TOYOTA MOTOR PHILIPPINES CORP.

WORKERS ASSOCIATION (TPCWA)

vs. NATIONAL LABOR RELATIONS COMMISSION, et al.

G.R. Nos 158798-99 19 October 2007

FACTS:

The Union is the sole and exclusive bargaining agent of all Toyota rank
and file employees. After the holding of a certification election, and
the issuance of an Order certifying the Union as the sole and exclusive
bargaining agent of all the Toyota rank and file employees, Toyota
challenged said Order via appeal to the DOLE Secretary. Thus, Toyota
refused to negotiate CBAs with the Union pending said appeal. The
Unions subsequent notice to strike was converted into a preventive
mediation case.

The 21 February 2001 hearing on the exclusion of the votes of alleged

supervisory employees from the votes cast during the certification
election was cancelled and reset to the next day The Union requested
that its members be absent on 22 February, but the same was denied.
Despite said denal, more than 200 employees staged mass actions on
22 and 23 February in front of the BLR and DOLE offices, to protest the
partisan and anti-union stance of Toyota. Due to the loss of the said
number of employees, Toyota experienced losses due to inability to
meet production goals. Soon thereafter, Toyota sent individual letters
to some 360 employees requiring them to explain within 24 hours why
they should not be dismissed for their obstinate defiance of the
companys directives. The letters specifically cited the Companys
Code of Conduct wherein inciting or participating in riots, disorders,
alleged strikes, or concerted actions detrimental to Toyotas interest
wherein the first offense would amount to dismissal.

In response to the letters, the Union circulated a Manifesto which

urged its members to participate in a strike/picket and to abandon
their posts. The Union members explained that their refusal to work
on their scheduled work time for two consecutive days was simply an
exercise of their constitutional right to peaceably assemble and to
petition the government for redress of grievances. On 16 March 2001,
Toyota terminated 227 employees for participation in concerted
actions in violation of its Code of Conduct and for misconduct under
Article 282 of the Labor Code. In reaction to the dismissal of its union
members and officers, the Union went on strike on 17 March, 28 March
ad 12 April. In the latter dates, the Union intensified its strike by
barricading the gates of Toyotas Bicutan and Sta. Rosa plants. The
strikers prevented workers who reported for work from entering the
plants.

ISSUE(S):

1. Whether the mass actions committed by the Union on different

occasions are illegal strikes; and
2. Whether separation pay should be awarded to the Union
members who participated in the illegal strikes.

HELD:

1. Yes. The alleged protest rallies in front of the offices of BLR

and DOLE Secretary and at the Toyota plants constituted illegal
strikes. Even if the Union claims that the said acts were not
strikes, there was a lack of permit from the City of Manila to hold
rallies, nor were there any filing of a notice in the two-day walk-
out. Shrouded by demonstrations, they were in reality temporary
stoppages of work perpetrated through the converted action of
the employees who deliberately failed to report for work on the
convenient excuse that they will hold a rally at the BLR and DOLE
offices in Intramuros, Manila. It is obvious that the real and
ultimate goal of the Union is to coerce Toyota to finally
acknowledge the Union as the sole bargaining agent of the
company. This is not a legal and valid exercise of the right of
assembly and to demand redress of grievance. A valid strike
should comply with the prerequisites under Article 263 of the
Labor Code. These requisites were not complied with by the
Union. Furthermore, the February 2001 strikes are in blatant
violation of Toyotas Code of Conduct to which the Union and its
members are bound to. To make matters worse, the barricade
done during the March and April strikes are in palpable violation
of Article 264(e) of the Labor Code, which proscribes acts of
 violence, coercion, or intimidation, or which obstruct the free
ingress to and egress from the company premises.
2. No. There can be no good faith in intentionally incurring
absences in a collective fashion from work just to attend DOLE
hearings. The Union members should know from common sense
that the company will incur substantial amounts of losses. In a
slew of cases, the Court refrained from awarding separation pay
or financial assistance to union officers and members who were
separated from service due to their participation in or
commission of illegal acts during strikes.

LORLENE A. GONZALES, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION, FIFTH DIVISION, CAGAYAN DE ORO CITY, and
ATENEO DE DAVAO UNIVERSITY, respondents.

DECISION
BELLOSILLO, J.:

By way of certiorari under Rule 65 of the Rules of Court petitioner

seeks the nullification of the Decision of public respondent National
Labor Relations Commission, Fifth Division, which reversed and set
aside that of Executive Labor Arbiter Conchita J. Martinez.
Lorlene Gonzales, petitioner, has been a schoolteacher in the
Elementary Department of private respondent Ateneo de Davao
University (hereafter ATENEO) since 1974 assigned to teach Reading,
Mathematics, Language and Pilipino in the Grade VI class, while
ATENEO is an educational institution, a corporation duly organized
under the laws of the Philippines, with principal address at Jacinto St.,
Davao City.
Sometime in 1991 Fr. Oscar Millar, S.J., Ateneo Grade School
Headmaster, sent a letter dated 11 April 1991 informing petitioner
Lorlene A. Gonzales of the complaints of two (2) parents for alleged
use of corporal punishment on her students. Petitioner claimed that
she was not informed of the identity of the parents who allegedly
complained of the corporal punishment she purportedly inflicted in
school-year 1990-1991. She likewise claimed that she was not
confronted about it by private respondent ATENEO in 1991 and that it
was only two (2) years after the complaints were made that she
discovered, through her students and their parents, that ATENEO was
soliciting complainants to lodge written complaints against her.
On 31 March 1993 she wrote a letter to Fr. Oscar Millar, S.J.,
demanding that she be formally informed of the complaint and be duly
investigated.
On 9 June 1993 petitioner was informed of the composition of an
investigative committee organized by Fr. Oscar Millar, S.J., to look into
the alleged use of corporal punishment by petitioner in disciplining her
students. It can be gleaned from the records that she was duly
furnished with the rules of procedure, informed of the schedule of the
hearings, and given copies of the affidavits executed by the students
who testified against her.
Petitioner refused to take part in the investigation unless the rules
of procedure laid down by the Committee be revised, contending that
the same were violative of her right to due process. Petitioner
specifically objected to the provision which stated: x x x 3) Counsel for
Ms. Lorlene Gonzales shall not directly participate in the investigation
but will merely advise Ms. Gonzales x x x (par. 3).[1]
But the Committee was steadfast in its resolve to adopt the
aforementioned rules. In its letter dated 9 August 1993, private
respondent informed petitioner that the rules of procedure to be
applied were substantially the same rules that were used in the
investigation of a former Ateneo employee and therefore we are under
legal advice not to change these rules." [2]Over the objection of
petitioner the Committee commenced with its investigation without
petitioners participation. Out of the twenty -two (22) invitations sent
out by ATENEO to petitioners students and their parents to shed light
on the matter of corporal punishment allegedly administered by her,
eleven (11) appeared and testified before the committee. The eleven
(11) witnesses also executed written statements denominated as
affidavits.
On 10 November 1993 private respondent served a Notice of
Termination on petitioner pursuant to the findings and
recommendation of the Committee. Thereafter, petitioner received a
letter from the president of ATENEO demanding her voluntary
resignation a week from receipt of the letter, otherwise, she would be
considered resigned from the service.
 On 29 November 1993 petitioner filed a complaint before the Labor
Arbiter for illegal dismissal. After trial, Executive Labor Arbiter
Conchita J. Martinez found her dismissal illegal for lack of factual
basis and ordered ATENEO to award petitioner separation pay, back
wages and 13th month pay. In her decision, the Executive Labor Arbiter
opined that although petitioner was afforded procedural due process
respondent institution failed to establish substantial evidence as to
the guilt of the complainant of the offense charged"[3] thus -

x x x the complainant was afforded procedural due process. There is

convincing and sufficient evidence x x x showing respondent complied
with the notice and hearing requirement x x x x.[4]

After considering the evidence, arguments and counter-arguments of

the parties, this office finds that the respondent failed to establish
substantial evidence as to the guilt of complainant of the offense
charged x x x x.[5]

Complainant has sufficiently established that she is a very good

teacher. She is equipped with the appropriate educational
qualifications, trainings, seminars and work experiences. Such fact
was affirmed by her present and former students, their parents,
colleagues and the former headmaster of the grade school x x x x[6]

As a matter of fact, six (6) out of the nine (9) students and their
parents/guardians have retracted and withdrawn their statements x x x
x[7]

Both parties appealed to the NLRC which on 25 March 1996

reversed the decision of the Executive Labor Arbiter by declaring
petitioners dismissal valid and legal but added that since ATENEO
offered petitioner her retirement benefits it was but proper that she be
extended said benefits. Petitioner now seeks the reversal of the
decision; hence, this petition.
The crux of the controversy is whether the NLRC committed grave
abuse of discretion in sustaining as valid and legal the dismissal of
petitioner by private respondent ATENEO.
The NLRC, in our view, appears to have skirted several important
issues raised by petitioner foremost of which is the absence of due
process. Upon being notified of her termination, she has the right to
demand compliance with the basic requirements of due
process. Compliance entails the twin requirements of procedural and
substantial due process.Ample opportunity must be afforded the
employee to defend herself either personally and/or with assistance of
a representative; to know the nature of her offense; and, to cross
examine and confront face to face the witnesses against her. Likewise,
due process requires that the decision must be based on established
facts and on a sound legal foundation.
It is precisely to demand compliance with these requirements that
petitioner at the very onset of the investigation demanded the revision
of the rules laid down by the Investigative Committee. The adamant
refusal of the Committee to accede to this demand resulted in her
failure to confront and cross-examine her accusers. This is not harping
at technicalities as wrongfully pointed out by the NLRC but a serious
violation of petitioner's statutory and constitutional right to due
process that ultimately vitiated the investigation.
Moreover, the failure of ATENEO to refute the contention of
petitioner that the joint affidavits executed by the students and
parents were "pre-prepared" raises serious doubts as to the probative
value of this evidence. As correctly pointed out by the Executive Labor
Arbiter, there is more reason to disregard it especially where the same
was challenged and has remained unexplained. Hearsay evidence, in
the strict sense, has no probative value whether objected to or not.
In the instant case, ATENEO failed to prove by substantial evidence
that petitioner had inflicted corporal punishment on her
students. In Ang Tibay v. CIR, the Court set the measure of evidence to
be presented in an administrative investigation when it said,
substantial evidence is more than mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion. The evidence of private respondent did not
measure up to this standard. It relied solely on the witnesses
affidavits with questionable veracity. Moreover, the affidavit of
recantation executed by some students and their parents all the more
weakened the case of private respondent. Failure in this regard
negates the very existence of the ground for dismissal.
On the other hand, petitioner adequately proved, by means of
affidavits, letters of petition and manifesto made by her students and
co-teachers, that she was a competent and dedicated teacher having
spent seventeen (17) years of her life in the service of the very
institution which is now seeking her dismissal.
In view of the foregoing, the conclusion of the NLRC is
unwarranted. Employment is not merely a contractual relationship; it
has assumed the nature of property right. It may spell the difference
whether or not a family will have food on their table, roof over their
heads and education for their children. It is for this reason that the
State has taken up measures to protect employees from unjustified
dismissals. It is also because of this that the right to security of tenure
is not only a statutory right but, more so, a constitutional right.
WHEREFORE, the assailed Decision of public respondent National
Labor Relations Commission dated 25 March 1996 is REVERSED and
SET ASIDE, and the decision of Executive Labor Arbiter Conchita J.
Martinez declaring the dismissal of complainant Lorlene A. Gonzales
illegal for lack of factual basis and ordering respondent Ateneo de
Davao University to pay complainant separation pay, back wages and
13th month pay in the total amount of TWO HUNDRED SIXTEEN
THOUSAND NINE HUNDRED THIRTY-EIGHT and 70/100 PESOS
(P216,938.70) x x x [f]urther, ordering respondent to pay 10% of the
total monetary award as attorney's fees to counsel for complainant x x
x [d]ismissing all other claims for lack of merit, is REINSTATED,
AFFIRMED and ADOPTED herein as the decision in the instant case.
SO ORDERED.
Mendoza, Quisumbing, and Buena JJ., concur.

CAPITOL MEDICAL CENTER, G.R. No. 155098

INC. and DR. THELMA
NAVARETTE-CLEMENTE, Present:
Petitioner
s, PANGANIBAN, Chairman,
SANDOVAL- GUTIERREZ,
CORONA,
CARPIO MORALES, and
- versus - GARCIA, JJ.

Promulgated:

DR. CESAR E. MERIS, September 16, 2005

 Responde
nt.

xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx

DECISION

CARPIO MORALES, J.:

Subject of the present appeal is the Court of Appeals

Decision[1] dated February 15, 2002 reversing the NLRC
Resolution[2] dated January 19, 1999 and Labor Arbiter
[3]
Decision dated April 28, 1998 which both held that the closure of the
Industrial Service Unit of the

Capitol Medical Center, Inc., resulting to the termination of the

services of herein respondent Dr. Cesar Meris as Chief thereof, was
valid.

On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol)

hired Dr. Cesar Meris (Dr. Meris),[4] one of its stockholders,[5] as in
charge of its Industrial Service Unit (ISU) at a monthly salary
of P10,270.00.

Until the closure of the ISU on April 30, 1992,[6] Dr. Meris performed
dual functions of providing medical services to Capitols more than 500
employees and health workers as well as to employees and workers of
companies having retainer contracts with it.[7]

On March 31, 1992, Dr. Meris received from Capitols president and
chairman of the board, Dr. Thelma Navarette-Clemente (Dr. Clemente),
a notice advising him of the managements decision to close or abolish
the ISU and the consequent termination of his services as Chief
thereof, effective April 30, 1992.[8] The notice reads as follows:

March 31, 1992

Dr. Cesar E. Meris

Chief, Industrial Service Unit
Capitol Medical Center

Dear Dr. Meris:

Greetings!

Please be formally advised that the hospital management

has decided to abolish CMCs Industrial Service Unit as
of April 30, 1992 in view of the almost extinct demand for
direct medical services by the private and semi-government
corporations in providing health care for their
employees. Such a decision was arrived at, after
considering the existing trend of industrial companies
allocating their health care requirements to Health
Maintenance Organizations (HMOs) or thru a tripartite
arrangement with medical insurance carriers and
designated hospitals.

As a consequence thereof, all positions in the unit will be

decommissioned at the same time industrial services [are]
deactivated. In that event, you shall be entitled to return to
your private practice as a consultant staff of the institution
and will become eligible to receive your retirement benefits
as a former hospital employee. Miss Jane Telan on the other
hand will be transferred back to Nursing Service for
reassignment at the CSR.

We wish to thank you for your long and faithful service to

the institution and hope that our partnership in health care
delivery to our people will continue throughout the future.
Best regards.
 Very truly yours,

(SGD.) DR. THELMA NAVARETTE-CLEMENTE[9] (Emphasis

and underscoring supplied)

Dr. Meris, doubting the reason behind the managements decision to

close the ISU and believing that the ISU was not in fact abolished as it
continued to operate and offer services to the client companies with
Dr. Clemente as its head and the notice of closure was a mere ploy for
his ouster in view of his refusal to retire despite Dr. Clementes
previous prodding for him to do so,[10] sought his reinstatement but it
was unheeded.

Dr. Meris thus filed on September 7, 1992 a complaint against Capitol

and Dr. Clemente for illegal dismissal and reinstatement with claims
for backwages, moral and exemplary damages, plus attorneys fees.[11]

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the
abolition of the ISU was a valid and lawful exercise of management
prerogatives and there was convincing evidence to show that ISU was
being operated at a loss.[12] The decretal text of the decision reads:

WHEREFORE, judgment is hereby rendered dismissing the

complaint. Respondents are however ordered to pay
complainant all sums due him under the hospital retirement
plan.

SO ORDERED.[13] (Emphasis supplied)

On appeal by Dr. Meris, the National Labor Relations Commission

(NLRC) modified the Labor Arbiters decision. It held that in the
exercise of Capitols management prerogatives, it had the right to close
the ISU even if it was not suffering business losses in light of Article
283 of the Labor Code and jurisprudence.[14]

And the NLRC set aside the Labor Arbiters directive for the payment of
retirement benefits to Dr. Meris because he did not retire. Instead, it
ordered the payment of separation pay as provided under Article 283
as he was discharged due to closure of ISU, to be charged against the
retirement fund.[15]

Undaunted, Dr. Meris elevated the case to the Court of Appeals

via petition for review[16] which, in the interest of substantial justice,
was treated as one for certiorari.[17]

Discrediting Capitols assertion that the ISU was operating at a loss as

the evidence showed a continuous trend of increase in its revenue for
three years immediately preceding Dr. Meriss dismissal on April 30,
1992,[18] and finding that the ISUs Analysis of Income and Expenses
which was prepared long after Dr. Meriss dismissal, hence, not yet
available, on or before April 1992, was tainted with irregular entries,
the appellate court held that Capitols evidence failed to meet the
standard of a sufficient and adequate proof of loss necessary to justify
the abolition of the ISU.[19]

The appellate court went on to hold that the ISU was not in fact
abolished, its operation and management having merely changed
hands from Dr. Meris to Dr. Clemente; and that there was a procedural
lapse in terminating the services of Dr. Meris, no written notice to the
Department of Labor and Employment (DOLE) of the ISU abolition
having been made, thereby violating the requirement embodied in
Article 283.[20]

The appellate court, concluding that Capitol failed to strictly comply

with both procedural and substantive due process, a condition sine
qua non for the validity of a case of termination, [21] held that Dr. Meris
was illegally dismissed. It accordingly reversed the NLRC Resolution
and disposed as follows:
 IN VIEW OF ALL THE FOREGOING, the assailed resolutions
of the NLRC are hereby set aside, and another one entered

1 declaring illegal the dismissal of petitioner as Chief of the

Industrial Service Unit of respondent Medical Center;

2 ordering respondents to pay petitioner

a) backwages from the date of his separation in April 1992

until this decision has attained finality;
b) separation pay in lieu of reinstatement computed at the
rate of one (1) month salary for every year of service with a
fraction of at least six (6) months being considered as one
year;

c) other benefits due him or their money equivalent;

d) moral damages in the sum of P50,000.00;

e) exemplary damages in the sum of P50,000.00; and

f) attorneys fees of 10% of the total monetary award

payable to petitioner.

SO ORDERED.[22]

Hence, the present petition for review assigning to the appellate court
the following errors:

. . . IN OVERTURNING THE FACTUAL FINDINGS AND

CONCLUSIONS OF BOTH THE NATIONAL LABOR RELATIONS
COMMISSION (NLRC) AND THE LABOR ARBITER.

II
 . . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH
THE LABOR ARBITER AND THE NATIONAL LABOR
RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT
(ISU) WAS NOT INCURRING LOSSES AND THAT IT WAS NOT
IN FACT ABOLISHED.

III

. . . IN NOT UPHOLDING PETITIONERS MANAGEMENT

PREROGATIVE TO ABOLISH THE INDUSTRIAL SERVICE
UNIT (ISU).

IV

. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT

BACKWAGES AS WELL AS DAMAGES AND ATTORNEYS FEES.
[23]

Capitol questions the appellate courts deciding of the petition of Dr.

Meris on the merits, instead of merely determining whether the
administrative bodies acted with grave abuse of discretion amounting
to lack or excess of jurisdiction.

The province of a special civil action for certiorari under Rule 65, no
doubt the appropriate mode of review by the Court of Appeals of the
NLRC decision,[24] is limited only to correct errors of jurisdiction or
grave abuse of discretion amounting to lack or excess of jurisdiction.
[25]
In light of the merits of Dr. Meris claim, however, the relaxation by
the appellate court of procedural technicality to give way to a
substantive determination of a case, as this Court has held in several
cases,[26] to subserve the interest of justice, is in order.

Capitol argues that the factual findings of the NLRC, particularly when
they coincide with those of the Labor Arbiter, as in the present case,
should be accorded respect, even finality.[27]
For factual findings of the NLRC which affirm those of the Labor
Arbiter to be accorded respect, if not finality, however, the same must
be sufficiently supported by evidence on record. [28] Where there is a
showing that such findings are devoid of support, or that the judgment
is based on a misapprehension of facts,[29] the lower tribunals factual
findings will not be upheld.

As will be reflected in the following discussions, this Court finds that

the Labor Arbiter and the NLRC overlooked some material facts
decisive of the instant controversy.

Capitol further argues that the appellate courts conclusion that the
ISU was not incurring losses is arbitrary as it was based solely on the
supposed increase in revenues of the unit from 1989-1991, without
taking into account the Analysis of Income and Expenses of ISU from
July 1, 1990 to July 1, 1991 which shows that the unit operated at a
loss;[30] and that the demand for the services of ISU became almost
extinct in view of the affiliation of industrial establishments with HMOs
such as Fortunecare, Maxicare, Health Maintenance, Inc. and
Philamcare and of tripartite arrangements with medical insurance
carriers and designated hospitals,[31] and the trend resulted in losses in
the operation of the ISU.

Besides, Capitol stresses, the health care needs of the hospital

employees had been taken over by other units without added expense
to it;[32] the appellate courts decision is at best an undue interference
with, and curtailment of, the exercise by an employer of its
management prerogatives;[33] at the time of the closure of the ISU, Dr.
Meris was already eligible for retirement under the Capitols retirement
plan; and the appellate court adverted to the alleged lack of notice to
the DOLE regarding Dr. Meriss dismissal but the latter never raised
such issue in his appeal to the NLRC or even in his petition for review
before the Court of Appeals, hence, the latter did not have authority to
pass on the matter.[34]
Work is a necessity that has economic significance deserving legal
protection. The social justice and protection to labor provisions in the
Constitution dictate so.

Employers are also accorded rights and privileges to assure their self-
determination and independence and reasonable return of capital. This
mass of privileges comprises the so-called management prerogatives.
Although they may be broad and unlimited in scope, the State has the
right to determine whether an employers privilege is exercised in a
manner that complies with the legal requirements and does not offend
the protected rights of labor. One of the rights accorded an employer is
the right to close an establishment or undertaking.

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

explicitly recognized under the Labor Code as one of the authorized
causes in terminating employment of workers, the only limitation being
that the closure must not be for the purpose of circumventing the
provisions on termination of employment embodied in the Labor Code.

ART. 283. Closure of establishment and reduction of

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

The phrase closures or cessation of operations of establishment or

undertaking includes a partial or total closure or cessation. [35]

x x x Ordinarily, the closing of a warehouse facility and the

termination of the services of employees there assigned is
a matter that is left to the determination of the employer in
the good faith exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the Labor
Code which permits closure or cessation of operation of an
establishment or undertaking not due to serious business
losses or financial reverses, which, in our reading
includes both the complete cessation of operations and the
cessation of only part of a companys business. (Emphasis
supplied)

And the phrase closures or cessation x x x not due to serious business

losses or financial reverses recognizes the right of the employer to
close or cease his business operations or undertaking even if he is not
suffering from serious business losses or financial reverses, as long as
he pays his employees their termination pay in the amount
corresponding to their length of service.[36]

It would indeed be stretching the intent and spirit of the law if a court
were to unjustly interfere in managements prerogative to close or
cease its business operations just because said business operation or
undertaking is not suffering from any loss. [37] As long as the companys
exercise of the same is in good faith to advance its interest and not for
the purpose of defeating or circumventing the rights of employees
under the law or a valid agreement, such exercise will be upheld.[38]

Clearly then, the right to close an establishment or undertaking may

be justified on grounds other than business losses but it cannot be an
unbridled prerogative to suit the whims of the employer.

The ultimate test of the validity of closure or cessation of

establishment or undertaking is that it must be bona fide in character.
[39]
And the burden of proving such falls upon the employer.[40]

In the case at bar, Capitol failed to sufficiently prove its good faith in
closing the ISU.

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the
abolition of the ISU was due to the almost extinct demand for
direct medical service by the private and semi-government
corporations in providing health care for their employees; and that
such extinct demand was brought about by the existing trend of
industrial companies allocating their health care requirements to
Health Maintenance Organizations (HMOs) or thru a tripartite
arrangement with medical insurance carriers and designated
hospitals.

The records of the case, however, fail to impress that there was indeed
extinct demand for the medical services rendered by the ISU. The ISUs
Annual Report for the fiscal years 1986 to 1991, submitted by Dr. Meris
to Dr. Clemente, and uncontroverted by Capitol, shows the following:

Fiscal Year No. of Industrial No of No. of Capitol

Patients Companies Employees
1986-1987 466 11 1445
1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 2320[41]

If there was extinct demand for the ISU medical services as what
Capitol and Dr. Clemente purport to convey, why the number of client
companies of the ISU increased from 11 to 18 from 1986 to 1991, as
well as the number of patients from both industrial corporations and
Capitol employees, they did not explain.

The Analysis of Income and Expenses adduced by Capitol showing that

the ISU incurred losses from July 1990 to February 1992, to wit:

July 1, 1990 to July 1, 1991 to

June 30, 1991 February 29, 1992

INCOME P16, 772.00 P35, 236.00

TOTAL EXPENSES P225, 583.70 P169,244.34

NET LOSS P(208,811.70) P(134,008.34),[42]

was prepared by its internal auditor Vicenta Fernandez, [43] a relative of

Dr. Clemente, and not by an independent external auditor, hence, not
beyond doubt. It is the financial statements audited by independent
external auditors which constitute the normal method of proof of the
profit and loss performance of a company.[44]

At all events, the claimed losses are contradicted by the accounting

records of Capitol itself which show that ISU had increasing revenue
from 1989 to 1991.

Year In-Patient Out-Patient Total Income

1989 P230,316.38 P 79,477.50 P309,793.88

1990 P278,438.10 P124,256.65 P402,694.75
1991 P305,126.35 P152,920.15 P458,046.50[45]
The foregoing disquisition notwithstanding, as reflected above, the
existence of business losses is not required to justify the closure or
cessation of establishment or undertaking as a ground to terminate
employment of employees. Even if the ISU were not incurring losses,
its abolition or closure could be justified on other grounds like that
proffered by Capitol extinct demand. Capitol failed, however, to present
sufficient and convincing evidence to support such claim of extinct
demand. In fact, the employees of Capitol submitted a
[46]
petition dated April 21, 1992 addressed to Dr. Clemente opposing the
abolition of the ISU.

The closure of ISU then surfaces to be contrary to the provisions of

the Labor Code on termination of employment.

The termination of the services of Dr. Meris not having been premised
on a just or authorized cause, he is entitled to either reinstatement or
separation pay if reinstatement is no longer viable, and to backwages.

Reinstatement, however, is not feasible in case of a strained employer-

employee relationship or when the work or position formerly held by
the dismissed employee no longer exists, as in the instant case. [47] Dr.
Meris is thus entitled to payment of separation pay at the rate of one
(1) month salary for every year of his employment, with a fraction of at
least six (6) months being considered as one(1) year,[48] and full
backwages from the time of his dismissal from April 30, 1992 until the
expiration of his term as Chief of ISU or his mandatory retirement,
whichever comes first.

The award by the appellate court of moral damages,[49] however, cannot

be sustained, solely upon the premise that the employer fired his
employee without just cause or due process. Additional facts must be
pleaded and proven to warrant the grant of moral damages under the
Civil Code, such as that the act of dismissal was attended by bad faith
or fraud, or was oppressive to labor, or done in a manner contrary to
morals, good customs, or public policy; and of course, that social
humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.
[50]
Such circumstances, however, do not obtain in the instant case.
More specifically on bad faith, lack of it is mirrored in Dr. Clementes
offer to Dr. Meris to be a consultant of Capitol, despite the abolition of
the ISU.

There being no moral damages, the award of exemplary damages does

not lie.[51]

The award for attorneys fees, however, remains.[52]

WHEREFORE, the decision of the Court of Appeals dated February 15,

2002 is hereby AFFIRMED with MODIFICATION. As modified, judgment
is hereby rendered ordering Capitol Medical Center, Inc. to pay Dr.
Cesar Meris separation pay at the rate of One (1) Month salary for
every year of his employment, with a fraction of at least Six (6) Months
being considered as One (1) Year, full backwages from the time of his
dismissal from April 30, 1992 until the expiration of his term as Chief of
the ISU or his mandatory retirement, whichever comes first; other
benefits due him or their money equivalent; and attorneys fees.

Costs against petitioners.

SO ORDERED.

G.R. No. 178505

CHERRY J. PRICE, STEPHANIE G.
DOMINGO AND LOLITA Present:
ARBILERA, Petitioners,
YNARES-SANTIAGO, J.,
- versus - Chairperson,

INNODATA PHILS. INC.,/ INNODATA AUSTRIA-MARTINEZ,

CORPORATION, LEO RABANG AND CHICO-NAZARIO,
JANE NAVARETTE, Respondents. NACHURA, and
REYES, JJ.
 Promulgated:
September 30, 2008

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

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of

Court assails the Decision1 dated 25 September 2006 and
Resolution2 dated 15 June 2007 of the Court of Appeals in CA-G.R. SP
No. 72795, which affirmed the Decision dated 14 December 2001 of the
National Labor Relations Commission (NLRC) in NLRC NCR Case No.
30-03-01274-2000 finding that petitioners were not illegally dismissed
by respondents.

The factual antecedents of the case are as follows:

Respondent Innodata Philippines, Inc./Innodata Corporation

(INNODATA) was a domestic corporation engaged in the data encoding
and data conversion business. It employed encoders, indexers,
formatters, programmers, quality/quantity staff, and others, to maintain
its business and accomplish the job orders of its clients. Respondent
Leo Rabang was its Human Resources and Development (HRAD)
Manager, while respondent Jane Navarette was its Project Manager.
INNODATA had since ceased operations due to business losses in June
2002.

Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera

were employed as formatters by INNODATA. The parties executed an
employment contract denominated as a "Contract of Employment for a
Fixed Period," stipulating that the contract shall be for a period of one
year,3 to wit:

CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD

xxxx

WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of FORMATTER
and in the course thereof and represented himself/herself to be fully
qualified and skilled for the said position;

WHEREAS, the EMPLOYER, by reason of the aforesaid representations,

is desirous of engaging that the (sic) services of the EMPLOYEE for a
fixed period;

NOW, THEREFORE, for and in consideration of the foregoing premises,

the parties have mutually agreed as follows:

TERM/DURATION

The EMPLOYER hereby employs, engages and hires the EMPLOYEE and
the EMPLOYEE hereby accepts such appointment as FORMATTER
effective FEB. 16, 1999 to FEB. 16, 2000 a period of ONE YEAR.

xxxx

TERMINATION

6.1 In the event that EMPLOYER shall discontinue operating its

business, this CONTRACT shall also ipso facto terminate on the last
day of the month on which the EMPLOYER ceases operations with the
same force and effect as is such last day of the month were originally
set as the termination date of this Contract. Further should the
Company have no more need for the EMPLOYEEs services on account
of completion of the project, lack of work (sic) business losses,
introduction of new production processes and techniques, which will
negate the need for personnel, and/or overstaffing, this contract maybe
pre-terminated by the EMPLOYER upon giving of three (3) days notice
to the employee.

6.2 In the event period stipulated in item 1.2 occurs first vis--vis the
completion of the project, this contract shall automatically terminate.

6.3 COMPANYs Policy on monthly productivity shall also apply to the

EMPLOYEE.

6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this

CONTRACT, with or without cause, by giving at least Fifteen (15)
notice to that effect. Provided, that such pre-termination shall be
effective only upon issuance of the appropriate clearance in favor of
the said EMPLOYEE.

6.5 Either of the parties may terminate this Contract by reason of the
breach or violation of the terms and conditions hereof by giving at
least Fifteen (15) days written notice. Termination with cause under
this paragraph shall be effective without need of judicial action or
approval.4

During their employment as formatters, petitioners were assigned to

handle jobs for various clients of INNODATA, among which were CAS,
Retro, Meridian, Adobe, Netlib, PSM, and Earthweb. Once they finished
the job for one client, they were immediately assigned to do a new job
for another client.

On 16 February 2000, the HRAD Manager of INNODATA wrote

petitioners informing them of their last day of work. The letter reads:

RE: End of Contract

Date: February 16, 2000

Please be informed that your employment ceases effective at the end

of the close of business hours on February 16, 2000. 5

According to INNODATA, petitioners employment already ceased due

to the end of their contract.

On 22 May 2000, petitioners filed a Complaint 6 for illegal dismissal and

damages against respondents. Petitioners claimed that they should be
considered regular employees since their positions as formatters were
necessary and desirable to the usual business of INNODATA as an
encoding, conversion and data processing company. Petitioners also
averred that the decisions in Villanueva v. National Labor Relations
Commission7 and Servidad v. National Labor Relations Commission, 8 in
which the Court already purportedly ruled "that the nature of
employment at Innodata Phils., Inc. is regular,"9 constituted stare
decisis to the present case. Petitioners finally argued that they could
not be considered project employees considering that their
employment was not coterminous with any project or undertaking, the
termination of which was predetermined.

On the other hand, respondents explained that INNODATA was engaged

in the business of data processing, typesetting, indexing, and
abstracting for its foreign clients. The bulk of the work was data
processing, which involved data encoding. Data encoding, or the
typing of data into the computer, included pre-encoding, encoding 1
and 2, editing, proofreading, and scanning. Almost half of the
employees of INNODATA did data encoding work, while the other half
monitored quality control. Due to the wide range of services rendered
to its clients, INNODATA was constrained to hire new employees for a
fixed period of not more than one year. Respondents asserted that
petitioners were not illegally dismissed, for their employment was
terminated due to the expiration of their terms of employment.
Petitioners contracts of employment with INNODATA were for a limited
period only, commencing on 6 September 1999 and ending on 16
February 2000.10 Respondents further argued that petitioners were
estopped from asserting a position contrary to the contracts which
they had knowingly, voluntarily, and willfully agreed to or entered into.
There being no illegal dismissal, respondents likewise maintained that
petitioners were not entitled to reinstatement and backwages.

On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding

petitioners complaint for illegal dismissal and damages meritorious.
The Labor Arbiter held that as formatters, petitioners occupied jobs
that were necessary, desirable, and indispensable to the data
processing and encoding business of INNODATA. By the very nature of
their work as formatters, petitioners should be considered regular
employees of INNODATA, who were entitled to security of tenure. Thus,
their termination for no just or authorized cause was illegal. In the end,
the Labor Arbiter decreed:

FOREGOING PREMISES CONSIDERED, judgment is hereby rendered

declaring complainants dismissal illegal and ordering respondent
INNODATA PHILS. INC./INNODATA CORPORATION to reinstate them to
their former or equivalent position without loss of seniority rights and
benefits. Respondent company is further ordered to pay complainants
their full backwages plus ten percent (10%) of the totality thereof as
attorneys fees. The monetary awards due the complainants as of the
date of this decision are as follows:
 A. Backwages

1. Cherry J. Price

2/17/2000 10/17/2000 at 223.50/day

P5,811.00/mo/ x 8 mos. P46,488.00

2. Stephanie Domingo 46,488.00

(same computation)

3. Lolita Arbilera 46,488.00

(same computation)

Total Backwages P139,464.00

B. Attorneys fees (10% of total award) 13,946.40

Total Award P153,410.40

Respondent INNODATA appealed the Labor Arbiters Decision to the

NLRC. The NLRC, in its Decision dated 14 December 2001, reversed the
Labor Arbiters Decision dated 17 October 2000, and absolved
INNODATA of the charge of illegal dismissal.

The NLRC found that petitioners were not regular employees, but were
fixed-term employees as stipulated in their respective contracts of
employment. The NLRC applied Brent School, Inc. v. Zamora 13 and St.
Theresas School of Novaliches Foundation v. National Labor Relations
Commission,14 in which this Court upheld the validity of fixed-term
contracts. The determining factor of such contracts is not the duty of
the employee but the day certain agreed upon by the parties for the
commencement and termination of the employment relationship. The
NLRC observed that the petitioners freely and voluntarily entered into
the fixed-term employment contracts with INNODATA. Hence,
INNODATA was not guilty of illegal dismissal when it terminated
petitioners employment upon the expiration of their contracts on 16
February 2000.

The dispositive portion of the NLRC Decision thus reads:

WHEREFORE, premises considered, the decision appealed from is
hereby REVERSED and SET ASIDE and a new one entered DISMISSING
the instant complaint for lack of merit.15

The NLRC denied petitioners Motion for Reconsideration in a

Resolution dated 28 June 2002.16

In a Petition for Certiorari under Rule 65 of the Rules of Court filed

before the Court of Appeals, petitioners prayed for the annulment,
reversal, modification, or setting aside of the Decision dated 14
December 2001 and Resolution dated 28 June 2002 of the
NLRC.lawphil.net

On 25 September 2006, the Court of Appeals promulgated its Decision

sustaining the ruling of the NLRC that petitioners were not illegally
dismissed.

The Court of Appeals ratiocinated that although this Court declared in

Villanueva and Servidad that the employees of INNODATA working as
data encoders and abstractors were regular, and not contractual,
petitioners admitted entering into contracts of employment with
INNODATA for a term of only one year and for a project called
Earthweb. According to the Court of Appeals, there was no showing
that petitioners entered into the fixed-term contracts unknowingly and
involuntarily, or because INNODATA applied force, duress or improper
pressure on them. The appellate court also observed that INNODATA
and petitioners dealt with each other on more or less equal terms, with
no moral dominance exercised by the former on latter. Petitioners were
therefore bound by the stipulations in their contracts terminating their
employment after the lapse of the fixed term.

The Court of Appeals further expounded that in fixed-term contracts,

the stipulated period of employment is governing and not the nature
thereof. Consequently, even though petitioners were performing
functions that are necessary or desirable in the usual business or
trade of the employer, petitioners did not become regular employees
because their employment was for a fixed term, which began on 16
February 1999 and was predetermined to end on 16 February 2000.

The appellate court concluded that the periods in petitioners

contracts of employment were not imposed to preclude petitioners
from acquiring security of tenure; and, applying the ruling of this Court
in Brent, declared that petitioners fixed-term employment contracts
were valid. INNODATA did not commit illegal dismissal for terminating
petitioners employment upon the expiration of their contracts.

The Court of Appeals adjudged:

WHEREFORE, the instant petition is hereby DENIED and the Resolution

dated December 14, 2001 of the National Labor Relations Commission
declaring petitioners were not illegally dismissed is AFFIRMED.17

The petitioners filed a Motion for Reconsideration of the afore-

mentioned Decision of the Court of Appeals, which was denied by the
same court in a Resolution dated 15 June 2007.

Petitioners are now before this Court via the present Petition for
Review on Certiorari, based on the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

ERROR OF LAW AND GRAVE ABUSE OF DISCRETION WHEN IT DID
NOT APPLY THE SUPREME COURT RULING IN THE CASE OF
NATIVIDAD & QUEJADA THAT THE NATURE OF EMPLOYMENT OF
RESPONDENTS IS REGULAR NOT FIXED, AND AS SO RULED IN AT
LEAST TWO OTHER CASES AGAINST INNODATA PHILS. INC.

II.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

ERROR OF LAW IN RULING THAT THE STIPULATION OF
CONTRACT IS GOVERNING AND NOT THE NATURE OF
EMPLOYMENT AS DEFINED BY LAW.

III.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN IT DID NOT CONSIDER THE EVIDENCE ON RECORD
SHOWING THAT THERE IS CLEAR CIRCUMVENTION OF THE LAW
 ON SECURITY OF TENURE THROUGH CONTRACT
MANIPULATION.18

The issue of whether petitioners were illegally dismissed by

respondents is ultimately dependent on the question of whether
petitioners were hired by INNODATA under valid fixed-term employment
contracts.

After a painstaking review of the arguments and evidences of the

parties, the Court finds merit in the present Petition. There were no
valid fixed-term contracts and petitioners were regular employees of
the INNODATA who could not be dismissed except for just or
authorized cause.

The employment status of a person is defined and prescribed by law

and not by what the parties say it should be. 19 Equally important to
consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common
good.20 Thus, provisions of applicable statutes are deemed written into
the contract, and the parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations
by simply contracting with each other.21

Regular employment has been defined by Article 280 of the Labor

Code, as amended, which reads:

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 engagement of the employee or
where the work or services to be performed is seasonal in nature and
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 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. (Underscoring ours).

Based on the afore-quoted provision, the following employees are

accorded regular status: (1) those who are engaged to perform
activities which are necessary or desirable in the usual business or
trade of the employer, regardless of the length of their employment;
and (2) those who were initially hired as casual employees, but have
rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed.

Undoubtedly, petitioners belong to the first type of regular employees.

Under Article 280 of the Labor Code, the applicable test to determine
whether an employment should be considered regular or non-regular is
the reasonable connection between the particular activity performed
by the employee in relation to the usual business or trade of the
employer.22

In the case at bar, petitioners were employed by INNODATA on 17

February 1999 as formatters. The primary business of INNODATA is
data encoding, and the formatting of the data entered into the
computers is an essential part of the process of data encoding.
Formatting organizes the data encoded, making it easier to understand
for the clients and/or the intended end users thereof. Undeniably, the
work performed by petitioners was necessary or desirable in the
business or trade of INNODATA.

However, it is also true that while certain forms of employment require

the performance of usual or desirable functions and exceed one year,
these do not necessarily result in regular employment under Article
280 of the Labor Code.23Under the Civil Code, fixed-term employment
contracts are not limited, as they are under the present Labor Code, to
those by nature seasonal or for specific projects with predetermined
dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination. 24

The decisive determinant in term employment is 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. Seasonal employment and employment for a particular project
are instances of employment in which a period, where not expressly
set down, is necessarily implied.25

Respondents maintain that the contracts of employment entered into

by petitioners with INNDOATA were valid fixed-term employment
contracts which were automatically terminated at the expiry of the
period stipulated therein, i.e., 16 February 2000.

The Court disagrees.

While this Court has recognized the validity of fixed-term employment

contracts, it has consistently held that this is the exception rather
than the general rule. More importantly, a fixed-term employment is
valid only under certain circumstances. In Brent, the very same case
invoked by respondents, the Court identified several circumstances
wherein a fixed-term is an essential and natural appurtenance, to wit:

Some familiar examples may be cited of employment contracts which

may be neither for seasonal work nor for specific projects, but to
which a fixed term is an essential and natural appurtenance: overseas
employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies
does not appear ever to have been applied, Article 280 of the Labor
Code notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition
rotated among the faculty members, and where fixed terms are a
necessity without which no reasonable rotation would be possible.
Similarly, despite the provisions of Article 280, Policy Instructions No.
8 of the Minister of Labor implicitly recognize that certain company
officials may be elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing that
these officials, "x x may lose their jobs as president, executive vice-
president or vice president, etc. because the stockholders or the board
of directors for one reason or another did not reelect them."26

As a matter of fact, the Court, in its oft-quoted decision in Brent, also

issued a stern admonition that where, from the circumstances, it is
apparent that the period was imposed to preclude the acquisition of
tenurial security by the employee, then it should be struck down as
being contrary to law, morals, good customs, public order and public
policy.27

After considering petitioners contracts in their entirety, as well as the

circumstances surrounding petitioners employment at INNODATA, the
Court is convinced that the terms fixed therein were meant only to
circumvent petitioners right to security of tenure and are, therefore,
invalid.

The contracts of employment submitted by respondents are highly

suspect for not only being ambiguous, but also for appearing to be
tampered with.

Petitioners alleged that their employment contracts with INNODATA

became effective 16 February 1999, and the first day they reported for
work was on 17 February 1999. The Certificate of Employment issued
by the HRAD Manager of INNODATA also indicated that petitioners
Price and Domingo were employed by INNODATA on 17 February 1999.

However, respondents asserted before the Labor Arbiter that

petitioners employment contracts were effective only on 6 September
1999. They later on admitted in their Memorandum filed with this Court
that petitioners were originally hired on 16 February 1999 but the
project for which they were employed was completed before the
expiration of one year. Petitioners were merely rehired on 6 September
1999 for a new project. While respondents submitted employment
contracts with 6 September 1999 as beginning date of effectivity, it is
obvious that in one of them, the original beginning date of effectivity,
16 February 1999, was merely crossed out and replaced with 6
September 1999. The copies of the employment contracts submitted
by petitioners bore similar alterations.

The Court notes that the attempt to change the beginning date of
effectivity of petitioners contracts was very crudely done. The
alterations are very obvious, and they have not been initialed by the
petitioners to indicate their assent to the same. If the contracts were
truly fixed-term contracts, then a change in the term or period agreed
upon is material and would already constitute a novation of the
original contract.
Such modification and denial by respondents as to the real beginning
date of petitioners employment contracts render the said contracts
ambiguous. The contracts themselves state that they would be
effective until 16 February 2000 for a period of one year. If the
contracts took effect only on 6 September 1999, then its period of
effectivity would obviously be less than one year, or for a period of
only about five months.

Obviously, respondents wanted to make it appear that petitioners

worked for INNODATA for a period of less than one year. The only
reason the Court can discern from such a move on respondents part is
so that they can preclude petitioners from acquiring regular status
based on their employment for one year. Nonetheless, the Court
emphasizes that it has already found that petitioners should be
considered regular employees of INNODATA by the nature of the work
they performed as formatters, which was necessary in the business or
trade of INNODATA. Hence, the total period of their employment
becomes irrelevant.

Even assuming that petitioners length of employment is material,

given respondents muddled assertions, this Court adheres to its
pronouncement in Villanueva v. National Labor Relations
28
Commission, to the effect that where a contract of employment,
being a contract of adhesion, is ambiguous, any ambiguity therein
should be construed strictly against the party who prepared it. The
Court is, thus, compelled to conclude that petitioners contracts of
employment became effective on 16 February 1999, and that they were
already working continuously for INNODATA for a year.

Further attempting to exonerate itself from any liability for illegal

dismissal, INNODATA contends that petitioners were project
employees whose employment ceased at the end of a specific project
or undertaking. This contention is specious and devoid of merit.

In Philex Mining Corp. v. National Labor Relations Commission, 29 the

Court defined "project employees" as those workers hired (1) for a
specific project or undertaking, and wherein (2) the completion or
termination of such project has been determined at the time of the
engagement of the employee.
Scrutinizing petitioners employment contracts with INNODATA,
however, failed to reveal any mention therein of what specific project
or undertaking petitioners were hired for. Although the contracts made
general references to a "project," such project was neither named nor
described at all therein. The conclusion by the Court of Appeals that
petitioners were hired for the Earthweb project is not supported by any
evidence on record. The one-year period for which petitioners were
hired was simply fixed in the employment contracts without reference
or connection to the period required for the completion of a project.
More importantly, there is also a dearth of evidence that such project
or undertaking had already been completed or terminated to justify the
dismissal of petitioners. In fact, petitioners alleged - and respondents
failed to dispute that petitioners did not work on just one project, but
continuously worked for a series of projects for various clients of
INNODATA.

In Magcalas v. National Labor Relations Commission ,30 the Court

struck down a similar claim by the employer therein that the dismissed
employees were fixed-term and project employees. The Court here
reiterates the rule that all doubts, uncertainties, ambiguities and
insufficiencies should be resolved in favor of labor. It is a well-
entrenched doctrine that in illegal dismissal cases, the employer has
the burden of proof. This burden was not discharged in the present
case.

As a final observation, the Court also takes note of several other

provisions in petitioners employment contracts that display utter
disregard for their security of tenure. Despite fixing a period or term of
employment, i.e., one year, INNODATA reserved the right to pre-
terminate petitioners employment under the following circumstances:

6.1 x x x Further should the Company have no more need for the
EMPLOYEEs services on account of completion of the project, lack of
work (sic) business losses, introduction of new production processes
and techniques, which will negate the need for personnel, and/or
overstaffing, this contract maybe pre-terminated by the EMPLOYER
upon giving of three (3) days notice to the employee.

xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this
CONTRACT, with or without cause, by giving at least Fifteen (15)
[day] notice to that effect. Provided, that such pre-termination shall be
effective only upon issuance of the appropriate clearance in favor of
the said EMPLOYEE. (Emphasis ours.)

Pursuant to the afore-quoted provisions, petitioners have no right at all

to expect security of tenure, even for the supposedly one-year period
of employment provided in their contracts, because they can still be
pre-terminated (1) upon the completion of an unspecified project; or (2)
with or without cause, for as long as they are given a three-day notice.
Such contract provisions are repugnant to the basic tenet in labor law
that no employee may be terminated except for just or authorized
cause.

Under Section 3, Article XVI of the Constitution, it is the policy of the

State to assure the workers of security of tenure and free them from
the bondage of uncertainty of tenure woven by some employers into
their contracts of employment. This was exactly the purpose of the
legislators in drafting Article 280 of the Labor Code to prevent the
circumvention by unscrupulous employers of the employees right to be
secure in his tenure by indiscriminately and completely ruling out all
written and oral agreements inconsistent with the concept of regular
employment.

In all, respondents insistence that it can legally dismiss petitioners on

the ground that their term of employment has expired is untenable. To
reiterate, petitioners, being regular employees of INNODATA, are
entitled to security of tenure. In the words of Article 279 of the Labor
Code:

ART. 279. Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
By virtue of the foregoing, an illegally dismissed employee is entitled
to reinstatement without loss of seniority rights and other privileges,
with full back wages computed from the time of dismissal up to the
time of actual reinstatement.

Considering that reinstatement is no longer possible on the ground

that INNODATA had ceased its operations in June 2002 due to business
losses, the proper award is separation pay equivalent to one month
pay31 for every year of service, to be computed from the
commencement of their employment up to the closure of INNODATA.

The amount of back wages awarded to petitioners must be computed

from the time petitioners were illegally dismissed until the time
INNODATA ceased its operations in June 2002.32

Petitioners are further entitled to attorneys fees equivalent to 10% of

the total monetary award herein, for having been forced to litigate and
incur expenses to protect their rights and interests herein.

Finally, unless they have exceeded their authority, corporate officers

are, as a general rule, not personally liable for their official acts,
because a corporation, by legal fiction, has a personality separate and
distinct from its officers, stockholders and members. Although as an
exception, corporate directors and officers are solidarily held liable
with the corporation, where terminations of employment are done with
malice or in bad faith,33 in the absence of evidence that they acted
with malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any personal
liability for the illegal dismissal of petitioners.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The

Decision dated 25 September 2006 and Resolution dated 15 June 2007
of the Court of Appeals in CA-G.R. SP No. 72795are
hereby REVERSED and SET ASIDE. RespondentInnodata Philippines,
Inc./Innodata Corporation is ORDERED to pay petitioners Cherry J.
Price, Stephanie G. Domingo, and Lolita Arbilera: (a) separation pay, in
lieu of reinstatement, equivalent to one month pay for every year of
service, to be computed from the commencement of their employment
up to the date respondent Innodata Philippines, Inc./Innodata
Corporation ceased operations; (b) full backwages, computed from the
time petitioners compensation was withheld from them up to the time
respondent Innodata Philippines, Inc./Innodata Corporation ceased
operations; and (3) 10% of the total monetary award as attorneys fees.
Costs against respondent Innodata Philippines, Inc./Innodata
Corporation.

SO ORDERED.

MINITAV.CHICO-NAZARIO
Associate Justice

National Federation of Labor vs NLRC

Before us is a special civil action for certiorari to set aside and annul
two (2) resolutions of the National Labor Relations
[1] [2]
Commission promulgated on April 24, 1996 and August 29,
1996[3] denying the award of separation pay to petitioners.

The pertinent facts are as follows:

Petitioners are bona fide members of the National Federation of Labor

(NFL), a legitimate labor organization duly registered with the
Department of Labor and Employment. They were employed by private
respondents Charlie Reith and Susie Galle Reith, general manager and
owner, respectively, of the 354-hectare Patalon Coconut Estate located
at Patalon, Zamboanga City. Patalon Coconut Estate was engaged in
growing agricultural products and in raising livestock.

In 1988, Congress enacted into law Republic Act (R.A.) No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL),
which mandated the compulsory acquisition of all covered agricultural
lands for distribution to qualified farmer beneficiaries under the so-
called Comprehensive Agrarian Reform Programme (CARP).

Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to
the Patalon Estate Agrarian Reform Association (PEARA), a
cooperative accredited by the Department of Agrarian Reform (DAR), of
which petitioners are members and co-owners.
As a result of this acquisition, private respondents shut down the
operation of the Patalon Coconut Estate and the employment of the
petitioners was severed on July 31, 1994. Petitioners did not receive
any separation pay.

On August 1, 1994, the cooperative took over the estate. A certain

Abelardo Sangadan informed respondents of such takeover via a letter
which was received by the respondents on July 26, 1994. Being
beneficiaries of the Patalon Coconut Estate pursuant to the CARP, the
petitioners became part-owners of the land.[4]

On April 25, 1995, petitioners filed individual complaints before the

Regional Arbitration Branch (RAB) of the National Labor Relations
Commission (NLRC) in Zamboanga City, praying for their reinstatement
with full backwages on the ground that they were illegally dismissed.
The petitioners were represented by their labor organization, the NFL.

On December 12, 1995, the RAB rendered a decision, the dispositive

portion of which provides:

"WHEREFORE, in view of the foregoing, judgment is hereby

rendered dismissing complainants charge for illegal
dismissal for lack of merit, but ordering respondents thru
[sic] its owner-manager or its duly authorized
representative to pay complainants separation pay in view
of the latters cessation of operations or forced sale, and for
13th month differential pay in the amount, as follows, for:

"FURTHER, complainants claim for Muslim Holiday, overtime

pay and rest day pay should be dismissed for lack of merit,
too."[5]

Appeal was taken by private respondents to public respondent NLRC.[6]

On April 24, 1996, the NLRC issued a resolution, the dispositive portion
of which provides:

"WHEREFORE, the decision appealed from is hereby

modified in favor of the following findings:
 1) Respondents are not guilty of illegally dismissing
complainants. Respondents cessation of operation was not
due to a unilateral action on their part resulting in the
cutting off of the employment relationship between the
parties. The severance of employer-employee relationship
between the parties came about INVOLUNTARILY, as a
result of an act of the State. Consequently, complainants
are not entitled to any separation pay.

2) The award of 13th month pay differential is, however, Set

Aside. Any award of 13th month pay differentials to
complainants should be computed strictly based on their
reduced pay, equivalent to six (6) hours work, Monday to
Friday, pursuant to what the parties agreed in the November
18, 1991 Compromise Agreement."

SO ORDERED.[7]

Petitioners filed a motion for reconsideration which was denied by the

NLRC in its resolution[8] dated August 29, 1996.

Hence, this petition.

The issue is whether or not an employer that was compelled to cease

its operation because of the compulsory acquisition by the government
of its land for purposes of agrarian reform, is liable to pay separation
pay to its affected employees.

The petition is bereft of merit.

Petitioners contend that they are entitled to separation pay citing

Article 283 of the Labor Code which reads:

"ART. 283. Closure of establishment and reduction of

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

It is clear that Article 283 of the Labor Code applies in cases of

closures of establishment and reduction of personnel. The peculiar
circumstances in the case at bar, however, involves neither the closure
of an establishment nor a reduction of personnel as contemplated
under the aforesaid article. When the Patalon Coconut Estate was
closed because a large portion of the estate was acquired by DAR
pursuant to CARP, the ownership of that large portion of the estate was
precisely transferred to PEARA and ultimately to the petitioners as
members thereof and as agrarian lot beneficiaries. Hence, Article 283
of the Labor Code is not applicable to the case at bench.

Even assuming, arguendo, that the situation in this case were a

closure of the business establishment called Patalon Coconut Estate
of private respondents, still the petitioners/employees are not entitled
to separation pay. The closure contemplated under Article 283 of the
Labor Code is a unilateral and voluntary act on the part of the
employer to close the business establishment as may be gleaned from
the wording of the said legal provision that "The employer may also
terminate the employment of any employee due to...". [9] The use of the
word "may," in a statute, denotes that it is directory in nature and
generally permissive only.[10] The "plain meaning rule" or verba legis in
statutory construction is thus applicable in this case. Where the words
of a statute are clear, plain and free from ambiguity, it must be given
its literal meaning and applied without attempted interpretation. [11]
In other words, Article 283 of the Labor Code does not contemplate a
situation where the closure of the business establishment is forced
upon the employer and ultimately for the benefit of the employees.

As earlier stated, the Patalon Coconut Estate was closed down

because a large portion of the said estate was acquired by the DAR
pursuant to the CARP. Hence, the closure of the Patalon Coconut
Estate was not effected voluntarily by private respondents who even
filed a petition to have said estate exempted from the coverage of RA
6657. Unfortunately, their petition was denied by the Department of
Agrarain Reform. Since the closure was due to the act of the
government to benefit the petitioners, as members of the Patalon
Estate Agrarian Reform Association, by making them agrarian lot
beneficiaries of said estate, the petitioners are not entitled to
separation pay. The termination of their employment was not caused
by the private respondents. The blame, if any, for the termination of
petitioners employment can even be laid upon the petitioner-
employees themselves inasmuch as they formed themselves into a
cooperative, PEARA, ultimately to take over, as agrarian lot
beneficiaries, of private respondents landed estate pursuant to RA
6657. The resulting closure of the business establishment, Patalon
Coconut Estate, when it was placed under CARP, occurred through no
fault of the private respondents.

While the Constitution provides that "the State x x x shall protect the
rights of workers and promote their welfare", that constitutional policy
of providing full protection to labor is not intended to oppress or
destroy capital and management. Thus, the capital and management
sectors must also be protected under a regime of justice and the rule
of law.

WHEREFORE, the petition is DISMISSED. The Resolutions of the

National Labor Relations Commission dated April 24, 1996 and August
29, 1996 are hereby AFFIRMED. No costs.

Ledesma Jr. vs NLRC

This a Petition for Review on Certiorari under Rule 45 of the Revised

Rules of Court, filed by petitioner Federico Ledesma, Jr., seeking to
reverse and set aside the Decision, [1] dated 28 May 2005, and the
Resolution,[2] dated 7 September 2006, of the Court of Appeals in CA-
G.R. SP No. 79724. The appellate court, in its assailed Decision and
Resolution, affirmed the Decision dated 15 April 2003, and Resolution
dated 9 June 2003, of the National Labor Relations Commission
(NLRC), dismissing petitioners complaint for illegal dismissal and
ordering the private respondent Philippine National Training Institute
(PNTI) to reinstate petitioner to his former position without loss of
seniority rights.

The factual and procedural antecedents of the instant petition

are as follows:

On 4 December 1998, petitioner was employed as a bus/service

driver by the private respondent on probationary basis, as evidenced
by his appointment.[3] As such, he was required to report at private
respondents training site in Dasmarias, Cavite, under the direct
supervision of its site administrator, Pablo Manolo de Leon (de Leon).[4]

On 11 November 2000, petitioner filed a complaint against de

Leon for allegedly abusing his authority as site administrator by using
the private respondents vehicles and other facilities for personal
ends. In the same complaint, petitioner also accused de Leon of
immoral conduct allegedly carried out within the private respondents
premises. A copy of the complaint was duly received by private
respondents Chief Accountant, Nita Azarcon (Azarcon).[5]

On 27 November 2000, de Leon filed a written report against the

petitioner addressed to private respondents Vice-President for
Administration, Ricky Ty (Ty), citing his suspected drug use.

In view of de Leons report, private respondents Human Resource

Manager, Trina Cueva (HR Manager Cueva), on 29 November 2000,
served a copy of a Notice to petitioner requiring him to explain within
24 hours why no disciplinary action should be imposed on him for
allegedly violating Section 14, Article IV of the private respondents
Code of Conduct.[6]

On 3 December 2000, petitioner filed a complaint for illegal

dismissal against private respondent before the Labor Arbiter.
 In his Position Paper,[7] petitioner averred that in view of the
complaint he filed against de Leon for his abusive conduct as site
administrator, the latter retaliated by falsely accusing petitioner as a
drug user. VP for Administration Ty, however, instead of verifying the
veracity of de Leons report, readily believed his allegations and
together with HR Manager Cueva, verbally dismissed petitioner from
service on 29 November 2000.

Petitioner alleged that he was asked to report at private

respondents main office in Espaa, Manila, on 29 November
2000. There, petitioner was served by HR Manager Cueva a copy of the
Notice to Explain together with the copy of de Leons report citing his
suspected drug use. After he was made to receive the copies of the
said notice and report, HR Manager Cueva went inside the office of VP
for Administration Ty. After a while, HR Manager Cueva came out of the
office with VP for Administration Ty. To petitioners surprise, HR
Manager Cueva took back the earlier Notice to Explain given to him
and flatly declared that there was no more need for the petitioner to
explain since his drug test result revealed that he was positive for
drugs. When petitioner, however, asked for a copy of the said drug test
result, HR Manager Cueva told him that it was with the companys
president, but she would also later claim that the drug test result was
already with the proper authorities at Camp Crame.[8]

Petitioner was then asked by HR Manager Cueva to sign a

resignation letter and also remarked that whether or not petitioner
would resign willingly, he was no longer considered an employee of
private respondent. All these events transpired in the presence of VP
for Administration Ty, who even convinced petitioner to just voluntarily
resign with the assurance that he would still be given separation
pay. Petitioner did not yet sign the resignation letter replying that he
needed time to think over the offers. When petitioner went back to
private respondents training site in Dasmarias, Cavite, to get his
bicycle, he was no longer allowed by the guard to enter the premises.[9]

On the following day, petitioner immediately went to St. Dominic

Medical Center for a drug test and he was found negative for any drug
substance.With his drug result on hand, petitioner went back to private
respondents main office in Manila to talk to VP for
Administration Ty and HR Manager Cuevaand to show to them his drug
test result. Petitioner then told VP for Administration Ty and HR
Manager Cueva that since his drug test proved that he was not guilty
of the drug use charge against him, he decided to continue to work for
the private respondent.[10]

On 2 December 2000, petitioner reported for work but he was no

longer allowed to enter the training site for he was allegedly
banned therefrom according to the guard on duty. This incident
prompted the petitioner to file the complaint for illegal dismissal
against the private respondent before the Labor Arbiter.

For its part, private respondent countered that petitioner was

never dismissed from employment but merely served a Notice to
Explain why no disciplinary action should be filed against him in view
of his superiors report that he was suspected of using illegal
drugs. Instead of filing an answer to the said notice, however,
petitioner prematurely lodged a complaint for illegal dismissal against
private respondent before the Labor Arbiter.[11]

Private respondent likewise denied petitioners allegations that it

banned the latter from entering private respondents premises. Rather,
it was petitioner who failed or refused to report to work after he was
made to explain his alleged drug use. Indeed, on 3 December 2000,
petitioner was able to claim at the training site his salary for the
period of 16-30 November 2000, as evidenced by a copy of the pay
voucher bearing petitioners signature. Petitioners accusation that he
was no longer allowed to enter the training site was further belied by
the fact that he was able to claim his 13th month pay thereat on 9
December 2000, supported by a copy of the pay voucher signed by
petitioner.[12]

On 26 July 2002, the Labor Arbiter rendered a Decision, [13] in favor

of the petitioner declaring illegal his separation from employment. The
Labor Arbiter, however, did not order petitioners reinstatement for the
same was no longer practical, and only directed private respondent to
pay petitioner backwages. The dispositive portion of the Labor Arbiters
Decision reads:

WHEREFORE, premises considered, the dismissal of

the [petitioner] is herein declared to be illegal. [Private
 respondent] is directed to pay the complainant backwages
and separation pay in the total amount of One Hundred
Eighty Four Thousand Eight Hundred Sixty One Pesos and
Fifty Three Centavos (P184, 861.53).[14]

Both parties questioned the Labor Arbiters Decision before the

NLRC. Petitioner assailed the portion of the Labor Arbiters Decision
denying his prayer for reinstatement, and arguing that the doctrine of
strained relations is applied only to confidential employees and his
position as a driver was not covered by such prohibition. [15] On the
other hand, private respondent controverted the Labor Arbiters finding
that petitioner was illegally dismissed from employment, and insisted
that petitioner was never dismissed from his job but failed to report to
work after he was asked to explain regarding his suspected drug use.
[16]

On 15 April 2003, the NLRC granted the appeal raised by both

parties and reversed the Labor Arbiters Decision. [17] The NLRC declared
that petitioner failed to establish the fact of dismissal for his claim
that he was banned from entering the training site was rendered
impossible by the fact that he was able to subsequently claim his
salary and 13th month pay. Petitioners claim for reinstatement was,
however, granted by the NLRC. The decretal part of the NLRC Decision
reads:

WHEREFORE, premises considered, the decision under

review is, hereby REVERSED and SET ASIDE, and another
entered, DISMISSING the complaint for lack of merit.

[Petitioner] is however, ordered REINSTATED to his

former position without loss of seniority rights, but
WITHOUT BACKWAGES.[18]

The Motion for Reconsideration filed by petitioner was likewise

denied by the NLRC in its Resolution dated 29 August 2003.[19]

The Court of Appeals dismissed petitioners Petition

for Certiorari under Rule 65 of the Revised Rules of Court, and affirmed
the NLRC Decision giving more credence to private respondents
stance that petitioner was not dismissed from employment, as it is
more in accord with the evidence on record and the attendant
circumstances of the instant case.[20] Similarly ill-fated was petitioners
Motion for Reconsideration, which was denied by the Court of Appeals
in its Resolution issued on 7 September 2006. [21]

Hence, this instant Petition for Review on Certiorari[22] under Rule

45 of the Revised Rules of Court, filed by petitioner assailing the
foregoing Court of Appeals Decision and Resolution on the following
grounds:

I.

WHETHER, THE HON. COURT OF APPEALS COMMITTED A

MISAPPREHENSION OF FACTS, AND THE ASSAILED
DECISION IS NOT SUPPORTED BY THE EVIDENCE ON
RECORD. PETITIONERS DISMISSAL WAS ESTABLISHED BY
THE UNCONTRADICTED EVIDENCES ON RECORD, WHICH
WERE MISAPPRECIATED BY PUBLIC RESPONDENT NLRC,
AND HAD THESE BEEN CONSIDERED THE INEVITABLE
CONCLUSION WOULD BE THE AFFIRMATION OF THE LABOR
ARBITERS DECISION FINDING ILLEGAL DISMISSAL

II.

WHETHER, THE HON. COURT OF APPEALS SUBVERTED DUE

PROCESS OF LAW WHEN IT DID NOT CONSIDER THE
EVIDENCE ON RECORD SHOWING THAT THERE WAS NO
JUST CAUSE FOR DISMISSAL AS PETITIONER IS NOT A
DRUG USER AND THERE IS NO EVIDENCE TO SUPPORT
THIS GROUND FOR DISMISSAL.

III.

WHETHER, THE HON. COURT OF APPEALS COMMITTED

REVERSIBLE ERROR OF LAW IN NOT FINDING THAT
RESPONDENTS SUBVERTED PETITIONERS RIGHT TO DUE
PROCESS OF THE LAW.[23]
 Before we delve into the merits of this case, it is best to stress
that the issues raised by petitioner in this instant petition are factual
in nature which is not within the office of a Petition for Review.
[24]
The raison detre for this rule is that, this Court is not a trier of facts
and does not routinely undertake the re-examination of the evidence
presented by the contending parties for the factual findings of the
labor officials who have acquired expertise in their own fields are
accorded not only respect but even finality, and are binding upon this
Court.[25]

However, when the findings of the Labor Arbiter contradict those

of the NLRC, departure from the general rule is warranted, and this
Court must of necessity make an infinitesimal scrunity and examine
the records all over again including the evidence presented by the
opposing parties to determine which findings should be preferred as
more conformable with evidentiary facts.[26]

The primordial issue in the petition at bar is whether the

petitioner was illegally dismissed from employment.

The Labor Arbiter found that the petitioner was illegally

dismissed from employment warranting the payment of his
backwages. The NLRC and the Court of Appeals found otherwise.

In reversing the Labor Arbiters Decision, the NLRC underscored the

settled evidentiary rule that before the burden of proof shifts to the
employer to prove the validity of the employees dismissal, the
employee must first sufficiently establish that he was indeed
dismissed from employment. The petitioner, in the present case, failed
to establish the fact of his dismissal. The NLRC did not give credence
to petitioners allegation that he was banned by the private respondent
from entering the workplace, opining that had it been true that
petitioner was no longer allowed to enter the training site when he
reported for work thereat on 2 December 2000, it is quite a wonder he
was able to do so the very next day, on 3 December 2000, to claim his
salary.[27]

The Court of Appeals validated the above conclusion reached by

the NLRC and further rationated that petitioners positive allegations
that he was dismissed from service was negated by substantial
evidence to the contrary. Petitioners averments of what transpired
inside private respondents main office on 29 November 2000, when he
was allegedly already dismissed from service, and his claim that he
was effectively banned from private respondents premises are belied
by the fact that he was able to claim his salary for the period of 16-30
November 2000 at private respondents training site.

Petitioner, therefore, is now before this Court assailing the

Decisions handed down by the NLRC and the Court of Appeals, and
insisting that he was illegally dismissed from his
employment. Petitioner argues that his receipt of his earned salary for
the period of 16-30 November 2000, and his 13th month pay, is neither
inconsistent with nor a negation of his allegation of illegal
dismissal. Petitioner maintains that he received his salary and benefit
only from the guardhouse, for he was already banned from the work
premises.

We are not persuaded.

Well-entrenched is the principle that in order to establish a case

before judicial and quasi-administrative bodies, it is necessary that
allegations must be supported by substantial evidence. [28] Substantial
evidence is more than a mere scintilla. It means such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion.[29]

In the present case, there is hardly any evidence on record so as

to meet the quantum of evidence required, i.e., substantial
evidence. Petitioners claim of illegal dismissal is supported by no
other than his own bare, uncorroborated and, thus, self-serving
allegations, which are also incoherent, inconsistent and contradictory.

Petitioner himself narrated that when his presence was

requested on 29 November 2000 at the private respondents main office
where he was served with the Notice to Explain his superiors report on
his suspected drug use, VP for Administration Ty offered him
separation pay if he will just voluntarily resign from employment. While
we do not condone such an offer, neither can we construe that
petitioner was dismissed at that instance. Petitioner was only being
given the option to either resign and receive his separation pay or not
to resign but face the possible disciplinary charges against him. The
final decision, therefore, whether to voluntarily resign or to continue
working still, ultimately rests with the petitioner. In fact,
by petitoners own admission, he requested from VP for
Administration Ty more time to think over the offer.

Moreover, the petitioner alleged that he was not allowed to enter

the training site by the guard on duty who told him that he was already
banned from the premises. Subsequently, however, petitioner admitted
in his Supplemental Affidavit that he was able to return to the said site
on 3 December 2000, to claim his 16-30 November 2000 salary, and
again on 9 December 2000, to receive his 13th month pay. The fact
alone that he was able to return to the training site to claim his salary
and benefits raises doubt as to his purported ban from the premises.

Finally, petitioners stance that he was dismissed by private

respondent was further weakened with the presentation of private
respondents payroll bearing petitioners name proving that petitioner
remained as private respondents employee up to December
2000. Again, petitioners assertion that the payroll was merely
fabricated for the purpose of supporting private respondents case
before the NLRC cannot be given credence. Entries in the payroll,
being entries in the course of business, enjoy the presumption of
regularity under Rule 130, Section 43 of the Rules of Court. It is
therefore incumbent upon the petitioner to adduce clear and
convincing evidence in support of his claim of fabrication and to
overcome such presumption of regularity.[30] Unfortunately, petitioner
again failed in such endeavor.

On these scores, there is a dearth of evidence to establish the

fact of petitioners dismissal. We have scrupulously examined the
records and we found no evidence presented by petitioner, other than
his own contentions that he was indeed dismissed by private
respondent.

While this Court is not unmindful of the rule that in cases of

illegal dismissal, the employer bears the burden of proof to prove that
the termination was for a valid or authorized cause in the case at bar,
however, the facts and the evidence did not establish a prima
facie case that the petitioner was dismissed from employment.
[31]
Before the private respondent must bear the burden of proving that
the dismissal was legal, petitioner must first establish by substantial
evidence the fact of his dismissal from service. Logically, if there is no
dismissal, then there can be no question as to the legality or illegality
thereof.

In Machica v. Roosevelt Services Center, Inc.,[32] we had

underscored that the burden of proving the allegations rest upon the
party alleging, to wit:

The rule is that one who alleges a fact has the burden
of proving it; thus, petitioners were burdened to prove their
allegation that respondents dismissed them from their
employment. It must be stressed that the evidence to prove
this fact must be clear, positive and convincing. The rule
that the employer bears the burden of proof in illegal
dismissal cases finds no application here because the
respondents deny having dismissed the petitioners.[33]

In Rufina Patis Factory v. Alusitain,[34] this Court took the

occasion to emphasize:

It is a basic rule in evidence, however, that the burden

of proof is on the part of the party who makes the
allegations ei incumbit probatio, qui dicit, non qui negat.If
he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own
evidence and not upon the weakness of that of his
opponent.[35]

It is true that the Constitution affords full protection to labor, and

that in light of this Constitutional mandate, we must be vigilant in
striking down any attempt of the management to exploit or oppress the
working class. However, it does not mean that we are bound to uphold
the working class in every labor dispute brought before this Court for
our resolution.
 The law in protecting the rights of the employees, authorizes
neither oppression nor self-destruction of the employer. It should be
made clear that when the law tilts the scales of justice in favor of
labor, it is in recognition of the inherent economic inequality between
labor and management. The intent is to balance the scales of justice;
to put the two parties on relatively equal positions. There may be
cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the
result is an injustice to the employer. Justitia nemini neganda est --
justice is to be denied to none.[36]

WHEREFORE, premises considered, the instant Petition is DENIED. The

Court of Appeals Decision dated 28 May 2005 and its Resolution
dated 7 September 2006 in CA-G.R. SP No. 79724 are
hereby AFFIRMED. Costs against the petitioner.

Manila Public School Teachers vs. Laguio

The series of events that touched off these cases started with the so-
called "mass action" undertaken by some 800 public school teachers,
among them members of the petitioning associations in both cases, on
September 17, 1990 to "dramatize and highlight" 1 the teachers' plight
resulting from the alleged failure of the public authorities to act upon
grievances that had time and again been brought to the latter's
attention.

The petition in G.R. No. 95590 alleges in great detail the character and
origins of those grievances as perceived by the petitioners, and the
attempts to negotiate their correction; 2 these are more briefly, but
quite adequately and with no sacrifice of relevant content, set forth in
the petition in G.R. No. 954451, portions of which are quoted hereunder
without necessarily affirming their objective truth or correctness:

3. Together with other teachers embracing the Teachers and

Employees Consultative Council (TECC) and the Alliance of
Concerned Teachers, the petitioners, in accordance with
their Constitution and By-Laws, resolved to engage in mass
concerted actions, after peaceful dialogues with the heads
of the Department of the Budget and Management, Senate
 and House of Representatives in public hearings as well as
after exhausting all administrative remedies, to press for,
among other things, the immediate payment of due chalk,
clothing allowances, 13th month pay for 1989 arising from
the implementation of the Salary Standardization Law, the
recall of DECS Order 39 s. 1990 directing the oversizing of
classes and overloading of teachers pursuant to the cost-
cutting measures of the government, the hiring of 47,000
new teachers to ease the overload of existing teachers, the
return of the additional 1% real property taxes collected by
local government units to education purposes to be
administered by the Local School Boards, and consequent
recall of DBM Circulars Nos. 904 and 9011 and local budget
circular No. 47 consistent with RA 5447 and the new
Constitution mandating that education shall enjoy the
highest budgetary priority in the national budget, and other
equally important demands; The dialogues and conferences
initiated by the petitioners and other teacher organizations
were as early as March 14, 1989, March 14, 1990, April 23,
1990, May 28, 1990, June 5, 1990, September 3, 1990 and
September 14, 1990 with the Civil Service Commission, the
Senate and House of Representatives, Department of
Budget and Management and the Department of Education,
Culture and Sports, but all these did not result in the
granting of the demands of the petitioners, leaving them
with no other recourse but to take direct mass action such
as the one they engaged in three weeks ago.

4. On September 14, 1990, the petitioners and other

teachers in other cities and municipalities in Metro Manila,
staged a protest rally at the DECS premises without
disrupting classes as a last call for the government to
negotiate the granting of demands. No response was made
by the respondent Secretary of Education, despite the
demonstration, so the petitioners began the ongoing protest
mass actions on September, 17,1990. ... 3

September 17, 1990 fell on a Monday, which was also a regular school
day. There is no question that the some 800 teachers who joined the
mass action did not conduct their classes on that day; instead, as
alleged in the petition in G.R. No. 95590, 4 they converged at the
Liwasang Bonifacio in the morning whence they proceeded to the
National Office of the Department of Education, Culture and Sport
(DECS) for a whole-day assembly. At about 1:00 o'clock p.m., three
representatives of the group were allowed to see the respondent
Secretary of Education who "brushed aside their grievances," warned
them that they would lose their jobs for going on illegal and
unauthorized mass leave. Upon leaving said respondent's presence,
they were handed an order directing all participants in the mass action
to return to work in 24 hours or face dismissal, and a memorandum
directing the DECS officials concerned to initiate dismissal
proceedings against those who did not comply and to hire their
replacements. 5 Those directives notwithstanding, the mass actions
continued into the week, with more teachers joining in the days that
followed. In its issue of September 19, 1990, the newspaper Manila
Standard reported that the day previous, the respondent Secretary of
Education had relieved 292 teachers who did not return to their
classes. The next day, however, another daily, Newsday, reported that
the Secretary had revoked its dismissal order and instead placed 56 of
the 292 teachers under preventive suspension, despite which the
protesters' numbers had swelled to 4,000. 6

On the record, what did happen was that, based on reports submitted
by the principals of the various public schools in Metro Manila, the
respondent Secretary of Education had filed motu
proprio administrative complaints against the teachers who had taken
part in the mass actions and defied the return-to-work order on
assorted charges like grave misconduct, gross neglect of duty, gross
violation of the Civil Service Law, absence without official leave, etc.,
and placed them under 90-day preventive suspension. The respondents
were served copies of the charge sheets and given five (5) days to
submit answer or explanation. Later, on October 8, 1990, the
respondent Secretary constituted an investigating committee of four
(4) to determine and take the appropriate course of action on the
formal charges and designated the special prosecutors on detail with
the DECS to handle their prosecution during the formal hearings. 7

On October 11, 1990, the respondent Secretary of Education rendered

the first of his now questioned decisions on the administrative
complaints. In Case No. DECS 90-002, he found twenty (20) respondent
teachers guilty of the charges preferred against them and dismissed
them from office, effective immediately. 8 In the other investigations
that followed and as of December 3, 1990, 658 teachers were
dismissed, 40 were suspended for one (1) year, 33 for nine (9) months,
and 122 for six (6) months; 398 were exonerated. 9

Earlier, on September 19, 1990, the petitioners in G.R. No. 95445 had
filed with the Regional Trial Court of Manila Branch 18, a petition 10 for
prohibition, declaratory relief and preliminary mandatory injunction to
restrain the implementation of the return-to-work order of September
17, 1990 and the suspension or dismissal of any teacher pursuant
thereto and to declare said order null and void. Issuance ex-parte of a
temporary restraining order was sought, but seeing no compelling
reason therefor, the Regional Trial Court instead set the application for
preliminary injunction for hearing, and heard the same, on September
24, 1990. Thereafter and following the submission of memorandums by
the parties, said Court rendered judgment declaring the assailed
return-to-work order valid and binding, and dismissing the petition for
lack of merit. 11

Review of said judgment is sought in G. R. No. 95445.

G.R. No. 95590 is a parallel original proceeding for prohibition,

mandamus and certiorari grounded on the same state of facts and
instituted for substantially the same purpose i.e., the invalidation of
the return-to-work order of the respondent Secretary of Education and
all orders of suspension and/or dismissal thereafter issued by said
respondent against the teachers who had taken part in the mass
actions of September 17, 1990 and the days that followed.

Both cases were ordered consolidated by Resolution issued on

October 25, 1990, 12 and separate comments were filed by the Solicitor
General on behalf of the public respondents, in G.R. No. 95445 on
October 31, 1990, and in G.R. No. 95590 on December 5, 1990. 13 On
November 20, 1990 the parties were heard in oral argument on the
petitioners' united pleas for a temporary restraining order/mandatory
injunction to restore the status quo ante and enjoin the public
respondents from continuing with the issuance of suspension orders
and proceeding with the administrative cases against the teachers
involved in the mass actions.
Said pleas were denied by the Court in its Resolution of December 18,
1990, 14 and a motion for reconsideration filed by the petitioners in G.R.
No. 95590 was likewise denied.

In two separate but identically-worded motions filed on their behalf by

Atty. Froilan M. Bacungan, 15 the following persons, to wit: Florita D.
Guazon, Elisea G. Lazo, Gonzala G. Sioson, Esperanza Valero, Nenita
Pangilinan, Ramon David, Aurora Bosi, Encarnita David, Socorro Sentin,
Crispulo Santos, Rodriguez Bagana, Rodolfo D. Bacsal, Ruben
Bersamina, Rodolfo Arroyo, Irene Gadil, Rebecca Roldan, Rosita
Samson, Priscilla Avendia, Arturo Cabuhat, Rosalinda Caoili, Angelina
Corpuz, Purisima Lena, Elsie Somera, Dedaica Jusay, Teresita Partoza,
Gloria Salvador, Catherine San Agustin, Nestor Aguirre, Lorenzo Real,
Celia Ronquillo, Vicente Carranza, Jessie Villanueva, Yolanda Alura,
Clara Alvarez, Danilo Llamas, Ladera Panita Myrna, Sena, Zenaida
Ligon, Daisy S. Conti, Danilo Caballes, Susan Maragat, Roberto
Manlangit and Elizabeth T. Aguirre, seek leave to withdraw as parties in
G.R. No. 95590. These movants claim that they are such parties
although not individually so named in the petition in said case, being
among those referred to in its title as "other similarly situated public
school teachers too numerous to be impleaded," who had been
administratively charged, then preventively suspended and/or
dismissed in the wake of the mass actions of September 1990. They
assert that since this Court is not a trier of facts, they have opted to
appeal the questioned decisions or actuations of the respondent
Secretary of Education to the Civil Service Commission where they
believe they will have "... all the opportunity to introduce evidence on
how (Secretary) Cario violated their constitutional rights to due
process of law ... security of tenure and ... peaceably to assemble and
petition the government for redress of grievances ...."

An opposition to the first motion was filed 16 which, briefly, contended

that, as this Court had already found that the petitioners had gone on
an unlawful strike and that public respondent Cario's acts were prima
facie lawful, the motion was either an attempt at forum-shopping or
meant to avoid the "inevitable outcome" of issues already pending
final determination by the Court.

The Court's Resolution of December 18, 1990, supra, denying the

petitioners' plea for restoration of the status quo ante and to
restrain/enjoin further suspensions of, and the initiation or
continuation of, administrative proceedings against the teachers
involved, is based on the following postulates:

(1) the undenied indeed, the pleaded and admitted fact that
about 800 teachers, among them the individual petitioners
and other unnamed but "similarly situated" members of the
petitioning associations in both cases, unauthorizedly
absented themselves from their classes on a regular
schoolday, September 17, 1990, in order to participate in a
"mass action" to dramatize their grievances concerning, in
the main, the alleged failure of the public authorities, either
to implement at all or to implement in a just and correct
manner, certain laws and measures intended to benefit
them materially;

(2) the fact, too, that in the days that followed, more mass
actions for the same purpose were undertaken,
notwithstanding a return-to-work order issued by the
respondent Secretary of Education; more teachers joined
the so-called "peaceful assemblies" on September 18, 1990
and the number rising to 4,000 on September 19, 1990; 17

(3) that from the pleaded and admitted facts, these "mass
actions" were to all intents and purposes a strike; they
constituted a concerted and unauthorized stoppage of, or
absence from, work which it was the teachers' duty to
perform, undertaken for essentially economic reasons;

(4) that this court had already definitively ruled that

employees in the public (civil) service, unlike those in the
private sector, do not have the right to strike, although
guaranteed the right to self-organization, to petition
Congress for the betterment of employment terms and
conditions and to negotiate with appropriate government
agencies for the improvement of such working conditions as
are not fixed by law; 18

(5) that upon the foregoing premises, it was prima

facie lawful and within his statutory authority for the
respondent Secretary of Education to take the actions
complained of, to wit: issue a return-to-work order, prefer
 administrative charges against, and place under preventive
suspension, those who failed to comply with said order, and
dismiss from the service those who failed to answer or
controvert the charges; 19

The Court has not since been presented with any consideration of law
or established fact that would impair the validity of these postulates or
preclude continued reliance thereon for the purpose of resolving the
present petitions on their merits.

The underlying issue here is due process; not whether the petitioners
have a right to strike, which it is clear they do not, however justifiable
their reasons, nor whether or not there was in fact such a strike, it
being equally evident from the pleadings that there was, and there
being no dispute about this. What therefore, is brought before the
Court is the question of whether or not any rights of the petitioners
under the due process clause of the Constitution as it applies to
administrative proceedings were violated in the initiation, conduct, or
disposition of the investigations complained of.

Indeed, what the petitioners in G.R. No. 95590 proclaim about denial of
due process being their "paramount complaint" ... "central to their
prayer for interlocutory relief' 20 could as well be said of the merits of
their main cause as of their plea for a restraining order pendente lite
or a preliminary injunction.

There are, however, insuperable obstacles to the Court's taking up that

issue and resolving it in these cases. Said issue is not ripe for
adjudication by this Court in the exercise of its review jurisdiction; and
this, for the obvious reason that it is one of fact. The petitions and
subsequent pleadings of the petitioners allege facts and
circumstances which, it is claimed, show denial of due process, citing
as supposedly "representative samples" 21among others: (a) that
teachers were dismissed on the sole basis of unsworn reports of their
principals and without evidence of their alleged failure to obey the
return-to-work order; (b) that the charge sheets failed to specify the
particular charges or offenses allegedly committed; (c) that some
teachers were not furnished sworn complaints, and others were
suspended without any formal charges; (d) that teachers who
attempted to return within a reasonable time after notice of the return-
to-work order were not accepted back; and similar allegations.
These are however denied and disputed by the public respondents,
who set forth their own version, initially in their separate Comments in
both cases and, later and in greater detail, in their Consolidated
Memorandum of December 3, 1990, supra, from which the following
passages are quoted:

(6) Petitioners in G.R. No. 95545 and G.R. No. 95590 admit
engaging in a strike (referred by semantic interplay as
"concerted activity" or "mass action") directed against
public respondent Cario beginning September 17, 1990,
MPSTA Petition, pp. 3, 9; ACT Petition, pp. 1516).

To avoid the disruption of classes, public respondent Cario,

also on September 17, 1990, issued a 'return to work order'
reminding striking workers that in law, they cannot engage
in strike and warning them that dismissal proceedings will
be instituted against them if they do not return to work with
24 hours from their walkout (MPSTA Petition, p. 4; ACT
Petition, p. 15) and a memorandum to DECS officials
instructing them to notify the striking teachers to return to
work within 24 hours from their walkout and to initiate
dismissal proceedings against those who defy the return to
work order as well as to hire temporary replacements,
MPSTA Petition, p. 4; ACT Petition, pp. 15-16).

The striking teachers who did not heed the return-to-work

order were administratively charged and preventively
suspended for ninety days for grave misconduct, gross
neglect of duty, insubordination, refusal to perform official
duty, absence without leave beginning September 17, 1990
and other violations of Civil Service Law, rules and
regulations. All of striking teachers were served with the
suspension orders and the change sheets notifying them of
the charges and giving them five (5) days from receipt of
the charge sheets within which to file their respective
answers.

With the filing of the administrative complaints and the

receipt of the answers of some of the teachers involved,
public respondent Carino on October 8, 1990 issued a
Memorandum forming an Investigation Committee
composed of Atty, Reno Capinpin of DECS Administrative
Services as Chairman Dr. Alberto Mendoza, representing the
Division Supervisors, Atty. Evangeline de Castro,
representing the City Superintendent of Schools of Manila,
and Atty. Isaias Meleto representing the National PPSTA
Organization, as members. Copy of the aforesaid
Memorandum is hereto attached as Annex "I."

The committee was authorized to meet everyday, even as

Special Prosecutors from the Department of justice on
detail with the DECS were designated to handle the
prosecution during the formal hearings. (Ibid.)

Petitioners in GR No. 95545' and 'G.R. No. 95590' admit

having received the charge sheets and notices of
preventive suspension wherein they were given five days
from receipt of the charges within which to file their
answers (MPSTA Petition, p. 4-1 ACT Petition, p. 16, Annexes
x , to , AA ).

xxx xxx xxx

... Many striking teachers received their preventive

suspension orders and the charge sheets from their
respective principals when they visited their schools. Many
refused to receive and sign receipt therefor; others tore up
the preventive suspension orders and charge sheets in front
of their principals. Instead, they took the occasion to
belittle and insult the substitute teachers who took over
their classrooms temporarily.

The striking teachers were given a period of five days to file

their Answers in line with Sec. 8, Rule III of Rules on
Administrative Disciplinary Cases in CSC Memorandum
Circular No. 46, s. 1989. The motion for extension of time to
file Answer was denied by DECS Task Force because it was
dilatory the alleged reason being that Atty. Fabros is
handling 2,000 cases of teachers. The DECS was
constrained by Sec. 38(d) of P.D. 807 and Sec. 8 of the
Memorandum Circular mentioned which mandate that
administrative cases must be decided within 30 days from
the filing of the charges. Another reason was that many
refused to receive the notice of charges. Also, to delay the
resolution of the cases was to their disadvantage.

Moreover, another reason proferred was that the Regional

Trial Court (RTC) of Manila still had to act on the petition
before it. However, the Motion was filed AFTER the RTC
Manila had already dismissed the Petition.

Nevertheless, answers to the administrative complaints

started pouring in at the DECS, as prepared personally by
the striking teachers or by their lawyers.

After initial assessments of the reports coming in from the

principals of the schools concerned and the answers of the
striking teachers, the DECS Special Task Force prepared on
October 9, 1990 and submitted to respondent Secretary
Carino the Guidelines and Criteria as to the nature of the
evidence to be assessed and the corresponding penalty to
be imposed against the striking teachers, which was
approved by respondent Secretary Carino on the same day.
A copy of the aforesaid Guidelines and Criteria is hereto
attached as Annex "2." Thereafter, the DECS Special Task
Force proceeded with its task of investigating the cases
against the striking teachers.

Those who refused to sign the DECS return-to-work order,

the preventive suspension orders and the charge
sheets, some even tearing up the documents presented to
them by their principals were considered by the DECS
Special Task Force as having waived their right to be heard;
their cases had to be resolved on the basis of the records.
Nevertheless, the DECS Special Task Force summoned the
principals concerned, who then testified under oath
confirming their reports on the absences of the striking
teachers. Some clarificatory questions were asked of them
on the manner of the service of the DECS orders and the
situation obtaining in their schools.

For those who answered the charge sheets, the DECS

Special Task Force set the administrative cases for
hearing. Many of the striking teachers refused to appear at
the hearings but preferred to submit their case on the basis
of their answers.

With regard to those who attended the hearings, each of the

absent or striking teachers was investigated and asked
questions under oath on their answers and the reasons for
their absences and/or joining the teachers' strike. Some
teachers reiterated their answers to the charge sheets,
either giving justifiable reasons for their absences on the
days mentioned or maintaining their stubborn stand that
they have all the right to absent themselves from classes in
the exercise of their constitutional right to join mass action
to demand from the government what are supposedly due
them. Still the DECS Special Task Force was not satisfied
with their written answers and explanation during the
hearings. The principals of the striking teachers were
summoned and they confirmed under oath their reports of
absences and/or on teachers joining the strike.

After having conducted fully their investigations, the DECS

Special Task Force submitted in series their investigation
reports and recommendation for each category of striking
teachers to respondent Secretary Carino. The investigation
reports, together with their supporting documents,
submitted by the DECS Special Task Force indicated clearly
the manner and conduct of the administrative hearings, the
nature and weight of the evidence adduced, and the
correspondingly penalty or exoneration recommended.

On the bases of the investigation reports and

recommendations of the DECS Special Task Force, and after
evaluating the reports and its documents attached,
respondent Secretary Carino promulgated the decisions
either for exoneration, suspension or dismissal. Copies of
the DECS decisions of exoneration, suspension or dismissal
were forwarded to the principals of the striking teachers
concerned. Those exonerated were allowed to resume their
duties and received their back salaries. Some of the
teachers either suspended or dismissed have already
 received the copies of the decisions, either personally or
through mail.

22
xxx xxx xxx

This copious citation is made, not to suggest that the Court finds what
is stated therein to be true and the contrary averments of the petitions
to be false, but precisely to stress that the facts upon which the
question of alleged denial of due process would turn are still in issue,
actively controverted, hence not yet established.

It is not for the Court, which is not a trier of facts, as the petitioners
who would now withdraw correctly put it, to make the crucial
determination of what in truth transpired concerning the disputed
incidents. Even if that were within its competence, it would be at best
a monumental task. At any rate, the petitioners cannot-as it seems
they have done lump together into what amounts to a class action
hundreds of individual cases, each with its own peculiar set of facts,
and expect a ruling that would justly and correctly resolve each and
everyone of those cases upon little more than general allegations,
frontally disputed as already pointed out, of incidents supposedly
"representative" of each case or group of cases.

This case illustrates the error of precipitate recourse to the Supreme

Court, especially when numerous parties desparately situated as far
as the facts are concerned gather under the umbrella of a common
plea, and generalization of what should be alleged with particularity
becomes unavoidable. The petitioners' obvious remedy was NOT to
halt the administrative proceedings but, on the contrary, to take part,
assert and vindicate their rights therein, see those proceedings
through to judgment and if adjudged guilty, appeal to the Civil Service
Commission; or if, pending said proceedings, immediate recourse to
judicial authority was believed necessary because the respondent
Secretary or those acting under him or on his instructions were acting
without or in excess of jurisdiction, or with grave abuse of discretion,
to apply, not directly to the Supreme Court, but to the Regional Trial
Court, where there would be an opportunity to prove the relevant facts
warranting corrective relief.

Parties-litigant are duty bound to observe the proper order of recourse

through the judicial hierarchy; they by-pass the rungs of the judicial
ladder at the peril of their own causes. 23 This Court is a court of last
resort. Its review jurisdiction is limited to resolving questions of law
where there is no dispute of the facts or the facts have already been
determined by lower tribunals, except only in criminal actions where
capital penalties have been imposed.

WHEREFORE, both petitioners are DISMISSED, without prejudice to any

appeals, if still timely, that the individual petitioners may take to the
Civil Service Commission on the matters complained of. The motions
to withdraw, supra, are merely NOTED, this disposition rendering any
express ruling thereon unnecessary. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J. (Chairman), Melencio-Herrera, Gancayco, Bidin, Grio-

Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

Abanilla vs. COA

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for certiorari under Rule 64 in relation to Rule 65

of the 1997 Rules of Civil Procedure, as amended, assailing the

Decision No. 98-465[1] dated December 3, 1998 and Resolution No.

2000-062[2] dated February 15, 2000 rendered by the Commission on

Audit (COA).

The antecedents are:

Pursuant to Presidential Decree 198 or the Provincial Water Utilities

Act of 1973, Metropolitan Cebu Water District (MCWD), a local water

district was organized as a government-owned corporation with

original charter.

Subsequently, MCWD, through its Board of Directors, issued the

following Resolutions giving benefits and privileges to its personnel,

one of whom is Dulce M. Abanilla, MCWDs General

Manager, petitioner herein: (1) Board Resolution No. 054-83 dated May

23, 1983 granting hospitalization privileges; (2) Board Resolution Nos.

091-83 and 0203-85 dated October 21, 1983 and November 20, 1985,

respectively, allowing the monetization of leave credits; (3) Board

Resolution No. 0161-86 dated November 29, 1986 granting Christmas

bonus; and (4) Board Resolution No. 083-88 granting longevity

allowance.

On January 1, 1989, MCWD and Metropolitan Cebu Water District

Employees Union, petitioner-in-intervention, executed a collective

bargaining agreement (CBA) providing for the continuous grant to all

its regular rank and file employees of existing benefits, such as cash

advances, thirteenth month pay, mid-year bonus, Christmas bonus,

vacation and sick leave credits, hospitalization, medicare, uniform

privileges, and water allowance.

On January 1, 1992, the parties renewed their CBA.

On November 13, 1995, an audit team headed by Bernardita T. Jabines

of the COA Regional Office No. VII at Cebu City, one of the

herein respondents, conducted an audit of the accounts and

transactions of MCWD.

Thereafter, the Regional Director of COA Regional Office No. VII, also

a respondent, sent MCWD several notices disallowing the amount

of P12,221,120.86 representing hospitalization benefits, mid-year

bonus, 13th month pay, Christmas bonus and longevity pay. [3]

Aggrieved, petitioner interposed an appeal to respondent COA at

Quezon City. She cited COA Memorandum Circular No. 002-94 providing

that all benefits provided under the duly existing CBAs entered into

prior to March 12, 1992, the date of official entry of judgment of the

Supreme Court ruling in Davao City Water District, et al. vs. CSC and

COA, shall continue up to the respective expiry dates of the benefits or

CBA whichever comes earlier.

On December 3, 1998, respondent COA rendered its Decision No. 98-

465[4] denying petitioners appeal. In sustaining the disallowance in the

amount of P12,221,120.86, respondent COA cited this Courts ruling

in Davao City Water District vs. Civil Service Commission[5] that a water

district is a corporation created pursuant to a special law P.D. No. 198,

as amended, and as such, its officers and employees are covered by

the Civil Service Law.

Respondent COA then held that:

 There is no question that the CBA was concluded after the
decision in the Davao case was promulgated. As far as the
CBA is concerned the critical moment is the date of the
promulgation itself. Any transaction (CBA) concluded after
this date in violation of existing laws and regulations
applicable to government entities is void and of no effect. It
conferred no demandable right, it created no enforceable
obligation.
xxx

PREMISES CONSIDERED, the instant appeal has to be, as it

is hereby, denied. The disallowance in the total amount
of P12,221,120.86 is hereby AFFIRMED.

SO ORDERED.

Petitioner filed a motion for reconsideration but it was denied by

respondent COA in a Resolution No. 2000-062[6] dated February 15,

2000. In denying petitioners motion, respondent COA ruled that the

compensation package of MCWD personnel may no longer be the

subject of a CBA. For the terms of employment of those personnel are

covered, not by the Labor Code, but by the Civil Service Law.

Hence, this petition for certiorari.

Petitioner contends that respondent COA acted with grave abuse

of discretion in disallowing the above benefits and privileges and

contravened the Labor Code provision on non-diminution of benefits.

 The Solicitor General, in his comment, maintains that the COA did

not gravely abuse its discretion in denying petitioners appeal

considering that the terms and conditions of employment, such as the

entitlement of government personnel, like the affected MCWD

employees, to privileges and benefits are governed by the Civil Service

Law, the General Appropriations Act and applicable issuances of the

Department of Budget and Management, not by the Labor Code.

The petition is bereft of merit.

In light of this Courts ruling in Davao City Water District[7] that the

officers and employees of a water district are covered by the Civil

Service Law,[8] petitioners invocation of the CBA, in justifying the

receipt by the MCWD personnel of benefits and privileges, is utterly

misplaced. Thus, we sustain the disallowance by respondent COA.

In Alliance of Government Workers vs. Minister of Labor and

Employment,[9] this Court held:

Subject to the minimum requirements of wage laws and

other labor and welfare legislation, the terms and conditions
of employment in the unionized private sector are settled
through the process of collective bargaining. In government
employment, however, it is the legislature and, where
properly given delegated power, the administrative heads of
government which fix the terms and conditions of
employment. And this is effected through statutes or
 administrative circulars, rules, and regulations, not through
collective bargaining agreements.

While we sustain the disallowance of the above benefits by respondent

COA, however, we find that the MCWD affected personnel who received

the above mentioned benefits and privileges acted in good faith under

the honest belief that the CBA authorized such payment. Consequently,

they need not refund them.

In Querubin vs. Regional Cluster Director, Legal and Adjudication

Office, COA Regional Office VI, Pavia, Iloilo City,[10] citing De Jesus vs.
Commission on Audit,[11] this Court held:

Considering, however, that all the parties here acted in good

faith, we cannot countenance the refund of subject
incentive benefits for the year 1992, which amounts the
petitioners have already received. Indeed, no indicia of bad
faith can be detected under the attendant facts and
circumstances. The officials and chiefs of offices concerned
disbursed such incentive benefits in the honest belief that
the amounts given were due to the recipients and the latter
accept the same with gratitude, confident that they richly
deserve such benefits.

x x x. Petitioners here received the additional allowances

and bonuses in good faith under the honest belief that LWUA
Board Resolution No. 313 authorized such payment. At the
time petitioners received the additional allowances and
bonuses, the Court had not yet decided Baybay Water
District. Petitioners had no knowledge that such payment
was without legal basis. Thus, being in good faith,
petitioners need not refund the allowances and bonuses
they received but disallowed by the COA.
WHEREFORE, the petition is DENIED. The assailed Decision No. 98-465

dated December 3, 1998 and Resolution No. 2000-062 dated February

15, 2000 of respondent COA are AFFIRMED with MODIFICATION in the

sense that the amount of P12,221,120.86 representing disallowed

benefits and privileges should not be refunded by the MCWD personnel.

SO ORDERED.

Lumanta vs. NLRC

FELICIANO, J.:

The present Petition for certiorari seeks to annul and set aside the
Decision of the National Labor Relations Commission rendered on 18
March 1988 in NLRC-NCR Case No. 00- 0301035-87, entitled "Luz
Lumanta, et al., versus Food Terminal Incorporated." The Decision
affirmed an order of the Labor Arbiter dated 31 August 1987 dismissing
petitioners' complaint for lack of Jurisdiction.

On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four (54)

other retrenched employees, filed a complaint for unpaid 'd
retrenchment or separation pay against private respondent Food
Terminal, Inc. ("FTI") with the Department of Labor and Employment.
The complaint was later amended to include charges of underpayment
of wages and non-payment of emergency cost of living allowances
(ECOLA).

Private respondent FTI moved to dismiss the complaint on the ground

of lack of jurisdiction. It argued that being a government-owned and
controlled corporation, its employees are governed by the Civil Service
Law not by the Labor Code, and that claims arising from employment
fall within the jurisdiction of the Civil Service Commission and not the
Department of Labor and Employment.
The petitioners opposed the Motion to Dismiss contending that
although FTI is a corporation owned and controlled by the government,
it has still the marks of a private corporation: it directly hires its
employees without seeking approval from the Civil Service
Commission and its personnel are covered by the Social Security
System and not the Government Service Insurance System. Petitioners
also argued that being a government-owned and controlled corporation
without original charter, private respondent FTl clearly falls outside
the scope of the civil service as marked out in Section 2 (1), Article IX
of the 1987 Constitution.

On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an

Order, 1 the dispositive part of which read:

On account of the above findings the instant case is

governed by the Civil Service Law. The case at bar lies
outside the jurisdictional competence of this Office.

WHEREFORE, premises considered this case is hereby

directed to be DISMISSED for lack of jurisdiction of this
Office to hear and decide the case.

SO ORDERED.

On 18 March 1988, the public respondent National Labor Relations

Commission affirmed on appeal the order of the Labor Arbiter and
dismissed the petitioners' appeal for lack of merit.

Hence this Petition for Certiorari.

The only question raised in the present Petition is whether or not a

labor law claim against a government-owned and controlled
corporation, such as private respondent FTI, falls within the
jurisdiction of the Department of Labor and Employment.

In refusing to take cognizance of petitioners' complaint against private

respondent, the Labor Arbiter and the National Labor Relations
Commission relied chiefly on this Court's ruling in National Housing
Authority v. Juco, 2which held that "there should no longer be any
question at this time that employees of government-owned or
controlled corporations are governed by the civil service law and civil
service rules and regulations.

Juco was decided under the 1973 Constitution, Article II-B, Section 1
(1) of which provided:

The civil service embraces every branch, agency,

subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation.

The 1987 Constitution which took effect on 2 February 1987, has on

this point a notably different provision which reads:

The civil service embraces all branches, subdivisions,

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

The Court, in National Service Corporation (NASECO) v. National Labor

Relations Commission, G.R. No. 69870, promulgated on 29 November
1988, 3 quoting extensively from the deliberations 4 of the 1986
Constitutional Commission in respect of the intent and meaning of the
new phrase "with original charter," in effect held that government-
owned and controlled corporations with original charter refer to
corporations chartered by special law as distinguished from
corporations organized under our general incorporation statute-the
Corporation Code. In NASECO, the company involved had been
organized under the general incorporation statute and was a
subsidiary of the National Investment Development Corporation (NIDC)
which in turn was a subsidiary of the Philippine National Bank, a bank
chartered by a special statute. Thus, government-owned or controlled
corporations like NASECO are effectively excluded from the scope of
the Civil Service.

It is the 1987 Constitution, and not the case law embodied

in Juco, 5 which applies in the case at bar, under the principle that
jurisdiction is determined as of the time of the filing of the
complaint. 6 At the time the complaint against private respondent FTI
was filed (i.e., 20 March 1987), and at the time the decisions of the
respondent Labor Arbiter and National Labor Relations Commission
were rendered (i.e., 31 August 1987 and 18 March 1988, respectively),
the 1987 Constitution had already come into effect. latter of
Instruction No. 1013, dated 19 April 1980, included Food Terminal, Inc.
in the category of "government-owned or controlled
7
corporations." Since then, FTI served as the marketing arm of the
National Grains Authority (now known as the National Food Authority).
The pleadings show that FTI was previously a privately owned
enterprise, created and organized under the general incorporation law,
with the corporate name "Greater Manila Food Terminal Market,
Inc." 8The record does not indicate the precise amount of the capital
stock of FM that is owned by the government; the petitioners' claim,
and this has not been disputed, that FTl is not hundred percent (100%)
government-owned and that it has some private shareholders.

We conclude that because respondent FTI is government-owned and

controlled corporation without original charter, it is the Department of
Labor and Employment, and not the Civil Service Commission, which
has jurisdiction over the dispute arising from employment of the
petitioners with private respondent FTI, and that consequently, the
terms and conditions of such employment are governed by the Labor
Code and not by the Civil Service Rules and Regulations.

Public respondent National Labor Relations Commission acted without

or in excess of its jurisdiction in dismissing petitioners complaint.

ACCORDINGLY, the Petition for certiorari is hereby GRANTED and the

Decision of public respondent Labor Arbiter dated 31 August 1987 and
the Decision of public respondent Commission dated 18 March 1988,
both in NLRC-NCR Case No. 00-03-01035-87 are hereby SET ASIDE. The
case is hereby REMANDED to the Labor Arbiter for further appropriate
proceedings.

Real vs. Sangu Philippines

DECISION

DEL CASTILLO, J.:

The perennial question of whether a complaint for illegal
dismissal is intra-corporate and thus beyond the jurisdiction of
the Labor Arbiter is the core issue up for consideration in this
case.

This Petition for Review on Certiorari assails the

[1]
Decision dated June 28, 2005 of the Court of Appeals (CA) in
CA-G.R. SP. No. 86017 which dismissed the petition
for certiorari filed before it.
Factual Antecedents

Petitioner Renato Real was the Manager of respondent

corporation Sangu Philippines, Inc., a corporation engaged in
the business of providing manpower for general services, like
janitors, janitresses and other maintenance personnel, to
various clients. In 2001, petitioner, together with 29 others who
were either janitors, janitresses, leadmen and maintenance
men, all employed by respondent corporation, filed their
respective Complaints[2] for illegal dismissal against the latter
and respondent Kiichi Abe, the corporations Vice-President and
General Manager. These complaints were later on consolidated.

With regard to petitioner, he was removed from his position as

Manager through Board Resolution 2001-03[3] adopted by
respondent corporations Board of Directors.Petitioner
complained that he was neither notified of the Board Meeting
during which said board resolution was passed nor formally
charged with any infraction. He just received from respondents
a letter[4] dated March 26, 2001 stating that he has been
terminated from service effective March 25, 2001 for the
following reasons: (1) continuous absences at his post at Ogino
Philippines Inc. for several months which was detrimental to the
corporations operation; (2) loss of trust and confidence; and, (3)
to cut down operational expenses to reduce further losses
being experienced by respondent corporation.

Respondents, on the other hand, refuted petitioners claim of

illegal dismissal by alleging that after petitioner was appointed
Manager, he committed gross acts of misconduct detrimental to
the company since 2000. According to them, petitioner would
almost always absent himself from work without informing the
corporation of his whereabouts and that he would come to the
office only to collect his salaries. As he was almost always
absent, petitioner neglected to supervise the employees
resulting in complaints from various clients about employees
performance. In one instance, petitioner together with a few
others, while apparently drunk, went to the premises of one of
respondents clients, Epson Precision (Phils.) Inc., and engaged
in a heated argument with the employees therein. Because of
this, respondent Abe allegedly received a complaint from
Epsons Personnel Manager concerning petitioners
conduct. Respondents likewise averred that petitioner
established a company engaged in the same business as
respondent corporations and even submitted proposals for
janitorial services to two of the latters clients. Because of all
these, the Board of Directors of respondent corporation met on
March 24, 2001 and adopted Board Resolution No. 2001-03
removing petitioner as Manager. Petitioner was thereafter
informed of his removal through a letter dated March 26,
2001 which he, however, refused to receive.

Further, in what respondents believed to be an act of retaliation,

petitioner allegedly encouraged the employees who had been
placed in the manpower pool to file a complaint for illegal
dismissal against respondents. Worse, he later incited those
assigned in Epson Precision (Phils.) Inc., Ogino Philippines
Corporation, Hitachi Cable Philippines Inc. and Philippine TRC
Inc. to stage a strike on April 10 to 16, 2001. Not satisfied,
petitioner together with other employees also barricaded the
premises of respondent corporation. Such acts respondents
posited constitute just cause for petitioners dismissal and that
same was validly effected.

Rulings of the Labor Arbiter and the National Labor Relations

Commission

The Labor Arbiter in a Decision[5] dated June 5, 2003 declared

petitioner and his co-complainants as having been illegally
dismissed and ordered respondents to reinstate complainants
to their former positions without loss of seniority rights and
other privileges and to pay their full backwages from the time of
their dismissal until actually reinstated and furthermore, to pay
them attorneys fees. The Labor Arbiter found no convincing
proof of the causes for which petitioner was terminated and
noted that there was complete absence of due process in the
manner of his termination.

Respondents thus appealed to the National Labor Relations

Commission (NLRC) and raised therein as one of the issues the
lack of jurisdiction of the Labor Arbiter over petitioners
complaint. Respondents claimed that petitioner is both a
stockholder and a corporate officer of respondent corporation,
hence, his action against respondents is an intra-corporate
controversy over which the Labor Arbiter has no jurisdiction.

The NLRC found such contention of respondents to be

meritorious. Aside from petitioners own admission in the
pleadings that he is a stockholder and at the same time
occupying a managerial position, the NLRC also gave weight to
the corporations General Information Sheet[6] (GIS) dated
October 27, 1999 listing petitioner as one of its stockholders,
consequently his termination had to be effected through a
board resolution. These, the NLRC opined, clearly established
petitioners status as a stockholder and as a corporate officer
and hence, his action against respondent corporation is an
intra-corporate controversy over which the Labor Arbiter has no
jurisdiction. As to the other complainants, the NLRC ruled that
there was no dismissal. The NLRC however, modified the
appealed decision of the Labor Arbiter in a Decision[7] dated
February 13, 2004, the dispositive portion of which reads:

WHEREFORE, all foregoing premises considered, the appealed

Decision dated June 5, 2003 is hereby MODIFIED. Accordingly,
judgment is hereby rendered DISMISSING the complaint of
Renato Real for lack of jurisdiction. As to the rest of the
complainants, they are hereby ordered to immediately report
back to work but without the payment of backwages.

All other claims against respondents including attorneys

fees are DISMISSED for lack of merit.

SO ORDERED.

Still joined by his co-complainants, petitioner brought the case

to the CA by way of petition for certiorari.
Ruling of the Court of Appeals

Before the CA, petitioner imputed upon the NLRC grave abuse of
discretion amounting to lack or excess of jurisdiction in
declaring him a corporate officer and in holding that his action
against respondents is an intra-corporate controversy and thus
beyond the jurisdiction of the Labor Arbiter.

While admitting that he is indeed a stockholder of respondent

corporation, petitioner nevertheless disputed the declaration of
the NLRC that he is a corporate officer thereof. He posited that
his being a stockholder and his being a managerial employee do
not ipso facto confer upon him the status of a corporate
officer. To support this contention, petitioner called the CAs
attention to the same GIS relied upon by the NLRC when it
declared him to be a corporate officer. He pointed out that
although said information sheet clearly indicates that he is a
stockholder of respondent corporation, he is not an officer
thereof as shown by the entry N/A or not applicable opposite his
name in the officer column. Said column requires that the
particular position be indicated if the person is an officer and if
not, the entry N/A. Petitioner further argued that the fact that
his dismissal was effected through a board resolution does not
likewise mean that he is a corporate officer. Otherwise, all that
an employer has to do in order to avoid compliance with the
requisites of a valid dismissal under the Labor Code is to
dismiss a managerial employee through a board
resolution. Moreover, he insisted that his action for illegal
dismissal is not an intra-corporate controversy as same
stemmed from employee-employer relationship which is well
within the jurisdiction of the Labor Arbiter. This can be deduced
and is bolstered by the last paragraph of the termination letter
sent to him by respondents stating that he is entitled to
benefits under the Labor Code, to wit:

In this connection (his dismissal) you are entitled to separation

pay and other benefits provided for under the Labor Code of
the Philippines.[8] (Emphasis supplied)
In contrast, respondents stood firm that the action against
them is an intra-corporate controversy. It cited Tabang v.
National Labor Relations Commission[9]wherein this Court
declared that an intra-corporate controversy is one which arises
between a stockholder and the corporation; that [t]here is no
distinction, qualification, nor any exemption whatsoever; and
that it is broad and covers all kinds of controversies between
stockholders and corporations. In view of this ruling and since
petitioner is undisputedly a stockholder of the corporation,
respondents contended that the action instituted by petitioner
against them is an intra-corporate controversy cognizable only
by the appropriate regional trial court. Hence, the NLRC
correctly dismissed petitioners complaint for lack of
jurisdiction.

In the assailed Decision[10] dated June 28, 2005, the CA sided

with respondents and affirmed the NLRCs finding that aside
from being a stockholder of respondent corporation, petitioner
is also a corporate officer thereof and consequently, his
complaint is an intra-corporate controversy over which the labor
arbiter has no jurisdiction. Said court opined that if it was true
that petitioner is a mere employee, the respondent corporation
would not have called a board meeting to pass a resolution for
petitioners dismissal considering that it was very tedious for
the Board of Directors to convene and to adopt a resolution
every time they decide to dismiss their managerial
employees. To support its finding, the CA likewise
cited Tabang. As to petitioners co-complainants, the CA
likewise affirmed the NLRCS finding that they were never
dismissed from the service. The dispositive portion of the CA
Decision reads:

WHEREFORE, the instant petition is hereby

DISMISSED. Accordingly, the assailed decision and resolution
of the public respondent National Labor Relations Commission
in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-
6619-02-B/05-6620-02-B/10-6637-01-B/10-6833-01-B, STANDS.

SO ORDERED.
Now alone but still undeterred, petitioner elevated the case to
us through this Petition for Review on Certiorari.
The Parties Arguments

Petitioner continues to insist that he is not a corporate

officer. He argues that a corporate officer is one who holds an
elective position as provided in the Articles of Incorporation or
one who is appointed to such other positions by the Board of
Directors as specifically authorized by its By-Laws. And, since
he was neither elected nor is there any showing that he was
appointed by the Board of Directors to his position as Manager,
petitioner maintains that he is not a corporate officer contrary
to the findings of the NLRC and the CA.

Petitioner likewise contends that his complaint for illegal

dismissal against respondents is not an intra-corporate
controversy. He avers that for an action or suit between a
stockholder and a corporation to be considered an intra-
corporate controversy, same must arise from intra-corporate
relations, i.e., an action involving the status of a stockholder as
such. He believes that his action against the respondents does
not arise from intra-corporate relations but rather from
employer-employee relations.This, according to him, was even
impliedly recognized by respondents as shown by the earlier
quoted portion of the termination letter they sent to him.

For their part, respondents posit that what petitioner is

essentially assailing before this Court is the finding of the NLRC
and the CA that he is a corporate officer of respondent
corporation. To the respondents, the question of whether
petitioner is a corporate officer is a question of fact which, as
held in a long line of jurisprudence, cannot be the subject of
review under this Petition for Review on Certiorari. At any rate,
respondents insist that petitioner who is undisputedly a
stockholder of respondent corporation is likewise a corporate
officer and that his action against them is an intra-corporate
dispute beyond the jurisdiction of the labor tribunals. To support
this, they cited several jurisprudence such as Pearson &
George (S.E. Asia), Inc. v. National Labor Relations Commission,
[11]
Philippine School of Business Administration v. Leano,
[12]
Fortune Cement Corporation v. National Labor Relations
Commission[13] and again, Tabang v. National Labor Relations
Commission.[14]

Moreover, in an attempt to demolish petitioners claim that

the present controversy concerns employer-employee relations,
respondents enumerated the following facts and
circumstances: (1) Petitioner was an incorporator, stockholder
and manager of respondent company; (2) As an incorporator, he
was one of only seven incorporators of respondent corporation
and one of only four Filipino members of the Board of Directors;
(3) As stockholder, he has One Thousand (1,000) of the Ten
Thousand Eight Hundred (10,800) common shares held by
Filipino stockholders, with a par-value of One Hundred
Thousand Pesos (P100,000.00); (4) His appointmentas manager
was by virtue of Section 1, Article IV of respondent corporations
By-Laws; (5) As manager, he had direct management and
authority over all of respondent corporations skilled employees;
(6) Petitioner has shown himself to be an incompetent manager,
unable to properly supervise the employees and even causing
friction with the corporations clients by engaging in unruly
behavior while in clients premises; (7) As if his incompetence
was not enough, in a blatant and palpable act of disloyalty, he
established another company engaged in the same line of
business as respondent corporation; (8) Because of these acts
of incompetence and disloyalty, respondent corporation through
a Resolution adopted by its Board of Directors was finally
constrained to remove petitioner as Manager and declare his
office vacant; (9) After his removal, petitioner urged the
employees under him to stage an unlawful strike by leading
them to believe that they have been illegally dismissed from
employment.[15] Apparently, respondents intended to show from
this enumeration that petitioners removal pertains to his
relationship with respondent corporation, that is, his utter
failure to advance its interest and the prejudice caused by his
acts of disloyalty. For this reason, respondents see the action
against them not as a case between an employer and an
employee as what petitioner alleges, but one by an officer and
at same time a major stockholder seeking to be reinstated to
his former office against the corporation that declared his
position vacant.

Finally, respondents state that the fact that petitioner is

being given benefits under the Labor Code as stated in his
termination letter does not mean that they are recognizing the
employer-employee relations between them. They explain that
the benefits provided under the Labor Code were merely made
by respondent corporation as the basis in determining
petitioners compensation package and that same are merely
part of the perquisites of petitioners office as a director and
manager. It does not and it cannot change the intra-corporate
nature of the controversy. Hence, respondents pray that this
petition be dismissed for lack of merit.

Issues

From the foregoing and as earlier mentioned, the core

issue to be resolved in this case is whether petitioners
complaint for illegal dismissal constitutes an intra-corporate
controversy and thus, beyond the jurisdiction of the Labor
Arbiter.

Our Ruling
Two-tier test in determining the
existence of intra-corporate
controversy

Respondents strongly rely on this Courts pronouncement in the

1997 case of Tabang v. National Labor Relations Commission, to
wit:

[A]n intra-corporate controversy is one which arises between a

stockholder and the corporation. There is no distinction,
qualification nor any exemption whatsoever. The provision is
broad and covers all kinds of controversies between
stockholders and corporations.[16]

In view of this, respondents contend that even if petitioner

challenges his being a corporate officer, the present case still
constitutes an intra-corporate controversy as petitioner is
undisputedly a stockholder and a director of respondent
corporation.

It is worthy to note, however, that before the promulgation of

the Tabang case, the Court provided in Mainland Construction
Co., Inc. v. Movilla[17] a better policy in determining which
between the Securities and Exchange Commission (SEC) and
the Labor Arbiter has jurisdiction over termination disputes,
[18]
or similarly, whether they are intra-corporate or not, viz:

The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders
and the corporation does not necessarily place the dispute
within the ambit of the jurisdiction of the SEC (now the
Regional Trial Court[19]). The better policy to be followed in
determining jurisdiction over a case should be to consider
concurrent factors such as the status or relationship of the
 parties or the nature of the question that is subject of their
controversy. In the absence of any one of these factors, the
SEC will not have jurisdiction. Furthermore, it does not
necessarily follow that every conflict between the corporation
and its stockholders would involve such corporate matters as
only SEC (now the Regional Trial Court [20]) can resolve in the
exercise of its adjudicatory or quasi-judicial powers. (Emphasis
ours)

And, while Tabang was promulgated later than Mainland

Construction Co., Inc., the better policy enunciated in the latter
appears to have developed into a standard approach in
classifying what constitutes an intra-corporate
controversy. This is explained lengthily in Reyes v. Regional
Trial Court of Makati, Br. 142,[21] to wit:

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the

Courts approach in classifying what constitutes an intra-
corporate controversy. Initially, the main consideration in
determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-
corporate relationship existing between or among the
parties. The types of relationships embraced under Section 5(b)
x x x were as follows:

a) between the corporation, partnership or association and the

public;
b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c) between the corporation, partnership or association and the
State as far as its franchise, permit or license to operate is
concerned; and
d) among the stockholders, partners or associates themselves.

The existence of any of the above intra-corporate

relations was sufficient to confer jurisdiction to the SEC (now
the RTC), regardless of the subject matter of the dispute. This
came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta

del Sol Mountain Reserve, Inc., the Court introduced the nature
of the controversy test. We declared in this case that it is not
the mere existence of an intra-corporate relationship that gives
rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a
corporation, its directors, officers, or stockholders. We saw that
there is no legal sense in disregarding or minimizing the value
of the nature of the transactions which gives rise to the
dispute.

Under the nature of the controversy test, the incidents of

that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-
corporate.The controversy must not only be rooted in the
existence of an intra-corporate relationship, but must as well
pertain to the enforcement of the parties correlative rights and
obligations under the Corporation Code and the internal and
intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy
exists.

The Court then combined the two tests and declared that
jurisdiction should be determined by considering not only the
status or relationship of the parties, but also the nature of the
question under controversy. This two-tier test was adopted in
the recent case of Speed Distribution Inc. v. Court of Appeals:

To determine whether a case involves an intra-

corporate controversy, and is to be heard and decided by
the branches of the RTC specifically designated by the
Court to try and decide such cases, two elements must
concur: (a) the status or relationship of the parties, and
(2) the nature of the question that is the subject of their
controversy.
 The first element requires that the controversy
must arise out of intra-corporate or partnership relations
between any or all of the parties and the corporation,
partnership, or association of which they are not
stockholders, members or associates, between any or all
of them and the corporation, partnership or association
of which they are stockholders, members or associates,
respectively; and between such corporation, partnership,
or association and the State insofar as it concerns the
individual franchises. The second element requires that
the dispute among the parties be intrinsically connected
with the regulation of the corporation. If the nature of the
controversy involves matters that are purely civil in
character, necessarily, the case does not involve an
intra-corporate controversy. [Citations omitted.]

Guided by this recent jurisprudence, we thus find no merit in

respondents contention that the fact alone that petitioner is a
stockholder and director of respondent corporation
automatically classifies this case as an intra-corporate
controversy. To reiterate, not all conflicts between the
stockholders and the corporation are classified as intra-
corporate. There are other factors to consider in determining
whether the dispute involves corporate matters as to consider
them as intra-corporate controversies.

What then is the nature of petitioners Complaint for Illegal

Dismissal? Is it intra-corporate and thus beyond the jurisdiction
of the Labor Arbiter? We shall answer this question by using the
standards set forth in the Reyes case.

No intra-corporate relationship
between the parties
 As earlier stated, petitioners status as a stockholder and
director of respondent corporation is not disputed. What the
parties disagree on is the finding of the NLRC and the CA that
petitioner is a corporate officer. An examination of the
complaint for illegal dismissal, however, reveals that the root of
the controversy is petitioners dismissal as Manager of
respondent corporation, a position which respondents claim to
be a corporate office. Hence, petitioner is involved in this case
not in his capacity as a stockholder or director, but as an
alleged corporate officer. In applying the relationship test,
therefore, it is necessary to determine if petitioner is a
corporate officer of respondent corporation so as to establish
the intra-corporate relationship between the parties. And albeit
respondents claim that the determination of whether petitioner
is a corporate officer is a question of fact which this Court
cannot pass upon in this petition for review on certiorari, we
shall nonetheless proceed to consider the same because such
question is not the main issue to be resolved in this case but is
merely collateral to the core issue earlier mentioned.

Petitioner negates his status as a corporate officer by

pointing out that although he was removed as Manager through
a board resolution, he was never elected to said position nor
was he appointed thereto by the Board of Directors. While the
By-Laws of respondent corporation provides that the Board may
from time to time appoint such officers as it may deem
necessary or proper, he avers that respondents failed to present
any board resolution that he was appointed pursuant to said By-
Laws. He instead alleges that he was hired as Manager of
respondent corporation solely by respondent Abe. For these
reasons, petitioner claims to be a mere employee of respondent
corporation rather than as a corporate officer.

We find merit in petitioners contention.

 Corporate officers in the context of Presidential Decree
No. 902-A are those officers of the corporation who are given
that character by the Corporation Code or by the corporations
by-laws. There are three specific officers whom a corporation
must have under Section 25 of the Corporation Code. These are
the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have
such other officers as may be provided for by its by-laws like,
but not limited to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus limited by
law and by the corporations by-laws.[22]
Respondents claim that petitioner was appointed Manager by
virtue of Section 1, Article IV of respondent corporations By-
Laws which provides:
ARTICLE IV
OFFICER

Section 1. Election/Appointment Immediately after their

election, the Board of Directors shall formally organize by
electing the President, Vice-President, the Secretary at said
meeting.

The Board, may from time to time, appoint such other officers
as it may determine to be necessary or proper . Any two (2) or
more positions may be held concurrently by the same person,
except that no one shall act as President and Treasurer or
Secretary at the same time.

x x x x[23] (Emphasis ours)

We have however examined the records of this case and

we find nothing to prove that petitioners appointment was made
pursuant to the above-quoted provision of respondent
corporations By-Laws. No copy of board resolution appointing
petitioner as Manager or any other document showing that he
was appointed to said position by action of the board was
submitted by respondents. What we found instead were mere
allegations of respondents in their various pleadings[24] that
petitioner was appointed as Manager of respondent corporation
and nothing more. The Court has stressed time and again that
allegations must be proven by sufficient evidence because
mere allegation is definitely not evidence.[25]

It also does not escape our attention that respondents

made the following conflicting allegations in their Memorandum
on Appeal[26] filed before the NLRC which cast doubt on
petitioners status as a corporate officer, to wit:

xxxx

24. Complainant-appellee Renato Real was appointed as

the manager of respondent-appellant Sangu on November 6,
1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-
shi, Ibaraki-ken Japan. He was staying in Japan as an illegal
alien for the past eleven (11) years. He had a problem with his
family here in the Philippines which prompted him to surrender
himself to Japans Bureau of Immigration and was deported
back to the Philippines. His former employer, Mr. Tsutomo
Nogami requested Mr. Masahiko Shibata, one of respondent-
appellant Sangus Board of Directors, if complainant-appellee
Renato Real could work as one of its employees here in the
Philippines because he had been blacklisted at Japans
Immigration Office and could no longer go back to Japan . And
so it was arranged that he would serve as respondent-appellant
Sangus manager, receiving a salary of P25,000.00. As such, he
was tasked to oversee the operations of the company. x x
x (Emphasis ours)

xxxx
As earlier stated, complainant-appellee Renato Real
was hired as the manager of respondent-appellant Sangu. As
 such, his position was reposed with full trust and confidence. x
xx

While respondents repeatedly claim that petitioner was

appointed as Manager pursuant to the corporations By-Laws,
the above-quoted inconsistencies in their allegations as to how
petitioner was placed in said position, coupled by the fact that
they failed to produce any documentary evidence to prove that
petitioner was appointed thereto by action or with approval of
the board, only leads this Court to believe otherwise. It has
been consistently held that [a]n office is created by the charter
of the corporation and the officer is elected (or appointed) by
the directors or stockholders.[27] Clearly here, respondents failed
to prove that petitioner was appointed by the board of
directors.Thus, we cannot subscribe to their claim that
petitioner is a corporate officer. Having said this, we find that
there is no intra-corporate relationship between the parties
insofar as petitioners complaint for illegal dismissal is
concerned and that same does not satisfy the relationship test.

Present controversy does not

relate to intra-corporate dispute

We now go to the nature of controversy test. As earlier stated,

respondents terminated the services of petitioner for the
following reasons: (1) his continuous absences at his post at
Ogino Philippines, Inc; (2) respondents loss of trust and
confidence on petitioner; and, (3) to cut down operational
expenses to reduce further losses being experienced by the
corporation. Hence, petitioner filed a complaint for illegal
dismissal and sought reinstatement, backwages, moral
damages and attorneys fees. From these, it is not difficult to
see that the reasons given by respondents for dismissing
petitioner have something to do with his being a Manager of
respondent corporation and nothing with his being a director or
stockholder. For one, petitioners continuous absences in his
post in Ogino relates to his performance as Manager. Second,
respondents loss of trust and confidence in petitioner stemmed
from his alleged acts of establishing a company engaged in the
same line of business as respondent corporations and
submitting proposals to the latters clients while he was still
serving as its Manager. While we note that respondents also
claim these acts as constituting acts of disloyalty of petitioner
as director and stockholder, we, however, think that same is a
mere afterthought on their part to make it appear that the
present case involves an element of intra-corporate
controversy. This is because before the Labor Arbiter,
respondents did not see such acts to be disloyal acts of a
director and stockholder but rather, as constituting willful
breach of the trust reposed upon petitioner as Manager.[28] It
was only after respondents invoked the Labor Arbiters lack of
jurisdiction over petitioners complaint in the Supplemental
Memorandum of Appeal[29] filed before the NLRC that
respondents started considering said acts as such. Third, in
saying that they were dismissing petitioner to cut operational
expenses, respondents actually want to save on the salaries
and other remunerations being given to petitioner as its
Manager. Thus, when petitioner sought for reinstatement, he
wanted to recover his position as Manager, a position which we
have, however, earlier declared to be not a corporate
position. He is not trying to recover a seat in the board of
directors or to any appointive or elective corporate position
which has been declared vacant by the board. Certainly, what
we have here is a case of termination of employment which is a
labor controversy and not an intra-corporate dispute. In sum, we
hold that petitioners complaint likewise does not satisfy the
nature of controversy test.
With the elements of intra-corporate controversy being absent
in this case, we thus hold that petitioners complaint for illegal
dismissal against respondents is not intra-corporate. Rather, it
is a termination dispute and, consequently, falls under the
jurisdiction of the Labor Arbiter pursuant to Section 217[30] of the
Labor Code.

We take note of the cases cited by respondents and find them

inapplicable to the case at bar. Fortune Cement Corporation v.
National Labor Relations Commission[31]involves a member of
the board of directors and at the same time a corporate officer
who claims he was illegally dismissed after he was stripped of
his corporate position of Executive Vice-President because of
loss of trust and confidence. On the other hand, Philippine
School of Business Administration v. Leano[32] and Pearson &
George v. National Labor Relations Commission[33] both concern
a complaint for illegal dismissal by corporate officers who were
not re-elected to their respective corporate positions. The Court
declared all these cases as involving intra-corporate
controversies and thus affirmed the jurisdiction of the SEC (now
the RTC)[34] over them precisely because they all relate to
corporate officers and their removal or non-reelection to their
respective corporate positions. Said cases are by no means
similar to the present case because as discussed earlier,
petitioner here is not a corporate officer.

With the foregoing, it is clear that the CA erred in affirming the

decision of the NLRC which dismissed petitioners complaint for
lack of jurisdiction. In cases such as this, the Court normally
remands the case to the NLRC and directs it to properly dispose
of the case on the merits. However, when there is enough basis
on which a proper evaluation of the merits of petitioners case
may be had, the Court may dispense with the time-consuming
procedure of remand in order to prevent further delays in the
disposition of the case.[35] It is already an accepted rule of
procedure for us to strive to settle the entire controversy in a
single proceeding, leaving no root or branch to bear the seeds
of litigation. If, based on the records, the pleadings, and other
evidence, the dispute can be resolved by us, we will do so to
serve the ends of justice instead of remanding the case to the
lower court for further proceedings.[36] We have gone over the
records before us and we are convinced that we can now
altogether resolve the issue of the validity of petitioners
dismissal and hence, we shall proceed to do so.

Petitioners dismissal not in

accordance with law

In an illegal dismissal case, the onus probandi rests on the

employer to prove that [the] dismissal of an employee is for a
valid cause.[37] Here, as correctly observed by the Labor Arbiter,
respondents failed to produce any convincing proof to support
the grounds for which they terminated petitioner. Respondents
contend that petitioner has been absent for several months, yet
they failed to present any proof that petitioner was indeed
absent for such a long time. Also, the fact that petitioner was
still able to collect his salaries after his alleged absences casts
doubts on the truthfulness of such charge. Respondents
likewise allege that petitioner engaged in a heated argument
with the employees of Epson, one of respondents clients. But
just like in the charge of absenteeism, there is no showing that
an investigation on the matter was done and that disciplinary
action was imposed upon petitioner. At any rate, we have
reviewed the records of this case and we agree with the Labor
Arbiter that under the circumstances, said charges are not
sufficient bases for petitioners termination. As to the charge of
breach of trust allegedly committed by petitioner when he
established a new company engaged in the same line of
business as respondent corporations and submitted proposals
to two of the latters clients while he was still a Manager, we
again observe that these are mere allegations without
sufficient proof. To reiterate, allegations must be proven by
sufficient evidence because mere allegation is definitely not
evidence.[38]

Moreover, petitioners dismissal was effected without due

process of law. The twin requirements of notice and hearing
constitute the essential elements of due process. The law
requires the employer to furnish the employee sought to be
dismissed with two written notices before termination of
employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for
which his dismissal is sought in order to afford him an
opportunity to be heard and to defend himself with the
assistance of counsel, if he desires, and (2) a subsequent notice
informing the employee of the employers decision to dismiss
him. This procedure is mandatory and its absence taints the
dismissal with illegality.[39] Since in this case, petitioners
dismissal was effected through a board resolution and all that
petitioner received was a letter informing him of the boards
decision to terminate him, the abovementioned procedure was
clearly not complied with. All told, we agree with the findings of
the Labor Arbiter that petitioner has been illegally
dismissed. And, as an illegally dismissed employee is entitled to
the two reliefs of backwages and reinstatement,[40] we affirm
the Labor Arbiters judgment ordering petitioners reinstatement
to his former position without loss of seniority rights and other
privileges and awarding backwages from the time of his
dismissal until actually reinstated. Considering that petitioner
has to secure the services of counsel to protect his interest and
necessarily has to incur expenses, we likewise affirm the award
of attorneys fees which is equivalent to 10% of the total
backwages that respondents must pay petitioner in accordance
with this Decision.

WHEREFORE, the petition is hereby GRANTED. The

assailed June 28, 2005 Decision of the Court of Appeals insofar
as it affirmed the National Labor Relations Commissions
dismissal of petitioners complaint for lack of jurisdiction, is
hereby REVERSED and SET ASIDE. The June 5, 2003 Decision
of the Labor Arbiter with respect to petitioner Renato Real
is AFFIRMED and this case is ordered REMANDED to the
National Labor Relations Commission for the computation of
petitioners backwages and attorneys fees in accordance with
this Decision.

SO ORDERED.