FIRST DIVISION

[G.R. No. 47800. December 2, 1940.]

MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.

Maximo Calalang in his own behalf.

Solicitor General Ozaeta and Assistant Solicitor General Amparo for respondents Williams, Fragante and Bayan

City Fiscal Mabanag for the other respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648; DELEGATION OF LEGISLATIVE

POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS
TO PROMULGATE RULES AND REGULATIONS. — The provisions of section 1 of Commonwealth Act No. 648 do not
confer legislative power upon the Director of Public Works and the Secretary of Public Works and Communications.
The authority therein conferred upon them and under which they promulgated the rules and regulations now
complained of is not to determine what public policy demands but merely to carry out the legislative policy laid
down by the National Assembly in said Act, to wit, "to promote safe transit upon, and avoid obstructions on, roads
and streets designated as national roads by acts of the National Assembly or by executive orders of the President of
the Philippines" and to close them temporarily to any or all classes of traffic "whenever the condition of the road or
the traffic thereon makes such action necessary or advisable in the public convenience and interest." The delegated
power, if at all, therefore, is not the determination of what the law shall be, but merely the ascertainment of the
facts and circumstances upon which the application of said law is to be predicated. To promulgate rules and
regulations on the use of national roads and to determine when and how long a national road should be closed to
traffic, in view of the condition of the road or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by the National Assembly. It must depend
on the discretion of some other government official to whom is confided the duty of determining whether the
proper occasion exists for executing the law. But it cannot be said that the exercise of such discretion is the making
of the law.

2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY. — Commonwealth Act No. 548 was
passed by the National Assembly in the exercise of the paramount police power of the state. Said Act, by virtue of
which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid
obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the
National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to
relieve congestion of traffic, which is, to say the least, a menace to public safety. Public welfare, then, lies at the
bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with
personal liberty, with property, and with business and occupations. Persons and property may be subjected to all
kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. v.
Gomer Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over
authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty
because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and
authority in his mind through education and, personal discipline, so that there may be established the resultant
equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon
the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The
paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its
preservation.
3. ID.; ID.; SOCIAL JUSTICE. — Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but
the humanization of laws and the equalization of social and economic force by the State so that justice in its rational
and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare
of all the people, the adoption by the Government of measures calculated to insure economic stability of all the
competent elements of society, through the maintenance of a proper economic and social equilibrium in the
interrelations of the members of the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on
the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the
recognition of the necessity of interdependence among divers and diverse units of a society and of the protection
that should be equally and evenly extended to all groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet
of all persons, and of bringing about "the greatest good to the greatest number."

DECISION
LAUREL, J.:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought before this court this
petition for a writ of prohibition against the respondents, A. D. Williams, as Chairman of the National Traffic
Commission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and
Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of
Manila.

It is alleged in the petition that the National Traffic Commission, in its resolution of July 17, 1940, resolved to
recommend to the Director of Public Works and to the Secretary of Public Works and Communications that animal-
drawn vehicles be prohibited from passing along Rosario Street extending from Plaza Calderon de la Barca to
Dasmariñas Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending
from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year
from the date of the opening of the Colgante Bridge to traffic; that the Chairman of the National Traffic Commission,
on July 18, 1940 recommended to the Director of Public Works the adoption of the measure proposed in the
resolution aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which authorizes said
Director of Public Works, with the approval of the Secretary of Public Works and Communications, to promulgate
rules and regulations to regulate and control the use of and traffic on national roads; that on August 2, 1940, the
Director of Public Works, in his first indorsement to the Secretary of Public Works and Communications,
recommended to the latter the approval of the recommendation made by the Chairman of the National Traffic
Commission as aforesaid, with the modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles
be limited to the portion thereof extending from the railroad crossing at Antipolo Street to Azcarraga Street; that on
August 10, 1940, the Secretary of Public Works and Communications, in his second indorsement addressed to the
Director of Public Works, approved the recommendation of the latter that Rosario Street and Rizal Avenue be closed
to traffic of animal-drawn vehicles, between the points and during the hours as above indicated, for a period of one
year from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of
Police of Manila have enforced and caused to be enforced the rules and regulations thus adopted; that as a
consequence of such enforcement, all animal-drawn vehicles are not allowed to pass and pick up passengers in the
places above-mentioned to the detriment not only of their owners but of the riding public as well.

It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of Public Works, with the
approval of the Secretary of Public Works and Communications, is authorized to promulgate rules and regulations
for the regulation and control of the use of and traffic on national roads and streets is unconstitutional because it
constitutes an undue delegation of legislative power. This contention is untenable. As was observed by this court in
Rubi v. Provincial Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere been better stated than in the early
Ohio case decided by Judge Ranney, and since followed in a multitude of cases, namely: ’The true distinction
therefore is between the delegation of power to make the law, which necessarily involves a discretion as to what it
shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the
law. The first cannot be done; to the latter no valid objection can be made.’ (Cincinnati, W. & Z. R. Co. v. Comm’rs.
Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in Wayman v. Southard (10 Wheat., 1)
may be committed by the Legislature to an executive department or official. The Legislature may make decisions of
executive departments or subordinate officials thereof, to whom it has committed the execution of certain acts, final
on questions of fact. (U.S. v. Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give prominence to
the ’necessity’ of the case."cralaw virtua1aw library

Section 1 of Commonwealth Act No. 548 reads as follows:jgc:chanrobles.com.ph

"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets designated as national roads
by acts of the National Assembly or by executive orders of the President of the Philippines, the Director of Public
Works, with the approval of the Secretary of Public Works and Communications, shall promulgate the necessary
rules and regulations to regulate and control the use of and traffic on such roads and streets. Such rules and
regulations, with the approval of the President, may contain provisions controlling or regulating the construction of
buildings or other structures within a reasonable distance from along the national roads. Such roads may be
temporarily closed to any or all classes of traffic by the Director of Public Works and his duly authorized
representatives whenever the condition of the road or the traffic thereon makes such action necessary or advisable
in the public convenience and interest, or for a specified period, with the approval of the Secretary of Public Works
and Communications."cralaw virtua1aw library

The above provisions of law do not confer legislative power upon the Director of Public Works and the Secretary of
Public Works and Communications. The authority therein conferred upon them and under which they promulgated
the rules and regulations now complained of is not to determine what public policy demands but merely to carry out
the legislative policy laid down by the National Assembly in said Act, to wit, "to promote safe transit upon and avoid
obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines" and to close them temporarily to any or all classes of traffic "whenever
the condition of the road or the traffic makes such action necessary or advisable in the public convenience and
interest." The delegated power, if at all, therefore, is not the determination of what the law shall be, but merely the
ascertainment of the facts and circumstances upon which the application of said law is to be predicated. To
promulgate rules and regulations on the use of national roads and to determine when and how long a national road
should be closed to traffic, in view of the condition of the road or the traffic thereon and the requirements of public
convenience and interest, is an administrative function which cannot be directly discharged by the National
Assembly. It must depend on the discretion of some other government official to whom is confided the duty of
determining whether the proper occasion exists for executing the law. But it cannot be said that the exercise of such
discretion is the making of the law. As was said in Locke’s Appeal (72 Pa. 491): "To assert that a law is less than a law,
because it is made to depend on a future event or act, is to rob the Legislature of the power to act wisely for the
public welfare whenever a law is passed relating to a state of affairs not yet developed, or to things future and
impossible to fully know." The proper distinction the court said was this: "The Legislature cannot delegate its power
to make the law; but it can make a law to delegate a power to determine some fact or state of things upon which the
law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government.
There are many things upon which wise and useful legislation must depend which cannot be known to the law-
making power, and, must, therefore, be a subject of inquiry and determination outside of the halls of legislation."
(Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmeña, G.R. Nos. 46076 and 46077, promulgated June 12, 1939, and in
Pangasinan Transportation v. The Public Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court
had occasion to observe that the principle of separation of powers has been made to adapt itself to the complexities
of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate
legislation," not only in the United States and England but in practically all modern governments. Accordingly, with
the growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory of separation of governmental powers has, to
a large extent, been relaxed by permitting the delegation of greater powers by the legislative and vesting a larger
amount of discretion in administrative and executive officials, not only in the execution of the laws, but also in the
promulgation of certain rules and regulations calculated to promote public interest.

The petitioner further contends that the rules and regulations promulgated by the respondents pursuant to the
provisions of Commonwealth Act No. 548 constitute an unlawful interference with legitimate business or trade and
abridge the right to personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the
National Assembly in the exercise of the paramount police power of the state.

Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit
upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law,
therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired
by a desire to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public welfare, then,
lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere
with personal liberty, with property, and with business and occupations. Persons and property may be subjected to
all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. v.
Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over
authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty
because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and
authority in his mind through education and personal discipline, so that there may be established the resultant
equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon
the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The
paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its
preservation.

The scope of police power keeps expanding as civilization advances. As was said in the case of Dobbins v. Los Angeles
(195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the police power is a continuing one, and a business lawful
today may in the future, because of the changed situation, the growth of population or other causes, become a
menace to the public health and welfare, and be required to yield to the public good." And in People v. Pomar (46
Phil., 440), it was observed that "advancing civilization is bringing within the police power of the state today things
which were not thought of as being within such power yesterday. The development of civilization, the rapidly
increasing population, the growth of public opinion, with an increasing desire on the part of the masses and of the
government to look after and care for the interests of the individuals of the state, have brought within the police
power many questions for regulation which formerly were not so considered."cralaw virtua1aw library

The petitioner finally avers that the rules and regulations complained of infringe upon the constitutional precept
regarding the promotion of social justice to insure the well-being and economic security of all the people. The
promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any given group.
Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and
the equalization of social and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the
adoption by the Government of measures calculated to insure economic stability of all the competent elements of
society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members
of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally,
through the exercise of powers underlying the existence of all governments on the time-honored principle of salus
populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and
diverse units of a society and of the protection that should be equally and evenly extended to all groups as a
combined force in our social and economic life, consistent with the fundamental and paramount objective of the
state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the
greatest number."cralaw virtua1aw library

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs against the petitioner. So
ordered.

Avanceña, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.

G.R. No. 74156 June 29, 1988

GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA CONCEPCION,
respondents.

Castillo, Laman, Tan & Pantaleon for petitioners.

Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:

A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from
enforcing the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in NCR Case No. 1-168-
85 entitled "FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the
dispositive portion of which reads:

WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another one issued:

1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living allowance;

2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from the
time of illegal deduction; and

3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-appellants.

SO ORDERED.

Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner Cleto T.
Villaltuya dissented and voted to affirm in toto the Labor Arbiter's Decision.

On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the assailed
Decision. On 2 September 1987, we gave due course to the petition and required the submittal of memoranda, by
the parties, which has been complied with.

The facts follow:

Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural
workers in the private sector. Petitioner corporation complied with the said Wage Order by paying its monthly-paid
employees the mandated P3.00 per day COLA. However, in computing said COLA, Petitioner Corporation multiplied
the P 3.00 daily COLA by 22 days, which is the number of working days in the company.

Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA rate of P3.00
should be multiplied by 30 days to arrive at the monthly COLA rate. The union alleged furthermore that prior to the
effectivity of Wage Order No. 6, Petitioner Corporation had been computing and paying the monthly COLA on the
basis of thirty (30) days per month and that this constituted an employer practice, which should not be unilaterally
withdrawn.

After several grievance proceedings proved futile, the Union filed a complaint against Petitioner Corporation, its
President, F. White, and Vice-President, J. Santiago, for illegal deduction, underpayment, unpaid allowances, and
violation of Wage Order No. 6. Petitioners White and Santiago were sought to be held personally liable for the
money claims thus demanded.

Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since the
individual petitioners acted in their corporate capacity they should not have been impleaded; and that the monthly
COLA should be computed on the basis of twenty two (22) days, since the evidence showed that there are only 22
paid days in a month for monthly-paid employees in the company. His reasoning, inter alia, was as follows:

To compel the respondent company to use 30 days in a month to compute the allowance and retain 22 days for
vacation and sick leave, overtime pay and other benefits is inconsistent and palpably unjust. If 30 days is used as
divisor, then it must be used for the computation of all benefits, not just the allowance. But this is not fair to
complainants, not to mention that it will contravene the provision of the parties' CBA.

On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner Corporation was
guilty of illegal deductions, upon the following considerations: (1) that the P3.00 daily COLA under Wage Order No. 6
should be paid and computed on the basis of thirty (30) days instead of twenty-two (22) days since workers paid on a
monthly basis are entitled to COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full
allowance enjoyed by Petitioner Corporation's monthly-paid employees before the CBA executed between the
parties in 1982 constituted voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that
petitioners White and Santiago were properly impleaded as respondents in the case below.

Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.

We are constrained to reverse the reversal.

Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:

Section 5. Allowance for Unworked Days.

All covered employees shall be entitled to their daily living allowance during the days that they are paid their basic
wage, even if unworked. (Emphasis supplied)

The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the
payment of COLA is mandated only for the days that the employees are paid their basic wage, even if said days are
unworked. So that, on the days that employees are not paid their basic wage, the payment of COLA is not mandated.
As held in University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA
691):

... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence, we have the
principle of 'No Pay, No ECOLA.

Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are deemed paid their
basic wages for all those days and they should be entitled to their COLA on those days "even if unworked," as the
NLRC had opined. Peculiar to this case, however, is the circumstance that pursuant to the Collective Bargaining
Agreement (CBA) between Petitioner Corporation and Respondent Union, the monthly basic pay is computed on the
basis of five (5) days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement
read:

Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.

Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work week.

Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess of 5 days weekly shall be
computed on hourly basis at the rate of time and one half.

The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes of
computing overtime pay, the monthly wage is divided by the number of actual work days in a month and then, by
eight (8) working hours. If a monthly-paid employee renders overtime work, he is paid his basic salary rate plus one-
half thereof. For example, after examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter
found:

the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50% premium. This is
over and above his monthly basic pay as supported by the fact that base pay was paid. If the 6th and 7th days of the
week are deemed paid even if unworked and included in the monthly salary, Santos should not have been paid his
base pay for Saturday and Sunday but should have received only the 50% overtime premium.

Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in computing the
vacation and sick leaves of the employees, Petitioner Corporation consistently used twenty-two (22) days.

Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have
to be held that the COLA should be computed on the basis of twenty two (22) days, which is the period during which
the monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA is the law between the
parties and, if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in
compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as constitutive of
voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To be considered as such, it
should have been practiced over a long period of time, and must be shown to have been consistent and deliberate.
Adequate proof is wanting in this respect. The test of long practice has been enunciated thus:

... Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not
covered by the law requiring payment of holiday pay.' (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-
50568, November 7, 1979, 94 SCRA 270). (Emphasis ours)

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage
Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for
the conversion of the daily allowance to its monthly equivalent was laid down, thus:

Section 3. Application of Section 2--

xxx xxx xxx

(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:

xxx xxx xxx

(3) For workers who do not work and are not considered paid on Saturdays and Sundays:

P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)

As the Labor Arbiter had analyzed said formula:

Under the aforecited formula/guideline, issued for the first time, when applied to a company like respondent which
observes a 5-day work week (or where 2 days in a week, not necessarily Saturday and Sunday, are not considered
paid), the monthly equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262 divided by
12. This formula results in the equivalent of 21.8 days in a month.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the
law. Payment may be said to have been made by reason of a mistake in the construction or application of a
"doubtful or difficult question of law." (Article 2155, 1 in relation to Article 2154 2 of the Civil Code). Since it is a past
error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article
100 of the Labor Code3 may be said to have resulted by virtue of the correction.

With the conclusions thus reached, there is no further need to discuss the liability of the officers of Petitioner
Corporation.

WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10 March 1986, is
SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary
Restraining Order heretofore issued is hereby made permanent.

SO ORDERED.

Yap, C.J., Paras, and Sarmiento, JJ., concur.

Padilla, J., took no part.

[G.R. No. 110518. August 1, 1994.]

JOSE L. GARCIA, EDUARDO ALAS, NOEL APAYA, RICARDO ARMAMENTO, MARCOS AVEJERO REYNALDO BANTIGUE,
ROMEO BORRAS, MARGARITO CABICUELAS, ROLANDO CAMUA, JOSE DENNIS CASTILLO, DICOROSO CARBO, FELIPE
COSCULLA, EDUARDO DE GUZMAN, SEVILLA DEMLO, DIONALDO TEODOLFO, ADEMAR DUPINO, JOSE ESCOBAR,
REYNALDO FLORES, DELFIN GARCIA, FEDERICO GATDULA, FELOMINO GUTIERREZ, HILARIO EUGENIO, EUGENIO
ILANO, JR., WILFREDO JALLA, RAMON LASQUITE, CESARIANO LIM, AUGUSTO LUMBANG, SALVADOR MACARAEG,
ERNESTO MARQUEZ, LAURO MIRAVALLES, FRED ONIA, REYNALDO ORTIZ, LEONIZA PALALIMPA, ALFREDO ROMEO,
LECERIO ROSARIO, ARMANDO SABIDURIA, RONILO SACE, REGONDOLA SANTOS, ERNESTO SALVATUS, ENRICO
SANDOVAL, EUFEMIO SATURAY, VIRGILIO TINAMISAN, MACARIO VALDEZ, JOSE VILLARICA, SANTOS VIRAY,
FLORENDO LOPEZ, JOSE SEGISMUNDO, DIZON GERONIMO, RUPERTO CLAVIO, JR., SEFARIN DYTIOCO, FIDEL
TAGULAM, and EDITHA R. JUAN, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL SERVICE
CORPORATION, Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; EMPLOYMENT, TERMINATION THEREOF; RETRENCHMENT; REQUISITES. —

The requisites of a valid retrenchment as laid down in Lopez Sugar Corporation v. Federation of Free Workers. The
requisites are: 1) the losses expected should be substantial and not merely de minimis in extent; 2) the substantial
losses apprehended must be reasonably imminent; 3) the retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and 4) the alleged losses, if already incurred, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and convincing evidence.

2. ID.; NATIONAL LABOR RELATIONS COMMISSION; PROCEDURE THEREIN, LIBERAL. — The Revised Rules of the
NLRC provide under Sec. 3, Rule V, that parties should not be allowed to allege facts not referred to or included in
the complaint, or position paper, affivadits and other documents. This would mean that although not contained in
the complaint, any claim can still be averred in the position paper, as was done by the petitioners, or in an affidavit
or other documents.

3. ID.; MINIMUM WAGE LAW; INCREASES IN MINIMUM WAGES CONSIDERED IN COMPUTATION OF

SEPARATION PAY OF EMPLOYEES BEFORE THEIR RETRENCHMENT. — We also hold that the increases in the
petitioners’ minimum wage under RA 6640 and RA 6720 should be granted since they became effective before the
petitioners’ retrenchment. Said increases should be considered in the computation of their separation pay in
accordance with Art. 283 of the Labor Code.

4. ID.; EMPLOYMENT; TERMINATION THEREOF; SEPARATION PAY; REQUISITE FOR AWARD OF MORAL AND
EXEMPLARY DAMAGES; CASE AT BAR. — Moral damages are recoverable only 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. Exemplary damages may be awarded only if the dismissal was effected in a
wanton, oppressive or malevolent manner. None of these grounds has been proven.

5. ID.; ID.; ID.; ID.; AMOUNT OF ATTORNEY’S FEES AVAILABLE TO PARTY. — The Court will grant the claim for
attorney’s fees in an amount equivalent to 10% of the total amount awarded to the petitioner as authorized by the
Labor Code.

6. ID.; ID.; EMPLOYER-EMPLOYEE RELATIONSHIP; EMPLYER CANNOT BE COMPELLED TO RETAIN ITS EMPLOYEES
IT NO LONGER NEEDS. — The constitutional policy of providing full protection to labor is not intended to oppress or
destroy management. The employer cannot be compelled to retain employees it no longer needs, to be paid for
work unreasonably refused and not actually performed. NASECO bent over backward and exerted every effort to
help the petitioners look for other work, postponed the effective date of their separation, and offered them a
generous termination pay package. The unflagging commitment of this Court to the cause of labor will not prevent
us from sustaining the employer when it is in the right, as in this case.

DECISION

CRUZ, J.:

The main issue before the Court in this petition for certiorari is the validity of the retrenchment of the fifty-one
petitioners by private respondent National Service Corporation (NASECO) as upheld by the Labor Arbiter and later by
the National Labor Relations Commission.

NASECO is a government-owned or controlled corporation engaged in providing manpower services such as security
guards, radio operators, janitors and clerks, principally for the Philippine National Bank.chanrobles law library
The petitioners were its employees who were either members of the NASECO Employees Union (NASECO — EU) or
of the Alliance of Concerned Workers of NASECO (ACW — NASECO). On November 19, 1988, they were among those
who staged a strike and picketed the premises of the PNB.

On November 21, 1988, the PNB filed a complaint for damages with preliminary injunction against the labor unions
with the Regional Trial Court of Manila. It was docketed as Civil Case No. 88-46938 in Branch 22. On December 5,
1988, the court granted the application for a preliminary injunction and issued the writ ordering the lifting of the
picket.

NASECO also filed on November 21, 1988, a petition with the National Labor Relations Commission to declare the
strike illegal. This was docketed as NLRC Case No. 00-11-04766-88. On February 17, 1989, the NLRC rendered its
decision sustaining NASECO. 1 The union officers who knowingly and actively participated in the strike, as well as the
members of the respondent union who committed illegal acts in the course of the strike, were deemed to have
legally lost their employment status.chanrobles lawlibrary : rednad

The rest of the striking members, including the herein fifty-one petitioners, were ordered to report for work
immediately.

The complaint of the labor union against the PNB for unfair labor practice and illegal lockout was dismissed on the
ground that there was no employer-employee relationship between the PNB and the labor unions. 2

On March 1, 1989, the petitioners reported for work at the NASECO office but they could not be given assignments
because the PNB had meanwhile contracted with another company to fill the positions formerly held by the
petitioners.

NASECO inquired from the PNB whether or not the petitioners could still be accepted to their former positions in
light of the Service Agreement between NASECO and the PNB giving the latter the right to reject or replace any and
all of NASECO’s employers assigned to it, for inefficiency or other valid reasons.

In reply, the PNB manifested that it was no longer accepting the petitioners back to their former positions as these
were no longer vacant.

NASECO then sought new assignments for the petitioners with its other clients, but the petitioners insisted on their
reassignment to the PNB. In the meantime, starting April 1, 1989, NASECO paid the salaries and other benefits of the
petitioners although they were not actually working. 3chanrobles lawlibrary : rednad

On October 13, 1989, the petitioners received notice of separation from NASECO, effective thirty days thereafter.
The reason given was the financial losses NASECO was incurring at that time due mainly to the salaries being paid to
the employees who could not be posted despite efforts to place them. 4

Conformably to Art. 283 of the Labor Code, the Department of Labor and Employment was likewise given a 30-day
notice of the intended retrenchment.

The management of NASECO even offered a better separation package equivalent to three-fourths of the estimated
new basic monthly salary for every year of service, compared to the statutory requirement of only 1/2 month pay for
every year of service. 5

The petitioners refused to acknowledge receipt of the notice and instead, on October 26, 1989, filed with NLRC a
complaint against NASECO for unfair labor practice, illegal dismissal, non-payment of wages and damages. 6

On November 13, 1989, NASECO sent notice to the petitioners that their termination from the service would take
effect not on November 16, 1989, but on November 30, 1989, for humanitarian considerations. The effective date
was again extended to December 15, 1989, and finally to December 31, 1989.cralawnad

On June 22, 1990, Labor Arbiter Potenciano Canizares Jr. rendered a decision finding that the petitioners had been
"fairly discharged by the respondent (NASECO) in a valid act of simple retrenchment." 7

On July 11, 1990, the petitioners appealed to the NLRC. On September 11, 1992, they filed a manifestation that the
private respondent had been hiring new personnel, but not proof was offered to support the charge.

On December 21, 1992, the NLRC issued a resolution affirming the decision of the labor arbiter. 8 A motion for
reconsideration filed by the petitioners on January 15, 1993, was denied by the NLRC on February 10, 1993. 9
It is now asserted in this petition that the NLRC gravely abused its discretion in holding that the petitioners were
validly dismissed on the ground of retrenchment; that NASECO is not guilty of unfair labor practice; and that their
monetary claims for increases under Republic Acts 6640 and 6727, as well as for moral and exemplary damages and
attorney’s fees, should be denied.

On the first two issues, the petitioners fault the NLRC fir completely disregarding the requisites of a valid
retrenchment as laid down in Lopez Sugar Corporation v. Federation of Free Workers. 10

The requisites are: 1) the losses expected should be substantial and not merely de minimis in extent; 2) the
substantial losses apprehended must be reasonably imminent; 3) the retrenchment must be reasonably necessary
and likely to effectively prevent the expected losses; and 4) the alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.chanrobles law
library : red

The petitioners assert that NASECO failed to show with convincing evidence that the incurred losses, if any, were
substantial. The claimed losses were belied by the fact that NASECO hired new personnel before and after the
dismissal of the petitioners. NASECO also failed to pursue other measures to forestall losses, short of dismissing the
petitioners. It did not follow the "first in, last out" rule that in cases of retrenchment, employees with long years of
service with the company, like the petitioners, should not be the first to be retrenched. They attribute their dismissal
to their participation in the strike of November 19, 1988. Thus, their dismissal was an act of unfair labor practice for
being discriminatory and violative of their rights to self-organization and to engage in concerted activities.

We have to disagree.

The losses incurred by NASECO for the year 1989 amounted to P1,457,700.42 and were adequately proved by it. 11
These losses were directly caused by the salaries and other benefits paid to the petitioners during the period from
April 1 to December 31, 1989. The amount of these payments is not insubstantial in light of the economic difficulties
of the country during that year when several coups d’ etat adversely affected the nation’s economic growth.

It is also not true that respondent NASECO did not look for other measures to cut back on its losses. NASECO had in
fact tried to place the petitioners with its other clients but it was the petitioners themselves who refused
reassignment.

The particular facts of this case preclude application of the "first in, last out" rule in the retrenchment of employees.
There was no discrimination against the petitioners. NASECO could not compel the PNB to take the petitioners back
to their former positions in view of its contractual right to reject any employee of NASECO for inefficiency and other
valid reasons. The PNB had already filled the vacated positions of the petitioners during the strike, to ensure the
continued operation of its business.chanrobles.com:cralaw:red

The monetary claim under RA 6640 and RA 6727 is another matter. RA 6640, which took effect on December 14,
1987, and RA 6727, which took effect on July 1, 1989, provide for P10.00 and a P25.00 increases respectively in the
minimum wage of laborers. The NLRC denied this claim on the ground that the petitioners had failed to include it in
their basic complaint. This contention is not acceptable because the claim was clearly included and prayed for in
their position paper.

The Revised Rules of the NLRC provide under Sec. 3, Rule V, that parties should not be allowed to allege facts not
referred to or included in the complaint, or position paper, affivadits and other documents. This would mean that
although not contained in the complaint, any claim can still be averred in the position paper, as was done by the
petitioners, or in an affidavit or other documents.

We also hold that the increases in the petitioners’ minimum wage under RA 6640 and RA 6720 should be granted
since they became effective before the petitioners’ retrenchment. Said increases should be considered in the
computation of their separation pay in accordance with Art. 283 of the Labor Code.

Moral damages are recoverable only 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. 12
Exemplary damages may be awarded only if the dismissal was effected in a wanton, oppressive or malevolent
manner. 13 None of these grounds has been proven. However, the Court will grant the claim for attorney’s fees in an
amount equivalent to 10% of the total amount awarded to the petitioner as authorized by the Labor Code. 14

The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The
employer cannot be compelled to retain employees it no longer needs, to be paid for work unreasonably refused
and not actually performed. NASECO bent over backward and exerted every effort to help the petitioners look for
other work, postponed the effective date of their separation, and offered them a generous termination pay package.
The unflagging commitment of this Court to the cause of labor will not prevent us from sustaining the employer
when it is in the right, as in this case.chanrobles.com.ph : virtual law library

WHEREFORE, the decision of the Labor Arbiter dated June 22, 1990, and the resolutions of the NLRC dated
December 21, 1992, and February 10, 1993, are AFFIRMED, with the modification that the monetary claim under RA
6640 and RA 6720, and for attorney’s fees, should be and is hereby granted. The award of moral and exemplary
damages is disallowed.

SO ORDERED.
G.R. No. 106370 September 8, 1994

PHILIPPINE GEOTHERMAL, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EDILBERTO M. ALVAREZ, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles for petitioner.

Fidel Angelito I. Arias for private respondent.

PADILLA, J.:

Petitioner Philippine Geothermal, Incorporated filed the present petition for certiorari seeking the reversal of the
decision of public respondent National Labor Relation Commision In NLRC CA No. L-000295-91/RB-IV-1-3583-91
entitled "Edilberto M. Alvarez v. Philippine Geothermal, Inc. et al."

The relevant facts of this case are as follows:

Private respondent Edilberto M. Alvarez was first employed by petitioner on 2 July 1979. On 31 May 1989, private
respondent, who was then occupying the position of Steam Test Operator II, injured his right wrist when a steam-
pressured "chicksan swivel joint assembly" exploded while he was checking a geothermal well operated by
petitioner. As a result, private respondent's right arm was placed in a plaster cast and he was confined at the San
Pablo Doctor's Hospital from 31 May 1989 to 3 June 1989.

Dr. Oscar M. Brion, the attending physician, diagnosed private respondent's injuries to be:

1) Complete fracture/dislocation distal radius (r);

2) Complete fracture styloid process and dislocation of the ulna;

3) Right pelvic contusion, which required a recuperation period of approximately forty-five (45) days.

Petitioner thus gave private respondent a fifty (50) days "work-connected accident" (WCA) leave with pay until 29
July 1989. Petitioner also referred private respondent's case to Dr. Liberato A.C. Leagogo, Jr. of the Philippine
Orthopedic Institute, at petitioner's expense.

On 26 July 1989, Dr. Leagogo certified that private respondent was fit to return to work with the qualification
however, that he could only perform light work. Thus, on 31 July 1989, when respondent Alvarez returned to work,
he was assigned to "caliberation of barton recorders", in accordance with the doctor's recommendations.

On 13 November 1989, Alvarez was again examined by Dr. Leagogo who issued a medical certificate which reads: 1

This is with regards [sic] the work recommendation for Mr. Bert Alvarez.

At this point in time, 5 months post-injury, he can be given moderate working activities, pulling, pushing, carrying
and turning a 20 lbs.-25 lbs. weight/force.

On the 6th month, he can go back to his previous job.

Despite this certification, respondent Alvarez continued to absent himself from work and by the end of 1989 he had
used ten (10) days of vacation leave, eighteen (18) days of sick leave, fifteen (15) days of WCA leave and four (4) days
of emergency leave for the period starting 31 July 1989.

On 28 December 1989, Dr. Leagogo, after examining Alvarez, certified that the latter's injury had healed completely
and that he could thus return to his pre-injury work.

On the same day, Alvarez consulted another doctor, Dr. Angela D.V. Garcia, a private physician, who likewise
confirmed that there were "no contraindications for him (Alvarez) not to attend to his work."

On 29 December 1989, based on Dr. Leagogo's findings, petitioner wrote Alvarez stating:

This is to inform you that based on the examination performed on December 28, 1989 by your attending physician,
Dr. Liberato Antonio C. Leagogo, Jr., your right wrist fracture is completely healed as stated in the attached medical
certificate. Therefore, you are advised to go back to your regular duty as an Operator II at the Well Testing Section
effective immediately.

xxx xxx xxx

Any absences you may incur in the future will be subject to our existing policy on leaves and absences. . . . 2

Since Alvarez failed to report for work from 2 to 10 January 1990, petitioner again wrote him stating:

. . . it is indicated that your therapy has no contraindication for you not to attend to your work. However, from that
date up to now, January 11, you have not reported for work. . . .

Therefore, as of January 11, 1990, you are considered to be "Absent Without Official Leave (AWOL) and Without
Pay". This letter serves as a warning letter per our rules and regulations, Unauthorized absences, rule 3, par. i, page
31.

You are advised to immediately report for work or further disciplinary action will be taken. 3

After reading the letter. Alvarez wrote a hand-written note on petitioner's copy of the letter, stating "Please wait for
my doctor's medical certificate from Dr. Relampagos."

On 19 January 1990, Dr. Victoria Pineda, an orthopedic doctor of the National Orthopedic Hospital whom Alvarez
also consulted issued the following medical certificate:

Patient has reached a plateau in his rehabilitation with limitations of wrist motion (r) as regular. Fit for work. 4

On 20 January 1990, Alvarez consulted Dr. Francisco, another orthopedic doctor at the Polymedic General Hospital,
who recommended a set of laboratory tests to be conducted on Alvarez' right wrist.

On 1 February 1990, Dr. Relampagos of the National Orthopedic Hospital certified Alvarez to be "Fit for light job." 5

On 6 February 1990, Dr. Francisco, who read and interpreted the results of the tests undertaken on Alvarez at the St.
Luke's Medical Center, certified that there is no "hindrance for him (Mr. Alvarez) to do his office work." 6

Notwithstanding the above medical findings, respondent Edilberto M. Alvarez continued to incur numerous
absences. He did not report for work in the months of January and February 1990.

On 7 February 1990, petitioner addressed its third letter to Alvarez stating:

The attached medical certificates from Dr. Garcia, Dr. Pineda,

Dr. Relampagos, Dr. Francisco, and Dr. Leagogo all indicate that you are fit to work. Based on these medical
certificates, your absences from January 11 to February 6 1990 (23 working days) will be charged to your sick leave
credits. Be advised that your sick leave credits will be exhausted on February 8, 1990 therefore, you will not be paid
for subsequent absences.

In addition, if you fail to report to work and are unable to present a medical certificate explaining your absences, you
will face disciplinary action. I am enclosing the statement of company policy on absences for your information and
would strongly suggest that you report to work immediately. 7

Under petitioner's company rules, employees who incur unauthorized absences of six (6) days or more are subject to
dismissal. Thus, when Alvarez failed to report for work from 8 to 28 February 1990, a total of eighteen (18) working
days with three (3) days off, petitioner wrote Alvarez a fourth time stating in part:

This refers to your continued refusal to report back to work following your recovery from a work-related accident
involving your right wrist last May 31, 1989. That you have recovered is based on the certification of four (4)
physicians, including the company-retained orthopedic doctor and three (3) other orthopedic specialists whom you
personally chose and consulted.

xxx xxx xxx

In order not to lose your income, the company has allowed you to charge all these unwarranted absences against
your accumulated sick leave credits. Our records show that as of February 7, 1990, you have used up all your
remaining sick leaves. We would like to emphasize that from February 8 to 28, all your absences are considered
unauthorized and without pay. Please be reminded that, according to company rules, employees who go on
unauthorized absences of six (6) or more days are subject to dismissal.

The company, therefore, believes that it has given all the time, help, and considerations in your case. We go by the
doctor's certifications that you are already fit to work.

In view of the above, we are giving you a final warning. Should you fail to report to work on Monday, March 5, 1990
your employment with the company will be terminated. 8

This fourth warning letter of petitioner was unheeded. Alvarez failed to report for work; neither did he inform
petitioner of the reason for his continued absences.

As a consequence, petitioner terminated Alvarez, employment on

9 March 1990.

On 19 June 1990, Alvarez filed a complaint for illegal dismissal against petitioner with the Regional Arbitration
Branch, Region IV.

On 19 December 1990, the labor arbiter dismissed the complaint, without prejudice, for failure of the complainant
to submit his position paper despite repeated orders from the labor arbiter.

On 16 January 1991, private respondent refiled his complaint for illegal dismissal.

On 6 September 1991 the labor arbiter rendered a decision holding private respondent's termination from
employment as valid and justified.

On appeal to the public respondent National Labor Relations Commission (NLRC), the decision was reserved and set
aside. Petitioner was ordered to reinstate Edilberto M. Alvarez to his former position without loss of seniority rights
but without backwages.

A Motion for Reconsideration was denied on 15 May 1992. Petitioner then filed the present petition for certiorari,
based on two (2) grounds namely:

RESPONDENT COMMISSION ABUSED ITS DISCRETION AND ACTED BEYOND ITS JURISDICTION BY ENTERTAINING AN
APPEAL THAT WAS FILED OUT OF TIME

EVEN ON THE MERITS OF THE CASE, RESPONDENT COMMISSION ABUSED ITS DISCRETION BY FAILING TO
APPRECIATE OVERWHELMING EVIDENCE UNIFORMLY SHOWING THAT THE TERMINATION OF MR. ALVAREZ WAS
VALID AND JUSTIFIED. 9

On the issue of whether or not the appeal from the decision of the labor arbiter to the NLRC was filed within the ten
(10) day reglementary period, it is undisputed that private respondent received a copy of the labor arbiter's decision
on 5 September 1991. Alvarez thus had up to 15 September 1991 to perfect his appeal. Since this last mentioned
date was a Sunday, private respondent had to file his appeal on the next business day, 16 September 1991.

Petitioner contends that the appeal was filed only on 20 September 1991. Respondent NLRC however found that
private respondent filed his appeal by registered mail on 16 September 1991, the same day that petitioner's counsel
was furnished copies of said appeal. 10

We will not disturb this factual finding of the NLRC.

The contention that even assuming arguendo that the appeal was filed on time, the appeal fee was paid four (4) days
late (and, therefore, the appeal to the NLRC should be dismissed) likewise fails to entirely empress us. In C.W. Tan
Manufacturing v. NLRC, 11 we held that "the broader interest of justice and the desired objective of deciding the
case on the merits demand that the appeal be given due course."

On the issue of whether or not Edilberto M. Alvarez was validly dismissed, we rule in the affirmative and
consequently the decision of respondent NLRC is set aside.

Article 282(b) of the Labor Code provides that an employer may validly dismiss an employee for gross and habitual
neglect by the employee of his duties. In the present case, it is clear that private respondent was guilty of seriously
neglecting his duties.
The records establish that as early as 26 July 1989, Dr. Leagogo already had certified that Alvarez could perform light
work. On 13 November 1989,
Dr. Leagogo certified that Alvarez could perform moderate work and it was further certified that by December 1989,
Alvarez could return to his pre-injury duties. Notwithstanding these certifications, Alvarez continued to incur
unexplained absences until his dismissal on 9 March 1990.

A review of Alvarez' record of attendance shows that from August to December 1989, he reported for work only
seventy-seven (77) times while he incurred forty-seven (47) absences.

An employee who earnestly desires to resume his regular duties after recovering from an injury undoubtedly will not
go through the trouble of getting opinions from five (5) different of getting opinions from five (5) different physicians
before going back to work after he has been certified to be fit to return to his regular duties.

Petitioner has not been shown to be without sympathy or concern for Alvarez. He was given fifty (50) days work-
connected accident (WCA) leave with pay to allow him to recuperate from his injury without loss of earnings. He was
allowed to use his leave credits and was actually given an additional fifteen (15) days WCA leave to allow him to
consult his doctors and fully recover from his injuries. Moreover, petitioner gave Alvarez several warnings to report
for work, otherwise, he would face disciplinary sanctions. In spite of these warnings, Alvarez was absent without
official leave (AWOL) for eighteen (18) days. Under company policy, of which Alvarez was made aware, employees
who incur without valid reason six (6) or more absences are subject to dismissal.

Petitioner, in its fourth and last warning letter to Alvarez, was willing to allow him to resume his work in spite of the
eighteen (18) days he went on AWOL. It was made clear, however, that should private respondent still fail to report
for work on 5 March 1990, his employment would be terminated.

Private respondent failed to report for work on 5 March 1990. Petitioner validly dismissed him not only for violation
of company policy but also for violation of Section 282(c) of the Labor Code aforecited.

While it is true that compassion and human consideration should guide the disposition of casses involving
termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the
benefits accorded to labor do not include compelling an employer to retain the services of an employee who has
been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes
neither oppression nor self-destruction of the employer. 12 It should be made clear that when the law tilts the scale
of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and
management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There
may be cases where the circumstances warrant favoring labor over the interests of management but never should
the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied
to none).

In Cando v. National Labor Relations Commission 13 the Court awarded separation pay to an employee who was
terminated for unuathorized absences. We believe that separation pay of one-half (1/2) month salary for every year
of service is adequate in this case.

WHEREFORE, the decision of respondent National Labor Relations Commision is hereby SET ASIDE and the decision
of the Labor Arbiter is reinstated with the MODIFICATION that petitioner Philippine Geothermal, Inc. is ordered to
pay private respondent Edilberto M. Alvarez separation pay equivalent to one-half (1/2) month salary for every year
of service starting from 2 July 1979 until his dismissal on 9 March 1990.

SO ORDERED.
G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,

vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC. (formerly FILIPRO,
INC.), respondents.

Jose C. Espinas for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the
divisor in the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations
Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of
its monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees
Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and
appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and
limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo,
p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of
salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as
sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment
for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code,
that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251
as divisor is an established employee benefit which cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay
award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the
company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that
with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the
reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251
days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the
two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987
remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in
voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa
Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning
that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1,
1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261
days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential,
vacation and sick leave pay.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code.
The respondent company controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-
agritultural employees who regularly perform their duties away from the principal place of business or branch office
of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty."

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's
working hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel, even if they report to the office before
8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00
a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an
exercise of purely management prerogative of providing administrative control over such personnel. This does not in
any manner provide a reasonable level of determination on the actual field work of the employees which can be
reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report
for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field
work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow
their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period
between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of
which are subject to their individual capacity and industry and which "cannot be determined with reasonable
certainty." This is the reason why effective supervision over field work of salesmen and medical representatives,
truck drivers and merchandisers is practically a physical impossibility. Consequently, they are excluded from the ten
holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty"
must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Rule IV Holidays with Pay

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . .
(Emphasis supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The
petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the
Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by
the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the
field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of
Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in
the field can be determined with reasonable certainty, query must be made as to whether or not such employee's
time and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and
performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the
office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an
employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their
performance is proof that their actual hours of work in the field can be determined with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good
collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal
market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty
in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by
the actual hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss
the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court
stated:

The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works
individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within
the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to the personal supervision of his
employer, and his employer has no way of knowing the number of hours he works per day.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their
exclusion as field personnel from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay,
the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should
reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the
basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no
longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon
that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with
additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for
purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore,
reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten
holidays with pay. (Rollo, p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly
paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered
Bank Employees Association v. Ople (supra). In that case, We held:

It is argued that even without the presumption found in the rules and in the policy instruction, the company practice
indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law.
The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If
the employees are already paid for all non-working days, the divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

———————————

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro
indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the
purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which
is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the
same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual
salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of
holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00
After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100
+ 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim
of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of
which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must
fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to
September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303,
indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on
September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late to
allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974.
This ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically,
therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay
award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose
is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or
affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing
La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in
order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly
delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised
by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered
Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of
the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred
to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and
which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned
that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and
policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the
above ruling and added the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA
case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be
given to a legislative or executive act subsequently declared invalid:
xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must
have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares
its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their
positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while
such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the government organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and
justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, — with respect to particular relations, individual and
corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US
371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952])
and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion
of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975
now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit
validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not
obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the
fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it
would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984
was not in any way attributed to Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday
pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other
respects, the order of the respondent arbitrator is hereby AFFIRMED.

SO ORDERED.
[G.R. No. 116542. July 30, 1996]

THE HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and EMMANUEL A. MENESES, respondents.

DECISION

PANGANIBAN, J.:

What species of dishonesty would constitute a ground for termination? Is a provision in the employees handbook
stating that any form of dishonesty shall constitute serious offense(s) calling for termination valid and binding upon
the respondent NLRC?

These questions are answered by this Court in resolving the instant petition for certiorari which seeks a partial
reversal of the Decision[1] of the respondent National Labor Relations Commission[2] promulgated on April 19, 1994
insofar as it directs reinstatement of private respondent to his former position.

The Antecedent Facts

The undisputed facts, as summarized in the Labor Arbiters decision, are as follows:

Complainant is a regular rank and file employee of Hongkong and Shanghai Banking Corp. Ltd., with office address at
Royal Match Building, Ayala Avenue, Makati, Metro Manila. He started working with the said bank in July 1986 as a
clerk until his dismissal on February 17, 1993.

It appears that on February 3, 1993, complainant called the bank to inform the latter that he had an upset stomach
and would not be able to report for work. His superior, however, requested him to report for work because the
department he was then in was undermanned but complainant insisted that it was impossible for him to report for
work, hence, he was allowed to go on sick leave on that day.

Later on that day, the bank called complainant at his given Tel. No. 521-17-54 in order to obtain vital information
from him, but the bank was informed by the answering party at the phone number given by complainant that
complainant had left early that morning.

When complainant reported for work the following day, February 4, 1993, he was asked by his superior to explain
why he was not at his residence on February 3, 1993 when he was on sick leave because of an upset stomach.

Complainant explained that he indeed suffered from an upset stomach and that he even consulted Dr. Arthur Logos
at 4:00 oclock in the afternoon of the same day and the reason why he could not be reached by telephone was
because he had not been staying at his given residence for over a week.

On February 4, 1993 the bank called up Dr. Logos to verify the truth of complainants statement but the doctor
denied that he examined or attended to complainant on February 3, 1993 and the last time complainant consulted
him was in December 1992. For this reason, the bank directed complainant to explain his acts of dishonesty because
allegedly he was not honest in telling the bank that he had an upset stomach on February 3, 1993, and that he
consulted Dr. Logos on that day.

In his written statement, by way of answer to the memorandum, complainant insisted that he had diarrhea on
February 3, 1993 and attached a certification from his aunt where he stayed from the evening of February 2, 1993
and the whole day of February 3, 1993 as well as a certification from his uncle named Andre R. Lozano attesting to
the conversation between complainant and Melvin Morales regarding the whereabouts of complainant on that day.
Complainant further admitted that his statement about his not staying at his house for one week and his consulting
a doctor was incorrect, but that the said statement was not given with malicious intention or deceit or meant to
commit fraud against the bank, its operations, customers and employees. The said statement according to him was
impulsive reaction as a result of his emotional stress he had been going through because of his marital problems. He
pleaded for leniency such that instead of termination, he be given a lighter penalty.

However, on February 16, 1993, the bank came out with a memorandum from the Vice-President, Human Resources
Department terminating his services effective March 16, 1993 pursuant to Article 13, Section VI of the Collective
Bargaining Agreement between the union of the rank and file employees of the bank and the company and the
banks Code of Conduct.

The following day, February 17, 1993, the bank sent complainant another memorandum directing him to settle his
outstanding loan amounting to PHP179,834.00, net of a months salary the bank was paying him in lieu of notice not
later than June 16, 1993. The import of the said letter was while the effectivity of the said termination is March 16,
1993, the company opted to pay him in lieu of the notice from February 17, 1993 up to March 16, 1993 his pay
without having to report for work.

Noting that the banks Employee Handbook made any form of dishonesty a cause for termination, the labor arbiter[3]
ruled said ground to be overly broad, and stated that (f)or us to agree that any form of dishonesty committed by an
employee of the bank is a ground for dismissal, is to say the least stretching the import of the aforecited rule too far.
The arbiter instead held that the offenses of dishonesty contemplated by the aforementioned rule which would
warrant termination of services are those involving deceit and resulting in loss of trust and confidence. The arbiter
further found that the private respondents proffered excuse, assuming it to be false, did not result in any damage to
the bank, and therefore the bank had no reason to lose its trust and confidence in the private respondent on
account of such manner of dishonesty. Additionally, the labor arbiter did not find in the record any proof that private
respondent was not really suffering from diarrhea as claimed.

Thus, in her decision dated August 13, 1993, the arbiter declared the termination illegal and ordered petitioner bank
to reinstate private respondent to his former position without loss of seniority rights and with backwages.

On appeal, the respondent Commission sustained the arbiters findings and ruled that --

x x x For while there is a semblance of truth to the charge of respondent (herein petitioner bank) that complainant
(private respondent) had been dishonest as to his whereabouts on February 3, 1993, such act of dishonesty cannot
be considered so serious (as) to warrant complainants outright dismissal. The dishonesty that complainant had
committed cannot be considered depraved. It was a simple kind of dishonesty that was committed not in connection
with his job. x x x

Brushing aside petitioner banks argument about strained relations, the NLRC reasoned that the private respondents
falsehoods were not of such nature as to have actually caused animosity between the private respondent and the
petitioner bank, and even if there was any such strained relations, x x x it was not of so serious a nature or of such a
degree as to justify his termination x x x. Thus, the NLRC ordered petitioner to reinstate complainant to his former
position but without backwages, considering that private respondent was not entirely faultless since he committed a
certain degree of dishonesty in lying.

Now before this Court, petitioner argues[4] that the dismissal is reasonable and valid pursuant to its Employee
Handbook, specifically, Appendix A thereto which provides for serious offenses calling for termination x x x.

The Issue

Petitioner raises the following reason to warrant this review:

Public respondent acted with grave abuse of discretion when it unilaterally curtailed and restricted petitioners
inherent and inalienable prerogative to set and impose reasonable disciplinary rules and regulations.

In short, the issue, as summed up by the Solicitor General, is whether or not the NLRC committed grave abuse of
discretion in ruling that private respondents act of making a false statement as to the real reason for his absence on
February 3, 1993 did not constitute such dishonesty as would warrant his termination from service.

The Courts Ruling

The petition is bereft of merit.

Petitioner insists that private respondent should be dismissed in accordance with rules contained in its employees
handbook titled Working Together, Appendix A[5] of which reads as follows:

Appendix A

Serious Offenses

Calling For

Termination Any form of dishonesty, like but not limited to the following:

fraud

making false or artificial entries in the books or records of the Bank

failing to turn over money entrusted by a client for the Bank within a specified time

theft of bank property

using company funds/assets for any unofficial purpose.

Any violation of the Banks Code of Conduct which has penal consequences under relevant local laws.

Deliberately inflicting or attempting to inflict bodily injury upon a co-employee on Bank premises, or in case it is
committed elsewhere, for reasons which are work-related.

Sabotage or causing damage to work or equipment of the Bank, or any underhanded interference in Bank
operations.

Any other serious offense analogous to the above.

While the foregoing text makes any form of dishonesty x x x a serious offense calling for termination, such general
statement must however be understood in the context of the enumeration of offenses, all of which are directly
related to the function of the petitioner as a banking institution. It is unarguable that private respondents false
information concerning his whereabouts on February 3, 1993 is not a fraud, nor a false entry in the books of the
bank; neither is it a failure to turn over clients funds, or theft or use of company assets, or anything analogous as to
constitute a serious offense meriting the extreme penalty of dismissal.

Like petitioner bank, this Court will not countenance nor tolerate ANY form of dishonesty. But at the same time, we
cannot permit the imposition of the maximum penalty authorized by our labor laws for JUST ANY act of dishonesty,
in the same manner that death, which is now reinstated as the supreme sanction under the penal laws of our
country, is not to be imposed for just any killing. The penalty imposed must be commensurate to the depravity of the
malfeasance, violation or crime being punished. A grave injustice is committed in the name of justice when the
penalty imposed is grossly disproportionate to the wrong committed.

In the context of the instant case, dismissal is the most severe penalty that an employer can impose on an employee.
It goes without saying that care must be taken, and due regard given to an employees circumstances, in the
application of such punishment. Moreover, private respondents acts of dishonesty -- his first offense in his seven
years of employment, as noted by the respondent NLRC -- did not show deceit nor constitute fraud and did not
result in actual prejudice to petitioner. Certainly, such peremptory dismissal is far too harsh, too severe, excessive
and unreasonable under the circumstances.

Besides, by ordering private respondents reinstatement without granting backwages, the NLRC effectively penalized
him by disallowing compensation for the three years counted from the time he received notice of his dismissal on
February 23, 1993.

Under Art. 282 of the Labor Code, 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.

None of the above apply in the instant case. To be lawful, the cause for termination must be a serious and grave
malfeasance to justify the deprivation of a means of livelihood. This is merely in keeping with the spirit of our
Constitution and laws which lean over backwards in favor of the working class, and mandate that every doubt must
be resolved in their favor.[6]

Petitioner further contends that the NLRC arbitrarily imposed its value judgment and standard on petitioners
disciplinary rules, thereby unilaterally restricting the Banks power and prerogative to discipline its employees
according to reasonable rules and regulations. We do not agree. Precisely, the employers prerogative and power to
discipline and terminate an employees services may not be exercised in an arbitrary or despotic manner as to erode
or render meaningless the constitutional guarantees of security of tenure and due process.[7]

Our labor laws, both substantive and procedural, require strict compliance before an employee may be dismissed.[8]
Clearly, it is the NLRCs right and duty to review employers exercise of their prerogative to dismiss so as to prevent
abuse and arbitrariness.

Petitioner points to GTE Directories Corporation vs. Sanchez[9] as authority for its contention that, since the
disciplinary rule cited in its Handbook has not been declared illegal or improper by competent authority, the
employees ignore or disobey them at their peril. This is absurd. As pointed out by the Solicitor General:[10]

x x x, the cited GTE case is not applicable to the present case because of an entirely different factual setting. This
case merely involves a simple reportorial requirement which the workers had deliberately and unjustifiably ignored.
Besides, the management imposed the penalty of dismissal only after the workers failed to comply with (the)
requirement for the sixth time and after the workers were already meted out the less severe penalty of suspension.

In the case at bar, it would have been different if private respondent had also been suspended first and despite that,
he still continued to defy the disciplinary rule. Meneses, indeed, was a first offender which is consistent at this point
to his being human, who occasionally commits mistakes just like anybody else.

Indeed, upholding petitioners argument (that the NLRC cannot review petitioners disciplinary rules) would mean
upsetting the entire labor arbitral machinery, for it would result in depriving the labor arbiter and the NLRC of their
jurisdiction to determine the justness of a cause for dismissal as granted by Arts. 217 and 218 of the Labor Code.

This petition is an unwarranted attack against workers right to security of tenure. It must be, as it is hereby,
demolished at first sight.

WHEREFORE, the instant petition is hereby DISMISSED, there being no showing of grave abuse of discretion on the
part of the respondent NLRC.

SO ORDERED.
G.R. No. 73681 June 30, 1988

COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,

vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

PARAS, J.:

Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent Minister of Labor and
Employment (MOLE) directly certifying private respondent as the recognized and duly-authorized collective
bargaining agent for petitioner's sales force and ordering the reinstatement of three employees of petitioner.

Acting on the petition for certiorari with prayer for temporary restraining order, this Court issued a Temporary
Restraining Order enjoining respondents from enforcing and/or carrying out the assailed order.

The antecedent facts are as follows:

On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor Relations (BLR) on ground
of unfair labor practice consisting of alleged refusal to bargain, dismissal of union officers/members; and coercing
employees to retract their membership with the union and restraining non-union members from joining the union.

After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition of petitioner assumed
jurisdiction over the dispute pursuant to Article 264 (g) of the Labor Code, Thereafter the case was captioned AJML-
3-142-85, BLR-3-86-85 "In Re: Assumption of Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines,
Inc." In its position paper, petitioner pointed out that —

(a) There is no legal basis for the charge that the company refused to bargain collectively with the union
considering that the alleged union is not the certified agent of the company salesmen;

(b) The union's status as a legitimate labor organization is still under question because on 6 March 1985, a
certain Monchito Rosales informed the BLR that an overwhelming majority of the salesmen are not in favor of the
Notice of Strike allegedly filed by the Union (Annex "C");

(c) Upon verification of the records of the Ministry of Labor and Employment, it appeared that a petition for
cancellation of the registration of the alleged union was filed by Monchito Rosales on behalf of certain salesmen of
the company who are obviously against the formation of the Colgate Palmolive Sales Labor Union which is supposed
to represent them;

(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador Reynante and Cornelio Mejia, and their
eventual dismissal from the employ of the company were carried out pursuant to the inherent right and prerogative
of management to discipline erring employees; that based on the preliminary investigation conducted by the
company, there appeared substantial grounds to believe that Sayson, Reynante and Mejia violated company rules
and regulations necessitating their suspension pending further investigation of their respective cases;

(e) It was also ascertained that the company sustained damages resulting from the infractions committed by the
three salesmen, and that the final results of the investigation fully convinced the company of the existence of just
causes for the dismissal of the three salesmen;

(f) The formation of the union and the membership therein of Sayson, Reynante and Mejia were not in any
manner connected with the company's decision to dismiss the three; that the fact that their dismissal came at a time
when the alleged union was being formed was purely coincidental;

(g) The union's charge therefore, that the membership in the union and refusal to retract precipitated their
dismissal was totally false and amounted to a malicious imputation of union busting;

(h) The company never coerced or attempted to coerce employees, much less interferred in the exercise of
their right to self-organization; the company never thwarted nor tried to defeat or frustrate the employees' right to
form their union in pursuit of their collective interest, as long as that right is exercised within the limits prescribed by
law; in fact, there are at present two unions representing the rank and file employees of the company-the factory
workers who are covered by a CBA which expired on 31 October 1985 (which was renewed on May 31, 1985) and
are represented by Colgate Palmolive Employees Union (PAFLU); whereas, the salaried employees are covered by a
CBA which will expire on 31 May 1986 represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office
Chapter. (pp. 4-6, Rollo)
The respondent Union, on the other hand, in its position paper, reiterated the issue in its Notice to Strike, alleging
that it was duly registered with the Bureau of Labor Relations under Registry No. 10312-LC with a total membership
of 87 regular salesmen (nationwide) out of 117 regular salesmen presently employed by the company as of
November 30, 1985 and that since the registration of the Union up to the present, more than 2/3 of the total
salesmen employed are already members of the Union, leaving no doubt that the true sentiment of the salesmen
was to form and organize the Colgate-Palmolive Salesmen Union. The Union further alleged that the company is
unreasonably delaying the recognition of the union because when it was informed of the organization of the union,
and when presented with a set of proposals for a collective bargaining agreement, the company took an adversarial
stance by secretly distributing a "survey sheet on union membership" to newly hired salesmen from the Visayas,
Mindanao and Metro Manila areas, purposely avoiding regular salesmen who are now members of the union; that in
the accomplishment of the form, District Sales Managers, and Sales Supervisors coerced salesmen from the Visayas
and Mindanao by requiring them to fill up and/or accomplish said form by checking answers which were adverse to
the union; that with a handful of the survey sheets secured by management through coercion, it now would like to
claim that all salesmen are not in favor of the organization of the union, which acts are clear manifestations of unfair
labor practices.

On August 9,1985, respondent Minister rendered a decision which:

(a) found no merit in the Union's Complaint for unfair labor practice allegedly committed by petitioner as
regards the alleged refusal of petitioner to negotiate with the Union, and the secret distribution of survey sheets
allegedly intended to discourage unionism,

(b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio Mejia "not without fault" and
that "the company 1 has grounds to dismiss above named salesmen"

and at the same time respondent Minister directly certified the respondent Union as the collective bargaining agent
for the sales force in petitioner company and ordered the reinstatement of the three salesmen to the company on
the ground that the employees were first offenders.

Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his assailed Order, dated
December 27, 1985. Petitioner now comes to Us with the following:

Assignment of Errors

Respondent Minister committed a grave abuse of discretion when he directly certified the Union solely on the basis
of the latter's self-serving assertion that it enjoys the support of the majority of the sales force in petitioner's
company.

II

Respondent Minister committed a grave abuse of discretion when, notwithstanding his very own finding that there
was just cause for the dismissal of the three (3) salesmen, he nevertheless ordered their reinstatement. (pp. 7-8,
Rollo)

Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case assumed by him
under Art. 264 (g) of the Labor Code but this power was exceeded when he certified respondent Union as the
exclusive bargaining agent of the company's salesmen since this is not a representation proceeding as described
under the Labor Code. Moreover the Union did not pray for certification but merely for a finding of unfair labor
practice imputed to petitioner-company.

The petition merits our consideration. The procedure for a representation case is outlined in Arts. 257-260 of the
Labor Code, in relation to the provisions on cancellation of a Union registration under Arts. 239-240 thereof, the
main purpose of which is to aid in ascertaining majority representation. The requirements under the law, specifically
Secs. 2, 5, and 6 of Rule V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the
certified bargaining representative is the true choice of the employees against all contenders. The Constitutional
mandate that the State shall "assure the rights of the workers to self-organization, collective bargaining, security of
tenure and just and humane conditions of work," should be achieved under a system of law such as the
aforementioned provisions of the pertinent statutes. When an overzealous official by-passes the law on the pretext
of retaining a laudable objective, the intendment or purpose of the law will lose its meaning as the law itself is
disregarded. When respondent Minister directly certified the Union, he in fact disregarded this procedure and its
legal requirements. There was therefore failure to determine with legal certainty whether the Union indeed enjoyed
majority representation. Contrary to the respondent Minister's observation, the holding of a certification election at
the proper time is not necessarily a mere formality as there was a compelling legal reason not to directly and
unilaterally certify a union whose legitimacy is precisely the object of litigation in a pending cancellation case filed by
certain "concerned salesmen," who also claim majority status. Even in a case where a union has filed a petition for
certification elections, the mere fact that no opposition is made does not warrant a direct certification. More so as in
the case at bar, when the records of the suit show that the required proof was not presented in an appropriate
proceeding and that the basis of the direct certification was the Union's mere allegation in its position paper that it
has 87 out of 117 regular salesmen. In other words, respondent Minister merely relied on the self-serving assertion
of the respondent Union that it enjoyed the support of the majority of the salesmen, without subjecting such
assertion to the test of competing claims. As pointed out by petitioner in its petition, what the respondent Minister
achieved in rendering the assailed orders was to make a mockery of the procedure provided under the law for
representation cases because:

(a) He has created havoc by impliedly establishing a procedural short-cut to obtaining a direct certification-by
merely filing a notice of strike.

(b) By creating such a short-cut, he has officially encouraged disrespect for the law.

(c) By directly certifying a Union without sufficient proof of majority representation, he has in effect arrogated
unto himself the right, vested naturally in the employees, to choose their collective bargaining representative.

(d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose majority
representation is under serious question. This is highly irregular because while the Union enjoys the blessing of the
Minister, it does not enjoy the blessing of the employees. Petitioner is therefore under threat of being held liable for
refusing to negotiate with a union whose right to bargaining status has not been legally established. (pp. 9-10, Rollo)

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence
was sufficient to warrant the dismissal of the employees the law warrants their dismissal without making any
distinction between a first offender and a habitual delinquent. Under the law, respondent Minister is duly mandated
to equally protect and respect not only the labor or workers' side but also the management and/or employers' side.
The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer.
To order the reinstatement of the erring employees namely, Mejia, Sayson and Reynante would in effect encourage
unequal protection of the laws as a managerial employee of petitioner company involved in the same incident was
already dismissed and was not ordered to be reinstated. As stated by Us in the case of San Miguel Brewery vs.
National Labor Union, 2 "an employer cannot legally be compelled to continue with the employment of a person
who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest."

In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the dismissal of the
employees to the assumption order created a doubt as to whether their dismissal was really for just cause or due to
their activities." 4

This is of no moment for the following reasons:

(a) Respondent Minister has still maintained in his assailed order that a just cause existed to justify the dismissal
of the employees.

(b) Respondent Minister has not made any finding substantiated by evidence that the employees were
dismissed because of their union activities.

WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the respondent Minister,
dated December 27, 1985 for grave abuse of discretion. However, in view of the fact that the dismissed employees
are first offenders, petitioner is hereby ordered to give them separation pay. The temporary restraining order is
hereby made permanent.

SO ORDERED.
G.R. No. L-51353 June 27, 1988

SHELL PHILIPPINES, INC., plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

Picazo, Agcaoile, Santayana, Reyes and Tayao for plaintiff-appellee.

F.E. Evangelista, A.L. Bautista & Juan P. Adcaura and Albamento Bisquera for defendant- appellant.

GUTIERREZ, JR., J.:

This case comes to us on a Court of Appeals resolution certifying the controversy as one which involves a pure
question of law. The resolution states the factual background of the case.

On May 1, 1970, Congress approved the Act imposing a stabilization tax on consignments abroad (RA 6125). Section
1 of the statute, in part, provided as follows:

Section 1. There shall be imposed, assessed and collected a stabilization tax on the gross F.O.B. peso proceeds,
based on the rate of exchange prevailing at the time of receipt of such proceeds, whether partial or total, of any
exportation of the following schedule:

a. In the case of logs, copra, centrifugal sugar, and copper ore and concentrates;

Ten per centum of the F.O.B. peso proceeds of exports received on or after the date of effectivity of this Act to June
thirty, nineteen hundred seventy-one;

Eight per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred seventy-one to
June thirty, nineteen hundred seventy-two.

xxx xxx xxx

"Any export products the aggregate annual F.O.B. value of which shall exceed five million United States dollars in any
one calendar year during the effectivity of this Act shall likewise be subject to the rates of tax in force during the
fiscal years following its reaching the said aggregate value."

In August, 1970, the Central Bank, through its Circular No. 309 provided that:

The stabilization tax shall begin to apply on January 1st following the calendar year during which such export
products shall have reached the aggregate F.O.B. value of more than US $5 million, and the applicable tax rates shall
be the rates prescribed in Schedule (b) of Section 1 of Republic Act No. 6125 for the fiscal year following the reaching
of the said aggregate value.

During 1971, appellee Shell, Philippines, Inc. exported seria residues, a by-product of petroleum refining, to an
extent reaching $5 million. On January 7, 1972, the Monetary Board issued its Resolution No. 47 "subjecting
petroleum pitch and other petroleum residues" to the stabilization tax effective January 1, 1972. Under the Central
Bank Circular No. 309, implemented by Resolution No. 47, appellee had to pay the stabilization tax beginning
January 1, 1972, which it did under protest.

On September 14, 1972, appellee filed suit against the Central Bank before the Court of First Instance of Manila,
praying that Monetary Board Resolution No. 47 be declared null and void, and that Central Bank be ordered to
refund the stabilization tax it paid during the first semester of 1972. Its position was that, pursuant to the provisions
of RA 6125, it had to pay the stabilization tax only from July 1, 1972.

The lower court sustained appellee, and it declared Monetary Board Resolution No. 47 as void and it ordered refund
of the stabilization tax paid by appellee during the period January 1 to June 30, 1972. Central Bank has appealed
from the judgment. (Rollo, pp. 47-49)

The trial court opined:

Note that the law mentions both calendar year and fiscal year. Calendar year refers to one year starting from
January to December. Fiscal year, as it is usually and commonly used, refers to the period covered between July 1 of
a year to June 30 of the following year. In using these two terms, it is the considered opinion of this Court that they
should be taken in the meaning where they are commonly and usually understood. So that when an export product
reaches an aggregate F.O.B. value of more than $5,000,000.00 in a calendar year it becomes subject to the rates of
tax in force during the fiscal year following its reaching the said aggregate value.

The statute is clear and free from ambiguity so that an interpretation even becomes unnecessary ... . (Brief for
Defendant-Appellant, pp. 34-35)

The Central Bank appeals from the above cited decision alleging that the trial court erred in regarding the
deliberations of the Senate on the stabilization tax in favor of Shell Philippines, Inc. and in failing to consider the
authority granted to the appellant to promulgate rules and regulations in the implementation of the stabilization tax
law.

It should be mentioned, however, that on July 1, 1973, Presidential Decree No. 230 took effect. This law entitled

Amending the Tariff and Customs Code, creating Title III in Book — I Export Tariff," expressly repealed Section 1 of
Republic Act No. 6125 and transferred the assessment and collection of the export duty from the Central Bank to the
Bureau of Customs by ordering the Commissioner of Customs to promulgate rules and regulations necessary for the
implementation of the decree, subject to the approval of the Secretary of Finance (Section 2 of the Decree).

Notwithstanding this fact, the issue raised must be resolved on the merits as an affirmative relief was granted to the
appellee.

First, the petitioner's allegation that the trial court gave undue weight to the deliberations of the Senate on the
stabilization tax law is not supported by either the records or the decision itself. It is clear in the decision that the
trial court found no ambiguity in the provision of law governing the dispute and accordingly applied it in its ordinary
sense. The cited Senate deliberations merely corroborated the fact that the tax commences on the following fiscal
year after the aggregate value is reached. However, even if the lower court was influenced by the Senate
deliberations, we see nothing wrong in courts' examining and following the intent of the legislature when an act of
Congress has to be interpreted.

Second, while it is true that under the same law the Central Bank was given the authority to promulgate rules and
regulations to implement the statutory provision in question, we reiterate the principle that this authority is limited
only to carrying into effect what the law being implemented provides.

In People v. Maceren (79 SCRA 450, 458 and 460), this Court ruled that:

Administrative regulations adopted under legislative authority by a particular department must be in harmony with
the provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be extended. (U.S. v. Tupasi Molina, supra). An administrative agency
cannot amend an act of Congress (Santos v. Estenzo, 109 Phil. 419, 422; Teoxon v. Members of the Board of
Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel v. General Auditing Office, L-28952, December 29,
1971,42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the
law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or
to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. (University of
Santo Tomas v. Board of Tax Appeals, 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see Collector
of Internal Revenue v. Villamor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. 665, 676; Del Mar v. Phil. Veterans
Administration, L-27299, June 27, 1973, 51 SCRA 340, 349).

xxx xxx xxx

... The rule or regulation should be within the scope of the statutory authority granted by the legislature to the
administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victorias Milling Co., Inc. v. Social Security
Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim,
108 Phil. 1091)

Considering the foregoing, we rule that the trial court was correct in declaring that "Monetary Board Resolution No.
47 is void insofar as it imposes the tax mentioned in Republic Act No. 6125 on the export seria residue of (plaintiff)
the aggregate annual F.O.B., value of which reached five million United States dollars in 1971 effective on January 1,
1972." The said resolution runs counter to the provisions of R.A. 6125 which provides that "(A)ny export product the
aggregate annual F.O.B. value of which shall exceed five million United States dollars in any one calendar year during
the effectivity of this Act shall likewise be subject to the rates of tax in force during the fiscal year following its
reaching the said aggregate value."

We note that under the same provision of law the tax accrues when the aggregate annual F.O.B. value of the export
product has exceeded five million United States dollars during any calendar year. The imposition of the tax is only
deferred until the "fiscal year following its reaching the said aggregate value." It is only then that the rates in force
are ascertained.

In this case, there is no question that in 1971, the appellee exported seria residue with an F.O.B. value of more than
five million US dollars. The appellee's objection lies in the collection of the tax thereon as of January 1972 rather
than in July 1972.

It is, therefore, undeniable that the respondent was liable to pay the tax and that the Central Bank merely collected
the said tax prematurely. There is likewise no controversy over the rate of tax in force when payment became due.
Thus, the tax refund granted by the trial court was not proper because the tax paid was in fact, and in law due to the
government at the correct time.

We decline to grant to the respondent an amount equivalent to the interest on the prematurely collected tax
because of the well entrenched rule that in the absence of a statutory provision clearly or expressly directing or
authorizing payment of interest on the amount to be refunded to the taxpayer, the Government cannot be required
to pay interest. Likewise, it is the rule that interest may be awarded only when the collection of tax sought to be
refunded was attended with arbitrariness (Atlas Fertilizer Corp. v. Commission on Internal Revenue, 100 SCRA 556).
There is no indication of arbitrariness in the questioned act of the appellant.

WHEREFORE, in view of the foregoing, the assailed decision is hereby AFFIRMED but MODIFIED to the effect that the
tax refund granted by the trial court is ordered retained by or reverted to, as the case may be, the Central Bank.

SO ORDERED.
G.R. No. L-52415 October 23, 1984

INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,

vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF ASIA AND AMERICA,
respondents.

Sisenando R. Villaluz, Jr. for petitioner.

Abdulmaid Kiram Muin colloborating counsel for petitioner.

The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law Office and Sycip, Salazar, Feliciano &
Hernandez Law Office for respondents.

MAKASIAR, J.:ñé+.£ªwph!1

This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent Deputy Minister of
Labor, Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular Bank of Asia and America Employees'
Union (complainant-appellee), vs. Insular Bank of Asia and America" (respondent-appellant), the dispositive portion
of which reads as follows: têñ.£îhqwâ£

xxx xxx xxx

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National Labor Relations Commission
dated 20 June 1978 be, as it is hereby, set aside and a new judgment. promulgated dismissing the instant case for
lack of merit (p. 109 rec.).

The antecedent facts culled from the records are as follows:

On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of holiday pay before
the then Department of Labor, National Labor Relations Commission, Regional Office No. IV in Manila. Conciliation
having failed, and upon the request of both parties, the case was certified for arbitration on July 7, 1975 (p. 18, NLRC
rec.

On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled case, granting
petitioner's complaint for payment of holiday pay. Pertinent portions of the decision read: têñ.£îhqwâ£

xxx xxx xxx

The records disclosed that employees of respondent bank were not paid their wages on unworked regular holidays
as mandated by the Code, particularly Article 208, to wit: têñ.£îhqwâ£

Art. 208. Right to holiday pay.

(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than 10 workers.

(b) The term "holiday" as used in this chapter, shall include: New Year's Day, Maundy Thursday, Good Friday,
the ninth of April the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth
and the thirtieth of December and the day designated by law for holding a general election.

xxx xxx xxx

This conclusion is deduced from the fact that the daily rate of pay of the bank employees was computed in the past
with the unworked regular holidays as excluded for purposes of determining the deductible amount for absences
incurred Thus, if the employer uses the factor 303 days as a divisor in determining the daily rate of monthly paid
employee, this gives rise to a presumption that the monthly rate does not include payments for unworked regular
holidays. The use of the factor 303 indicates the number of ordinary working days in a year (which normally has 365
calendar days), excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a factor (365 calendar days
less 52 Saturdays, 52 Sundays, and 10 regular holidays) gives rise likewise to the same presumption that the
unworked Saturdays, Sundays and regular holidays are unpaid. This being the case, it is not amiss to state with
certainty that the instant claim for wages on regular unworked holidays is found to be tenable and meritorious.
WHEREFORE, judgment is hereby rendered:

(a) xxx xxxx xxx

(b) Ordering respondent to pay wages to all its employees for all regular h(olidays since November 1, 1974 (pp.
97-99, rec., underscoring supplied).

Respondent bank did not appeal from the said decision. Instead, it complied with the order of Arbiter Ricarte T.
Soriano by paying their holiday pay up to and including January, 1976.

On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among others, the provisions of
the Labor Code on the right to holiday pay to read as follows: têñ.£îhqwâ£

Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wages during regular holidays, except
in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate and

(c) As used in this Article, "holiday" includes New Year's Day, Maundy Thursday, Good Friday, the ninth of April,
the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and the thirtieth
of December, and the day designated by law for holding a general election.

Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of Labor (now
Ministry of Labor) promulgated the rules and regulations for the implementation of holidays with pay. The
controversial section thereof reads: têñ.£îhqwâ£

Sec. 2. Status of employees paid by the month. — Employees who are uniformly paid by the month, irrespective of
the number of working days therein, with a salary of not less than the statutory or established minimum wage shall
be presumed to be paid for all days in the month whether worked or not.

For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365
days divided by twelve" (italics supplied).

On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now Minister) interpreting the
above-quoted rule, pertinent portions of which read: têñ.£îhqwâ£

xxx xxx xxx

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of
monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are
entitled to the benefit.

Under the rules implementing P.D. 850, this policy has been fully clarified to eliminate controversies on the
entitlement of monthly paid employees, The new determining rule is this: If the monthly paid employee is receiving
not less than P240, the maximum monthly minimum wage, and his monthly pay is uniform from January to
December, he is presumed to be already paid the ten (10) paid legal holidays. However, if deductions are made from
his monthly salary on account of holidays in months where they occur, then he is still entitled to the ten (10) paid
legal holidays. ..." (emphasis supplied).

Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article 94 of the Labor Code
and by Policy Instruction No. 9, stopped the payment of holiday pay to an its employees.

On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's decision of August 25,
1975, whereby the respondent bank was ordered to pay its employees their daily wage for the unworked regular
holidays.

On September 10, 1975, respondent bank filed an opposition to the motion for a writ of execution alleging, among
others, that: (a) its refusal to pay the corresponding unworked holiday pay in accordance with the award of Labor
Arbiter Ricarte T. Soriano dated August 25, 1975, is based on and justified by Policy Instruction No. 9 which
interpreted the rules implementing P. D. 850; and (b) that the said award is already repealed by P.D. 850 which took
effect on December 16, 1975, and by said Policy Instruction No. 9 of the Department of Labor, considering that its
monthly paid employees are not receiving less than P240.00 and their monthly pay is uniform from January to
December, and that no deductions are made from the monthly salaries of its employees on account of holidays in
months where they occur (pp. 64-65, NLRC rec.).

On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution, issued an order
enjoining the respondent bank to continue paying its employees their regular holiday pay on the following grounds:
(a) that the judgment is already final and the findings which is found in the body of the decision as well as the
dispositive portion thereof is res judicata or is the law of the case between the parties; and (b) that since the
decision had been partially implemented by the respondent bank, appeal from the said decision is no longer
available (pp. 100-103, rec.).

On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter Soriano to the
National Labor Relations Commission, reiterating therein its contentions averred in its opposition to the motion for
writ of execution. Respondent bank further alleged for the first time that the questioned order is not supported by
evidence insofar as it finds that respondent bank discontinued payment of holiday pay beginning January, 1976 (p.
84, NLRC rec.).

On June 20, 1978, the National Labor Relations Commission promulgated its resolution en banc dismissing
respondent bank's appeal, the dispositive portion of which reads as follows: têñ.£îhqwâ£

In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss, respondent's appeal; to set aside Labor
Arbiter Ricarte T. Soriano's order of 18 October 1976 and, as prayed for by complainant, to order the issuance of the
proper writ of execution (p. 244, NLRC rec.).

Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost eight. (8) months
after it was promulgated, while copies were served on the respondent bank on February 13, 1979.

On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a) that there is prima
facie evidence of grave abuse of discretion, amounting to lack of jurisdiction on the part of the National Labor
Relations Commission, in dismissing the respondent's appeal on pure technicalities without passing upon the merits
of the appeal and (b) that the resolution appealed from is contrary to the law and jurisprudence (pp. 260-274, NLRC
rec.).

On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged the following
grounds: (a) that the office of the Minister of Labor has no jurisdiction to entertain the instant appeal pursuant to
the provisions of P. D. 1391; (b) that the labor arbiter's decision being final, executory and unappealable, execution is
a matter of right for the petitioner; and (c) that the decision of the labor arbiter dated August 25, 1975 is supported
by the law and the evidence in the case (p. 364, NLRC rec.).

On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a writ of execution be
issued by the National Labor Relations Commission pending appeal of the case with the Office of the Minister of
Labor. Respondent bank filed its opposition thereto on August 8, 1979.

On August 13, 1979, the National Labor Relations Commission issued an order which states: têñ.£îhqwâ£

The Chief, Research and Information Division of this Commission is hereby directed to designate a Socio-Economic
Analyst to compute the holiday pay of the employees of the Insular Bank of Asia and America from April 1976 to the
present, in accordance with the Decision of the Labor Arbiter dated August 25, 1975" (p. 80, rec.).

On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G. Inciong, issued an
order, the dispositive portion of which states: têñ.£îhqwâ£

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National Labor Relations Commission
dated 20 June 1978 be, as it is hereby, set aside and a new judgment promulgated dismissing the instant case for
lack of merit (p. 436, NLRC rec.).

Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of discretion amounting
to lack or excess of jurisdiction.

The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of regular holiday pay can
still be set aside on appeal by the Deputy Minister of Labor even though it has already become final and had been
partially executed, the finality of which was affirmed by the National Labor Relations Commission sitting en banc, on
the basis of an Implementing Rule and Policy Instruction promulgated by the Ministry of Labor long after the said
decision had become final and executory.
WE find for the petitioner.

WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of clarifying the Labor
Code's provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion (p. 1 1, rec.).

Article 94 of the Labor Code, as amended by P.D. 850, provides: têñ.£îhqwâ£

Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing less than ten (10) workers. ...

The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out under Article 82
thereof which reads: têñ.£îhqwâ£

Art. 82. Coverage. — The provision of this Title shall apply to employees in all establishments and undertakings,
whether for profit or not, but not to government employees, managerial employees, field personnel members of the
family of the employer who are dependent on him for support domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

... (emphasis supplied).

From the above-cited provisions, it is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor excludes
monthly paid employees from the said benefits by inserting, under Rule IV, Book Ill of the implementing rules,
Section 2, which provides that: "employees who are uniformly paid by the month, irrespective of the number of
working days therein, with a salary of not less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not. "

Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No. 9 were issued to
clarify the policy in the implementation of the ten (10) paid legal holidays. As interpreted, 'unworked' legal holidays
are deemed paid insofar as monthly paid employees are concerned if (a) they are receiving not less than the
statutory minimum wage, (b) their monthly pay is uniform from January to December, and (c) no deduction is made
from their monthly salary on account of holidays in months where they occur. As explained in Policy Instruction No,
9, 'The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily paid employees. In case
of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are
entitled to the benefit' " (pp. 340-341, rec.). This contention is untenable.

It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal the
law must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the
entitlement to the benefits of holiday pay are clear and explicit - it provides for both the coverage of and exclusion
from the benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that
the benefit is principally intended for daily paid employees, when the law clearly states that every worker shall be
paid their regular holiday pay. This is a flagrant violation of the mandatory directive of Article 4 of the Labor Code,
which states that "All doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor." Moreover, it shall always be presumed that
the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112.)

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the Labor
Code authorizing him to promulgate the necessary implementing rules and regulations.

Public respondent vehemently argues that the intent and spirit of the holiday pay law, as expressed by the Secretary
of Labor in the case of Chartered Bank Employees Association v. The Chartered Bank (NLRC Case No. RB-1789-75,
March 24, 1976), is to correct the disadvantages inherent in the daily compensation system of employment —
holiday pay is primarily intended to benefit the daily paid workers whose employment and income are circumscribed
by the principle of "no work, no pay." This argument may sound meritorious; but, until the provisions of the Labor
Code on holiday pay is amended by another law, monthly paid employees are definitely included in the benefits of
regular holiday pay. As earlier stated, the presumption is always in favor of law, negatively put, the Labor Code is
always strictly construed against management.
While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty is to
enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the instant case,
the same must be declared as null and void. It is the role of the Judiciary to refine and, when necessary, correct
constitutional (and/or statutory) interpretation, in the context of the interactions of the three branches of the
government, almost always in situations where some agency of the State has engaged in action that stems
ultimately from some legitimate area of governmental power (The Supreme Court in Modern Role, C. B. Swisher
1958, p. 36).

Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations Commission (106 SCRA 444, July
31, 1981) where the Secretary of Labor enlarged the scope of exemption from the coverage of a Presidential Decree
granting increase in emergency allowance, this Court ruled that: têñ.£îhqwâ£

... the Secretary of Labor has exceeded his authority when he included paragraph (k) in Section 1 of the Rules
implementing P. D. 1 1 23.

xxx xxx xxx

Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the Secretary of Labor, and the
same is therefore void, as ruled by this Court in a long line of cases . . . .. têñ.£îhqwâ£

The recognition of the power of administrative officials to promulgate rules in the administration of the statute,
necessarily limited to what is provided for in the legislative enactment, may be found in the early case of United
States vs. Barrios decided in 1908. Then came in a 1914 decision, United States vs. Tupasi Molina (29 Phil. 119)
delineation of the scope of such competence. Thus: "Of course the regulations adopted under legislative authority
by a particular department must be in harmony with the provisions of the law, and for the sole purpose of carrying
into effect its general provisions. By such regulations, of course, the law itself cannot be extended. So long, however,
as the regulations relate solely to carrying into effect the provisions of the law, they are valid." In 1936, in People vs.
Santos, this Court expressed its disapproval of an administrative order that would amount to an excess of the
regulatory power vested in an administrative official We reaffirmed such a doctrine in a 1951 decision, where we
again made clear that where an administrative order betrays inconsistency or repugnancy to the provisions of the
Act, 'the mandate of the Act must prevail and must be followed. Justice Barrera, speaking for the Court in Victorias
Milling inc. vs. Social Security Commission, citing Parker as well as Davis did tersely sum up the matter thus: "A rule is
binding on the Courts so long as the procedure fixed for its promulgation is followed and its scope is within the
statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein
or its innate wisdom. ... On the other hand, administrative interpretation of the law is at best merely advisory, for it
is the courts that finally determine chat the law means."

"It cannot be otherwise as the Constitution limits the authority of the President, in whom all executive power
resides, to take care that the laws be faithfully executed. No lesser administrative executive office or agency then
can, contrary to the express language of the Constitution assert for itself a more extensive prerogative. Necessarily,
it is bound to observe the constitutional mandate. There must be strict compliance with the legislative enactment.
Its terms must be followed the statute requires adherence to, not departure from its provisions. No deviation is
allowable. In the terse language of the present Chief Justice, an administrative agency "cannot amend an act of
Congress." Respondents can be sustained, therefore, only if it could be shown that the rules and regulations
promulgated by them were in accordance with what the Veterans Bill of Rights provides" (Phil. Apparel Workers
Union vs. National Labor Relations Commission, supra, 463, 464, citing Teozon vs. Members of the Board of
Administrators, PVA 33 SCRA 585; see also Santos vs. Hon. Estenzo, et al, 109 Phil. 419; Hilado vs. Collector of
Internal Revenue, 100 Phil. 295; Sy Man vs. Jacinto & Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and
Trinidad, 43 Phil. 259).

This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers Union (TUPAS) vs. The
National Labor Relations Commission and American Wire & Cable Co., Inc., G.R. No. 53337, promulgated on June 29,
1984.

In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy instruction
No. 9 issued by the then Secretary of Labor must be declared null and void. Accordingly, public respondent Deputy
Minister of Labor Amado G. Inciong had no basis at all to deny the members of petitioner union their regular holiday
pay as directed by the Labor Code.

II

It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, had already become
final, and was, in fact, partially executed by the respondent bank.
However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA 49, November 13,
1974, he can annul the final decision of Labor Arbiter Soriano since the ensuing promulgation of the integrated
implementing rules of the Labor Code pursuant to P.D. 850 on February 16, 1976, and the issuance of Policy
Instruction No. 9 on April 23, 1976 by the then Secretary of Labor are facts and circumstances that transpired
subsequent to the promulgation of the decision of the labor arbiter, which renders the execution of the said decision
impossible and unjust on the part of herein respondent bank (pp. 342-343, rec.).

This contention is untenable.

To start with, unlike the instant case, the case of De Luna relied upon by the public respondent is not a labor case
wherein the express mandate of the Constitution on the protection to labor is applied. Thus Article 4 of the Labor
Code provides that, "All doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor and Article 1702 of the Civil Code provides
that, " In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer.

Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the members of petitioner
union of their vested right acquired by virtue of a final judgment on the basis of a labor statute promulgated
following the acquisition of the "right".

On the question of whether or not a law or statute can annul or modify a judicial order issued prior to its
promulgation, this Court, through Associate Justice Claro M. Recto, said: têñ.£îhqwâ£

xxx xxx xxx

We are decidedly of the opinion that they did not. Said order, being unappealable, became final on the date of its
issuance and the parties who acquired rights thereunder cannot be deprived thereof by a constitutional provision
enacted or promulgated subsequent thereto. Neither the Constitution nor the statutes, except penal laws favorable
to the accused, have retroactive effect in the sense of annulling or modifying vested rights, or altering contractual
obligations" (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324, emphasis supplied).

In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a court renders a decision
or promulgates a resolution or order on the basis of and in accordance with a certain law or rule then in force, the
subsequent amendment or even repeal of said law or rule may not affect the final decision, order, or resolution
already promulgated, in the sense of revoking or rendering it void and of no effect." Thus, the amendatory rule (Rule
IV, Book III of the Rules to Implement the Labor Code) cannot be given retroactive effect as to modify final
judgments. Not even a law can validly annul final decisions (In re: Cunanan, et al., Ibid).

Furthermore, the facts of the case relied upon by the public respondent are not analogous to that of the case at bar.
The case of De Luna speaks of final and executory judgment, while iii the instant case, the final judgment is partially
executed. just as the court is ousted of its jurisdiction to annul or modify a judgment the moment it becomes final,
the court also loses its jurisdiction to annul or modify a writ of execution upon its service or execution; for,
otherwise, we will have a situation wherein a final and executed judgment can still be annulled or modified by the
court upon mere motion of a panty This would certainly result in endless litigations thereby rendering inutile the rule
of law.

Respondent bank counters with the argument that its partial compliance was involuntary because it did so under
pain of levy and execution of its assets (p. 138, rec.). WE find no merit in this argument. Respondent bank clearly
manifested its voluntariness in complying with the decision of the labor arbiter by not appealing to the National
Labor Relations Commission as provided for under the Labor Code under Article 223. A party who waives his right to
appeal is deemed to have accepted the judgment, adverse or not, as correct, especially if such party readily
acquiesced in the judgment by starting to execute said judgment even before a writ of execution was issued, as in
this case. Under these circumstances, to permit a party to appeal from the said partially executed final judgment
would make a mockery of the doctrine of finality of judgments long enshrined in this jurisdiction.

Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a matter of right upon the
expiration of the period to appeal ... or if no appeal has been duly perfected." This rule applies to decisions or orders
of labor arbiters who are exercising quasi-judicial functions since "... the rule of execution of judgments under the
rules should govern all kinds of execution of judgment, unless it is otherwise provided in other laws" Sagucio vs.
Bulos 5 SCRA 803) and Article 223 of the Labor Code provides that "... decisions, awards, or orders of the Labor
Arbiter or compulsory arbitrators are final and executory unless appealed to the Commission by any or both of the
parties within ten (10) days from receipt of such awards, orders, or decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction to alter the final
judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC, 2 PHILAJUR
436, 440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and Regala vs. WCC, decided
jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69 SCRA 576).

In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961, where the lower court
modified a final order, this Court ruled thus: têñ.£îhqwâ£

xxx xxx xxx

The lower court was thus aware of the fact that it was thereby altering or modifying its order of January 8, 1959.
Regardless of the excellence of the motive for acting as it did, we are constrained to hold however, that the lower
court had no authorities to make said alteration or modification. ...

xxx xxx xxx

The equitable considerations that led the lower court to take the action complained of cannot offset the dem ands of
public policy and public interest — which are also responsive to the tenets of equity — requiring that an issues
passed upon in decisions or final orders that have become executory, be deemed conclusively disposed of and
definitely closed for, otherwise, there would be no end to litigations, thus setting at naught the main role of courts
of justice, which is to assist in the enforcement of the rule of law and the maintenance of peace and order, by
settling justiciable controversies with finality.

xxx xxx xxx

In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said: têñ.£îhqwâ£

xxx xxx xxx

In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is absolute that after a judgment
becomes final by the expiration of the period provided by the rules within which it so becomes, no further
amendment or correction can be made by the court except for clerical errors or mistakes. And such final judgment is
conclusive not only as to every matter which was offered and received to sustain or defeat the claim or demand but
as to any other admissible matter which must have been offered for that purpose (L-7044, 96 Phil. 526). In the
earlier case of Contreras and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it was stated that the rule
must be adhered to regardless of any possible injustice in a particular case for (W)e have to subordinate the equity
of a particular situation to the over-mastering need of certainty and immutability of judicial pronouncements

xxx xxx xxx

III

The despotic manner by which public respondent Amado G. Inciong divested the members of the petitioner union of
their rights acquired by virtue of a final judgment is tantamount to a deprivation of property without due process of
law Public respondent completely ignored the rights of the petitioner union's members in dismissing their complaint
since he knew for a fact that the judgment of the labor arbiter had long become final and was even partially
executed by the respondent bank.

A final judgment vests in the prevailing party a right recognized and protected by law under the due process clause
of the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324). A final judgment is "a
vested interest which it is right and equitable that the government should recognize and protect, and of which the
individual could no. be deprived arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W. 2d 785, 791).

lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy language of then Justice,
later Chief Justice, Concepcion "... acts of Congress, as well as those of the Executive, can deny due process only
under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the same sanction, any
statutory provision to the contrary notwithstanding (Vda. de Cuaycong vs. Vda. de Sengbengco 110 Phil. 118,
emphasis supplied), And "(I)t has been likewise established that a violation of a constitutional right divested the
court of jurisdiction; and as a consequence its judgment is null and void and confers no rights" (Phil. Blooming Mills
Employees Organization vs. Phil. Blooming Mills Co., Inc., 51 SCRA 211, June 5, 1973).

Tested by and pitted against this broad concept of the constitutional guarantee of due process, the action of public
respondent Amado G. Inciong is a clear example of deprivation of property without due process of law and
constituted grave abuse of discretion, amounting to lack or excess of jurisdiction in issuing the order dated
November 10, 1979.

WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC RESPONDENT IS SET ASIDE, AND THE
DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975, IS HEREBY REINSTATED.

COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA

SO ORDERED.
[G.R. No. 98107. August 18, 1997]

BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING
CORPORATION, respondents.

DECISION

HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission (NLRC) dated
March 14, 1991, which reversed the Decision dated May 21, 1990 of Labor Arbiter Manuel R. Caday, on the ground
of lack of jurisdiction.

Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing Corporation (NHC) from
November 16, 1970 to May 14, 1975. On May 14, 1975, he was separated from the service for having been
implicated in a crime of theft and/or malversation of public funds.

On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.

On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC
had no jurisdiction over the case.[1]

Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982, reversing the
decision of the Labor Arbiter.[2]

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on January 17, 1985, we
rendered a decision, the dispositive portion thereof reads as follows:

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations
Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case before it for lack of jurisdiction is
REINSTATED.[3]

On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal dismissal, with
preliminary mandatory injunction.[4]

On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that the Civil Service
Commission has no jurisdiction over the case.[5]

On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of jurisdiction. It
ratiocinated that:

The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a government
corporation without an original charter but organized/created under the Corporate Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies of the government, including
government owned and controlled corporations with original charters. (underscoring supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope of the civil
service and is therefore beyond the jurisdiction of this board. Moreover, it is pertinent to state that the 1987
Constitution was ratified and became effective on February 2, 1987.

WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed.[6]

On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with preliminary mandatory
injunction against respondent NHC.[7]

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was illegally dismissed
from his employment by respondent as there was evidence in the record that the criminal case against him was
purely fabricated, prompting the trial court to dismiss the charges against him. Hence, he concluded that the
dismissal was illegal as it was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering that the period from which to reckon
the reglementary period of four years should be from the date of the receipt of the decision of the Civil Service
Commission promulgated on April 11, 1989. He also ratiocinated that:

It appears x x x complainant filed the complaint for illegal dismissal with the Civil Service Commission on January 6,
1989 and the same was dismissed on April 11, 1989 after which on April 28, 1989, this case was filed by the
complainant. Prior to that, this case was ruled upon by the Supreme Court on January 17, 1985 which enjoined the
complainant to go to the Civil Service Commission which in fact, complainant did. Under the circumstances, there is
merit on the contention that the running of the reglementary period of four (4) years was suspended with the filing
of the complaint with the said Commission. Verily, it was not the fault of the respondent for failing to file the
complaint as alleged by the respondent but due to, in the words of the complainant, a legal knot that has to be
untangled.[8]

Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

"Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and
ordering the respondent to immediately reinstate him to his former position without loss of seniority rights with full
back wages inclusive of allowance and to his other benefits or equivalent computed from the time it is withheld from
him when he was dismissed on March 27, 1977, until actually reinstated.[9]

On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the NLRC promulgated a
decision which reversed the decision of Labor Arbiter Manuel R. Caday on the ground of lack of jurisdiction.[10]

The primordial issue that confronts us is whether or not public respondent committed grave abuse of discretion in
holding that petitioner is not governed by the Labor Code.

Under the laws then in force, employees of government-owned and /or controlled corporations were governed by
the Civil Service Law and not by the Labor Code. Hence,

Article 277 of the Labor Code (PD 442) then provided:

"The terms and conditions of employment of all government employees, including employees of government-owned
and controlled corporations shall be governed by the Civil Service Law, rules and regulations x x x.

The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including
government-owned or controlled corporations.

Although we had earlier ruled in National Housing Corporation v. Juco,[11] that employees of government-owned
and/or controlled corporations, whether created by special law or formed as subsidiaries under the general
Corporation Law, are governed by the Civil Service Law and not by the Labor Code, this ruling has been supplanted
by the 1987 Constitution. Thus, the said Constitution now provides:

The civil service embraces all branches, subdivision, instrumentalities, and agencies of the Government, including
government owned or controlled corporations with original charter. (Article IX-B, Section 2[1])

In National Service Corporation (NASECO) v. National Labor Relations Commission,[12] we had the occasion to apply
the present Constitution in deciding whether or not the employees of NASECO are covered by the Civil Service Law
or the Labor Code notwithstanding that the case arose at the time when the 1973 Constitution was still in effect. We
ruled that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution
that governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the new
phrase with original charter means that government-owned and controlled corporations refer to corporations
chartered by special law as distinguished from corporations organized under the Corporation Code. Thus, NASECO
which had been organized under the general incorporation stature and a subsidiary of the National Investment
Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is excluded from the
purview of the Civil Service Commission.

We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government owned corporation organized in 1959 in
accordance with Executive Order No. 399, otherwise known as the Uniform Charter of Government Corporation,
dated January 1, 1959. Its shares of stock are and have been one hundred percent (100%) owned by the Government
from its incorporation under Act 1459, the former corporation law. The government entities that own its shares of
stock are the Government Service Insurance System, the Social Security System, the Development Bank of the
Philippines, the National Investment and Development Corporation and the Peoples Homesite and Housing
Corporation.[13] Considering the fact that the NHA had been incorporated under act 1459, the former corporation
law, it is but correct to say that it is a government-owned or controlled corporation whose employees are subject to
the provisions of the Labor Code. This observation is reiterated in recent case of Trade Union of the Philippines and
Allied Services (TUPAS) v. National Housing Corporation,[14] where we held that the NHA is now within the
jurisdiction of the Department of Labor and Employment, it being a government-owned and/or controlled
corporation without an original charter. Furthermore, we also held that the workers or employees of the NHC (now
NHA) undoubtedly have the right to form unions or employees organization and that there is no impediment to the
holding of a certification election among them as they are covered by the Labor Code.

Thus, the NLRC erred in dismissing petitioners complaint for lack of jurisdiction because the rule now is that the Civil
Service now covers only government-owned or controlled corporations with original charters.[15] Having been
incorporated under the Corporation Law, its relations with its personnel are governed by the Labor Code and come
under the jurisdiction of the National Labor Relations Commission.

One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal case. It is but
apt that we put an end to his dilemma in the interest of justice.

WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is hereby REVERSED and the
Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.

SO ORDERED.
[G.R. No. 100947. May 31, 1993.]

PNOC ENERGY DEVELOPMENT CORPORATION AND MARCELINO TONGCO, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION and MANUEL S. PINEDA, Respondents.

Alikpala, Gomez & Associates Law Office, for Petitioners.

Filomeno A. Zeta for Private Respondent.

SYLLABUS

1. CONSTITUTIONAL LAW; CIVIL SERVICE; GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS WITHOUT

ORIGINAL CHARTERS, NOT EMBRACED THEREIN. — Section 2 (1), Article IX of the 1987 Constitution provides as
follows: "The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government,
including government-owned or controlled corporations with original charters." Implicit in the provision is that
government-owned or controlled corporations without original charters — i.e., organized under the general law, the
Corporation Code — are not comprehended within the Civil Service, and their employees are not subject to Civil
Service Law. So has this Court construed the provision. (NASECO, et. al. v. NLRC, Et Al., 166 SCRA 122, Lumanta, et. al.
v. NLRC, Et Al., 170 SCRA 79, PNOC-EDC v. Leogardo, et. al., 175 SCRA 29).

2. ID.; OMNIBUS ELECTION CODE; CANDIDATES HOLDING APPOINTIVE OFFICE OR POSITION CONSIDERED IPSO
FACTO RESIGNED UPON FILING OF CERTIFICATE OF CANDIDACY; APPLIES TO OFFICERS AND EMPLOYEES IN
GOVERNMENT-OWNED AND CONTROLLED CORPORATION WITH OR WITHOUT ORIGINAL CHARTERS. — When the
Congress of the Philippines reviewed the Omnibus Election Code of 1985, in connection with its deliberations on and
subsequent enactment of related and repealing legislation — i.e., Republic Acts Numbered 7166: "An Act Providing
for Synchronized National and Local Elections and for Electoral Reforms, Authorizing Appropriations Therefor, and
for Other Purposes" (effective November 26, 1991), 6646: "An Act Introducing Additional Reforms in the Electoral
System and for Other Purposes" (effective January 5, 1988) and 6636: "An Act Resetting the Local Elections, etc."
(effective November 6, 1987), it was no doubt aware that in light of Section 2(1), Article IX of the 1987 Constitution:
(a) government-owned or controlled corporations were of two (2) categories — those with original charters, and
those organized under the general law — and (b) employees of these corporations were of two (2) kinds — those
covered by the Civil Service Law, rules and regulations because employed in corporations having original charters,
and those not subject to Civil Service Law but to the Labor Code because employed in said corporations organized
under the general law, or the Corporation Code. Yet Congress made no effort to distinguish between these two
classes of government-owned or controlled corporations or their employees in the Omnibus Election Code or
subsequent related statutes, particularly as regards the rule that an any employee "in government-owned or
controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of
candidacy." What all this imports is that Section 66 of the Omnibus Election Code applies to officers and employees
in government-owned or controlled corporations, even those organized under the general laws on incorporation and
therefore not having an original or legislative charter, and even if they do not fall under the Civil Service Law but
under the Labor Code. In other words, Section 66 constitutes just cause for termination of employment in addition
to those set forth in the Labor Code, as amended.

DECISION
NARVASA, C.J.:

The applicability to private respondent Manuel S. Pineda of Section 66 of the Election Code is what is chiefly involved
in the case at bar. Said section reads as follows:jgc:chanrobles.com.ph

"SECTION 66. Candidates holding appointive office or position. — Any person holding a public appointive office or
position, including active members of the Armed Forces of the Philippines, and officers and employees in
government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the filing
of his certificate of candidacy."cralaw virtua1aw library

Manuel S. Pineda was employed with the Philippine National Oil Co. - Energy Development Corp. (PNOC-EDC), a
subsidiary of the Philippine National Oil Co., from September 17, 1981, when he was hired as clerk, to January 26,
1989, when his employment was terminated. The events leading to his dismissal from his job are not
disputed.chanroblesvirtuallawlibrary

In November, 1987, while holding the position of Geothermal Construction Secretary, Engineering and Construction
Department, at Tongonan Geothermal Project, Ormoc City, Pineda decided to run for councilor of the Municipality of
Kananga, Leyte, in the local elections scheduled in January, 1988, and filed the corresponding certificate of candidacy
for the position. Objection to Pineda’s being a candidate while retaining his job in the PNOC-EDC was shortly
thereafter registered by Mayor Arturo Cornejos of Kananga, Leyte. The mayor communicated with the PNOC-EDC —
thru Engr. Ernesto Patanao, Resident Manager, Tongonan Geothermal Project — to express the view that Pineda
could not actively participate in politics unless he officially resigned from PNOC-EDC. 1 Nothing seems to have
resulted from this protest.

The local elections in Leyte, scheduled for January, 1988, were reset to and held on February 1, 1988. Pineda was
among the official candidates voted for, and eventually proclaimed elected to, the office of councilor. Some
vacillation appears to have been evinced by Pineda at about this time. On February 8, 1988, he wrote to the
COMELEC Chairman, expressing his desire to withdraw from the political contest on account of what he considered
to be election irregularities; 2 and on March 19, 1988, he wrote to the Secretary of Justice seeking legal opinion on
the question, among others, of whether or not he was "considered automatically resigned upon . . . filing of . . . (his)
certificate of candidacy," and whether or not, in case he was elected, he could "remain appointed to any corporate
offspring of a government-owned or controlled corporation." 3 Nevertheless, Pineda took his oath of office in June,
1988 as councilor-elect of the Municipality of Kananga, Leyte. 4 And despite so qualifying as councilor, and assuming
his duties as such, he continued working for PNOC-EDC as the latter’s Geothermal Construction Secretary,
Engineering and Construction Department, at Tongonan Geothermal Project, Ormoc City.

On June 7, 1988, Marcelino M. Tongco, Department Manager of the Engineering and Construction Department,
PNOC-EDC, addressed an inquiry to the latter’s Legal Department regarding the status of Manuel S. Pineda as
employee in view of his candidacy for the office of municipal councilor. 5 In response, the Legal Department
rendered an opinion to the effect that Manuel S. Pineda should be considered ipso facto resigned upon the filing of
his Certificate of Candidacy in November, 1987, in accordance with Section 66 of the Omnibus Election Code. 6

Pineda appealed the PNOC-EDC Legal Department’s ruling to N.C. Vasquez, the Vice President of PNOC-EDC, on July
14, 1988. In his letter of appeal, 7 he invoked a "court ruling in the case of Caagusan and Donato v. PNOC-Exploration
Corp. . . . (to the effect that) while the government-owned or controlled corporations are covered by the Civil Service
Law (as is taken to mean in Sec. 66 of the Omnibus Election Code of 1985) (sic), the subsidiaries or corporate
offsprings are not." In the same letter he declared his wish to continue working with PNOC-EDC and his willingness
to voluntarily resign from his position as councilor/member of the Sangguniang Bayan.

He also wrote a letter dated October 17, 1988 to the Department of Local Government inquiring about the status of
his employment with PNOC-EDC in relation to his election as member of the Sangguniang Bayan. He was advised by
DLG Undersecretary Jacinto T. Rubillo Jr., by letter dated March 31, 1989, that there was no legal impediment to his
continuing in his employment with PNOC-EDC while holding at the same time the elective position of municipal
councilor. Cited as basis by Undersecretary Rubillo was Section 2(1) Article IX-B of the 1987 Constitution and this
Court’s ruling in NASECO VS. NLRC, 168 SCRA 122. Undersecretary Rubillo went on to say that Pineda could receive
his per diems as municipal councilor as well as the corresponding representation and transportation allowance
(RATA) "provided the PNOC-EDC charter does not provide otherwise and public service shall not be prejudiced." 8

The PNOC-EDC did not, however, share the Undersecretary’s views. On January 26, 1989, the PNOC-EDC, through
Marcelino Tongco (Manager, Engineering and Construction Department), notified Manuel S. Pineda in writing (1)
that after having given him "ample time" to make some major adjustments before . . . separation from the
company," his employment was being terminated pursuant to Section 66 of the Omnibus Election Code, effective
upon receipt of notice, and (2) that he was entitled to "proper compensation" for the services rendered by him from
the time he filed his certificate of candidacy until his actual separation from the service. 9

On October 16, 1989, Pineda lodged a complaint for illegal dismissal in the Regional Arbitration Branch No. VIII,
NLRC, Tacloban City. Impleaded as respondents were the PNOC-EDC and the Manager of its Engineering and
Construction Department, Marcelino M. Tongco. 10

After due proceedings, Labor Arbiter Araceli H. Maraya, to whom the case was assigned, rendered a decision on
December 28, 1990, 11 declaring Manuel S. Pineda’s dismissal from the service illegal, and ordering his
reinstatement to his former position without loss of seniority rights and payment of full back wages corresponding
to the period from his illegal dismissal up to the time of actual reinstatement. The Arbiter pointed out that the ruling
relied upon by PNOC-EDC to justify Pineda’s dismissal from the service, i.e., NHA v. Juco, 12 had already been
abandoned; and that "as early as November 29, 1988," the governing principle laid down by case law — in light of
Section 2(1), Article IX-B of the 1987 Constitution 13 — has been that government-owned or controlled corporations
incorporated under the Corporation Code, the general law — as distinguished from those created by special charter
— are not deemed to be within the coverage of the Civil Service Law, and consequently their employees, like those
of the PNOC-EDC, are subject to the provisions of the Labor Code rather than the Civil Service Law. 14

The PNOC-EDC filed an appeal with the National Labor Relations Commission. The latter dismissed the appeal for
lack of merit in a decision dated April 24, 1991. 15 PNOC-EDC sought reconsideration; 16 its motion was denied by
the Commission in a Resolution dated June 21, 1991. 17
It is this Decision of April 24, 1991 and the Resolution of June 21, 1991 that the PNOC-EDC seeks to be annulled and
set aside in the special civil action for certiorari at bar. It contends that the respondent Commission gravely abused
its discretion:chanrob1es virtual 1aw library

1) when it ruled that Manuel S. Pineda was not covered by the Civil Service Rules when he filed his candidacy
for the 1988 local government elections in November 1987;

2) when it ruled that Pineda was not covered by the Omnibus Election Code at the time he filed his certificate
of candidacy for the 1988 local elections;

3) when it ruled that Pineda was illegally dismissed despite the fact that he was considered automatically
resigned pursuant to Section 66 of the Omnibus Election Code; and

4) when it ruled that Pineda could occupy a local government position and be simultaneously employed in a
government-owned or control corporation, a situation patently violative of the constitutional prohibition on
additional compensation.

Acting on the petition, this Court issued a temporary restraining order enjoining the respondent NLRC from
implementing or enforcing its decision and resolution dated April 24, 1991 and June 21, 1991,
respectively.chanroblesvirtualawlibrary

In the comment required of him by the Court, the Solicitor General expressed agreement with the respondent
Commission’s holding that Manuel Pineda had indeed been illegally separated from his employment in the PNOC-
EDC; in other words, that his running for public office and his election thereto had no effect on his employment with
the PNOC-EDC, a corporation not embraced within the Civil Service.

Petitioner PNOC-EDC argues that at the time that Pineda filed his certificate of candidacy for municipal councilor in
November, 1987, the case law "applicable as far as coverage of government-owned or controlled corporations are
concerned . . . (was to the following effect): 18

‘As correctly pointed out by the Solicitor General, the issue of jurisdiction had been resolved in a string of cases
starting with the National Housing Authority v. Juco (134 SCRA 172) followed by Metropolitan Waterworks and
Sewerage System v. Hernandez (143 SCRA 602) and the comparatively recent case of Quimpo v. Sandiganbayan (G.R.
No. 72553, Dec. 2, 1986) in which this Court squarely ruled that PNOC subsidiaries, whether or not originally created
as government-owned or controlled corporations are governed by the Civil Service Law.’"

This doctrine, petitioner further argues, was not "automatically reversed" by the 1987 Constitution because not
"amended or repealed by the Supreme Court or the Congress;" 19 and this Court’s decision in November, 1988, in
National Service Corporation v. NLRC, supra 20 — abandoning the Juco ruling — "cannot be given retroactive effect .
. . (in view of) the time-honored principle . . . that laws (judicial decisions included) shall have no retroactive effect,
unless the contrary is provided (Articles 4 and 8 of the New Civil Code of the Philippines)."cralaw virtua1aw library

Section 2 (1), Article IX of the 1987 Constitution provides as follows:jgc:chanrobles.com.ph

"The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters."cralaw virtua1aw library

Implicit in the provision is that government-owned or controlled corporations without original charters — i.e.,
organized under the general law, the Corporation Code — are not comprehended within the Civil Service, and their
employees are not subject to Civil Service Law. So has this Court construed the provision. 21

In National Service Corporation (NASECO), Et. Al. v. NLRC, Et Al., etc., 22 decided on November 29, 1988, it was ruled
that the 1987 Constitution "starkly varies" from the 1973 charter — upon which the Juco doctrine rested — in that
unlike the latter, the present constitution qualifies the term, "government-owned or controlled corporations," by the
phrase, "with original charter;" hence, the clear implication is that the Civil Service no longer includes government-
owned or controlled corporations without original charters, i.e., those organized under the general corporation law.
23 NASECO further ruled that the Juco ruling should not apply retroactively, considering that prior to its
promulgation on January 17, 1985, this Court had expressly recognized the applicability of the Labor Code to
government-owned or controlled corporations. 24

Lumanta, Et. Al. v. NLRC, Et Al., 25 decided on February 8, 1989, made the same pronouncement: that Juco had been
superseded by the 1987 Constitution for implicit in the language of Section 2(1), Article IX thereof, is the proposition
that government-owned or controlled corporations without original charter do not fall under the Civil Service Law
but under the Labor Code.
And in PNOC-EDC v. Leogardo, etc. Et. Al., 26 promulgated on July 5, 1989, this Court ruled that conformably with
the apparent intendment of the NASECO case, supra, since the PNOC-EDC, a government-owned or controlled
company had been incorporated under the general Corporation Law, its employees are subject to the provisions of
the Labor Code.

It is thus clear that the Juco doctrine prevailing at the time of the effectivity of the fundamental charter in 1987 —
i.e., that government-owned or controlled corporations were part of the Civil Service and its employees subject to
Civil Service laws and regulations, 27 regardless of the manner of the mode of their organization or incorporation —
is no longer good law, being at "stark variance," to paraphrase NASECO, with the 1987 Constitution. In other words,
and contrary to the petitioner’s view, as of the effectivity of the 1987 Constitution, government-owned or controlled
corporations without original charters, or, as Mr. Justice Cruz insists in his concurring opinion in NASECO v. NLRC, 28
a legislative, charter (i.e., those organized under the Corporation Code), ceased to pertain to the Civil Service and its
employees could no longer be considered as subject to Civil Service laws, rules or regulations.

The basic question is whether an employee in a government-owned or controlled corporations without an original
charter (and therefore not covered by Civil Service Law) nevertheless falls within the scope of Section 66 of the
Omnibus Election Code, viz.:jgc:chanrobles.com.ph

"SECTION 66. Candidates holding appointive office or position. — Any person holding a public appointive office or
position, including active members of the Armed Forces of the Philippines, and officers and employees in
government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the filing
of his certificate of candidacy."cralaw virtua1aw library

When the Congress of the Philippines reviewed the Omnibus Election Code of 1985, in connection with its
deliberations on and subsequent enactment of related and repealing legislation — i.e., Republic Acts Numbered
7166: "An Act Providing for Synchronized National and Local Elections and for Electoral Reforms, Authorizing
Appropriations Therefor, and for Other Purposes" (effective November 26, 1991), 6646: "An Act Introducing
Additional Reforms in the Electoral System and for Other Purposes" (effective January 5, 1988) and 6636: "An Act
Resetting the Local Elections, etc." (effective November 6, 1987), it was no doubt aware that in light of Section 2(1),
Article IX of the 1987 Constitution: (a) government-owned or controlled corporations were of two (2) categories —
those with original charters, and those organized under the general law — and (b) employees of these corporations
were of two (2) kinds — those covered by the Civil Service Law, rules and regulations because employed in
corporations having original charters, and those not subject to Civil Service Law but to the Labor Code because
employed in said corporations organized under the general law, or the Corporation Code. Yet Congress made no
effort to distinguish between these two classes of government-owned or controlled corporations or their employees
in the Omnibus Election Code or subsequent related statutes, particularly as regards the rule that an any employee
"in government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the
filing of his certificate of candidacy." 29

Be this as it may, it seems obvious to the Court that a government-owned or controlled corporation does not lose its
character as such because not possessed of an original charter but organized under the general law. If a
corporation’s capital stock is owned by the Government, or it is operated and managed by officers charged with the
mission of fulfilling the public objectives for which it has been organized, it is a government-owned or controlled
corporation even if organized under the Corporation Code and not under a special statute; and employees thereof,
even if not covered by the Civil Service but by the Labor Code, are nonetheless "employees in government-owned or
controlled corporations," and come within the letter of Section 66 of the Omnibus Election Code, declaring them
"ipso facto resigned from . . . office upon the filing of . . . (their) certificate of candidacy."cralaw virtua1aw library

What all this imports is that Section 66 of the Omnibus Election Code applies to officers and employees in
government-owned or controlled corporations, even those organized under the general laws on incorporation and
therefore not having an original or legislative charter, and even if they do not fall under the Civil Service Law but
under the Labor Code. In other words, Section 66 constitutes just cause for termination of employment in addition
to those set forth in the Labor Code, as amended.

The conclusions here reached make unnecessary discussion and resolution of the other issues raised in this
case.chanroblesvirtuallawlibrary

WHEREFORE, the petition is GRANTED; the decision of public respondent National Labor Relations Commission dated
April 24, 1991 and its Resolution dated June 21, 1991 are NULLIFIED AND SET ASIDE; and the complaint of Manuel S.
Pineda is DISMISSED. No costs.

SO ORDERED.
G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN
BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA,
JOSENIANO B. ESPINA, all represented by MARIANO R. ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION (UNRFNRE) represented by its
operations manager, DR. KYRIACOS LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT,
Commissioners of National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING
PETILLA, Labor Arbiter of Butuan City, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Resolution dated January
25, 1993 of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City.

We dismiss the petition.

Petitioners were dismissed from their employment with private respondent, the United Nations Revolving Fund for
Natural Resources Exploration (UNRFNRE), which is a special fund and subsidiary organ of the United Nations. The
UNRFNRE is involved in a joint project of the Philippine Government and the United Nations for exploration work in
Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91 and SRAB 10-07-
00159-91 for illegal dismissal and damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction over its
personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the Privileges and Immunities
of the United Nations. In support thereof, private respondent attached a letter from the Department of Foreign
Affairs dated August 26, 1991, which acknowledged its immunity from suit. The letter confirmed that private
respondent, being a special fund administered by the United Nations, was covered by the 1946 Convention on the
Privileges and Immunities of the United Nations of which the Philippine Government was an original signatory (Rollo,
p. 21).

On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the ground that
private respondent was protected by diplomatic immunity. The dismissal was based on the letter of the Foreign
Office dated September 10, 1991.

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which affirmed the
dismissal of the complaints in its Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC are final and
executory. Thus, they may only be questioned through certiorari as a special civil action under Rule 65 of the Revised
Rules of Court.

Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed before the
respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty Insurance Corporation v. Court
of Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant petition. Moreover,
the petition lacks any explanation for such omission, which may merit its being considered as falling under the
recognized exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because of the implications of the issue in our
international relations.
Petitioners argued that the acts of mining exploration and exploitation are outside the official functions of an
international agency protected by diplomatic immunity. Even assuming that private respondent was entitled to
diplomatic immunity, petitioners insisted that private respondent waived it when it engaged in exploration work and
entered into a contract of employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to labor and
promote full employment and equality of employment opportunities for all (1987 Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is covered by the mantle of diplomatic
immunity. Private respondent is a specialized agency of the United Nations. Under Article 105 of the Charter of the
United Nations:

1. The Organization shall enjoy in the territory of its Members such privileges and immunities as are necessary
for the fulfillment of its purposes.

2. Representatives of the Members of the United Nations and officials of the Organization shall similarly enjoy
such privileges and immunities as are necessary for the independent exercise of their functions in connection with
the organization.

Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized Agencies of the
United Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty Series, p. 621). We quote Sections
4 and 5 of Article III thereof:

Sec. 4. The specialized agencies, their property and assets, wherever located and by whomsoever held shall enjoy
immunity from every form of legal process except insofar as in any particular case they have expressly waived their
immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution
(Emphasis supplied).

Sec. 5. The premises of the specialized agencies shall be inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation,
expropriation and any other form of interference, whether by executive, administrative, judicial or legislative action
(Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the generally
accepted principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member of the United Nations
and a party to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations,
the Philippine Government adheres to the doctrine of immunity granted to the United Nations and its specialized
agencies. Both treaties have the force and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:

It is a recognized principle of international law and under our system of separation of powers that diplomatic
immunity is essentially a political question and courts should refuse to look beyond a determination by the executive
branch of the government, and where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is then the duty of the courts to accept the claim of immunity upon
appropriate suggestion by the principal law officer of the government, the Solicitor General or other officer acting
under his direction. Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction by
seizure and detention of property, as to embarrass the executive arm of the government in conducting foreign
relations, it is accepted doctrine that "in such cases the judicial department of (this) government follows the action
of the political branch and will not embarrass the latter by assuming an antagonistic jurisdiction (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific universal endeavors, such as health,
agriculture, science and technology and environment. It is not surprising that their existence has evolved into the
concept of international immunities. The reason behind the grant of privileges and immunities to international
organizations, its officials and functionaries is to secure them legal and practical independence in fulfilling their
duties (Jenks, International Immunities 17 [1961]).

Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield the affairs of
international organizations, in accordance with international practice, from political pressure or control by the host
country to the prejudice of member States of the organization, and to ensure the unhampered performance of their
functions" (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there is no conflict between the constitutional
duty of the State to protect the rights of workers and to promote their welfare, and the grant of immunity to
international organizations. Clauses on jurisdictional immunity are now standard in the charters of the international
organizations to guarantee the smooth discharge of their functions.

The diplomatic immunity of private respondent was sufficiently established by the letter of the Department of
Foreign Affairs, recognizing and confirming the immunity of UNRFNRE in accordance with the 1946 Convention on
Privileges and Immunities of the United Nations where the Philippine Government was a party. The issue whether an
international organization is entitled to diplomatic immunity is a "political question" and such determination by the
executive branch is conclusive on the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr.,
G.R. No. 101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity, which is not so in
the case at bench (Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations,
Art. III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is by virtue of a joint
project entered into by the Philippine Government and the United Nations for mineral exploration in Dinagat Island.
Its mission is not to exploit our natural resources and gain pecuniarily thereby but to help improve the quality of life
of the people, including that of petitioners.

This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges and Immunities of
the Specialized Agencies of the United Nations states that "each specialized agency shall make a provision for
appropriate modes of settlement of: (a) disputes arising out of contracts or other disputes of private character to
which the specialized agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.