G. De Vera in
NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal
and ordered petitioners to pay private respondent Jose Mascarinas separation pay,
backwages, legal holiday pay, service incentive leave pay and 13 th month pay in the
aggregate sum of P85,871.00.
The facts, as culled from the records, are as follows:
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single
proprietorship engaged in the business of selling second-hand heavy equipment. JAT is
owned by its namesake, co-petitioner Jesusa Adlawan Torobu. Sometime in April 1997,
JAT hired private respondent Jose F. Mascarinas as helper tasked to coordinate with the
cleaning and delivery of the heavy equipment sold to customers. Initially, private
respondent was hired as a probationary employee and was paid P165 per day that was
increased to P180 in July 1997 and P185 in January 1998.
In October 1997, the sales of heavy equipment declined because of the Asian
currency crisis. Consequently, JAT temporarily suspended its operations. It advised its
employees, including private respondent, not to report for work starting on the first week
of March 1998. JAT indefinitely closed shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and
underpayment of wages against petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of
JAT on January 6, 1997 with an initial salary rate of P165.00 per day, which was
increased to P180.00 per day after six (6) months in employment. He related that he was
one of those retrenched from employment by JAT and was allegedly required to sign a
piece of paper which he refused, causing his termination from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the
Department of Labor and Employment (DOLE), notifying the latter of its decision to close
its business operations due to business losses and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999,
finding the dismissal of herein private respondent unjustified and ordering JAT to pay
private respondent separation pay and backwages, among others. The decretal portion
of the decision reads as follows:

WHEREFORE, all the foregoing premises being considered, judgment is hereby


rendered ordering the respondents [herein petitioners] to pay complainant the
aggregate sum of P85,871.00.

SO ORDERED.[5]

The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas dismissal was
unjustified because of petitioners failure to serve upon the private respondent and the
DOLE the required written notice of termination at least one month prior to the effectivity
thereof and to submit proof showing that petitioners suffered a business slowdown in
operations and sales effective January 1998; (2) private respondent may recover
backwages from March 1, 1998 up to March 1, 1999 or P66,924.00[6] and separation pay,
in lieu of reinstatement, at the rate of one (1) month pay for every year of service,
or P10,296.00;[7] (3) the payrolls submitted by JAT showed that effective May 1, 1997,
private respondents wages did not conform to the prevailing minimum wage, hence,
private respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998,
in the amount of P1,066.00;[8] (4) that private respondent be awarded legal holiday pay in
the amount of P1,850.00,[9] service incentive leave pay in the amount of P925.00[10] and
13th month pay for 1997 in the amount of P4,810.00.[11]
On appeal, the NLRC affirmed the decision of the labor arbiter.[12] The NLRC found
that the financial statements submitted on appeal were questionable, unreliable and
inconsistent with petitioners allegations in the pleadings, particularly as to the date of the
alleged closure of operation; hence, they cannot be used to support private respondents
dismissal. The NLRC also affirmed the monetary awards because petitioners failed to
prove the payment of benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court
of Appeals, which the latter dismissed. The decretal portion of the decision reads as
follows:

WHEREFORE, foregoing premises considered, the instant petition, having no merit in


fact and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the
assailed decision of the National Labor Relations Commission AFFIRMED, with costs to
petitioners.

SO ORDERED.[13]

The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal
dismissal of the private respondent. The appellate court held that the petitioners failed to
prove by clear and convincing evidence their compliance with the requirements for valid
retrenchment. It cited the findings of the NLRC on the belated submission of the financial
statements during appeal that could not be given sufficient weight, and that the petitioners
late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of
Appeals.
Hence, the present petition alleging that the:

A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE


DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN
CASE OF TEMPORARY SUSPENSION OF BUSINESS;

B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT


IS ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE
RESPONDENT WAS NOT DISMISSED FROM SERVICE AT THE TIME THE
COMPLAINT WAS FILED;

C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS
THE BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES;

D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT


FAILED TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER
COURT (sic) ERRED IN AWARDING BACKWAGES AND/OR SEPARATION
PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS
FILED A NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE
LABOR DEPARTMENT.[14]

The relevant issues for our resolution are: (a) whether or not private respondent was
illegally dismissed from employment due to closure of petitioners business, and (b)
whether or not private respondent is entitled to separation pay, backwages and other
monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously
concluded that they are liable for illegal dismissal because of non-compliance of the
procedural and substantive requirements of terminating employment due to retrenchment
and cessation of business. They argued that there was no closure but only suspension of
operation in good faith in March 1998, when private respondent claimed to have been
illegally dismissed, due to the decline in sales and heavy losses incurred in its business
arising from the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the
Labor Code, a bona fide suspension of the operation of a business for a period not
exceeding six (6) months shall not terminate employment and no notice to an employee
is required. However, petitioners relate that JAT was compelled to permanently close its
operation eight (8) months later or on November 1998, when the hope of recovery
became nil but only after sending notices to all its workers and DOLE. Thus, petitioners
argue that it cannot be held liable for illegal dismissal in March 1998 since there was no
termination of employment during suspension of operations and a notice to employee is
not required, unlike in the case of permanent closure of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of
business under Article 286[15] of the Labor Code. This matter is not pertinent to, much
less determinative of, the disposition of this case. Suffice it to state that there is no
termination of employment during the period of suspension, thus the procedural
requirement for terminating an employee does not come into play yet. Rather, the issue
demanding a sharpened focus here concerns the validity of dismissal resulting from the
closure of JAT.
A brief discussion on the difference between retrenchment and closure of business
as grounds for terminating an employee is necessary. While the Court of Appeals defined
the issue to be the validity of dismissal due to alleged closure of business, it cited
jurisprudence relating to retrenchment to support its resolution and conclusion.While the
two are often used interchangeably and are interrelated, they are actually two separate
and independent authorized causes for termination of employment.Termination of an
employment may be predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby
there is a complete cessation of business operations and/or an actual locking-up of the
doors of establishment, usually due to financial losses. Closure of business as an
authorized cause for termination of employment aims to prevent further financial drain
upon an employer who cannot pay anymore his employees since business has already
stopped. On the other hand, retrenchment is reduction of personnel usually due to poor
financial returns so as to cut down on costs of operations in terms of salaries and wages
to prevent bankruptcy of the company. It is sometimes also referred to as down-
sizing. Retrenchment is an authorized cause for termination of employment which the law
accords an employer who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees. The purpose of
retrenchment is to save a financially ailing business establishment from eventually
collapsing.[16]
In the present case, we find the issues and contentions more centered on closure of
business operation rather than retrenchment. Closure or cessation of operation of the
establishment is an authorized cause for terminating an employee under Article 283 of
the Labor Code, to wit:

ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the intended
date thereof. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or to at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.

However, the burden of proving that such closure is bona fide falls upon the
employer.[17] In the present case, JAT justifies its closure of business due to heavy losses
caused by declining sales. It belatedly submitted its 1997 Income Statement[18] and
Comparative Statement of Income and Capital for 1997 and 1998[19] to the NLRC to prove
that JAT suffered losses starting 1997. However, as noted earlier, these were not given
much evidentiary weight by the NLRC as well as the Court of Appeals, to wit:

The financial statements submitted by the respondents on appeal are questionable for
the following reasons: (1) the figures in Annexes D-2 and E of the appeal memorandum
(which both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on
March 1, 1998. Yet, their 1998 financial statement (Annex E) indicates operations up to
and ending December 31, 1998. In view of the foregoing, the above-mentioned financial
statements do not justify the complainants dismissal. [20]

The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent
reason to set it aside. While business reverses or losses are recognized by law as an
authorized cause for terminating employment, it is an essential requirement that alleged
losses in business operations must be proven convincingly. Otherwise, said ground for
termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures in order to ease out
employees.[21] In this case, the financial statements were not only belatedly submitted but
were also bereft of necessary details on the extent of the alleged losses incurred, if
any. The income statements only indicated a decline in sales in 1998 as compared to
1997. These fell short of the stringent requirement of the law that the employer prove
sufficiently and convincingly its allegation of substantial losses. While the comparative
income statement shows a net loss of P207,091 in 1998, the income statement of 1997
still shows JAT posting a net income of P19,361. Both statements need interpretation as
to their impact on the companys termination of certain personnel as well as business
closure.
Having concluded that private respondent was not validly dismissed resulting from
closure of business operations due to substantial losses, we now proceed to determine
whether or not private respondent was validly dismissed on the ground of closure or
cessation of operations for reasons other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or
cessation of business operation as a valid and authorized ground of terminating
employment is not limited to those resulting from business losses or reverses. Said
provision in fact provides for the payment of separation pay to employees terminated
because of closure of business not due to losses, thus implying that termination of
employees other than closure of business due to losses may be valid.
Hence, in one case,[22] we emphasized that:

Art. 283 governs the grant of separation benefits in case of closures or cessation of
operation of business establishments NOT due to serious business losses or financial
reverses x x x.Where, however, the closure was due to business lossesas in the instant
case, in which the aggregate losses amounted to over P20 billionthe Labor Code
does not impose any obligation upon the employer to pay separation benefits, for
obvious reasons. There is no need to belabor this point. Even the public respondents, in
their Comment filed by the Solicitor General, impliedly concede this point.

In another case,[23] we held more emphatically that:

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees their termination pay in
the amount corresponding to their length of service. It would, indeed, be stretching the
intent and spirit of the law if we were to unjustly interfere in managements prerogative to
close or cease its business operations just because said business operation or
undertaking is not suffering from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses
to justify closure of the business, its income statement shows declining sales in 1998,
prompting the petitioners to suspend its business operations sometime in March 1998,
eventually leading to its permanent closure in December 1998. Apparently, the petitioners
saw the declining sales figures and the unsustainable business environment with no hope
of recovery during the period of suspension as indicative of bleak business prospects,
justifying a permanent closure of operation to save its business from further collapse. On
this score, we agree that undue interference with an employers judgment in the conduct
of his business is uncalled for. Even as the law is solicitous of the welfare of employees,
it must also protect the right of an employer to exercise what is clearly a management
prerogatives. As long as the companys exercise of the same is in good faith to advance
its interest and not for the purpose of defeating or circumventing the rights of employees
under the law or a valid agreement such exercise will be upheld.[24]
In the event, under Article 283 of the Labor Code, three requirements are necessary
for a valid cessation of business operations, namely: (a) service of a written notice to the
employees and to the DOLE at least one (1) month before the intended date thereof; (b)
the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to at least one-half (1/2) month pay for every
year of service, or one (1) month pay, whichever is higher.[25]
The closure of business operation by petitioners, in our view, is not tainted with bad
faith or other circumstance that arouses undue suspicion of malicious intent. The decision
to permanently close business operations was arrived at after a suspension of operation
for several months precipitated by a slowdown in sales without any prospects of
improving. There were no indications that an impending strike or any labor-related union
activities precipitated the sudden closure of business. Further, contrary to the findings of
the Labor Arbiter, petitioners had notified private respondent [26] and all other workers
through written letters dated November 25, 1998 of its decision to permanently close its
business and had submitted a termination report to the DOLE.[27] Generally, review of
labor cases elevated to this Court on a petition for review on certiorari is confined merely
to questions of law. But in certain cases, we are constrained to analyze or weigh the
evidence again if the findings of fact of the labor tribunals and the appellate court are in
conflict, or not supported by evidence on record or the judgment is based on a
misapprehension of facts.[28]
In this case, we are persuaded that the closure of JATs business is not
unjustified. Further we hold that private respondent was validly terminated, because the
closure of business operations is justified.
Nevertheless in this case, we must stress that the closure of business operation is
allowed under the Labor Code, provided separation pay be paid to the terminated
employee. It is settled that in case of closure or cessation of operation of a business
establishment not due to serious business losses or financial reverses, the employees
are always given separation benefits.[29] The amount of separation pay must be computed
from the time private respondent commenced employment with petitioners until the time
the latter ceased operations.[30]
Considering that private respondent was not illegally dismissed, however, no
backwages need to be awarded. Backwages in general are granted on grounds of equity
for earnings which a worker or employee has lost due to illegal dismissal. [31] It is well
settled that backwages may be granted only when there is a finding of illegal dismissal.[32]
The other monetary awards to private respondent are undisputed by petitioners and
unrefuted by any contrary evidence. These awards, namely legal holiday pay, service
incentive leave pay and 13th month pay, should be maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the
Court of Appeals in CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that
the award of P66,924.00 as backwages is deleted. The award of separation pay
amounting to P10,296.00 and the other monetary awards, namely salary differentials in
the amount of P1,066.00, legal holiday pay in the amount of P1,850.00, service incentive
leave pay in the amount of P925.00 and 13th month pay in the amount of P4,910, or a
total of P29,047.00 are maintained. No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Genuino Ice vs. Magpantay, 493 SCRA 195,


GR No. 147790, June 27, 2006
enuino Ice Company, Inc. G.R. No. 147790
Petitioner,
Present:

PANGANIBAN, CJ., Chairperson,


YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.

Promulgated:
Alfonso S. Magpantay,
Respondent. June 27, 2006
x------------------------------------------------x
DECISION

AUSTRIA-MARTINEZ, J.:

Alfonso Magpantay (respondent) was employed as a machine operator with Genuino Ice
Company, Inc. (petitioner) from March 1988 to December 1995. On November 18, 1996,
respondent filed against petitioner a complaint for illegal dismissal with prayer for moral
and exemplary damages.[1] In his Position Paper, respondent alleged that he was
dismissed from service effective immediately by virtue of a memorandum, after which he
was not allowed anymore to enter the company premises. Respondent bewailed that his
termination from employment was done without due process.[2]

Petitioner countered that he was not illegally dismissed, since the dismissal was based
on a valid ground, i.e., he led an illegal strike at petitioners sister company, Genuino Agro
Industrial Development Corporation, which lasted from November 18 to 22, 1995,
resulting in big operation losses on the latters part. Petitioner also maintained that
respondents dismissal was made after he was accorded due process.[3]

Respondent replied, however, that assuming that he led such illegal strike, he could not
be liable therefore because it was done in petitioners sister company which is a separate
and distinct entity from petitioner.[4]

Petitioner initially claimed that respondents acts were tantamount to serious misconduct
or willful disobedience, gross and habitual neglect of duties, and breach of
trust. Subsequently, petitioner amended its position paper to include insubordination
among the grounds for his dismissal, since it came out during respondents cross-
examination, and the matter was reported only after the new personnel manager
assumed his position in August 1996.[5]

On August 14, 1998, the Labor Arbiter of the National Labor Relations Commission
(NLRC) dismissed the case for lack of merit[6] finding that petitioner had valid cause to
dismiss respondent.

Respondent appealed from the Labor Arbiters Decision. The NLRC,


in its Decision dated June 30, 1999, sustained the findings of the Labor
Arbiter and denied the appeal for lack of merit. [7]

Respondent filed a motion for reconsideration of the NLRC Decision, which was denied
in a Resolution dated August 31, 1999.[8]

On October 29, 1999, entry of judgment was made on the NLRC Resolution dated August
31, 1999.[9]

On February 7, 2000, respondent filed a special civil action for certiorari with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 57105. Respondents counsel stated that it
was on December 20, 1999 that he received the NLRC Resolution dated August 31,
1999.[10]

In his petition before the CA, respondent alleged that the Labor Arbiter committed an error
in ruling that his dismissal was for a valid cause; and reiterated his claim that his dismissal
was made without due process.[11]

Petitioner filed its Comment, contending that the petition was filed out of time, considering
that contrary to respondents claim that the NLRC Resolution dated August 31, 1999 was
received on December 20, 1999, it was actually received on September 15, 1999, as
shown in the registry return card. Petitioner also reiterated its arguments that respondent
was dismissed for cause and with due process.

On August 3, 2000, the CA[12] rendered the assailed Decision granting the
petition and declaring respondents dismissal as illegal. The dispositive
portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The dismissal of petitioner


is hereby declared as illegal. Respondent company is ORDERED to pay to
petitioner separation pay and full backwages. Let this case be remanded to
the labor arbiter for the computation of the aforesaid awards.

SO ORDERED.[13]

Petitioner filed a motion for reconsideration which the CA denied per its Resolution
dated March 16, 2001.[14]

Hence, herein petition for review on certiorari under Rule 45 of the Rules of Court stating
the following issues:
1. Whether or not the Court of Appeals erred and committed grave abuse
of discretion in giving due course to the respondents Petition for
Certiorari?

2. Whether or not the Court a quo erred and committed grave abuse of
discretion in declaring that the respondent was illegally dismissed
from employment?

3. Whether or not the Court a quo erred and committed grave abuse of
discretion in ordering the payment of separation pay and full
backwages to the respondent?[15]

At the outset, it should be stated that under Rule 45 of the Rules of Court, only
questions of law may be raised, the reason being that this Court is not a trier of facts. It
is not for this Court to reexamine and reevaluate the evidence on record. [16] However,
considering that the CA came up with an opinion different from that of the Labor Arbiter
and the NLRC, the Court is
now constrained to review the evidence on record.[17]

On the first issue, petitioner argues that the CA should have dismissed
respondents petition for having been filed out of time. According to petitioner, since the
registry return receipt shows that the NLRC Resolution dated August 31, 1999 denying
respondents motion for reconsideration was received on September 15, 1999, the petition
filed on February 7, 2000 was, therefore, 85 days late.

Respondent, however, counters that the person who received the NLRC Resolution dated
August 31, 1999 on September 15, 1999, a certain Mirela G. Ducut of the Computer
Services Department, was not a duly-authorized representative of the FEU Legal Aid
Bureau, as it is only Ellen Dela Paz, who is authorized to receive all communications
addressed to the office.

The CA sustained respondents contention that since the service was not made to an
authorized person, it was not legally effective, and the counting of the period should be
reckoned from the date of actual receipt by counsel, which was on December 20, 1999.

The New Rules of Procedure of the NLRC provides the rule for the service of notices and
resolutions in NLRC cases, to wit:
Sec. 4. Service of notices and resolutions. a) Notices or summons
and copies of orders, resolutions or decisions shall be served on the parties
to the case personally by the bailiff or the duly authorized public officer
within three (3) days from receipt thereof by registered mail; Provided, that
where a party is represented by counsel or authorized representative,
service shall be made on such counsel or authorized representative; x x x

The presumption is that the decision was delivered to a person in his office, who
was duly authorized to receive papers for him, in the absence of proof to the contrary. [18] It
is likewise a fundamental rule that unless the contrary is proven, official duty is presumed
to have been performed regularly and judicial proceedings regularly conducted, which
includes the presumption of regularity of service of summons and other notices. [19] The
registry return of the registered mail as having been received is prima facie proof of the
facts indicated therein.Thus, it was necessary for respondent to rebut that legal
presumption with competent and proper evidence.

In an attempt to disprove that there was proper receipt of the Resolution,


respondents counsel presented an Affidavit executed by Ellen dela Paz, who attested
that she is the only person authorized to receive communications for and in behalf of the
FEU Legal Aid Bureau; that she never received the NLRC Resolution dated August 31,
1999 on September 15, 1999; and that it was only on December 20, 1999, through
respondent, that they learned of said Resolution.[20]

Records show that Ducut is not an employee of the FEU Legal Aid Bureau, but is
connected with the Computer Services Department. The FEU Legal Aid Bureau has its
own personnel which include Ms. dela Paz who is the one authorized to receive
communications in behalf of the office. It has been ruled that a service of a copy of a
decision on a person who is neither a clerk nor one in charge of the attorneys office is
invalid.[21] This was the Courts ruling in Caete v. National Labor Relations
Commission,[22] to wit:

We have ruled that where a copy of the decision is served on a


person who is neither a clerk nor one in charge of the attorneys office, such
service is invalid. In the case at bar, it is undisputed that Nenette Vasquez,
the person who received a copy of the labor arbiters Decision, was neither
a clerk of Atty. Chua, respondents counsel, nor a person in charge of Atty.
Chuas office. Hence, her receipt of said Decision on March 15, 1993 cannot
be considered as notice to Atty. Chua. Since a copy of the Decision
was actually delivered by Vasquez to Atty. Chuas clerk only on March 16,
1993, it was only on this date that the ten-day period for the filing of
respondents appeal commenced to run. Thus, respondents March 26,
1993 appeal to the NLRC was seasonably filed.[23]

This was recently reiterated in Prudential Bank v. Business Assistance Group,


Inc.,[24]
where the Court accepted the affidavit executed by Arlan Cayno denying that he
was an employee of Gella, Danguilan, Nabaza & Associates law firm authorized to
receive legal or judicial processes. Cayno likewise disclaimed knowledge of the
whereabouts of the notice. According to the Court, since Mr. Cayno was not an employee
of the said law firm authorized to receive notices in its behalf, his alleged receipt of the
notice is without any effect in law.

Hence, the CA was correct in ruling that the reckoning period should be the date
when respondents counsel actually received the NLRC Resolution dated August 31,
1999, which was on December 20, 1999.
Petitioner, however, pointed out that a certain Ruby D.G. Sayat received a copy of
their Motion for Reconsideration filed by registered mail on August 16,
2000.[25] Respondent contended that at the time Sayat received the motion, she was then
detailed at the office and was authorized to receive said pleading, and that it was an
isolated and exceptional instance.[26] On this matter, the FEU Acting Postmaster certified
that Sayat is a permanent employee of the FEU Legal Aid Bureau. [27] As such, she is
authorized to receive communications in behalf of the office and need not possess an
express authority to do so.

More importantly, the Court has consistently frowned upon the dismissal of an
appeal on purely technical grounds. While the right to appeal is a statutory, not a natural
right, it is, nonetheless, an essential part of our judicial system. Courts should proceed
with caution so as not to deprive a party of the right to appeal, but rather, ensure amplest
opportunity for the proper and just disposition of a cause, free from the constraints of
technicalities.[28]

On the issue of illegal dismissal, both the Labor Arbiter and the NLRC were one in
concluding that petitioner had just cause for dismissing respondent, as his act of leading
a strike at petitioners company for four days, his absence from work during such time,
and his failure to perform his duties during such absence, make up a cause for habitual
neglect of duties, while his failure to comply with petitioners order for him to transfer to
the GMA, Cavite Plant constituted insubordination or willful disobedience. The CA,
however, differed with said conclusion and found that respondents attitude has not been
proved to be visited with any wrongdoing, and that his four-day absence does not appear
to be both gross and habitual.
The Court sustains the CAs finding that respondents four-day absence does not
amount to a habitual neglect of duty; however, the Court finds that respondent was validly
dismissed on ground of willful disobedience or insubordination.

Under Article 282 of the Labor Code, as amended, 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; (b) gross and habitual neglect by the employee of his duties;
(c) fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative; (d) commission of a crime or offense by the employee
against the person of his employer or any immediate member of his family or his duly
authorized representative; and, (e) other causes analogous to the foregoing. [29] The
employer has the burden of proving that the dismissal was for a just cause; failure to show
this would necessarily mean that the dismissal was unjustified and, therefore, illegal.[30]

Neglect of duty, to be a ground for dismissal, must be both gross and


habitual.[31] Gross negligence connotes want of care in the performance of ones
duties. Habitual neglect implies repeated failure to perform ones duties for a period of
time, depending upon the circumstances. On the other hand, fraud and willful neglect of
duties imply bad faith on the part of the employee in failing to perform his job to the
detriment of the employer and the latters business.[32] Thus, the single or isolated act of
negligence does not constitute a just cause for the dismissal of the employee. [33]

Thus, the Court agrees with the CA that respondents four-day absence is not
tantamount to a gross and habitual neglect of duty. As aptly stated by the CA, (W)hile he
may be found by the labor courts to be grossly negligent of his duties, he has never been
proven to be habitually absent in a span of seven (7) years as GICIs employee. The
factual circumstances and evidence do not clearly demonstrate that petitioners
[respondent] absences contributed to the detriment of GICIs operations and caused
irreparable damage to the company.[34]

Petitioner, however, insists that during his four-day absence, respondent was
leading an illegal strike in its sister company. In the first place, there is no showing that
the strike held at the Genuino Agro Industrial Development Corporation is illegal. It is a
basic rule in evidence that each party must prove his affirmative allegation. Since the
burden of evidence lies with the party who asserts the affirmative allegation, the plaintiff
or complainant has to prove his affirmative allegations in the complaint and the defendant
or the respondent has to prove the affirmative allegation in his affirmative defenses and
counterclaim.[35] Since it was petitioner who alleged that such strike is illegal, petitioner
must, therefore, prove it. Except for such bare allegation, there is a dearth of evidence in
this case proving the illegality of said strike.

However, as previously stated, the Court finds that respondent was validly
dismissed on the ground of insubordination or willful disobedience.

On this point, the CA opined that petitioner included insubordination as a mere


after-thought. It noted that petitioner seemed to be irresolute in stating the cause of
respondents dismissal, as in its Position Paper, it originally relied on respondents four-
day absence or participation in the illegal strike as a cause for dismissal but later on
amended its Position Paper to include insubordination.[36] Thus, the CA did not make any
factual finding or conclusion in its Decision vis--vis petitioners allegation of respondents
insubordination.

While its perception may be true, it should not have deterred the CA from making
any resolution on the matter. For one, respondent was able to argue against petitioners
allegation of insubordination before the Labor Arbiter[37] and the NLRC.[38] For another, it
was respondent himself who raised the subject before the CA, wherein he stated in his
Petition, inter alia, viz.:
37. Miserably, public respondent [NLRC] justified the validity of his
dismissal by holding that the 12 December 1995 Memorandum showed that
it was effected with due process. x x x

xxxx

38. How could the foregoing memorandum justify petitioners


dismissal for allegedly joining the four (4) days strike when it refers to his
alleged refusal to transfer? This memorandum shows glaring violations of
his right to substantive and procedural due process and reveal the true
circumstances of his dismissal, to wit: 1) petitioner was dismissed because
of his failure to abide with the managements decision to transfer
him, and not on his alleged participation in the four (4) day strike or his
absence on those dates; x x x;3) while the true cause of his dismissal is his
failure to abide with the decision to transfer, private respondent belatedly
and self-servingly claimed that he was dismissed because of the alleged
strike; 4) the Labor Arbiters decision that the dismissal is valid is based on
speculation in that while it was clear that petitioner was actually dismissed
for refusing the transfer, he held that the dismissal is justified because
petitioner absented for four (4) days to join the strike elsewhere;
x x x [39] (Emphasis supplied)
Further, the proceedings before the Labor Arbiter and the NLRC are non-litigious
in nature.[40] As such, the proceedings before it are not bound by the technical niceties of
the law and procedure and the rules obtaining in courts of law, [41] as dictated by Article
221 of the Labor Code:

ART. 221. Technical rules not binding and prior resort to amicable
settlement. In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not
be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and
all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the
interest of due process.

This rule applies equally to both the employee and the employer. In the interest of
due process, the Labor Code directs labor officials to use all reasonable means to
ascertain the facts speedily and objectively, with little regard to technicalities or
formalities.[42] What is essential is that every litigant is given reasonable opportunity to
appear and defend his right, introduce witnesses and relevant evidence in his
favor,[43] which undoubtedly, was done in this case.

Willful disobedience, or insubordination as otherwise branded in this case, as a


just cause for dismissal of an employee, necessitates 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.[44]

In Coca-Cola Bottlers, Phils. Inc v. Kapisanan ng Malayang Manngagawa sa


Coca-Cola-FFW, it was held that an employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on work-related activities of the employees
so long as they are exercised in good faith for the advancement of the employers interest
and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements. Company policies and regulations are generally
valid and binding on the parties and must be complied with until finally revised or
amended, unilaterally or preferably through negotiation, by competent authority. For
misconduct or improper behavior to be a just cause for dismissal, the same must be
related to the performance of the employees duties and must show that he has become
unfit to continue working for the employer.[45]

In the case at bench, petitioner informed respondent, through a Memorandum


dated November 14, 1995, that he was being transferred to its GMA, Cavite operations
effective November 20, 1995, to wit:

We have considered you to fill-up the maintenance position urgently


required in our GMA, Cavite business operations. After thorough evaluation
of qualified candidates, we find your qualifications most suited to
satisfactorily perform the maintenance activities at GMA, Cavite.

x x x x[46]
Due to his refusal to report to the Cavite plant, petitioner reiterated its order
transferring respondent in its Memorandum dated November 24, 1995,[47] where
respondent was also warned that his failure to report to the Cavite plant will be considered
as an absence without leave (AWOL) and insubordination. Respondent was required to
comply with the order within 24 hours from receipt, otherwise, disciplinary action will be
imposed on respondent. Respondent replied with a request that he remain in the Otis
plant since a transfer to the Cavite plant will entail additional expenditure and travel time
on his part.[48]

Petitioner again wrote respondent inviting him to appear before the Plant Level
Investigation on December 11, 1995 for the latter to be able to clarify his reasons for
refusing the transfer.[49]

Finally, petitioner issued its Memorandum dated December 12, 1995 informing
respondent of its decision to terminate his services. The Memorandum reads, in part:

The management panel has discussed and deliberated thoroughly


on your case regarding your transfer to GMA Plant in GMA, Cavite which
was supposed to be effective on 20 November, 1995 but unfortunately you
refused to comply despite our repeated instructions to you to assume your
new assignment while your case had been under grievance machinery.

On 09 December, 1995 a letter memorandum was served to you


informing you to appear at plant level investigation to be conducted on 11
December, 1995. The management panel in consideration to (sic) your
reasons for not transferring to GMA Plant as stated in your reply
dated December 07, 1995, offered you to provide monetary allowance to at
least compensate for your assumed additional expenses. However, you
turned down this action of good faith from the management.

xxxx

Your written explanation and the outcome of the plant level


investigation clearly showed your willful or intentional disobedience. It was
insubordination in its highest order. In this regard, much to our regret, we
have no other recourse but to terminate your services with us for cause and
causes cited in the foregoing effective 13 December 1995.

x x x x[50]

The rule is that the transfer of an employee ordinarily lies within the ambit of the
employers prerogatives. The employer exercises the prerogative to transfer an employee
for valid reasons and according to the requirement of its business, provided the transfer
does not result in demotion in rank or diminution of the employees salary, benefits and
other privileges.[51]

In this case, petitioners order for respondent to transfer to the GMA, Cavite Plant
is a reasonable and lawful order was made known to him and pertains to his duties as a
machine operator. There was no demotion involved or diminution of salary, benefits and
other privileges, and in fact, petitioner was even willing to provide respondent with
monetary allowance to defray whatever additional expenses he may incur with the
transfer.

In Allied Banking Corporation v. Court of Appeals,[52] the Court ruled that an


employee cannot validly refuse a transfer order on the ground of parental obligations,
additional expenses, and the anguish he would suffer if assigned away from his
family. Citing Homeowners Savings and Loan Association, Inc. v. National Labor
Relations Commission,[53] the Court stated:

The acceptability of the proposition that transfer made by an


employer for an illicit or underhanded purpose i.e., to defeat an employees
right to self-organization, to rid himself of an undesirable worker, or to
penalize an employee for union activities cannot be upheld is self-evident
and cannot be gainsaid. The difficulty lies in the situation where no such
illicit, improper or underhanded purpose can be ascribed to the employer,
the objection to the transfer being grounded solely upon the personal
inconvenience or hardship that will be caused to the employee by reason of
the transfer. What then?

This was the very same situation we faced in Phil. Telegraph and
Telephone Corp. v. Laplana. In that case, the employee, Alicia Laplana,
was a cashier at the Baguio City Branch of PT&T who was directed to
transfer to the companys branch office at Laoag City. In refusing the
transfer, the employee averred that she had established Baguio City as her
permanent residence and that such transfer will involve additional expenses
on her part, plus the fact that an assignment to a far place will be a big
sacrifice for her as she will be kept away from her family which might
adversely affect her efficiency. In ruling for the employer, the Court upheld
the transfer from one city to another within the country as valid as long as
there is no bad faith on the part of the employer. We held then:

Certainly the Court cannot accept the proposition that


when an employee opposes his employers decision to
transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the
employees wishes that should be made to prevail.

Such being the case, respondent cannot adamantly refuse to abide by the order
of transfer without exposing himself to the risk of being dismissed. Hence, his dismissal
was for just cause in accordance with Article 282 (a) of the Labor Code. Consequently,
respondent is not entitled to reinstatement or separation pay and backwages.

Lastly, on the issue of due process, Section 2 (d), Rule 1, Book VI of the Omnibus
Rules Implementing the Labor Code provides for the standards of due process, which
shall be substantially observed, to wit:

For termination of employment based on just causes as defined in


Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or


grounds of termination, and giving said employee reasonable opportunity
within which to explain his side.

(ii) A hearing or conference during which the employee concerned,


with the assistance of counsel if he so desires is given opportunity to
respond to the charge, present his evidence, or rebut the evidence
presented against him.

(iii) A written notice of termination served on the employee indicating


that upon due consideration of all the circumstances, grounds have been
established to justify his termination.

Simply stated, the employer must furnish the employee a written notice containing
a statement of the cause for termination and to afford said employee ample opportunity
to be heard and defend himself with the assistance of his representative, if he so desires,
and the employee must be notified in writing of the decision dismissing him, stating clearly
the reasons therefor.[54]

The CA found that petitioner failed to observe the twin requirements of notice and
hearing, stating that its Memorandum dated December 13, 1995 does not squarely meet
the standards of due process. The circumstances surrounding respondents dismissal,
however, prove the contrary. The CA failed to take into account that prior to the
Memorandum dated December 13, 1995, petitioner sent respondent several memoranda
apprising him of the possible implications of his refusal to comply with the order of
transfer. Thus, in its Memorandum dated November 24, 1995, petitioner notified
respondent that his continued non-compliance with the order of transfer might bring about
disciplinary action.[55] Respondent replied to this memorandum, stating the reasons for
his refusal, i.e., additional expenses, longer travel time, and union concerns.[56] Petitioner
sent another Memorandum on December 9, 1995, asking respondent to appear
on December 11, 1995, for further clarification of his reasons for refusing the
transfer.[57] Despite the meeting, and since respondent, apparently, stubbornly refused to
heed petitioners order, it was then that the Memorandum dated December 13, 1995 was
issued to respondent informing him of the managements decision to terminate his
services.Clearly, respondents right to due process was not violated.

WHEREFORE, the petition is GRANTED. The CA Decision dated August 3,


2000 and Resolution dated March 16, 2001 are SET ASIDE, and the NLRC Decision
dated June 30, 1999 is REINSTATED.

No costs.

SO ORDERED.

Great Southern vs. Acuna, 425 SCRA 422,


GR 140189, February 28, 2005

[G.R. No. 140189. February 28, 2005]

GREAT SOUTHERN MARITIME SERVICES CORPORATION, FERRY CASINOS


LIMITED and PIONEER INSURANCE AND SURETY
CORPORATION, petitioners, vs. JENNIFER ANNE B. ACUA, HAYDEE ANNE B.
ACUA, MARITES T. CLARION, MARISSA C. ENRIQUEZ, GRACIELA M.
TORRALBA and MARY PAMELA A. SANTIAGO, respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals dated June 30, 1999 in CA-G.R. SP No.
50504, which set aside the Decision of the National Labor Relations Commission (NLRC)
dated January 15, 1997 in NLRC CA No. 010186-96.
The factual background of the case is as follows:
Petitioner Great Southern Maritime Services Corporation (GSMSC) is a manning
agency organized and existing under Philippine laws. It is the local agent of petitioner
Ferry Casinos Limited. Petitioner Pioneer Insurance and Surety Corporation is the surety
company of petitioner GSMSC.
On October 7, 1993, respondents Jennifer Anne B. Acua, Haydee Anne B. Acua,
Marites T. Clarion, Marissa C. Enriquez, Graciela M. Torralba, and Mary Pamela A.
Santiago filed a complaint for illegal dismissal against petitioners before the Philippine
Overseas Employment Administration (POEA), docketed as POEA Case No. (M) 93-10-
1987.[2]
Respondents claim that: between the months of March and April 1993, they were
deployed by petitioner GSMSC to work as croupiers (card dealers) for petitioner Ferry
Casinos Limited under a six-month contract with monthly salaries of US$356.45 plus fixed
overtime pay of US$107 a month and vacation leave pay equivalent to two months salary
pro rata, except for respondent Jennifer Anne B. Acua who had a monthly salary of
US$250.56 plus fixed overtime pay of US$87.17 and vacation leave pay equivalent to two
months salary pro rata; sometime in July 1993, Sue Smits, the Casino Manager, informed
them that their services were no longer needed; considering that their plane tickets were
already ready and they were subjected to harassment, they had no alternative but to sign
documents on July 11 and 12, 1993 specifying that they were the ones who terminated
their employment; they were repatriated on July 25, 1993.[3]
Petitioners denied the allegations of respondents and averred that respondents
voluntarily resigned from employment. They contend that: respondents were hired by
petitioner Ferry Casinos Limited through petitioner GSMSC to work as croupiers for a
period of six months; sometime in July 1993, respondents intimated their desire to resign;
petitioner Ferry Casinos Limited did not allow them to resign as the simultaneous loss of
croupiers would paralyze casino operations; respondents thereafter exhibited lukewarm
attitude towards work, became defiant and rude; consequently, petitioner Ferry Casinos
Limited was forced to accede to respondents demands; and respondents executed
resignation letters and disembarked on July 27, 1993.[4]
On October 5, 1995, the POEA decided the case against petitioners, thus:

WHEREFORE, premises considered, respondent Great Southern Maritime Services


[Corporation] and Pioneer Insurance and Surety Corporation, are hereby ordered jointly
and severally liable to pay complainants the following amounts:

1. Jennifer B. Acua US $ 610.17


2. Marissa C. Enriquez 986.17
3. Marites T. Clarion 986.17
4. Graciela M. Torralba 986.17
5. Pamela Santiago 582.20
6. Haydee Anne B. Acua 582.20

representing their salaries for the unexpired portion of their contract. All other claims are
dismissed for lack of merit.

SO ORDERED.[5]

The POEA ruled that the respondents were illegally dismissed since petitioners failed to
prove that respondents voluntarily resigned from employment. It held that the alleged
resignation letters are only declarations of release and quitclaim.
Petitioners appealed to the NLRC[6] which, on January 15, 1997, set aside the
decision of the POEA and dismissed the complaint for illegal dismissal.[7] The NLRC held
that the contested letters are not only declarations of release and quitclaim but
resignations as well. It further held that there is no concrete evidence of undue pressure,
force and duress in the execution of the resignation letters. The NLRC gave credence to
petitioners claim that respondents pre-terminated their contracts en masse because two
of the respondents, Haydee Anne B. Acua and Marites T. Clarion, are now working in
Singapore.
Respondents filed a motion for reconsideration[8] but the NLRC denied the same in a
Resolution dated April 30, 1997.[9]
On July 18, 1997, respondents filed a petition for certiorari before us, docketed as
G.R. No. 129673.[10]
On October 3, 1997, petitioners, in their Comment, prayed for outright dismissal of
the petition for: (a) failure of respondents to submit a verified statement of the material
dates to show that the petition was filed on time, and (b) filing a certification on non-forum
shopping signed only by their counsel. In addition, petitioners argued that the issues
raised are factual and there is no showing that the NLRC committed grave abuse of
discretion.[11]
On January 27, 1998, the Solicitor General, in lieu of Comment, manifested that he
is unable to sustain the position of the NLRC because the allegation that respondents
voluntarily resigned was not substantially established and respondents non-compliance
with the formal requirements of the petition should be waived since the petition is
meritorious.[12]
The NLRC, in compliance with our Resolution dated March 16, 1998, [13] filed its own
Comment praying for the dismissal of the petition and the affirmance of its decision with
finality. It argued that in reversing the POEA, it focused its attention on the correct
evaluation of the evidence on record which substantially showed that petitioners did not
dismiss respondents but that the latter resigned en masse on July 12, 1993. [14]
In accordance with St. Martin Funeral Homes vs. NLRC,[15] we referred the petition to
the Court of Appeals which, on June 30, 1999, set aside the decision of the NLRC and
reinstated the decision of the POEA.[16] The Court of Appeals held that respondents were
illegally dismissed since the petitioners failed to substantiate their claim that respondents
voluntarily resigned from employment. It ruled that the quitclaims are not sufficient to
show valid terminations. Anent non-compliance with the formal requirements of the
petition, the Court of Appeals, adopting the observation of the Solicitor General, held that
the case is an exception to the rule on strict adherence to technicality.
On July 21, 1999, petitioners filed a motion for reconsideration but the Court of
Appeals denied it in a Resolution dated September 22, 1999.
Hence, the present petition for review on certiorari on the following grounds:

1. Under the law and applicable jurisprudence, the Petition for Certiorari filed by
respondents should have been denied outright for non-compliance with the
requirements for filing a Petition for Certiorari.[17]
2. Under the law and applicable jurisprudence, respondents cannot be considered to
have been dismissed from employment, because it was respondents who resigned from
their employment.[18]

Petitioners maintain that the petition for certiorari should have merited outright
dismissal for non-compliance with the mandatory requirements of the rules. There is no
statement indicating the material dates when the decision of the NLRC was received and
when the motion for reconsideration was filed. Likewise, the certification on non-forum
shopping was not signed by respondents but by their counsel. In any event, petitioners
insist that respondents voluntarily resigned from their employment.
In their Comment, respondents allege that the instant petition highlights the same
arguments already raised and squarely resolved by the Court of Appeals. Nevertheless,
they reiterate that they did not resign from employment but were abruptly and
unceremoniously terminated by petitioner Ferry Casinos Limited.[19]
Section 3[20] of Rule 46 of the Rules of Court provides that there are three material
dates that must be stated in a petition for certiorari brought under Rule 65: (a) the date
when notice of the judgment or final order or resolution was received, (b) the date when
a motion for new trial or for reconsideration when one such was filed, and, (c) the date
when notice of the denial thereof was received. This requirement is for the purpose of
determining the timeliness of the petition, since the perfection of an appeal in the manner
and within the period prescribed by law is jurisdictional and failure to perfect an appeal
as required by law renders the judgment final and executory.[21]
The same rule requires the pleader to submit a certificate of non-forum shopping to
be executed by the plaintiff or principal party. Obviously, it is the plaintiff or principal party,
and not the counsel whose professional services have been retained for a particular case,
who is in the best position to know whether he or it actually filed or caused the filing of a
petition in that case.[22]
As a general rule, these requirements are mandatory, meaning, non-compliance
therewith is a sufficient ground for the dismissal of the petition.[23]
In the case before us, the failure to comply with the rule on a statement of material
dates in the petition may be excused since the dates are evident from the records. A
thorough scrutiny of the records reveals that the January 15, 1997 decision of the NLRC
was received by respondents counsel on January 24, 1997. [24] On February 19, 1997,
respondents filed a motion for reconsideration[25] which was denied by the NLRC in a
Resolution dated April 30, 1997.[26] Respondents counsel received the resolution on May
30, 1997 and they filed the petition for certiorari on July 18, 1997.
In view of the retroactive application of procedural laws, [27] Section 4, Rule 65 of the
1997 Rules of Procedure, [28] as amended by A.M. No. 00-2-03 which took effect on
September 1, 2000, is the governing provision. It provides that when a motion for
reconsideration is timely filed, the 60-day period for filing a petition for certiorari shall be
counted from notice of the denial of said motion. While respondents motion for
reconsideration was filed 16 days late,[29] the NLRC nonetheless acted thereon and
denied it on the basis of lack of merit. In resolving the merits of the motion despite being
filed out of time, the NLRC undoubtedly recognized that it is not strictly bound by the
technicalities of law and procedure. Thus, the 60-day period for filing of a petition
for certiorari should be reckoned from the date of the receipt of the resolution denying the
motion for reconsideration, i.e., May 30, 1997, and thus, the filing made on July 18, 1997
was well within the 60-day reglementary period.
As regards the verification signed only by respondents counsel, this procedural lapse
could have warranted the outright dismissal of respondents petition for certioraribefore
the Court of Appeals. However, it must be remembered that the rules on forum shopping,
which were precisely designed to promote and facilitate the orderly administration of
justice, should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective which is the goal of all rules of procedure - that is, to
achieve substantial justice as expeditiously as possible.[30]
Needless to stress, rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid the court in
the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of
judicial discretion. In rendering justice, courts have always been, as they ought to be,
conscientiously guided by the norm that on the balance, technicalities take a backseat
against substantive rights, and not the other way around. Thus, if the application of the
Rules would tend to frustrate rather than promote justice, it is always within our power to
suspend the rules or except a particular case from its operation.[31]
As the Court eloquently stated in the case of Aguam vs. Court of Appeals:[32]

The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a
power conferred on the court, not a duty. The "discretion must be a sound one, to be
exercised in accordance with the tenets of justice and fair play, having in mind the
circumstances obtaining in each case." Technicalities, however, must be avoided. The
law abhors technicalities that impede the cause of justice. The court's primary duty is to
render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits unlike
duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts." Litigations must be decided on their merits and not on
technicality. Every party litigant must be afforded the amplest opportunity for the proper
and just determination of his cause, free from the unacceptable plea of technicalities.
Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of
procedure ought not to be applied in a very rigid, technical sense; rules of procedure are
used only to help secure, not override substantial justice. It is a far better and more
prudent course of action for the court to excuse a technical lapse and afford the parties
a review of the case on appeal to attain the ends of justice rather than dispose of the
case on technicality and cause a grave injustice to the parties, giving a false impression
of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.[33] (Emphasis supplied)

Thus, in Sy Chin vs. Court of Appeals,[34] we held that the procedural lapse of a partys
counsel in signing the certificate of non-forum shopping may be overlooked if the interests
of substantial justice would thereby be served. Further, in Damasco vs. NLRC,[35] we
noted that the certificate of non-forum shopping was executed by the petitioners counsel,
but nevertheless resolved the case on its merits for the reason that technicality should
not be allowed to stand in the way of equitably and completely resolving the equity and
obligations of the parties to a labor case.
Indeed, where a decision may be made to rest on informed judgment rather than rigid
rules, the equities of the case must be accorded their due weight because labor
determinations should not only be secundum rationem but also secundum caritatem.[36]
In this case, the Court of Appeals aptly found compelling reasons to disregard
respondents procedural lapses in order to obviate a patent injustice.
Time and again we have ruled that in illegal dismissal cases like the present one,
the onus of proving that the employee was not dismissed or if dismissed, that the
dismissal was not illegal, rests on the employer and failure to discharge the same would
mean that the dismissal is not justified and therefore illegal.[37] Thus, petitioners must not
only rely on the weakness of respondents evidence but must stand on the merits of their
own defense. A party alleging a critical fact must support his allegation with substantial
evidence for any decision based on unsubstantiated allegation cannot stand as it will
offend due process.[38] Petitioners failed to discharge this burden.
Petitioners complete reliance on the alleged resignation letters cum release and
quitclaim to support their claim that respondents voluntarily resigned is unavailing as the
filing of the complaint for illegal dismissal is inconsistent with resignation.[39] Resignation
is the voluntary act of employees who are compelled by personal reasons to dissociate
themselves from their employment. It must be done with the intention of relinquishing an
office, accompanied by the act of abandonment.[40] Thus, it is illogical for respondents to
resign and then file a complaint for illegal dismissal. We find it highly unlikely that
respondents would just quit even before the expiration of their contracts, after all the
expenses and the trouble they went through in seeking greener pastures and financial
upliftment, and the concomitant tribulations of being separated from their families, having
invested so much time, effort and money to secure their employment abroad. Considering
the hard economic times, it is incongruous for respondents to simply give up their work,
return home and be jobless once again.
Likewise, petitioners submission that respondents voluntarily resigned because of
their desire to seek employment elsewhere, as accentuated by the concurrent fact that
two of the respondents, Haydee Anne B. Acua and Marites T. Clarion, already have jobs
in Singapore is an unreasonable inference. The fact that these two have already found
employment elsewhere should not be weighed against their favor. It should be expected
that they would seek other means of income to tide them over during the time that the
legality of their termination is under litigation. They should not be faulted for seeking
employment elsewhere for their economic survival.
We further note that the alleged resignation letters, one of which reads:

In signing this document, I am declaring my decision to return to the Philippines with the
other eight employees of Ferry Casinos Limited and Great Southern Maritime
Corporation, on the 25th July 1993. I understand that my contract is uncompleted and I
fully understand the consequences of that. I do however promise to work to full for both
companies before my departure.

I realise (sic) that I may be dismissed by the captain or Purser of my assigned vessel, if
I am suspected of misconduct in the remaining weeks of my employment, until my
departure, and I understand that I will compansate (sic) both companies for the results
from (sic) my actions.

I sign to say that I will follow the instructions of Captain A. Sanchez upon my arrival in
the Philippines and that any previous arrangements to this date are nul (sic) and void.

I recognise (sic) that I have been fairly treated by both companies and for this I will not
jeopardise (sic) them upon my arrival in the Philippines.

I acknowledge and accept this as evidence for (sic) my departure to be shown to the
P.O.E.A. in the Philippines.[41]

which were all prepared by petitioner Ferry Casinos Limited, are substantially similarly
worded and of the same tenor. A thorough scrutiny of the purported resignation letters
reveals the true nature of these documents. In reality, they are waivers or quitclaims which
are not sufficient to show valid separation from work or bar respondents from assailing
their termination. The burden of proving that quitclaims were voluntarily entered into falls
upon the employer.[42] Deeds of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or from contesting the legality of
their dismissal.[43] The reason for this rule was laid down in the landmark case of Cario
vs. ACCFA:[44]

Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get hold of money. Because, out
of job, he had to face the harsh necessities of life. He thus found himself in no position
to resist money proffered. His, then, is a case of adherence, not of choice. One thing
sure, however, is that petitioners did not relent their claim. They pressed it. They are
deemed not to have waived any of their rights. Renuntiatio non praesumitur.

Thus, we are more than convinced that respondents did not voluntarily quit their jobs.
Rather, they were forced to resign or were summarily dismissed without just cause. The
Court of Appeals acted in the exercise of its sound discretion when it denied petitioners
insistence to dismiss the petition for certiorari, in light of the factual and antecedent milieu.
By so doing, the appellate court correctly gave more importance to the resolution of the
case on the merits.
WHEREFORE, the instant petition is DENIED and the assailed Decision of the Court
of Appeals dated June 30, 1999 in CA-G.R. SP No. 50504 is AFFIRMED. Costs against
petitioners.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

BPI Union vs. BPI, 454 SCRA 357,

GR 137863, March 31, 2005


[G.R. No. 137863. March 31, 2005]

BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION and ZENAIDA


UY, petitioners, vs. BANK OF THE PHILIPPINE ISLANDS, CARLOS FRAGANTE,
DELFIN SANTOS, ALBERTO JUGO and/or OSCAR CONTRERAS, respondents.

DECISION
CHICO-NAZARIO, J.:
This petition for review on certiorari under Rule 45 of the 1997 Rules on Civil
Procedure, as amended, seeks to partially reverse the Decision[1] of 28 October 1998 and
the Resolution[2] of 08 March 1999 of the Court of Appeals, in CA-G.R. SP No. 47363,
which affirmed with modification the Decision[3] rendered by the Accredited Voluntary
Arbitrator dated 31 December 1997, in VA Case No. 08-001-97. The case before the
Voluntary Arbitrator was for illegal transfer and termination, with the latter ruling in favor
of the petitioners herein.
The facts as narrated by the Court of Appeals are quoted hereunder:

On 26 October 1995, respondent[4] Zenaida V. Uy, former teller of the Escolta Branch of
BPI, shouted at her Senior Manager, petitioner[5] Delfin D. Santos (Santos for brevity).
Uy was told to go to the office of the petitioner Carlos B. Fragante, BPIs area head and
Assistant Vice President, to discuss her complaint. On the same date, AVP Fragante
told Uy to transfer to the nearby Plaza Cervantes Branch of BPI and report to its
operations manager to defuse (sic) the tense situation prevailing at the Escolta Branch.
On 27 October 1995, AVP Fragante received the report of the Escolta Branch Manager
(Santos) on the shouting incident, together with the written letter-reports of some branch
personnel. On the same day, AVP Fragante ordered Uy to transfer to the Plaza
Cervantes Branch. Upon receipt of the order, Uy commented that she will not transfer
and will await the result of the grievance meeting. The respondent BPI Employees
Union initiated a grievance proceeding against the BPI Management for the transfer of
Uy to the Plaza Cervantes Branch. A meeting was set for 30 October 1995. On 30
October 1995, AVP Fragante sent Uy a letter . . . directing her to explain within 24 hours
why no disciplinary action should be taken against her for insubordination, for not
paying heed to the order to transfer. Uy sent a reply on the same date . . . explaining
that she could not transfer from Escolta Branch because there was no proper turnover
of her accountabilities; that she was not able to do so on October 27, 1995 because she
was not allowed to open (as a teller); and, that since then she has been barred from
entering the bank premises. On the same day, a meeting was held to hear Uys
grievance relative to her transfer, but no agreement was reached. On 31 October 1995,
AVP Fragante sent Uy another letter . . . asking her to explain why no disciplinary action
should be taken against her for uttering disrespectful, discourteous, insulting and
unbecoming language to her superior, Senior Manager Delfin Santos. Uy sent an
undated reply thereto . . . reiterating why she could just not leave her position at the
Escolta Branch, and requesting that she be considered on leave starting November 2,
1995. On 13 November 1995, AVP Fragante wrote Uy another letter . . . directing her to
show cause on or before 16 November 1995 why no disciplinary action, including
possible termination, should be taken against her for the October 26, 1995 incident, for
insubordination or defiance to the transfer order, and for going on absence without
leave. A copy thereof was furnished the Union. Uy sent a reply letter dated November
20, 1995, asking for particulars relative to the alleged highly disrespectful, discourteous,
insulting, threatening, and unbecoming language and behavior towards your Manager,
Delfin Santos and on the alleged past instances when she was involved with quarrels
with your co-employees, and alleging that she felt binabastos mo ako (I was being
sexually harassed) when he uttered Dito ka na lang, marami and [ang] lalaki dito (You
just stay here, there are plenty of men here), and when she answered Hindi ako mahilig
sa lalaki (I am not fond of men), he retorted, Maski dito ka na lang sa kuwarto ko (You
may just stay here in my room . . .). The union asked for a suspension of the grievance
machinery and for investigation of the sexual harassment charge. On November 24,
1995, Uy requested Management through Mr. Oscar L. Cervantes, for transfer to the
Taft Avenue Branch to save on gasoline expenses. Two meetings were held between
the union side and the management side, represented by Mr. Fragantes superior,
Senior Vice President Alberto Jugo and Senior Manager Efren Tuble. When no
agreement was reached, the management advised Uy and the Union as well as their
counsel that the management had no choice but to terminate Uy. Both the union and Uy
were sent copies of the Notice of Termination . . . dated December 8, 1995, which had
the following tenor:

NOTICE OF TERMINATION

Dear Ms. Uy:

This is to advise you of the termination of your employment effective December 14,
1995 on the grounds of gross disrespect/discourtesy towards an officer, insubordination
and absence without leave.

It has been established that you used highly disrespectful, discourteous, insulting,
threatening and unbecoming language and behavior towards your branch manager,
Delfin Santos, last October 26. Despite being given the chance to explain or justify your
actions, you chose to skirt the issue by pointing out that I am in no position to make a
conclusion as I was not around when the incident happened. You know fully well that as
Sales Director of North Manila area having supervision over Escolta Branch, such
incident was reported to me. Mr. Delfin Santos appropriately inhibited himself from
conducting the investigation for obvious reasons. We disagree with you when you
dismissed the incident as trivial. Moreover, the explanations you gave at our Head
Office were found wanting in circumstances that would absolve you or mitigate your
wrongdoing as said explanations in fact confirmed the findings at the branch level. With
regard to quarrels with your officemates, you can be considered as recidivist. You can
of course recall your quarrels, using very strong and insulting words, with your co-
employees Ms. Teresa Manalang last year and with Jocelyn Ng this year.
You refused to follow the transfer instruction to report to Cervantes Branch last October
27 alleging failure to properly turn over your accountabilities despite being in the branch
for practically the whole day on October 27. We have adequate procedure for the
opening of pico boxes in the presence of witnesses in cases of refusal and AWOL.

In a further manifestation of your contempt towards managerial authority, you went on


absence without leave starting October 30. After refusing to receive all communications
sent to your residence, you tried to rectify this AWOL by sending an undated letter
received by us last November 6 wherein you declared yourself to be on leave beginning
November 2. You have since refused to report for work.

Under the circumstances, you left us with no alternative but to terminate your
employment with us.

(SGD.) CARLOS B. FRAGANTE


Asst. Vice President

Uy filed a case for illegal transfer and termination. On June 29, 1996, Labor Arbiter
Manuel R. Caday who initially heard and decided the case issued a decision declaring
the dismissal of Uy as illegal and ordering her reinstatement with full backwages and
10% attorneys fees BPI appealed the said decision to the National Labor Relations
Commission (NLRC) which rendered a decision on May 28, 1997, setting aside the
Labor Arbiters Decision for lack of jurisdiction, and ruling that the case falls under the
jurisdiction of a Voluntary Arbitrator.

The case was raffled to respondent Arbitrator Entuna, who requested the parties to
submit their respective position papers.[6]

The Voluntary Arbitrator, in his disputed Decision of 31 December 1997, adjudged:

WHEREFORE, premises considered, judgment is hereby rendered declaring the


dismissal of complainant Zenaida Uy as illegal and ordering the respondent Bank of the
Philippine Islands to immediately reinstate her to her position as bank teller of the
Escolta Branch without loss of seniority rights and with full backwages computed from
the time she was dismissed on December 14, 1995 until she is actually reinstated in the
service, and including all her other benefits which are benefits under their Collective
Bargaining Agreement (CBA).

For reasonable attorneys fees, respondent is also ordered to pay complainant the
equivalent of 10% of the recoverable award in this case.[7]
The Motion for Reconsideration of the herein respondents BPI, et al., was
subsequently denied.
Aggrieved, they then filed a Petition for Review before the Court of Appeals assailing
the aforestated decision.
On 28 October 1998, the Court of Appeals issued the assailed decision affirming the
finding of the Voluntary Arbitrator that indeed Uys employment was illegally terminated.
The appellate court, however, modified the award for backwages by limiting it to three
years as well as finding that there was strained relations between the parties, to wit:

WHEREFORE, the judgment appealed from is AFFIRMED with


the MODIFICATION that instead of reinstatement, the petitioner Bank of the Philippine
Islands is DIRECTED to pay Uy back salaries not exceeding three (3) years and
separation pay of one month for every year of service. The said judgment
is AFFIRMED in all other respects.[8]

Both parties seasonably filed their respective motions for partial reconsideration of
the aforesaid decision but the appellate court denied them in a Resolution dated 08 March
1999.
Hence, the parties individually went to this Court via a Petition for Review
on Certiorari.
The petition[9] filed by herein respondents BPI, et al., however, was denied for their
failure to submit a certification duly executed by themselves that no other action or
proceeding involving the same issues raised in this case has been filed or is pending
before this Court, the Court of Appeals, or in the different divisions thereof, or in any other
tribunal or quasi-judicial agency, with the undertaking to inform the Court of any similar
case filed or pending in any court, tribunal or quasi-judicial agency that may thereafter
come to their knowledge in accordance with Section 4(e), Rule 45 in relation to Section
5, Rule 7, Section 2, Rule 42, and Sections 4 and 5(d), Rule 56 of the Rules of Court. The
corresponding Entry of Judgment[10] was entered in the Book of Entries of Judgments on
22 September 1999.
For the reason above stated, only the following errors imputed by herein petitioners
Bank of the Philippine Islands Employees Union (BPIEU) and Uy to the appellate court
are in issue:
I

WITH DUE RESPECT, THE QUESTIONED RESOLUTION AND DECISION OF THE


HONORABLE COURT OF APPEALS ARE CONTRARY TO LAW INSOFAR AS THEY
LIMITED THE AWARD OF BACKWAGES TO THREE (3) YEARS; AND
II

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED


GRAVE ABUSE OF DISCRETION IN HOLDING THAT STRAINED RELATIONS EXIST
BETWEEN THE BANK AND PETITIONER UY DESPITE THE FACT THAT THE
SHOUTING INCIDENT IS NOT SO SERIOUS AND IT INVOLVED ONLY PETITIONER
UY AND RESPONDENT DELFIN SANTOS.[11]

Anent the first issue, the petitioners contend that the decision of the appellate court
limiting the award of backwages to three (3) years is contrary to law and jurisprudence.
The petition is meritorious.
The rule providing for the entitlement of an illegally dismissed employee to only three
years backwages without deduction or qualification to obviate the need for further
proceedings in the course of execution, otherwise known as the Mercury Drug
Rule,[12] has long been abandoned.
In a long line of cases,[13] we have stated that the case of Mercury Drug, Co., Inc. v.
CIR,[14] is no longer applicable. To preclude the recurrence of the situation where the
employee, with folded arms, remains inactive in the expectation that windfall would come
to him and to speed up the process of execution, the aforementioned Mercury Drug case
provided a remedy by ruling that an employee whose illegal termination had lasted some
years was entitled to backwages for a fixed period without further qualifications, i.e.,
without need of taking account of whatever he might have earned during such period, and
deducting it from the amount of recovery, by providing a base period of three years. The
three-year-limit doctrine has been consistently and uniformly applied by this Court over
many years until the promulgation of Republic Act No. 6715 which amended Article 279
of the Labor Code in 1989.
With the new law before us, we clarified the computation of backwages due an
employee on account of his illegal dismissal from employment in the case of Osmalik
Bustamante, et al. v. NLRC and Evergreen Farms, Inc.[15] We held that the passing of
Republic Act No. 6715,[16] particularly Section 34,[17] which took effect on 21 March 1989,
amended Article 279 of the Labor Code, which now states in part:

ART. 279. Security of Tenure. - 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.
Verily, the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted,
is that the backwages to be awarded to an illegally dismissed employee, should not, as a
general rule, be diminished or reduced by the earnings derived by him elsewhere during
the period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must still earn a living to
support himself and his family. Corollary thereto, full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing his employee.
Thus, a closer adherence to the legislative policy behind Rep. Act. No. 6715 points to full
backwages as meaning exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of his illegal dismissal.
In other words, the provision calling for full backwages to illegally dismissed employees
is clear, plain and free from ambiguity and, therefore, must be applied without attempted
or strained interpretation.[18]
Consequently, in accordance with Section 34, Rep. Act No. 6715, employees illegally
dismissed after 21 March 1989 are entitled to their full backwages, inclusive of other
benefits or their monetary equivalent, from the time their actual compensation was
withheld from them up to the time of their actual reinstatement.
Under the factual circumstances of the case, the law and jurisprudence prevailing,
therefore, we find that the Court of Appeals committed a reversible error in limiting the
award of backwages for a fixed period of three years. The illegal dismissal of petitioner
Uy was effected in 1995, or after Rep. Act No. 6715 took effect on 21 March 1989. Absent
any exceptional circumstance, it is now settled that an employee who is unjustly
dismissed from work shall be entitled to full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent from the time his compensation was
withheld from him up to the time of his actual reinstatement.[19]
Apropos the issue of non-reinstatement of petitioner Uy, the Court of Appeals held
that in a number of cases, the High Court had allowed mere payment of severance pay,
when reinstatement would no longer be beneficial to either party in view of strained
relations between them.[20] And, thus, in lieu of reinstatement, it ordered the payment of
separation pay instead.
The petitioners, on the other hand, posit that the material incidents of the case at bar
are but confined or personal to the individual respondents Delfin Santos and Carlos
Fragante. The other respondents, namely Alberto Jugo and Oscar Contreras were
impleaded merely because of their position in respondent BPIs Human Resources
Department. In the words of the petitioners, the controversy was a personal
matter between Ms. Uy and Messrs. Delfin Santos and Carlos Fragante.[21] In addition,
they bolstered their position by relying on what this Court had to say in Globe-Mackay
Cable and Radio Corp. v. NLRC:[22]
Obviously, the principle of strained relations cannot be applied indiscriminately.
Otherwise, reinstatement can never be possible simply because some hostility is
invariably engendered between the parties as a result of litigation. That is human
nature.

Besides, no strained relations should arise from a valid and legal act of asserting ones
right; otherwise an employee who shall assert his right could be easily separated from
the service, by merely paying his separation pay on the pretext that his relationship with
his employer had already become strained.

Petitioners reliance is well placed.


We have oft said that mere allegation of strained relations to bar reinstatement is
frowned upon.
In the case of PLDT, et al. v. Tolentino,[23] we reiterated our ruling in Quijano v.
Mercury Drug Corp.[24] wherein we propitiously said that the strained relations doctrine
should be strictly applied so as not to deprive an illegally dismissed employee of his right
to reinstatement. We further stated that:

Well-entrenched is the rule that an illegally dismissed employee is entitled to


reinstatement as a matter of right. Over the years, however, the case law developed
that where reinstatement is not feasible, expedient or practical, as where reinstatement
would only exacerbate the tension and strained relations between the parties, or where
the relationship between the employer and employee has been unduly strained by
reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent
to order payment of separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of this doctrine of
strained relations by using it as a cover to get rid of its employees and thus defeat their
right to job security.

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.

The said case went on further to quote our pronouncement in the case of Almira v.
B.F. Goodrich, Philippines, Inc.:[25]
This Court is cognizant of managements right to select the people who will manage its
business as well as its right to dismiss them. However, this right cannot be abused. Its
exercise must always be tempered with compassion and understanding. As former
Chief Justice Enrique Fernando eloquently put it:

Where penalty less severe would suffice, whatever missteps may be committees by
labor ought not to be visited with consequence so severe. It is not only because of the
laws concern for the workingmen. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those dependent on the wage-
earner. The misery and pain attendant on the loss of jobs then could be avoided if there
be acceptance of the view that under all the circumstances of a case, the workers
should not be deprived of their means of livelihood. Nor is this to condone what has
been done by them.

Moreover, it has been almost a decade since the incident that led to the dismissal of
petitioner Uy occurred. Petitioner Uy contends, and the respondents do not contradict,
that respondent Carlos Fragante has long been assigned in another area and Messrs.
Alberto Jugo and Oscar Contreras are no longer connected with respondent BPI.
Considering, thus, that there now appears no more basis for strained relations between
the present management and petitioner Uy, reinstatement is possible.
WHEREFORE, the instant petition is GRANTED. The assailed 28 October 1998
Decision and 8 March 1999 Resolution of the Court of Appeals are hereby MODIFIED as
follows: 1) respondent BPI is DIRECTED to pay petitioner Uy backwages from the time
of her illegal dismissal until her actual reinstatement; and 2) respondent BPI is ORDERED
to reinstate petitioner Uy to her former position, or to a substantially equivalent one,
without loss of seniority right and other benefits attendant to the position.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Equitable vs. Sadac, 490 SCRA 380,


GR 164772, June 8, 2006
FIRST DIVISION

EQUITABLE BANKING G.R. No. 164772


CORPORATION (now known as
EQUITABLE-PCI BANK), Present:
Petitioner, PANGANIBAN,C.J.
Chairperson,
- versus - YNARES-SANTIAGO,*
AUSTRIA-MARTINEZ,**
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
RICARDO SADAC,
Respondent. Promulgated:

June 8, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to
the Court En Banc filed by Equitable Banking Corporation (now known as Equitable-PCI
Bank), seeking to reverse the Decision[1] and Resolution[2] of the Court of Appeals, dated
6 April 2004 and 28 July 2004, respectively, as amended by the Supplemental
Decision[3] dated 26 October 2004 in CA-G.R. SP No. 75013, which reversed and set
aside the Resolutions of the National Labor Relations Commission (NLRC), dated 28
March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.
The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the
Legal Department of petitioner Bank effective 1 August 1981, and subsequently General
Counsel thereof on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Banks
Legal Department, in a letter-petition to the Chairman of the Board of Directors, accused
respondent Sadac of abusive conduct, inter alia, and ultimately, petitioned for a change
in leadership of the department. On the ground of lack of confidence in respondent Sadac,
under the rules of client and lawyer relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases in which the latter was appearing
as its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing
and formal investigation but the same remained unheeded. On 9 November 1989,
respondent Sadac filed a complaint for illegal dismissal with damages against petitioner
Bank and individual members of the Board of Directors thereof. After learning of the filing
of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally,
on 10 August 1989, respondent Sadac was removed from his office and ordered
disentitled to any compensation and other benefits.[4]
In a Decision[5] dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr.,
dismissed the complaint for lack of merit. On appeal, the NLRC in its Resolution[6] of 24
September 1991 reversed the Labor Arbiter and declared respondent Sadacs dismissal
as illegal. The decretal portion thereof reads, thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision


of October 2, 1990 be, as it is hereby, SET ASIDE, and a new one
ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him
to his former position as bank Vice-President and General Counsel without
loss of seniority rights and other privileges, and to pay him full backwages
and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorneys fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from
November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees
equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.[7]

Petitioner Bank came to us for the first time via a Special Civil Action
for Certiorari assailing the NLRC Resolution of 24 September 1991 in Equitable Banking
Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467. [8]

In our Decision[9] of 13 June 1997, we held respondent Sadacs dismissal


illegal. We said that the existence of the employer-employee relationship between
petitioner Bank and respondent Sadac had been duly established bringing the case within
the coverage of the Labor Code, hence, we did not permit petitioner Bank to rely on Sec.
26, Rule 138[10] of the Rules of Court, claiming that the association between the parties
was one of a client-lawyer relationship, and, thus, it could terminate at any time the
services of respondent Sadac.Moreover, we did not find that respondent Sadacs
dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We
similarly found that petitioner Bank disregarded the procedural requirements in
terminating respondent Sadacs employment as so required by Section 2 and Section 5,
Rule XIV, Book V of the Implementing Rules of the Labor Code. We decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is


AFFIRMED with the following MODIFICATIONS: That private respondent
shall be entitled to backwages from termination of employment until turning
sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.[11]

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became
final and executory.[12]

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
Execution[13] thereof. Likewise, petitioner Bank filed a Manifestation and
Motion[14] praying that the award in favor of respondent Sadac be computed and that after
payment is made, petitioner Bank be ordered forever released from liability under said
judgment.

Per respondent Sadacs computation, the total amount of the monetary award
is P6,030,456.59, representing his backwages and other benefits, including the general
increases which he should have earned during the period of his illegal
termination. Respondent Sadac theorized that he started with a monthly compensation
of P12,500.00 in August 1981, when he was appointed as Vice President of petitioner
Banks Legal Department and later as its General Counsel in December 1981. As of
November 1989, when he was dismissed illegally, his monthly compensation amounted
to P29,365.00 or more than twice his original compensation. The difference, he posited,
can be attributed to the annual salary increases which he received equivalent to 15
percent (15%) of his monthly salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of
the Philippines, and cited as authority the cases of East Asiatic Company, Ltd. v. Court
of Industrial Relations,[15] St. Louis College of Tuguegarao v. National Labor Relations
Commission,[16] and Sigma Personnel Services v. National Labor Relations
Commission.[17] According to respondent Sadac, the catena of cases uniformly holds that
it is the obligation of the employer to pay an illegally dismissed employee the whole
amount of the salaries or wages, plus all other benefits and bonuses and general
increases to which he would have been normally entitled had he not been dismissed; and
therefore, salary increases should be deemed a component in the computation of
backwages. Moreover, respondent Sadac contended that his check-up benefit, clothing
allowance, and cash conversion of vacation leaves must be included in the computation
of his backwages.

Petitioner Bank disputed respondent Sadacs computation. Per its computation, the
amount of monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion
of the latters general salary increases and other claimed benefits which, it maintained,
were unsubstantiated. The jurisprudential precedent relied upon by petitioner Bank in
assailing respondent Sadacs computation is Evangelista v. National Labor Relations
Commission,[18] citing Paramount Vinyl Products Corp. v. National Labor Relations
Commission,[19] holding that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner
Bank argued before the Labor Arbiter that the award of salary differentials is not allowed,
the established rule being that upon reinstatement, illegally dismissed employees are to
be paid their backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were not dismissed
or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order[20] adopting
respondent Sadacs computation. In the main, the Labor Arbiter relying on Millares v.
National Labor Relations Commission[21] concluded that respondent Sadac is entitled to
the general increases as a component in the computation of his backwages. Accordingly,
he awarded respondent Sadac the amount of P6,030,456.59 representing his backwages
inclusive of allowances and other claimed benefits, namely check-up benefit, clothing
allowance, and cash conversion of vacation leave plus 12 percent (12%) interest per
annum equivalent to P1,367,590.89 as of 30 June 1999, or a total
of P7,398,047.48. However, considering that respondent Sadac had already received the
amount of P1,055,740.48 by virtue of a Writ of Execution[22] earlier issued on 18 January
1999, the Labor Arbiter directed petitioner Bank to pay respondent Sadac the amount
of P6,342,307.00. The Labor Arbiter also granted an award of attorneys fees equivalent
to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%) interest
per annum reckoned from the finality of the judgment until the satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an ALIAS Writ of


Execution be issued commanding the Sheriff, this Branch, to collect from
respondent Bank the amount of Ph6,342,307.00 representing the
backwages with 12% interest per annum due complainant.[23]

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in
a Resolution,[24] promulgated on 28 March 2001. It ratiocinated that the doctrine on
general increases as component in computing backwages in Sigma Personnel
Services and St. Louis was merely obiter dictum. The NLRC found East Asiatic Co.,
Ltd. inapplicable on the ground that the original circumstances therein are not only
peculiar to the said case but also completely strange to the case of respondent
Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was being
granted and enjoyed by other employees of petitioner Bank. The award of attorneys fees
was similarly deleted.

The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and


accordingly, the computation prepared by respondent Equitable Banking
Corporation on the award of backwages in favor of complainant Ricardo
Sadac under the decision promulgated by the Supreme Court on June 13,
1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is
hereby ordered.[25]

Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,[26] promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition


for Certiorari seeking nullification of the twin resolutions of the NLRC, dated 28 March
2001 and 24 September 2002, as well as praying for the reinstatement of the 2 August
1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-


up benefit, clothing allowance, and cash conversion of
vacation leave are included in the computation of full
backwages for illegally dismissed employees;

(2) Whether respondent is entitled to attorneys fees; and


(3) Whether respondent is entitled to twelve percent (12%) per
annum as interest on all accounts outstanding until full
payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered
a Decision on 6 April 2004, the dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the


September 24, 2002 Resolutions of the National Labor Relations
Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999
Order of the Labor Arbiter is REVIVED to the effect that private respondent
is DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, representing
full back wages (sic) which sum includes annual general increases in basic
salary, check-up benefit, clothing allowance, cash conversion of vacation
leave and other sundry benefits plus 12% per annum interest on
outstanding balance from July 28, 1997 until full payment.

Costs against private respondent.[27]

The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases
should be added as part of his backwages. According to the appellate court, respondent
Sadacs entitlement to the annual general increases has been duly proven by substantial
evidence that the latter, in fact, enjoyed an annual increase of more or less 15 percent
(15%). Respondent Sadacs check-up benefit, clothing allowance, and cash conversion
of vacation leave were similarly ordered added in the computation of respondent Sadacs
basic wage.

Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It
ruled that our Decision[28] of 13 June 1997 did not award attorneys fees in respondent
Sadacs favor as there was nothing in the aforesaid Decision, either in the dispositive
portion or the body thereof that supported the grant of attorneys fees. Resolving the final
issue, the Court of Appeals imposed a 12 percent (12%) interest per annum on the total
monetary award to be computed from 28 July 1997 or the date our judgment in G.R. No.
102467 became final and executory until fully paid at which time the quantification of the
amount may be deemed to have been reasonably ascertained.

On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration[29] of the 6
April 2004 Court of Appeals Decision insofar as the appellate court did not award him
attorneys fees. Similarly, petitioner Bank filed a Motion for Partial Reconsideration
thereon. Following an exchange of pleadings between the parties, the Court of Appeals
rendered a Resolution,[30] dated 28 July 2004, denying petitioner Banks Motion for Partial
Reconsideration for lack of merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of
errors, to wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases
should be included in the computation of full backwages.

(b) The Hon. Court of Appeals erred in ruling that the applicable authorities
in this case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St.
Louis College of Tuguegarao v. NLRC, 177 SCRA 151 (1989); (iii) Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv) Millares v.
NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor Code;
(ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista
v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430
(1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to
check-up benefit, clothing allowance and cash conversion of vacation
leaves notwithstanding that respondent did not present any evidence to
prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to
be paid legal interest even if the principal amount due him has not yet been
correctly and finally determined.[31]

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental


Decision granting respondent Sadacs Partial Motion for Reconsideration and amending
the dispositive portion of the 6 April 2004 Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the


September 24, 2002 Resolutions of the National Labor Relations
Commission are hereby REVERSED and SET ASIDE and the August 2,
1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of
P6,342,307.00, representing full backwages which sum includes annual
general increases in basic salary, check-up benefit, clothing allowance,
cash conversion of vacation leave and other sundry benefits and attorneys
fees equal to TEN PERCENT (10%) of all the monetary award plus 12%
per annum interest on all outstanding balance from July 28, 1997 until full
payment.

Costs against private respondent.[32]

On 22 November 2004, petitioner Bank filed a Supplement to Petition for


Review[33] contending in the main that the Court of Appeals erred in issuing the
Supplemental Decision by directing petitioner Bank to pay an additional amount to
respondent Sadac representing attorneys fees equal to ten percent (10%) of all the
monetary award.

The Courts Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At
the core of the instant case are the divergent contentions of the parties on the manner of
computation of backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of


the Philippines does not contemplate the inclusion of salary increases in the definition of
full backwages. It controverts the reliance by the appellate court on the cases of (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While it is in accord with the
pronouncement of the Court of Appeals that Republic Act No. 6715, in amending Article
279, intends to give more benefits to workers, petitioner Bank submits that the Court of
Appeals was in error in relying on East Asiatic to support its finding that salary increases
should be included in the computation of backwages as nowhere in Article 279, as
amended, are salary increases spoken of. The prevailing rule in the milieu of the East
Asiatic doctrine was to deduct earnings earned elsewhere from the amount of backwages
payable to an illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary
increases in the computation of backwages, it was because the inclusion was purposely
to cushion the blow of the deduction of earnings derived elsewhere; with the amendment
of Article 279 and the consequent elimination of the rule on the deduction of earnings
derived elsewhere, the rationale for including salary increases in the computation of
backwages no longer exists. On the references of salary increases in the aforementioned
cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank contends
that the same were merely obiter dicta. In fine, petitioner Bank anchors its claim on the
cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations
Commission;[34] (ii) Evangelista v. National Labor Relations Commission; [35] and
(iii) Espejo v. National Labor Relations Commission,[36] which ruled that an unqualified
award of backwages is exclusive of general salary increases and the employee is paid at
the wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when
it ruled that his backwages should include the general increases on the basis of the
following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and
(iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit


our pronouncements on the interpretation of the term backwages. We said that
backwages in general are granted on grounds of equity for earnings which a worker or
employee has lost due to his illegal dismissal.[37] It is not private compensation or
damages but is awarded in furtherance and effectuation of the public objective of the
Labor Code. Nor is it a redress of a private right but rather in the nature of a command to
the employer to make public reparation for dismissing an employee either due to the
formers unlawful act or bad faith.[38] The Court, in the landmark case of Bustamante v.
National Labor Relations Commission,[39] had the occasion to explicate on the meaning
of full backwages as contemplated by Article 279[40] of the Labor Code of the Philippines,
as amended by Section 34 of Rep. Act No. 6715. The Court in Bustamante said, thus:

The Court deems it appropriate, however, to reconsider such earlier


ruling on the computation of backwages as enunciated in said Pines City
Educational Center case, by now holding that conformably with the evident
legislative intent as expressed in Rep. Act No. 6715, above-
quoted, backwages to be awarded to an illegally dismissed
employee, should not, as a general rule, be diminished or reduced by the
earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while
litigating the legality (illegality) of his dismissal, must still earn a living to
support himself and family, while full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing
his employee. The clear legislative intent of the amendment in Rep. Act
No. 6715 is to give more benefits to workers than was previously given them
under the Mercury Drug rule or the deduction of earnings elsewhere
rule. Thus, a closer adherence to the legislative policy behind Rep. Act
No.6715 points to full backwages as meaning exactly that, i.e., without
deducting from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal. In other
words, the provision calling for full backwages to illegally dismissed
employees is clear, plain and free from ambiguity and, therefore, must be
applied without attempted or strained
interpretation. Index animi sermo est. [41]

Verily, jurisprudence has shown that the definition of full backwages has forcefully
evolved. In Mercury Drug Co., Inc. v. Court of Industrial Relations,[42] the rule was that
backwages were granted for a period of three years without qualification and without
deduction, meaning, the award of backwages was not reduced by earnings actually
earned by the dismissed employee during the interim period of the separation. This came
to be known as the Mercury Drug rule.[43] Prior to the Mercury Drug ruling in 1974, the
total amount of backwages was reduced by earnings obtained by the employee
elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule was
subsequently modified in Ferrer v. National Labor Relations Commission[44] and Pines
City Educational Center v. National Labor Relations Commission,[45] where we allowed
the recovery of backwages for the duration of the illegal dismissal minus the total amount
of earnings which the employee derived elsewhere from the date of dismissal up to the
date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted,
and instead, the dismissed employee was paid backwages for the entire period that he
was without work subject to the deductions, as mentioned. Finally came our ruling
in Bustamante which superseded Pines City Educational Center and
allowed full recovery of backwages without deduction and without qualification pursuant
to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act No.
6715, i.e., without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his reinstatement, that is,
covering the entirety of the period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full
backwages, mainly, the basis of the computation thereof. Otherwise stated, whether
general salary increases should be included in the base figure to be used in the
computation of backwages.

In so concluding that general salary increases should be made a component in the


computation of backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations,
40 SCRA 521 (1971) that general increases should be added as a part of
full backwages, to wit:

In other words, the just and equitable rule regarding the point
under discussion is this: It is the obligation of the employer to
pay an illegally dismissed employee or worker the whole
amount of the salaries or wages, plus all other benefits and
bonuses and general increases, to which he would have been
normally entitled had he not been dismissed and had not
stopped working, but it is the right, on the other hand of the
employer to deduct from the total of these, the amount
equivalent to the salaries or wages the employee or worker
would have earned in his old employment on the
corresponding days he was actually gainfully employed
elsewhere with an equal or higher salary or wage, such that if
his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.

The doctrine in East Asiatic was subsequently reiterated, in the cases of St.
Louis College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v.
National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioners contention, alleged in his


Memorandum that only the wage rate at the time of the employees illegal
dismissal should be considered private respondent citing the following
decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA
525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC,
255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic,
Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages
is the price or penalty that the employer must pay for having illegally
dismissed an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497
(1997) and Bustamante v. NLRC and Evergreen Farms, Inc. 265 SCRA 61
(1996) the Supreme Court held that the clear legislative intent in the
amendment in Republic Act 6715 was to give more benefits to workers than
was previously given them under the Mercury Drug rule or the deductions
of earnings elsewhere rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private


respondent are inapplicable to the case at bar. The doctrines therein came
about as a result of the old Mercury Drug rule, which was repealed with the
passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East
Asiatic, which was soon supplanted by the case of Bustamante v. NLRC
and Evergreen Farms, Inc., which held that the backwages to be awarded
to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period
of his illegal dismissal. Furthermore, the Mercury Drug rule was never
meant to prejudice the workers, but merely to speed the recovery of their
backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been
the intent of the Supreme Court to increase the backwages due an illegally
dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages
was interpreted to mean absolutely no deductions regardless of the duration
of the illegal dismissal. In Bustamante, the Supreme Court no longer
regarded equity as a basis when dealing with illegal dismissal cases
because it is not equity at play in illegal dismissals but rather, it is employers
obligation to pay full back wages (sic). It is an obligation of the employer
because it is the price or penalty the employer has to pay for illegally
dismissing his employee.

The applicable modern definition of full backwages is now found in Millares


v. National Labor Relations Commission 305 SCRA 500 (1999), where
although the issue in Millares concerned separation pay separation pay and
backwages both have employees wage rate at their foundation.

x x x The rationale is not difficult to discern. It is the obligation


of the employer to pay an illegally dismissed employee the
whole amount of his salaries plus all other benefits, bonuses
and general increases to which he would have been normally
entitled had he not been dismissed and had not stopped
working. The same holds true in case of retrenched
employees. x x x

xxxx

x x x Annual general increases are akin to allowances or other


benefits. [46] (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as
amended by Section 34 of Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. In cases of regular employment, the


employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his
actual reinstatement.(Emphasis supplied.)

Article 279 mandates that an employees full backwages shall be inclusive


of allowances and other benefits or their monetary equivalent. Contrary to the ruling of
the Court of Appeals, we do not see that a salary increase can be interpreted as either
an allowance or a benefit. Salary increases are not akin to allowances or benefits, and
cannot be confused with either. The term allowances is sometimes used synonymously
with emoluments, as indirect or contingent remuneration, which may or may not be
earned, but which is sometimes in the nature of compensation, and sometimes in the
nature of reimbursement.[47] Allowances and benefits are granted to the employee apart
or separate from, and in addition to the wage or salary. In contrast, salary increases are
amounts which are added to the employees salary as an increment thereto for varied
reasons deemed appropriate by the employer. Salary increases are not separate grants
by themselves but once granted, they are deemed part of the employees salary. To
extend the coverage of an allowance or a benefit to include salary increases would be to
strain both the imagination of the Court and the language of law. As aptly observed by
the NLRC, to otherwise give the meaning other than what the law speaks for by itself, will
open the floodgates to various interpretations.[48] Indeed, if the intent were to include
salary increases as basis in the computation of backwages, the same should have been
explicitly stated in the same manner that the law used clear and unambiguous terms in
expressly providing for the inclusion of allowances and other benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East


Asiatic, therein petitioner East Asiatic Company, Ltd. was found guilty of unfair labor
practices against therein respondent, Soledad A. Dizon, and the Court ordered her
reinstatement with back pay. On the question of the amount of backwages, the Court
granted the dismissed employee the whole amount of the salaries plus all general
increases and bonuses she would have received during the period of her lay-off with the
corresponding right of the employer to deduct from the total amounts, all the earnings
earned by the employee during her lay-off. The emphasis in East Asiatic is the duty of
both the employer and the employee to disclose the material facts and competent
evidence within their peculiar knowledge relative to the proper determination of
backwages, especially as the earnings derived by the employee elsewhere are
deductions to which the employer are entitled. However, East Asiatic does not find
relevance in the resolution of the issue before us. First, the material date to consider is 21
March 1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715,
otherwise known as the Herrera-Veloso Law, took effect. It is obvious that the backdrop
of East Asiatic, decided by this Court on 31 August 1971 was prior to the current state of
the law on the definition of full backwages. Second, it bears stressing that East
Asiatic was decided at a time when even as an illegally dismissed employee is entitled to
the whole amount of the salaries or wages, it was the recognized right of the employer to
deduct from the total of these, the amount equivalent to the salaries or wages the
employee or worker would have earned in his old employment on the corresponding days
that he was actually gainfully employed elsewhere with an equal or higher salary or wage,
such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.[49] It is for this reason the Court centered its
discussion on the duty of both parties to be candid and open about facts within their
knowledge to establish the amount of the deductions, and not leave the burden on the
employee alone to establish his claim, as well as on the duty of the court to compel the
parties to cooperate in disclosing such material facts. The inapplicability of East Asiatic to
respondent Sadac was sufficiently elucidated upon by the NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to


be executed in East Asiatic Co., Ltd. would reveal as follows:
x x x to reinstate Soledad A. Dizon immediately to her
former position with backwages from September 1, 1958 until
actually reinstated with all the rights and privileges acquired
and due her, including seniority and such other terms and
conditions of employment AT THE TIME OF HER LAY-OFF

The basis on which this doctrine was laid out was summed up by the
Supreme Court which ratiocinated in this light. To quote:

x x x on the other hand, of the employer to deduct from


the total of these, the amount equivalent to these salaries or
wages the employee or worker would have earned in his old
employment on the corresponding days that he was actually
gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what
has been actually earned x x x (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but
different judgment from that of East Asiatic Co. decretal portion, in this wise:

WHEREFORE, the herein questioned Resolution of the


NLRC is AFFIRMED with the following MODIFICATIONS: that
private respondent shall be entitled to backwages from
termination of employment until turning sixty (60) years of age
(in 1995) and, thereupon, to retirement benefits in accordance
with law; xxx

Undisputably (sic), it was decreed in plain and unambiguous language


that complainant Sadac shall be entitled to backwages. No more, no less.

Thus, this decree for Sadac cannot be considered in any way,


substantially in essence, with the award of backwages as pronounced for
Ms. Dizon in the case of East Asiatic Co. Ltd.[50]

In the same vein, we cannot accept the Court of Appeals reliance on the doctrine
as espoused in Millares. It is evident that Millares concerns itself with the computation of
the salary base used in computing the separation pay of petitioners therein. The
distinction between backwages and separation pay is elementary. Separation pay is
granted where reinstatement is no longer advisable because of strained relations
between the employee and the employer. Backwages represent compensation that
should have been earned but were not collected because of the unjust dismissal. The
bases for computing the two are different, the first being usually the length of the
employees service and the second the actual period when he was unlawfully prevented
from working.[51]

The issue that confronted the Court in Millares was whether petitioners housing
and transportation allowances therein which they allegedly received on a monthly basis
during their employment should have been included in the computation of their separation
pay. It is plain to see that the reference to general increases in Millares citing East
Asiatic was a mere obiter.The crux in Millares was our pronouncement that the receipt of
an allowance on a monthly basis does not ipso facto characterize it as regular and
forming part of salary because the nature of the grant is a factor worth
considering. Whether salary increases are deemed part of the salary base in the
computation of backwages was not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant


controversy. What was mainly contentious therein was the inclusion of fringe benefits in
the computation of the award of backwages, in particular additional vacation and sick
leaves granted to therein concerned employees, it evidently appearing that the reference
to East Asiatic in a footnote was a mere obiter dictum. Salary increases are not akin to
fringe benefits[52] and neither is it logical to conceive of both as belonging to the same
taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the
case at bar. The basic issue before the Court therein was whether the employee, Susan
Sumatre, a domestic helper in Abu Dhabi, United Arab Emirates, had been illegally
dismissed, in light of the contention of Sigma Personnel Services, a duly licensed
recruitment agency, that the former was a mere probationary employee who was, on top
of this status, mentally unsound.[53] Even a cursory reading of Sigma Personnel
Services citing St. Louis College of Tuguegarao would readily show that inclusion of
salary increases in the computation of backwages was not at issue. The same was not
on all fours with the instant petition.

What, then, is the basis of computation of backwages? Are annual general


increases in basic salary deemed component in the computation of full backwages? The
weight of authority leans in petitioner Banks favor and against respondent Sadacs claim
for the inclusion of general increases in the computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages


requires simply an application of judicial precedents defining the term
"backwages". Unfortunately, the Labor Arbiter erred in this regard. An
unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of
Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418;
Capital Garments Corporation v. Ople, G.R. No. 53627, September 30,
1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that
the base figure to be used in the computation of backwages due to the
employee should include not just the basic salary, but also the regular
allowances that he had been receiving, such as the emergency living
allowances and the 13th month pay mandated under the law [See Pan-
Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29,
1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721, September 21,
1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987,
155 SCRA 124; Insular Life Assurance Co., Ltd. v.
[54]
NLRC, supra.] (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation
of backwages is pegged at the wage rate at the time of the employees dismissal, inclusive
of regular allowances that the employee had been receiving such as the emergency living
allowances and the 13th month pay mandated under the law.

In Evangelista v. National Labor Relations Commission,[55] we addressed the sole


issue of whether the computation of the award of backwages should be based on current
wage level or the wage levels at the time of the dismissal. We resolved that an unqualified
award of backwages means that the employee is paid at the wage rate at the time of his
dismissal, thus:

As explicitly declared in Paramount Vinyl Products Corp. vs.


NLRC, the determination of the salary base for the computation of
backwages requires simply an application of judicial precedents defining the
term backwages. An unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal. Furthermore,
the award of salary differentials is not allowed, the established rule being
that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were
not dismissed or did not go on strike.[56]

The case of Paramount was relied upon by the Court in the latter case of Espejo
v. National Labor Relations Commission,[57] where we reiterated that the computation of
backwages should be based on the basic salary at the time of the employees dismissal
plus the regular allowances that he had been receiving. Further, the clarification made by
the Court in General Baptist Bible College v. National Labor Relations
Commission,[58] settles the issue, thus:

We also want to clarify that when there is an award of backwages


this actually refers to backwages without qualifications and
deductions. Thus, We held that:

The term backwages without qualification and deduction


means that the workers are to be paid their backwages fixed
as of the time of the dismissal or strike without deduction for
their earnings elsewhere during their layoff and without
qualification of their wages as thus fixed; i.e., unqualified by
any wage increases or other benefits that may have been
received by their co-workers who are not dismissed or did not
go on strike. Awards including salary differentials are not
allowed. The salary base properly used should, however,
include not only the basic salary but also the emergency cost
of living allowances and also transportation allowances if the
workers are entitled thereto.[59] (Italics supplied.)

Indeed, even a cursory reading of the dispositive portion of the Courts Decision
of 13 June 1997 in G.R. No. 102467, awarding backwages to respondent Sadac, readily
shows that the award of backwages therein is unqualified, ergo, without qualification of
the wage as thus fixed at the time of the dismissal and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court
in Paguio v. Philippine Long Distance Telephone Co., Inc.,[60] where therein petitioner
Paguio, on account of his illegal transfer sought backwages, including an amount equal
to 16 percent (16%) of his monthly salary representing his salary increases during the
period of his demotion, contending that he had been consistently granted salary increases
because of his above average or outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the
reason for the grant of backwages. Backwages are granted on grounds of
equity to workers for earnings lost due to their illegal dismissal from
work. They are a reparation for the illegal dismissal of an employee based
on earnings which the employee would have obtained, either by virtue of a
lawful decree or order, as in the case of a wage increase under a wage
order, or by rightful expectation, as in the case of ones salary or wage. The
outstanding feature of backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had he not been
illegally terminated from his employment.

Petitioners claim, however, is based simply on expectancy or his


assumption that, because in the past he had been consistently rated for his
outstanding performance and his salary correspondingly increased, it is
probable that he would similarly have been given high ratings and salary
increases but for his transfer to another position in the company.

In contrast to a grant of backwages or an award of lucrum cessans in


the civil law, this contention is based merely on speculation. Furthermore, it
assumes that in the other position to which he had been transferred
petitioner had not been given any performance evaluation. As held by the
Court of Appeals, however, the mere fact that petitioner had been previously
granted salary increases by reason of his excellent performance does not
necessarily guarantee that he would have performed in the same manner
and, therefore, qualify for the said increase later. What is more, his claim is
tantamount to saying that he had a vested right to remain as Head of the
Garnet Exchange and given salary increases simply because he had
performed well in such position, and thus he should not be moved to any
other position where management would require his services.[61]

Applying Paguio to the case at bar, we are not prepared to accept that this degree
of assuredness applies to respondent Sadacs salary increases. There was no lawful
decree or order supporting his claim, such that his salary increases can be made a
component in the computation of backwages. What is evident is that salary increases are
a mere expectancy. They are, by its nature volatile and are dependent on numerous
variables, including the companys fiscal situation and even the employees future
performance on the job, or the employees continued stay in a position subject to
management prerogative to transfer him to another position where his services are
needed. In short, there is no vested right to salary increases. That respondent Sadac may
have received salary increases in the past only proves fact of receipt but does not
establish a degree of assuredness that is inherent in backwages. From the foregoing, the
plain conclusion is that respondent Sadacs computation of his full backwages which
includes his prospective salary increases cannot be permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks


only of wage and not salary, and therefore, the rule is inapplicable to him. It is respondent
Sadacs stance that he was not paid at the wage rate nor was he engaged in some form
of manual or physical labor as he was hired as Vice President of petitioner Bank. He
cites Gaa v. Court of Appeals[62] where the Court distinguished between wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was
for the purpose of Article 1708 of the Civil Code which mandates that, [t]he laborers wage
shall not be subject to execution or attachment, except for debts incurred for food, shelter,
clothing and medical attendance. In labor law, however, the distinction appears to be
merely semantics.Paramount and Evangelista may have involved wage earners, but the
petitioner in Espejo was a General Manager with a monthly salary of P9,000.00 plus
privileges. That wage and salary are synonymous has been settled in Songco v. National
Labor Relations Commission.[63] We said:

Broadly, the word salary means a recompense or consideration made to a


person for his pains or industry in another mans business. Whether it be
derived from salarium, or more fancifully from sal, the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
wages and salary are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839,
841, 89 App. Div. 481; 38 Am. Jur. 496). Salary, the etymology of which is
the Latin word salarium, is often used interchangeably with wage, the
etymology of which is the Middle English word wagen. Both words generally
refer to one and the same meaning, that is, a reward or recompense for
services performed. Likewise, pay is the synonym of wages and salary
(Blacks Law Dictionary, 5th Ed). x x x[64] (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals
ruling that respondent Sadac is entitled to check-up benefit, clothing allowance and cash
conversion of vacation leaves notwithstanding that respondent Sadac did not present any
evidence to prove entitlement to these claims.[65]
The determination of respondent Sadacs entitlement to check-up benefit, clothing
allowance, and cash conversion of vacation leaves involves a question of fact. The well-
entrenched rule is that only errors of law not of facts are reviewable by this Court in a
petition for review.[66] The jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited
to reviewing only errors of law, not of fact, unless the factual findings being assailed are
not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.[67] This Court is also not precluded from delving into and
resolving issues of facts, particularly if the findings of the Labor Arbiter are inconsistent
with those of the NLRC and the Court of Appeals.[68] Such is the case in the instant
petition. The Labor Arbiter and the Court of Appeals are in agreement anent the
entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash
conversion of vacation leaves, but the findings of the NLRC were to the contrary. The
Labor Arbiter sustained respondent Sadacs entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Banks
acknowledgment in its computation that respondent Sadac is entitled to certain benefits,
namely, rice subsidy, tuition fee allowance, and medicine allowance, thus, there exists no
reason to deprive respondent Sadac of his other benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim that the
benefits sought by respondent Sadac are not granted to its employees and
officers. Similarly, the Court of Appeals ratiocinated that if ordinary employees are entitled
to receive these benefits, so it is with more reason for a Vice President, like herein
respondent Sadac to receive the same.

We find in the records that, per petitioner Banks computation, the benefits to be
received by respondent are monthly rice subsidy, tuition fee allowance per year, and
medicine allowance per year.[69] Contained nowhere is an acknowledgment of herein
claimed benefits, namely, check-up benefit, clothing allowance, and cash conversion of
vacation leaves. We cannot sustain the rationalization that the acknowledgment by
petitioner Bank in its computation of certain benefits granted to respondent Sadac means
that the latter is also entitled to the other benefits as claimed by him but not acknowledged
by petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Mere
allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.

III.

We come to the third assignment of error raised by petitioner Bank in its


Supplement to Petition for Review, assailing the 26 October 2004 Supplemental Decision
of the Court of Appeals which amended the fallo of its 6 April 2004 Decision to include
attorneys fees equal to TEN PERCENT (10%) of all the monetary award granted to
respondent Sadac. Petitioner Bank posits that neither the dispositive portion of our 13
June 1997 Decision in G.R. No. 102467 nor the body thereof awards attorneys fees to
respondent Sadac. It is postulated that the body of the 13 June 1997 Decision does not
contain any findings of facts or conclusions of law relating to attorneys fees, thus, this
Court did not intend to grant to respondent Sadac the same, especially in the light of its
finding that the petitioner Bank was not motivated by malice or bad faith and that it did
not act in a wanton, oppressive, or malevolent manner in terminating the services of
respondent Sadac.[70]

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory,
it thereby becomes immutable and unalterable. The judgment may no longer be modified
in any respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the modification is
attempted to be made by the Court rendering it or by the highest Court of the land. The
only recognized exceptions are the correction of clerical errors or the making of so-
called nunc pro tunc entries which cause no prejudice to any party, and, of course, where
the judgment is void.[71] The Courts 13 June 1997 Decision in G.R. No. 102467 became
final and executory on 28 July 1997. This renders moot whatever argument petitioner
Bank raised against the grant of attorneys fees to respondent Sadac. Of even greater
import is the settled rule that it is the dispositive part of the judgment that actually settles
and declares the rights and obligations of the parties, finally, definitively, and
authoritatively, notwithstanding the existence of inconsistent statements in the body that
may tend to confuse.[72]

Proceeding therefrom, we make a determination of whether the Court in Equitable


Banking Corporation v. National Labor Relations Commission,[73] G.R. No. 102467,
dated 13 June 1997, awarded attorneys fees to respondent Sadac. In recapitulation, the
dispositive portion of the aforesaid Decision is hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is


AFFIRMED with the following MODIFICATIONS: That private respondent
shall be entitled to backwages from termination of employment until turning
sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.[74]

The dispositive portion of the 24 September 1991 Decision of the NLRC awards
respondent Sadac attorneys fees equivalent to ten percent (10%) of the monetary
award, viz:

WHEREFORE, in view of all the foregoing considerations, let the


Decision of October 2, 1990 be, as it is hereby, SET ASIDE and a new one
ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him
to his former position as bank Vice-President and General Counsel without
loss of seniority rights and other privileges, and to pay him full backwages
and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorneys fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from
November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees
equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.[75](Italics Ours.)

As can be gleaned from the foregoing, the Courts Decision of 13 June


1997 AFFIRMED with MODIFICATION the NLRC Decision of 24 September 1991, which
modification did not touch upon the award of attorneys fees as granted, hence, the award
stands. Juxtaposing the decretal portions of the NLRC Decision of 24 September
1991 with that of the Courts Decision of 13 June 1997, we find that what was deleted by
the Court was the award of moral and exemplary damages, but not the award of attorneys
fees equivalent to Ten Percent (10%) of the monetary award. The issue on the grant of
attorneys fees to respondent Sadac has been adequately and definitively threshed out
and settled with finality when petitioner Bank came to us for the first time on a Petition
for Certiorari in Equitable Banking Corporation v. National Labor Relations Commission,
docketed as G.R. No. 102467. The Court had spoken in its Decision of 13 June 1997 in
the said case which attained finality on 28 July 1997. It is now immutable.
IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to


twelve percent (12%) interest per annum on the outstanding balance as of 28 July 1997,
the date when our Decision in G.R. No. 102467 became final and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals,[76] the Court, speaking through
the Honorable Justice Jose C. Vitug, laid down the following rules of thumb:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor can
be held liable for damages. The provisions under Title XVIII on Damages
of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of


actual or compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a


sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is


breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of
the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.

3. When the judgment of the court awarding a sum of money becomes


final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2 above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.[77]

It is obvious that the legal interest of twelve percent (12%) per annum shall be
imposed from the time judgment becomes final and executory, until full satisfaction
thereof. Therefore, petitioner Bank is liable to pay interest from 28 July 1997, the finality
of our Decision in G.R. No. 102467.[78] The Court of Appeals was not in error in
imposing the same notwithstanding that the parties were at variance in the computation
of respondent Sadacs backwages. What is significant is that the Decision of 13 June
1997 which awarded backwages to respondent Sadac became final and executory
on 28 July 1997.

V.

Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily
be denied as established in our foregoing discussion. We are not herein modifying or
reversing a doctrine or principle laid down by the Court en banc or in a division. The
instant case is not one that should be heard by the Court en banc.[79]

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the


computation of the backwages, respondent Sadacs claimed prospective salary increases,
check-up benefit, clothing allowance, and cash conversion of vacation leaves are
excluded. The petition is PARTIALLY DENIED insofar as we AFFIRMED the grant of
attorneys fees equal to ten percent (10%) of all the monetary award and the imposition of
twelve percent (12%) interest per annum on the outstanding balance as of 28 July
1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision
dated 26 October 2004 are MODIFIEDin the following manner, to wit:

Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:


(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R.
No. 102467 with a clarification that the award of
backwages EXCLUDES respondent Sadacs claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation
leaves;

(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all
monetary award; and

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the
total sum of all monetary award from 28 July 1997, the date of finality of Our
Decision in G.R. No. 102467 until full payment of the said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.
SO ORDERED.

Eastern Shipping vs. Sedan, 486 SCRA 565,


GR 159354, April 7, 2006
THIRD DIVISION

EASTERN SHIPPING LINES, INC., G.R. No. 159354


and/or ERWIN L. CHIONGBIAN,
Petitioners, Present:

QUISUMBING, J., Chairperson,


- versus - CARPIO,
CARPIO MORALES, and
TINGA, JJ.

DIOSCORO D. SEDAN, Promulgated:


Respondent. April 7, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:
For review on certiorari are the Decision[1] and Resolution,[2] dated February 14,
2003 and August 7, 2003, respectively, of the Court of Appeals in CA-G.R. SP No. 70836,
which reversed the October 4, 2001[3] Resolution of the National Labor Relations
Commission affirming the Labor Arbiters Decision of June 15, 2000.[4]

The antecedent facts, as culled from the records, are as follows:

On December 30, 1973, petitioners hired on a per-voyage basis private


respondent Dioscoro[5] Sedan as 3rd marine engineer and oiler in one of the vessels
owned by petitioners. His last voyage was on July 27, 1997 on board the
vessel M/V Eastern Universe. His monthly pay was P22,000.[6] Additionally, after each
voyage his earned leave credits are monetized and paid in cash. He said he was
disembarking because he was going to take the board examinations for marine
engineers.

Two months later, on September 27, 1997, Sedan sent a letter to petitioners
applying for optional retirement, citing as reason the death of his only daughter, hence
the retirement benefits he would receive would ease his financial burden. However,
petitioners deferred action on his application for optional retirement since his services on
board ship were still needed. Nonetheless, according to petitioners, the company
expressed intention to extend him a loan in order to defray the costs incurred for the burial
and funeral expenses of his daughter.

On October 28, 1997, Sedan sent petitioners another letter[7] insisting on the
release of half of his optional retirement benefits. Later, he said that he no longer wanted
to continue working on board a vessel for reasons of health.[8]

On December 1, 1997, Sedan sent another letter to petitioners threatening to file


a complaint if his application was not granted. In reply, according to petitioners, the
company management sent a telegram on December 9, 1997 informing Sedan that his
services were needed on board a vessel and that he should report immediately for work
as there was no available replacement. Sedan claims he did not receive the telegram,
nor was this fact proved by the company before the Labor Arbiter or the NLRC.

Sedan proceeded to file a complaint with the Labor Arbiter against petitioners,
docketed as NLRC-NCR CASE NO. 00-12-08578-97, demanding payment of his
retirement benefits, leave pay, 13th month pay and attorneys fees. The Labor Arbiter ruled
in favor of Sedan, as follows:
WHEREFORE, premises all considered, judgment is hereby
rendered as follows:

1. Ordering respondents to pay complainant retirement


gratuity/separation pay of P253,000.00 (23 yrs. x P22,000.00 at
month for every year of service).

2. Ordering respondents to pay complainant 10% of the total


monetary award by way of attorneys fees.

All other claims are dismissed for lack of merit.

SO ORDERED.[9]

Petitioners appealed the said decision to the National Labor Relations


Commission. However, the NLRC found the factual findings of the Labor Arbiter
consistent with the evidence on record. Hence, the NLRC dismissed the appeal for lack
of merit. Petitioners motion for reconsideration was likewise denied.

Dissatisfied, petitioners filed a special civil action for certiorari with the Court of
Appeals anchored on the following grounds:

1. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF


DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
AWARDING RETIREMENT GRATUITY/SEPARATION PAY TO THE
PRIVATE RESPONDENT BY HOLDING THAT THERE WAS NO
EVIDENCE TO SHOW THAT PRIVATE RESPONDENT WAS
INFORMED/NOTIFIED OF PETITIONERS NEED FOR HIS SERVICES OR
DIRECTING HIM TO REPORT FOR WORK, INCLUDING [ACTION] ON
HIS APPLICATION FOR OPTIONAL RETIREMENT.

2. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF


DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
AWARDING ATTORNEYS FEES TO THE PRIVATE RESPONDENT
CONSIDERING THAT PETITIONERS ACTED IN GOOD FAITH IN
REFUSING THE SUBJECT CLAIM.[10]

The Court of Appeals granted the petition and ruled that the retirement gratuity and
attorneys fees awarded by the Labor Arbiter and the NLRC had no basis in fact or law
since pursuant to the Agreement between the company and the employees, the granting
of optional retirement is the exclusive prerogative of the employer, herein
petitioners. Unless such prerogative was exercised arbitrarily or capriciously, private
respondent cannot demand it as a right. Nonetheless, the Court of Appeals ordered
petitioners to pay private respondent P200,000 as financial assistance, to wit:

WHEREFORE, FOREGOING PREMISES CONSIDERED, this


petition is GRANTED. The assailed Decision dated October 4, 2001 and the
Resolution dated April 22, 2002 of public respondent National Labor
Relations Commission in NLRC NCR Case No. 00-12-08578-97/NLRC CA
No. 026697-00 entitled, Dioscoro D. Sedan, complainant-appellee vs.
Eastern Shipping Lines, Inc. and/or Erwin L. Chiongbian, respondents-
appellants are hereby reversed and set aside for having been
rendered/issued with grave abuse of discretion amounting to lack or in
excess of jurisdiction and, in lieu thereof, petitioners are hereby ordered to
pay respondent Dioscoro D. Sedan the amount of Two Hundred Thousand
(P200,000.00) Pesos as financial assistance.

SO ORDERED.[11]

Petitioners filed a motion for reconsideration, but it was denied by the Court of
Appeals.

Hence, the instant petition raising as sole issue:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN


GIVING THE RESPONDENT PHP200,000.00 AS FINANCIAL
ASSISTANCE WHEN IN FACT IT WAS THE RESPONDENT WHO
REFUSED TO REPORT FOR WORK.[12]

Petitioners contend that by refusing to report for work and insisting on applying for
optional retirement, private respondent wrongly assumed that he was justified in
abandoning his job. Petitioners maintain that private respondents refusal to report back
to work, despite being duly notified of the need for his service, is tantamount to voluntary
resignation. Therefore, petitioners contend, the respondent should not be entitled to any
financial assistance.
Moreover, granting arguendo that private respondent was entitled to financial
assistance, petitioners protest the amount of the financial assistance awarded by the
Court of Appeals for being disproportionately excessive. Petitioners
[13]
cite Manggagawa ng Komunikasyon sa Pilipinas v. NLRC, where the employee was
given only P10,000 as financial assistance.
In his Comment, private respondent argues that the Court of Appeals awarded
him P200,000 for equity consideration. Private respondent claims that the retirement
policy of the company, which states that [i]t will be the exclusive prerogative and sole
option of this company to retire any covered employee,[14] must be interpreted in favor of
the working class. Otherwise, private respondent laments, he will be placed at the mercy
of the company, contrary to the constitutional mandate to afford full protection to labor.

At the outset, we rule for petitioners on the matter of optional retirement benefits.

Private respondent is not entitled to retirement benefits. The pertinent law


governing retirement is found in the Labor Code, which provides:
ART. 287. Retirement. Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or
other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such


retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided,
however, That an employees retirement benefits under any collective
bargaining and other agreements shall not be less than those provided
herein.

In the absence of a retirement plan or agreement providing for


retirement benefits of employees in the establishment, an employee upon
reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment may retire and shall
be entitled to retirement pay equivalent to at least one half (1/2) month
salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
xxx

The age of retirement is primarily determined by the existing agreement between


the employer and the employees. However, in the absence of such agreement, the
retirement age shall be fixed by law. Under the aforecited article of the Labor Code, the
legally mandated age for compulsory retirement is 65 years, while the set minimum age
for optional retirement is 60 years.
In the instant case, there is an agreement[15] between petitioner shipping company and
its employees. The agreement states:

xxx
B. Retirement under the Labor Code:

Any employee whether land-based office personnel or shipboard employee


who shall reach the age of sixty (60) while in active employment with this
company may retire from the service upon his written request in accordance
with the provisions of Art. 277 of the Labor Code and its Implementing
Rules, Book 6, Rule 1, Sec. 13 and he shall be paid termination pay
equivalent to fifteen (15) days pay for every year of service as stated in said
Labor Code and its Implementing Rules. However, the company may at its
own volition grant him a higher benefit which shall not exceed the benefits
provided for in the Retirement Gratuity table mentioned elsewhere in this
policy.

C. Optional Retirement:

It will be the exclusive prerogative and sole option of this company


to retire any covered employee who shall have rendered at least fifteen (15)
years of credited service for land based employees and 3,650 days actually
on board vessel for shipboard personnel. Such employee shall be entitled
to a Retirement Gratuity which shall be computed in accordance with the
following table:

Years of Service Monthly Basic Pay


(Percentage)

15 years 55%
16 years 56%
17 years 57%
18 years 58%
19 years 59%
20 years 60%
21 years 63%
22 years 66%
23 years 69%
24 years 72%
25 years 75%
26 years 80%
27 years 85%
28 years 90%
29 years 95%
30 years or above 100%
The computation of the benefit shall be based on the final basic pay,
for every year of credited service, a fraction of at least six (6) months being
considered as one whole year but shall be exclusive of fringe benefits and
other special emoluments.[16]

xxx

Clearly, the eligibility age for optional retirement is set at 60 years. [17] However,
employees of herein petitioners who are under the age of 60 years, but have rendered at
least 3650 days (10 years) on board ship or fifteen (15) years of service for land-based
employees may also avail of optional retirement, subject to the exclusive prerogative and
sole option of petitioner company.[18]
Records show that private respondent was only 48 years old[19] when he applied for
optional retirement. Thus he cannot claim optional retirement benefits as a matter of
right. His application for optional retirement was subject to the exclusive prerogative and
sole option of the shipping company pursuant to the abovecited agreement between the
workers and the company. In this regard, no error was committed by the appellate court
when it set aside the ruling of the Labor Arbiter and the NLRC granting herein private
respondent P253,000retirement gratuity/separation pay.

So now we come to the grant of financial assistance by the appellate court. We


are not unmindful of the rule that financial assistance is allowed only in instances where
the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character.[20] Neither are we unmindful of this Courts
pronouncements in Arc-Men Food Industries Corporation v.
[21] [22]
NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that
when there is no dismissal to speak of, an award of financial assistance is not in order.

But we must stress that this Court did allow, in several instances, the grant of
financial assistance.[23] In the words of Justice Sabino de Leon, Jr., now deceased,
financial assistance may be allowed as a measure of social justice and exceptional
circumstances, and as an equitable concession.[24] The instant case equally calls for
balancing the interests of the employer with those of the worker, if only to approximate
what Justice Laurel calls justice in its secular sense.[25]

In this instance, our attention has been called to the following circumstances: that
private respondent joined the company when he was a young man of 25 years and stayed
on until he was 48 years old; that he had given to the company the best years of his youth,
working on board ship for almost 24 years; that in those years there was not a single
report of him transgressing any of the company rules and regulations; that he applied for
optional retirement under the companys non-contributory plan when his daughter died
and for his own health reasons; and that it would appear that he had served the company
well, since even the company said that the reason it refused his application for optional
retirement was that it still needed his services; that he denies receiving the telegram
asking him to report back to work; but that considering his age and health, he preferred
to stay home rather than risk further working in a ship at sea.

In our view, with these special circumstances, we can call upon the same social
and compassionate justice cited in several cases[26] allowing financial assistance. These
circumstances indubitably merit equitable concessions, via the principle of
compassionate justice for the working class. Thus, we agree with the Court of Appeals to
grant financial assistance to private respondent. The only catch is whether, as the
shipping company alleges, the amount of P200,000 that the Court of Appeals granted him
is arbitrary and excessive.

The propriety of awarding financial assistance has long been tackled by this
Court. In Philippine Long Distance Telephone Co. v. NLRC,[27] we laid down the rule that
henceforth separation pay shall be allowed as a measure of social justice only in the
instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. A contrary rule, we said would have
the effect of rewarding rather than punishing an erring employee.

Subsequent to PLDT, in the 2004 case of Piero v. NLRC,[28] Piero who was dismissed for
an illegal strike was granted one-half () months pay for the 29 years of his service. His
infraction was deemed not so reprehensible nor unscrupulous as to warrant complete
disregard of his long years of service with no derogatory record. In Aparente, Sr. v.
NLRC,[29] for blatant disobedience of company rules, one-half () months pay for every
year of service was also deemed equitable. In the 1998 case of Salavarria v. NLRC,[30] for
the teacher who had previously been meted with a two week suspension for the same
offense, illegally soliciting contributions from students, the Court granted one months
salary for every year of service because, said the Court, she never took custody of the
illegally solicited funds.

Considering the doctrine in the abovecited NLRC cases and taking into account equitable
results in those cases, we find the grant of two hundred thousand pesos (P200,000) by
the Court of Appeals, neither arbitrary nor excessive. Private respondent who has no
derogatory record in his 23 years of service should be granted equitable assistance equal
to one-half months pay for each of his 23 years of service.

To conclude, in the instant case, private respondent has no claim against petitioners for
retirement benefits. We agree with the appellate court, however, that financial assistance
could be awarded him but only as an equitable concession under the special
circumstances of this case.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals granting
assistance to private respondent in the amount of two hundred thousand pesos
(P200,000) is AFFIRMED. No pronouncement as to cost.

SO ORDERED.

Hanford vs. Joseph, 454 SCRA 773,


GR 158251, March 31, 2005

T H I R D D I V I S I O N

HANFORD PHILIPPINES, G.R. No. 158251


INCORPORATED and VICTOR
TE,
Petitioners, Present:

PANGANIBAN,J., Chairman,
- versus - SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.

SHIRLEY JOSEPH,
Respondent. Promulgated:

March 31, 2005


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

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision[1] of the Court of Appeals dated January
23, 2003and its Resolution dated April 29, 2003 in CA-G.R. SP No. 60701.

On July 17, 1978, petitioner Hanford Philippines, Inc. (Hanford) hired Shirley Joseph,
herein respondent, as a sewer.

On August 10, 1998, respondent voluntarily tendered her resignation effective September
17, 1998,[2] which petitioner accepted the following day.[3]

Petitioner then paid respondent her last salary, 13 th month pay and the cash conversion
of her unused vacation and sick leave.

On November 19, 1998,[4] respondent sent a letter to petitioner requesting


payment of her separation pay pursuant to Section 1, Article IV of the Collective
Bargaining Agreement (CBA) quoted as follows:

SECTION 1. Regular employees or workers separated by the


COMPANY because of reduction of personnel and employees or workers
who may be separated without cause, or those whose services are
terminated or are separated from work due to suspension or cessation of
operation shall be entitled to a termination pay in accordance with law. The
COMPANY shall give termination pay to those who voluntarily resign due
to the reasons heretofore statedsubject to the following terms and
conditions:

a) 1 to 30 years of service shall be paid 20 days for every year


of service;
b) 16 to 20 years of service to the COMPANY shall be paid 15
days pay for every year of service;
c) 11 to 15 years of service to the COMPANY shall be paid 10
days pay for every year of service; and
d) 5 to 10 years of service to the COMPANY shall be paid 5
days pay for every year of service.[5]
Petitioner denied respondents request on the ground that under the Labor Code,
voluntary resignation is not one of the grounds which justifies the grant of separation
pay.[6]

On December 17, 1998, respondent filed with the Office of the Labor Arbiter a complaint
for the payment of her separation pay against petitioner Hanford and co-petitioner Victor
Te, docketed as NLRC NCR CN. 00-12-10238-98.

On May 20, 1999, the Labor Arbiter rendered a Decision [7] granting respondents petition
and ordering petitioners to pay her separation pay in the amount of P93,820.00 as
authorized by Section 1, Article IV of the parties CBA.

On appeal, the National Labor Relations Commission (NLRC) rendered its


Resolution[8] dated April 14, 2000 affirming the Labor Arbiters Decision.

Forthwith, petitioners filed their motion for reconsideration

but was denied by the NLRC in its Resolution[9] dated July 24, 2000, prompting them
to file with the Court of Appeals a petition for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure, as amended.

On January 23, 2003, the Appellate Court rendered its Decision[10] dismissing the petition.

The Court of Appeals held that the parties CBA clearly provides that
petitioner Hanford shall give termination pay to those who voluntarily resigned due to the
following reasons: reduction of personnel; employees or workers who may be separated
without cause; and those whose services are terminated due to suspension or cessation
of operation. Here, respondent voluntarily resigned. This separation from the service is
one without cause as provided by the CBA. Hence, pursuant thereto, petitioner is entitled
to a separation pay.

Petitioners filed a motion for reconsideration. However, it was denied by the Appellate
Court in a Resolution dated April 29, 2003.[11]

Hence, the present recourse. Petitioners contend that the Court of Appeals erred
in ruling that a resigned employee is entitled to separation pay under Section 1, Article IV
of the CBA.[12]

Respondent counters that the Decision of the Court of Appeals should not be
disturbed. She worked with petitioner company for twenty years but decided to resign
believing that pursuant to the CBA, she is entitled to a separation pay. She also avers
that several former employees of petitioner, namely: Astor Madamag, Danilo Suplito,
Domingo Bobis, Rosita Bobis, Evelyn Cunanan, Fe Viray, Doris Angeles and Dula
Imperia, were granted separation pay pursuant to the CBA and petitioners policy and
practice.[13]

It is well to note that there is no provision in the Labor Code which grants
separation pay to employees who voluntarily resign. Under the Code, separation pay may
be awarded only in cases when the termination of employment is due to: (a) installation
of labor saving devices, (b) redundancy, (c) retrenchment, (d) closing or cessation of
business operations, (e) disease of an employee and his continued employment is
prejudicial to himself or his co-employees, or (f) when an employee is illegally dismissed
but
reinstatement is no longer feasible.

In Hinatuan Mining Corporation and/or the Manager versus National Labor


Relations and Margo Batister,[14] we held that while it is true that under the Labor Code,
an employee who voluntarily resigns may not be granted separation pay, as in fact, the
general rule is that an employee who voluntarily resigns is not entitled to separation pay,
however, there is an exception, that is, when it is stipulated in the employment contract
or CBA or such payment is authorized by the employers practice or policy, as in this
case.[15]

As aptly held by the Labor Arbiter, the NLRC and the Court of Appeals, it is very
clear from the CBA that when an employee or worker voluntarily resigns due to, among
others, separation from the company without cause, such as voluntary resignation, then
he is entitled to a separation pay.

Moreover, records show that petitioners granted the employees mentioned earlier
their separation pay upon their separation by reason of their retirement. Under the Labor
Code, retirement is not also a ground for the grant of separation pay. If petitioners could
be liberal to those employees who retired, there is no reason why they should not also
extend such liberality to respondent considering that she served petitioner for twenty one
years.

Our ruling in Philippine National Construction vs. NLRC finds application here,
thus:

In the interpretation of an employers program providing for


separation benefits, all doubts should be construed in favor of labor. After
all, workers are the intended beneficiaries of such program and our
Constitution mandates a clear bias in favor of the working class.

WHEREFORE, the petition is hereby DENIED. Costs against petitioners.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

Tan vs Timbal, 434 SCRA 381,

GR 141926, July 14, 2004


[G.R. No. 141926. July 14, 2004]

CONRADO TAN, petitioner, vs. RESTITUTO TIMBAL, JR., respondent.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals
in CA-G.R. SP No. 51404 which affirmed with modification the decision of the National
Labor Relations Commission (NLRC) in NLRC Case No. NCR-00-08-03596-89.
The antecedents are as follows:
On July 17, 1989, Restituto Timbal, Jr. and Ernesto Valenciano received a letter from
their employer, Nationwide Steel Corporation (NSC), through Conrado Tan, its general
manager, informing them that they were found to be among those employees who filed a
complaint with the Social Security System (SSS) in which they claimed that NSC was not
remitting its employees SSS premiums. Tan required the two to explain their side on the
matter within 24 hours.
After submitting their explanation, Timbal, Jr. and Valenciano were instructed by Tan
to report the following day for the resolution of the matter. However, when Timbal, Jr. and
Valenciano arrived the following day, they were not allowed entry by the security
guard. Both were handed a memorandum signed by Tan stating that they were being
suspended indefinitely. Timbal, Jr. and Valenciano refused to receive the memorandum
and tried to report for work the next day. Again, they were refused entry by the security
guard.
Aggrieved, Timbal, Jr. and Valenciano filed, on August 3, 1989, a complaint for illegal
dismissal with the NLRC, against NSC, and impleaded Conrado Tan as respondent, in
his capacity as general manager of the said corporation. [2] The case was docketed as
NLRC-NCR-00-08-03596-89.
The respondents alleged in their position papers that the complainants falsely
charged NSC of not paying the SSS premium contributions of its employees, and that
both complainants were indefinitely suspended as a result of the criminal case filed by
Benny Sy against them for their false charge.
At the conclusion of the proceedings, the Labor Arbiter rendered his decision on
August 9, 1990 in favor of the complainants and against the NSC only, the decretal portion
of which reads as follows:

WHEREFORE, finding the respondent company guilty of illegal dismissal as charged,


judgment is hereby rendered ordering it to reinstate complainants to their former or
equivalent positions without loss of seniority rights and to pay them full backwages and
other benefits.

SO ORDERED.[3]

Labor Arbiter Cornelio L. Linsangan found that the respondents failed to substantiate
the charge that Timbal, Jr. and Valenciano falsely accused NSC of not paying the SSS
premium contributions of its employees and failing to remit the said contributions. He also
declared that the evidence on record showed that the legal officer of the SSS [4] cleared
the complainants, through his letter, in which he stated that the SSS complaints against
the NSC were the result of an investigation conducted by their field representative, and
not by any of the employees of the NSC.
The decision became final and executory as no appeal from the decision was filed by
any of the parties.
On October 10, 1990, the Labor Arbiter issued a Writ of Execution directing the sheriff
to effect the complainants reinstatement and to collect from the respondent NSC the
accrued backwages, and remit the same to the complainants. The sheriff served a notice
of garnishment on the Philippine Banking Corporation. However, the Bank did not
respond to the notice, and the decision of the labor arbiter remained unsatisfied.[5]
The complainants filed an omnibus motion, praying that they be paid separation pay
instead of being reinstated, as part of the monetary award in their favor. They also prayed
for the issuance of an alias writ of execution enforceable against the respondent NSC
and its officers/stockholders. Appended to their motion was a copy of the Articles of
Incorporation of the NSC showing that Conrado Tan was one of its incorporators and
member of the Board of Directors. They averred that all of the incorporators had unpaid
subscribed capital stock, and that they had the right to collect their monetary claim from
Conrado Tans unpaid subscribed capital stock under the trust fund doctrine as provided
in the Corporation Code.
The Labor Arbiter granted the motion and issued his Order dated January 16, 1991,
ordering Conrado D. Tan, Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang
to pay to the respondent corporation, through the Office of the Labor Arbiter, their unpaid
subscribed capital stock in the total amount of P135,514.05 in order that the same may
be applied to satisfy the complainants backwages, failing which, an alias writ of execution
would be issued by his Office against their assets.[6] The Arbiter, thereafter, issued an
alias writ of execution.
On March 7, 1991, the respondent NSC filed an Urgent Motion to Set Aside the Alias
Writ of Execution filed by the complainants. However, the Labor Arbiter denied the said
motion in his Order dated May 2, 1991.[7]
Conrado Tan and William Ang filed with the NLRC a petition for the issuance of a writ
of preliminary injunction and a temporary restraining order to enjoin the implementation
of the alias writ of execution issued by the Labor Arbiter. They alleged that they were
never furnished copies of the omnibus motion filed by Timbal, Jr. and Valenciano; that
they were not notified of any hearing on the matter; and, that the Labor Arbiter acted in
excess or lack of jurisdiction when he issued an alias writ of execution ordering the sheriff
to collect from the respondent NSC their unpaid subscriptions.
On June 18, 1997, the NLRC rendered a Decision granting the motion of Tan and
Ang and setting aside the assailed order and alias writ of execution of the Labor
Arbiter. The NLRC ruled as follows:

It may be true that the petitioners were/are stockholders of Nation Wide (sic) Steel Corp.
and that accordingly, they have unpaid subscription to the letter but the records
likewise, readily show that petitioners were not impleaded as party respondents in
NLRC Case No. 08-3596-80 (sic). A stockholder who has an unpaid subscription is not
automatically held liable in case of judgment against the corporation where he has an
unpaid subscription. A separate complaint for the payment of the unpaid subscription
should be filed so that unpaid subscriptions of stockholders be made answerable and
liable to the obligations and debts of the corporation.

This Commission has not acquired jurisdiction over the stockholders of the respondent
corporation.[8]
The NLRC denied the complainants motion for reconsideration of the said decision.
Aggrieved, Restituto Timbal, Jr., filed his petition for certiorari under Rule 65, with this
Court for the nullification of the decision of the NLRC, asserting that the NLRC committed
a grave abuse of its discretion in setting aside the order and alias writ of execution issued
by the Labor Arbiter.[9]
On January 20, 1999, this Court issued a Resolution referring the case to the Court
of Appeals conformably to its ruling in St. Martin Funeral Homes vs. NLRC.[10]
After due proceedings, the Court of Appeals rendered a Decision on September 24,
1999, affirming the decision of the NLRC as far as William Ang was concerned, but
granting the petition and affirming the Order and Alias Writ of Execution of the Labor
Arbiter against Conrado Tan. The decretal portion of the decision reads:

IN VIEW OF ALL THE FOREGOING, the assailed NLRC decision dated June 18, 1997
is AFFIRMED insofar as Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang
are concerned. However, as regard (sic) Conrado D. Tan, the Orders of Labor Arbiter
Cornelio L. Linsangan dated January 16 and May 2, 1991, are REINSTATED,
SUSTAINED and UPHELD. No pronouncement as to costs.

SO ORDERED.[11]

After the CA denied petitioner Tans motion for reconsideration, the latter filed the
petition at bar contending that the Court of Appeals erred in finding him, jointly and
severally, liable with the NSC for the Labor Arbiters monetary award in favor of the
respondent on its finding that he acted in bad faith and with malice in suspending the
respondent.
The sole issue in this case is whether the petitioner is liable, either jointly or severally
with the NSC, for the monetary award in favor of the respondent herein in NLRC Case
No. NCR-00-08-03596-89.
The petitioner avers that under his decision, the Labor Arbiter found the NSC solely
liable for the monetary award issued in favor of the respondent. Hence, the alias writ of
execution issued by the Labor Arbiter should be directed only against the NSC and not
against him. As such, his property, real and personal, should not be burdened by the said
award. For his part, the respondent contends that the Court of Appeals did not err in
holding the petitioner, jointly and severally, liable with NSC for the monetary award in his
favor on its finding that the petitioner acted in bad faith and with malice in suspending
him.
The petition is meritorious.
Irrefragably, under the decision of the Labor Arbiter in NLRC Case No. NCR-00-08-
03596-89, only the NSC was found liable for the monetary awards in favor of the
complainants therein, including the herein respondent. The petitioner, although the
general manager of NSC, was not ordered to pay for the monetary award in favor of the
complainants, jointly or severally, with the NSC. The decision of the Labor Arbiter had
become final and executory; hence, immutable. As we held in Industrial Management
International Development Corporation vs. NLRC:[12]

It is an elementary principle of procedure that the resolution of the court in a given issue
as embodied in the dispositive part of a decision or order is the controlling factor as to
settlement of rights of the parties. Once a decision or order becomes final and
executory, it is removed from the power or jurisdiction of the court which rendered it to
further alter or amend it. It thereby becomes immutable and unalterable and any
amendment or alteration which substantially affects a final and executory judgment is
null and void for lack of jurisdiction, including the entire proceedings held for that
purpose. An order of execution which varies the tenor of the judgment or exceeds the
terms thereof is a nullity.

None of the parties in the case before the Labor Arbiter appealed the Decision dated
March 10, 1987; hence the same became final and executory. It was, therefore,
removed from the jurisdiction of the Labor Arbiter or the NLRC to further alter or amend
it. Thus, the proceedings held for the purpose of amending or altering the dispositive
portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ
of Execution is null and void because it varied the tenor of the judgment in that it sought
to enforce the final judgment against Antonio Gonzales/Industrial Management
Development Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and Gerardo
Sicat, which makes the liability solidary.[13]

Not even the NLRC, the Court of Appeals and this Court has any appellate jurisdiction
to alter or reverse the decision of the Labor Arbiter.
The Court of Appeals correctly cited our ruling in MAM Realty Development
Corporation vs. NLRC,[14] that in labor cases, corporate directors and officers are
solidarily liable with the corporation for the termination of employment of corporate
employees committed with malice or bad faith. The ruling applies in a case where a
corporate officer acts with malice or bad faith in suspending an employee. Whether or not
the petitioner acted with malice or bad faith in ordering the suspension of the respondent
is a question of fact submitted by the parties to the Labor Arbiter for resolution.
In the instant case, the Labor Arbiter did not make any finding in his decision in NLRC
Case No. NCR-00-08-03596-89 that the petitioner acted with malice or bad faith in
ordering the suspension of the respondent. Neither did he hold the petitioner liable, either
jointly or severally with the NSC, for the monetary award in favor of the complainants
therein including the respondent herein. The Court of Appeals had no jurisdiction to delve
into and resolve an issue already passed upon by the Labor Arbiter with finality. For the
Court of Appeals to do so in a petition for certiorari from the decision of the NLRC, by
granting the petitioners petition for a writ of injunction, is to do indirectly what it is
proscribed from doing directly.
Far from committing a grave abuse of its discretion amounting to excess or lack of
jurisdiction, the NLRC acted in accordance with law and current jurisprudence.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the
Court of Appeals in CA-G.R. SP No. 51404 is REVERSED and SET ASIDE. The assailed
decision of the NLRC is AFFIRMED. No costs.

Brion vs. South Philippine, 307 SCRA 497,


GR 135136, May 19, 1999

THIRD DIVISION

[G.R. No. 135136. May 19, 1999]

DELFIN A. BRION, petitioner, vs. SOUTH PHILIPPINE UNION MISSION OF THE


SEVENTH DAY ADVENTIST CHURCH, represented by PASTORS PATERNO
DIAZ, ULYSSES CAMAGAY, MANUEL DONATO and WENDELL
SERRANO, respondents.

DECISION
ROMERO, J.:

Blow, blow, thou winter wind,


Thou art not so unkind
As mans ingratitude
[Shakespeare: As You Like It, Act II, sc. 7, Line 174]

Vilified as an ingrate by his erstwhile church, accused of being possessed by the


devil, and likened to the dog that bit the hand that fed him, petitioner Delfin A. Brion comes
to this Court with a novel question of law: Must the conditions for eligibility for retirement
be met only at the time of retirement or are these conditions continuing ones which must
be complied with even after one has retired?
The facts are simple.
Petitioner Delfin A. Brion became a member of respondent South Philippine Union
Mission of the Seventh Day Adventist Church (hereafter SDA) sometime in 1949. He
worked his way up the ladder, starting as a literature evangelist, then a janitor or office
helper, until he became an ordained minister and president of the Northeastern Mindanao
Mission of the Seventh Day Adventist Church in Butuan City.
Respondent claims that due to corruption charges, petitioner was transferred to the
Davao Mission of the SDA. Thereafter, allegedly due to an act of indiscretion with a
masseuse, petitioner was demoted to the position of Sabbath School Director at the
Northern Mindanao Mission of the SDA located at Cagayan de Oro City. Here, petitioner
worked until he retired in 1983. As was the practice of the SDA, petitioner was provided
a monthly amount as a retirement benefit.
Sometime thereafter, petitioner got into an argument with Samuel Sanes, another
pastor of the SDA. This disagreement degenerated into a rift between petitioner and the
SDA, culminating in the establishment by petitioner of a rival religious group which he
called the Home Church. Petitioner succeeded in enticing a number of SDA members to
become part of his congregation even as he continued disparaging and criticizing the
SDA. Because of his actions, petitioner was excommunicated by the SDA and, on July 3,
1993, his name was dropped from the Church Record Book. As a consequence of his
disfellowship, petitioners monthly retirement benefit was discontinued by the SDA.
On December 21, 1995, petitioner filed an action for mandamus with the Regional
Trial Court of Cagayan de Oro City asking that the SDA restore his monthly retirement
benefit. On July 10, 1996, the trial court rendered a decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, the Court finds in favor of plaintiff and hereby
orders defendant to pay the retirement benefits due to the plaintiff from October 1995 to
the present and all subsequent monthly benefits that may be due to the plaintiff until his
demise. The Court finds no basis or no justification to the (sic) award any damages
considering that there is no showing of bad faith on the part of defendant, since the
latter acted in good faith and believing that it is within their right to withhold the benefits
that may be due to the plaintiff.

Without pronouncement as to cost.

SO ORDERED.[1]
Aggrieved by the trial courts decision, the SDA filed an appeal with the Court of
Appeals, docketed therein as CA-G.R. SP No. 43846. On March 19, 1998, the appellate
court set aside the decision of the trial court and ordered the dismissal of petitioners
complaint. Petitioner filed a motion for reconsideration, which was denied on August 3,
1998, hence this petition.
We find for petitioner.
The following provisions on retirement, contained in the General Conference Working
Policy of the SDA, are of primary importance in resolving the issue at hand:

[Paragraph] Z1010 Beneficiaries of Retirement Plan The benefits of the retirement plan
are designed for those who have devoted their lives to the work of the Seventh-day
Adventist Church and are eligible to retire for reasons of old age and/or disability.

xxxxxxxxx

[Paragraph] Z1025 Termination of Benefits The benefits shall terminate with the
decease of the beneficiary, except where there is an eligible surviving spouse and/or
children.[2]

On the basis of these two provisions, the trial court ruled in favor of petitioner. In its
own words:

Going over the aforecited provisions in the Retirement Plan of defendant church, it is
very clear that the benefit of retirement provided therein are designed for those who
have devoted their lives to the work of the SDA. The word have in the quoted
provision refers to past acts rendered by the retiree to the defendant church. There is no
doubt that plaintiff has devoted his life to the service. That is the reason he is qualified
to receive the retirement benefit.

The second quoted provision does not impose any other cause of termination of the
benefit except the death of the beneficiary. Since there is no other condition that is
attached to the same except the death of the beneficiary, then the plaintiff must be
entitled to receive the benefits provided. The retirement benefit is not conditional, but
rather it is for past services that have already been rendered. The grant of retirement
benefit is absolute since it is a reward for one who has devoted his life to the defendant
church up to the time plaintiff retired.[3]

The above declaration was, however, refuted by the Court of Appeals when it stated
in its decision that:
In the first place, its ruling that the wording of paragraph Z1010 that by using the word
have, both parties intended to refer to past acts rendered by the retiree to the Church is
erroneous.The provision was couched in the present perfect tense, the word have being
used as an auxiliary verb prefixed to the past participial form of the verb devote. It is an
elementary rule in grammar that the present perfect tense is used to refer to an action
or condition that began in the past and continues to the present or has just been
completed. Such being the case, the SDAs argument that a member must maintain
loyalty and fealty to the Church for him to continue to qualify for benefits gains
ground. The use of the word lives also implies that the beneficiary devoted all of his life
not just a part of it, to the work of the Church. On the other hand, the word work, instead
of service, connotes the ministry of the Church, to which one can be devoted by loyalty,
if no longer active participation.[4]

Furthermore, the Court of Appeals considered of great significance the fact that
petitioner had been disfellowed and expelled by SDA. Citing American Jurisprudence, the
appellate court held that:

It may preliminarily be observed that the profession of priest or minister of any


denomination is held subject to its laws; he acquires it by compact, and is not exempt
from the proper discipline and authority of his church. A minister, in the legal point of
view, is a voluntary member of the association to which he belongs. The position is not
forced upon him; he seeks it.He accepts it with all its burdens and consequences, with
all the rules and laws and canons subsisting or to be made by competent authority, and
may, at pleasure and with impunity, abandon it. While a member of the association,
however, and having a full share in the benefits resulting therefrom, he should adhere to
its discipline, conform to its doctrines and mode of worship, and obey its laws and
canons.

The continuance, powers, and emoluments of a priest or minister depend on the will of
the church, and the sentence of the church judicatory in a proper case deprives him of
the position and the right to further salary or emoluments; hence, upon the dissolution or
suspension of the pastoral relation, or upon the expulsion of a priest or minister from a
pastorate, all right to further salary ceases.

x x x x x x x x x.[5]
Retirement has been defined as a withdrawal from office, public station, business,
occupation, or public duty.[6] It is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter, after reaching a
certain age, agrees and/or consents to sever his employment with the former. [7] In this
connection, the modern socio-economic climate has fostered the practice of setting up
pension and retirement plans for private employees, initially through their voluntary
adoption by employers, and lately, established by legislation. Pension schemes, while
initially humanitarian in nature, now concomitantly serve to secure loyalty and efficiency
on the part of employees, and to increase continuity of service and decrease the labor
turnover by giving to the employees some assurance of security as they approach and
reach the age at which earning ability and earnings are materially impaired or at an end. [8]
It must be noted, however, that the nature of the rights conferred by a retirement or
pension plan depends in large measure upon the provisions of such particular plan. The
Labor Code provides:

Art. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement
and other agreements

xxxxxxxxx
From the above, it can be gleaned that employer and employee are free to stipulate
on retirement benefits, as long as these do not fall below the floor limits provided by law.
Again, it has been held that pension and retirement plans create a contractual
obligation in which the promise to pay benefits is made in consideration of the continued
faithful service of the employee for the requisite period.[9] In other words, before a right to
retirement benefits or pension vests in an employee, he must have met the stated
conditions of eligibility with respect to the nature of employment, age, and length of
service. This is a condition precedent to his acquisition of rights thereunder.
Under the SDAs theory, however, the right to a pension never really vests in an
employee, there being no fixed period for eligibility for retirement. The SDA insists that an
employee must devote his life to the work of the Seventh-day Adventist Church even after
retirement to continue enjoying retirement benefits. There is, thus, no definite length of
service provided as the SDA can withdraw retirement benefits at any time after retirement,
if it determines that a retired employee is not devoting his life to the work of the
church. Furthermore, the SDAs eligibility requirement as to length of service is even more
stringent than that required by law. Under the Labor Code, an employee upon reaching
the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said
establishment may retire and shall be entitled to retirement pay Under the law, service for
five years is enough to entitle an employee who meets the requisite age to retirement
benefits. However, the SDA would require its employees to serve it for all his lifetime. It
must be noted that petitioner has served the SDA for thirty-four (34) years.
Likewise, the SDAs theory negates the very concept of retirement. As earlier defined,
retirement means to withdraw from ones office, occupation, or duty. To require petitioner
to continue devoting his life to the work of the Seventh-day Adventist Church would mean
that petitioner never really withdraws from his office or occupation, that of working for the
church.It is an oxymoron to retire an employee and yet require him to continue working
for the same employer. This Court cannot, thus give its imprimatur to SDAs theory. We
rule that the conditions of eligibility for retirement must be met at the time of retirement at
which juncture the right to retirement benefits or pension, if the employee is eligible, vests
in him.
In the present case, petitioner was adjudged by the SDA in 1983, to be qualified for
retirement, such that when it began paying petitioner retirement benefits in said year, it
must have been convinced that petitioner had devoted his life to the work of the Seventh-
day Adventist Church. Having arrived at such a conclusion, it may not now reverse this
finding to the detriment of petitioner.
Furthermore, pension and retirement plans, in line with the Constitutional mandate of
affording full protection to labor,[10] must be liberally construed in favor of the employee,
it being the general rule that pension plans formulated by an employer are to be construed
most strongly against the employer.[11] Hence, where two constructions of a retirement
plan are possible, one of which requires the retiree to devote his life to the service of the
church even after retirement, and the other of which sanctions the severance by the
retiree of his employment thereto at retirement, this Court will not hesitate to adopt the
latter interpretation.
Bolstering this conclusion is this Courts observation in UST Faculty Union v.
NLRC[12] that upon the retirement of an employee or official in the public or private service
his employment is deemed terminated. With the termination of employment, the right of
the employer to control the employees conduct, the so-called control test also terminates;
hence, after retirement, the SDA may no longer require petitioner to devote his life to the
work of the church, it having lost control over its erstwhile employee.
Given the above disquisition, it can be seen that the importance placed by the
appellate court on petitioners excommunication and disfellowship is misplaced. While it
is true that upon the expulsion of a priest or minister from a pastorate, all right to further
salary ceases,[13] this presupposes that the priest or minister is still on active duty, so to
speak. Here, petitioner has already retired. Hence, he already had a vested right to
receive retirement benefits, a right which could not be taken away from him by expulsion
or excommunication, this not being a ground for termination of retirement benefits under
the SDAs retirement plan. In fact, under paragraph Z1025 of the SDAs General
Conference Working Policy, retirement benefits terminate only with the decease of the
beneficiary, an event which has not yet transpired here. The SDA must, thus, pay
petitioner his retirement benefits despite his establishment of a rival church and his
excommunication.
Again, while paying retirement benefits to petitioner may be odious and abhorrent to
the SDA, in the absence of any other stipulation for the termination of petitioners
retirement benefits, the SDA must comply with its contractual obligations, the contract
being the law between the parties. As correctly pointed out by the trial court:

While what plaintiff is doing may be inimical, despicable or repulsive to the view of
defendant, it is of no consequence. Dura lex sed lex, the law is hard but that is the
law. Since the only condition for the termination of the same is death of (sic) beneficiary,
then the defendant cannot legally cut off what is due to the plaintiff. [14]

In refutation of this point, the appellate court declared that:

[I]t is not only death which would terminate receipt of benefits under the retirement plan,
as per paragraph Z1025 of the GCWP; to this extent, the covenant must be deemed
subject to the implied condition that the beneficiary continues to be a member in good
standing of the church. The Court believes that such an understanding is inherent in
every relationship between the believer and his church.[15]

Obviously, the SDA would have petitioner cease and desist from organizing and
running a rival church. This is analogous to provisions limiting or prohibiting a retiree or
pensioner from engaging in a competitive business or accepting employment with a
business competitor, a clause not infrequently found in private retirement or pension
plans. The SDA, however, chose not to include such a provision in its General
Conference Working Policy. For its lack of foresight, it now seeks to extricate itself from
a messy situation through the assistance of the Court. This Courts pronouncement
in Vales v. Villa[16]seems particularly apropos:

Courts cannot follow [a person] every step of his life and extricate him from bad
bargains, protect him from unwise investments, relieve him from one-sided contracts, or
annul the effects of foolish acts. Courts cannot constitute themselves guardians of
persons who are not legally incompetent. Courts operate not because one person has
been defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them-indeed, all they have in the world; but not for that
alone can the law intervene and restore. There must be, in addition, a violation of law,
the commission of what the law knows as an actionable wrong, before the courts are
authorized to lay hold the situation and remedy it.
Petitioners establishment of a rival church hardly qualifies as an actionable wrong. In
fact, it is a perfectly legitimate exercise of ones freedom of religion enshrined in our
Constitution.
WHEREFORE, premises considered, the decision of the Court of Appeals dated
March 19, 1998 is hereby REVERSED and SET ASIDE and the decision of the trial court
dated July 10, 1996 AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.
Purisima, J., did not participate in the deliberations.

Sta. Catalina vs. NLRC, 416 SCRA 233,


GR 144483, NOv. 19, 2003

[G.R. No. 144483. November 19, 2003]

STA. CATALINA COLLEGE and SR. LORETA ORANZA, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and HILARIA G. TERCERO, respondents.

DECISION
CARPIO MORALES, J.:

From the April 28, 2000 decision of the Court of Appeals (CA) [1] affirming that of the
National Labor Relations Commission (NLRC) awarding retirement benefits in the
amount of P85,287.72 to private respondent Hilaria G. Tercero (Hilaria), petitioners Sta.
Catalina College and its former directress Sr. Loreta Oranza come to this Court on a
petition for review on certiorari.
In June 1955, Hilaria was hired as an elementary school teacher at
the Sta. Catalina College (petitioner school) in San Antonio, Bian, Laguna. In 1970, she
applied for and was granted a one year leave of absence without pay on account of the
illness of her mother. After the expiration in 1971 of her leave of absence, she had not
been heard from by petitioner school.
In the meantime, she was employed as a teacher at the San Pedro Parochial
School during school year 1980-1981 and at the Liceo de San Pedro, Bian, Laguna during
school year 1981-1982.
In 1982, she applied anew[2] at petitioner school which hired her with a monthly salary
of P6,567.95.[3]
On March 22, 1997, during the 51st Commencement Exercises of petitioner school,
Hilaria was awarded a Plaque of Appreciation for thirty years of service and P12,000.00
as gratuity pay.
On May 31, 1997, Hilaria reached the compulsory retirement age of 65. Retiring
pursuant to Article 287 of the Labor Code, as amended by Republic Act 7641, petitioner
school pegged her retirement benefits at P59,038.35,[4] computed on the basis of fifteen
years of service from 1982 to 1997. Her service from 1955 to 1970 was excluded in the
computation, petitioner school having asserted that she had, in 1971, abandoned her
employment.
From the P59,038.35 retirement benefits was deducted the amount
of P28,853.09[5] representing reimbursement of the employers contribution to her
retirement benefits under the Private Education Retirement Annuity Association (PERAA)
which Hilaria had already received. Deducted too was the amount of P12,000.00
representing the gratuity pay which was given to her. The remaining balance of the
retirement benefits due her thus amounted to P18,185.26.[6]
Hilaria insisted, however, that her retirement benefits should be computed on the
basis of her thirty years of service, inclusive of the period from 1955 to 1970; and that the
gratuity pay earlier given to her should not be deducted therefrom. She thus concluded
that she was entitled to P190,539.90, computed as follows:

Retirement Benefits = month salary for every year of service

One-half month salary

= (15 days x latest salary per day) + (5 days leave x latest salary per day)
+ 1/12 of 13th month pay

= (15 x 290.90) + (5 x 290.90) + 533.33

= P6,351.33

Retirement Benefits = P6,351.33 (30 years)

= P190,539.90[7]
The parties having failed to agree on how the retirement benefits should be
computed, Hilaria filed a complaint[8] before the NLRC Regional Arbitration, Branch No.
IV against petitioner school and/or petitioner Sr. Loreta Oranza for non-payment of
retirement benefits. The complaint was docketed as NLRC Case No. RAB-IV-3-9860.
By Decision of October 30, 1998, Labor Arbiter Pedro C. Ramos upheld petitioners
position, disposing as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering the


respondents to pay the complainant the amount of P18,185.26 only as the differential of
her retirement benefits.

SO ORDERED.[9]

On appeal, the NLRC, by Decision of April 27, 1999, set aside the Labor Arbiters
decision and disposed as follows:

WHEREFORE, on account of the foregoing, the judgment a quo is SET ASIDE.

Respondent-appellee is hereby ordered to pay the total amount of P85,287.72


computed as follows: P3,935.89 (total computation of the retirement components)
MULTIPLIED by 29 (number of years in service) EQUALS P114,140.81 (total retirement
package) LESS P28,287.72 (representing respondent-appellees contribution with the
PERAA proven to have already been received by complainant-appellant). However, the
gratuity pay earlier already given shall not be deducted from the retirement package.

SO ORDERED.[10]

Not satisfied with the NLRC decision, petitioners brought the case on certiorari[11] to
the CA which, by the assailed decision, dismissed it, holding that petitioners failed to
prove that Hilaria had abandoned her position in 1970, as petitioner school even gave her
a Plaque of Appreciation for thirty years of service precisely because of her thirty year
continuous service, and that petitioner school never sent notice to her dismissing her,
hence, the employer-employee relationship was not severed and, therefore, her services
for petitioner school during the period from 1955-1970 should be credited in the
computation of her retirement benefits. Held the CA:

x x x [D]espite the absence of the Private Respondent for a period of eleven (11) years
or so from 1970 to 1982 and her employment with the Liceo de San Pedro and San
Pedro Parochial School, her employer-employee juridical relationship, with the
Petitioner School, had not been severed, namely: (a) the Petitioner School never sent
any notice to the Private Respondent dismissing her from her employment on account
of her unexplained and prolonged absence as required by Section 2, Rule XIV, Book V
of the Omnibus Rules Implementing the Labor Code (Reno Foods, Inc. versus NLRC, et
al., 249 SCRA 386); (b) the Private Respondent did not receive any amount, from the
Petitioner School, by way of separation pay, indemnity pay, and her share of her
retirement contributions for the period from 1955 when she commenced her
employment with the Petitioner School until her leave of absence in 1970; (c) the
Petitioner School gave the Private Respondent a Plaque of Appreciation for her thirty
(30) year continuous service to the Petitioner School on the occasion of the
51st Commencement Exercise of her Petitioner School on March 22, 1997; (d) she was
given a gratuity of P12,000.00 on account of her exemplary services to the Petitioner
School until the time when she reached the compulsory retirement age of 65
years.[12] (Underscoring supplied)

With respect to the gratuity pay awarded to Hilaria, the CA upheld the NLRC ruling
that it should not be deducted from the retirement benefits due her.
Their motion for reconsideration[13] having been denied by the CA
Resolution[14] of August 11, 2000, petitioners lodged the present petition which imputes
the following error to the appellate court:
THE PUBLIC RESPONDENT CA ERRED IN AWARDING THE RETIREMENT
BENEFITS DIFFERENTIAL OF [HILARIA] COMPUTED BASED ON HER 29
YEARS OF SERVICE WHEN SHE MERELY RENDERED 15 CONTINUOUS
YEARS OF SERVICE PRIOR TO HER RETIREMENT. THE COURT OF
APPEALS COMPLETELY IGNORED THE RULING OF THIS HONORABLE
COURT IN CARANDANG V. DULAY, 188 SCRA 793 [1990] THAT
SEPARATION PAY SHOULD BE BASED ON THE NUMBER OF CONTINUOUS
YEARS OF SERVICE OF THE EMPLOYEE BEFORE THE DATE OF HIS
SEPARATION FROM EMPLOYMENT.[15]
Petitioners argue that when Hilaria did not report upon the expiration in 1971 of her
one year leave of absence without pay nor request for an extension thereof, she actually
voluntarily resigned from or abandoned her employment,[16] thus effectively forfeiting all
the benefits she had earned for services rendered from 1955 to 1970, hence, she ceased
to be an employee of the school. Prescinding from this ratiocination, petitioners conclude
that the period from 1955 to 1970 cannot be included in the determination of her
retirement benefits, for when she was rehired in 1982, she was a new employee.
In support of their position, petitioners cite the case of Carandang v. Dulay which held
that when therein petitioner was re-hired as teacher six years after resigning, she had to
start from zero experience and her previous years of service with the therein respondent
school could not be credited to her. What was in issue in Carandang, however, was the
therein petitioners separation, not retirement pay, this Court therein ruling that separation
pay should be computed on the basis of her last continuous period of service.
Petitioners further argue that the P12,000.00 gratuity earlier given to Hilaria should
be considered part of the retirement benefits due her since it was given precisely because
she had retired and was in addition to the amount that the school contributed to PERAA
for her retirement.
As a general rule, the factual findings and conclusions of quasi-judicial agencies such
as the NLRC are, on appeal, accorded great weight and respect and even finality as long
as they are supported by substantial evidence or that amount of relevant evidence which
a reasonable man might accept as adequate to justify a conclusion. [17]Where, as in the
present case, the findings of the NLRC contradict those of the Labor Arbiter, this Court
must of necessity examine the records and the evidence presented to determine which
finding should be preferred as more conformable with the evidentiary facts.[18]
The threshold issue is whether Hilarias services for petitioner school during the period
from 1955 to 1970 should be factored in the computation of her retirement benefits.
The inapplicability to the present case of the ruling in Carandang notwithstanding,
Hilaria cannot be credited for her services in 1955-1970 in the determination of her
retirement benefits. For, after her one year leave of absence expired in 1971 without her
requesting for extension thereof as in fact she had not been heard from until she
resurfaced in 1982 when she reapplied with petitioner school, she abandoned her
teaching position as in fact she was employed elsewhere in the interim and effectively
relinquished the retirement benefits accumulated during the said period.
For a valid finding of abandonment, two factors must be present: (1) the failure to
report for work, or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second element as the more
determinative factor, being manifested by some overt acts.[19]
To prove abandonment, the employer must show that the employee deliberately and
unjustifiably refused to resume his employment without any intention of
returning.[20] There must be a concurrence of the intention to abandon and some overt
acts from which an employee may be deduced as having no more intention to
work.[21] The law, however, does not enumerate what specific overt acts can be
considered as strong evidence of the intention to sever the employee-employer
relationship.[22]
It is not disputed that the approved one year leave of absence without pay of Hilaria
expired in 1971, without her, it bears repeating, requesting for extension thereof or
notifying petitioner school if and when she would resume teaching. Nor is it disputed that
she was rehired only in 1982 after filing anew an application, without her proffering any
explanation for her more than a decade of absence. Under the circumstances,
abandonment of work at petitioner school in 1971 is indubitably manifest.
As regards the requirement of notice of termination, it was error for the CA to apply
Sec 2, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code.[23] It should
be noted that when Hilaria abandoned her teaching position in 1971, the law in force was
Republic Act 1052 or the Termination Pay Law, as amended by Republic Act 1787,
Section 1 of which provides:

SEC. 1. In cases of employment, without a definite period, in a commercial, industrial, or


agricultural establishment or enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just cause in the case of an
employee by serving written notice on the employer at least one month in advance, or in
the case of an employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee, whichever is
longer, a fraction of at least six months being considered as one whole year.

The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.

The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.

x x x (Emphasis and underscoring supplied)

Above-stated law should thus apply in the case at bar, so Mapua Institute of
Technology v. Manalo[24] instructs:

Without declaring that a private college or university like the Mapua Institute of
Technology is a commercial, industrial, or agricultural establishment, we believe
that there being no special law governing the dismissal or separation of professors from
colleges and universities, the provisions of Republic Act No. 1052, as amended by
Republic Act No. 1787, should be made to apply. Authority for such a course of action is
78 Corpus Juris Secundum 617, which says:

Contracts between private schools and teachers or other instructors are governed, in
general, by the rules applicable to other contracts of employment. (Underscoring
supplied)
Abandonment of work being a just cause for terminating the services of Hilaria,
petitioner school was under no obligation to serve a written notice to her.
That Hilaria was in 1997 given a plaque of appreciation for thirty years of service to
the school and awarded P12,000.00 as gratuity pay should not be taken against
petitioners, for acknowledgment of the total number of years of her service, which was
discontinuous, should not obliterate the fact that she abandoned her employment in 1971,
albeit she was rehired in 1982.
It was error too for the CA to conclude that since petitioner school did not award
separation pay and Hilarias share of her retirement contributions when she temporarily
stopped working after she left her teaching position in 1971, employer-employee relation
between them was not severed. It bears noting that an employee who is terminated for
just cause is generally not entitled to separation pay. Moreover, the PERAA, petitioner
schools substitute retirement plan, was only established in 1972, such that when Hilaria
abandoned her work in 1971, there were no retirement contributions to speak of.
As Hilaria was considered a new employee when she rejoined petitioner school upon
re-applying in 1982, her retirement benefits should thus be computed only on the basis
of her years of service from 1982 to 1997. This is what JAM Transportation Co., Inc. v.
Flores[25] teaches:

Private respondents re-employment as a new employee x x x would mean a demotion


in rank and privileges, retirement benefits, for example, as his entire previous eighteen
(18) years of service with petitioner, would simply be considered as non-existent.

This Court is not unmindful of Hilarias rendition of a total of thirty years of teaching in
petitioner school and should be accorded ample support in her twilight years.Petitioner
school in fact acknowledges her dedicated service to its students. She can, however, only
be awarded with what she is rightfully entitled to under the law. So Sosito v. Aguinaldo
Development Corporation dictates:[26]

While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privilege in life, this Court has inclined more often than not
toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine.
As for the ruling of the CA affirming that of the NLRC that the P12,000.00 gratuity pay
earlier awarded to Hilaria should not be deducted from the retirement benefits due her,
the same is in order. Gratuity pay is separate and distinct from retirement benefits. It is
paid purely out of generosity. So Republic Planters Bank v. NLRC[27] holds:

Gratuity pay x x x is paid to the beneficiary for the past services or favor rendered purely
out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a
worker for actual services rendered or for actual performance. It is a money benefit or
bounty given to the worker, the purpose of which is to reward employees who have
rendered satisfactory service to the company. (Underscoring supplied)

Retirement benefits, on the other hand, are intended to help the employee enjoy the
remaining years of his life, releasing him from the burden of worrying for his financial
support, and are a form of reward for his loyalty to the employer.[28]
In Hilarias case, her retirement pay as computed by petitioners amounts
to P59,038.35, P28,853.09 of which had already been given to her under the
PERAA. Since the computed amount of her retirement pay is much lower than that
provided under the law, she is entitled to receive the difference between the actual
amount of her retirement benefits as required by law and that provided for under the
PERAA. Although she did not appeal from the NLRC decision awarding her P85,287.72,
this Court awards the entire amount of the retirement benefits to which she is rightfully
entitled under the law. Technical rules of procedure are not binding in labor cases.[29] The
application of technical rules of procedure may be relaxed to serve the demands of
substantial justice.[30]
Article 287 of the Labor Code, as amended by Republic Act 7641 or the New
Retirement Law, provides:

ART. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement
and other agreements: Provided, however, That an employees retirement benefits
under any collective bargaining and other agreements shall not be less than those
provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of


employees in the establishment, an employee upon reaching the age of sixty (60) years
or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as
one whole year.

Unless the parties provide for broader inclusions, the term one half (1/2) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.

x x x (Emphasis Supplied)

Likewise, Section 3.3, Rule II of the Rules Implementing R.A. 7641 provides:

3.3 Where both the employer and the employee contribute to a retirement fund in
accordance with an individual or collective agreement or other applicable employment
contract, the employers total contribution thereto shall not be less than the total
retirement benefits to which the employee would have been entitled had there been no
such retirement fund. In case the employers contribution is less than the retirement
benefits provided under this Rule, the employer shall pay the difference.

Hence, Hilaria is entitled to receive P98,706.45 computed as follows:

One-half month salary = (15 days x latest salary per day) + (5 days leave x
latest salary per day) + (1/12 of 13th month pay)

= P4,512.30 + P1,504.10 + P547.33

= P6,563.73

Retirement Pay = number of years in service x one-half month salary

= 15 years x P6,580.43

= P98,455.95

Since petitioner school had already paid Hilaria P28,853.09 representing employer
contributions under the PERAA, the same should be deducted from the retirement pay
due her, to thereby leave a balance of P69,602.86 still due her.
WHEREFORE, the petition is GRANTED in part. The decision of the Court of Appeals
dated April 28, 2000 is hereby MODIFIED. Petitioners are directed to pay the balance of
the retirement benefits to private respondent Hilaria G. Tercero in the amount
of P69,602.86, as computed above.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez and Corona, JJ., concur