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G.R. No.

L-68147

June 30, 1988

AMADA RANCE, MERCEDES LACUESTA, MELBA GUTIERREZ, ESTER


FELONGCO, CATALINO ARAGONES, CONSOLACION DE LA ROSA, AMANCIA
GAY, EDUARDO MENDOZA, ET AL., petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, POLYBAG MANUFACTURING
CORPORATION, VIRGINIA MALLARI, JOHNNY LEE, ROMAS VILLAMIN,
POLYBAG WORKERS UNION, PONCIANO FERNANDEZ, AND ANTONIO
ANTIQUERA, respondents.

PARAS, J.:
A review of the records shows that a Collective Bargaining Agreement was entered
into on April 30, 1981 by and between respondents Polybag Manufacturing
Corporation and Polybag Workers Union which provides among others:
ARTICLE V
UNION SECURITY
Any employee within the bargaining agreement who is a member of the union at the
time of the effectivity of this agreement or becomes a member of the UNION
thereafter, shall during the term thereof or any extention, continue to be a member
in good standing of the UNION as a condition of continued employment in the
COMPANY.
Any employee hired during the effectivity of this agreement shall, within 30 days
after becoming regular join the UNION and continue to be a member in good
standing thereof as a condition of continued employment in the COMPANY.
On the basis of a board resolution of the UNION, the COMPANY shall dismiss from the
service any member of the UNION who loses his membership in good standing either
by resignation therefrom or expulsion therefrom for any of the following causes:
1.

Disloyalty to the UNION;

2.

Commission of acts inimical to the interest of the UNION;

3.

Failure and refusal to pay UNION dues and other assessments;

4.

Conviction for any offense or crime; or

5.
Organizing and/or joining another labor organization claiming jurisdiction
similar to that of the UNION.

Provided, however, that in case expulsion proceedings are instituted against any
member of the UNION, pending such proceedings, the COMPANY, on the basis of a
board resolution of the UNION, shall suspend the member concerned; and provided
further, that the UNION, jointly and severally with the officers and members of the
board voting for the dismissal or suspension, shall hold and render the COMPANY, its
executive, owners, and officers free from any and all claims and liabilities. (Rollo, p.
64).
Petitioners herein were among the members of the respondent union who were
expelled by the latter for disloyalty in that they allegedly joined the NAFLU a large
federation. Because of the expulsion, petitioners were dismissed by respondent
Corporation. Petitioners sued for reinstatement and backwages stating their
dismissal was without due process. Losing both in the decisions of the Labor Arbiter
and the National Labor Relations Commission (NLRC), they elevated their cause to
the Supreme Court.
Respondent Polybag Workers Union as already stated expelled 125 members on the
ground of disloyalty and acts inimical to the interests of the Union (Resolution No.
84, series of 1982, Rollo, p. 16) based on the findings and recommendations of the
panel of investigators. Both the Labor Arbiter and the NLRC found the Collective
Bargaining Agreement and the "Union Security Clause" valid and considered the
termination of the petitioners justified thereunder, for having committed an act of
disloyalty to the Polybag Workers Union by having affiliated with and having joined
the NAFLU, another labor union claiming jurisdiction similar to the former, while still
members of respondent union (Rollo, pp. 45-46).
Among the disputed portions of the NLRC decision is its finding that it has been
substantially proven that the petitioners committed acts of disloyalty to their union
as a consequence of the filing by NAFLU for and in their behalf of the complaint in
question (Rollo, p. 46).
Petitioners insist that their expulsion from the Union and consequent dismissal from
employment have no basis whether factual or legal, because they did not in fact
affiliate themselves with another Union, the NAFLU. On the contrary, they claim that
there is a connivance between respondents Company and Union in their illegal
dismissal in order to avoid the payment of separation pay by respondent company.
Petitioners' contention that they did not authorize NAFLU to file NLRC-AB Case No. 64275-82 for them is borne out by the records which show that they did not sign the
complaint, neither did they sign any document of membership application with
NAFLU (Rollo, p. 323). Significantly, none of private respondents was able to present
any evidence to the contrary except for one employee who admitted having
authorized NAFLU to file the complaint but only for the purpose of questioning the
funds of the Union (Rollo, p. 216).
Placed in proper perspective, the mere act of seeking help from the NAFLU cannot
constitute disloyalty as contemplated in the Collective Bargaining Agreement. At
most it was an act of self-preservation of workers who, driven to desperation found
shelter in the NAFLU who took the cudgels for them.

It will be recalled that 460 employees were temporarily laid off; some were laid-off
as early as March 22, 1982 although the actual official announcement and notice of
the intended shutdown was made only on May 27, 1982 (Rollo, p. 151). The laid-off
employees did not receive any separation pay because as alleged by respondent
company their dismissal was due to serious business reverses suffered by it. The
only aid offered by the company which was offered when the disgruntled employees
began to discuss among themselves their plight, was a 1/2 sack of rice monthly and
P 50.00 weekly. Most of the employees did not avail themselves of the aid as those
who did were allegedly made to sign blank papers. To aggravate matters, petitioners
complained that their pleas for their union officers to fight for their right to
reinstatement, fell on deaf ears. Their union leaders continued working and were not
among those laid-off, which explains the lack of positive action on the part of the
latter to help or even sympathize with the plight of the members. All they could offer
was a statement "marunong pa kayo sa may-ari ng kumpanya" ("you know more
than the company owners") (Rollo, p. 80). Under the circumutances, petitioners
cannot be blamed for seeking help wherever it could be found.
In fact even assuming that petitioners did authorize NAFLU to file the action for
them, it would have been pointless because NAFLU cannot file an action for
members of another union. The proper remedy would be to drop the union as party
to the action and place the names of the employees instead (Lakas v. Marcelo
Enterprises, 118 SCRA 422 [1982]) as what appears to have been done in this case
before the Court.
Petitioners claim that the NLRC erred in ruling that the expulsion proceeding
conducted by the Union was in accordance with its by-laws. Respondent Union had
notified and summoned herein petitioners to appear and explain why they should
not be expelled from the union for having joined and affiliated with NAFLU.

disloyalty; those who came were not only threatened with persecution but also
made to write the answers to questions as dictated to them by the Union and
company representatives. These untoward incidents prompted petitioners to request
for a general investigation with all the petitioners present but their request was
ignored by the panel of investigators (Rollo, pp. 280, 307). Again, these allegations
were not denied by private respondents.
In any event, even if petitioners who were complainants in NLRC-AB Case No. 64275-82 appeared in the supposed investigation proceedings to answer the charge
of disloyalty against them, it could not have altered the fact that the proceedings
were violative of the elementary rule of justice and fair play. The Board of Directors
of respondent union would have acted as prosecutor, investigator and judge at the
same time. The proceeding would have been a farce under the circumstances (Lit
Employees Association v. Court of Industrial Relations, 116 SCRA 459 [1982] citing
Kapisanan ng Mga Manggagawa sa MRR v. Rafael Hernandez, 20 SCRA 109). The
filing of the charge of disloyalty against petitioners was instigated by the Chairman
of the Board of Directors and Acting Union President, Ponciano Fernandez, in the
special meeting of the members of the Board of Directors as convened by the Union
President on August 16, 1982 (Rollo, p. 213). The Panel of Investigators created
under the Board's Resolution No. 83, s. 1982 was composed of the Chairman of the
Board, Ponciano Fernandez, and two (2) members of the Board, Samson Yap and
Carmen Garcia (Rollo, p. 214). It is the same Board that expelled its 125 members in
its Resolution No. 84, s. of 1982 (Rollo, p. 219).
All told, it is obvious, that in the absence of any full blown investigation of the
expelled members of the Union by an impartial body, there is no basis for
respondent Union's accusations.

According to the minutes of the special meeting of the Board of Directors of


respondent Union held on September 14, 1982, the Chairman of the Board of
Directors showed the members of the board, copies of the minutes of the
investigation proceedings of each individual member, together with a consolidated
list of Union members found guilty as charged and recommended for expulsion as
members of the respondent Union. The Board members examined the minutes and
the list (Rollo, p. 219).

It is the policy of the state to assure the right of workers to "security of tenure"
(Article XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973
Constitution). The guarantee is an act of social justice. When a person has no
property, his job may possibly be his only possession or means of livelihood.
Therefore, he should be protected against any arbitrary deprivation of his job. Article
280 of the Labor Code has construed security of tenure as meaning that "the
employer shall not terminate the services of an employee except for a just cause or
when authorized by" the code (Bundoc v. People's Bank and Trust Company, 103
SCRA 599 [1981]). Dismissal is not justified for being arbitrary where the workers
were denied due process (Reyes v. Philippine Duplicators, Inc., 109 SCRA 489 [1981]
and a clear denial of due process, or constitutional right must be safeguarded
against at all times, (De Leon v. National Labor Relations Commission, 100 SCRA 691
[1980]). This is especially true in the case at bar where there were 125 workers
mostly heads or sole breadwinners of their respective families.

It is to be noted, however, that only two (2) of the expelled petitioners appeared
before the investigation panel (Rollo, pp. 203, 235). Most of the petitioners
boycotted the investigation proceedings. They alleged that most of them did not
receive the notice of summons from respondent Union because they were in the
provinces. This fact was not disproved by private respondents who were able to
present only a sample copy of proof of service, Annex "14" (Rollo, p. 215).
Petitioners further claim that they had no Idea that they were charged with

Time and again, this Court has reminded employers that while the power to dismiss
is a normal prerogative of the employer, the same is not without limitations. The
employer is bound to exercise caution in terminating the services of his employees
especially so when it is made upon the request of a labor union pursuant to the
Collective Bargaining Agreement, as in the instant case. Dismissals must not be
arbitrary and capricious. Due process must be observed in dismissing an employee
because it affects not only his position but also his means of livelihood. Employers

Petitioners contend that the requisites of due process were not complied with in
that, there was no impartial tribunal or union body vested with authority to conduct
the disciplinary proceeding under the union constitution and by-laws, and, that
complainants were not furnished notice of the charge against them, nor timely
notices of the hearings on the same (Rollo, p. 48).

should, therefore, respect and protect the rights of their employees, which include
the right to labor (Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 90
SCRA 393 [1979], Resolution).
In the case at bar, the scandalous haste with which respondent corporation
dismissed 125 employees lends credence to the claim that there was connivance
between respondent corporation and respondent Union. It is evident that private
respondents were in bad faith in dismissing petitioners. They, the private
respondents, are guilty of unfair labor practice.
PREMISES CONSIDERED, (1) the decision of respondent National Labor Relations
Commission in NLRC-NCR-11-6881-82 dated April 26, 1984 is REVERSED and SET
ASIDE; and (2) respondent corporation is ordered: (1) to reinstate petitioners to their
former positions without reduction in rank, seniority and salary; (b) to pay
petitioners three-year backwages, without any reduction or qualification, jointly and
solidarily with respondent Union; and (c) to pay petitioners exemplary damages of
P500.00 each. Where reinstatement is no longer feasible, respondent corporation
and respondent union are solidarily ordered to pay, considering their length of
service their corresponding separation pay and other benefits to which they are
entitled under the law.
SO ORDERED.

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


ORLANDO M. ESCAREAL, Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION, HON. MANUEL P. ASUNCION, Labor Arbiter, NLRC, National
Capital Region, PHILIPPINE REFINING COMPANY, INC., CESAR BAUTISTA and
GEORGE B. DITCHING, Respondents.
R.S. Arlanza & Associates for Petitioner.
Siguion Reyna, Montecillo & Ongsiako for Private Respondents.

SYLLABUS

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


REDUNDANCY IN PERSONNEL FORCE AS A GROUND; DEFINED. In Wiltshire File Co.,
Inc. v. NLRC, (193 SCRA 665 [1991]) this Court held that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as the overhiring of workers, a decreased
volume of business or the dropping of a particular product line or service activity

previously manufactured or undertaken by the enterprise. Redundancy in an


employers personnel force, however, does not necessarily or even ordinarily refer to
duplication of work. That no other person was holding the same position which the
dismissed employee held prior to the termination of his services does not show that
his position had not become redundant.
2. ID.; ID.; ID.; NOT JUSTIFIED IN CASE AT BAR; REASON THEREFOR. Private
respondent PRC had no valid and acceptable basis to declare the position of
Pollution Control and Safety Manager redundant as the same may not be considered
as superfluous; by the express mandate of the provisions earlier cited, said positions
are required by law. Thus, it cannot be gainsaid that the services of the petitioner
are in excess of what is reasonably required by the enterprise. Otherwise, PRC would
not have allowed ten (10) long years to pass before opening its eyes to that fact;
neither would it have increased the petitioners salary to P23,100.00 a month
effective 1 April 1988. The latter by itself is an unequivocal admission of the specific
and special need for the position and an open recognition of the valuable services
rendered by the petitioner. Such admission and recognition are inconsistent with the
proposition that petitioners positions are redundant. If based on the ground of
redundancy, a substitution of the petitioner by Miguelito S. Navarro would be invalid
as the creation of said position is mandated by the law; the same cannot therefore
be declared redundant. If the change was effected to consolidate the functions of
the pollution control and safety officer with the duties of the Industrial Engineering
Manager, as private respondent postulates, such substitution was done in bad faith
for as had already been pointed out, Miguelito S. Navarro was hardly qualified for the
position. If the aim was to generate savings in terms of the salaries that PRC would
not be paying the petitioner any more as a result of the streamlining of operations
for improved efficiency, such a move could hardly be justified in the face of PRCs
hiring of ten (10) fresh graduates for the position of Management Trainee and
advertising for vacant positions in the Engineering/Technical Division at around the
time of the termination. Besides, there would seem to be no compelling reason to
save money by removing such an important position. As shown by their recent
financial statements, PRCs year-end net profits had steadily increased from 1987 to
1990. While concededly, Article 283 of the Labor Code does not require that the
employer should be suffering financial losses before he can terminate the services of
the employee on the ground of redundancy, it does not mean either that a company
which is doing well can effect such a dismissal whimsically or capriciously. The fact
that a company is suffering from business losses merely provides stronger
justification for the termination.
3. ID.; ID.; RIGHT OF EMPLOYEE ILLEGALLY DISMISSED; RULE; CASE AT BAR. Since
We have concluded that the petitioners dismissal was illegal and can not be justified
under a valid redundancy initiative, Article 283 of the Labor Code, as amended, on
the benefits to be received by the dismissed employee in the case of redundancy,
retrenchment to prevent losses, closure of business or the installation of labor
saving devices, is not applicable. Instead, We apply Article 279 thereof which
provides, in part, that an "employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.

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


It is evident that petitioners right to security of tenure was violated by the private
respondent PRC. Both the Constitution (Section 3, Article XIII) and the Labor Code
(Article 279, P.D. 442, as amended) enunciate this right as available to an employee.
In a host of cases, this Court has upheld the employees right to security of tenure in
the face of oppressive management behavior and management prerogative. (Dosch
v. NLRC, 123 SCRA 296 [1983]; Tolentino v. NLRC, 152 SCRA 717 [1987]; Cebu Royal
Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987]; PT&T v. NLRC, 183 SCRA 451
[1990]; Filipinas Manufacturers Bank v. NLRC, 182 SCRA 848 [1990]; Batongbacal v.
Associated Bank, 168 SCRA 600 [1988]; International Harvester Macleod v. NLRC,
149 SCRA 641 [1987]; Remerco Garments v. Minister of Labor, 135 SCRA 167 [1985];
Cebu Royal Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987]) Security of
tenure is a right which may not be denied on mere speculation of any unclear and
nebulous basis. (Tolentino v. NLRC, 152 SCRA 717 [1987]) In this regard, it could be
concluded that the respondent PRC was merely in a hurry to terminate the services
of the petitioner as soon as possible in view of the latters impending retirement; it
appears that said company was merely trying to avoid paying the retirement
benefits the petitioner stood to receive upon reaching the age of sixty (60). PRC
acted in bad faith.
5. ID.; EMPLOYMENT CONTRACT; PERIOD OF EMPLOYMENT STIPULATED THEREIN;
EXPLAINED; CASE AT BAR. An examination of the contents of the contract of
employment yields the conclusion arrived at by the Solicitor General. There is no
indication that PRC intended to offer uninterrupted employment until the petitioner
reached the mandatory retirement age; it merely informs the petitioner of the
compulsory retirement age and the terms pertaining to the retirement. In Brent
School, Inc. v. Zamora, (181 SCRA 702 [1990]) this Court, in upholding the validity of
a contract of employment with a fixed or specific period, declared that the "decisive
determinant in term employment should not be the activities that the employee is
called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain
being understood to be that which must necessarily come, although it may not be
known when." (Id., citing Article 1193 (third paragraph), Civil Code) The term period
was further defined to be, "Length of existence; duration. A point of time marking a
termination as of a cause or an activity; an end, a limit, a bound; conclusion;
termination. A series of years, months or days in which something is completed. A
time of definite length. . . . the period from one fixed date to another fixed
date . . . ." (Id., citing Capiral v. Manila Electric Co., 119 Phil. 124 [1963], cited in
MORENO, Philippine Law Dictionary, 3rd ed.)
6. ID.; SEPARATION PAY; DISTINGUISHED FROM BACKWAGES. In Torillo v. Leogardo,
Jr., (197 SCRA 471 [1991]) an amplification was made on Article 279 of the Labor
Code and the distinction between separation pay and backwages. Citing the case of
Santos v. NLRC, (154 SCRA 166 [1987]), We held in the former: "The normal
consequences of a finding that an employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement to his former position without
loss of seniority rights and, secondly, the payment of backwages corresponding to
the period from his illegal dismissal up to actual reinstatement . . . Though the grant
of reinstatement commonly carries with it an award to backwages, the

inappropriateness or non-availability of one does not carry with it the


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

G.R. No. 83108

August 29, 1989

OFFSHORE INDUSTRIES, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION (5th DIVISION),
CORNELIO L. LINSANGAN and ALFREDO F. OSORIO, respondents.

LABOR

ARBITER

Martin M. Fernando, Jr. for petitioner.

GANCAYCO, J.:
The validity of the dismissal of an employee is the principal issue in this special civil
action for certiorari.
Petitioner Offshore Industries, Inc. is a business firm engaged in lighterage. Private
respondent Alfredo F. Osorio had been an employee of the petitioner since 1982. At
the time of his dismissal in 1987, the private respondent was the barge master of
Barge 10002.
In December 1986, the Vill Integrated Transport Corporation chartered two barges
owned by the petitioner, i.e., Barge 10002 and another barge, the Masuda. The
chartered vessels were to transport bags of sugar from Port Victorias in Negros
Occidental to Manila. The charter agreement provides, among others, that the
conditions recited in the Uniform Time Charter adopted in the Baltic and
International Maritime Conference shall be incorporated therein.
On December 28, 1986, both barges were completely loaded. Barge Masuda was
loaded with 14,000 bags of sugar. On the other hand, Barge 10002 was loaded with
19,000 bags of the said commodity. The two barges set out to leave the port despite
the rough sea and the high winds that day.
On its way out of the port, Barge 10002 ran aground. A tugboat tried to pull the
barge but it did not succeed in doing so. On account of the incident, the cargo of
Barge 10002 had to be transferred to another barge. The petitioner incurred
expenses as a result of the incident.
In a letter addressed to the petitioner, the Vill Integrated Transport Corporation
reported the incident. Although the letter took note of the rough sea and the high
winds when the two barges set out to leave the port, The unfortunate incident was

nonetheless attributed to the negligence of the crew of Barge 10002, particularly the
failure of the private respondent, as barge master, to release the anchor of the
barge upon the signal of the tugmaster. In support of this contention, it was also
pointed out that no untoward incident came upon Barge Masuda on the same
occasion because her crew released the anchor of the said barge at the proper time.
It was also alleged in the letter that the Vill Integrated Transport Corporation lost
eleven bags of sugar during an earlier voyage of Barge 10002 on account of the
negligence of its barge master, the herein private respondent.
On January 19, 1987, the private respondent was replaced as barge master. On
January 24, 1987, his employment was terminated. It appears that the petitioner did
not conduct a thorough investigation of the incident.
On January 28, 1987, the private respondent filed a Complaint for illegal dismissal
against the petitioner and the company president with the National Labor Relations
Commission. The private respondent also sought the payment of overtime pay, night
shift differential pay, premium pay for holiday and rest day, as well as service
incentive leave pay.
Both parties submitted their respective position papers and other pertinent
pleadings.
The petitioner contended that the company conducted some inquiries regarding the
incident and that it was eventually ascertained that the private respondent was
indeed negligent on account of his failure to release the anchor of the barge at the
appropriate time. The petitioner added that the negligence of the private respondent
should not be ignored considering that as barge master, he was expected to
exercise extreme care and diligence in the performance of his duties.
The petitioner also contended that the private respondent was already warned in the
past that a repetition of his negligent behavior during an earlier voyage of Barge
10002 where the charterer lost eleven bags of sugar will result in his dismissal. In
sum, the petitioner contended that the dismissal of the private respondent was
justified. The petitioner likewise maintained that the money claims of the private
respondent had already been paid. In support of the allegation, the petitioner
submitted a personnel change memo and a check voucher.
For his part, the private respondent contended that the incident was not due to
negligence attributable to him. He imputed the same to the overloading of Barge
10002 and the low tide. He also pointed out that the Masuda was able to negotiate
the exit from Port Victorias despite the rough sea and the high winds because it was
5,000 bags of sugar lighter than Barge 10002 and that the big difference in weight
hampered the maneuverability of the latter.
The private respondent also invoked paragraphs 8 and 9 of the Uniform Time
Charter which provide that the charterer is liable for damages incurred due to the
overloading of the barge. The private respondent likewise alleged that his summary
dismissal was arbitrary in character and was in violation of his right to due process.
He averred that the petitioner has yet to pay his money claims.

In a Decision dated October 26, 1987, the labor arbiter assigned to the case ruled in
favor of the private respondent. The pertinent portions of the said Decision are as
follows
We are not impressed with the contention of complainant for it clearly appears that
the incident was due to his failure to exercise necessary precaution and prompt
action relative to the loading of sugar on his barge.
Be that as it may, however, we find the penalty of dismissal imposed on complainant
as harsh and excessive. A penalty of two or three months suspension would be more
reasonable.
With regard to the claim for overtime pay, no amplification was made As such, the
same will fail.
On the claim for holiday pay and service incentive pay, suffice to say that
respondent failed to present evidence of payment of the same. The presumption
therefore, that necessarily follows is that there really was no payment made.
WHEREFORE, judgment is hereby rendered ordering the respondent company to
reinstate complainant to his former or equivalent position and to pay him backwages
effective 1 May 1987. Further, the respondent is ordered to pay complainant legal
holiday pay and service incentive leave pay for the last three years. 1
The petitioner brought an appeal to the National Labor Relations Commission. In a
Decision promulgated on March 18, 1988, the majority of the members of the Fifth
Division of the respondent Commission' ruled that the private respondent was
arbitrarily dismissed considering that he was never given the opportunity to be
heard as mandated by the Labor Code. Thus, the respondent Commission held that
the reinstatement of the private respondent was proper.
The respondent Commission was also of the view that the private respondent may
riot be considered negligent inasmuch as the charges against him were not
substantiated. The pertinent portions of the said Decision are as follows
However, we do not concur with the conclusion of the Labor Arbiter that
complainant-appellee was to be blamed for the overloading and for the late release
of the anchor for the simple reason that no evidence was adduced thereto. Under
the aforecited par. 9 of the Uniform Time Charter, the loading of the ship appears to
be under the control of the charterer. The alleged late release of the anchor by the
crew under complainant-appellee's command was not shown to be his fault. This
was merely an opinion of the charterer as stated in his letter. In fact, in its letter, the
charterer acknowledged the high seas and heavy wind at the port's entrance. There
was no basis therefore for the Labor Arbiter's finding that the barge patron merited
suspension for three (3) months. The backwages awarded should thus be from
January 24,1987 the date of termination and not from May 1, 1987.
Considering respondent-appellant's failure to produce the payrolls that complainantappellee was paid holiday pay and service incentive leave pay we affirm the awards

in favor of complainant-appellee. It was incumbent for respondent-appellant to


produce the appropriate documents (payrolls') to prove payment of said benefits
instead of those presented (personnel change memo).

Section 1.
Security of tenure and due process. No worker shall be
dismissed except for a just or authorized cause provided by law and after due
process.

WHEREFORE, in view of the foregoing, the Decision dated October 26, 1987 is
hereby MODIFIED as above indicated and the appeal, therefrom is DISMISSED for
lack of merit.

Section 2.
Notice of dismissal. Any employer who seeks to dismiss a
worker shall furnish him a written notice stating the particular acts or omission
constituting the grounds for his dismiss In cases of abandonment of work, the notice
shall be served at the worker's last known address.

Commissioner Danilo S. Lorredo, however, entered a dissenting vote. He was of the


view that whatever happens to the barge is the responsibility of the barge master in
the same way that a captain is responsible for his slap He also stressed that while
the private respondent should not be totally exonerated from any liability, his
dismissal under the circumstances was too harsh. ln his opinion, the private
respondent should be reinstated without the payment of backwages, and that the
period when he was jobless would amount to an appropriate penalty. 4
Hence, the instant Petition.
The petitioner maintains that the position of barge master is a very sensitive
position and that the negligence of the private respondent justifies his dismissal, The
petitioner adds that the reinstatement of the private respondent will be extremely
detrimental to its interest inasmuch as there will always be uncertainty and anxiety
on the part of the petitioner everytime the private respondent is in charge of a
barge.
The petitioner likewise pleads that the overloading of the barge could have been
avoided if the private respondent was attentive to his duties and prerogatives. It
pointed out that the private respondent could have stopped further loading of the
bags of sugar when the barge had already exceeded its maximum capacity.
Accordingly, the petitioner prays for the annulment of the questioned Decision, as
well as other equitable reliefs 5
As instructed by the Court, the respondent Commission filed its Comment on the
Petition, praying therein for the dismissal of the same for lack of merit. 6 Thereafter,
the Court resolved to give due course to the instant Petition . 7 After the submission
of simultaneous memoranda, the case was deemed submitted for decision.
After a careful examination of the entire record of the case, the Court finds the
instant Petition devoid of merit.
Under Article 279 of the Labor Code, a worker is entitled to security of tenure, to wit

ART. 279.
Security of tenure. In case of regular employment, the employer
shall not terminate the services of an employee except fora just cause ...
The procedure to be observed by an employer who seeks to dismiss an employee is
recited in Rule XIV of the rules implementing the Labor Code, particularly Sections 1,
2 and 5, thereof, to wit-

xxx

xxx

xxx

Section 5.
Answer and hearing. The worker may answer the allegations
stated against him in the notice of dismissal within a reasonable period from receipt
of such notice. The employer shall afford the worker ample opportunity to be heard
and to defend himself with the assistance of his representative, if he so desires.
In Philippine Movie Pictures Workers' Association v. Premiere Productions. Inc., 8 this
Court explained the rationale behind the right of every worker to due process of law,
to wit
The right to labor is a constitutional as well as a statutory right. Every man has a
natural right to the fruits of his own industry. A man who has been employed to
undertake certain labor and has put into it his time and effort is entitled to be
protected. The right of a person to his labor is deemed to be property within the
meaning of constitutional guarantees. That is his means of livelihood. He cannot be
deprived of his labor or work without due process of law ... 9
The guarantee of due process applies to all workers, including managerial
employees. 10
The record of the case is devoid of any indication that the private respondent was
given an opportunity to present his side of the controversy in accordance with the
procedure recited in the Labor Code and the implementing rules. At most, the
contention of the petitioner to the contrary is an unsubstantiated allegation. Thus,
the Court is convinced that the dismissal of the private respondent was in violation
of his right to due process and that, accordingly, his reinstatement is in order.
The said observation notwithstanding, it also appears that the imputation of
negligence made against the private respondent has no sound basis. As pointed out
by the private respondent, the incident can be attributed to the overloading of Barge
10002 and the low tide. The rough sea and the high winds made the situation more
difficult for the crew to maneuver the said barge. The fact that Barge Masuda was
able to negotiate the exit from Port Victorias despite the rough sea and the high
winds is beside the point. Barge 10002 was heavier by 5,000 bags of sugar and this
difference in weight adversely affected its maneuverability.
Under paragraphs 8 and 9 of the Uniform Time Charter, the private respondent, as
barge master, must follow all orders given by the charterer, including instructions
relating to the amount of cargo to be loaded on the vessel, and that the charterer is
responsible for all consequences arising from the overloading of the vessel, viz

8.
The whole reach and burthen of the Vessel, including lawful deck-capacity
to be at the Charterers' disposal, reserving proper and sufficient space for the
Vessel's Master, Officers, Crew, tackle, apparel, furniture, provisions and stores.
9.
... The Master to be under the orders of the Charterers as regards
employment, agency, or other arrangements. The Charterers to indemnify the
Owners against all consequences or liabilities arising from the Master, Officers or
Agents signing Bills of Lading or other documents or otherwise complying with such
orders, as well as from any irregularity in the Vessel's papers or for overcarrying
goods. ... . (emphasis supplied.)
An evaluation of the terms of the said Charter leads to the inevitable conclusion that
the control of the charterer over the vessel is extensive and includes the power to
determine how much cargo is to be loaded on the barge, and that any incident that
may happen as a consequence of the overloading of the barge is to be imputed to
the charterer. To say that the incident could have been avoided if the private
respondent objected to the continuous loading of the barge is to overlook the clear
and express terms of the Uniform Time Charter.
In fine, the petitioner failed to show that the dismissal of the private respondent is
for just cause. The burden of proof in termination cases rests upon the employer to
show that the dismissal is for just cause and the failure to do so means that the
dismissal is not justified and the employee is entitled to reinstatement. 12
As to the issue regarding the propriety of the awards in favor of the private
respondent, the petitioner failed to substantiate its allegation that the private
respondent had already been paid his money claims. The personnel change memo
and check voucher relied upon by the petitioner are not sufficient evidence of
payment of the financial benefits to which the private respondent was entitled
during the entire period of his employment. Actual receipts signed by the private
respondent, if any, would have been more appropriate. The burden of proof rests on
the party asserting the affirmative.13 Since the petitioner failed to prove its
assertion that the money claims of the private respondent had already been paid,
the respondent Commission correctly resolved the matter in favor of the private
respondent.
In sum, the Court finds no jurisdictional infirmity in the Decision of the respondent
Commission. Accordingly, the writ of certiorari will not issue.
WHEREFORE, in view of 'the foregoing, the Petition is hereby DISMISSED for lack of
merit. No pronouncement as to costs.
SO ORDERED.
G.R. No. 77859

May 25, 1988

CENTURY TEXTILE MILLS, INC. and ALFREDO T. ESCAO, petitioners,


vs.

NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER FELIPE P. PATI,


and EDUARDO CALANGI, respondents.
Melanio L. Zoreta for petitioners.
The Solicitor General for public respondent.
Alfonso P. Ancheta, Jr. for private respondent.

FELICIANO, J.:
Since 13 December 1974, private respondent Eduardo Calangi had been employed
at the factory of petitioner Century Textile Mills, Inc. where he worked initially as an
apprentice and later on as a machine operator in the Finishing Department. Effective
10 June 1983, however, petitioner Corporation, acting through its company officers,
1 placed him under preventive suspension and, on 27 July 1983, completely
terminated his services with the company. Private respondent Calangi was accused
of having masterminded a criminal plot against Melchor Meliton and Antonio Santos,
two of his supervisors at his place of work.
The events that led to private respondent's dismissal are as follows:
According to Rodolfo Marin (a factory co-worker of private respondent Calangi), at
around 12:15 a.m. on 4 June 1983 and within company premises, he chanced upon
"Gatchie" Torrena (a machine operator at petitioner's factory) and noticed the latter
mixing some substance with the drinking water contained in a pitcher from which
Meliton and Santos regularly drank. Before anyone could take a drink from the
pitcher, Marin reported what he had observed to Meliton who, in turn, informed
Santos of the same. Soon after, Meliton and Santos took possession of the pitcher of
water and filed a formal report of the incident with company management. 2 The
contents of the pitcher were subsequently brought to and analyzed by chemists at
the Philippine Constabulary Crime Laboratory at Camp Crame, Quezon City who
found the presence of a toxic chemical (formaldehyde) therein. 3
In the police investigation that followed, Torrena confessed that private respondent
Calangi personally instructed him, and he agreed, to place formaldehyde in the
pitcher of water. Torrena also admitted that he and private respondent were then
motivated by a desire to avenge themselves upon Meliton and Santos, both of whom
had instigated their (i.e., Torrena's and private respondent's) suspension from work
several times in the past. 4 These circumstances moved petitioner Corporation
preventively to suspend Torrena and private respondent Calangi, and eventually to
dismiss them from its employ. Additionally, criminal charges for attempted murder
were filed against these two employees with the Office of the Provincial Fiscal of
Rizal.
On 11 October 1983, private respondent Calangi filed a Complaint 5 for illegal
dismissal (docketed as Case No. NLRC-NCR-10-4518-83) with the Arbitration Branch,

National Capital Region, of the then Ministry of Labor and Employment. Among other
things, private respondent alleged in his complaint that "[p]rior to his preventive
suspension neither the company nor any of its officers furnished him [with] a copy of
their charges, if any, nor afforded him the opportunity to answer the same and
defend himself." Hence, private respondent claimed entitlement to the following:
A. Moral damages

A. Moral damages
P50,000.00
Actual damages

a) Wages for 3 years


P6,520.80
b) ECOLA for 3 years
3, 841.60
c) 13th month pay for

3 years
903.60
d) Vacation and Sick

Leave of 15 days each


627.00
11,893.00
Exemplary damages
25,000.00
Attorney's fees
17,398.60
TOTAL
P104,291.60

P104,291.60

A prayer for "such other reliefs and remedies consequent upon the premises" was
likewise set out in the complaint.
In a Decision 6 dated 16 August 1984, the Labor Arbiter dismissed private
respondent's Complaint. The Labor Arbiter found that not only was the evidence
against private respondent Calangi "so overwhelming" and "sufficient enough" to
justify his dismissal, but that private respondent had himself failed inexplicably to
deny or controvert the charges against him.
An appeal was brought by private respondent Calangi before the public respondent
National Labor Relations Commission, which agency, on 3 December 1985, rendered
a Decision, 7 the dispositive portion of which reads:
WHEREFORE, with all the foregoing considerations, let the appealed decision dated
27 August 1984 be, as it is hereby REVERSED. Accordingly, complainant's dismissal
is hereby declared to be illegal, and consequently, respondents [petitioners] are
hereby ordered to reinstate Eduardo Calangi to his former or equivalent position
without loss of seniority and other benefits, with full backwages from 27 July 1983
until he is actually reinstated.
SO ORDERED.
Petitioner Corporations' Motion for Reconsideration was denied on 4 April 1986.
Sometime in November of 1986, the Labor Arbiter issued a writ of execution
directing petitioners to pay private respondent Calangi the amount of P54,747.74
representing the latter's backwages, 13th month pay, living allowance, and vacation
and sick leave i.e., actual damages.
The present Petition for certiorari with Preliminary Injunction or Restraining Order
was filed with this Court on 3 April 1987. The Court issued a Temporary Restraining
Orders 8 on 8 April 1987 and, on 24 August 1987, issued a Resolution 9 giving due
course to the Petition and directing the parties to submit their respective
memoranda.
The Petition at bar raises the following issues for consideration: (1) whether or not
private respondent Calangi was illegally dismissed from his job as machine operator;
and (2) assuming he was illegally dismissed, whether or not petitioner Corporation
can be ordered legally (a) to reinstate private respondent Calangi to his former
position in the company, with full backwages and without loss of seniority rights and
other benefits, considering that such relief had not been sought by private
respondent in his complaint, and (b) to pay private respondent an amount for actual
damages in excess of what had been claimed by the latter in his Complaint.
We sustain the ruling of public respondent Commission that private respondent
Calangi had been dismissed without just cause from his employment by petitioner
Corporation.
Public respondent Commission found that private respondent Calangi was effectively
denied his right to due process in that, prior to his preventive suspension and the
termination of his services, he had not been given the opportunity either to affirm or

refute the charges proferred against him by petitioner Corporation. Petitioners allege
however that private respondent Calangi had been previously informed of and given
the chance to answer the company's accusations against him, but that he had "kept
silent" all the while. The following Memorandum issued by petitioner's Personnel
Manager on 10 June 1983 (Calangi's first day of preventive suspension) was cited in
this connection:

prejudice to the right of the worker to contest the validity and legality of his
dismissing by filing a complaint with the regional branch of the National Labor
Relations Commission. The burden of proving that the termination was for a valid or
authorized cause shall rest on the employer. The [Department] may suspend the
effects of the termination pending resolution of the case in the event of a prima
facie finding by the Ministry that the termination may cause a serious labor dispute
or is in implementation of a mass lay-off.

MEMO: TO ALL CONCERNED


xxx
SUBJ.: Under Preventive Suspension Employees. Please be advised that the following
employees are under preventive suspension (indefinite) namely:
1.

Eduardo Calangi--effective June 10, 1983

2.

Gatchie Torrena--effective June 10, 1983

xxx

xxx

(Emphasis supplied)
Rule XIV, Book V of the Rules and Regulations Implementing the Labor Code
reiterates the above requirements:
xxx

xxx

xxx

GROUND
Policy Instruction No. 10 of the New Labor Code of the Philippines, Revised Edition
1982.
NOTE: Decision about the indebtedness suspension of concerned employees was
reached after the meeting between the union and the management.
Be guided accordingly.
MANAGEMENT

Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall
furnish him a written notice stating the particular acts or omission constituting the
grounds for his dismissal. In case of abandomment of work, the notice shall be
served at the worker's last known address.
xxx

xxx

xxx

Sec. 5. Answer and hearing. The worker may answer the allegations stated
against him in the notice of dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so desires.

(SGD.) Jovencio G. Tolentino


Personnel Manager
Petitioners contend that the above Memorandum "clearly shows that prior
investigation and consultation with the union was made," and "will therefore negate
the theory of respondents that respondent Calangi was not afforded the chance to
present his side for the memo itself speaks otherwise."
The procedure that an employer wishing to terminate the services of an employee
must follow, is spelled out in the Labor Code:
ART. 278. Miscellaneous provisions.
xxx

xxx

xxx

However, the employer shall fumish the worker whose employment is sought to be
terminated a written notice containing a statement of the causes for termination and
shall afford the latter ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the [Department] of
Labor and Employment. Any decision taken by the employer shall be without

SEC. 6. Decision to dismiss. The employer shall immediately notify a worker in


writing of a decision to dismiss him stating clearly the reasons therefor.
xxx

xxx

xxx

(Emphasis supplied)
The twin requirements of notice and hearing constitute essential elements of due
process in cases of employee dismissal: the requirement of notice is intended to
inform the employee concerned of the employer's intent to dismiss and the reason
for the proposed dismissal; upon the other hand, the requirement of hearing affords
the employee an opportunity to answer his employer's charges against him and
accordingly to defend himself therefrom before dismissal is effected. Neither of
these two requirements can be dispensed with without running afoul of the due
process requirement of the 1987 Constitution.
The record of this case is bereft of any indication that a hearing or other gathering
was in fact held where private respondent Calangi was given a reasonable
opportunity to confront his accuser(s) and to defend against the charges made by
the latter. Petitioner Corporation's "prior consultation" with the labor union with
which private respondent Calangi was affiliated, was legally insufficient. So far as

the record shows, neither petitioner nor the labor union actually advised Calangi of
the matters at issue. The Memorandum of petitioner's Personnel Manager certainly
offered no helpful particulars. It is important to stress that the rights of an employee
whose services are sought to be terminated to be informed beforehand of his
proposed dismissal (or suspension) as well as of the reasons therefor, and to be
afforded an adequate opportunity to defend himself from the charges levelled
against him, are rights personal to the employee. Those rights were not satisfied by
petitioner Corporation's obtaining the consent of or consulting with the labor union;
such consultation or consent was not a substitute for actual observance of those
rights of private respondent Calangi. The employee can waive those rights, if he so
chooses, but the union cannot waive them for him. That the private respondent
simply 'kept silent" all the while, is not adequate to show an effective waiver of his
rights. Notice and opportunity to be heard must be accorded by an employer even
though the employee does not affirmatively demand them.
Investigation of the alleged attempt to poison the drinking water of the two (2)
supervisors of the private respondent was conducted by the Cainta police
authorities. These authorities interrogated and took the sworn statements of Messrs.
Marin, Torrena, Meliton and Santos who, in one way or another, had been involved in
such incident. Petitioners argue that the decision to place private respondent
Calangi under preventive suspension and subsequently to terminate his services
was arrived at only after the incident complained of, and Mr. Calangi, had been
investigated by the company. There is, once again, nothing in the record to show
that private respondent Calangi been interrogated by the Cainta police authorities or
by anyone else; indeed, it appears that practically everybody, save Calangi, was so
interrogated by the police. If petitioner Corporation did notify and investigate private
respondent and did hold a hearing, petitioners have succeeded in keeping such facts
off the record. It needs no documentation, but perhaps it should be stressed, that
this Court can act only on the basis of matters which have been submitted in
evidence and made part of the record.
Additionally, the Court notes that the application filed by petitioner Corporation with
the Ministry of Labor and Employment for clearance to suspend or terminate the
services of Mr. Calangi, cited as ground therefor "[Calangi's] frustrated plan to
poison Mr. Antonio Santos and Mr. Melchor Meliton last June 5, 1983." This ground,
so far as can be gathered from the allegations of petitioners in their pleadings and
from the evidence of record, both in the public respondent Commission and in this
Court, is anchored mainly, if not wholly on Mr. Torrena's sworn statement, given to
the Cainta police authorities, that both he (Torrena) and private respondent had
conspired with each other to inflict physical harm upon the persons of Messrs.
Meliton and Santos. A finding of private respondent's participation in the alleged
criminal conspiracy cannot, however, be made to rest solely on the unilateral
declaration of Mr. Torrena himself a confirmed "co-conspirator." Such declaration
must be corroborated by other competent and convincing evidence. In. the absence
of such other evidence, Mr. Torrena's "confession" implicating Mr. Calangi must be
received with considerable caution. The very least that petitioner Corporation should
have done was to confront private respondent with Torrena's sworn statement; the
record does not show that petitioner Corporation did so. The burden of showing the
existence of a just cause for terminating the services of private respondent Calangi
lay on the petitioners. Petitioners have not discharged that burden.

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

G.R. No. 80383

September 26, 1988

REV. FR. EMMANUEL LABAJO, personally and in his capacity as Director of San Andres
High School, Maramag, Bukidnon, and, SAN ANDRES HIGH SCHOOL OF MARAMAG,
INCORPORATED, petitioners,
vs.
PUREZA V. ALEJANDRO, ZENAIDA S. DAHILAN, JOSEPHINE A. CHAN, HERNANI C.
MIAGUE, OPHELIA M. MIAGUE, ROLANDO T. AMAR and The HON. NATIONAL LABOR
RELATIONS COMMISSION, respondents.

Please be informed that your service at the San Andres High School will be
terminated effective March 31, 1985.
Thank you for all services you have rendered to the school.
Very truly yours,
(Sgd.) Fr. Emmanuel Labajo
Director

Jesus V. Agana for petitioners.


The Office of the Solicitor General for public respondent.
Rodolfo M. Tan for private respondents.

FELICIANO, J.:
The present "Petition for certiorari with Preliminary Injunction and/or Restraining
Order" is directed at: (a) the Resolution of the National Labor Relations Commission
dated 8 May 1987 which affirmed the 18 November 1985 Decision of the Labor
Arbiter in NLRC RAB X Case No. 5-0410-85; and (b) the Commission's Resolution
dated 17 July 1987 denying petitioners' Motion for Reconsideration.
The background facts are as follows:
The six (6) private respondents had all been contracted by petitioners to work as
classroom teachers at the San Andres High School, a private learning institution
situated in Maramag, Bukidnon. Private respondents Pureza V. Alejandro and
Rolando T. Amar were assigned to handle petitioner High School's regular day
classes; private respondents Zenaida S. Dahilan, Josephine A. Chan, Hernani C.
Miague and Ophelia M. Miague upon the other hand, were assigned to handle the
school's special evening classes.
On 3 June 1985, private respondents filed a Complaint 1 (docketed as NRLRC RAB X
Case No. 5-0410-85) with Regional Arbitration Branch No. 10 (Cagayan de Oro City)
of the then Ministry of Labor and Employment, alleging that they had each received
on 29 March 1985 from petitioner Fr. Emmanuel Labajo, Director of the San Andres
High School, a copy of the following letter:
March 13, 1985
(Name omitted) Maramag, Bukidnon
Dear (Name omitted):

Private respondents alleged that their dismissal by petitioner High School was
without justifiable cause and in violation of their rights to due process and security
of tenure. It was also alleged that petitioners had failed to pay private respondents
the full amounts corresponding to certain employment benefits (i.e., daily wages,
basic pay, service incentive leave, sick leave, and cost of living allowance) granted
to the latter under labor laws. Prayers for reinstatement and payment of the stated
differentials, including moral and exemplary damages, attorney's fees, and litigation
expenses, closed out the complaint. In a subsequent Position Paper 2 dated 21 June
1985, private respondents set out the total amount of monetary claims against
petitioners at P177,831.39, plus 10% thereof.
Petitioners filed their own Position Papers 3 where it was admitted that private
respondents had not been paid in full the employment benefits enumerated by the
latter in their complaint. It was alleged, however, that private respondents, prior to
their acceptance of teaching jobs at the San Andres High School, "were already
made aware that the school could not give them everything due them under existing
laws" and, hence, were estopped from claiming such benefits. Petitioners, further,
denied having dismissed illegally any of the six (6) private respondents and, in turn,
alleged that each of the latter were, at the time of their dismissal, merely
probationary employees of the San Andres High School whose services thereat were
terminated for just cause i.e., upon expiration on 31 March 1985 of their respective
contracts of employment with petitioner High School and before any of them had
achieved regular or permanent status in their jobs. With respect to private
respondents Amar and Alejandro, allegations of estafa committed by the two against
a number of their pupils were raised as additional grounds for their dismissal. Finally,
petitioners, while they acknowledged an indebtedness of P52,173.67 to private
respondents, interposed a counterclaim for moral and exemplary damages,
attorney's fees, and litigation expenses, in the aggregate amount of P64,000.00.
On 18 November 1985, the Labor Arbiter rendered a Decision, 4 the dispositive
portion of which read:
WHEREFORE, premises considered, judgment is hereby entered in favor of
Complainants and against Respondent:
(1)
Ordering Respondent to reinstate Complainants to their former positions
with three (3) months backwages without qualification and deduction;
(2)

Ordering Respondents to pay Complainants the sum of P52,173.67.

The claim for moral and exemplary damages [is] dismissed for lack of merits.
The counterclaim filed by Respondent is dismissed for lack of jurisdiction.
SO ORDERED.
The Labor Arbiter held that dismissal of the six (6) private respondents in this case
"was violative of the Constitution which guarantees security of tenure of
employment and a provision of Batas Pambansa Blg. 130 which requires notice and
investigation before outright termination from the service." The Labor Arbiter also
held that, contrary to the claim of petitioners, private respondents were not under
probation at the time of their dismissal; even assuming that private respondents
were then merely probationary employees of and under contract with petitioner High
School, nevertheless, they could only be dismissed for cause and only after having
been accorded due process. Finally, the Labor Arbiter cited a letter, 5 dated 9 April
1985, addressed to the private respondents and written by Mr. Jose M. Veloso,
Regional Supervisor for Private Schools (Regional Office No. 10, Cagayan de Oro
City) of the then Ministry of Education, Culture and Sports, stating, among other
things, that "the Ministry sees no ground for your [private respondents'] termination,
suspension or separation."
In a Resolution 6 dated 8 May 1987, public respondent National Labor Relations
Commission, affirmed on appeal the decision of the Labor Arbiter. 7 A Motion for
Reconsideration filed by petitioners was denied by the Commissions. 8
The petitioners are now before this Court on Petition for Certiorari. On 14 October
1987, the Court issued a temporary restraining order in this case, 9 and on 6 January
1988, gave due course to the Petition and required the parties to submit their
respective Memoranda. 10
The two (2) main issues presented for consideration are: (1) whether or not the
private respondents were illegally dismissed by petitioners; and (2) whether or not
reinstatement of all six (6) private respondents is proper in this case.
Petitioners deny having illegally dismissed any of the private respondents. In their
Petition, it is contended once more that private respondents were all probationary,
employees of the San Andres High School at the time of their separation therefrom;
that private respondents' right to due process had not been violated; and that there
existed in this case justifiable cause for private respondents' separation from
petitioner High School.
Considering first the nature of private respondents' employment, we note that the
applicability in this case of paragraph 75 of the Manual of Regulations for Private
Schools is not disputed by the parties. The provision reads:
(75) Full-time teacherswhohaverendered three years of satisfactory service shall be
considered permanent. (Emphasis supplied)

The three (3)-year period of service mentioned in paragraph 75 above is of course


the maximum period or upper limit, so to speak, of probationary employment
allowed in the case of private school teachers. This necessarily implies that a regular
or permanent employment status may, under certain conditions, be attained in less
than three (3) years. By and large, however, whether or not one has indeed attained
permanent status in one's employment, before the passage of three (3) years, is a
matter of proof.
The evidence of record shows that none of the six (6) private respondents had been
able to accumulate at least three (3) years of service with the San Andres High
School at the time of their separation therefrom. Private respondents Zenaida S.
Dahilan, Josephine A. Chan, Ophelia M. Miague and Hernani C. Miague openly
admitted in their own Position Paper filed with the Labor Arbiter that, as of 31 March
1985, they were actually then still probationary employees of petitioner High School.
Private respondents Rolando T. Amar and Pureza V. Alejandro, however, asserted
that they had both been made regular employees of petitioner High School prior to
dismissal therefrom and, hence, enjoyed security of tenure. On this point, private
respondent Amar argued that the twelve (12) years of teaching experience he had
accumulated prior to his acceptance of employment at petitioner High School in June
of 1982, qualified him as a regular employee thereof. For her part, private
respondent Alejandro asserted in the main that her appointment on 27 April 1984 as
"Night Principal" of the San Andres High School after having served a year thereat
as a non-regular full-time teacher amounted to a promotion which raised her
status to that of a regular employee at petitioner High School.
The contention of private respondent Amar is not persuasive. First of all, aside from
the assertions of private respondents in their own pleadings, the record is bereft of
evidence of Mr. Amar's supposed extensive prior teaching experience. Second, it is
the length of time Mr. Amar has been teaching at petitioner High School that is
material in determining whether or not he in fact qualified as a regular employee
thereof Third, as already mentioned, at the time of receipt by him of Fr. Labajo's
letter, private respondent Amar had been employed by the San Andres High School
for less than three (3) years. Private respondents have not shown, and the record is
bare of evidence to show that petitioner High School had otherwise extended to Mr.
Amar a regular and permanent appointment prior to Fr. Labajo's letter.
The contention of private respondent Alejandro is likewise not persuasive. As
previously stated, Ms. Alejandro lacked the requisite number of years of service to
qualify as a regular employee of petitioner High School: Ms. Alejandro had taught
there for at most only two (2) years. Furthermore, mere appointment as "Night
Principal" is not, by itself and absent any additional evidence, sufficient proof that
her employment status had in fact been upgraded from probationary to regular.
What appears clearly from the record, therefore, is that all of the six (6) private
respondents in this case were at the time they received the disputed letter of Fr.
Labajo, non-permanent, contractual employees of the San Andres High School.
The Court notes that the contracts of employment entered into by the San Andres
High School separately with each of the six (6) private respondents stipulated,
among others: (a) that employment of the individual concerned took effect at the
beginning of the school year, or sometime in the month of June; and (b) that

payment of that individual's salary would be made "every month for 10 months." 11
We read these stipulations together to mean that such contracts each had an
effective term of ten (10) months, i.e., from June until either March or April of the
following year, excluding the two-month summer holiday period between school
years. New contracts for another period of ten (10) months were negotiated
between petitioner High School and private respondents at the beginning of each
school year. It does not appear from the record or from the stipulations in those
contracts, however, that renewal was obligatory upon either party. In this case,
betwen 1982 and 1985, petitioner High School gave Mr. Amar three (3) consecutive
and Ms. Alejandro two (2) consecutive ten-month contracts; Mr. Miague and Ms.
Miague, upon the other hand, were each given two (2) non-consecutive ten-month
contracts during that same period of time while Ms. Dahilan was contracted only for
school year 1984-1985. With the exception possibly of private respondent Chan, who
taught at petitioner High School merely on a part-time basis and only for a few
months in 1984 and 1985, private respondents' employment contracts for the school
year 1984-1985 provided a term of ten (10) months and took effect on 1 June 1984;
those contracts were thus due to expire on 31 March 1985.
We note that private respondents were informed in writing 12 by petitioner Fr.
Labajo that their services at the San Andres High School would be "terminated"
effective 31 March 1985. Private respondents claim that this allegedly "unusual
antedated letter of termination" did not sufficiently inform them of the reasons for
their dismissal, nor did the same satisfy the due process requirements in termination
cases. These contentions, however, appear to ignore the fact that private
respondents' employment at petitioner High School was on a contractual basis and
for a stipulated period of time: both parties knew beforehand that the employment
relation would come to an end on 31 March 1985. In view of these circumstances, Fr.
Labajo's letter cannot properly be regarded as one of termination. The use of the
word "terminated" was inept and unfortunate but need not preclude recognition of
the real nature of that letter. Such letter was either a formal reminder to private
respondents that their respective contracts of employment with petitioners for
school year 1984-1985 were due to expire on 31 March 1985, or advance notice that
such contracts would no longer be renewed for school year 1985-1986, or both.
Assuming (though merely arguendo) that prior notice of expiration of the contractual
term was necessary in this case, we consider that Fr. Labajo's letter substantially
complied with that requirement.
Coming now to the matter of the existence of justifiable grounds for the disputed
separation, we find applicable here Biboso vs. Victorias Milling Company Inc., 13
case which also involved the separation of private school teachers, probationary
employees who had been covered similarly by corresponding contracts of
employment. The Court, speaking through then Mr. Justice Fernando, stated in that
case:
2.
This is by no means to assert that the security of tenure protection of the
Constitution does not apply to probationary employees. The Labor Code has wisely,
provided for such a case thus: 'The termination of employment of probationary
employees and those employed with a fixed period shall be subject to such
regulations as the Secretary of Labor may prescribe to prevent the circumvention of
the right of the employees to be secured in their employment as provided herein.

'There is no question here, as noted in the assailed order of Presidential Executive


Assistant Clave, that petitioners did not enjoy a permanent status. During such
period they could remain in then positions and any circumvention of their rights, in
accordance with the statutory scheme subject to inquiry and thereafter correction by
the Department of Labor. Thus there was the safeguard as to the duration of their
employment being respected. To that extent, their tenure was secured. The moment,
however, the period expired in accordance with contracrs freely entered into, they
could no longer invoke the constitutional protection. ... 14 (Emphasis supplied)
In view of all the foregoing, we hold that none of the six (6) private respondents in
this case, at the time of their separation, had achieved permanent status in their
employment as teachers at the San Andres High School. As probationary and
contractual employees, private respondents enjoyed security of tenure, but only to a
limited extent i.e., they remained secure in their employment during the period of
time their respective contracts of employment remained in effect. That temporary
security of tenure, however, ended the moment their employment contracts expired
on 31 March 1985 and petitioners declined to renew the same for the next
succeeding school year. Consequently, as petitioners were not under obligation to
renew those contracts of employment, the separation of private respondents in this
case cannot be said to have been without justifiable cause, much less illegal.
Since the six (6) private respondents were not illegally dismissed, the twin remedies
of reinstatement and backwages are not available to them. Finally, the Court notes
that petitioners had willingly acknowledged an indebtedness of P52,173.67 in favor
of private respondents, although they interposed in turn a counterclaim against the
six (6) for P64,000.00 for moral and exemplary damages and litigation expenses
which public respondent Commission, however, subsequently dismissed for lack of
merit. In respect of the latter, we note that petitioners have not shown here any
grave abuse of discretion on the part of public respondent Commission. Thus, the
Court affirms the decision appealed from to the extent that such decision: (a) holds
petitioners liable to private respondents in the amount of P52,173.67; and (b)
dismisses petitioners' counterclaim.
WHEREFORE, the Resolution of the public respondent National Labor Relations
Commission dated 8 May 1987 in NLRC RAB X Case No. 5-0410-85 is hereby SET
ASIDE, except for the portion thereof ordering the dismissal of petitioners'
counterclaim, and directing petitioners to pay the amount of P52,173.67 in favor of
private respondents. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 116781. September 5, 1997]
TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION, THOMAS and
JAMES DEVELOPERS (PHIL.), INC., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, MARIO O. LABENDIA, SR., ROBERTO LABENDIA, NARCISO ADAN,
FLORENCIO GOMEZ, ERNESTO BAGATSOLON, SALVADOR BABON, PATERNO BISNAR,
CIPRIANO BERNALES, ANGEL MABULAY, SR., LEO SURIGAO, and ROQUE MORILLO,
respondents.
DECISION

BELLOSILLO, J.:
From October to December 1990 private respondents individually filed complaints
for illegal dismissal against petitioners with the National Labor Relations Commission
Regional Arbitration Branch No. VIII (NLRC - RAB VIII), Tacloban City. Alleging that
they were hired for various periods as construction workers in different capacities
they described their contractual terms as follows: (a) Roberto Labendia, general
construction foreman, from 1971 to 17 October 1990 at P3,700/month; (b) Narciso
Adan, tireman, from October 1981 to November 1990 at P75.00/day; (c) Florencio
Gomez, welder, from July 1983 to July 1990 at P60.00/day; (d) Ernesto Bagatsolon
leadman/checker, from June 1982 to October 1990 at P2,800/month; (e) Salvador
Babon, clerk/timekeeper/paymaster, from June 1982 to October 1990 at
P3,200/month; (f) Paterno Bisnar, road grader operator, from January 1979 to
October 1990 at P105/day; (g) Cipriano Bernales, instrument man, from February
1980 to November 1990 at P3,200/month; (h) Angel Mabulay, Sr., dump truck driver,
from August 1974 to October 1990 at P90/day; (I) Leo Surigao, payloader operator,
from March 1975 to January 1978 at P100/day; (J) Mario Labendia, Sr.
surveyor/foreman, from August 1971 to July 1990 at P2,900/month; and, (k) Roque
Morillo, company watchman, from August 1983 to October 1990 at P3,200/month.[1]
Within the periods of their respective employments, they alternately worked for
petitioners Tomas Lao Corporation (TLC), Thomas and James Developers (T&J) and
LVM Construction Corporation (LVM), altogether informally referred to as the Lao
Group of Companies, the three (3) entities comprising a business conglomerate
exclusively controlled and managed by members of the Lao family.
TLC, T&J and LVM are engaged in the construction of public roads and bridges. Under
joint venture agreements they entered into among each other, they would
undertake their projects either simultaneously or successively so that, whenever
necessary, they would lease tools and equipment to one another. Each one would
also allow the utilization of their employees by the other two (2). With this
arrangement, workers were transferred whenever necessary to on-going projects of
the same company or of the others, or were rehired after the completion of the
project or project phase to which they were assigned. Soon after, however, TLC
ceased its operations[2] while T&J and LVM stayed on.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J,[3]
issued a memorandum[4] requiring all workers and company personnel to sign
employment contract forms and clearances which were issued on 1 July 1989 but
antedated 10 January 1989. These were to be used allegedly for audit purposes
pursuant to a joint venture agreement between LVM and T&J. To ensure compliance
with the directive, the company ordered the withholding of the salary of any
employee who refused to sign. Quite notably, the contracts expressly described the
construction workers as project employees whose employments were for a definite
period, i.e., upon the expiration of the contract period or the completion of the
project for which the workers was hired.
Except for Florencio Gomez[5] all private respondents refused to sign contending
that this scheme was designed by their employer to downgrade their status from
regular employees to mere project employees. Resultantly, their salaries were

withheld. They were also required to explain why their services should not be
terminated for violating company rules and warned that failure to satisfactorily
explain would be construed as disinterest in continued employment with the
company. Since the workers stood firm in their refusal to comply with the directives
their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private
respondents were project employees whose employments could be terminated upon
completion of the projects or project phase for which they were hired. It upheld
petitioners contention that the execution of their employment contracts was to
forestall the eventuality of being compelled to pay the workers their salaries even if
there was no more work to be done due to the completion of the projects or project
phases. The labor court however granted each employee a separation pay of
P6,435.00 computed at one-half (1/2) month salary for every year of service,
uniformly rounded at five (5) years.[6]
The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed on appeal by the
Fourth Division of the National Labor Relations Commission (NLRC) of Cebu City
which found that private respondents were regular employees who were dismissed
without just cause and denied due process. The NLRC also overruled the fixing by
the Labor Arbiter of the term of employment of complainants uniformly at five (5)
years since the periods of employment of the construction workers as alleged in
their complaints were never refuted by petitioners. In granting monetary awards to
complainants, NLRC disregarded the veil of corporate fiction and treated the three
(3) corporations as forming only one entity on the basis of the admission of
petitioners that the three (3) operated as one (1), intermingling and commingling all
its resources, including manpower facility.[7]
Petitioners now lay their cause before us and assign the following errors: (a) NLRC
erred in classifying the employees as regular instead of project employees; (b)
assuming that the workers were regular employees, NLRC failed to consider that
they were terminated for cause; (c) assuming further that the employees were
illegally dismissed, NLRC erred in awarding back wages in excess of three (3) years;
and, (d) assuming finally that the decision is correct, NLRC erred when it pierced the
veil of corporate personality of petitioner-corporations.
The main thrust of petitioners expostulation is that respondents have no valid cause
to complain about their employment contracts since these documents merely
formalized their status as project employees. They cite Policy Instruction No. 20 of
the Department of Labor which defines project employees as those employed in
connection with a particular construction project, adding that the ruling in Sandoval
Shipyards, Inc. v. NLRC[8] applies squarely to the instant case because there the
Court declared that the employment of project employees is co-terminous with the
completion of the project regardless of the number of projects in which they have
worked. And as their employment is one for a definite period, they are not entitled to
separation pay nor is their employer required to obtain clearance from the Secretary
of Labor in connection with their termination. Petitioners thus argue that their
dismissal from the service of private respondents was legal since the projects for
which they were hired had already been completed. As additional ground, they claim

that Mario Labendia and Roberto Labendia had absented themselves without leave
giving management no choice but to sever their employment.

they were assigned, they were transferred and rehired in another on-going project.
[12]

We are not convinced. The principal test in determining whether particular


employees are project employees distinguished from regular employees is whether
the project employees are assigned to carry out specific project or undertaking, the
duration (and scope) of which are specified at the time the employees are engaged
for the project. Project in the realm of business and industry refers to a particular job
or undertaking that is within the regular or usual business of employer, but which is
distinct and separate and identifiable as such from the undertakings of the company.
Such job or undertaking begins and ends at determined or determinable times.[9]

A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees. Clearly, the
continuous rehiring of the same set of employees within the framework of the Lao
Group of Companies is strongly indicative that private respondents were an integral
part of a work pool from which petitioners drew its workers for its various projects.

While it may be allowed that in the instant case the workers were initially hired for
specific projects or undertakings of the company and hence can be classified as
project employees, the repeated re-hiring and the continuing need for their services
over a long span of time (the shortest, at seven [7] years) have undeniably made
them regular employees. Thus, we held that where the employment of project
employees is extended long after the supposed project has been finished, the
employees are removed from the scope of project employees and considered regular
employees.[10]
While length of time may not be a controlling test for project employment, it can be
a strong factor in determining whether the employee was hired for a specific
undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual business or trade of the employer. In the case at bar,
private respondents had already gone through the status of project employees. But
their employments became non-coterminous with specific projects when they
started to be continuously re-hired due to the demands of petitioners business and
were re-engaged for many more projects without interruption. We note petitioners
own admission [t]hese construction projects have been prosecuted by either of the three
petitioners, either individually or in a joint venture with one another. Likewise, these
construction projects have been prosecuted by either of the three petitioners, either
simultaneously, one construction project overlapping another and/or one project
commencing immediately after another project has been completed or terminated.
Perhaps because of their capacity to prosecute government projects and their good
record and performance, at least one of the three petitioners had an on-going
construction project and/or one of the three petitioners construction project
overlapped that of another. [11]
The denial by petitioners of the existence of a work pool in the company because
their projects were not continuous is amply belied by petitioners themselves who
admit that All the employees of either of the three petitioners were actually assigned to a
particular project to remain in said project until the completion or termination of that
project. However, after the completion of that particular project or when their
services are no longer needed in the project or particular phase of the project where

In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other companies
when there were no on-going projects. This argument however cannot defeat the
workers status of regularity. We apply by analogy the case of Industrial-CommercialAgricultural Workers Organization v. CIR [13] which deals with regular seasonal
employees. There we held That during the temporary layoff the laborers are free to seek other employment is
natural, since the laborers are not being paid, yet must find means of support. A
period during which the Central is forced to suspend or cease operation for a time
xxx should not mean starvation for employees and their families (emphasis
supplied).
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be demanded from
the employer because the stoppage of operations at the end of a project and before
the start of a new one is regular and expected by both parties to the labor relations.
Similar to the case of regular seasonal employees, the employment relation is not
severed by merely being suspended. [14] The employees are, strictly speaking, not
separated from services but merely on leave of absence without pay until they are
reemployed. [15] Thus we cannot affirm the argument that non-payment of salary or
non-inclusion in the payroll and the opportunity to seek other employment denote
project employment.
Contrary to petitioners assertion, our ruling in Sandoval Shipyards is inapplicable
considering the special circumstances attendant to the present case. In Sandoval,
the hiring of construction workers, unlike in the instant case, was intermittent and
not continuous for the shipyard merely accepts contracts for shipbuilding or for
repair of vessels from third parties and, only on occasions when it has work contract
of this nature that it hires workers to do the job which, needless to say, lasts only for
less than a year or longer. [16]
Moreover, if private respondents were indeed employed as project employees,
petitioners should have submitted a report of termination to the nearest public

employment office every time their employment was terminated due to completion
of each construction project. [17] The records show that they did not. Policy
Instruction No. 20 is explicit that employers of project employees are exempted from
the clearance requirement but not from the submission of termination report. We
have consistently held that failure of the employer to file termination reports after
every project completion proves that the employees are not project employees. [18]
Nowhere in the New Labor Code is it provided that the reportorial requirement is
dispensed with. The fact is that Department Order No. 19 superseding Policy
Instruction No. 20 expressly provides that the report of termination is one of the
indicators of project employment. [19]
We agree with the NLRC that the execution of the project employment contracts was
farcical. [20] Obviously, the contracts were a scheme of petitioners to prevent
respondents from being considered as regular employees. It imposed time frames
into an otherwise flexible employment period of private respondents some of whom
were employed as far back as 1969. Clearly, here was an attempt to circumvent
labor laws on tenurial security. Settled is the rule that when periods have been
imposed to preclude the acquisition of tenurial security by the employee, they
should be struck down as contrary to public morals, good customs or public order.
[21] Worth noting is that petitioners had engaged in various joint venture
agreements in the past without having to draft project employment contracts. That
they would require execution of employment contracts and waivers at this point,
ostensibly to be used for audit purposes, is a suspect excuse, considering that
petitioners enforced the directive by withholding the salary of any employee who
spurned the order.
We likewise reject petitioners justification in re-hiring private respondents i.e., that it
is much cheaper and economical to re-hire or re-employ the same workers than to
train a new set of employees. It is precisely because of this cost-saving benefit to
the employer that the law deems it fair that the employees be given a regular
status. We need not belabor this point.
The NLRC was correct in finding that the workers were illegally dismissed. The rule is
that in effecting a valid dismissal, the mandatory requirements of substantive and
procedural due process must be strictly complied with. These were wanting in the
present case. Private respondents were dismissed allegedly because of
insubordination or blatant refusal to comply with a lawful directive of their employer.
But willful disobedience of the employers lawful orders as a just cause for the
dismissal of the employees envisages the concurrence of at least two (2) requisites:
(a) the employees assailed conduct must have been willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude; and, (b) the
order violated must have been reasonable, lawful, made known to the employee and
must pertain to the duties which he has been engaged to discharge. [22] The refusal
of private respondents was willful but not in the sense of plain and perverse
insubordination. It was dictated by necessity and justifiable reasons - for what
appeared to be an innocent memorandum was actually a veiled attempt to deny
them their rightful status as regular employees. The workers therefore had no option
but to disobey the directive which they deemed unreasonable and unlawful because
it would result in their being downsized to mere project workers. This act of selfpreservation should not merit them the extreme penalty of dismissal.

The allegation of petitioners that private respondents are guilty of abandonment of


duty is without merit. The elements of abandonment are: (a) failure to report for
work or absence without valid or justifiable reason, and, (b) a clear intention to sever
the employer-employee relationship, with the second element as the more
determinative factor manifested by some overt acts. [23] In this case, private
respondents Roberto Labendia and Mario Labendia were forced to leave their
respective duties because their salaries were withheld. They could not simply sit idly
and allow their families to starve. They had to seek employment elsewhere, albeit
temporarily, in order to survive. On the other hand, it would be the height of
injustice to validate abandonment in this particular case as a ground for dismissal of
respondents thereby making petitioners benefit from a gross and unjust situation
which they themselves created. [24] Private respondents did not intend to sever ties
with petitioner and permanently abandon their jobs; otherwise, they would not have
filed this complaint for illegal dismissal.[25]
Petitioners submit that since private respondents were only project employees, they
are not entitled to security of tenure. This is incorrect. In Archbuild Masters and
Construction, Inc. v. NLRC [26] we held x x x a project employee hired for a specific task also enjoys security of tenure. A
termination of his employment must be for a lawful cause and must be done in a
manner which affords him the proper notice and hearing x x x x To allow employers
to exercise their prerogative to terminate a project workers employment based on
gratuitous assertions of project completion would destroy the constitutionally
protected right of labor to security of tenure (emphasis supplied).
The burden of proving that an employee has been lawfully dismissed therefore lies
with the employer. In the case at bar, the assertions of petitioners were self-serving
and insufficient to substantiate their claim of proximate project completion. The
services of the employees were terminated not because of contract expiration but as
sanction for their refusal to sign the project employment forms and quitclaims.
Finding that the dismissal was without just cause, we find it unnecessary to dwell on
the non-observance of procedural due process. Suffice it to state that private
respondents were not priorly notified of their impending dismissal and that they
were not provided ample opportunity to defend themselves.
Petitioners charge as erroneous the grant to private respondents by NLRC of back
wages in excess of three (3) years or, in the alternative, to an award of separation
pay if reinstatement is no longer feasible.
We disagree. Since the illegal dismissal was made in 1990 or after the effectivity of
the amendatory provision of RA No. 6715 on 21 March 1989, private respondents
back wages should be computed on the basis of Art. 279 of the Labor Code which
states that (a)n employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full back
wages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.

Conformably with our ruling in Bustamante v. NLRC [27] the illegally dismissed
employees are entitled to full back wages, undiminished by earnings derived
elsewhere during the period of their illegal dismissal. In the event that reinstatement
is no longer feasible, back wages shall be computed from the time of illegal
termination until the time of the finality of the decision. [28] The award shall be
based on the documents submitted by private respondents, i.e. affidavits, SSS and
Medicare documents, since petitioners failed to adduce competent evidence to the
contrary. The separation pay shall be equivalent to "at least one (1) month salary or
to one (1) month salary for every year of service, whichever is higher, a fraction of
at least six (6) months being considered as one whole year." [29]
Finally, public respondent NLRC did not err in disregarding the veil of separate
corporate personality and holding petitioners jointly and severally liable for private
respondents back wages and separation pay. The records disclose that the three (3)
corporations were in fact substantially owned and controlled by members of the Lao
family composed of Lao Hian Beng alias Tomas Lao, Chiu Siok Lian (wife of Tomas
Lao), Andrew C. Lao, Lao Y. Heng, Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and
Ismaelita Maluto. A majority of the outstanding shares of stock in LVM and T&J is
owned by the Lao family. T&J is 100% owned by the Laos as reflected in its Articles
of Incorporation. The Lao Group of Companies therefore is a closed corporation
where the incorporators and directors belong to a single family. Lao Hian Beng is the
same Tomas Lao who owns Tomas Lao Corporation and is the majority stockholder of
T&J. Andrew C. Lao is the Managing Director of LVM Construction, and President and
Managing Director of the Lao Group of Companies. Petitioners are engaged in the
same line of business under one management and use the same equipment
including manpower services. Where it appears that [three] business enterprises are
owned, conducted and controlled by the same parties, both law and equity will,
when necessary to protect the rights of third persons, disregard the legal fiction that
the [three] corporations are distinct entities, and treat them as identical.[30]
Consonant with our earlier ruling, [31] we hold that the liability of petitioners
extends to the responsible officers acting in the interest of the corporations. In view
of the peculiar circumstances of this case, we disregard the separate personalities of
the three (3) corporations and at the same time declare the members of the
corporations jointly and severally liable with the corporations for the monetary
awards due to private respondents. It should always be borne in mind that the fiction
of law that a corporation as a juridical entity has a distinct and separate personality
was envisaged for convenience and to serve justice; therefore it should not be used
as a subterfuge to commit injustice and circumvent labor laws.
WHEREFORE, the petition is DENIED and the decision of the National Labor Relations
Commission dated 05 August 1994 is AFFIRMED. Petitioners are ordered to reinstate
private respondents to their former positions without loss of seniority rights and
other privileges with full back wages, inclusive of allowances, computed from the
time compensation was withheld up to the time of actual reinstatement. In the event
that reinstatement is no longer feasible, petitioners are directed to pay private
respondents separation pay equivalent to one month salary for every year of
service, a fraction of at least six (6) months being considered one (1) year in the
computation thereof, and full back wages computed from the time compensation

was withheld until the finality of this decision. All other claims of the parties are
DISMISSED for lack of merit. Costs against petitioners.
SO ORDERED.
[G.R. No. 113911. January 23, 1998]
VINTA MARITIME CO., INC. and ELKANO SHIP MANAGEMENT, INC., petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and LEONIDES C. BASCONCILLO,
respondents.
DECISION
PANGANIBAN, J.:
To justify an employees dismissal, the employer has the burden of proving the
presence of just cause and due process. An illegally dismissed worker whose
employment is for a fixed period is entitled to payment of his salaries corresponding
to the unexpired portion of his contract.
The Case
These rules of long standing are invoked by the Court in resolving this special civil
action for certiorari under Rule 65 of the Rules of Court seeking the reversal of the
Decision dated September 13, 1993 and the Resolution dated November 23, 1993 of
the National Labor Relations Commission in NLRC CA No. 000309 [POEA Case No. (M)
87-05-327].
On April 20, 1987, Leonides C. Basconcillo, herein private respondent, filed a
complaint[1] with the Philippine Overseas Employment Administration (POEA)
Workers Assistance and Adjudication Office for illegal dismissal against Vinta
Maritime Co., Inc. and Elkano Ship Management, Inc., herein petitioners. In their
answer,[2] petitioners alleged that private respondent was dismissed for his gross
negligence and incompetent performance as chief engineer of the M/V Boracay, as
exemplified by the following recorded incidents:
3.1.a. During a maneuver of the Vessel, [private respondent] closed off the
operating air valve to the bridge control system despite the large sign on the valve
itself-DO NOT CLOSE.
3.1.b. During a standby period, there was a loss of the main sea water pressure
because the suction strainer was blocked by ice. [Private respondents] failure to
change over the sea suctions resulted in the overheating of the main engine and the
auxiliaries, which forced the Vessel to stop.
3.1.c. In another instance, complainant assured that the fuel situation of the Vessel
was in order. But when the fuel figures were verified, it was discovered that there
were only five (5) tons of fuel left before the next bunkering, leaving thus, no margin
for safety. Because of this, an unscheduled bunkering operation in Oslo had to be
done, contrary to instructions.

3.1.d. As part of the safety procedures in the Vessel, it is necessary that all items of
safety equipment be tested every week and a report entered in the engine room
logbook. [Private respondent] was instructed and under duty to test the engine room
fire alarms by activating each one individually with a heat or smoke source
depending on its type. It was, however, discovered later that [private respondent]
miserably failed to do this xxx.

WHEREFORE, in view of the foregoing, respondents are hereby ordered to pay,


jointly and severally, herein complainant the amount of SEVENTEEN THOUSAND
EIGHT HUNDRED SEVENTY FIVE US DOLLARS (US$17,875.00) or its peso equivalent
at the time of actual payment, representing his salaries for the unexpired portion of
his employment contract at US$1,787.50 per month.

3.1.e. [Private respondent] as [c]hief [e]ngineer miserably failed to instill discipline


among the engine room personnel who are under his direct supervision, causing
unrest among them and lack of respect for him and resulting in the disruption of the
smooth operations of the Vessel.

All other claims are hereby DISMISSED.

3.2. Contrary to [private respondents] allegations, he was given fair warning and
enough opportunity to explain his side in the foregoing incidents, not to mention all
the chances given to him to improve his substandard work performance before he
was dismissed. Because of his gross negligence and his failure to perform the duties
for which he was hired, [petitioners] had no other choice than to terminate his
services for cause pursuant to managements prerogative to terminate an employee
because of gross and habitual neglectof his duties (Article 283, Labor Code).

Accordingly, the decision of the POEA Administrator is hereby AFFIRMED en toto.

Private respondent rebutted these allegations in his position paper, stating: (1) it
would be childish for an experienced chief engineer to close the operating air valve
to the bridge; a low level of starting air is caused by excessive and continuous use
thereof during maneuvering, and such malfunction is due to the pilots error; (2) the
loss of main water pressure due to the formation of ice on the suction strainer
occurred because the sea water inlet was clogged; private respondent, who was at
the engine room, contacted the master of the vessel, who was then asleep, to stop
the engine and change the sea valve to activate the sea water pressure; during the
same incident, it was also found that the other valve did not fully open by remote
control; (3) private respondent denied that the fuel figures reached only five tons as
demonstrated by the low-level alarm which, while set at ten cubic meters, did not
set off even until the next bunkering of the ship; it was Peter Robinson, the ship
superintendent, who panicked and caused the unscheduled bunkering operation in
Oslo; (4) private respondent conducted safety equipment-testing religiously, but
admitted that in one instance he did not test the equipment with a heat or smoke
source, upon Robinsons advice that the alarm would upset the pilot and the crew
who were then resting; (5) private respondent denied that there was unrest among
the engine personnel, averring that on the contrary, they cooperated and signed the
guidelines which the former issued to them; and (6) he denied having been given a
chance to explain his side regarding the mentioned incidents, the truth being that he
was surprised when he was told of his dismissal.[3] Petitioners filed their position
paper and supporting documents which however failed to rebut private respondents
allegations.[4]
Despite an unopposed motion for hearing[5] filed by private respondent, the POEA
considered the case submitted for resolution by mutual agreement of the parties
after submission of their respective position papers and supporting documents. In
his decision dated March 9, 1990, POEA Administrator Tomas D. Achacoso ruled that
private respondent was illegally dismissed. The dispositive portion of the decision
reads as follows:[6]

On appeal, the National Labor Relations Commission[7] (Respondent Commission,


for brevity) affirmed the POEA:[8]

Respondent Commission denied the motion for reconsideration in the challenged


Resolution:[9]
After due consideration of the Motion for Reconsideration filed by respondentsappellants Vinta Maritime Co., Inc/ Elkano Ship Management, Inc. on October 22,
1993, from the Decision of September 13, 1993, the Commission (Second Division)
RESOLVED to deny the same for lack of merit.
Hence, this petition.[10]
The Facts
The facts of this case are undisputed. The solicitor general relates the following
circumstances leading to the complaint:[11]
This case arose from a complaint for illegal dismissal by private respondent herein,
Leonides O. Basconcillo, against petitioner companies, xxx Vinta Maritime Company,
Incorporation and the El Kano Ship Management Incorporated, before the POEA
Adjudication Office.
On February 13, 1987, private respondent, a licensed Marine Engineer since 1970,
was hired as Chief Engineer for M.V. Boracay by the shipping company, xxx Vinta
Maritime Company, Incorporated, thru its accredited manning agent, the Elkano Ship
Management, Inc.
The crew contract for his employment was effective for a fixed duration of one (1)
year, with a stipulated monthly basic pay of $1,375.00 U.S. Dollars, and fixed
overtime pay of $402.50 U.S. Dollars a month, or a total of $1,787.50 U.S. Dollars
per month, with an additional 2 days leave a month. So on February 18, 1987,
private respondent joined the vessel at the port of Rotterdam, the Netherlands, and
assumed his duties and responsibilities as Chief Engineer.
On April 2, 1987, or barely three (3) months after boarding the vessel, private
respondent was informed by Captain Jose B. Orquinaza, the ships Master, that he
was relieved of his duties per recommendation of the Marine Superintendent, Mr.
Peter Robinson, due to his poor performance (Annex G, Petition). He was in effect

terminated from the service. This came after private respondent had a verbal
altercation with Robinson, a British national, regarding the discipline or lack thereof
of the Filipino crew under private respondents supervision. No inquiry or
investigation, however, regarding his supposed incompetence or negligence was
ever conducted; neither was private respondent furnished with a notice or
memorandum regarding the cause of his dismissal.
Private respondent was made to disembark at the port of Oslo, Norway, and
immediately repatriated to the country. Contrary to his perceived incompetence,
private respondents Seamens Book contained the following entries:
Conduct - Very good
Ability - Very good
Remarks - Highly Recommended
(Annex F, p. 5, Petition)
Assignment of Errors
In their memorandum, petitioners submit that Respondent Commission gravely
abused its discretion by:[12]
a. Rendering the assailed resolution and decisions without a full-blown trial on the
merits, and
b. Disregarding the evidence for the petitioners and ruling that the company illegally
dismissed Basconcillo.
The Courts Ruling
The petition is bereft of merit. The petitioners failed to prove the elements of a valid
dismissal, namely: (1) just cause and (2) due process.
First Issue: Trial is Not Indispensable in Administrative Due Process
Petitioners claim that Respondent Commission gravely abused its discretion in
upholding the POEAs decision, which was based on the position papers and
documents submitted by the parties in view of a motion for trial which remained
unacted upon. They insist that a hearing was an indispensable condition before a
judgment could be rendered in this case. We do not agree. Although bound by law
and practice to observe due process, administrative agencies exercising quasijudicial powers are nonetheless free from the rigidity of certain procedural
requirements. As applied to these proceedings, due process requires only an
opportunity to explain ones side.[13]
In labor cases, this Court has consistently held that due process does not necessarily
mean or require a hearing, but simply an opportunity or a right to be heard. The
requirements of due process are deemed to have been satisfied when parties are

given the opportunity to submit position papers.[14] The holding of an adversarial


trial is discretionary on the labor arbiter and the parties cannot demand it as a
matter of right.[15] More often than not, a litigant may be heard more creditably
through pleadings than through oral arguments. In administrative proceedings,
technical rules of procedure and evidence are not strictly applied; administrative due
process cannot be fully equated with due process in its strict judicial sense.[16] Due
process was designed to afford an opportunity to be heard, and an actual verbal
hearing need not always be held.[17] The necessity of conducting a hearing is
addressed to the sound discretion of the labor arbiter.
These rules equally apply to cases filed with the Philippine Overseas Employment
Administration Adjudication Office. Section 6 of Rule III, Book VII of the POEA Rules
and Regulations of 1991[18] categorically states that proceedings before a POEA
hearing officer is non-litigious, although they are still subject to the requirements of
due process.[19] Under the POEA Rules in force[20] at the time the complaint was
filed, summary judgments in which the pleadings, affidavits and evidence submitted
are sufficient to render a decision -- are allowed under Section 4.[21] Where the
parties fail to agree on an amicable settlement and summary judgment is not
appropriate, a judgment based on position papers may be resorted to under Section
5.[22] Where there are complicated factual issues involved which cannot be resolved
through such means, the hearing officer may direct the parties to submit suggested
written clarificatory questions to be propounded to the party concerned.[23]
Applied to this particular case, it is undeniable that petitioners were given their
chance to be heard. Their answer, position paper and supporting documents had
become parts of the records and were considered accordingly by the POEA
administrator and by the Respondent Commission in rendering their respective
decisions.
Furthermore, petitioners did not deem it necessary to ask the POEA Adjudication
Office to conduct a hearing. It was the private respondent who moved for a fullblown trial. Although they did not oppose the motion, they did not concur with it
either. Their silence was not an assent to the motion or an argument showing its
necessity. Rather, it was an eloquent statement that the position paper they
submitted sufficiently covered all the issues. On the other hand, private respondents
Motion for Decision, dated November 10, 1989, indubitably shows his waiver of his
earlier requested hearing.[24] This motion was similarly unopposed by petitioners.
So too, petitioners present insistence on the necessity of a hearing is weakened by
the fact that their memorandum before this Court failed to specify the matters which
would have required a hearing.
In all, the Court concurs with the POEA administrator and Respondent Commission
that a verbal hearing was dispensable. Petitioners belated insistence is a veiled
attempt to reopen an otherwise decided case. Aside from being late, this attempt is
purely dilatory, designed to unnecessarily prolong the resolution of the case. The
Court holds that petitioners were not denied due process. No grave abuse of
discretion was committed by Respondent Commission.
Second Issue: Private Respondent Was Illegally Dismissed

Where there is no showing of a clear, valid, and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal. Verily, the
burden is on the employer to prove that the termination was for a valid or
authorized cause.[25] For an employees dismissal to be valid, (1) the dismissal must
be for a valid cause and (2) the employee must be afforded due process.[26] Article
282 of the Labor Code lists the following causes for termination of employment by
the employer: (1) serious misconduct or willful disobedience of lawful orders in
connection with his or her work, (2) gross and habitual neglect of duties, (3) fraud or
willful breach of trust, (4) commission of a crime or an offense against the person of
the employer or his immediate family member or representative, and (5) analogous
cases.[27]
The absence of a valid cause for termination in this case is patent. Petitioners allege
that private respondent was dismissed because of his incompetence, enumerating
incidents in proof thereof. However, this is contradicted by private respondents
seamans book which states that his discharge was due to an emergency leave.
Moreover, his alleged incompetence is belied by the remarks made by petitioners in
the same book that private respondents services were highly recommended and
that his conduct and ability were rated very good. Petitioners allegation that such
remark and ratings were given to private respondent as an accommodation for
future employment fails to persuade. The Court cannot consent to such an
accommodation, even if the allegation were true, as it is a blatant
misrepresentation.
It
cannot
exculpate
petitioners
based
on
such
(mis)representation. When petitioners issued the accommodation, they must have
known its possible repercussions. They cannot be allowed to turn against their
representation.
As correctly argued by the solicitor general in his comment, it was incumbent upon
the petitioners to clearly establish that the discharge was for a just cause before
they could legitimately terminate the private respondents services. However, they
miserably failed in this respect.[28] The alleged incidents of incompetence were
unsupported by relevant and convincing evidence. The affidavits of Robinson and
Capt. Jose B. Orquinaza, who caused private respondents dismissal and
recommendation, are highly suspicious and do not in any way prove that the alleged
incidents showing private respondents incompetence were ever investigated and
proven,[29] as they were sufficiently rebutted by the entries in the seamans book.
[30] Mere allegations are not synonymous with proof.
Further, the POEA administrator and the Respondent Commission have cleared the
private respondent of such charges, noting that he sufficiently rebutted them.
Petitioners, on the other hand, presented no adequate evidence or argument to tilt
the weight of the evidence in their favor. Without factual basis are their contentions
which are as follows: (1) private respondent had been inactive and unemployed for
five years prior to his employment with petitioners; and (2) developments in ship
technology, equipment and damage control measures, during the five years he was
unemployed, gravely affected his expertise. Petitioners failed to specify these
alleged advanced equipment and measures. Neither did they explain that the
instances where private respondent allegedly endangered the ship and its crew
involved any of these advanced equipment and measures. The Court sees no
justification to depart from the well-settled rule that the factual findings of quasi-

judicial agencies like the Respondent Commission, which have acquired expertise in
the matters entrusted to their jurisdiction, are accorded by the Supreme Court not
only respect but even finality if they are supported by substantial evidence, or that
amount of relevant evidence which a reasonable mind would accept as adequate to
justify a conclusion.[31]
Petitioners, in our view, failed to rebut the following observations of the Respondent
Commission:[32]
After perusing the records of this case, we arrived at the conclusion that the
Honorable POEA Administrator committed no reversible error in finding that the
dismissal of the complainant herein was illegal and violative of the contract of
employment. [Petitioners] allegation that [private respondent] was validly
terminated because of inefficiency on the basis of their consultants report would not
merit [o]ur judicial approval because of the following reasons:
First, it was [petitioners] themselves who hired and contracted the services of
[private respondent], presumably after considering his years of experience and
records of performance, otherwise, it would not have entered into a one year
contract of employment with [private respondent]. It is highly unthinkable that [a]
company like them would be so naive as to be hoodwink[ed] into hiring somebody
who is not an expert and does not know anything. Not if [w]e are to consider that
they ply international routes and capable of offering such princely benefits as they
did to [private respondent].
Second, the report of their British consultant is suspect to being one made out of
vengeance, what with the altercation that transpired between them immediately
prior to the preparation of the report. xxxx But more importantly, the detailed report
(See, p. 125 of Rollo), said consultant[s report] was to [o]ur mind substantially
rebutted by complainant one after the other in his position paper dated October 2,
1987 (See, pp. 109 to 112 of Rollo). As such, the same could not have carried much
weight. There is no question therefore that complainant was dismissed without any
justifiable cause.
Due process, the second element for a valid dismissal, requires notice and hearing.
[33] Before the employee can be dismissed under Article 282, the Code requires the
service of a written notice containing a statement of the cause(s) of termination and
giving said employee ample opportunity to be heard and to defend himself. A notice
of termination in writing is further required if the employees dismissal is decided
upon.[34] The employer must furnish the worker with two written notices before
termination of employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought and (2)
subsequent notice which informs the employee of the employers decision to dismiss
him. The twin requirements of notice and hearing constitute the essential elements
of due process, and neither of these elements can be eliminated without running
afoul of the constitutional guaranty.[35]
Using these legal criteria, we hold that private respondent was illegally dismissed.
No notice was ever given to him prior to his dismissal. This fact alone disproves
petitioners allegation that private respondent was given fair warning and enough

opportunity to explain his side [regarding] the incidents that led to his dismissal.
These requisites cannot be replaced as they are not mere technicalities, but
requirements of due process to which every employee is entitled to ensure that the
employers prerogative to dismiss is not exercised arbitrarily.[36]
Illegally dismissed workers are entitled to the payment of their salaries
corresponding to the unexpired portion of their employment where the employment
is for a definite period.[37] Conformably, the administrator and the Respondent
Commission properly awarded private respondent salaries for the period beginning
April 9, 1987, the date of his illegal dismissal, until February 18, 1988, the expiration
of his contract.
WHEREFORE, the petition is hereby DISMISSED. The challenged Decision and
Resolution are AFFIRMED. Costs against petitioners.
SO ORDERED.

[G.R. No. 129449. June 29, 1999]

1. Misconduct - for having replaced the stereo of a UNDP-ERDC vehicle without


permission from the company;
2. Absence without official leave (AWOL) - for petitioners absence on 13 October
1993 and 15 October 1993;
3. Non-compliance of administrative reporting procedure on accidents - for having
failed to submit the Police Accident Report and other necessary requirements of a
vehicular accident Kiamco was involved in;
4. Unauthorized use of company vehicles - for having used the UNDP-ERDC company
vehicle without permission from his superiors.
In a letter dated 22 October 1993 Kiamco tried to explain his side[5] but private
respondents found his explanation unsatisfactory. On 28 October 1993 Kiamco
received a Memorandum[6] placing him under preventive suspension from 1
November 1993 to 30 November 1993 pending further investigation. No
investigation however was ever conducted. Private respondents contended that an
investigation was not necessary since Kiamco had ceased to be an employee ipso
facto upon the expiration of his employment contract on 30 November 1993.

CISELL A. KIAMCO, petitioner, vs. NATIONAL LABOR RELATIONS


COMMISSION (4TH DIVISION), PHILIPPINE NATIONAL OIL COMPANY (PNOC)
and
PNOC-ENERGY
DEVELOPMENT
CORPORATION
(PNOC-EDC),
respondents.
DECISION
BELLOSILLO, J.:

On 1 December 1993 Kiamco reported back to work but was prevented by security
guards from entering the company premises. On 27 May 1994 private respondent
PNOC-EDC reported to the Department of Labor and Employment that petitioner
Kiamco was terminated on 1 November 1993 due to the expiration of his
employment contract and the abolition of his position.[7]

On 1 July 1992 private respondent PHILIPPINE NATIONAL OIL COMPANY (PNOC)


through its Energy Research and Development Division, later incorporated as PNOCENERGY DEVELOPMENT CORPORATION (PNOC-EDC) (now its co-private respondent
herein), hired petitioner Cisell Kiamco as a project employee in its Geothermal AgroIndustrial Plant Project in Valencia, Negros Oriental. The Contract of Employment[1]
stipulated among others that Kiamco was being hired by the company as a
technician for a period of five (5) months from 1 July 1992 to 30 November 1992, or
up to the completion of the project, whichever would come first, at a monthly salary
of P3,500.00.

Thus on 25 April 1994 Kiamco filed before the NLRC Sub-Regional Arbitration Branch
No. VII, Dumaguete City, a Complaint for illegal suspension and dismissal against the
PNOC.[8] He prayed that he be reinstated to his former position and paid back
wages. On 30 June 1995 Labor Arbiter Geoffrey P. Villahermosa rendered a Decision
dismissing the complaint for lack of merit.[9] According to the Labor Arbiter, the
three (3) employment contracts were freely and voluntarily signed by Kiamco and
the PNOC representatives. The contracts plainly stated that Kiamco was being hired
for a specific project and for a fixed term. Therefore Kiamco could not question his
dismissal since it was in accordance with his employment contract.

After the termination of the contract, a second one was entered into by the parties
containing basically the same terms and conditions except that the work-time was
reduced to twenty-two (22) days per month instead of twenty-six (26) days as
stipulated in the first contract. The period of employment was from 1 December
1992 to 30 April 1993.[2] Thereafter Kiamco was again re-hired. This time the
contract was for six (6) months spanning 1 May 1993 to 30 November 1993 with an
increased salary of P3,850.00 per month.[3]

Kiamco appealed the decision of the Labor Arbiter to public respondent National
Labor Relations Commission (NLRC) which on 27 September 1996 reversed the
Labor Arbiter and ruled -

However on 20 October 1993 Kiamco received a Memorandum[4] from the


administration department demanding an explanation from him on certain
infractions he allegedly committed as follows:

WHEREFORE x x x x the decision appealed from is REVERSED, VACATED and SET


ASIDE and a new one entered declaring the complainant as a regular employee of
the respondents and to have been illegally dismissed by the latter. Ordering
respondents to REINSTATE the complainant to his former position without loss of
seniority rights and privileges with back wages from the date of his dismissal up to
actual reinstatement less any income he may have earned during the pendency of
the case.[10]

On 12 November 1996 private respondents filed a Motion for Reconsideration of the


decision of the NLRC[11] contending that it erred in holding that Kiamco was a
regular employee and that the findings of the Labor Arbiter that Kiamco was a
project employee should be affirmed. On 23 January 1997 the NLRC issued a
Resolution modifying its 27 September 1996 Decision in NLRC Case No. V-0316-95
the dispositive portion of which reads WHEREFORE x x x x the decision in question is MODIFIED in accordance with Our
above discussion. Accordingly, the complainant-appellant is declared a project
employee at respondents Geothermal Agro-Industrial Demonstration Plant and to
continue with said employment until the full completion of the project but in the
absence of proof to that effect, complainant is hereby awarded back wages for a
period of six (6) months or in the amount of P23,100.00. The order declaring the
complainant-appellant as a regular employee of respondent Philippine National Oil
Corporation [sic], and for said company to reinstate the complainant with full back
wages is hereby deleted.[12]
In his petition for certiorari Kiamco assails the 23 January 1997 Resolution of the
NLRC. He charges the NLRC with grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the questioned Resolution and prays that it be
nullified and he reinstated to his former position. He also seeks payment of back
wages, damages and attorneys fees. The petition also raises the following issues: (a)
whether the petition should be dismissed for failure of petitioner Kiamco to file a
motion for reconsideration with the NLRC; (b) whether petitioner is a regular
employee or a project employee; (c) whether petitioner is entitled to reinstatement
without loss of seniority rights and privileges and to the payment of full back wages;
and, (d) whether petitioner is entitled to moral and exemplary damages.
Both the Solicitor General and private respondents insist that the petition should be
dismissed because of petitioners failure to file a motion for reconsideration with the
NLRC, pleading that It is undisputed that petitioner failed to file a motion for reconsideration of the
assailed Resolution before filing this petition. Such being the case, the assailed
Resolution became final and executory, petitioner can no longer question the
correctness of the assailed Resolution before this Honorable Court. As ruled in
Palomado v. NLRC (257 SCRA 680, 687-699 [1996]): Additionally, the allegations in
the petition clearly show that petitioner failed to file a motion for reconsideration of
the assailed Resolution before filing the instant petition. x x x such failure
constitutes a fatal infirmity even if the petition be treated as a special civil action for
certiorari. The unquestioned rule in this jurisdiction is that certiorari will lie only if
there is no appeal or any other plain, speedy and adequate remedy expressly
provided by law against the acts of public respondent. In the instant case, the plain
and adequate remedy expressly provided by law was a motion for reconsideration of
the assailed decision x x x made under oath and filed within ten (10) days from
receipt of the questioned decision. And for failure to avail of the correct remedy
expressly provided by law, petitioner has permitted the subject Resolution to
become final and executory after the lapse of the ten-day period x x x x[13]

But this is not a rigid rule. In Macawiwili Gold Mining and Development Co., Inc. v.
Court of Appeals[14] we held 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 (citation omitted). This rule, however, is not without
exceptions. In Pajo v. Ago and Ortiz (108 Phil. 905) we held: Respondent contends
that petitioners should have filed a motion for reconsideration of the order in
question, or asked for the dissolution of the preliminary injunction issued by the trial
court, before coming to us.
This is not always so. It is only when the questions are raised for the first time before
this Court in a certiorari proceeding that the writ shall not issue unless the lower
court had first been given the opportunity to pass upon the same. In fine, when the
questions raised before this Court are the same as those which have been squarely
raised in and passed upon by the court below, the filing of a motion for
reconsideration in said court before certiorari can be instituted in this Court is no
longer prerequisite. In Locsin v. Climaco (26 SCRA 816) it was stated: When a
definite question has been properly raised, argued and submitted to a lower court,
and the latter has decided the question, a motion for reconsideration is no longer
necessary as a condition precedent to the filing of a petition for certiorari in this
Court.
The issues now raised by petitioner Kiamco were the very same issues submitted
before the NLRC. And, as correctly pointed out by Kiamco, the questioned resolution
was in fact already the result of a motion for reconsideration filed by the original
private respondent. Thus, a motion for reconsideration filed before the NLRC would
only be a rehash of the same arguments it previously considered. We therefore hold
that Kiamcos failure to file a motion for reconsideration is not fatal to his present
petition.
The more important question to be resolved in this case is whether petitioner
Kiamco is a regular employee or a project employee. Article 280 of the Labor Code
answers this query thus Art. 280. Regular and casual employment. - The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed - for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the
duration of the season.
An employee shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, that any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.

In Violeta v. NLRC[15] we held The principal test for determining whether particular employees are properly
characterized as project employees, as distinguished from regular employees, is
whether or not the project employees were assigned to carry out a specific project
or undertaking, the duration (and scope) of which were specified at the time the
employees were engaged for that project. As defined, project employees are those
workers hired (1) for a specific project or undertaking, and (2) the completion or
termination of such project or undertaking has been determined at the time of
engagement of the employee.
Under Policy Instruction No. 20 of the Secretary of Labor, project employees are
those employed in connection with a particular project. Non-project or regular
employees are those employed without reference to any particular project.[16]
All the employment contracts which Kiamco signed stipulated that he was being
employed by private respondents in their Geothermal Agro-Industrial Demonstration
Plant Project in Valencia, Negros Occidental. The contracts similarly provided WHEREAS, the COMPANY is undertaking projects related to applied research and
development, technical consultancy, training, information and planning services on
energy and related technologies, that include the implementation and completion of
(the) Geothermal Agroindustrial Demonstration Plant Project with Project Code: 1504309912-117 hereinafter referred to as the PROJECT.[17]
Furthermore, not only was Kiamco assigned to a specific project, but the duration
and completion of such project had also been determined at the time of his
employment. Thus NOW THEREFORE, for and in consideration of the foregoing, the COMPANY and the
PROJECT EMPLOYEE hereby agree as follows:
1. The COMPANY hires and engages the services of (the) PROJECT EMPLOYEE, and
the latter has agreed to render and perform services for the COMPANY, as Technician
for a period commencing on 01 May 1993 to 31 October 1993 or up to the
completion of the PROJECT, whichever comes first (emphasis supplied).

was not a regular employee; (b) the position had already been abolished; (c)
petitioner failed to substantiate his claim that the project was still on-going; and, (d)
the separation of Kiamco from his employment was not exactly cordial, incurring the
ire and anger of both his co-workers and superiors.[18]
In Santos v. NLRC[19] we said The normal consequences of a finding that an employee has been illegally dismissed
are, that the employee becomes entitled to reinstatement to his former position
without loss of seniority rights and the payment of back wages.
Reinstatement restores the employee who was unjustly dismissed to the position
from which he was removed, that is, to his status quo ante dismissal; while the grant
of back wages allows the same employee to recover from the employer that which
he had lost by way of wages as a result of his dismissal.
The argument of private respondents that reinstatement and payment of back
wages could not be made since Kiamco was not a regular employee is apparently
misplaced. As quoted above, the normal consequences of an illegal dismissal are the
reinstatement of the aggrieved employee and the grant of back wages. These rights
of an employee do not depend on the status of his employment prior to his dismissal
but rather to the legality and validity of his termination. The fact that an employee is
not a regular employee does not mean that he can be dismissed any time, even
illegally, by his employer.
It cannot be gainsaid that the dismissal of an employee should be for any of the just
and authorized causes enumerated in the Labor Code.[20] However, petitioners case
no proof or evidence was ever presented by private respondents to justify his
termination. On the contrary, they relied solely on the expiration of the employment
contract to legitimize his termination, instead of the administrative infractions he
allegedly committed, thus abandoning altogether any valid cause private
respondents might have under the Labor Code that could justify his dismissal.
In De la Cruz v. NLRC[21] we held In termination cases, the burden of proving just and valid cause for dismissing an
employee from his employment rests upon the employer, and the latters failure to
do so results in finding that the dismissal is unjustified.

From the foregoing discussion it is apparent that Kiamco was correctly labeled by the
NLRC as a project employee. The basis for this conclusion is indeed well-founded.
The three (3) Contracts of Employment entered into by Kiamco clearly established
that he was a project employee because (a) he was specifically assigned to work for
a particular project, which was the Geothermal Agro-Industrial Demonstration Plant
Project of private respondents, and (b) the termination and the completion of the
project or undertaking was determined and stipulated in the contract at the time of
his employment.

Furthermore, private respondents not only failed to give a valid and justifiable
reason to terminate Kiamco, but they also ignored the due process requirement of
the law. Due process in termination cases requires the employer to furnish the
worker or employee sought to be dismissed with two (2) written notices, i.e., a
notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought, and a subsequent notice which informs the employee of the
employers decision to dismiss him.

The next issue to be addressed is whether petitioner Kiamco, as a project employee,


is entitled to reinstatement and payment of back wages. Private respondents
postulate that Kiamco could not be reinstated for the following reasons: (a) Kiamco

The records show that the second written notice informing petitioner of his actual
dismissal was not complied with. When Kiamco returned to work he was bluntly
informed by private respondents that he was already terminated due to the

expiration of his employment contract. Indeed, the failure of private respondents to


comply with the due process requirement further tainted Kiamcos dismissal with
irregularity.[22]
While it is true that in some cases, among which are Wenphil Corp. v. NLRC[23]and
Rubberworld (Phils.) v. NLRC,[24] the lack of due process before the dismissal of the
employee was deemed corrected by the subsequent administrative proceedings
where the dismissed employee was given a chance to be heard, those cases
involved dismissals that were later proved to be for a valid cause. However, the
doctrine in those cases is not applicable to the case at bar because Kiamcos
dismissal was not proved by private respondents to be for any valid or justifiable
cause.[25]
Nonetheless even if the last contract signed by Kiamco fixed the term of his
employment from 1 May 1993 to 31 October 1993, this did not give private
respondent corporations the unbridled authority to terminate Kiamco upon the
expiration thereof. As discussed earlier, Kiamco was a project employee who was
specifically assigned to work in a particular project. Therefore, in the absence of any
valid reason to terminate him, private respondents should have retained his services
until the actual completion of the project. We ruled in De Ocampo, Jr. v. NLRC[26]x x x x the record shows that although the contracts of the project workers had
indeed expired, the project itself was still on-going and so continued to require the
workers services for its completion. There is no showing that such services were
unsatisfactory to justify their termination. This is not even alleged x x x. One can
therefore only wonder why, in view of these circumstances, the contract workers
were not retained to finish the project they had begun and were still working on x x
xx
Private respondent corporations further argue that reinstatement was no longer be
possible since the position had already been abolished for being unnecessary. But, it
was correctly pointed by the NLRC that The respondents other theory of abolition of position for being no longer necessary
deserves scant consideration. An examination of the three contracts of employment
of the complainant show that the complainant has always been task(ed) to perform
the following comprehensive functions:
To provide assistance in the installation, operation and maintenance of the plant
which include installation, operation of plant equipment, handling of raw materials
and safekeeping of all equipment, tools, service vehicle, and supplies in the project
area. He will also x x x be tasked to service the transportation requirements in the
project site when required.
It is clear from the above stipulated duties that the complainants service is needed
until the full completion of the so-called Geothermal Agroindustrial Demonstration
Project. It is unrefuted on record that when complainants service was terminated,
work in the project was still going on. In fact, the respondents failed to show proof as
to when it was completed.[27]

Thus, the argument that petitioner could no longer be reinstated since he failed to
substantiate the existence of the project is untenable. The burden of proving that
petitioner Kiamco is not entitled to reinstatement rests on private respondent
corporations. Being the employer, the private respondents would have in their
possession the necessary documents and proof to show that the project had already
been terminated. The NLRC even commented in its assailed resolution that in fact
private respondents failed to show proof as to when the project was completed.[28]
Lastly, private respondents argue against reinstatement on the basis of the strained
relations principle. They claim that after the termination of Kiamco he had incurred
the ire and anger of his co-employees and superiors. In this regard, it may be worth
to mention that in Globe-Mackay Cable and Radio Corp. v. NLRC[29] this Court
qualified the application of the strained relations principle when it held If in the wisdom of the Court, there may be a ground or grounds for the
nonapplication of the above-cited provision (Art. 279, Labor Code) this should be by
way of exception, such as when the reinstatement may be inadmissible due to
ensuing strained relations between the employer and employee.
In such cases, it should be proved that the employee concerned occupies a position
where he enjoys the trust and confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism may be generated as to
adversely affect the efficiency and productivity of the employee concerned x x x x
Obviously, the principle of strained relations cannot be applied indiscriminately.
Otherwise, reinstatement can never be possible simply because some hostility is
invariably engendered between the parties as a result of litigation. That is human
nature.
Besides, no strained relations should arise from a valid legal act of asserting ones
right; otherwise an employee who shall assert his right could be easily separated
from the service, by merely paying his separation pay on the pretext that his
relationship with his employer had already become strained.
Finally, as to the claim of moral and exemplary damages, jurisprudence is replete
with cases holding that moral damages are recoverable only where the dismissal of
the employee was attended with bad faith or fraud or constituted an act oppressive
to labor or was done in a manner contrary to morals, good custom or public policy.
Exemplary damages, on the other hand, may be awarded only if the dismissal was
effected in a wanton, oppressive or malevolent manner. The evidence on record
does not show any fraud, malice or bad faith on the part of private respondents that
would justify payment to petitioner of moral and exemplary damages.
WHEREFORE, the assailed Resolution of public respondent NLRC dated 23 January
1997 modifying its earlier Decision of 27 September 1996 in NLRC Case No. V-03169 is MODIFIED. Private respondents Philippine National Oil Company (PNOC) and
PNOC-Energy Development Corporation (PNOC-EDC) are ORDERED to REINSTATE
petitioner Cisell A. Kiamco immediately to his former position without loss of
seniority rights and privileges with full back wages from the date of his dismissal
until his actual reinstatement. Costs against private respondents.

SO ORDERED.
[G.R. No. 120466. May 17, 1999]
COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and RAMON B. CANONICATO, respondents.
DECISION
BELLOSILLO, J.:
This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3
January 1995 decision[1] of the National Labor Relations Commission (NLRC) holding
that private respondent Ramon B. Canonicato is a regular employee of petitioner
Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to reinstatement and back
wages. The NLRC reversed the decision of the Labor Arbiter of 28 April 1994[2]
which declared that no employer-employee relationship existed between COCA
COLA and Canonicato thereby foreclosing entitlement to reinstatement and back
wages.
On 7 April 1986 COCA COLA entered into a contract of janitorial services with
Bacolod Janitorial Services (BJS) stipulating[3] among others That the First Party (COCA COLA) desires to engage the services of the Second Party
(BJS), as an Independent Contractor, to perform and provide for the maintenance,
sanitation and cleaning services for the areas hereinbelow mentioned, all located
within the aforesaid building of the First Party x x x x
1. The scope of work of the Second Party includes all floors, walls, doors, vertical and
horizontal areas, ceiling, all windows, glass surfaces, partitions, furniture, fixtures
and other interiors within the aforestated covered areas.
2. Except holidays which are rest days, the Second Party will undertake daily the
following: 1) Sweeping, damp-mopping, spot scrubbing and polishing of floors; 2)
Cleaning, sanitizing and disinfecting agents to be used on commodes, urinals and
washbasins, water spots on chrome and other fixtures to be checked; 3) Cleaning of
glass surfaces, windows and glass partitions that require daily attention; 4) Cleaning
and dusting of horizontal and vertical surfaces; 5) Cleaning of fixtures, counters,
panels and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays and
trash receptacles; 7) Trash and rubbish disposal and burning.
In addition, the Second Party will also do the following once a week, to wit: 1)
Cleaning, waxing and polishing of lobbies and offices; 2) Washing of windows,
glasses that require cleaning; 3) Thorough disinfecting and cleaning of toilets and
washrooms.
3. The Second Party shall supply the necessary utensils, equipment and supervision,
and it shall only employ the services of fifteen (15) honest, reliable, carefully
screened, cooperative and trained personnel, who are in good faith, in the
performance of its herein undertaking x x x x

4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor


repair of comfort rooms are free of charge provided the First Party will supply the
necessary materials for such repairs at its expense. As may be necessary, the
Second Party shall also report on such part or areas of the premises covered by this
contract which may require repairs from time to time x x x (italics supplied).
Every year thereafter a service contract was entered into between the parties under
similar terms and conditions until about May 1994.[4]
On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a
casual employee and assigned him to the bottling crew as a substitute for absent
employees. In April 1990 COCA COLA terminated Canonicato's casual employment.
Later that year COCA COLA availed of Canonicato's services, this time as a painter in
contractual projects which lasted from fifteen (15) to thirty (30) days.[5]
On 1 April 1991 Canonicato was hired as a janitor by BJS[6] which assigned him to
COCA COLA considering his familiarity with its premises. On 5 and 7 March 1992
Canonicato started painting the facilities of COCA COLA and continued doing so
several months thereafter or so for a few days every time until 6 to 25 June 1993.[7]
Goaded by information that COCA COLA employed previous BJS employees who filed
a complaint against the company for regularization pursuant to a compromise
agreement,[8] Canonicato submitted a similar complaint against COCA COLA to the
Labor Arbiter on 8 June 1993.[9] The complaint was docketed as RAB Case No. 0606-10337-93.
Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment
starting 29 June 1993. On 15 July 1993 he sent his sister Rowena to collect his salary
from BJS.[10] BJS released his salary but advised Rowena to tell Canonicato to report
for work. Claiming that he was barred from entering the premises of COCA COLA on
either 14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria Lacson,
who offered him assignments in other firms which he however refused.[11]
On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing
instead as grounds therefor illegal dismissal and underpayment of wages. He
included BJS therein as a co-respondent.[12] On 28 September 1993 BJS sent him a
letter advising him to report for work within three (3) days from receipt, otherwise,
he would be considered to have abandoned his job.[13]
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee
relationship between COCA COLA and Ramon Canonicato because BJS was
Canonicato's real employer; (b) BJS was a legitimate job contractor, hence, any
liability of COCA COLA as to Canonicato's salary or wage differentials was solidary
with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA COLA
and BJS must jointly and severally pay Canonicato his wage differentials amounting
to P2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent
attorney's fees in the sum of P384.48. The Labor Arbiter also ordered that all other
claims by Canonicato against COCA COLA be dismissed for lack of employeremployee relationship; that the complaint for illegal dismissal as well as all the other
claims be likewise dismissed for lack of merit; and that COCA COLA and BJS deposit

P4,429.28 with the Department of Labor Regional Arbitration Branch Office within
ten (10) days from receipt of the decision.[14]
The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the
janitorial services of Canonicato were found to be necessary or desirable in the usual
business or trade of COCA COLA. The NLRC accepted Canonicato's proposition that
his work with the BJS was the same as what he did while still a casual employee of
COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and declared
that Canonicato was a regular employee of COCA COLA and entitled to
reinstatement and payment of P18,105.10 in back wages.[15]
On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack
of merit.[16] Hence, this petition, assigning as errors: (a) NLRC's finding that
janitorial services were necessary and desirable in COCA COLA's trade and business;
(b) NLRC's application of Art. 280 of the Labor Code in resolving the issue of whether
an employment relationship existed between the parties; (c) NLRC's ruling that there
was an employer-employee relationship between petitioner and Canonicato despite
its virtual affirmance that BJS was a legitimate job contractor; (d) NLRC's declaration
that Canonicato was a regular employee of petitioner although he had rendered the
company only five (5) months of casual employment; and, (e) NLRC's order directing
the reinstatement of Canonicato and the payment to him of six (6) months back
wages.[17]
We find good cause to sustain petitioner. Findings of fact of administrative offices are
generally accorded respect by us and no longer reviewed for the reason that such
factual findings are considered to be within their field of expertise. Exception
however is made, as in this case, when the NLRC and the Labor Arbiter made
contradictory findings.
We perceive at the outset the disposition of the NLRC that janitorial services are
necessary and desirable to the trade or business of petitioner COCA COLA. But this
is inconsistent with our pronouncement in Kimberly Independent Labor Union v.
Drilon[18] where the Court took judicial notice of the practice adopted in several
government and private institutions and industries of hiring janitorial services on an
"independent contractor basis." In this respect, although janitorial services may be
considered directly related to the principal business of an employer, as with every
business, we deemed them unnecessary in the conduct of the employer's principal
business.[19]
This judicial notice, of course, rests on the assumption that the independent
contractor is a legitimate job contractor so that there can be no doubt as to the
existence of an employer-employee relationship between contractor and the worker.
In this situation, the only pertinent question that may arise will no longer deal with
whether there exists an employment bond but whether the employee may be
considered regular or casual as to deserve the application of Art. 280 of the Labor
Code.
It is an altogether different matter when the very existence of an employment
relationship is in question. This was the issue generated by Canonicato's application
for regularization of his employment with COCA COLA and the subsequent denial by

the latter of an employer-employee relationship with the applicant. It was error


therefore for the NLRC to apply Art. 280 of the Labor Code in determining the
existence of an employment relationship of the parties herein, especially in light of
our explicit holding in Singer Sewing Machine Company v. Drilon[20] that x x x x [t]he definition that regular employees are those who perform activities
which are desirable and necessary for the business of the employer is not
determinative in this case. Any agreement may provide that one party shall render
services for and in behalf of another for a consideration (no matter how necessary
for the latter's business) even without being hired as an employee. This is precisely
true in the case of an independent contractorship as well as in an agency
agreement. The Court agrees with the petitioner's argument that Article 280 is not
the yardstick for determining the existence of an employment relationship because
it merely distinguishes between two kinds of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute.
In determining the existence of an employer-employee relationship it is necessary to
determine whether the following factors are present: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power to dismiss;
and, (d) the power to control the employee's conduct.[21] Notably, these are all
found in the relationship between BJS and Canonicato and not between Canonicato
and petitioner COCA COLA. As the Solicitor-General manifested[22]In the instant case, the selection and engagement of the janitors for petitioner were
done by BJS. The application form and letter submitted by private respondent
(Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the
hiring and not petitioner x x x x
BJS paid the wages of private respondent, as evidenced by the fact that on July 15,
1993, private respondent sent his sister to BJS with a note authorizing her to receive
his pay.
Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that
assigns the janitors to its clients and transfers them when it sees fit. Since BJS is the
one who engages their services, then it only follows that it also has the power to
dismiss them when justified under the circumstances.
Lastly, BJS has the power to control the conduct of the janitors. The supervisors of
petitioner, being interested in the result of the work of the janitors, also gives
suggestions as to the performance of the janitors, but this does not mean that BJS
has no control over them. The interest of petitioner is only with respect to the result
of their work. On the other hand, BJS oversees the totality of their performance.
The power of the employer to control the work of the employee is said to be the
most the most significant determinant. Canonicato disputed this power of BJS over
him by asserting that his employment with COCA COLA was not interrupted by his
application with BJS since his duties before and after he applied for regularization
were the same, involving as they did, working in the maintenance department and

doing painting tasks within its facilities. Canonicato cited the Labor Utilization
Reports of COCA COLA showing his painting assignments. These reports, however,
are not expressive of the true nature of the relationship between Canonicato and
COCA COLA; neither do they detract from the fact that BJS exercised real authority
over Canonicato as its employee.
Moreover, a closer scrutiny of the reports reveals that the painting jobs were
performed by Canonicato sporadically, either in a few days within a month and only
for a few months in a year.[23] This infrequency or irregularity of assignments
countervails Canonicatos submission that he was assigned specifically to undertake
the task of painting the whole year round. If anything, it hews closely to the
assertion of BJS that it assigned Canonicato to these jobs to maintain and sanitize
the premises of petitioner COCA COLA pursuant to its contract of services with the
company.[24]
It is clear from these established circumstances that NLRC should have recognized
BJS as the employer of Canonicato and not COCA COLA. This is demanded by the
fact that it did not disturb, and therefore it upheld, the finding of the Labor Arbiter
that BJS was truly a legitimate job-contractor and could by itself hire its own
employees. The Commission could not have reached any other legitimate conclusion
considering that BJS satisfied all the requirements of a job-contractor under the law,
namely, (a) the ability to carry on an independent business and undertake the
contract work on its own account under its own responsibility according to its
manner and method, free from the control and direction of its principal or client in all
matters connected with the performance of the work except as to the results
thereof; and, (b) the substantial capital or investment in the form of tools,
equipment, machinery, work premises, and other materials which are necessary in
the conduct of its business.[25]
It is to be noted that COCA COLA is not the only client of BJS which has its roster of
clients like San Miguel Corporation, Distileria Bago Incorporated, University of
Negros Occidental-Recolletos, University of St. La Salle, Riverside College, College
Assurance Plan Phil., Inc., and Negros Consolidated Farmers Association, Inc.[26]
This is proof enough that BJS has the capability to carry on its business of janitorial
services with big establishments aside from petitioner and has sufficient capital or
materials necessary therefor.[27] All told, there being no employer-employee
relationship between Canonicato and COCA COLA, the latter cannot be validly
ordered to reinstate the former and pay him back wages.

G.R. No. L-52056 October 30, 1980


BONIFACIO DE LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUGAR PRODUCERS COOPERATIVE
MARKETING ASSOCIATION, INC., ALFREDO U. BENEDICTO and GWENDOLYN H.
GUSTILO, respondents.

DE CASTRO, J.:
Petition for certiorari with prayer to annul the decision of the National Labor
Relations Commission reversing the decision of the Labor Arbiter which ordered
respondents to reinstate petitioner to his former position as Assistant Vice-PresidentManager of Sugar Producers Cooperative Marketing Association, Inc. without loss of
seniority rights and with full backwages to be computed from the date of his
dismissal.
This case arose from a complaint for illegal dismissal instituted by herein petitioner
against private respondents.
Petitioner started working with said corporation as a messenger wayback in 1949.
He, held various positions therein, such as bookkeeper, accountant, general office
supervisor and Assistant-Manager. He rose to the position as Assistant VicePresident-Manager (Makati Office) in 1973 and held it continuously up to 1977. Prior
to his dismissal, he was in the service for more than 28 years.
In October 1976, petitioner was sent to Korea on an official business for respondent
corporation. Before that, respondent Alfredo Benedicto, president and general
manager of the corporation, verbally intimated to petitioner that the latter would
soon be appointed as Assistant Vice-President for Finance, preparatory to his
assuming the position of Vice-President for Finance upon the resignation of the then
incumbent.
In early November 1976, petitioner was instructed to attend the staff meeting at
Bacolod every second and fourth Tuesdays of every month starting January 1977.
Arrangements were made to enable petitioner to go to Bacolod on January 7, 1977.

WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995


declaring Ramon B. Canonicato a regular employee of petitioner Coca Cola Bottlers
Phils., Inc., entitled to reinstatement and back wages is REVERSED and SET ASIDE.
The decision of the Labor Arbiter of 28 April 1994 finding no employer-employee
relationship between petitioner and private respondent but directing petitioner Coca
Cola Bottlers Phils., Inc., instead and Bacolod Janitorial Services to pay jointly and
severally Ramon B. Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th
month pay and P384.48 as attorney's fees, is REINSTATED.

On January 6, 1977, respondent Benedicto called petitioner and asked him to take a
vacation leave of one (1) month to start on January 10, 1977. On January 31, 1977,
said respondent wrote petitioner a letter stating "that because of necessity,
complainant is to extend his vacation leave for another month." Then on February
28, 1977, petitioner again received a letter from respondent Benedicto advising the
former that he is to resume his leave effective March 1, 1977 to April 30, 1977 and
that his application for retirement has been accepted effective April 30, 1977.

SO ORDERED.

On April 25, 1977, respondent Corporation tendered to petitioner a check for


P36,492.63 "representing (his) retirement gratuity pay and office consideration for

P10,000." Petitioner returned the P10,000 and accepted only P26,492.63 explaining
in his letter that "he was shocked, tortured and desperate because of his
unceremonious dismissal without cause and being the only breadwinner which
includes eight (8) children, he naturally grabbed any money offered by the company,
and that his decision was without the benefit of a legal counsel."
Petitioner in his complaint alleged that he had not at any time or in any manner
applied for retirement; that the requirement of due process was not observed, hence
his dismissal is illegal and unjustified; that he was not confronted by respondents to
explain to him any cause or reason for his dismissal; that no specific charges were
made against him and no formal investigation was made to afford him opportunity
to acquit himself of any charges; and finally, the money offered by the corporation
does not constitute estopped or waiver on his part, considering that his acceptance
was without prejudice to all his rights resulting from his illegal dismissal.
The Labor Arbiter ruled in favor of petitioner and ordered respondents to reinstate
the latter to his former position without loss of seniority rights and with full
backwages. He stated in his decision 1 that there was no showing that petition
petitioner has applied for retirement, which was admitted by respondent Benedicto
himself during one of the hearings when he testified, and that there is no disclosure
in the record that petitioner had even the slightest intention to retire or to avail of
any retrenchment program. In support of his stand, the labor arbiter quoted an
opinion rendered by leading US Arbitrators, to wit:
. . . if intent to resign or to retire is not adequately evidenced or if a statement of
intent to resign or to retire is involuntary or coerced, an alleged resignation or
retirement will be treated as discharge for purposes of arbitral review. (Healy in 61
LA557; Kates in 51 LA 1090)
The Labor Arbiter, further found, in substance as follows:
1)
The alleged retirement of petitioner is now treated as discharge for
purposes of arbitral review and since discharge is recognized to be the extreme
industrial penalty, the burden is held to be on the employer to prove guilt of
wrongdoing and probably more so where the agreement requires "just cause" for
discharge.
2)
From the testimony of respondent Benedicto that the auditing of the
Company's books was done in the absence of petitioner and that there was no need
to confront petitioner with the actual reports, it is safe to conclude that respondents
have violated the basic notions of fairness and due process.
3)
The evidence on record disclosed that petitioner was not afforded even a
single opportunity to defend himself against the adverse partial findings of the
auditors and as reflected in the testimony of respondent Benedicto, the reports
made by the auditors were verbal reports only and not reduced to writing.
4)
Resolution failed to present such quantum of proof where the alleged
offense involves an element of moral turpitude or criminal intent. Reasonable doubts
raised by proofs should be resolved in favor of the accused.

5)
Respondent's contention that petitioner being a Managerial employee,
could be terminated for lack of confidence cannot be sustained since the alleged
loss of confidence must necessarily have resulted from grounds which prompted
petitioner's dismissal and in as much as said grounds are unsubstantiated, there can
be no valid reason for loss of confidence.
6)
The ground of retrenchment as the basis of petitioner's dismissal became a
mere pretext and discriminatory considering that when petitioner was forced to go
on vacation leave, respondent Benedicto appointed immediately respondent Gustilo
to perform the functions of petitioner.
7)
Respondents' allegation that petitioner is estopped from questioning the
legality of his dismissal considering that he has accepted the retirement gratuity,
runs counter to the ruling of the Supreme Court in the Mercury Drug Case (56 SCRA
694-713) wherein Justice Sanchez has said. ". . . those benefits would not amount to
estopped. . . ., employer and employee obviously do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get hold of
his money. Because, out job, he had to face the harsh necessities of life. He thus
found himself in no position to resist the money proferred him. He is then, a case of
adherence, not of choice. One thing sure, however, is that petitioners did not relent
on their claim. They pressed it. They are deemed not to have waived any right. . . .
Private respondents appealed to the Commission which rendered a decision on July
12, 1979 reversing the Labor Arbiter's decision and dismissing the complaint. It was
pointed out by the Commission that although no retirement application was filed,
petitioner was agreeable to retirement since he accepted the retirement benefits;
that petitioner should have insisted on an investigation upon learning of his
involvement in the irregularities in the Company books, and under the circumstance,
his position required a high degree of trust and confidence and he could no longer
measure up to respondent Corporation's expectation. 2 Henee, the petition before
Us raising the following assignment of errors:
1.
Whether or not the NLRC can make findings or conclusions which are not
supported by evidence presented.
2.
Whether or not an employee is entitled to a formal investigation of
whatever specific charges against him or whether or not his dismissal based on lack
of confidence should be set aside.
3.
Whether or not a retirement effected upon employer's initiative and
insistence can be considered a free and voluntary act of an employee.
4.
Whether or not acceptance by employee of benefits proferred by employer
amounts to estoppel.
5.
Whether or not dismissal for loss of confidence, to be warranted, should
have some basis therefor.

Petitioner alleged that the "irregularities" charged were not explained or amplified in
the text of the commission's decision; neither is there a reference to the nature of
the evidence collated by the team of auditors; that there is no demonstration or
explanation as to how such evidence established his personal involvement in said
irregularities; that it is employer's duty to conduct an investigation into the
anomalies imputed to an employee even if the latter does not expressly ask for it;
and an employee is entitled to an investigation as a matter of right.
Commenting on the petition, private respondents averred that they gave petitioner
one month vacation leave to give the auditors a free hand in the audit of the books
in the Makati Office; that petitioner authorized his brother to withdraw from the
Company's bonded warehouse empty plastic bags which are normally sold for added
income to the company but such withdrawal was not supported by sales invoices nor
delivery orders contrary to the company's standard accounting principles; that
petitioner caused the issuance to another check in addition to his loyalty bonus
which was beyond board approval; that Mr. Benedicto informed petitioner in private
that the initial findings of the auditor's team were adverse to him, and it was agreed
that petitioner would just retire under the company's retrenchment program to save
him from embarrassed attendant to a full-dress investigation; petitioner accepted
the retirement gratuity and with that, he is estopped from claiming that he did not
apply for retirement, and the in involvement, of petitioner in the anomalies reported
by the auditors is more than sufficient cause for his severance from the company on
the ground of lack of confidence.
We find merit in the petition.
There is in this case a clear denial of due process, a constitutional right which must
be safeguarded at all times specially when what is at stake is petitioner's position as
his only means of livelihood. He has, in addition, a family to consider, and it is the
right of every working man to assure himself and his family a life worthy of human
dignity. It is therefore incumbent upon the employer to conduct a formal
investigation and conform the employee of the specific cnarges against him.
Respondents should be reminded that under our system of government, even the
most hardened criminals are given their day in court.
That petitioner was deprived of his right to be heard and acquit himself of the
charges, finds support in the testimony of Mr. Benedicto. 3 The latter declared that
there was no need to confront Mr. de Leon with the actual reports, but he was told
that partial audit reports were adverse to him. It must be stressed that the due
process requirement is not a mere formality that may be dispensed with at will. Its
disregard is a matter of serious concern since it is a constitutional safeguard of the
highest order; and a response to man's innate sense of justice. 4 No interrogations
or inquiries took place to give petitioner an opportunity to defend himself, as
testified by Mr. Benedicto thus:
Atty. de Castillo:
Was there a time when these auditors requested the presence of Mr. de Leon so he
could expopsed some items he was auditing?

Mr. Benedicto:
No. 5
The act of respondents in dismissing petitioner without first conducting a formal
investigation is arbitrary and unwarranted. The right of an employer to dismiss an
employee differs from and should not be confused with the manner in which such
right is exercised. 6 It must not be oppressive and abusive since it affects one's
person and property.
The Commission in its decision states that petitioner did not file any retirement
application, a fact likewise admitted by Mr. Benedicto when he was interrogated by
the Labor Arbiter. 7 We agree with the observation of the Labor Arbiter that if the
intent to retire is not clearly established or if the retirement is involuntary, it is to be
treated as a discharge. There is no showing that petitioner had the slightest
intention to retire or avail of the retrenchment program as alleged by private
respondents. The retirement of petitioner was, therefore, forced upon him by his
employer and was not done voluntarily. 8
While a Managerial employee may be dismissed merely on the ground of loss of
confidence, the matter of determining whether the cause for dismissing an
employee is justified on ground of loss of confidence, cannot be left entirely to the
employer. Impartial tribunals do not rely only on the statement made by employer
that there is "loss of confidence" unless duly proved or sufficiently substantiated. We
find no reason to disturb the findings of the Labor Arbiter that the charges against
petitioner were not fully substantiated, and "there can be no valid reason for said
loss of confidence. Anent the charges of unauthorized withdrawal of the plastic bags
by petitioner's brother, and unauthorized additional bonus, the arbiter found no
anomaly considering that the evidence presented during the proceedings discloses
that the withdrawal and the granting of bonus were all approved and ratified by the
board. Thus, the Commission erred in dismissing the complaint and acted with
patent abuse of discretion. Its assailed decision fails to establish by substantial
evidence the involvement of petitioner in the alleged anomalies imputed to him.
Without such supporting evidence, the conclusions made by the Commission are not
binding with this Court; they must be set aside.
After having served the company for more than 20 years, dismissal would be too
severe a penalty for petitioner who was not even afforded an opportunity to be
heard. He was just a victim of the whims and malicious maneuver of private
respondents.
The contention of respondents that petitioner is barred from contesting the illegality
of his dismissal since he has already received his separation pay cannot be
sustained. Since he was forced to retire, he suddenly found himself jobless with a
family of eight (8) children to support. He had no alternative but to accept what was
offered to him. He needed money to support his family. He had to grab whatever
was offered as he accepted less than what was offered to show his non-acquiescene
to what amounted to dismissal. Employees who received their separation pay are
not barred from contesting the legality of their dismissal. The acceptance of those

benefits would not amount to estoppel as held in the leading case of Mercury Drug
Co. vs. CIR 9 as aptly cited in the decision of the Labor Arbiter.
Having been illegally dismissed, petitioner is entitled to reinstatement with
backwages corresponding to a period of three (3) years without qualification minus
the amount of P26,492.63 he was forced to receive as retirement gratuity pay.
WHEREFORE, the assailed decision dated July 12, 1979 of the National Labor
Relations Commission is hereby SET ASIDE, and the Labor Arbiter's decision dated
January 2, 1979 is REINSTATED with modification by ordering private respondents to
immediately reinstate petitioner to his former position as Assistant Vice-President
Manager (Makati Office) of respondent corporation without loss of seniority rights
and other benefits and increases recognized by law or granted by private
respondents during the period of his illegal dismissal corresponding to his position to
which he is now ordered reinstated, with backwages equivalent to three years
without qualification minus the amount of P26,492.63 he received as retirement
gratuity pay. No costs.
SO ORDERED.
G.R. No. 78345

September 21, 1990

JOSE M. MAGLUTAC, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, COMMART (PHIL.), INC. AND JESUS T.
MAGLUTAC, respondents.
G.R. No. 78637 September 21, 1990
COMMART (PHIL.), INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND JOSE M. MAGLUTAC, respondents.
V.E. Del Rosario & Associates for COMMART (Phils.) Inc. Panganiban, Benitez,
Barinaga & Bautista Law Offices for Jose Maglutac.

Energy Equipment Sales. On October 3, 1984, he received a notice of termination


signed by Joaquin S. Cenzon, Vice-President-General Manager and Corporate
Secretary of CMS International, a corporation controlled by Commart. The notice of
termination reads:
You are hereby notified and advised that the Board of Directors of this Corporation,
acting on the unanimous resolution, have decided that your continued employment
in this company, will not be in the best interest of the corporation.
You are therefore discharged of all your duties and responsibilities as Manager,
Energy Equipment Sales effective immediately.
The termination of your services is without prejudice to any future action, private or
legal, that the Company may take to demand restitution, enforce collection or
require repayment of whatever financial obligations you now have incurred, to the
company. (p. 50, Rollo)
Thereafter, Jose Maglutac filed a complaint for illegal dismissal against Commart and
Jesus T. Maglutac, President and Chairman of the Board of Directors of Commart. The
complainant alleged that his dismissal was part of a vendetta drive against his
parents who dared to expose the massive and fraudulent diversion of company
funds to the company president's private accounts, stressing that complainant's
efficiency and effectiveness were never put to question when very suddenly he
received his notice of termination (p. 51, Rollo).
Commart and Jesus T. Maglutac, on the other hand, justified the dismissal for lack of
trust and confidence brought about by complainant and his family's establishment of
a company, MM International, in direct competition with Commart. After the parties
submitted their respective position papers, the Labor Arbiter assigned to the case,
Jose Collado, Jr., rendered a decision on January 11, 1986 finding that complainant
was illegally dismissed. The dispositive portion of the decision reads:
WHEREFORE, respondents are hereby ordered to reinstate complainant to his former
position with full backwages without loss of seniority rights and other personnel (sic)
privileges, to pay complainant jointly and severally P 200,000.00 in moral damages,
P20,000.00 in exemplary damages and to pay ten per cent (10%) attorney's fees.
SO ORDERED. (p. 57, Rollo)

MEDIALDEA, J.:
These petitions for certiorari seek the review of the decision of respondent National
Labor Relations Commission promulgated on April 30, 1987 in NLRC Case No. NCR11-3887-84. Both parties filed their petitions with this Court which were consolidated
on motion of Jesus T. Maglutac and Commart (Phils.), Inc. and by resolution of this
Court dated August 12, 1987 (p. 74, Rollo of G.R. No. 78345).
Jose M. Maglutac, petitioner in G.R. No. 78345 (hereinafter referred to as
complainant) was employed by Commart (Phils.), Inc. (hereinafter referred to as
Commart) sometime in February, 1980 and rose to become the Manager of its

Commart and Jesus T. Maglutac filed a motion for reconsideration of the decision of
the Labor Arbiter which was treated as an appeal to the National Labor Relations
Commission (NLRC). On April 30, 1987, a decision was rendered by the NLRC
modifying the decision of the Labor Arbiter, The NLRC affirmed the finding of the
Labor Arbiter that complainant was illegally dismissed by Commart but it deleted the
award for moral and exemplary damages in favor of complainant and absolved Jesus
T. Maglutac from any personal liability to the complainant. The pertinent portion of
the decision reads:
xxx

xxx

xxx

We agree however, to the contention of individual respondent that he should not


have been held liable in solidum with the corporation. He is merely a nominal party
to the case and made so only in his capacity as President and Chairman of the Board
of Directors of the respondent corporation. The respondent corporation has a
separate and distinct personality from that of its stockholders and its officers, and
respondent Jesus T. Maglutac simply cannot be held personally liable for his
corporate acts.

(II)
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN
SUSTAINING THE ARBITER'S DECISION WHICH WAS ISSUED IN VIOLATION OF DUE
PROCESS OF LAW. (p. 8, Rollo)

Finally, we delete the award of moral and exemplary damages to complainant for
lack of factual and legal basis.

In G.R. No. 78345, complainant argued that because of the Labor Arbiter and the
NLRC's findings that his dismissal was not merely without just cause but was also an
act of vendetta, malice attended the act. Consequently, he is entitled to moral and
exemplary damages under the Civil Code.

WHEREFORE, as above modified, the appealed decision is hereby Affirmed and the
appeal dismissed for lack of merit.
SO ORDERED. (pp. 44-45, Rollo)
Both parties filed their respective motions for reconsideration of the decision of the
NLRC. Commart and Jesus T. Maglutac questioned the NLRC's finding that the
complainant was dismissed without just cause. For his part, complainant questioned
the decision insofar as it deleted the award of moral and exemplary damages and
the non- holding of a joint and several liability of Jesus T. Maglutac and Commart.
Complainant's motion was denied on June 5, 1987 (p. 46, Rollo in G.R. No. 78345).
Commart and Jesus T. Maglutac's motion for reconsideration was also denied on May
29,1987 (p. 25, Rollo in G.R. No. 78637). Hence, the instant petitions both alleging
grave abuse of discretion on the part of respondent NLRC.
In G.R. No. 78345, complainant Jose M. Maglutac raised the following grounds:
(1)
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED
ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND EVEN
CONTRAVENED EXISTING LAWS AND JURISPRUDENCE IN HOLDING THAT THERE IS NO
FACTUAL OR LEGAL BASIS FOR THE AWARD OF MORAL AND EXEMPLARY DAMAGES.
(2)
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION AND CONTRAVENED EXISTING LAWS AND
JURISPRUDENCE IN HOLDING THAT RESPONDENT JESUS T. MAGLUTAC SHOULD NOT
HAVE BEEN HELD LIABLE IN SOLIDUM WITH THE RESPONDENT CORPORATION FOR
HE IS MERELY A NOMINAL PARTY TO THE CASE AND MADE SO ONLY IN HIS CAPACITY
AS PRESIDENT AND CHAIRMAN OF THE BOARD OF DIRECTORS OF RESPONDENT
CORPORATION, AND SIMPLY CANNOT BE HELD LIABLE FOR HIS CORPORATE ACT (p.
30, Rollo)
In G.R. No. 78637, Commart and Jesus Maglutac raised the following grounds:
(I)
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN
ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENT PLUS PAYMENT OF
BACKWAGES DESPITE CLEAR PROOF THAT SAID RESPONDENT COMMITTED AN ACT
INIMICAL TO PETITIONER'S INTEREST.

On August 29, 1988, Commart filed a manifestation stating that it had become
insolvent and that it had suspended operations since January, 1986 (p. 172-A:,
Rollo).

We agree. In the case of Primero v. Intermediate Appellate Court, G.R. No. 72644,
December 14,1987,156 SCRA 435, We held that in cases of illegal dismissal, in
addition to the reliefs granted under the Labor Code, other forms of damages under
the Civil Code may be granted. Thus,
The legislative intent appears clear to allow recovery in proceedings before Labor
Arbiters of moral and other forms of damages, in all cases or matters arising from
employer-employee relations. This would no doubt include, particularly, instances
where an employee has been unlawfully dismissed. In such a case, the Labor Arbiter
has jurisdiction to award to the dismissed employee not only the reliefs specifically
provided by labor laws, but also moral and other forms of damages governed by the
Civil Code. Moral damages would be recoverable, for example, where the dismissal
of the employee was not only effected without authorized cause and /or due process
for which relief is granted by the Labor Code but 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 for which the obtainable relief is determined
by the Civil Code (not the Labor Code). Stated otherwise, if the evidence adduced by
the employee before the Labor Arbiter should establish that the employer did indeed
terminate the employee's services without just cause or without according him due
process, the Labor Arbiter's judgment shall be for the employer to reinstate the
employee and pay him his backwages or, exceptionally, for the employee simply to
receive separation pay. These are reliefs explicitly prescribed by the Labor Code. But
any award of moral damages by the Labor Arbiter obviously cannot be based on the
Labor Code but should be grounded on the Civil Code.
Moral damages may be awarded to compensate one for diverse injuries such as
mental anguish, besmirched reputation, wounded feelings and social humiliation. It
is however not enough that such injuries have arisen; it is essential that they have
sprung from a wrongful act or omission of the defendant which was the proximate
cause thereof (Guita v. Court of Appeals, 139 SCRA 576)
From the findings of the Labor Arbiter as affirmed by the NLRC, there is sufficient
basis for an award of moral and exemplary damages in the instant case. The alleged
loss of trust and confidence on complainant because of his family's establishment of
MM International, a company allegedly in direct competition with Commart, was
belied by the findings of the Labor Arbiter:

The formation of another corporation by complainant's parents including the


complainant himself cannot be used to justify the termination of complainant. The
formation came about before complainant's parents brought a minority stockholders'
derivative suit and in fact, this was with the sanction of respondent company's
president. The following handwritten communications by respondent Jesus Maglutac
show that he even encouraged the organization of MM International Inc. which
Articles of Incorporation show complainant among the incorporating directors. (p.
32, Rollo)
Moreover, the complainant was dismissed without due process. His dismissal was
made effective immediately and he was not given an opportunity to present his side.
As found by the Labor Arbiter:
After studying in depth the facts and the evidence it is difficult to divert from the fact
that the dismissal of complainant was triggered by his parent's filing a derivative
suit against respondents with the Securities and Exchange Commission where it is
alleged that the company's president and his wife siphoned company funds to their
private bank accounts. Complainant's cause of termination cannot easily and simply
be detached from the filing of the minority stockholders' derivative suit as this
dismissal came abruptly shortly after the derivative suit was filed. Complainant's
brother who was likewise employed by respondents was likewise dismissed and this
came on the heels of the suit filed with the Securities and Exchange Commission.
The sequence of events should not be overlooked. It provides the link for the
dismissal of complainant and his brother. Worse, the requirement of due process was
blatantly violated. Ms notice of termination dated October 3, 1984 ipso facto states
that his dismissal is effective immediately. It should have dawned upon the senses of
respondents that BP 130 strictly enjoins an employer to terminate an employee
provided the latter is given the opportunity to answer charges imputed against him
as basis for disciplinary action. The case at bar prominently reveals respondent's
oversight of the requirements of the law. On this score alone, the illegality of
complainant's dismissal is bared eloquently more than ever.
It appears very clearly that the feud between complainant's parents and
respondent's president, the brother of complainant's father, seethed to an
intolerable point not sparing innocent people among whom is the complainant. Like
a wild fire spreading its path, complainant's close kins were sacked from their
employ with respondent corporation in what is termed by complainant as a
'vendetta drive.' But blood spawned as a result of the derivative suit filed by
complainant's parents, although the suit is, legally speaking, intended to 'protect
and safeguard the company's interest from further depredation.' (pp. 31-32, Rollo)
Where the employee's dismissal was effected without procedural fairness, an award
of exemplary damages in her favor can only be justified if her dismissal was affected
in a wanton, oppressive or malevolent manner (National Service Corp., et al. v.
NLRC, G.R. No. 69870, Nov. 29, 1988). The Labor Arbiter justified the award of moral
damages from its finding of the oppressive and malevolent manner the complainant
and his relatives were treated after Jesus T. Maglutac found out that a derivative suit
was filed by complainant's family with the Securities and Exchange Commission

accusing him and his wife of diverting corporation assets to their personal accounts.
The Labor Arbiter justified the award of damages, thus:
Complainant undoubtedly was exposed to undue humiliation as a result of his
dismissal. From the taunts and sleepless nights he suffered, the pain cannot be more
than imagined. The oppressive and malevolent treatment which respondents
subjected him to, including the ill-concealed attempt to deprive him of his rights to
the car that he had acquired through the company's car plan, not to mention the
vindictive manner in which his mother was removed as a director and his brother
dismissed from CMS International, furnishes adequate basis for the claim for moral
and exemplary damages. (pp. 35-36, Rollo)
We agree however, with the contention of the Solicitor General that the award by
the Labor Arbiter of P 200,000.00 moral damages and P20,000.00 exemplary
damages is excessive, In the exercise of our discretion, We reduce the award of
damages to P40,000.00 as moral damages and P10,000.00 as exemplary damages
(See General Bank v. C.A., G.R. No. L-42724, April 9, 1985).
The second ground raised by complainant, that is, that individual respondent Jesus T.
Maglutac should be held jointly and severally liable with Commart is also
meritorious. In the case of Chua v. NLRC, G.R. 81450, Feb. 15, 1990, citing the case
of A.C. Ransom Labor Union-CCLU v. NLRC, 142 SCRA 269, We affirmed the finding of
the Labor Arbiter and the NLRC that the vice-president of a corporation who was the
most ranking officer of the corporation can be held jointly and severally liable with
the corporation for the payment of the unpaid wages of its president. It was held:
We resolve the issue in the light of the precedent set in the case of A.C. Ransom
Labor Union-CCLU v. National Labor Relations Commission (142 SCRA 269 [1986]). In
this case, the Court set aside the decision of the NLRC upholding the personal nonliability of the individual officers and agents of the corporation unless they have
acted beyond the scope of their authority. In thus reversing the NLRC decision, the
Court ruled that the president or presidents of the corporation may be held liable for
the corporations's obligations to its workers.
The Court explained:
(c) Employer includes any person acting in the interest of an employer directly or
indirectly. The term shall not include any labor organization or any of its officers or
agents except when acting as employer.
...Since RANSOM is an artificial person, it must have an officer who can be presumed
to be the employer, being the 'person acting in the interest of employer,' RANSOM.
The Corporation, only in the technical sense is the employer.
The responsible officer of an employer corporation can be held personally, not to say
even criminally, liable for non-payment of backwages. ...(At pp. 273-274-1 Emphasis
supplied)
xxx

xxx

xxx

This court continued:


xxx

xxx

xxx

(d) The record does not clearly Identify the 'officer or officers of RANSOM directly
responsible for failure to pay backwages of the 22 strikers. In the absence of definite
proof in that regard, we believe it should be presumed that the responsible officer is
the President of the corporation who can be deemed the chief operation officer
thereof. Thus, in RA 602, criminal responsibility is with the 'manager or in his default,
the person acting as such.' In RANSOM, the President appears to be the Manager. (At
p. 274)
In the instant case, it was correct for the private respondent to have impleaded the
petitioner in the complaint considering that the latter was the highest and most
ranking official of the corporation after the private respondent had resigned.
Certainly, there should be an officer directly responsible for the failure to pay the
wages of the corporation's president. In this case, such officer happened to be the
vice-president.
And, in the later case of Gudez, et al., v. NLRC, et al., G.R. No. 83023, March 23,
1990, We held the president and treasurer, Herminia Crisologo, jointly and severally
liable with the corporation. In the said case, the employer corporation, Retired Army
Protective Security Agency, Inc. (RAPSA), was ordered to cease operations and the
corporation, on the same day when the Labor Arbiter promulgated its decision, filed
a petition for voluntary insolvency, We held:
... The foregoing circumstances make it more necessary to hold respondent
Crisologo liable for the claims due to petitioners; otherwise, any decision that would
be rendered in favor of the latter would be useless and ineffective for there would no
one against whom it can be enforced.
The same circumstances obtain in the instant case in the light of the manifestation
of Commart that it had become insolvent and that it had suspended operations.
Moreover, not only was Jesus T. Maglutac the most ranking officer of Commart at the
time of the termination of the complainant, it was likewise found that he had a direct
hand in the latter's dismissal. The Labor Arbiter therefore, correctly ruled that Jesus
T. Maglutac was jointly and severally liable with Commart.
In G.R. No. 78637, Jesus T. Maglutac would want Us to reverse the findings of the
Labor Arbiter and the NLRC that complainant Jose M. Maglutac was dismissed
without just cause. The matter, being factual, is beyond the authority of this court to
review. Factual findings of administrative agencies are generally final and binding
upon this Court when supported by substantial evidence as in the instant case.
Likewise, respondents' claim that they were denied due process because the Labor
Arbiter rendered judgment on the basis of complainant's reply-position paper
without furnishing them a copy thereof, is not meritorious. Where the records show
that in response to the complaint before the Labor Arbiter rendered his decision,
Commart and Jesus T. Maglutac submitted a position paper, complete with annexes

where they set out and argued the factual as well as the legal basis of their
positions, their due process argument must fail. (see Llora Motors, Inc. v. Franklin
Drilon, G.R. 82895, 7 Nov, 1989) The procedure by which issues are resolved based
on position papers, affidavits and other documentary evidence is recognized as not
violative of due process (AMS Farming Corp. v. Pura Ferrer-Calleja, G.R. No. 80557,
Feb. 1988). The failure of complainant to serve a copy of his Reply-Position Paper is
therefore, not fatal, it having been established that Commart and Jesus T. Maglutac
were afforded a reasonable opportunity to present their sides. Moreover, the
existence of the letters written by individual respondent Jesus T. Maglutac
encouraging the formation of MM International was never denied by him before the
NLRC nor before this Court.
While an employer has its own interests to protect, and pursuant thereto, it may
terminate a managerial employee for a just cause, such prerogative to dismiss or
lay-off an employee must be exercised without abuse of discretion. Its
implementation should be tempered with compassion and understanding. The
employer should bear in mind that in the execution of said prerogative, what is at
stake is not only the employees position but his livelihood. The fact that one is a
managerial employee does not by itself exclude him from the protection of the
constitutional guarantee of security of tenure (Santo v. NLRC, G.R. 76991, Oct. 28,
1988).
One final point. It cannot now be expected that the harmonious and pleasant
working relationship between the parties in this case prior to the bringing of the
derivative suit with the Securities and Exchange Commission and the filing of
complaint for illegal dismissal with the labor Arbiter, can be revived. The relationship
had been so strained ' that to order the reinstatement of the complainant would not
be wise. Where the relationship of employer to employee is so strained and ruptured
as to preclude a harmonious working relationship should reinstatement of the
employee be decreed, the latter should be afforded the right to separation pay
where the employer does not have to endure the continued services of the
employee in whom it has lost confidence (Esmalin v. NLRC, G.R. 67880, 15
September 1989, Bautista v. Enciong, G.R. No. L-52824, 16 March 1988, Asiaworld
Publishing House Inc. v. Hon. Ople, et al., G.R. No. 56398, July 23, 1987).
ACCORDINGLY, a decision is hereby rendered as follows:
1.
In G.R. No. 78345, the petition is GRANTED. The decision of the Labor
Arbiter is REINSTATED but the award of damages is reduced to P 40,000.00 as moral
damages and P 10,000.00 as exemplary damages. In lieu of reinstatement, private
respondents are ordered to pay complainant separation pay of one month salary for
every year of service in addition to his backwages equivalent to three years.
2.

In G.R. No. 78637, the petition is DISMISSED.

SO ORDERED.

G.R. No. 73053 September 15, 1989

DR. CARMELITA U. CRUZ, petitioner,


vs.
HON. GUILLERMO C. MEDINA, HON. GABRIEL
ROOSEVELT COLLEGES, INC., respondents.

M.

GATCHALIAN

and

... the issue concerning the amount of remuneration or honorarium to be added to


what you are presently receiving in view of the institution of the Agro-Forestry
Program in the Institute of Education was discussed by the board yesterday. The
final decision is given below:
1)
You will be given monthly honorarium equivalent to the amount you are
now receiving for teaching 6 loads.

FERNAN, C.J.:
Petitioner, by way of a special civil action for certiorari, seeks to annul and set aside
the resolution of the National Labor Relations Commission (NLRC) affirming the
decision of the Labor Arbiter, dismissing petitioner's complaint for illegal dismissal
from employment and for damages.
Petitioner Dr. Carmelita U. Cruz is a 1968 mathematics graduate of the University of
the Philippines. She earned a doctoral degree in Mathematics Education from Centro
Escolar University in 1977. She wrote several books in mathematics and statistics
and likewise attended numerous seminars, workshops and conferences, either as a
delegate, resource person or consultant. She rose from the ranks, starting out as a
high school teacher in 1958 to college instructor and eventually Dean, until her
services were terminated in 1984 by her employer and herein private respondent,
Roosevelt Colleges, Inc.
The whole controversy started when in October 1983, Agro-Industrial Management
and Consultancy, Inc. (AIMCON) submitted a proposal to Roosevelt Colleges, Inc., to
start a Distance Study Program leading to a Degree of Master of Arts in Education
Teaching Elementary Agriculture (MAETEA). Roosevelt Colleges, Inc., in accepting the
proposal, designated petitioner, being the Dean of the Institute of Education and
Graduate School, to head the committee to work for the approval of the program
with the Ministry of Education, Culture & Sports (MECS). The program which is a joint
venture between AIMCON and Roosevelt Colleges, will have its own operational
budget and a Board of Trustees composed of two representatives from Roosevelt
Colleges, the College President and one other person. In view of this, petitioner was
offered the post of Deputy Director as well as the second seat allotted to Roosevelt
Colleges in the Program's Board of Trustees.
The Ministry of Education however, issued the authority to operate the Program on
the condition that such shall only be an extension of the Graduate School of
Roosevelt Colleges. The masteral degree was changed to Master of Arts in
Education, Major in Elementary Agriculture (MEAMEA). Considering that she was
already the Dean of Graduate School, a post higher than the Program's director, the
offer to make petitioner as Deputy Director did not push through. During that time
petitioner was receiving P4,330.50, including P1,747.50 representing remuneration
for six (6) teaching loads. 1
On September 26, 1984, pursuant to Resolution No. 5 of the Board of Trustees, the
President of Roosevelt Colleges, Romeo P. de la Paz, sent petitioner a letter informing
her, as follows:

2)
This amount is chargeable to the Agro-Forestry Program and to be drawn
from the Cashier's Office in Sumulong.
3)
This shall take effect as soon as the monthly remuneration you are
receiving for teaching 6 loads ends.
4)
Effective the second semester of SY 84-85 you are not allowed to accept
teaching assignment be it in the undergraduate or graduate programs.
5)
It is expected that you will devote more time to effective and efficient
administration and supervision of the Institute of Education including the AgroForestry Program. ... 2
In response to the above letter, petitioner Dr. Cruz sent a letter dated October 1,
1984, stating that:
... with a few considerations to reckon with, I think it would be better that I, much to
my regret, be no longer involved in the Agro-Forestry Program. ... 3
In addition, she expressed her wish to retain her teaching loads citing professional
reasons as well as her desire to be in constant contact with her students.
On October 8, 1984, President de la Paz informed Dr. Cruz of the Resolution of the
Board, to wit: (a) that Dr. Cruz be required to appear in its next meeting to be held
on 30 October 1984; (b) that Dr. Cruz is expected to continue functioning as Dean of
Education including the new Agro-Forestry Program under the Institute of Education;
and (c) that Dr. Cruz be directed to send to the Board within twenty-four (24) hours
upon receipt of this communication her reply to these resolutions. 4 Dr. Cruz
manifested her willingness to appear before the Board. In the meanwhile, President
de la Paz informed the Board that he will go on leave until the issue in connection
with Dr. Cruz shall have been resolved.
The Board held several meetings to thresh out this problem. During these meetings,
Dr. Cruz reiterated her desire to retain her teaching loads in lieu of handling the
Agro-Forestry Program. The Board on the other hand, remained firm on its stand to
enforce Resolution No. 5. Several attempts were made to amicably settle the issue,
but to no avail. A deadlock occurred. On October 19, 1984, the Board issued Dr. Cruz
a letter terminating her services, the text to wit:

Even before the receipt of your letter of October 16, 1984, the Board was aware of
your intractable stand not to be involved in the Agro-forestry Program unless your
teaching loads are retained.
The Board has been too patient with you aside from the fact that Dr. Isidro was
unofficially designated to talk to you and clarify things to avoid misunderstanding.
You are aware that the course of Master of Arts in Education in Teaching Elementary
Agriculture is a part of the Graduate School of Education including the Institute of
Education wherein you are the Dean. Your refusal to accept involvement in the said
program, unavoidable as it is, is a defiant disregard of the Board's action, and leaves
us no other recourse except to terminate your relationship with the school effective
immediately. 5
On November 16, 1984, Dr. Cruz filed a complaint for illegal dismissal in the National
Labor Relations Commission (NLRC), National Capital Region. This case was assigned
to Labor Arbiter Apolinar L. Sevilla. The parties were required to submit their
respective position papers, supplemental pleadings and supporting documents, after
which the case was deemed submitted for decision. On Mach 19, 1985, Labor Arbiter
Sevilla rendered a decisions 6 finding petitioner guilty of insubordination and thus
dismissed petitioner's complaint for illegal dismissal for lack of merit. Dr. Cruz
appealed to the National Labor Relations Commission which on June 26, 1985
promulgated a Resolution 7 dismissing petitioner's appeal and affirming the Labor
Arbiter's decision in toto. Not satisfied, petitioner filed a Motion for Reconsiderations
8 on September 30, 1985 which was likewise denied on October 3, 1985. 9 Petitioner
then filed a special civil action for certiorari 10 before Us on December 13, 1985.
This was dismissed for lack of merit by the First Division in a Court resolution 11
dated July 7, 1986.
Still not satisfied, petitioner filed a Motion for Reconsideration 12 on August 8, 1986.
On October 27, 1986, the Second Division to which the case was raffled on August
29, 1986 granted the motion for reconsideration and gave due course to the
petition. 13 Said Second Division eventually became the present Third Division.
Petitioner raises the following issues:
1)
Whether or not the June 26, 1985 Resolution of the NL RC is replete with
factual findings unsupported by substantial and credible evidence; and, therefore,
not binding on and subject to review by the Honorable Supreme Court;
2)
Whether or not the 26 years of petitioner's continuous, efficient and
devoted service to the private respondent should be taken into account in deciding
the case;
3)
Whether or not the alleged loss of trust and confidence on the petitioner
was validly justified so as to warrant her dismissal vis-a-vis her recent promotion and
manifestation to handle the Program even without pay;
4)
Whether or not the petitioner could be dismissed from her position as
Professor III, an ordinary employee when the basis of her dismissal was loss of trust
and confidence on her as a Dean or managerial employee;

5)

Whether or not the petitioner was guilty of insubordination;

6)
Whether or not the petitioner is entitled to a writ of certiorari, annulling the
NLRC Resolutions, and
7)

Whether or not the petitioner is entitled to damages and for how much. 14

The primordial issue in this case is whether or not petitioner is guilty of


insubordination resulting in loss of confidence sufficient to warrant a dismissal.
Before attempting to resolve this issue, the employment status of petitioner must
first be looked into. Petitioner contends that she was divested of her Deanship of the
Graduate School and retained as Dean in the Institute of Education. This is of no
moment. The fact remains that she was a Dean, a position which is on the
managerial level. In the case of Metro Drug Corporation v. NLRC, 15 this Court held
that managerial personnel and other employees occupying positions of trust and
confidence are entitled to security of tenure, fair standards of employment and the
protection of labor laws. While it is true that the decision to dismiss or lay-off an
employee is management's prerogative, it must be made without abuse of
discretion, for what is at stake is not only the employee's position but also his means
of livelihood. 16
However, the rules on termination of employment, penalties for infractions and
resort to concerted actions in so far as managerial employees are concerned are not
necessarily the same as those for ordinary employees. 17 Employers, generally, are
allowed a wider latitude of discretion in terminating the employment of managerial
personnel or those of similar rank performing functions which by their nature require
the employer's trust and confidence, than in the case of ordinary rank and file
employees. 18
With these principles in mind, we find no grave abuse of discretion committed by
public respondents in ruling petitioner's dismissal legal. Considering the fact that
she was holding a managerial position, her refusal to abide by the lawful orders of
her employers would lead to the erosion of the trust and confidence reposed on her.
Loss of confidence is a valid ground for dismissing an employee and proof beyond
reasonable doubt is not required. All that is needed is for the employer to establish a
sufficient basis for the dismissal of an employee. The grant of teaching loads was
only a privilege since as Dean, her first and primary function was to administer the
particular college under her care and authority. Hence, the decision of Roosevelt
Colleges to take away her six (6) teaching loads so that she can handle the AgroForestry Program, with the same pay is found to be reasonable and lawful. In the
case of Philippine Japan Active Carbon Corporation and Tokuichi Satofuka v. NLRC &
Olga Quinanola, 19 We held that:
It is the employer's prerogative, based on its assessment and perception of its
employees' qualifications, aptitudes, and competence, to move them around in the
various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. An employee's right to security of tenure
does not give him such a vested right in his position as would deprive the company

of its prerogative to change his assignment or transfer him where he will be most
useful. When his transfer is not unreasonable, nor inconvenient, or prejudicial to
him, and it does not involve a demotion in rank or a diminution of his salaries,
benefits, and other privileges, the employee may not complain that it amounts to a
constructive dismissal.
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every dispute will be
automatically decided in favor of labor. Management also has rights, which, as such,
are entitled to respect and enforcement in the interest of simple fair play. Although
the Supreme Court has inclined more often than not toward the worker and has
upheld his cause in his conflicts with the employer, such favoritism has not blinded
the Court to the rule that justice is in every case for the deserving, to be dispensed
in the light of the established facts and the applicable law and doctrine. 20
But considering that petitioner Cruz had spent the best years of her professional life
in the service of the employer and that her work as a Dean and teacher was, as
manifested by the Faculty Evaluation Results By Students," 21 beyond reproach, the
ends of social and compassionate justice would be served if she will be given some
equitable relief.
The grant of equitable relief in the form of separation pay finds support in a number
of decisions promulgated by this Court. In the case of Eduardo V. Reyes v. Minister of
Labor and PACWOOD, Inc., 22 this Court adopted the ruling in Baby Bus, Inc. vs.
Minister of Labor, 23 to wit:
... it does not necessarily follow that if there is no illegal dismissal, then no award of
separation pay may be made.
and in the case of San Miguel Corporation v. Deputy Minister of Labor and
Employment 24 where this Court held that:
... the trust and confidence in the private respondent having been lost, the
respondent Regional Director acted correctly in allowing termination of employment
but with retirement or separation benefits.
Furthermore, in the case of Soco v. Mercantile Corporation of Davao, 25 We held
that:

[G.R. No. 102467. June 13, 1997]


EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES, President &
Director GEORGE L. GO, Vice-Chairman & Director RICARDO J. ROMULO, ViceChairman & Director JOHN C.B. GO, Director HERMINIO B. BANICO, Director
FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director RICARDO C. LEONG,
Director JULIUS T. LIMPE and Director PEDRO A. ORTIZ, petitioners, vs. HON.
NATIONAL LABOR RELATIONS COMMISSION, First Division, and RICARDO L. SADAC,
respondents.
DECISION
VITUG, J.:
In the special civil action of certiorari, the petitioners, in order to have a reasonable
chance of success, must be able to come up with proof that the tribunal, board or
officer against whom the petition is brought has, in the exercise of judicial or quasijudicial function, acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction. In the instant petition, the
Court is asked to rule against the National Labor Relations Commission (NLRC) in
holding private respondent Ricardo L. Sadac, Vice-President for the Legal
Department and General Counsel of petitioner Equitable Banking Corporation, to
have been a regular employee of the bank whose services could only be terminated
in accordance with the Labor Code. Petitioner bank submits that the services of
private respondent, its legal counsel, could be dispensed with at anytime pursuant
to the provision on the cessation of lawyer-client relationship under Rule 138 of the
Rules of Court.
The facts, essentially, do not appear to be in dispute.
Private respondent Sadac was appointed, effective 01 August 1981, Vice-President
for the Legal Department of petitioner bank by its then President, Manuel L. Morales,
with a monthly salary of P8,000.00, plus an allowance of P4,500.00 and a Christmas
bonus equivalent to a two-month salary.[1] On 08 December 1981, private
respondent was also designated as the banks General Counsel. Private respondent
had these functions:
"Duties & Responsibilities

Where an employee who had been dismissed for violation of company rules had
been employed for 18 years, he may be afforded some equitable relief due to the
past services rendered by him by granting him separation pay equivalent to one
month salary for his every year of service to the company.

- Provides legal advice to the Board of Directors and Management of the Bank.

WHEREFORE, the decision of the National Labor Relations Commission (NLRC) is


hereby affirmed with the modification that petitioner, Dr. Carmelita U. Cruz is hereby
adjudged entitled to separation pay equivalent to one (1) month latest salary for
every year of service. No pronouncement as to costs.

- Insures effective conduct of litigation, collection of past due accounts, and


investigation of irregularities and other legal matters affecting the interest of the
Bank.

SO ORDERED.

- Participates in action of major character, financing, amendments to the Articles of


Incorporation and By-laws of the Bank, changes in corporate structures acquisition

- Takes charge of all Bank cases arising from bank transactions and rendering
opinions on legal questions in connection therewith.

and disposal of important segments of enterprises or real estate, determination of


action to comply with statutory and other government requirements.
- Directs, plans, coordinates and maintains supervision and control over the staff of
the Legal Department.
- Provides for and insures proper documentation and notarization of all Bank
transactions.
- Assumes primary responsibility in the account of continuing research and studies
on questions of law affecting the Bank and its subsidiary corporations and the
formulation and development of legal opinions.

however, came out of their meeting. Convinced that reconciliation was out of the
question, Mr. Banico, on 08 August 1989, submitted a report to the Board of
Directors with these findings:
a. ABUSIVE CONDUCT
There is no doubt at all, in my mind that the charge of `abusive conduct against Atty.
Sadac, in his treatment in varying degrees, of the complaining lawyers, is true, as
this is supported by overwhelming evidence. Atty. Sadac himself, in effect, admitted
this when he proferred his apologies in the presence of the Chairman in the
`confrontation held in the latters office.
b. MISMANAGEMENT

- Recommends appointments, promotions, transfers and disciplinary actions


involving Legal Department personnel.

In my study and investigation, I found abundant evidence to support a finding of


mismanagement of the Legal Department by Atty. Sadac.

- Establishes and maintains effective discipline, work performances, high level of


morale and cooperation among the staff.

c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS

- Performs such other duties as may be assigned from time to time by the President
and the Board of Directors."[2]

The above specific charges are each proven and/or established by the same nature
of evidence.[6]

The turning point in the relationship among the parties surfaced, when, on 26 June
1989, nine lawyers[3] of the banks Legal Department, who were all under private
respondent, addressed a letter-petition to the Chairman of the Board of Directors,
accusing private respondent of abusive conduct, inefficiency, mismanagement,
ineffectiveness and indecisiveness.[4] The individual written complaints of each of
the nine lawyers were attached to the letter-petition. Private respondent was
furnished with a copy of the letter.

Two days later, or on 10 August 1989, Mr. Morales issued a memorandum to private
respondent which, among other things, pertinently stated:

Private respondent promptly responded and manifested an intention to file criminal,


civil and administrative charges against the nine lawyers. Petitioner Morales, by now
Chairman of the Board of Directors, called the contending lawyers to a conference in
his office in an attempt to resolve their differences. The meeting held on 29 June
1989, in the presence of Vice-President for Personnel and Human Relations Dean
Alejandro C. Reyes, apparently did not amount to much and only resulted, it would
seem, in a broad commitment of the parties to implement the existing procedures
and practices in the Legal Department.[5] The dialogue was marked, in fact, by
rancorous and very heated altercation between private respondent and his
subordinates. Mr. Morales considered the problem serious enough to merit the
Boards attention. In its meeting on 11 July 1989, the Board of Directors, apprised of
the situation, adopted a resolution directing one of its directors, petitioner Herminio
B. Banico, to look further into the matter and to determine a course of action for the
best interest of the bank.
Petitioner Banico met with the complaining nine lawyers on 17 July 1989. He was
warned that if private respondent were to be retained in his position, the lawyers
would resign en masse. The following day, Mr. Banico saw private respondent. The
latter denied the charges leveled against him. Although the two would appear to
have explored various alternatives and avenues to solve the crisis, nothing positive,

"x x x. The Board, however, feels that because during all its existence of almost forty
(40) years, the Bank never had in its employ any senior officer who had compelled it
to resort to the unfortunate, sorry and nasty spectacle of conducting a formal
hearing (which of course is distasteful to all parties concerned) of whatever charge
such as the one lodged against you just to terminate your services, consonant with
the due process requirements of the Constitution, the Labor Code, the Implementing
Regulations thereof and other pertinent laws, it has chosen the more compassionate
option of waiting for your voluntary resignation from your employ with the Bank.
In the meantime, since all the lawyers under you, by petitioning for a change in
leadership of the department despite the fact that all these lawyers have all been
hired and promoted to their positions upon your recommendation, have thus shown
lack of confidence in you, the Board feels it has no reason to continue reposing
confidence in you and therefore elected to exercise its prerogative as your client,
under the rules of client and lawyer relationship to direct Atty. William R. Veto, Legal
Counsel of the Bank these many years to appear in substitution of you in all the
cases in which you are presently appearing as counsel of record for the Bank. For
this purpose, the Bank as your client, therefore, instructs you to deliver the folders
of pleadings and documents of all cases you are now personally handling and submit
a list of all the cases where you appear as the counsel of record for the bank and the
corresponding titles thereof not later than the close of office hours on Tuesday,
August 15, 1989 so that the Legal Counsel of the Bank, Atty. William R. Veto, could
file his substitution of appearance in all said cases where you are counsel of record.
Atty. Veto has already been instructed and authorized by the Board to take over from
you the functions that you are now performing in the Legal Department."[7]

Reacting to the above memorandum, private respondent, on 14 August 1989


addressed a letter to Board Chairman Morales, furnishing the other members of the
Board, to the effect that the report of Mr. Banico contained libelous statements and
that the implementation of the chairmans memorandum would lead to an illegal
dismissal. Pointing out that he could not now in conscience resign in the face of Mr.
Banicos baseless and libelous findings, private respondent requested for a full
hearing by the Board of Directors so that he could clear his name.[8]
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman, answered
private respondent. Mr. Romulo stressed that private respondents services were not
terminated by the Board which, instead, was merely exercising its managerial
prerogative to control, conduct (its) business in the manner (it) deems fit and to
regulate the same. In reply to private respondents request for a formal hearing, Mr.
Romulo reiterated the Boards decision that it would be to the best interest of all
concerned if the distasteful spectacle" of a hearing would not be resorted to "in
order to adhere to (the bank's) long standing compassionate policy."[9] Mr. Romulo
also said:
"We would like to emphasize that our decision as a Board did not dismiss you from
the service of the Bank. All that the Board is saying to you is that it has lost its
confidence in you and therefore it is patiently awaiting your resignation of course
with your right of retirement pay in accordance with the policy adopted by the Bank
under these situations. Trust or confidence like love are feelings which emanate from
the heart and, as the song goes, `once a heart is torn apart it is never the same
again.' So also, confidence like a tooth once pulled can never be restored."[10]
In his memorandum of 28 August 1989 to the members of the Board, private
respondent again made a request for a full hearing and cautioned that, under
Section 31 of the Corporation Code, individual members of the Board could be held
accountable for voting or assenting to patently unlawful acts of the corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:
"7. The charge that you have been constructively dismissed is likewise without basis
because as we said before, you are free to remain in the employ of the bank if you
so wish, even if the bank were to incur the tremendous expense of continuing to pay
your high salary just so it can continue to adhere to its compassionate policy of
avoiding ruining the future of any of its officers by a possible dismissal for cause
which is certainly bound to leak to the public. It is believed, however, that there is
no law which can compel an employer to give any of his employees any particular
work at all."[11]
Mr. Romulo stated that the banks confidence on private respondent had been lost
most especially in the light of (his) threats and that the latter could bring the matter
up in the appropriate forum.[12]
Undaunted, private respondent, in his memorandum of 07 September 1989 to the
individual members of the Board of Directors, persisted in his request for a formal
investigation.[13] Having been unheeded, private respondent, on 09 November

1989, filed with the Manila arbitration branch of the NLRC, a complaint, docketed
NLRC Case No. 00-11-05252-89, against herein petitioners for illegal dismissal and
damages.[14]
After learning of the filing of the complaint, the Board of Directors, on 21 November
1989, adopted Resolution No. 5803 terminating the services of private respondent in
view of his belligerence" and the Board's "honest belief that the relationship"
between private respondent and petitioner bank was one of "client and lawyer."
Private respondent was removed from his office occupancy in the bank and ordered
disentitled, starting 10 August 1989, to any compensation and other benefits. The
Board instructed management to take the necessary steps to "defend itself and all
the members of the Board of Directors" from private respondent's complaint.[15]
Pursuing their stand that the association between the bank and private respondent
was one of a client-lawyer relationship, herein petitioners filed a motion to dismiss
the complaint with the NLRC on the ground of lack of jurisdiction.[16] Private
respondent, opposing the motion, insisted on the existence of an employeremployee relationship between them.[17] In their reply, petitioners added another
ground for seeking a dismissal of the complaint, i.e., that under the ruling in Besa
vs. PNB,[18] the rule governing the duration of private respondents term was
provided for by the Rules of Court and not by the Labor Code.[19]
Following an exchange of position papers and other pleadings, Labor Arbiter
Jovencio Ll. Mayor, Jr., on 02 October 1990, rendered a decision dismissing the
complaint for lack of merit.[20] The Labor Arbiter was convinced that the
relationship between petitioner bank and private respondent was one of lawyerclient based on the functions of the latter which only a lawyer with highly trained
legal mind, can effectively discharge.[21] He distinguished the instant controversy
from the situation in Hydro Resources Contractors Corporation vs. Pagalilauan[22] in
that herein private respondent, he said, only performed functions encompassed by
the practice of law while in Hydro Resources, the involved lawyer was a mere legal
assistant tasked with certain duties not all that related to the practice of law. The
Labor Arbiter concluded that the complaint stated no cause of action because a
lawyer-client relationship should instead be governed by Section 26, Rule 138, of the
Rules of Court. On whether or not there were valid grounds to terminate the services
of private respondent, the Labor Arbiter, noting the letter-petition of the nine
subordinate lawyers of private respondent, said:
"x x x. The truth and veracity of these complaints were respectively affirmed under
oath by each and every one of these nine subordinate lawyers in their individual
affidavits (Annexes `1-J' to `1-R', inclusive), (Ibid). From these individual statements,
it can be culled that complainant has been charged, among others, with committing
such acts as shouting and insulting lawyers even in the presence of clients, having
frequent outbursts of temper, being indecisive even on simple and fundamental
questions, of devoting time to private and personal matters such that he is always
out of the office, of being closed and narrow minded to the ideas of subordinates,
and other similar acts. These charges were never refuted by herein complainant and
instead narrated a general refutation x x x."[23]

The Labor Arbiter brushed aside private respondents claim that he was denied due
process, holding that private respondent was heard exhaustively on the matter of
the charge lodged against him and that, for valid practical reasons, petitioners were
not in a position to accede to the demand for a formal hearing.[24]
On appeal, the NLRC concluded differently. On 24 September 1991, the First Division
of the NLRC rendered a resolution[25] reversing the decision of the Labor Arbiter. It
held that private respondent was an employee of petitioner bank which never stated
that complainant was an outside counsel for he was never so[26] as against the
pronouncement of the Court in Hydro Resources that distinguished between an inhouse counsel and an outside counsel hired on a retainer basis. Certain other
circumstances that likewise did not escape NLRCs attention were that petitioner
George L. Go, the banks president, had enjoined private respondent to attend a
bank-sponsored symposium on Japanese investment on 08 September 1989 at the
Hotel Intercontinental; that in petitioners letter of 31 August 1989, private
respondent was referred to as an employee; that in another letter, dated 24
November 1989, petitioner admitted having terminated private respondents
employment and requested the return of the 1988 Mitsubishi Galant 1800 which he
had acquired through the banks car plan; and that, through a communication of 02
January 1990 of the Personnel and HRD Department, the bank announced that
private respondents employment had been terminated effective 21 November 1989.

damages of P50,000.00, and attorney's fees equivalent to Ten Percent (10%) of the
monetary award. Should reinstatement be no longer possible due to strained
relations, the respondents are ordered likewise jointly and severally to grant
separation pay at one (1) month per year of service in the total sum of P293,650.00
with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut-off date subject to adjustment) computed at P1,055,740.48, plus damages of
P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorney's
fees equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.
SO ORDERED."[28]
Petitioners filed a motion,[29]
reconsideration of the resolution.

opposed

by

private

respondent,[30]

for

The motion for reconsideration was still pending when private respondent, following
an exchange of yet additional pleadings, filed an urgent ex-parte motion for
immediate reinstatement grounded on Article 223 of the Labor Code.[31] On 07
November 1991, NLRC Executive Clerk Pascual Y. Reyes addressed a communication,
with the letterhead of the First Division of the NLRC, to Attys. Vicente Abad Santos
and William R. Veto, counsel for petitioners, which read:

Turning to the issue of whether or not the employment of private respondent was
terminated for cause, the NLRC held that because he had not been afforded a
hearing in accordance with law, there was no factual basis to support the allegation
of loss of confidence made by petitioners who, instead, had relied on the doctrine of
res ipsa loquitor.

"G R E E T I N G S :

The NLRC ruled that private respondent was denied the right to due process with the
banks failure to observe the twin requirements of notice and hearing. The 10th
August 1989 memorandum could not have been a substitute for notice because it
did not manifest petitioners intention to dismiss him from employment, and neither
the meeting between private respondent and the complaining lawyers nor those
held between private respondent and petitioner Banico could be considered the
investigations which private respondent had consistently sought.

To immediately reinstate complainant under the same terms and conditions


prevailing prior to his dismissal or separation or, at RESPONDENT(s) option to
reinstate him in the payroll, and to submit proof of compliance thereof, otherwise, a
Writ of Execution shall issue."[32]

For having been made to undergo unnecessary embarrassment by being stripped of


his functions and made to undergo the sad and painful experience of reporting to
office every day doing nothing, the NLRC, citing Sibal vs. Notre Dame of Greater
Manila,[27] awarded damages.

Consistent with the NLRC New Rules and Procedure on Appeal under Republic Act
6715, amending Article 223 of the Labor Code, RESPONDENT(s) is/are hereby
directed within ten (10) calendar days from receipt of this Order:

Petitioners filed a motion to quash the "untitled document" which was claimed to be
"highly irregular." Private respondent countered, on the strength of the ruling in Aris
(Phil.) Inc. vs. NLRC,[33] that even before its amendment by Section 12 of R.A. 6715,
Article 223 of the Labor Code already allowed execution of decisions of the NLRC
pending their appeal to the Secretary of Labor and Employment, and that, under
Section 2, Rule XII, of the New Rules of Procedure of the NLRC, Executive Clerk Reyes
could be said to be performing a function similar or equivalent to that discharged by
the Clerk of Court of the Court of Appeals.

The NLRC, thereby concluded:


"WHEREFORE, in view of all the foregoing considerations, let the Decision of October
2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED declaring the
dismissal of the complainant as illegal, and consequently ordering the respondents
jointly and severally to reinstate him to his former position as bank Vice-President
and General Counsel without loss of seniority rights and other privileges, and to pay
him full backwages and other benefits from the time his compensation was withheld
to his actual reinstatement, as well as moral damages of P100,000.00, exemplary

Petitioners, on their part filed an urgent motion for immediate resolution of their
motion for reconsideration,[34] on account of what was felt to be the "dubious
legality" of the directive for reinstatement.
Pending the above incidents, particularly the motion for reconsideration of NLRCs
resolution that has reversed the Labor Arbiters decision, petitioners have filed the
instant petition for certiorari, with prayer for the issuance of a writ of preliminary
injunction, before this Court. The petition questions the resolution of the NLRC

finding that an employer-employee relationship existed between petitioner bank and


private respondent invoking the rulings in Besa vs. PNB[35] and Asis vs. Minister of
Labor and Employment,[36] against that of Hydro Resources Contractors vs.
Pagalilauan;[37] that the facts on record do support valid grounds for terminating
the employment of private respondent; and that due process has been duly
observed. The petition likewise assails the NLRC for its monetary awards and in
omitting to resolve the allegation of forum-shopping committed by private
respondent.
This Court required petitioners to post a cash bond in the amount of P500,000.00 for
the issuance of a temporary restraining order.[38]
Prefatorily, the Court must state that the filing of a motion for reconsideration of a
decision of the NLRC is prerequisite to the elevation of the case to this Court on a
petition for certiorari. The rule is aimed at enabling the commission to look into and
correct its error or mistake, if any has been committed, without the precipitate
intervention of this Court.[39] The failure to allow that opportunity for whatever
reason is ordinarily a fatal procedural defect that could warrant the dismissal of the
petition.[40]
In this case, petitioners, instead of waiting for the resolution by the NLRC of their
motion for reconsideration, posthaste filed the instant petition. Its prematurity
notwithstanding, the instant petition for certiorari was given due course in order not
to unduly delay the final disposition of the case considering that the issues
involved[41] have heretofore been ventilated practically to the limit by the parties.
While the Court agrees with private respondent that execution pending appeal may
be ordered by the NLRC,[42] it is equally true, however, that where the dismissed
employee's reinstatement would lead to a strained relation between the employer
and the employee or to an atmosphere of antipathy and antagonism, the exception
to the twin remedies of reinstatement and payment of backwages can be invoked
and reinstatement, which might become anathema to industrial peace, could be
held back pending appeal.[43] Nevertheless, the Court is not prepared to preempt
the NLRC and conclude that the directive for reinstatement is of dubious character.
[44] It can be assumed that had petitioners waited for NLRCs resolution on the
motion for reconsideration, the question on the regularity in the issuance of the
directive for reinstatement could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual question[45]
well within the province of the NLRC. Considering, nevertheless, that its findings are
at odds with the Labor Arbiter, the Court sees it fit to dwell a bit into the issue.[46]
In determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal, and (4) the power to control the
employee's conduct, with the control test generally assuming primacy in the overall
consideration. The power of control refers to the existence of the power and not
necessarily to the actual exercise thereof. It is not essential, in other words, for the
employer to actually supervise the performance of duties of the employee; it is
enough that the former has the right to wield the power.[47]

The NLRC, in the instant case, based its finding that there existed an employeremployee relationship between petitioner bank and private respondent on these
factual settings:
"It was complainant's understanding with respondent Morales that he would be
appointed and assigned to the Legal Department as vice President with the same
salary, privileges and benefits granted by the respondent bank to its ranking senior
officers. He was not hired as lawyer on a retainership basis but as an officer of the
bank.
Thus, the complainant was given an appointment as Vice President, Legal
Department, effective August 1, 1981, with a monthly salary of P8,000.00, monthly
allowance of P4,500.00, and the usual two months Christmas bonus based on basic
salary likewise enjoyed by the other officers of the bank.
Then, as part of the ongoing organization of the Legal Department, the position of
General Counsel of the bank was created and extended to the complainant. In
addition to his duties as Vice President of the bank, the complainant's duties and
responsibilities were so defined as to prove that he was a bank officer working under
the supervision of the President and the Board of Directors of the respondent bank.
In his more than eight years employment with the respondent bank, the complainant
was given the usual payslips to evidence his monthly gross compensation. The
respondent bank, as employer, withheld taxes due to the Bureau of Internal Revenue
from the complainant's salary as employee. Moreover, the bank enrolled the
complainant as its employee under the Social Security System and Medicare
programs. The complainant contributed to the bank Employees' Provident Fund.
When the respondent bank changed its payroll accounting system in September
1988 by appointing SGV & Co. to handle it and Far East Bank & Trust Company to
pay the salaries and other benefits of Equitable Banking Corporation officers, the
complainant was included as one of corporate officers. Specifically, that there were
eleven Far East Bank and Trust Company credit memos starting October 13, 1988 up
to September 13, 1989 received by the complainant from FBTC crediting his salary
and Christmas bonus to his account with FBTC per instruction of the respondent
bank.
In as much as the complainant and the lawyers in the Legal Department were
receiving salaries and other benefits as other bank officers and employees, the
attorney's fees, documentary and notarial fees earned in the exercise of their
profession as in-house lawyers were not given to or even shared with them, instead
all were credited to the income of the bank. In 1987 and 1988, the complainant and
his subordinate lawyers were able to generate by way of attorney's fees,
documentary and notarial fees a total income of P973,028.00 for the bank('s)
benefit. In turn, the respondent bank shouldered the professional tax and Integrated
Bar of the Philippines dues of the complainant and his subordinate lawyers. Further
proofs that there existed employer-employee relationship between the respondent
bank and the complainant are the following, to wit:

(1) Complainant's monthly attendance, like those of other bank officers, was
recorded by the Chief Security Officer and reported to the Office of the President
with copy of the report furnished to the bank Personnel and HRD Department.
(2) Complainant was authorized by the President to sign for and in behalf of the
bank contracts covering legal services of lawyers to be retained by the respondent
bank for its branches on periodical retainership basis.
(3) Complainant participated as part of management in annual Management
Planning Conferences which started in 1986 on objective-setting and long-range
planning in response to the requirement of the rapidly changing environment.
(4) Respondent bank extended to complainant the benefit (of) a car plan like any
other qualified senior officer of the bank.

because of the marked degree of confidence reposed in him, but rather because of
his technical competence.
As far as the petitioner is concerned, however, it is our conclusion that he could not
plausibly contend that there was a removal in the constitutional sense as what did
take place was a termination of official relation. Accepting as he did the position of
chief legal adviser, the essence of which is the utmost degree of confidence
involving such `close intimacy which insures freedom of intercourse without
embarrassment or freedom from misgivings of betrayals whether of personal trust or
official matters, he could not have been unaware that his term could be cut short
any time without giving rise to any alleged infringement of the above constitutional
safeguard. There was no removal which according to such a mandate is only
allowable for cause. Hence the lack of persuasive character of petitioners plea.[50]
And in Asis, the Court held:

(5) Respondent bank since 1982 continuously reported and included the
complainant as one of its senior officers in its statements of financial condition
holding the position of Vice President. These bank statements have been distributed
and circularized to the public, including bank clients and government entities.
(6) Complainant, like other bank officers, prepared his biographical data for
submission to the Central Bank after his assumption of duties in 1981. Thereafter,
and pursuant to the regulations of the Central Bank, he has been required to update
annually his biographical data."[48]
It would virtually be foolhardy to so challenge the NLRC as having committed grave
abuse of discretion in coming up with its above findings. Just to the contrary, NLRC
appears to have been rather exhaustive in its examination of this particular question
(existence or absence of an employer-employee relationship between the parties).
Substantial evidence, which is the quantum of evidence required to establish a fact
in cases before administrative and quasi-judicial bodies, connotes merely that
amount of relevant evidence which a reasonable mind might accept to be adequate
in justifying a conclusion.[49]
The rulings in Besa and Asis, cited by petitioners, could not be all that controlling in
this instance. In both cases, the question of whether or not the parties had an
employer-employee relationship was not the focal point of controversy. In Besa, the
Court said:
Petitioners reliance on the constitutional provision against removal without cause is
misplaced. It is appropriate to invoke it when an officer or employee in the civil
service enjoying a fixed term is made to lose his position without warrant or
justification. It certainly finds no application when the duration of ones term depends
on the will of the appointing power. That is so where the position held is highly
confidential in character. Such is the case of the Chief Legal Counsel of respondent
Philippine National Bank. That is our answer to the specific question before us. Our
decision is limited to the validity of the action taken by respondent Bank. We do not
by any means intimate an opinion as to the legal consequences attaching to an
action similar in character taken by any other office or agency of the government
concerning a lawyer in its staff, especially one who was not employed precisely

The Deputy Minister found that the evidence satisfactorily established that the
Centrals suspension of the petitioners and others monthly ration of gasoline and
LPG, had been caused by unavoidable financial constraints; that such a suspension,
in line with its conservation and cost-saving policy, did not in truth effect any
significant diminution of said benefits, since the petitioner was nevertheless entitled
to reimbursement of the actual amount of gas consumed; that petitioner had
encouraged his co-employees to file complaints against the Central over the rations
issue, and this, as well as his institution of his own actions, had created an
atmosphere of enmity in the Central, and caused the loss by the Central of that trust
and confidence in him so essential in a lawyer-client relationship as that theretofore
existing between them; and that under the circumstances, petitioners discharge as
the Centrals Legal Counsel and Head of the Manpower & Services Department was
justified. The Deputy Ministers order of dismissal was however subsequently
modified, at the petitioners instance, by decreeing the payment to the latter of
separation pay equivalent to one months salary for every year of service rendered.
[51]
It was, in fact, Hydro Resources which directly confronted the issue; there, the Court
ruled:
"A lawyer, like any other professional, may very well be an employee of a private
corporation or even of the government. It is not unusual for a big corporation to hire
a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its
table of organization, and otherwise treat them like its other officers and employees.
At the same time, it may also contract with a law firm to act as outside counsel on a
retainer basis. The two classes of lawyers often work closely together but one group
is made up of employees while the other is not. A similar arrangement may exist as
to doctors, nurses, dentists, public relations practitioners, and other
professionals."[52]
The existence of an employer-employee relationship, between the bank and private
respondent brings the case within the coverage of the Labor Code. Under the Code,
an employee may be validly dismissed if these requisites are attendant: (1) the
dismissal is grounded on any of the causes stated in Article 282 of the Labor Code,

and (2) the employee has been notified in writing and given the opportunity to be
heard and to defend himself as so required by Section 2 and Section 5, Rule XIV,
Book V, of the Implementing Rules of the Labor Code.[53]

Please accept our assurances that the interest of the bank is primordial to us as we
pledge our total commitment and unflinching loyalty to this institution.
Thank you."[57]

Article 282(c) of the Labor Code provides that "willful breach by the employee of the
trust reposed in him by his employer" is a cause for the termination of employment
by an employer. Ordinary breach of trust will not suffice, it must be willful and
without justifiable excuse.[54] This ground must be founded on facts established by
the employer who must clearly and convincingly prove by substantial evidence[55]
the facts and incidents upon which loss of confidence in the employee may fairly be
made to rest; otherwise, the dismissal will be rendered illegal.[56]
Petitioners' stated loss of trust and confidence on private respondent was spawned
by the complaints leveled against him by the lawyers in his department. The lettercomplaint signed by the nine lawyers read:

Concededly, a wide latitude of discretion is given an employer in terminating the


employment of managerial employees on the ground of breach of trust and
confidence.[58] In order to constitute a just cause for dismissal, however, the act
complained of must be related to the performance of the duties of the employee
such as would show him to be thereby unfit to continue working for the employer.
[59] Here, the grievances of the lawyers, in main, refer to what are perceived to be
certain objectionable character traits of private respondent. Although petitioners
have charged private respondent with allegedly mishandling two cases in his long
service with the bank, it is quite apparent that private respondent would not have
been asked to resign had it not been for the letter-complaint of his associates in the
Legal Department.

June 26, 1989


Mr. Manuel L. Morales
Chairman, Board of Directors
Equitable Banking Corporation
Sir:
With utmost respect, we have taken the liberty of seeking your intercession on the
problems besetting the Legal Department.
For a long time, we have kept silent, containing within us the abusive conduct and
inefficiency of our department head, Atty. Ricardo L. Sadac, if only to preserve
cohesion among us. But we have reached the breaking point where we could endure
no more except to speak out. We realize the gravity of our action and its possible
repercussions but we only have ourselves to blame if we remained silent.
Atty. Sadac's insults to the lawyers which are totally uncalled for and made even in
the presence of clients are simply too much for a fellow lawyer. His outburst of
temper on inconsequential matters have now become commonplace in the
department. His mismanagement, ineffectiveness as a head and indecisiveness on
basic legal questions have adversely affected the smooth operation of the
department and the output of the lawyers. He berates rather than inspires, delays
rather than facilitates. Each lawyer's complaint are (sic) attached hereto attached
(sic) as Annexes `A', `A-1' to `A-8'.

Confident that no employer-employee existed between the bank and private


respondent, petitioners have put aside the procedural requirements for terminating
ones employment, i.e., (a) a notice apprising the employee of the particular acts or
omissions for which his dismissal is sought, and (b) another notice informing the
employee of the employer's decision to dismiss him.[60] Failure to comply with
these requirements taints the dismissal with illegality. This procedure is mandatory,
any judgment reached by management without that compliance can be considered
void and inexistent.[61] While it is true that the essence of due process is simply an
opportunity to be heard or, as applied in administrative proceedings, an opportunity
to explain one's side,[62] meetings in the nature of consultation and conferences
such as the case here, however, may not be valid substitutes for the proper
observance of notice and hearing.[63]
Moral damages are recoverable when the dismissal of an employee is attended by
bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner
contrary to good morals, good customs or public policy. Exemplary damages may be
awarded if the dismissal is effected in a wanton, oppressive or malevolent manner.
[64]

At present, we are disgruntled on how he runs the department and our morale is at
its ebb. While our only desire is to work under an auspicious environment and under
an effective head, we could not do so because of the General Counsel.

The Court has deliberated closely on this case and, after reviewing all the facts and
circumstances heretofore described, it is its considered view that petitioners have
not been motivated by malice or bad faith nor have they acted in wanton,
oppressive or malevolent manner such as to warrant a judgment against them for
moral and exemplary damages. Malice or bad faith, the lesser evil of the two, the
Court has once said, implies a conscious and intentional design to do a wrongful act
for a dishonest purpose or moral obliquity; it is different from the negative idea of
negligence in that malice or bad faith contemplates a state of mind affirmatively
operating with furtive design or ill will.[65]

We, therefore, respectfully pray for an immediate change in the department


leadership in order to pave the way for a more effective system, a new image for the
department, and restore professionalism and the dignity of the lawyers.

It, too, then follows that the individual petitioners may not be held solidarily liable
with the bank. In Santos vs. NLRC,[66] the Court has explained the rule quite
elaborately; thus:

"A corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. The
rule is that obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities. Nevertheless, being a mere fiction of
law, peculiar situations or valid grounds can exist to warrant, albeit done sparingly,
the disregard of its independent being and the lifting of the corporate veil. As a rule,
this situation might arise when a corporation is used to evade a just and due
obligation or to justify a wrong, to shield or perpetrate fraud, to carry out similar
other unjustifiable aims or intentions, or as a subterfuge to commit injustice and so
circumvent the law. In Tramat Mercantile, Inc., vs. Court of Appeals [238 SCRA 14,
19], the Court has collated the settled instances when, without necessarily piercing
the veil of corporate fiction, personal civil liability can also be said to lawfully attach
to a corporate director, trustee or officer; to wit: When "`(1) He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith
or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in
damages to the corporation, its stockholders or other persons;
"`(2) He consents to the issuance of watered stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his written objection
thereto;
"`(3) He agrees to hold himself personally and solidarily liable with the corporation;
or
"`(4) He is made, by a specific provision of law, to personally answer for his
corporate action.
The case of petitioner is way off these exceptional instances. It is not even shown
that petitioner has had a direct hand in the dismissal of private respondent enough
to attribute to him (petitioner) a patently unlawful act while acting for the
corporation. Neither can Article 289 of the Labor Code be applied since this law
specifically refers only to the imposition of penalties under the Code. x x x.
It is true, there were various cases when corporate officers were themselves held by
the Court to be personally accountable for the payment of wages and money claims
to its employees. In A.C. Ransom Labor Union-CCLU vs. NLRC [142 SCRA 269], for
instance, the Court ruled that under the Minimum Wage Law, the responsible officer
of an employer corporation could be held personally liable for nonpayment of
backwages for (i)f the policy of the law were otherwise, the corporation employer
(would) have devious ways for evading payment of back wages." In the absence of a
clear identification of the officer directly responsible for failure to pay the
backwages, the Court considered the President of the corporation as such officer.
The case was cited in Chua vs. NLRC [182 SCRA 353] in holding personally liable the
vice-president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed, for the latter's claim for unpaid
wages.
A review of the above exceptional cases would readily disclose the attendance of
facts and circumstances that could rightly sanction personal liability on the part of

the company officer. In A.C. Ransom, the corporate entity was a family corporation
and execution against it could not be implemented because of the disposition
posthaste of its leviable assets evidently in order to evade its just and due
obligations. The doctrine of piercing the veil of corporate fiction was thus clearly
appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the
company. There were incontrovertible facts which pointed to extreme personal
animosity that resulted, evidently in bad faith, in the easing out from the company
of one of the brothers by the other.
The basic rule is still that which can be deduced from the Courts pronouncement in
Sunio vs. National Labor Relations Commission [127 SCRA 390]; thus:
`We come now to the personal liability of petitioner, Sunio, who was made jointly
and severally responsible with petitioner company and CIPI for the payment of the
backwages of private respondents. This is reversible error. The Assistant Regional
Directors Decision failed to disclose the reason why he was made personally liable.
Respondents, however, alleged as grounds thereof, his the being owner of one-half
(1/2) interest of said corporation, and his alleged arbitrary dismissal of private
respondents.
`Petitioner Sunio was impleaded in the Complaint in his capacity as General
Manager of petitioner corporation. There appears to be no evidence on record that
he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and was a
corporate act.
`It is basic that a corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of any other
legal entity to which it may be related. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is not of
itself sufficient ground for disregarding the separate corporate personality. Petitioner
Sunio, therefore, should not have been made personally answerable for the payment
of private respondents back salaries.
The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC
[183 SCRA 644]; however, it should be clear from our recent pronouncement in Mam
Realty Development Corporation and Manuel Centeno vs. NLRC [244 SCRA 797] that
the Sunio doctrine still prevails.[67]
For having violated private respondents right to due process private respondent
shall, considering the attendant circumstances particularly his repeated, but
unheeded, request for a hearing, be entitled to an amount of P5,000.00.
The allegation that private respondent was guilty of forum-shopping deserves scant
consideration. Suffice it said that, for forum-shopping to exist, both actions should
involve a common transaction with essentially the same facts and circumstances
and raise identical causes of action, subject matter and issues.[68] Certainly, the
filing by private respondent of a criminal action for libel during the pendency of this
illegal dismissal case could not constitute forum-shopping.

The controversy spawning this case has generated not too little personal
animosities.[69] Reinstatement, which is the consequence of illegal dismissal, has
markedly been rendered undesirable. Private respondent shall, instead, be entitled
to backwages from the time of his dismissal until reaching sixty (60) years of age
(1995)[70] and, thereupon, to retirement benefits in accordance with Article 287 of
the Labor Code and Section 14,[71] Rule 1, Book VI, of the Implementing Rules of
the Labor Code.[72]
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the
following MODIFICATIONS: That private respondent shall be entitled to backwages
from termination of employment until turning sixty (60) years of age (in 1995) and,
thereupon, to retirement benefits in accordance with law; that private respondent
shall be paid an additional amount of P5,000.00; that the award of moral and
exemplary damages are deleted; and that the liability herein pronounced shall be
due from petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.
SO ORDERED.
G.R. No. L-62909 April 18, 1989
HYDRO RESOURCES CONTRACTORS CORPORATION, petitioner,
vs.
LABOR ARBITER ADRIAN N. PAGALILAUAN and the NATIONAL LABOR RELATIONS
COMMISSION, public respondents, and ROGELIO A. ABAN, private respondent,
G.E. Aragones & Associates for petitioner.
The Solicitor General for public respondents.
Cirilo A. Bravo for private respondent.

GUTIERREZ, JR., J.:


This is a petition to review on certiorari the resolution of the National Labor Relations
Commission (NLRC) which affirmed the labor arbiter's decision ordering herein
petitioner, Hydro Resources Contractors Corporation to reinstate Rogelio A. Abanto
his former position without loss of seniority rights, to pay him 12 months backwages
in the amount of P18,000.00 and to pay attorney's fees in the amount of P1,800.00.
On October 24, 1978, petitioner corporation hired the private respondent Aban as its
"Legal Assistant." He received a basic monthly salary of Pl,500.00 plus an initial
living allowance of P50.00 which gradually increased to P320.00.

On September 4, 1980, Aban received a letter from the corporation informing him
that he would be considered terminated effective October 4, 1980 because of his
alleged failure to perform his duties well.
On October 6, 1980, Aban filed a complaint against the petitioner for illegal
dismissal.
The labor arbiter ruled that Aban was illegally dismissed.
This ruling was affirmed by the NLRC on appeal.
Hence, this present petition.
The only issue raised by the petitioner is whether or not there was an employeremployee relationship between the petitioner corporation and Aban. The petitioner
questions the jurisdiction of the public respondents considering the alleged absence
of an employer-employee relationship. The petitioner contends that its relationship
with Aban is that of a client with his lawyer. It is its position that "(a) lawyer as long
as he is acting as such, as long as he is performing acts constituting practice of law,
can never be considered an employee. His relationship with those to whom he
renders services, as such lawyer, can never be governed by the labor laws. For a
lawyer to so argue is not only demeaning to himself (sic), but also his profession and
to his brothers in the profession." Thus, the petitioner argues that the labor arbiter
and NLRC have no jurisdiction over the instant case.
The contention is without merit.
A lawyer, like any other professional, may very well be an employee of a private
corporation or even of the government. It is not unusual for a big corporation to hire
a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its
table of organization, and otherwise treat them like its other officers and employees.
At the same time, it may also contract with a law firm to act as outside counsel on a
retainer basis. The two classes of lawyers often work closely together but one group
is made up of employees while the other is not. A similar arrangement may exist as
to doctors, nurses, dentists, public relations practitioners, and other professionals.
This Court is not without a guide in deciding whether or not an employer-employee
relation exists between the contending parties or whether or not the private
respondent was hired on a retainer basis.
As stated in the case of Tabas v. California Manufacturing Co., (G.R. No. 80680,
January 26, 1989):
This Court has consistently ruled that the determination of whether or not there is
an employer-employee relation depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence or
absence of a power to control the putative employee's conduct. Of the four, the
right-of-control test has been held to be the decisive factor.

Aban was employed by the petitioner to be its Legal Assistant as evidenced by his
appointment paper (Exhibit "A"). The petitioner paid him a basic salary plus living
allowance. Thereafter, Aban was dismissed on his alleged failure to perform his
duties well. (Exhibit "B").
Aban worked solely for the petitioner and dealt only with legal matters involving the
said corporation and its employees. He also assisted the Personnel Officer in
processing appointment papers of employees. This latter duty is not an act of a
lawyer in the exercise of his profession but rather a duty for the benefit of the
corporation.
The above-mentioned facts show that the petitioner paid Aban's wages, exercised its
power to hire and fire the respondent employee and more important, exercised
control over Aban by defining the duties and functions of his work.
Moreover, estoppel lies against the petitioner. It may no longer question the
jurisdiction of the labor arbiter and NLRC .
The petitioner presented documents (Exhibits "2" to "19") before the Labor Arbiter
to prove that Aban was a managerial employee. Now, it is disclaiming that Aban was
ever its employee. The proper procedure was for the petitioner to prove its
allegations that Aban drank heavily, violated company policies, spent company
funds and properties for personal ends, and otherwise led the employer to lose trust
and confidence in him. The real issue was due process, not the specious argument
raised in this petition.
The new theory presented before this Court is a last-ditch effort by the petitioner to
cover up for the unwarranted dismissal of its employee. This Court frowns upon such
delaying tactics.
The findings of fact of the Labor Arbiter being supported by substantial evidence are
binding on this Court. (See Industrial limber Corp. v. National Labor Relations
Commission, G.R. No. 83616, January 20, 1989).
Considering that the private respondent was illegally dismissed from his
employment in 1980, he is entitled to reinstatement to his former or similar position
without loss of seniority rights, if it is still feasible, to backwages without
qualification or deduction for three years, (D.M. Consunji, Inc. v. Pucan 159 SCRA
107 (1988); Flores v. Nuestro, G.R. No. 66890, April 15, 1988), and to reasonable
attorney's fees in the amount of P5,000.00. Should reinstatement prove no longer
feasible, the petitioner will pay him separation pay in lieu of reinstatement. (City
Trust Finance Corp. v. NLRC, 157 SCRA 87; Santos v. NLRC, 154 SCRA 166; Metro
Drug v. NLRC, et al., 143 SCRA 132; Luzon Brokerage v. Luzon Labor Union, 7 SCRA
116). The amount of such separation pay as may be provided by law or the
collective bargaining agreement is to be computed based on the period from 24
October 1978 (date of first employment) to 4 October 1983 (three years after date
of illegal dismissal). [Manila Midtown Commercial Corporation v. Nuwhrain 159 SCRA
212 (1988)].

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The petitioner is
ordered to reinstate the private respondent to his former or a similar position
without loss of seniority rights and to pay three (3) years backwages without
qualification or deduction and P5,000.00 in attorney's fees. Should reinstatement
not be feasible, the petitioner shall pay the private respondent termination benefits
in addition to the above stated three years backpay and P5,000.00 attorney's fees.
SO ORDERED.
[G.R. No. 157214. June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE
VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from the 12
September 2002 Decision[1] and the 13 February 2003 Resolution[2] of the Court of
Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation
engaged in the business of communication services and allied activities, while
respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of the controversy is Dr.
De Veras status vis a vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,[3] offered
his services to the petitioner, therein proposing his plan of works required of a
practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours
daily for consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization
including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no
additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing medical
forms, evaluating conditions of employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters referred which are medical
in nature.

The parties agreed and formalized respondents proposal in a document


denominated as RETAINERSHIP CONTRACT[4] which will be for a period of one year
subject to renewal, it being made clear therein that respondent will cover the
retainership the Company previously had with Dr. K. Eulau and that respondents
retainer fee will be at P4,000.00 a month. Said contract was renewed yearly.[5] The
retainership arrangement went on from 1981 to 1994 with changes in the retainers
fee. However, for the years 1995 and 1996, renewal of the contract was only made
verbally.
The turning point in the parties relationship surfaced in December 1996 when
Philcom, thru a letter[6] bearing on the subject boldly written as TERMINATION
RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the latters
retainers contract with the Company effective at the close of business hours of
December 31, 1996 because management has decided that it would be more
practical to provide medical services to its employees through accredited hospitals
near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the
National Labor Relations Commission (NLRC), alleging that that he had been actually
employed by Philcom as its company physician since 1981 and was dismissed
without due process. He averred that he was designated as a company physician on
retainer basis for reasons allegedly known only to Philcom. He likewise professed
that since he was not conversant with labor laws, he did not give much attention to
the designation as anyway he worked on a full-time basis and was paid a basic
monthly salary plus fringe benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
decision[7] dismissing De Veras complaint for lack of merit, on the rationale that as
a retained physician under a valid contract mutually agreed upon by the parties, De
Vera was an independent contractor and that he was not dismissed but rather his
contract with [PHILCOM] ended when said contract was not renewed after December
31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision[8] dated 23 October 2000,
reversed (the word used is modified) that of the Labor Arbiter, on a finding that De
Vera is Philcoms regular employee and accordingly directed the company to
reinstate him to his former position without loss of seniority rights and privileges and
with full backwages from the date of his dismissal until actual reinstatement. We
quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to
reinstate complainant to his former position without loss of seniority rights and
privileges with full backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.

P44,400.00 x 39.33 mos. P1,750,185.00


b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00
GRAND TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27
February 2001,[9] Philcom then went to the Court of Appeals on a petition for
certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC when it
reversed the findings of the labor arbiter and awarded thirteenth month pay and
traveling allowance to De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying
that of the NLRC by deleting the award of traveling allowance, and ordering payment
of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent,
dated 23 October 2000, is MODIFIED. The award of traveling allowance is deleted as
the same is hereby DELETED. Instead of reinstatement, private respondent shall be
paid separation pay computed at one (1) month salary for every year of service
computed from the time private respondent commenced his employment in 1981 up
to the actual payment of the backwages and separation pay. The awards of
backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate
court in its resolution of 13 February 2003.[11]
Hence, Philcoms present recourse on its main submission that THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND
RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING
AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this
Court in decisions rendered by the Court of Appeals. There are instances, however,
where the Court departs from this rule and reviews findings of fact so that
substantial justice may be served. The exceptional instances are where:

xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise
and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of
the case and its findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the
trial court; (8) said findings of facts are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the petition as well as in
the petitioners main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record.[12]
As we see it, the parties respective submissions revolve on the primordial issue of
whether an employer-employee relationship exists between petitioner and
respondent, the existence of which is, in itself, a question of fact[13] well within the
province of the NLRC. Nonetheless, given the reality that the NLRCs findings are at
odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez
vs. National Labor Relations Commission,[14] is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,[15] the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold test, to wit:
[1] the selection and engagement of the employee; [2] the payment of wages; [3]
the power of dismissal; and [4] the power to control the employees conduct, or the
so-called control test, considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent
himself who sets the parameters of what his duties would be in offering his services
to petitioner. This is borne by no less than his 15 May 1981 letter[16] which, in full,
reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your
corporation if you deemed it necessary. I have the necessary qualifications, training
and experience required by such position and I am confident that I can serve the
best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a
practitioner in industrial medicine which includes the following:
1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours
daily for consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization
including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no
additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing medical
forms, evaluating conditions of employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters referred which are medical
in nature.
On the subject of compensation for the services that I propose to render to the
corporation, you may state an offer based on your belief that I can very well qualify
for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter
and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D.
Significantly, the foregoing letter was substantially the basis of the labor arbiters
finding that there existed no employer-employee relationship between petitioner
and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by
the complainant himself in a signed letter to the respondent dated April 21, 1982
attached as Annex G to the respondents Reply and Rejoinder. Quoting the pertinent
portion of said letter:
To carry out your memo effectively and to provide a systematic and workable time
schedule which will serve the best interests of both the present and absent
employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during
which period I can devote ample time to both groups depending upon the urgency of
the situation. I shall readjust my private schedule to be available for the herein
proposed extended hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall render to
the employees, it is dependent on your evaluation of the merit of my proposal and
your confidence on my ability to carry out efficiently said proposal.
The tenor of this letter indicates that the complainant was proposing to extend his
time with the respondent and seeking additional compensation for said extension.

This shows that the respondent PHILCOM did not have control over the schedule of
the complainant as it [is] the complainant who is proposing his own schedule and
asking to be paid for the same. This is proof that the complainant understood that
his relationship with the respondent PHILCOM was a retained physician and not as
an employee. If he were an employee he could not negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person.
Yet, the complainant, in his position paper, is claiming that he is not conversant with
the law and did not give much attention to his job title- on a retainer basis. But the
same complainant admits in his affidavit that his service for the respondent was
covered by a retainership contract [which] was renewed every year from 1982 to
1994. Upon reading the contract dated September 6, 1982, signed by the
complainant himself (Annex C of Respondents Position Paper), it clearly states that is
a retainership contract. The retainer fee is indicated thereon and the duration of the
contract for one year is also clearly indicated in paragraph 5 of the Retainership
Contract. The complainant cannot claim that he was unaware that the contract was
good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate
person and educated person, the complainant cannot claim that he does not know
what contract he signed and that it was renewed on a year to year basis.[17]
The labor arbiter added the indicia, not disputed by respondent, that from the time
he started to work with petitioner, he never was included in its payroll; was never
deducted any contribution for remittance to the Social Security System (SSS); and
was in fact subjected by petitioner to the ten (10%) percent withholding tax for his
professional fee, in accordance with the National Internal Revenue Code, matters
which are simply inconsistent with an employer-employee relationship. In the precise
words of the labor arbiter:
xxx xxx xxx After more than ten years of services to PHILCOM, the complainant
would have noticed that no SSS deductions were made on his remuneration or that
the respondent was deducting the 10% tax for his fees and he surely would have
complained about them if he had considered himself an employee of PHILCOM. But
he never raised those issues. An ordinary employee would consider the SSS
payments important and thus make sure they would be paid. The complainant never
bothered to ask the respondent to remit his SSS contributions. This clearly shows
that the complainant never considered himself an employee of PHILCOM and thus,
respondent need not remit anything to the SSS in favor of the complainant.[18]
Clearly, the elements of an employer-employee relationship are wanting in this case.
We may add that the records are replete with evidence showing that respondent had
to bill petitioner for his monthly professional fees.[19] It simply runs against the
grain of common experience to imagine that an ordinary employee has yet to bill his
employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually
vested on both. Either may terminate the arrangement at will, with or without cause.
[20]

Finally, remarkably absent from the parties arrangement is the element of control,
whereby the employer has reserved the right to control the employee not only as to
the result of the work done but also as to the means and methods by which the
same is to be accomplished.[21]
Here, petitioner had no control over the means and methods by which respondent
went about performing his work at the company premises. He could even embark in
the private practice of his profession, not to mention the fact that respondents work
hours and the additional compensation therefor were negotiated upon by the
parties.[22] In fine, the parties themselves practically agreed on every terms and
conditions of respondents engagement, which thereby negates the element of
control in their relationship. For sure, respondent has never cited even a single
instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the
Court of Appeals ruled that respondent is petitioners regular employee at the time of
his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents written retainer contract
was renewed annually from 1981 to 1994 and the alleged renewal for 1995 and
1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The provisions of written agreement to the contrary notwithstanding and regardless
of the oral agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one (1) year of
service, whether such is continuous or broken, shall be considered a regular with
respect to the activity in which he is employed and his employment shall continue
while such activity exists.
Parenthetically, the position of company physician, in the case of petitioner, is
usually necessary and desirable because the need for medical attention of
employees cannot be foreseen, hence, it is necessary to have a physician at hand. In
fact, the importance and desirability of a physician in a company premises is
recognized by Art. 157 of the Labor Code, which requires the presence of a physician
depending on the number of employees and in the case at bench, in petitioners
case, as found by public respondent, petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the
provisions of a written agreement to the contrary notwithstanding or the existence
of a mere oral agreement, if the employee is engaged in the usual business or trade
of the employer, more so, that he rendered service for at least one year, such
employee shall be considered as a regular employee. Private respondent herein has
been with petitioner since 1981 and his employment was not for a specific project or
undertaking, the period of which was pre-determined and neither the work or
service of private respondent seasonal. (Emphasis by the CA itself).

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


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

We disagree to the foregoing ratiocination.

Had only respondent read carefully the very statutory provision invoked by him, he
would have noticed that in non-hazardous workplaces, the employer may engage
the services of a physician on retained basis. As correctly observed by the petitioner,
while it is true that the provision requires employers to engage the services of
medical practitioners in certain establishments depending on the number of their
employees, nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees,[24] adding that the law, as written, only
requires the employer to retain, not employ, a part-time physician who needed to
stay in the premises of the non-hazardous workplace for two (2) hours.[25]

The appellate courts premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not
determinative in this case. For, we take it that any agreement may provide that one
party shall render services for and in behalf of another, no matter how necessary for
the latters business, even without being hired as an employee. This set-up is
precisely true in the case of an independent contractorship as well as in an agency
agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is
not the yardstick for determining the existence of an employment relationship. As it
is, the provision merely distinguishes between two (2) kinds of employees, i.e.,
regular and casual. It does not apply where, as here, the very existence of an
employment relationship is in dispute.[23]
Buttressing his contention that he is a regular employee of petitioner, respondent
invokes Article 157 of the Labor Code, and argues that he satisfies all the
requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall be the duty of every
employer to furnish his employees in any locality with free medical and dental
attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees
exceeds fifty (50) but not more than two hundred (200) except when the employer
does not maintain hazardous workplaces, in which case the services of a graduate
first-aider shall be provided for the protection of the workers, where no registered
nurse is available. The Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of employees does not exceed
fifty (50) and shall determine by appropriate order hazardous workplaces for
purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist,
and an emergency clinic, when the number of employees exceeds two hundred
(200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered nurse as well
as a dental clinic, and an infirmary or emergency hospital with one bed capacity for
every one hundred (100) employees when the number of employees exceeds three
hundred (300).

Respondent takes no issue on the fact that petitioners business of


telecommunications is not hazardous in nature. As such, what applies here is the
last paragraph of Article 157 which, to stress, provides that the employer may
engage the services of a physician and dentist on retained basis, subject to such
regulations as the Secretary of Labor may prescribe. The successive retainership
agreements of the parties definitely hue to the very statutory provision relied upon
by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a
statute that is free from doubt. Where the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice but to see to it that
the mandate is obeyed.[26] As it is, Article 157 of the Labor Code clearly and
unequivocally allows employers in non-hazardous establishments to engage on
retained basis the service of a dentist or physician. Nowhere does the law provide
that the physician or dentist so engaged thereby becomes a regular employee. The
very phrase that they may be engaged on retained basis, revolts against the idea
that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services of
respondent on a retainer basis, as shown by their various retainership contracts, so
can petitioner put an end, with or without cause, to their retainership agreement as
therein provided.[27]
We note, however, that even as the contracts entered into by the parties invariably
provide for a 60-day notice requirement prior to termination, the same was not
complied with by petitioner when it terminated on 17 December 1996 the verballyrenewed retainership agreement, effective at the close of business hours of 31
December 1996.
Be that as it may, the record shows, and this is admitted by both parties,[28] that
execution of the NLRC decision had already been made at the NLRC despite the

pendency of the present recourse. For sure, accounts of petitioner had already been
garnished and released to respondent despite the previous Status Quo Order[29]
issued by this Court. To all intents and purposes, therefore, the 60-day notice
requirement has become moot and academic if not waived by the respondent
himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of
Appeals REVERSED and SET ASIDE. The 21 December 1998 decision of the labor
arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
ATOK BIG WEDGE COMPANY, INC.,
Petitioner,

versus -

JESUS P. GISON,
Respondent.
G.R. No. 169510
Present:
CARPIO,* J.,
VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.
Promulgated:
August 8, 2011

This is a petition for review on certiorari seeking to reverse and set aside the
Decision[1] dated May 31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No.
87846, and the Resolution[2] dated August 23, 2005 denying petitioners motion for
reconsideration.
The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time


consultant on retainer basis by petitioner Atok Big Wedge Company, Inc. through its
then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a
consultant on retainer basis, respondent assisted petitioner's retained legal counsel
with matters pertaining to the prosecution of cases against illegal surface occupants
within the area covered by the company's mineral claims. Respondent was likewise
tasked to perform liaison work with several government agencies, which he said was
his expertise.
Petitioner did not require respondent to report to its office on a regular basis, except
when occasionally requested by the management to discuss matters needing his
expertise as a consultant. As payment for his services, respondent received a
retainer fee of P3,000.00 a month,[3] which was delivered to him either at his
residence or in a local restaurant. The parties executed a retainer agreement, but
such agreement was misplaced and can no longer be found.
The said arrangement continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he requested that petitioner
cause his registration with the Social Security System (SSS), but petitioner did not
accede to his request. He later reiterated his request but it was ignored by
respondent considering that he was only a retainer/consultant. On February 4, 2003,
respondent filed a Complaint[4] with the SSS against petitioner for the latter's
refusal to cause his registration with the SSS.
On the same date, Mario D. Cera, in his capacity as resident manager of petitioner,
issued a Memorandum[5] advising respondent that within 30 days from receipt
thereof, petitioner is terminating his retainer contract with the company since his
services are no longer necessary.

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

DECISION

On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair
labor practice, underpayment of wages, non-payment of 13th month pay, vacation
pay, and sick leave pay with the National Labor Relations Commission (NLRC),
Regional Arbitration Branch (RAB), Cordillera Administrative Region, against
petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as NLRC
Case No. RAB-CAR-02-0098-03.

PERALTA, J.:
Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of


respondent Atok Big Wedge Co., Inc., or Atok for brevity, approached him and asked
him if he can help the companys problem involving the 700 million pesos crop
damage claims of the residents living at the minesite of Atok. He participated in a
series of dialogues conducted with the residents. Mr. Torres offered to pay him
P3,000.00 per month plus representation expenses. It was also agreed upon by him
and Torres that his participation in resolving the problem was temporary and there
will be no employer-employee relationship between him and Atok. It was also agreed
upon that his compensation, allowances and other expenses will be paid through
disbursement vouchers.
On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop
damage claimants barricaded the only passage to and from the minesite. In the
early morning of February 1, 1992, a dialogue was made by Atok and the crop
damage claimants. Unfortunately, Atoks representatives, including him, were
virtually held hostage by the irate claimants who demanded on the spot payment of
their claims. He was able to convince the claimants to release the company
representatives pending referral of the issue to higher management.
A case was filed in court for the lifting of the barricades and the court ordered the
lifting of the barricade. While Atok was prosecuting its case with the claimants,
another case erupted involving its partner, Benguet Corporation. After Atok parted
ways with Benguet Corporation, some properties acquired by the partnership and
some receivables by Benguet Corporation was the problem. He was again entangled
with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the
properties of the partnership, which is about 5 million pesos worth of equipment and
condonation of Atoks accountabilities with Benguet Corporation in the amount of
P900,000.00.
In the meantime, crop damage claimants lost interest in pursuing their claims
against Atok and Atok was relieved of the burden of paying 700 million pesos. In
between attending the problems of the crop damage issue, he was also assigned to
do liaison works with the SEC, Bureau of Mines, municipal government of Itogon,
Benguet, the Courts and other government offices.
After the crop damage claims and the controversy were resolved, he was
permanently assigned by Atok to take charge of some liaison matters and public
relations in Baguio and Benguet Province, and to report regularly to Atoks office in
Manila to attend meetings and so he had to stay in Manila at least one week a
month.
Because of his length of service, he invited the attention of the top officers of the
company that he is already entitled to the benefits due an employee under the law,
but management ignored his requests. However, he continued to avail of his
representation expenses and reimbursement of company-related expenses. He also

enjoyed the privilege of securing interest free salary loans payable in one year
through salary deduction.
In the succeeding years of his employment, he was designated as liaison officer,
public relation officer and legal assistant, and to assist in the ejection of illegal
occupants in the mining claims of Atok.
Since he was getting older, being already 56 years old, he reiterated his request to
the company to cause his registration with the SSS. His request was again ignored
and so he filed a complaint with the SSS. After filing his complaint with the SSS,
respondents terminated his services.[7]

On September 26, 2003, after the parties have submitted their respective pleadings,
Labor Arbiter Rolando D. Gambito rendered a Decision[8] ruling in favor of the
petitioner. Finding no employer-employee relationship between petitioner and
respondent, the Labor Arbiter dismissed the complaint for lack of merit.
Respondent then appealed the decision to the NLRC.
On July 30, 2004, the NLRC, Second Division, issued a Resolution[9] affirming the
decision of the Labor Arbiter. Respondent filed a Motion for Reconsideration, but it
was denied in the Resolution[10] dated September 30, 2004.
Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court
before the CA questioning the decision and resolution of the NLRC, which was later
docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the
following issues:
a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent
Resolutions of the Honorable Public Respondent affirming the same, are in harmony
with the law and the facts of the case;
b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of
Discretion in Dismissing the Complaint of Petitioner and whether or not the
Honorable Public Respondent Committed a Grave Abuse of Discretion when it
affirmed the said Decision.[11]
On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside
the decision of the NLRC, the decretal portion of which reads:
WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor
Relations Commission dismissing petitioner's complaint for illegal dismissal is
ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company
Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or
equivalent position without loss of seniority rights and to pay him full backwages,
inclusive of allowances and other benefits or their monetary equivalent computed

from the time these were withheld from him up to the time of his actual and
effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the
proper computation of backwages, allowances and other benefits due to petitioner.
Costs against private respondent Atok Big Wedge Company Incorporated.
SO ORDERED.[12]

In ruling in favor of the respondent, the CA opined, among other things, that both
the Labor Arbiter and the NLRC may have overlooked Article 280 of the Labor Code,
[13] or the provision which distinguishes between two kinds of employees, i.e.,
regular and casual employees. Applying the provision to the respondent's case, he is
deemed a regular employee of the petitioner after the lapse of one year from his
employment. Considering also that respondent had been performing services for the
petitioner for eleven years, respondent is entitled to the rights and privileges of a
regular employee.
The CA added that although there was an agreement between the parties that
respondent's employment would only be temporary, it clearly appears that
petitioner disregarded the same by repeatedly giving petitioner several tasks to
perform. Moreover, although respondent may have waived his right to attain a
regular status of employment when he agreed to perform these tasks on a
temporary employment status, still, it was the law that recognized and considered
him a regular employee after his first year of rendering service to petitioner. As
such, the waiver was ineffective.
Hence, the petition assigning the following errors:
I.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE
FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR
EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE COURT HAS
DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYEREMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.
III.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF
SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE
OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE


CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT
THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND
CONFIDENTIAL.[14]

Petitioner argues that since the petition filed by the respondent before the CA was a
petition for certiorari under Rule 65 of the Rules of Court, the CA should have limited
the issue on whether or not there was grave abuse of discretion on the part of the
NLRC in rendering the resolution affirming the decision of the Labor Arbiter.
Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in
determining whether there was an employer-employee relationship between the
petitioner and the respondent. Petitioner contends that where the existence of an
employer-employee relationship is in dispute, Article 280 of the Labor Code is
inapplicable. The said article only set the distinction between a casual employee
from a regular employee for purposes of determining the rights of an employee to
be entitled to certain benefits.
Petitioner insists that respondent is not a regular employee and not entitled to
reinstatement.
On his part, respondent maintains that he is an employee of the petitioner and that
the CA did not err in ruling in his favor.
The petition is meritorious.
At the outset, respondent's recourse to the CA was the proper remedy to question
the resolution of the NLRC. It bears stressing that there is no appeal from the
decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin
Funeral Home v. NLRC,[15] the special civil action of certiorari under Rule 65 of the
Rules of Civil Procedure, which is filed before the CA, is the proper vehicle for judicial
review of decisions of the NLRC. The petition should be initially filed before the Court
of Appeals in strict observance of the doctrine on hierarchy of courts as the
appropriate forum for the relief desired.[16] This Court not being a trier of facts, the
resolution of unclear or ambiguous factual findings should be left to the CA as it is
procedurally equipped for that purpose. From the decision of the Court of Appeals,
an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme
Court may be resorted to by the parties. Hence, respondent's resort to the CA was
appropriate under the circumstances.
Anent the primordial issue of whether or not an employer-employee relationship
exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee


relationship is ultimately a question of fact and that the findings thereon by the
Labor Arbiter and the NLRC shall be accorded not only respect but even finality when
supported by substantial evidence.[17] Being a question of fact, the determination
whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by
substantial evidence, such determination should have been accorded great weight
by the CA in resolving the issue.
To ascertain the existence of an employer-employee relationship jurisprudence has
invariably adhered to the four-fold test, to wit: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct, or the so-called "control test."[18] Of
these four, the last one is the most important.[19] The so-called control test is
commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end.[20]
Applying the aforementioned test, an employer-employee relationship is apparently
absent in the case at bar. Among other things, respondent was not required to report
everyday during regular office hours of petitioner. Respondent's monthly retainer
fees were paid to him either at his residence or a local restaurant. More importantly,
petitioner did not prescribe the manner in which respondent would accomplish any
of the tasks in which his expertise as a liaison officer was needed; respondent was
left alone and given the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but petitioner did not control
the manner and methods by which respondent performed these tasks. Verily, the
absence of the element of control on the part of the petitioner engenders a
conclusion that he is not an employee of the petitioner.
Moreover, the absence of the parties' retainership agreement notwithstanding,
respondent clearly admitted that petitioner hired him in a limited capacity only and
that there will be no employer-employee relationship between them. As averred in
respondent's Position Paper:[21]
2. For the participation of complainant regarding this particular problem of Atok, Mr.
Torres offered him a pay in the amount of Php3,000.00 per month plus
representation expenses. It was also agreed by Mr. Torres and the complainant that
his participation on this particular problem of Atok will be temporary since the
problem was then contemplated to be limited in nature, hence, there will be no
employer-employee relationship between him and Atok. Complainant agreed on this
arrangement. It was also agreed that complainant's compensations, allowances,

representation expenses and reimbursement of company- related expenses will be


processed and paid through disbursement vouchers;[22]
Respondent was well aware of the agreement that he was hired merely as a liaison
or consultant of the petitioner and he agreed to perform tasks for the petitioner on a
temporary employment status only. However, respondent anchors his claim that he
became a regular employee of the petitioner based on his contention that the
temporary aspect of his job and its limited nature could not have lasted for eleven
years unless some time during that period, he became a regular employee of the
petitioner by continually performing services for the company.
Contrary to the conclusion of the CA, respondent is not an employee, much more a
regular employee of petitioner. The appellate court's premise that regular
employees are those who perform activities which are desirable and necessary for
the business of the employer is not determinative in this case. In fact, any
agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter's business, even without being hired
as an employee.[23] Hence, respondent's length of service and petitioner's repeated
act of assigning respondent some tasks to be performed did not result to
respondent's entitlement to the rights and privileges of a regular employee.
Furthermore, despite the fact that petitioner made use of the services of respondent
for eleven years, he still cannot be considered as a regular employee of petitioner.
Article 280 of the Labor Code, in which the lower court used to buttress its findings
that respondent became a regular employee of the petitioner, is not applicable in
the case at bar. Indeed, the Court has ruled that said provision is not the yardstick
for determining the existence of an employment relationship because it merely
distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits,
to join or form a union, or to security of tenure; it does not apply where the
existence of an employment relationship is in dispute.[24] It is, therefore, erroneous
on the part of the Court of Appeals to rely on Article 280 in determining whether an
employer-employee relationship exists between respondent and the petitioner
Considering that there is no employer-employee relationship between the parties,
the termination of respondent's services by the petitioner after due notice did not
constitute illegal dismissal warranting his reinstatement and the payment of full
backwages, allowances and other benefits.
WHEREFORE, premises considered, the petition is GRANTED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET
ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the National
Labor Relations Commission are REINSTATED.
SO ORDERED.

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