Labor Standards Nov-Dec

LABOR STANDARDS
ATTY BALINO
Statutory Reference:
Art. 91 to 96 of the
Labor Code and related provisions in the Omnibus Rules
RA 8187 Paternity Leave Act

REPUBLIC ACT NO. 8187
AN ACT GRANTING PATERNITY LEAVE OF SEVEN (7) DAYS WITH FULLPAY TO

ALL MARRIED MALE EMPLOYEES IN THE PRIVATE AND PUBLIC SECTORS FOR
THE FIRST FOUR (4) DELIVERIES OF THE LEGITIMATESPOUSE WITH WHOM HE
IS COHABITING AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:
SECTION 1. Short Title. - This Act shall be known as the "Paternity Leave Act of
1996".
SECTION 2. Notwithstanding any law, rules and regulations to the contrary, every
married male employee in the private and public sectors shall be entitled to a paternity
leave of seven (7) days with full pay for the first four (4) deliveries of the legitimate
spouse with whom he is cohabiting. The male employee applying for paternity leave shall
notify his employer of the pregnancy of his legitimate spouse and the expected date of
such delivery.
For purposes, of this Act, delivery shall include childbirth or any miscarriage.
SECTION 3. Definition of Term. - For purposes of this Act, Paternity Leave refers to
the benefits granted to a married male employee allowing him not to report for work for
seven (7)
days but continues to earn the compensation therefor, on the condition that his spouse
has delivered a child or suffered a miscarriage for purposes of enabling him to effectively
lend
support to his wife in her period of recovery and/or in the nursing of the newly-born child.
SECTION 4. The Secretary of Labor and Employment, the Chairman of the Civil
Service Commission and the Secretary of Health shall, within thirty (30) days from the
effectivity of
this Act, issue such rules and regulations necessary for the proper implementation of the
provisions hereof.
SECTION 5. Any person, corporation, trust, firm, partnership, association or entity

found violating this Act or the rules and regulations promulgated thereunder shall be
punished by a fine not exceeding Twenty-five thousand pesos (P25,000) or
imprisonment of not less than thirty (30)days nor more than six (6) months.
If the violation is committed by a corporation, trust or firm, partnership, association or

any other entity, the penalty of imprisonment shall be imposed on the entity's
responsible officers, including, but not limited to, the president, vice-president, chief
executive officer, general manager, managing director or partner directly responsible
therefor.
SECTION 6. Nondiminution Clause. - Nothing in this Act shall be construed to reduce

any existing benefits of any form granted under existing laws, decrees, executive orders,
or any
contract agreement or policy between employer and employee.
SECTION 7. Repealing Clause. - All laws, ordinances, rules, regulations, issuances,

or parts thereof which are inconsistent with this Act are hereby repealed or modified
accordingly.
SECTION 8. Effectivity. - This Act shall take effect (15) days from its publication in the
Official Gazette or in at least two (2) newspapers of national circulation.
RA 8282 Maternity Leave Act
RA 8972 Solo Parents' Welfare Act
REPUBLIC ACT NO. 8972
AN ACT PROVIDING FOR BENEFITS AND PRIVILEGES TO SOLO PARENTS AND

THEIR CHILDREN, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines Congress

assembled:
Section 1. Title. - This Act shall be known as the "Solo Parents' Welfare Act of 2000."
Section 2. Declaration of Policy. - It is the policy of the State to promote the family as
the foundation of the nation, strengthen its solidarity and ensure its total development.
Towards this end, it shall develop a comprehensive program of services for solo parents
and their children to be carried out by the Department of Social Welfare and
Development (DSWD), the Department of Health (DOH), the Department of Education,
Culture and Sports (DECS), the Department of the Interior and Local Government
(DILG), the Commission on Higher Education (CHED), the Technical Education and
Skills Development Authority (TESDA), the National Housing Authority (NHA), the
Department of Labor and Employment (DOLE) and other related government and
nongovernment agencies.
Section 3. Definition of Terms. - Whenever used in this Act, the following terms shall
mean as follows:
(a) "Solo parent" - any individual who falls under any of the following categories:
(1) A woman who gives birth as a result of rape and other crimes against
chastity even without a final conviction of the offender: Provided, That the
mother keeps and raises the child;
(2) Parent left solo or alone with the responsibility of parenthood due to
death of spouse;
(3) Parent left solo or alone with the responsibility of parenthood while the
spouse is detained or is serving sentence for a criminal conviction for at
least one (1) year;
physical and/or mental incapacity of spouse as certified by a public
medical practitioner;
legal separation or de facto separation from spouse for at least one (1)
year, as long as he/she is entrusted with the custody of the children;
declaration of nullity or annulment of marriage as decreed by a court or by
a church as long as he/she is entrusted with the custody of the children;
abandonment of spouse for at least one (1) year;
(8) Unmarried mother/father who has preferred to keep and rear her/his
child/children instead of having others care for them or give them up to a
welfare institution;
(9) Any other person who solely provides parental care and support to a
child or children;
(10) Any family member who assumes the responsibility of head of family
as a result of the death, abandonment, disappearance or prolonged
absence of the parents or solo parent.
A change in the status or circumstance of the parent claiming benefits

under this Act, such that he/she is no longer left alone with the
responsibility of parenthood, shall terminate his/her eligibility for these
benefits.
(b) "Children" - refer to those living with and dependent upon the solo parent for
support who are unmarried, unemployed and not more than eighteen (18) years
of age, or even over eighteen (18) years but are incapable of self-support
because of mental and/or physical defect/disability.
(c) "Parental responsibility" - with respect to their minor children shall refer to the
rights and duties of the parents as defined in Article 220 of Executive Order No.
209, as amended, otherwise known as the "Family Code of the Philippines."
(d) "Parental leave" - shall mean leave benefits granted to a solo parent to
enable him/her to perform parental duties and responsibilities where physical
presence is required.
(e) "Flexible work schedule" - is the right granted to a solo parent employee to
vary his/her arrival and departure time without affecting the core work hours as
defined by the employer.
Section 4. Criteria for Support. - Any solo parent whose income in the place of domicile
falls below the poverty threshold as set by the National Economic and Development
Authority (NEDA) and subject to the assessment of the DSWD worker in the area shall
be eligible for assistance: Provided, however, That any solo parent whose income is
above the poverty threshold shall enjoy the benefits mentioned in Sections 6, 7 and 8 of
this Act.
Section 5. Comprehensive Package of Social Development and Welfare Services. - A

comprehensive package of social development and welfare services for solo parents
and their families will be developed by the DSWD, DOH, DECS, CHED, TESDA, DOLE,
NHA and DILG, in coordination with local government units and a nongovernmental
organization with proven track record in providing services for solo parents.
The DSWD shall coordinate with concerned agencies the implementation of the
comprehensive package of social development and welfare services for solo parents
and their families. The package will initially include:
(a) Livelihood development services which include trainings on livelihood skills,

basic business management, value orientation and the provision of seed capital
or job placement.
(b) Counseling services which include individual, peer group or family counseling.
This will focus on the resolution of personal relationship and role conflicts.
(c) Parent effectiveness services which include the provision and expansion of
knowledge and skills of the solo parent on early childhood development, behavior
management, health care, rights and duties of parents and children.
(d) Critical incidence stress debriefing which includes preventive stress

management strategy designed to assist solo parents in coping with crisis
situations and cases of abuse.
(e) Special projects for individuals in need of protection which include temporary
shelter, counseling, legal assistance, medical care, self-concept or ego-building,
crisis management and spiritual enrichment.
Section 6. Flexible Work Schedule. - The employer shall provide for a flexible working
schedule for solo parents: Provided, That the same shall not affect individual and
company productivity: Provided, further, That any employer may request exemption
from the above requirements from the DOLE on certain meritorious grounds.
Section 7. Work Discrimination. - No employer shall discriminate against any solo

parent employee with respect to terms and conditions of employment on account of
his/her status.
Section 8. Parental Leave. - In addition to leave privileges under existing laws, parental
leave of not more than seven (7) working days every year shall be granted to any solo
parent employee who has rendered service of at least one (1) year.
Section 9. Educational Benefits. - The DECS, CHED and TESDA shall provide the
following benefits and privileges:
(1) Scholarship programs for qualified solo parents and their children in
institutions of basic, tertiary and technical/skills education; and
(2) Nonformal education programs appropriate for solo parents and their children.
The DECS, CHED and TESDA shall promulgate rules and regulations for the proper
implementation of this program.
Section 10. Housing Benefits. - Solo parents shall be given allocation in housing
projects and shall be provided with liberal terms of payment on said government low-
cost housing projects in accordance with housing law provisions prioritizing applicants
below the poverty line as declared by the NEDA.
Section 11. Medical Assistance. - The DOH shall develop a comprehensive health care
program for solo parents and their children. The program shall be implemented by the
DOH through their retained hospitals and medical centers and the local government
units (LGUs) through their provincial/district/city/municipal hospitals and rural health
units (RHUs).
Section 12. Additional Powers and Functions of the DSWD. The DSWD shall perform
the following additional powers and functions relative to the welfare of solo parents and
their families:
(a) Conduct research necessary to: (1) develop a new body of knowledge on solo
parents; (2) define executive and legislative measures needed to promote and
protect the interest of solo parents and their children; and (3) assess the
effectiveness of programs designed for disadvantaged solo parents and their
children;
(b) Coordinate the activities of various governmental and nongovernmental

organizations engaged in promoting and protecting the interests of solo parents
and their children; and
(c) Monitor the implementation of the provisions of this Act and suggest
mechanisms by which such provisions are effectively implemented.
Section 13. Implementing Rules and Regulations. - An interagency committee headed

by the DSWD, in coordination with the DOH, DECS, CHED, TESDA, DOLE, NHA, and
DILG is hereby established which shall formulate, within ninety (90) days upon the
effectivity of this Act, the implementing rules and regulations in consultation with the
local government units, nongovernment organizations and people's organizations.
Section 14. Appropriations. - The amount necessary to carry out the provisions of this
Act shall be included in the budget of concerned government agencies in the General
Appropriations Act of the year following its enactment into law and
thereafter.1awphil.net
Section 15. Repealing Clause. - All laws, decrees, executive orders, administrative
orders or parts thereof inconsistent with the provisions of this Act are hereby repealed,
amended or modified accordingly.
Section 16. Separability Clause. - If any provision of this Act is held invalid or
unconstitutional, other provisions not affected thereby shall continue to be in full force
and effect.
Section 17. Effectivity Clause. - This Act shall take effect fifteen (15) days following its
complete publication in the Official Gazette or in at least two (2) newspaper of general
circulation.
Approved.
(Sgd.)
JOSEPH EJERCITO ESTRADA

President of the Philippines
Cases:
Mantrade vs Bacungan, 144 SCRA 510,
GR L-48437, Sep. 30, 1986
SECOND DIVISION
[G.R. No. L-48437. September 30, 1986.]
MANTRADE/FMMC DIVISION EMPLOYEES AND WORKERS UNION (represented by

PHILIPPINE SOCIAL SECURITY LABOR UNION PSSLU Fed. TUCP), Petitioner,
v. ARBITRATOR FROILAN M. BACUNGAN and MANTRADE DEVELOPMENT
CORPORATION, Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; VOLUNTARY
ARBITRATORS; DECISIONS SUBJECT TO JUDICIAL REVIEW. The contentions of
respondent corporation have been ruled against in the decision of this court in the case
of Oceanic Bic Division (FFW) v. Romero, promulgated on July 16, 1984, wherein it
stated: . . . "A voluntary arbitrator by the nature of her functions acts in a quasijudicial
capacity. There is no reason why her decisions involving interpretation of law should be
beyond this courts review. Administrative officials are presumed to act in accordance
with law and yet we do not hesitate to pass upon their work where a question of law is
involved or where a showing of abuse of discretion in their officials acts is properly
raised in petitions for certiorari." (130 SCRA 392, 399, 400-401)
2. ID.; ID.; GRANT FOR HOLIDAY PAY MONTHLY PAID EMPLOYEES; ISSUE
SETTLED IN THE CASES OF INSULAR BANK OF ASIA AND AMERICA
EMPLOYEES UNION VS. INCIONG, [132 SCRA 633], AND CHARTERED BANK
EMPLOYEES UNION VS. OPLE [141 SCRA 9]. Respondent arbitrator opined that
respondent corporation does not have any legal obligation to grant its monthly salaried
employees holiday pay, unless it is argued that the pertinent section of the Rule and
Regulations implementing Section 94 of the Labor Code is not in conformity with the
law, and thus, without force and effect. This issue was subsequently decided on
October 24, 1984 by a division of this court in the case of Insular Bank of Asia and
American Employees Union (IBAAEU) v. Inciong, wherein it held as follows: "We agree
with petitioners contention that Section 2, Rule IV, Book III of the implementing rules
and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void
since in the guise of clarifying the Labor Codes provisions on holiday pay, they in effect
amended them enlarging the scope of their exclusion (p. 11, rec.). . . . "From the above-
cited provisions, it is clear that monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing rules on holiday pay promulgated by
the then Secretary of Labor excludes monthly paid employees from the said benefits by
inserting under Rule IV, Book III of the implementing rules, section 2, which provides
that: employees who are uniformly paid by the month, irrespective of the number of
working days therein , with the salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked
or not." (132 SCRA 663, 672-673) This ruling was reiterated by the court en banc on
August 28, 1985 in the case of Chartered Bank Employees Association v. Ople, wherein
it added that: "The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the
Secretarys Policy Instruction No. 9 add another excluded group, namely employees
who are uniformly paid by the month. While additional exclusion is only in the form of a
presumption that all monthly paid employees have already been paid holiday paid, it
constitutes a taking away or a deprivation which must be in the law if it is to be valid. An
administrative interpretation which diminishes the benefits of labor more than what the
statute delimits or withholds is obviously ultra vires." (138 SCRA 273, 282. See also
CBTC Employees Union v. Clave, January 7, 1986, 141 SCRA 9.)
3. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; APPROPRIATE

EQUITABLE REMEDY IN CASE AT BAR. Respondent corporation contends that
mandamus does not lie to compel the performance of an act which the law does not
clearly enjoin as a duty. True it is also that mandamus is not proper to enforce a
contractual obligation, the remedy being an action for specific performance (Province of
Pangasinan v. Reparations Commission, November 29, 1977, 80 SCRA 376). In the
case at bar, however, in view of the above-cited subsequent decisions of this Court
clearly defining the legal duty to grant holiday pay to monthly salaried employees,
mandamus is an appropriate equitable remedy (Dionisio v. Paterno, July 23, 1980, 98
SCRA 677; Gonzales v. Government Service Insurance System, September 10, 1981,
107 SCRA 492).
DECISION
FERIA, J.:
This is a petition for Certiorari and Mandamus filed by petitioner against arbitrator
Froilan M. Bacungan and Mantrade Development Corporation arising from the decision
of respondent arbitrator, the dispositive part of which reads as
follows:jgc:chanrobles.com.ph
"CONSIDERING ALL THE ABOVE, We rule that Mantrade Development Corporation is

not under legal obligation to pay holiday pay (as provided for in Article 94 of the Labor
Code in the third official Department of Labor edition) to its monthly paid employees
who are uniformly paid by the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or established minimum wage, and
this rule is applicable not only as of March 2, 1976 but as of November 1, 1974."cralaw
virtua1aw library
Petitioner questions the validity of the pertinent section of the Rules and Regulations
Implementing the Labor Code as amended on which respondent arbitrator based his
decision.
On the other hand, respondent corporation has raised procedural and substantive
objections. It contends that petitioner is barred from pursuing the present action in view
of Article 263 of the Labor Code, which provides in part that "voluntary arbitration
awards or decisions shall be final, inappealable, and executory," as well as the rules
implementing the same; the pertinent provision of the Collective Bargaining Agreement
between petitioner and respondent corporation; and Article 2044 of the Civil Code which
provides that "any stipulation that the arbitrators award or decision shall be final, is
valid, without prejudice to Articles 2038, 2039, and 2040." Respondent corporation
further contends that the special civil action of certiorari does not lie because
respondent arbitrator is not an "officer exercising judicial functions" within the
contemplation of Rule 65, Section 1, of the Rules of Court; that the instant petition
raises an error of judgment on the part of respondent arbitrator and not an error of
jurisdiction; that it prays for the annulment of certain rules and regulations issued by the
Department of Labor, not for the annulment of the voluntary arbitration proceedings; and
that appeal by certiorari under Section 29 of the Arbitration Law, Republic Act No. 876,
is not applicable to the case at bar because arbitration in labor disputes is expressly
excluded by Section 3 of said law.chanrobles law library : red
These contentions have been ruled against in the decision of this Court in the case of
Oceanic Bic Division (FFW) v. Romero, promulgated on July 16, 1984, wherein it
stated:jgc:chanrobles.com.ph
"We agree with the petitioner that the decisions of voluntary arbitrators must be given
the highest respect and as a general rule must be accorded a certain measure of
finality. This is especially true where the arbitrator chosen by the parties enjoys the first
rate credentials of Professor Flerida Ruth Pineda Romero, Director of the U.P. Law
Center and an academician of unquestioned expertise in the field of Labor Law. It is not
correct, however, that this respect precludes the exercise of judicial review over their
decisions. Article 262 of the Labor Code making voluntary arbitration awards final,
inappealable and executory, except where the money claims exceed P100,000.00 or
40% of the paid-up capital of the employer or where there is abuse of discretion or
gross incompetence refers to appeals to the National Labor Relations Commission and
not to judicial review.
"In spite of statutory provisions making final the decisions of certain administrative
agencies, we have taken cognizance of petitions questioning these decisions where
want of jurisdiction, grave abuse of discretion, violation of due process, denial of
substantial justice, or erroneous interpretation of the Law were brought to our attention.
...
x x x
"A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity.
There is no reason why her decisions involving interpretation of law should be beyond
this Courts review. Administrative officials are presumed to act in accordance with law
and yet we do not hesitate to pass upon their work where a question of law is involved
or where a showing of abuse of discretion in their official acts is properly raised in
petitions for certiorari." (130 SCRA 392, 399, 400-401)
In denying petitioners claim for holiday pay, respondent arbitrator stated that although
monthly salaried employees are not among those excluded from receiving such
additional pay under Article 94 of the Labor Code of the Philippines, to wit:chanrobles
virtual lawlibrary
ART. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing
less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee
shall be paid compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday, Good
Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and the thirtieth of December, and the day
designated by law for holding a general election.
they appear to be excluded under Sec. 2, Rule IV, Book III of the Rules and Regulations
implementing said provision which reads thus:chanrob1es virtual 1aw library
SEC. 2. Status of employees paid by the month. Employees who are uniformly paid
by the month, irrespective of the number of working days therein, with a salary of not
less than the statutory or established minimum wage shall be presumed to be paid for
all days in the month whether worked or not.
Respondent arbitrator further opined that respondent corporation does not have any
legal obligation to grant its monthly salaried employees holiday pay, unless it is argued
that the pertinent section of the Rules and Regulations implementing Section 94 of the
Labor Code is not in conformity with the law, and thus, without force and effect.
This issue was subsequently decided on October 24, 1984 by a division of this Court in
the case of Insular Bank of Asia and America Employees Union (IBAAEU) v. Inciong,
wherein it held as follows:jgc:chanrobles.com.ph
"WE agree with the petitioners contention that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor
are null and void since in the guise of clarifying the Labor Codes provisions on holiday
pay, they in effect amended them by enlarging the scope of their exclusion (p. 11, rec.)
"Article 94 of the Labor Code, as amended by P.D. 850, provides:chanrob1es virtual

1aw library
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
less than ten (10) workers . . .
"The coverage and scope of exclusion of the Labor Codes holiday pay provisions is
spelled out under Article 82 thereof which reads:chanrob1es virtual 1aw library
Art. 82. Coverage. The provision of this Title shall apply to employees in all
establishments and undertakings, whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons, in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
x x x
"From the above-cited provisions, it is clear that monthly paid employees are not
excluded from the benefits of holiday pay. However, the implementing rules on holiday
pay promulgated by the then Secretary of Labor excludes monthly paid employees from
the said benefits by inserting under Rule IV, Book III of the implementing rules, Section
2, which provides that: employees who are uniformly paid by the month, irrespective of
the number of working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all days in the month
whether worked or not." (132 SCRA 663, 672-673).
This ruling was reiterated by the Court en banc on August 28, 1985 in the case of
Chartered Bank Employees Association v. Ople, wherein it added that:chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
"The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the Secretarys
Policy Instruction No. 9 add another excluded group, namely employees who are
uniformly paid by the month. While the additional exclusion is only in the form of a
presumption that all monthly paid employees have already been paid holiday pay, it
constitutes a taking away or a deprivation which must be in the law if it is to be valid. An
administrative interpretation which diminishes the benefits of labor more than what the
statute delimits or withholds is obviously ultra vires." (138 SCRA 273, 282. See also
CBTC Employees Union v. , Clave, January 7, 1986, 141 SCRA 9.)
Lastly, respondent corporation contends that mandamus does not lie to compel the
performance of an act which the law does not clearly enjoin as a duty. True it is also
that mandamus is not proper to enforce a contractual obligation, the remedy being an
action for specific performance (Province of Pangasinan v. Reparations Commission,
November 29, 1977, 80 SCRA 376). In the case at bar, however, in view of the above
cited subsequent decisions of this Court clearly defining the legal duty to grant holiday
pay to monthly salaried employees, mandamus is an appropriate equitable remedy
(Dionisio v. Paterno, July 23, 1980, 98 SCRA 677; Gonzales v. Government Service
Insurance System, September 10, 1981, 107 SCRA 492).
WHEREFORE, the questioned decision of respondent arbitrator is SET ASIDE and

respondent corporation is ordered to GRANT holiday pay to its monthly salaried
employees. No costs.
SO ORDERED.
Asian Transmission vs CA, 425 SCRA 478,

GR 144664, Mar. 15, 2004
G.R. No. 144664 March 15, 2004
ASIAN TRANSMISSION CORPORATION, petitioner,

vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN
as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel
Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON.
BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment;
and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working
Conditions, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule
65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000
Decision1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993
"Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled
"Workers Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good
Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998
Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin
applied as well to April 9, 1998, and 3) the September 18, 1998 4 Resolution of the Panel
of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary

Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein
it clarified, inter alia, that employees are entitled to 200% of their basic wage on April 9,
1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a legal
holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from
being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the
same day, this Department is of the view that the covered employees are entitled to at
least two hundred percent (200%) of their basic wage even if said holiday is unworked.
The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday
and the second 100% is the payment of holiday pay for the same date as Araw ng
Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both
Maundy Thursday and Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to

pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent
Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining

Agreement (CBA) existing between petitioner and BATLU, the controversy was
submitted for voluntary arbitration. x x x x On July 31, 1998, the Office of the Voluntary
Arbitrator rendered a decision directing petitioner to pay its covered employees "200%
and not just 100% of their regular daily wages for the unworked April 9, 1998 which
covers two regular holidays, namely, Araw ng Kagitignan and Maundy Thursday."
(Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage
less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth and thirtieth of December and the
day designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that
the regular holidays are now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the
Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay for
every regular holiday, the computation of which is determined by a legal formula which
is not changed by the fact that there are two holidays falling on one day, like on April 9,
1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and
that that the law, as amended, enumerates ten regular holidays for every year should
not be interpreted as authorizing a reduction to nine the number of paid regular holidays
"just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also
Holy Friday or Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner
and BATLU, the law governing the relations between them, clearly recognizes their
intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they
may fall in any calendar year, as paid legal holidays during the effectivity of the CBA
and that "[t]here is no condition, qualification or exception for any variance from the
clear intent that all holidays shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law
which provides for [a] reduction of holiday pay if two holidays happen to fall on the same
day, any doubt in the interpretation and implementation of the Labor Code provisions on
holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS
OF THE COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND
SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY
THE PARTIES THEMSELVES
II

GRAVE ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE
VALIDITY OF THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS
LAID TO REST BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN
III
GRAVE ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE
EXPLANATORY BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLEITN
WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE
RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE
MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND

EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11,
1993, IN THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR
CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND
INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE
OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW

GRAVE ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE
DEPARTMENT OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED
MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR
APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE
CONTRARY
VI
WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF

PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS
WELL AS EQUAL PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner lodged the present petition for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any
alleged errors committed by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not by a special civil action
of certiorari. If the aggrieved party fails to do so within the reglementary period, and the
decision accordingly becomes final and executory, he cannot avail himself of the writ of
certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under
Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45
and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the
decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless
of the nature of the action or proceeding involved, may be appealed to this Court by
filing a petition for review, which would be but a continuation of the appellate process
over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15)
days from notice of judgment or denial of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must
show that he has no plain, speedy and adequate remedy in the ordinary course of law
against its perceived grievance. A remedy is considered "plain, speedy and adequate" if
it will promptly relieve the petitioner from the injurious effects of the judgment and the
acts of the lower court or agency. In this case, appeal was not only available but also a
speedy and adequate remedy.6
The records of the case show that following petitioners receipt on August 18, 2000 of a
copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for
Reconsideration, it filed the present petition for certiorari on September 15, 2000, at
which time the Court of Appeals decision had become final and executory, the 15-day
period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that
the State shall afford protection to labor.7 Its purpose is not merely "to prevent
diminution of the monthly income of the workers on account of work interruptions. In
other words, although the worker is forced to take a rest, he earns what he should earn,
that is, his holiday pay."8 It is also intended to enable the worker to participate in the
national celebrations held during the days identified as with great historical and cultural
significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last
Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were
declared national holidays to afford Filipinos with a recurring opportunity to
commemorate the heroism of the Filipino people, promote national identity, and deepen
the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the
contributions of the working class to the development of the nation, while the religious
holidays designated in Executive Order No. 203 allow the worker to celebrate his faith
with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the
enjoyment of ten paid regular holidays.9 The provision is mandatory,10 regardless of
whether an employee is paid on a monthly or daily basis.11Unlike a bonus, which is a
management prerogative,12 holiday pay is a statutory benefit demandable under the
law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that
two holidays fall on the same date should not operate to reduce to nine the ten holiday
pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the
law is clear and unequivocal, the law must be taken to mean exactly what it says.13 In
the case at bar, there is nothing in the law which provides or indicates that the
entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on
the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11,
1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-
paid employees are entitled to an additional days pay if a holiday falls on a Sunday.
This Court, in answering the issue in the negative, observed that in fixing the monthly
salary of its employees, Wellington took into account "every working day of the
year including the holidays specified by law and excluding only Sunday." In the instant
case, the issue is whether daily-paid employees are entitled to be paid for two regular
holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working mans welfare should be the primordial and
paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor
Code provides that "Nothing in the law or the rules shall justify an employer in
withdrawing or reducing any benefits, supplements or payments for unworked regular
holidays as provided in existing individual or collective agreement or employer practice
or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had
obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998
CBA incorporates the following provision:
ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular
holiday shall be entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday
payment in addition to normal vacation pay but will not entitle the employee to another
vacation leave.
Under similar circumstances, the COMPANY will give a days wage for November 1st
and December 31st whenever declared a holiday. When required to work on said days,
the employee will be paid according to Art. VI, Sec. 3B hereof. 18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.
Jose Rizal College vs NLRC, 156 SCRA 27,

GR L-65482, December 1, 1987
G.R. No. L-65482 December 1, 1987
JOSE RIZAL COLLEGE, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF
TEACHERS/OFFICE WORKERS, respondents.
PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary
injunction, seeking the annulment of the decision of the National Labor Relations
Commission * in NLRC Case No. RB-IV 23037-78 (Case No. R4-1-1081-71) entitled
"National Alliance of Teachers and Office Workers and Juan E. Estacio, Jaime Medina,
et al. vs. Jose Rizal College" modifying the decision of the Labor Arbiter as follows:
WHEREFORE, in view of the foregoing considerations, the decision

appealed from is MODIFIED, in the sense that teaching personnel paid by
the hour are hereby declared to be entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as follows:
Petitioner is a non-stock, non-profit educational institution duly organized and existing

under the laws of the Philippines. It has three groups of employees categorized as
follows: (a) personnel on monthly basis, who receive their monthly salary uniformly
throughout the year, irrespective of the actual number of working days in a month
without deduction for holidays; (b) personnel on daily basis who are paid on actual days
worked and they receive unworked holiday pay and (c) collegiate faculty who are paid
on the basis of student contract hour. Before the start of the semester they sign
contracts with the college undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977,
private respondent National Alliance of Teachers and Office Workers (NATOW) in
behalf of the faculty and personnel of Jose Rizal College filed with the Ministry of Labor
a complaint against the college for said alleged non-payment of holiday pay, docketed
as Case No. R04-10-81-72. Due to the failure of the parties to settle their differences on
conciliation, the case was certified for compulsory arbitration where it was docketed as
RB-IV-23037-78 (Rollo, pp. 155-156).
After the parties had submitted their respective position papers, the Labor
Arbiter ** rendered a decision on February 5, 1979, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered as follows:
1. The faculty and personnel of the respondent Jose Rizal College who
are paid their salary by the month uniformly in a school year, irrespective
of the number of working days in a month, without deduction for holidays,
are presumed to be already paid the 10 paid legal holidays and are no
longer entitled to separate payment for the said regular holidays;
2. The personnel of the respondent Jose Rizal College who are paid their
wages daily are entitled to be paid the 10 unworked regular holidays
according to the pertinent provisions of the Rules and Regulations
Implementing the Labor Code;
3. Collegiate faculty of the respondent Jose Rizal College who by contract

are paid compensation per student contract hour are not entitled to
unworked regular holiday pay considering that these regular holidays have
been excluded in the programming of the student contact hours. (Rollo.
pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision promulgated

on June 2, 1982, modified the decision appealed from, in the sense that teaching
personnel paid by the hour are declared to be entitled to holiday pay (Rollo. p. 33).
Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their
contracts are paid per lecture hour are entitled to unworked holiday pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner
who are paid their salaries monthly, are uniformly paid throughout the school year
regardless of working days, hence their holiday pay are included therein while the daily
paid employees are renumerated for work performed during holidays per affidavit of
petitioner's treasurer (Rollo, pp. 72-73).
There appears to be no problem therefore as to the first two classes or categories of

petitioner's workers.
The problem, however, lies with its faculty members, who are paid on an hourly basis,
for while the Labor Arbiter sustains the view that said instructors and professors are not
entitled to holiday pay, his decision was modified by the National Labor Relations
Commission holding the contrary. Otherwise stated, on appeal the NLRC ruled that
teaching personnel paid by the hour are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not covered by Book V of the
Labor Code on Labor Relations considering that it is a non- profit institution and that its
hourly paid faculty members are paid on a "contract" basis because they are required to
hold classes for a particular number of hours. In the programming of these student
contract hours, legal holidays are excluded and labelled in the schedule as "no class
day. " On the other hand, if a regular week day is declared a holiday, the school
calendar is extended to compensate for that day. Thus petitioner argues that the advent
of any of the legal holidays within the semester will not affect the faculty's salary
because this day is not included in their schedule while the calendar is extended to
compensate for special holidays. Thus the programmed number of lecture hours is not
diminished (Rollo, pp. 157- 158).
The Solicitor General on the other hand, argues that under Article 94 of the Labor Code
(P.D. No. 442 as amended), holiday pay applies to all employees except those in retail
and service establishments. To deprive therefore employees paid at an hourly rate of
unworked holiday pay is contrary to the policy considerations underlying such
presidential enactment, and its precursor, the Blue Sunday Law (Republic Act No. 946)
apart from the constitutional mandate to grant greater rights to labor (Constitution,
Article II, Section 9). (Reno, pp. 76-77).
In addition, respondent National Labor Relations Commission in its decision

promulgated on June 2, 1982, ruled that the purpose of a holiday pay is obvious; that is
to prevent diminution of the monthly income of the workers on account of work
interruptions. In other words, although the worker is forced to take a rest, he earns what
he should earn. That is his holiday pay. It is no excuse therefore that the school
calendar is extended whenever holidays occur, because such happens only in cases of
special holidays (Rollo, p. 32).
Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as
amended), which reads:
Art. 94. Right to holiday pay (a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but
such employee shall be paid a compensation equivalent to twice his
regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:
SEC. 8. Holiday pay of certain employees. (a) Private school teachers,

including faculty members of colleges and universities, may not be paid for
the regular holidays during semestral vacations. They shall, however, be
paid for the regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit

institution is under obligation to give pay even on unworked regular holidays to hourly
paid faculty members subject to the terms and conditions provided for therein.
We believe that the aforementioned implementing rule is not justified by the provisions
of the law which after all is silent with respect to faculty members paid by the hour who
because of their teaching contracts are obliged to work and consent to be paid only for
work actually done (except when an emergency or a fortuitous event or a national need
calls for the declaration of special holidays). Regular holidays specified as such by law
are known to both school and faculty members as no class days;" certainly the latter do
not expect payment for said unworked days, and this was clearly in their minds when
they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday pay are
silent as to payment on Special Public Holidays.
It is readily apparent that the declared purpose of the holiday pay which is the
prevention of diminution of the monthly income of the employees on account of work
interruptions is defeated when a regular class day is cancelled on account of a special
public holiday and class hours are held on another working day to make up for time lost
in the school calendar. Otherwise stated, the faculty member, although forced to take a
rest, does not earn what he should earn on that day. Be it noted that when a special
public holiday is declared, the faculty member paid by the hour is deprived of expected
income, and it does not matter that the school calendar is extended in view of the days
or hours lost, for their income that could be earned from other sources is lost during the
extended days. Similarly, when classes are called off or shortened on account of
typhoons, floods, rallies, and the like, these faculty members must likewise be paid,
whether or not extensions are ordered.
Petitioner alleges that it was deprived of due process as it was not notified of the appeal
made to the NLRC against the decision of the labor arbiter.
The Court has already set forth what is now known as the "cardinal primary"
requirements of due process in administrative proceedings, to wit: "(1) the right to a
hearing which includes the right to present one's case and submit evidence in support
thereof; (2) the tribunal must consider the evidence presented; (3) the decision must
have something to support itself; (4) the evidence must be substantial, and substantial
evidence means such evidence as a reasonable mind might accept as adequate to
support a conclusion; (5) the decision must be based on the evidence presented at the
hearing, or at least contained in the record and disclosed to the parties affected; (6) the
tribunal or body of any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of
a subordinate; (7) the board or body should in all controversial questions, render its
decisions in such manner that the parties to the proceeding can know the various issues
involved, and the reason for the decision rendered. " (Doruelo vs. Commission on
Elections, 133 SCRA 382 [1984]).
The records show petitioner JRC was amply heard and represented in the instant
proceedings. It submitted its position paper before the Labor Arbiter and the NLRC and
even filed a motion for reconsideration of the decision of the latter, as well as an "Urgent
Motion for Hearing En Banc" (Rollo, p. 175). Thus, petitioner's claim of lack of due
process is unfounded.
PREMISES CONSIDERED, the decision of respondent National Labor Relations

Commission is hereby set aside, and a new one is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay for regular
holidays, whether the same be during the regular semesters of the school year or during
semestral, Christmas, or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly rate on days
declared as special holidays or for some reason classes are called off or shortened for
the hours they are supposed to have taught, whether extensions of class days be
ordered or not; in case of extensions said faculty members shall likewise be paid their
hourly rates should they teach during said extensions.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.
Union of Filipino Employees vs. Vivar,

205 SCRA 200, GR 79255, January 20, 1992
.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,

vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL
PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the holiday pay
award and the change of the divisor in the computation of benefits from 251 to 261
days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with
the National Labor Relations Commission (NLRC) a petition for declaratory relief
seeking a ruling on its rights and obligations respecting claims of its monthly paid
employees for holiday pay in the light of the Court's decision in Chartered Bank
Employees Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for
voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary
arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:
pay its monthly paid employees holiday pay pursuant to Article 94 of the
Code, subject only to the exclusions and limitations specified in Article 82
and such other legal restrictions as are provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three
years, (2) the exclusion of salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter referred to as sales personnel)
from the award of the holiday pay, and (3) deduction from the holiday pay award of
overpayment for overtime, night differential, vacation and sick leave benefits due to the
use of 251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of
effectivity of the Labor Code, that their sales personnel are not field personnel and are
therefore entitled to holiday pay, and that the use of 251 as divisor is an established
employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the
effectivity of the holiday pay award shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged, however, that the company's sales
personnel are field personnel and, as such, are not entitled to holiday pay. He likewise
ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251
to 261 and ordered the reimbursement of overpayment for overtime, night differential,
vacation and sick leave pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration.
Respondent Arbitrator treated the two motions as appeals and forwarded the case to
the NLRC which issued a resolution dated May 25, 1987 remanding the case to the
respondent arbitrator on the ground that it has no jurisdiction to review decisions in
voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by
Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules
implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take
cognizance of the case reasoning that he had no more jurisdiction to continue as
arbitrator because he had resigned from service effective May 1, 1986.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be
changed from 251 to 261 days and whether or not the previous use of 251 as divisor
resulted in overpayment for overtime, night differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under
Article 82 of the Labor Code. The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field
personnel as "non-agritultural employees who regularly perform their duties away from
the principal place of business or branch office of the employer and whose actual hours
of work in the field cannot be determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work
in the field cannot be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having
reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are
Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m.
comprises the sales personnel's working hours which can be determined with
reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or not these
sales personnel, even if they report to the office before 8:00 a.m. prior to field work and
come back at 4:30 p.m, really spend the hours in between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly situated employees
to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m.
is not within the realm of work in the field as defined in the Code but an
exercise of purely management prerogative of providing administrative
control over such personnel. This does not in any manner provide a
reasonable level of determination on the actual field work of the
employees which can be reasonably ascertained. The theoretical analysis
that salesmen and other similarly-situated workers regularly report for
work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is supervised, is surface
projection. Actual field work begins after 8:00 a.m., when the sales
personnel follow their field itinerary, and ends immediately before 4:00 or
4:30 p.m. when they report back to their office. The period between 8:00
a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the
extent or scope and result of which are subject to their individual capacity
and industry and which "cannot be determined with reasonable certainty."
This is the reason why effective supervision over field work of salesmen
and medical representatives, truck drivers and merchandisers is
practically a physical impossibility. Consequently, they are excluded from
the ten holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be determined
with reasonable certainty" must be read in conjunction with Rule IV, Book III of the
Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo, p.
13), the petitioner nevertheless attempted to show that its affected members are not
covered by the abovementioned rule. The petitioner asserts that the company's sales
personnel are strictly supervised as shown by the SOD (Supervisor of the Day)
schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp.
53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule
did not add another element to the Labor Code definition of field personnel. The clause
"whose time and performance is unsupervised by the employer" did not amplify but
merely interpreted and expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. Hence, in deciding
whether or not an employee's actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employee's time
and performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these
sales personnel's time and performance are supervised. The purpose of this schedule is
merely to ensure that the sales personnel are out of the office not later than 8:00 a.m.
and are back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual
hours spent in field work by an employee through the imposition of sanctions on
absenteeism contained in the company circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus
every quarter based on their performance is proof that their actual hours of work in the
field can be determined with reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume
based on sales target; (2) good collection performance; (3) proper compliance with
good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6)
proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses
precisely because of the difficulty in measuring their actual hours of field work. These
employees are evaluated by the result of their work and not by the actual hours of field
work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the
Court had occasion to discuss the nature of the job of a salesman. Citing the case
of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a
salesman, to a greater extent, works individually. There are no restrictions
respecting the time he shall work and he can earn as much or as little,
within the range of his ability, as his ambition dictates. In lieu of overtime
he ordinarily receives commissions as extra compensation. He works
away from his employer's place of business, is not subject to the personal
supervision of his employer, and his employer has no way of knowing the
number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime pay,
the same rationale for their exclusion as field personnel from holiday pay benefits also
applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with
the award of holiday pay, the divisor should be changed from 251 to 261 days to include
the additional 10 holidays and the employees should reimburse the amounts overpaid
by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten

holidays certainly adds to or accelerates the basis of conversion and
computation by ten days. With the inclusion of ten holidays as paid days,
the divisor is no longer 251 but 261 or 262 if election day is counted. This
is indeed an extremely difficult legal question of interpretation which
accounts for what is claimed as falling within the concept of "solutio
indebti."
When the claim of the Union for payment of ten holidays was granted,
there was a consequent need to abandon that 251 divisor. To maintain it
would create an impossible situation where the employees would benefit
with additional ten days with pay but would simultaneously enjoy higher
benefits by discarding the same ten days for purposes of computing
overtime and night time services and considering sick and vacation leave
credits. Therefore, reimbursement of such overpayment with the use of
251 as divisor arises concomitant with the award of ten holidays with pay.
(Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is
already included in the monthly paid employee's salary and in the computation of his
daily rate. This is the thrust of our pronouncement in Chartered Bank Employees
Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the
policy instruction, the company practice indicates that the monthly salaries
of the employees are so computed as to include the holiday pay provided
by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the
Chartered Bank, in computing overtime compensation for its employees,
employs a "divisor" of 251 days. The 251 working days divisor is the result
of subtracting all Saturdays, Sundays and the ten (10) legal holidays from
the total number of calendar days in a year. If the employees are already
paid for all non-working days, the divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as
follows:
monthly rate x 12 months
251 days
Following the criterion laid down in the Chartered Bank case, the use of 251 days'
divisor by respondent Filipro indicates that holiday pay is not yet included in the
employee's salary, otherwise the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary
increases, is a constant figure for the purpose of computing overtime and night
differential pay and commutation of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would
result in a lower daily rate which is violative of the prohibition on non-diminution of
benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the
divisor is adjusted to 261 days, then the dividend, which represents the employee's
annual salary, should correspondingly be increased to incorporate the holiday pay. To
illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100,
then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10
days' holiday pay, his annual salary already includes holiday pay and totals P26,100
(P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus
no merit in respondent Nestle's claim of overpayment of overtime and night differential
pay and sick and vacation leave benefits, the computation of which are all based on the
daily rate, since the daily rate is still the same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use
of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the
implementation and interpretation of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September
1, 1980, when the company was on a 6-day working schedule, the divisor used by the
company was 303, indicating that the 10 holidays were likewise not paid. When Filipro
shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify
its error, if ever there was one but did not do so. It is now too late to allege payment by
mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be
computed from November 1, 1974. This ruling was not questioned by the petitioner
union as obviously said decision was favorable to it. Technically, therefore, respondent
Nestle should have filed a separate petition raising the issue of effectivity of the holiday
pay award. This Court has ruled that an appellee who is not an appellant may assign
errors in his brief where his purpose is to maintain the judgment on other grounds, but
he cannot seek modification or reversal of the judgment or affirmative relief unless he
has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989],
citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank,
142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so that the
execution of the Court's decision in this case may not be needlessly delayed by another
petition, the Court resolved to take up the matter of effectivity of the holiday pay award
raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is
1985 when the Chartered Bank decision, promulgated on August 28, 1985, became
final and executory, and not from the date of effectivity of the Labor Code. Although the
Court does not entirely agree with Nestle, we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA
663 [1984], hereinafter referred to as the IBAA case, the Court declared that Section 2,
Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the
then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and
which excluded monthly paid employees from holiday pay benefits, are null and void.
The Court therein reasoned that, in the guise of clarifying the Labor Code's provisions
on holiday pay, the aforementioned implementing rule and policy instruction amended
them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the
above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing rule and policy
instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the
holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in
compliance with these presumably valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court
discussed the effect to be given to a legislative or executive act subsequently declared
invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to
be complied with. This is so as until after the judiciary, in an appropriate
case, declares its invalidity, it is entitled to obedience and respect. Parties
may have acted under it and may have changed their positions. What
could be more fitting than that in a subsequent litigation regard be had to
what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely because
the judiciary is the government organ which has the final say on whether
or not a legislative or executive measure is valid, a period of time may
have elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its quality
of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual

existence of a statute, prior to such a determination of [unconstitutionality],
is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official."
(Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374
[1940]). This language has been quoted with approval in a resolution
in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor
Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is
the opinion of Justice Zaldivar speaking for the Court in Fernandez
v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue
harshness and resulting unfairness must be avoided. It is now almost the end of 1991.
To require various companies to reach back to 1975 now and nullify acts done in good
faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle,
relying on the implicit validity of the implementing rule and policy instruction before this
Court nullified them, and thinking that it was not obliged to give holiday pay benefits to
its monthly paid employees, may have been moved to grant other concessions to its
employees, especially in the collective bargaining agreement. This possibility is
bolstered by the fact that respondent Nestle's employees are among the highest paid in
the industry. With this consideration, it would be unfair to impose additional burdens on
Nestle when the non-payment of the holiday benefits up to 1984 was not in any way
attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date
of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor
Code, but from October 23, 1984, the date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to
be used in computing holiday pay shall be 251 days. The holiday pay as above directed
shall be computed from October 23, 1984. In all other respects, the order of the
respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla, Bidin, Medialdea, Grio-

Aquino, Regalado, Davide, Jr. and Romero, JJ., concur.
Cruz and Nocon, JJ., took no part.
Agga vs NLRC, 298 SCRA 285,

GR 123882, Nov. 16, 1998
SECOND DIVISION
[G.R. No. 123882. November 16, 1998]

JOE ASHLEY AGGA, VICTORINO MAKIMKIM, EDILBERTO EVANGELISTA, BENHUR
SANTOS, RICHMOND CASTILLO, ROMEO AVILA, SEGUNDO GUADEZ, JR.,
OSCAR MALOLOY-ON, RICARDO BELDA, RUEL TONACAO, ROMULO DILAP-
DILAP, JOSE SERGIO FRANCO, REYNALDO VILLAR, ROMULO DELA CRUZ,
CAMILO CAIG, NICOLAS URSUA, MARTIN BAEZ, JR., MARIO SOSA and
WOODY PADILLA petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, SUPPLY OILFIELD SERVICES, INC. and UNDERSEAS
DRILLING, INC., respondents.
DECISION
PUNO, J.:
Private respondent Supply Oilfield Services, Inc. (SOS) hired petitioners to work on
board SEDCO/BP 471, a drillship owned and operated by private respondent Underseas
Drilling, Inc. (UDI).
The employment contracts ran for one year with petitioners enjoying two months' off
with pay for every two months' duty. The contracts also provided that for service of 12
hours a day, 7 days a week in a two-shift 24-hour operation, petitioners would receive a
fixed monthly compensation covering "basic rate, allowances, privileges, travel
allowances and benefits granted by law during and after employment with the company."
In a complaint filed with the Philippine Overseas Employment Administration (POEA),
petitioners claimed that private respondents failed to pay them overtime pay, holiday pay,
rest day pay, 13th month pay and night shift differential. They likewise alleged that private
respondents did not comply with the mandatory insurance requirement of the rules
governing overseas employment. They further averred that while private respondents
made them use passports for overseas contract workers whenever they departed for, and
returned from, overseas employment, they were also instructed to use seaman's books
upon reaching port for transfer to, and while aboard, the oilrig. Petitioners opined that this
practice entitled them to the benefits granted by law to both land-based workers and
seamen.
In their Answer and Position Paper, private respondents denied liability. They said
that the benefits referred to in the employment contracts already included overtime pay,
holiday pay, termination pay and 13th month pay. They likewise denied that petitioners
were entitled to night shift differential since no proof was submitted to show that any of
them, at any time, had actually worked from 10:00 p.m. to 6:00 a.m. In addition, private
respondents belied petitioners' claim that they did not comply with the mandatory
insurance requirement. They alleged that petitioners were insured with Blue Cross (Asia-
Pacific) Insurance, Ltd. against death and permanent disability. Lastly, private
respondents contended that petitioners, as offshore oilriggers, had nothing to do with
manning a vessel or sea navigation. Hence, petitioners were merely land-based workers,
not seamen.
On July 2, 1992, the POEA dismissed petitioners' complaint for lack of
merit.[1] Petitioners appealed to the National Labor Relations Commission (First
Division). They submitted the following principal issues for resolution: (1) whether or not
the lumpsum mode of payment of monthly salary is legal; (2) whether or not there were
underpayments of their salary; (3) whether the days-off pay should be considered as part
of their salaries or should be regarded as vacation leave pay or bonus separate therefrom;
and (4) whether or not respondents substantially complied with the insurance requirement
under POEA rules.
Upon the other hand, private respondents informed the NLRC that the POEA had
already dismissed the claims for underpayment of labor benefits and lack of insurance
coverage in the consolidated cases docketed as POEA Case No. 91-12-1348 and POEA
Case No. 92-01-0011 filed by fourteen of the nineteen petitioners, and that the dismissal
was affirmed on appeal by its Second Division. The decision has become final.
On November 27, 1995, the respondent NLRC promulgated the Decision [2] assailed
herein, dismissing petitioners' appeal. It reiterated the decision in POEA Case No. 91-12-
1348 and POEA Case No. 92-01-0011, viz.:
"Perusing the unrefuted copy of the POEA decision attached as Annex "1" to
respondents' Reply dated August 14, 1995, it appears that in justifying his decision, the
Administrator held:
From the foregoing factual backdrop, the issues for resolution in the instant case are:
1. Whether or not complainants had been underpaid of their compensation;

and
2. Whether or not complainants are amply covered by insurance.
Anent the first issue, we find in the negative. After comparison of the Summary of
Claims of the Complainants and Table 2 of the Respondents (Average Monthly Salary
of Complainants vs. Statutorily Mandated Basic Salary and Benefits), we arrived at the
conclusion that the alleged underpayments represent the difference between the
amounts under Column E (Actual Pay on Board) and the amounts under Column D
(total of basic salary + overtime pay & premium pay + 13th month pay & vacation
pay). To illustrate, we take the case of complainant Agga who has a basic salary of
US$900, overtime/premium pay of US$973.71 and 13th month/vacation pay of US$150
totalling US$2,023.71. The latter amount represents the statutorily mandated basic
salary and benefits of complainant Agga. He received his actual pay on board in the
sum of US$1,500. Thus, US$2,023.71 minus US$1,500 equals US$523.71. The latter
amount is what now complainant Agga claims as underpayment and for a period of two
months, his total claim is US$1,047.42.
We note that in arriving at the alleged underpayment, complainant Agga totally

disregarded his day-off pay or pay while on leave under Column F in the amount of
US$750. Thus, with his pay on board of US$1,500 plus his day-off pay of US$750,
complainant Agga received an average monthly salary of US$2,250 which is a bit higher
than his statutorily mandated salary and benefit of US$2,027.71 in the amount of
US$222.29. The aforesaid formula applies to all the complainants. Thus, we see no
case of underpayment at bar.
The claim for underpayments of the complainants is premised on their wrong

interpretation of the salary memoranda issued to them individually wherein they insist
that vacation leave pay and days-off pay are additional fringe benefits which should not
affect payment of items 1 to 5 therein and to which we disagree.
The vacation leave pay is different from 'days-off pay.' Complainants' vacation pay is
accounted under Column C denominated as 13th month pay but also for a vacation pay
of one month which is clearly indicated by the prescribed formula, i.e. 'Basic Salary (A) x
.167. The product over a period of twelve months results in two months basic pay as
(0.167 x 12 = 2.004). The two months therefore corresponds to the 13th month pay and
the one month vacation leave pay. It is therefore erroneous for complainants to contend
that the vacation leave pay is a distinct benefit when in truth and in fact the same has
been duly considered in the computation of their statutorily mandated compensation
under the column of 13th month pay.
While the days-off pay constitutes complainants' salary in the same way as their
lumpsum pay while on board the oil rig, therefore complainants should not compare the
amounts under column D (Total of A + B + C) with the amounts under Column E (Actual
Pay while on Board) only but with the amounts under column 'E' and 'F' (pay while on
board or days-off pay) which sum is listed under column G (Average Monthly Salary
over a 12-Month Period). The days-off pay is paid to the complainants even though they
are not working and should therefore be considered in the computation of their total
compensation.
xxx xxx xxx
With respect to the second issue, we rule in the affirmative. The evidence on record
shows that complainants were provided with insurance coverage superior to that
mandated by law.Complainants are insured under two Blue Cross Insurance Policies,
i.e. the Disability Income Insurance (Policy No. ID00128, GP-01) and a Worldwide
Executive Health Plan (Policy No. W003323 GP7-01). Under the disability income
insurance, should the employee get sick or injured, he is entitled to a monthly indemnity
of US$200. While under the Worldwide Executive Health Plan, the benefits to which the
insured workers are entitled are enumerated in the Table of Insured Benefits. The
Personal Accident Plan Benefits to which the complainants are entitled are as follows:
BENEFITS PER
PERSON
1. Death US$15,000
2. Permanent total loss of sight of both eyes US$15,000
3. Permanent total loss of sight of one eye US$ 7,500
4. Loss of two limbs US$15,000
5. Loss of one limb US$ 7,500
6. Permanent total loss of sight of one eye and loss of
one limb US$15,000
7. Permanent total disablement US$15,000
(other than loss of sight of one eye or both eyes or loss of limb)
Verily, the benefits provided therein are far greater than mandated by law which
is P50,000.00 for death due to accident.
In an appeal dated February 26, 1993, the complainants questioned the aforesaid
decision. They, however, limited their appeal to claims for additional vacation pay and
insurance coverage.
xxx xxx xxx
(I)t then follows that to the extent that the POEA has concluded that there is "no case of
underpayment at bar," the same has to be bindingly observed by us vis-a-vis
complainants' submitted issue in their draft decision of "(2) whether or not there had
been underpayments as claimed by appellants under the provisions of PD 442."
Moreover, on June 13, 1995, the Second Division of this Commission dismissed
complainants' appeal "for lack of merit." At the end of its extended resolution, the
Commission concluded that the complainants failed "to show in a satisfactory manner
the facts upon which" they based their claims.
xxx xxx xxx

This thus disposes the third and fourth issues advanced by complainants for our
resolution in their earlier mentioned draft resolution.
xxx xxx xxx
Even the first issue submitted to us for our resolution (which, in their draft resolution,
has been defined by complainants as "whether or not the lumpsum mode of payment of
appellants' monthly salary is legal") was, for all legal intents and purposes, already
resolved in that other case for inherently submitted for the resolution of the POEA and
the Second Division of this Commission in that other case was the question of whether
or not the "fixed salary" mode of payment stipulated in the parties' contract was
valid. The POEA Administrator could not have concluded that "we see no case of
underpayment at bar" if, in his opinion, the parties' "fixed salary" mode of compensation
was illegal, aware that such declaration of nullity was precisely the end-goal of
complainants' complaint.
Similarly, the NLRC Second Division would not have dismissed complainants' appeal if
it were of the view, as argued by complainants, that respondent SOS' lumpsum mode of
payment was illegal.
Indeed, our resolving said first issue anew would amount to a duplicitous exercise of
appellate jurisdiction."[3]
On January 17, 1996, petitioners filed a motion for reconsideration. In an

Order[4] dated January 30, 1996, the respondent NLRC denied petitioners' motion.
Hence, this petition for certiorari[5] raising the following issues:
"I
WHETHER OR NOT RESPONDENT NLRC ACTED WITHOUT OR IN EXCESS OF

JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OREXCESS OF JURISDICTION IN NOT DECLARING THAT THE LUMPSUM MODE
OF PAYMENT OF PETITIONERS' MONTHLY SALARIES BY PRIVATE
RESPONDENTS IS ILLEGAL
II

OR EXCESS OF JURISDICTION IN NOT ORDERING PRIVATE RESPONDENTS,
JOINTLY AND SEVERALLY, TO PAY THE ADMITTED UNDERPAYMENTS AS
SHOWN BY PRIVATE RESPONDENTS' COMPUTATION AND BASED ON
PETITIONERS' REGULAR WAGES AND LEGAL FORMULAS FOR COMPUTING
OVERTIME PAY, HOLIDAY/REST DAY PAY, 13TH MONTH PAY AND NIGHT SHIFT
DIFFERENTIALS
III

OR EXCESS OF JURISDICTION IN NOT DECLARING THE DAYS-OFF PAY AS
BONUS AND NOT PART OF PETITIONERS' SALARIES WHICH COULD NOT
OFFSET THE ADMITTED UNDERPAYMENTS
IV

OR EXCESS OF JURISDICTION IN NOT ORDERING THE PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA) TO COMPLY WITH ITS MANDATED
DUTY TO SET UP STANDARD EMPLOYMENT CONTRACT AND GUIDING RATES
FOR OILRIG WORKERS LIKE PETITIONERS

OR EXCESS OF JURISDICTION IN NOT DECLARING THAT PRIVATE
RESPONDENTS FAILED TO COMPLY WITH THE LEGAL REQUIREMENT OF
MANDATORY PERSONAL INSURANCE PROVIDED IN THE POEA RULES AND
REGULATIONS AND IN ALLOWING PRIVATE RESPONDENTS TO INSURE
PETITIONERS WITH A FOREIGN INSURANCE COMPANY ILLEGALLY DOING
BUSINESS IN THE PHILIPPINES
VI

OR EXCESS OF JURISDICTION IN NOT PENALIZING PRIVATE RESPONDENT
SUPPLY OILFIELD SERVICES, INC. BY WAY OF SUSPENSION OR CANCELLATION
OF ITS LICENSE AS SERVICE CONTRACTOR DESPITE ITS ADMISSION THAT IT
ORDERS PETITIONERS AND OTHER OILRIG WORKERS TO ALTER TRAVEL
DOCUMENTS BY USING TWO (2) PASSPORTS (OCW AND SEAMAN'S BOOK)
DURING THEIR EMPLOYMENT
VII

OR EXCESS OF JURISDICTION IN NOT AWARDING DAMAGES AND ATTORNEY'S
FEES TO PETITIONERS
VIII
WHETHER OR NOT RESPONDENT NLRC ACTED WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
DECLARING HEREIN THAT THE ISSUE OF ILLEGALITY OF THE LUMPSUM MODE
OF PAYMENT OF SALARIES HAD BEEN RESOLVED IN NLRC CASE NO. 004779-93
CONSIDERING THAT IN THE LATTER CASE THE ISSUE IS LIMITED TO
UNDERPAYMENT OF DAYS-OFF PAY AND THE NLRC DID NOT RESOLVE THE
ISSUES POSITED HEREIN."[6]
We affirm.
Anent the first issue, petitioners contend that the lumpsum mode of payment of
salaries is illegal, citing Articles 5 and 6 of the New Civil Code, Articles 86, 87, 90, 93 and
94 of PD 442 and Book V, Rule II, Section 2(a) of the 1991 POEA Rules.
We do not agree. As correctly observed by the respondents, none of the
aforemetioned laws and rules prohibit the subject payment scheme. The cited articles of
the New Civil Code merely provide that agreements in violation of law or public policy
cannot be entered into and have legal effect. The cited provisions of PD 442 simply
declare that night shift differential and additional remuneration for overtime, rest day,
Sunday and holiday work shall be computed on the basis of the employee's regular
wage. In like fashion, the 1991 POEA Rules merely require employers to guarantee
payment of wages and overtime pay. Thus, petitioners' stance is bereft of any legal
support.
Anent the second and third issues, petitioners allege that their fixed monthly salaries
represented only their basic salaries and did not include overtime pay, holiday pay, 13th
month pay and night shift differential. In POEA Case No. 91-12-1348 and POEA Case
No. 92-01-0011, the Administrator found and ruled that petitioners were not underpaid
and that their fixed monthly compensation already comprised their basic salary, night shift
differential, overtime pay, holiday pay and 13th month pay. Petitioners did not appeal
this ruling. In this light, respondent NLRC correctly held:
"With Section 1, Rule V, Book VII of the POEA Rules dated May 31, 1991 (issued
pursuant to E.O. 247) providing that `(D)ecisions and/or awards of the Administration
shall be final and executory unless appealed to the National Labor Relations
Commission (NLRC) by any or both parties,' it then follows that to the extent that the
POEA has concluded that there is 'no case of underpayment at bar,' the same has to be
bindingly observed by us vis-a-vis complainants' submitted issue in their draft decision
of "(2) whether or not there had been underpayments as claimed by appellants under
the provisions of P.D. 442."[7]
The fourth issue deserves scant consideration. The matter of ordering the NLRC to
compel the POEA to set up standard employment contract and guiding rates for oilrig
workers is beyond the jurisdiction of this Court.
With respect to the fifth issue, we find petitioners' charge that private respondents
failed to provide them with life and personal accident insurance groundless. The POEA
and the NLRC have found that private respondents insured petitioners with Blue Cross
(Asia-Pacific) Insurance, Ltd. under two policies which even provide for coverage superior
to that mandated by the rules. Before this Court, however, petitioners assail these
insurance policies as they were allegedly issued by a foreign insurance company not
licensed to do business in the Philippines.The contention is raised for the first time and
cannot be considered.[8]
In regard to the sixth issue, the evidence shows that petitioners are land-based
workers and hence, not entitled to benefits appertaining to sea-based workers. Petitioners
have nothing to do with manning vessels or with sea navigation. Their use of a seaman's
book does not detract from the fact that they are truly land-based employees. Petitioners'
plea that we suspend SOS' license for making them use two (2) passports is off-
line. Again, they never prayed for this relief before the POEA and the NLRC. This Court
is the improper venue for the belated plea.
Finally, the claims for attorney's fees and damages of the petitioners have no basis
as private respondents did not act in bad faith or with malice.
IN VIEW WHEREOF, the decision of the NLRC dated November 27, 1995 is
AFFIRMED. No costs.
SO ORDERED.
Melo, (Acting Chairman), and Mendoza, JJ., concur.
Martinez, J., on leave.
II. Assignment for Nov. 4, 2017

Statutory Reference:
Art. 97 to 119, 123-127 of the Labor Code and related provisions in the Omnibus Rules
DOLE Department Order No. 174, series of 2017
*pdf
https://www.dole.gov.ph/files/DO%20174-
17%20Rules%20Implementing%20Articles%20106%20to%20109%20of%20the%20La
bor%20Code,%20As%20Amended(1).pdf
DOLE Department Order No. 126-13 series of 2013

*pdf
https://www.dole.gov.ph/files/DO%20126-13.pdf
Explanatory Bulletin issued by DOLE Secretary Leonardo Quisumbing dated Nov. 25,
1996
PD 851, Labor Advisory No. 12 series of 2013
Cases:
Chavez vs NLRC, 448 SCRA 478,
GR 146530, January 17, 2005
SECOND DIVISION
[G.R. No. 146530. January 17, 2005]
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution [1] dated
December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the
complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC
decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming
that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and distribution. It
engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25,
1984. As such, the petitioner was tasked to deliver the respondent companys products
from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila.
The respondent company furnished the petitioner with a truck. Most of the petitioners
delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and
returning thereto in the afternoon two or three days after. The deliveries were made in
accordance with the routing slips issued by respondent company indicating the order,
time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip.
This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent
companys plant manager, his (the petitioners) desire to avail himself of the benefits that
the regular employees were receiving such as overtime pay, nightshift differential pay,
and 13th month pay, among others. Although he promised to extend these benefits to the
petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the
case could be heard, respondent company terminated the services of the petitioner.
Consequently, on May 25, 1995, the petitioner filed an amended complaint against the
respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay,
nightshift differential pay, 13th month pay, among others. The case was docketed as
NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee
relationship between the respondent company and the petitioner. They averred that the
petitioner was an independent contractor as evidenced by the contract of service which
he and the respondent company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to
hire and the Contractor [referring to Pedro Chavez], by nature of their specialized line or
service jobs, accepts the services to be rendered to the Principal, under the following
terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the

contractor to the principal, shall only cover travel route from Mariveles to Metro
Manila. Otherwise, any change to this travel route shall be subject to further
agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery
transport services fully rendered by the Contractor shall be on a per trip basis
depending on the size or classification of the truck being used in the transport
service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be
THREE HUNDRED PESOS (P300.00) and EFFECTIVE December 15,
1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment
on a per trip basis, following the same route mentioned, shall be THREE
HUNDRED FIFTY (P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at
least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the
Principal for the cost of any damage to, loss of any goods, cargoes, finished
products or the like, while the same are in transit, or due to reckless [sic] of its
men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its
men working for him subject to this agreement, and that the Contractor shall
hold the Principal free and harmless from any liability or claim that may arise
by virtue of the Contractors non-compliance to the existing provisions of the
Minimum Wage Law, the Employees Compensation Act, the Social Security
System Act, or any other such law or decree that may hereafter be enacted, it
being clearly understood that any truck drivers, helpers or men working with
and for the Contractor, are not employees who will be indemnified by the
Principal for any such claim, including damages incurred in connection
therewith;
6. This contract shall take effect immediately upon the signing by the parties,
subject to renewal on a year-to-year basis.[2]
This contract of service was dated December 12, 1984. It was subsequently renewed
twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the
petitioner, the terms of the contracts were substantially the same. The relationship of the
respondent company and the petitioner was allegedly governed by this contract of
service.
The respondents insisted that the petitioner had the sole control over the means and
methods by which his work was accomplished. He paid the wages of his helpers and
exercised control over them. As such, the petitioner was not entitled to regularization
because he was not an employee of the respondent company. The respondents, likewise,
maintained that they did not dismiss the petitioner. Rather, the severance of his
contractual relation with the respondent company was due to his violation of the terms
and conditions of their contract. The petitioner allegedly failed to observe the minimum
degree of diligence in the proper maintenance of the truck he was using, thereby exposing
respondent company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the
Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal. The
Labor Arbiter declared that the petitioner was a regular employee of the respondent
company as he was performing a service that was necessary and desirable to the latters
business. Moreover, it was noted that the petitioner had discharged his duties as truck
driver for the respondent company for a continuous and uninterrupted period of more than
ten years.
The contract of service invoked by the respondents was declared null and void as it
constituted a circumvention of the constitutional provision affording full protection to labor
and security of tenure. The Labor Arbiter found that the petitioners dismissal was
anchored on his insistent demand to be regularized. Hence, for lack of a valid and just
cause therefor and for their failure to observe the due process requirements, the
respondents were found guilty of illegal dismissal. The dispositive portion of the Labor
Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring

respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with
business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said
respondent to pay complainant his separation pay equivalent to one (1) month pay per
year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement
as his reinstatement back to work will not do any good between the parties as the
employment relationship has already become strained and full backwages from the time
his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off
date) until compliance, otherwise, his backwages shall continue to run. Also to pay
complainant his 13th month pay, night shift differential pay and service incentive leave
pay hereunder computed as follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as
attorneys fees.
SO ORDERED.[3]
The respondents seasonably interposed an appeal with the NLRC. However, the
appeal was dismissed by the NLRC in its Decision[4] dated January 27, 1998, as it
affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the petitioner
as a scheme that was resorted to by the respondents who, taking advantage of the
petitioners unfamiliarity with the English language and/or legal niceties, wanted to evade
the effects and implications of his becoming a regularized employee.[5]
The respondents sought reconsideration of the January 27, 1998 Decision of the
NLRC. Acting thereon, the NLRC rendered another Decision[6] dated July 10, 1998,
reversing its earlier decision and, this time, holding that no employer-employee
relationship existed between the respondent company and the petitioner. In reconsidering
its earlier decision, the NLRC stated that the respondents did not exercise control over
the means and methods by which the petitioner accomplished his delivery services. It
upheld the validity of the contract of service as it pointed out that said contract was silent
as to the time by which the petitioner was to make the deliveries and that the petitioner
could hire his own helpers whose wages would be paid from his own account. These
factors indicated that the petitioner was an independent contractor, not an employee of
the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article
280 of the Labor Code on the regularization of employees. Said contract, including the
fixed period of employment contained therein, having been knowingly and voluntarily
entered into by the parties thereto was declared valid citing Brent School, Inc. v.
Zamora.[7] The NLRC, thus, dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied
by the NLRC in its Resolution dated September 7, 1998. He then filed with this Court a
petition for certiorari, which was referred to the CA following the ruling in St. Martin
Funeral Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000, reversing the July
10, 1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the
said decision, the CA ruled that the petitioner was a regular employee of the respondent
company because as its truck driver, he performed a service that was indispensable to
the latters business. Further, he had been the respondent companys truck driver for ten
continuous years. The CA also reasoned that the petitioner could not be considered an
independent contractor since he had no substantial capital in the form of tools and
machinery. In fact, the truck that he drove belonged to the respondent company. The CA
also observed that the routing slips that the respondent company issued to the petitioner
showed that it exercised control over the latter. The routing slips indicated the
chronological order and priority of delivery, the urgency of certain deliveries and the time
when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned
his job noting that he just filed a complaint for regularization. This actuation of the
petitioner negated the respondents allegation that he abandoned his job. The CA held
that the respondents failed to discharge their burden to show that the petitioners dismissal
was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the
respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers
from attaining the status of regular employment, it is but necessary for the courts to
scrutinize with extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into to preclude
acquisition of tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the contract of service
is just another attempt to exploit the unwitting employee and deprive him of the
protection of the Labor Code by making it appear that the stipulations of the parties
were governed by the Civil Code as in ordinary transactions.[9]
However, on motion for reconsideration by the respondents, the CA made a complete

turn around as it rendered the assailed Resolution dated December 15, 2000 upholding
the contract of service between the petitioner and the respondent company. In
reconsidering its decision, the CA explained that the extent of control exercised by the
respondents over the petitioner was only with respect to the result but not to the means
and methods used by him. The CA cited the following circumstances: (1) the respondents
had no say on how the goods were to be delivered to the customers; (2) the petitioner
had the right to employ workers who would be under his direct control; and (3) the
petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten
years was, according to the CA, of no moment because his status was determined not by
the length of service but by the contract of service. This contract, not being contrary to
morals, good customs, public order or public policy, should be given the force and effect
of law as between the respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners complaint
for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000
Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE
CONSIDERATION TO THE CONTRACT OF SERVICE ENTERED INTO BY
PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR
CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR
EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE
CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN
FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING
THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE CONTROL
TEST WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN
DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.[10]
The threshold issue that needs to be resolved is whether there existed an employer-
employee relationship between the respondent company and the petitioner. We rule in
the affirmative.
The elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employers power to control the employees conduct. [11] The most
important element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.[12] All
the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner
without the intervention of a third party.
Second. Wages are defined as remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time,
task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be
rendered.[13] That the petitioner was paid on a per trip basis is not significant. This is
merely a method of computing compensation and not a basis for determining the
existence or absence of employer-employee relationship. One may be paid on the basis
of results or time expended on the work, and may or may not acquire an employment
status, depending on whether the elements of an employer-employee relationship are
present or not.[14] In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered to the
latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required
to pay his employees by means of payroll.[15] The payroll should show, among other
things, the employees rate of pay, deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the payroll to support their claim
that the petitioner was not their employee, raising speculations whether this omission
proves that its presentation would be adverse to their case.[16]
Third. The respondents power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this power by
terminating the petitioners services albeit in the guise of severance of contractual relation
due allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship,
the control test is the most important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under its own responsibility
according to its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results
thereof.[17] Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the employers
power to control the means and methods by which the employees work is to be performed
and accomplished.[18]
Although the respondents denied that they exercised control over the manner and
methods by which the petitioner accomplished his work, a careful review of the records
shows that the latter performed his work as truck driver under the respondents
supervision and control. Their right of control was manifested by the following attendant
circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used
exclusively to deliver respondent companys goods; [19]
3. Respondents directed the petitioner, after completion of each delivery, to park the
truck in either of two specific places only, to wit: at its office in Metro Manila at 2320
Osmea Street, Makati City or at BEPZ, Mariveles, Bataan;[20] and
4. Respondents determined how, where and when the petitioner would perform his task
by issuing to him gate passes and routing slips. [21]
a. The routing slips indicated on the column REMARKS, the chronological order and
priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner
had to deliver the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently
or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be
delivered to the customers as, for example, the words tomorrow morning was written on
slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his work as
truck driver of the respondent company. On the other hand, the Court is hard put to
believe the respondents allegation that the petitioner was an independent contractor
engaged in providing delivery or hauling services when he did not even own the truck
used for such services. Evidently, he did not possess substantial capitalization or
investment in the form of tools, machinery and work premises. Moreover, the petitioner
performed the delivery services exclusively for the respondent company for a continuous
and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances
earlier discussed indubitably establish the existence of an employer-employee
relationship between the respondent company and the petitioner. It bears stressing that
the existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract and providing therein that the employee is an independent
contractor when, as in this case, the facts clearly show otherwise. Indeed, the
employment status of a person is defined and prescribed by law and not by what the
parties say it should be.[22]
Having established that there existed an employer-employee relationship between
the respondent company and the petitioner, the Court shall now determine whether the
respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid
and just cause.[23] In this case, the respondents failed to prove any such cause for the
petitioners dismissal. They insinuated that the petitioner abandoned his job. To constitute
abandonment, these two factors must concur: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship.[24] Obviously, the petitioner did not intend to sever his relationship with the
respondent company for at the time that he allegedly abandoned his job, the petitioner
just filed a complaint for regularization, which was forthwith amended to one for illegal
dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a
complaint for illegal dismissal, more so when it includes a prayer for reinstatement. [25]
Neither can the respondents claim that the petitioner was guilty of gross negligence
in the proper maintenance of the truck constitute a valid and just cause for his dismissal.
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. [26] The negligence, to warrant
removal from service, should not merely be gross but also habitual.[27] The single and
isolated act of the petitioners negligence in the proper maintenance of the truck alleged
by the respondents does not amount to gross and habitual neglect warranting his
dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not
dismissed from the service but due to complainants breach of their contractual relation,
i.e., his violation of the terms and conditions of the contract, we are very much inclined
to believe complainants story that his dismissal from the service was anchored on his
insistent demand that he be considered a regular employee. Because complainant in
his right senses will not just abandon for that reason alone his work especially so that it
is only his job where he depends chiefly his existence and support for his family if he
was not aggrieved by the respondent when he was told that his services as driver will
be terminated on February 23, 1995.[28]
Thus, the lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is
unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.[29] However, as found by the
Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioners
reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an
award of separation pay equivalent to one month for every year of service from the time
of his illegal dismissal up to the finality of this judgment in addition to his full backwages,
allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December
15, 2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R.
SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of
the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of
illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
Radio Communications vs. Sec of Labor, 169 SCRA 38, GR 77959, January 9, 1989
G.R. No. 77959 January 9, 1989
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,

vs.
THE SECRETARY OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR OF
THE NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR AND EMPLOYMENT
and UNITED RCPI COMMUNICATIONS LABOR ASSOCIATION (URCPICLA)-
FUR, respondents.
Ermitao, Asuncion, Manzano & Associates for petitioner.

The Solicitor General for public respondent.
Abad, Leano & Associates for respondent URCPICLA.
REGALADO, J.:
This petition for certiorari seeks the annulment of the orders issued by public
respondents in NWC Ref. No. W01-13, viz: (1) the order of May 7, 1986 of respondent
Regional Director requiring petitioner Radio Communications of the Philippines, Inc.
(hereinafter, RCPI) and its employees represented by Buklod ng Manggagawa sa
RCPI-NFL (BMRCPI-NFL, for brevity) to pay private respondent United RCPI
Communications Labor Association (URCPICLA-FUR for short) its 15% union service
fee of P427,845.60, jointly and severally, and accordingly directing the issuance of a
writ of execution and garnishment of RCPI's bank account for the satisfaction of said
fee; (2) the order of August 16, 1986 of respondent Secretary of Labor and Employment
modifying the foregoing order by reducing the union service fee to 10% of the awarded
amounts and holding petitioner solely liable for the payment of such fee; and (3) the
order, dated March 20, 1987, of respondent Secretary denying petitioner's motion for
reconsideration.
The records 1 show that on May 4, 1981, petitioner, a domestic corporation engaged in
the telecommunications business, filed with the National Wages Council an application
for exemption from the coverage of Wage Order No. 1. 2 The application was opposed
by respondent URCPICLA-FUR, a labor organization affiliated with the Federation of
Unions of Rizal (FUR). On May 22, 1981, the National Wages Council, through its
Chairman, rendered a letter-decision 3 disapproving said application and ordering the
petitioner to pay its covered employees the mandatory living allowance of P2.00 daily
effective March 22, 1981. Said letter-decision was affirmed by the Office of the
President in O.P. Case No. 1882 and, subsequently, this Court in its resolution of July
15, 1985 in G.R. No. 70148 dismissed RCPI's petition for certiorari for lack of merit.
Entry of final judgment was issued by the Court on July 15, 1985. 4
Furthermore, it is not denied that as early as March 13, 1985, before the aforesaid case
was elevated to this Court, respondent union filed a motion for the issuance of a writ of
execution, asserting therein its claim to 15% of the total backpay due to all its members
as "union service fee" for having successfully prosecuted the latter's claim for payment
of wages and for reimbursement of expenses incurred by FUR and prayed for the
segregation and remittance of said amount to FUR thru its National President. 5
In a subsequent "Motion for Immediate Issuance of Writ of Execution", dated September
9, 1985, respondent union reiterated its claim for said union service fee but this time in
an amount equivalent to 20% of the total backpay due its members, to be remitted to
the institution previously adverted to.6
On September 24, 1985, petitioner filed its opposition to said motion, asserting, among
others, that "there is no legal basis for respondent Union to have the sum equivalent to
20% union service fee deducted from the amount due to every recipient member". 7 An
alias writ of execution was issued on September 26, 1985.8
On October 24, 1985, without the knowledge and consent of respondent union,
petitioner entered into a compromise agreements 9 with BMRCPI-NFL as the new
bargaining agent of oppositors RCPI employees, the pertinent provisions whereof are
hereunder reproduced:
WHEREAS, there are now pending with the National Labor Relations
Commission Case No. NLRC-NCR- 11-5265-83 (NFL, et al. vs. RCPI)
relative to RCPI's alleged liabilities under P.D. 1713 and Wage Orders 1, 2
and 3 and NLRC Certified Case No. 0356, with the National Wages
Council and the Office of the Regional Director, Ministry of Labor and
Employment, National Capital Region NWC Case Ref. No. WO-1-13 (O.P.
Case No. 1882, S.C. G.R. No. 70148) relative to RCPI's alleged liabilities
under Wage Order No. 1; and with the Office of the Regional Director,
MOLE-NCR, a similar case (NCR-FSD-10-118- 83);
'WHEREAS, RCPI is one of the parties in the above cases and is herein
represented by its duly authorized representative/s while the
complainant/employees of RCPI are the other real parties in interest in the
said cases and are represented herein by BMRCPI-NFL, the duly certified
bargaining agent of the said complainant/employees;
WHEREAS, it is to the actual interest and benefit of the parties mentioned

in the preceding WHEREAS (the herein parties) that this Compromise
Agreement be entered into by and between them for the purpose of
novating the above mentioned cases, particularly any and all decisions
therein, with the view of re-defining the parties' rights and obligations
under the various Presidential Decrees and/or Wage Orders subjects of
the above mentioned cases.
NOW, THEREFORE, for and in consideration of the foregoing premises
and the terms and conditions herein stated, the parties have agreed and
bound themselves as follows: THAT
1. RCPI by way of a compromise settlement acknowledges its alleged

liability under PD 1713 (mandatory third year) and Wage Order 1 (first and
third year) subject of the cases mentioned in the first WHEREAS hereof;
2. As consideration for the dismissal with prejudice of the above-captioned

cases and the novation thereof and of all decisions in said cases, the
parties hereby further agree that:
a) On November 30, 1985, RCPI shall pay to each of its

employees/complainants 30% of whatever is due him/her under PD 1713
(mandatory third year) and Wage Order 1 (first and third year) subject of
the cases mentioned in the first WHEREAS hereof;
b) The balance of 70% due to each employee/complainant under PD 1713

(mandatory third year) and Wage Order 1 (first and third year) subject of
the cases mentioned in the first WHEREAS hereof shall be the subject of
re-opening and/or negotiation by the parties on July 31, 1986 for the
purpose of reaching a compromise settlement thereon on terms mutually
acceptable. Against this 30% shall be deducted in full all personal cash
advances of every covered employee;
c) Of and from the aforesaid total amount due every employee, 10%
thereof shall be considered as attorney's fee due Atty. Rodolfo Capocyan,
the same to be deducted from the remaining 70% and distributed to Atty.
R. Capocyan at the time of the distribution of the remaining 70%. In this
connection, Atty. Rodolfo Capocyan manifest (sic) that he is authorized by
the covered employee (sic) to collect 10% of whatever is/are due them as
attorney's fees and undertakes and binds himself to submit to RCPI the
required individual check-off authorization with respect to the 30%. He and
the herein union assume sole responsibility for and shall hold RCPI free
and harmless from any claim, suit or complaint arising from the deduction
of this 10% attorney's fee,'
xxx
What transpired thereafter is more completely and undisputedly narrated by the Solicitor
General in behalf of public respondent, thus:
Thereupon, the parties to the compromise agreement filed a joint Motion
to Dismiss with Prejudice praying for the dismissal of the same with
prejudice on the ground that the decision of the National Wages Council
dated May 22, 1981 had already been novated by the Compromise
Agreement re-defining the rights and obligations of the parties.
Respondent Union on November 7, 1985 countered by opposing the
motion and alleging that one of the signatories thereof-Buklod ng
Manggagawa sa RCPI is not a party in interest in the case but that it was
respondent Union which represented oppositors RCPI employees all the
way from the level of the National Wages Council up the Supreme Court.
Respondent Union therefore claimed that the Compromise Agreement is
irregular and invalid, apart from the fact that there was nothing to
compromise in the face of a final and executory decision.
On November 22, 1985, respondent Union filed an Urgent Motion for Lien
(15% Union Service Fee) calling attention to a Resolution passed and
approved by the URCPICLA-FUR Legislative Board on June 4, 1984
declaring respondent union entitled to a sum equivalent to 15% of the total
backpay received by each RCPI employee from RCPI as union service fee
and reimbursement of expenses incurred in successfully handling the
instant case. Respondent Union prayed that RCPI be required to deposit
with the Cashier of the National Capital Region, Ministry of Labor and
Employment an amount equivalent to 15% of the total amount due to the
covered employees as union service fee. Copy of this motion was
received by the Office of the President, RCPI on November 28, 1985.
xxx
'Acting on the Urgent Motion for Lien, Director Severo M. Pucan issued an
Order dated November 25, 1985 awarding to URCPICLA-FUR and FUR
15% of the total backpay of RCPI employees as their union service fees,
and directing RCPI to deposit said amount with the cashier of the Regional
Office for proper disposition to said awardees.
Despite notice of the Order of November 25, 1985, and its accompanying
letter requesting the management of RCPI to withhold the 15% union
service fee from each employee affected, petitioner paid in full the covered
employees on November 29, 1985, without deducting the union service
fee of 15%. In its motion for reconsideration and to set aside the Order of
November 25, 1985, petitioner argued that said Order has been rendered
moot and academic by the fact that it had already paid in full the award
under the decision of the National Wages Council. It proposed instead that
URCPICLA and/or FUR re-direct their efforts at collection to the rank and
file employees of RCPI. It also attacked the questioned order as null and
void ab anitio for lack of jurisdiction and due process.
On December 16, 1985, respondent Union filed a petition praying for

garnishment of petitioner's funds in its depository banks to effect
remittance of its 15% union service fee in view of the payment in full by
the latter of the wages due its covered employees. Petitioner moved to
dismiss the petition for garnishment as illegal, irregular and highly
anomalous. This was opposed by respondent Union.10
At this juncture, the record shows that on December 19, 1985, said Regional Director
issued an order declaring the decision fully satisfied and lifting all the garnishments
effected pursuant thereto "(C)onsidering that the Alias Writ of Execution dated 26
September 1985 in this case had already been fully satisfied. 11
However, it appears that thereafter, in an order dated May 7, 1986, NCR officer-in-
charge Romeo A. Young found petitioner RCPI and its employees jointly and severally
liable for the payment of the 15% union service fee amounting to P427,845.60 to private
respondent URCPICLA-FUR and consequently ordered the garnishment of petitioner's
bank account to enforce said claim. It was his position that although the decision of the
National Wages Council did not categorically require payment of the 15% service fee
directly to URCPICLA-FUR it had acted as the counsel of record of petitioner's
employees, hence said payment could be authorized by applying suppletorily the
provisions of Section 37, Rule 138 of the Rules of Court on attorney's lien. Said order
further noted that the transaction entered into by petitioner in favor of BMRCPI-NFL in
the guise of a compromise agreement, was made without the consent of URCPICLA-
FUR in clear defraudation of the latter's right to the 15% union service fee justly due
it. 12
Acting on petitioners "Omnibus Motion" seeking, among others, a reconsideration of

said order of May 7, 1986, which motion was treated as an appeal, respondent
Secretary of Labor and Employment issued an order on August 18, 1986 modifying the
order appealed from by holding petitioner solely liable to respondent union for 10% of
the awarded amounts as attorney's fees, on the rationale that:
... oppositor's claim for attorney's fee was the ultimate consequence of the
non-compliance of RCPI with Wage Order No. 1. The RCPI employees
were forced to avail of the services of oppositor as counsel, RCPI having
continuously withheld payment of said benefit. They were forced to litigate
up to the Supreme Court for the protection of their interest. In the case of
Cristobal vs. ECC, I,49280 promulgated February 26, 1981, 103 SCRA
339, the Supreme Court ruled that 'the defaulting employer or government
agency remains liable for attorney's fees because it compelled the
complainant to employ the services of counsel by unjustly refusing to
recognize the validity of the claim.' Attorney's fee due the oppositor is,
thus, chargeable against RCPI.13
Hence, the instant petition, basically on the sole issue of whether the public
respondents acted with grave abuse of discretion amounting to lack of jurisdiction in
holding the petitioner solely liable for "union service fee' to respondent URCPICLA-FUR.
We hold in the negative.
The contention of petitioner that the challenged order of May 7, 1986 was issued with
grave abuse of discretion, for supposedly imposing an additional obligation in the form
of attorney's fees not contemplated in the decision of the National Wages Council, is
bereft of merit.
While it is true that the original decision of said Council; did not expressly provide for
payment of attorney's fees, that particular aspect or deficiency is deemed to have been
supplied, if not modified pro tanto, by the compromise agreement subsequently
executed between the parties. A cursory perusal of said agreement shows an
unqualified admission by petitioner that "from the aforesaid total amount due every
employee, 10% thereof shall be considered as attorney's fee, 14 although, as hereinafter
discussed, it sought to withhold it from respondent union. Considering, however, that
respondent union was categorically found by the Labor Secretary to have been
responsible for the successful prosecution of the case to its ultimate conclusion in
behalf of its member, employees of herein petitioner, its right to fees for services
rendered, or what it termed as "union service fee," is indubitable.
The further pretension of petitioner that respondent union is not entitled to attorney's fee
or union service fee because it is not a member of the Bar is both untenable and in
disregard of the liberalized scheme and theory of representation for labor adopted in the
Labor Code.
As explained by the order of the Deputy Minister of August 18, 1986 hereinbefore
adverted to
... The appearance of labor federations and local unions as counsel in

labor proceedings has been given legal sanction and we need only cite
Art. 222 of the Labor Code which allows non-lawyers to represent their
organization or members thereof.
It is undisputed that oppositor (private respondent herein) was the counsel

on record of the RCPI employees in their claim for EC0LA under Wage
Order No. 1 since the inception of the proceedings at the National Wages
Council up to the Supreme Court. It had therefore a valid claim for
attorney's fee which it called union service fee'. .. 15 (Emphasis supplied).
As affirmed and further clarified by respondent Secretary of Labor and Employment in

his order of March 20, 1987
'While the claim for union service fee was initially directed against the
union members, there is no dispute that the claim was basically for
attorney's fee. As a matter of fact, RCPI admitted that the union service
fee is 'for Compensation for services rendered by the union. ... 16
We also cannot but look askance and take a quizzical view of the aforequoted
compromise agreement on which petitioner anchors its main arguments.
Aside from the fact that, as already stated, the same was concluded behind the back of
private respondent, so to speak, and with another labor union and a lawyer neither of
whom prior thereto had a hand in the recovery of benefits for the RCPI employees
concerned, there are certain indicia which cast serious doubts on the motives and
actuations therein of petitioner.
As already stated, as early as March 13, 1985, private respondent had moved for the
deduction of said fee from the total backpay awarded in the decision of the Council. It
reiterated such claim in its motion for a writ of execution filed on September 10, 1985
after this Court had dismissed the petition for certiorari filed by petitioner in G.R. No.
70148. Petitioner was fully aware of these proceedings since it even filed its opposition
thereto on September 23, 1985, but in the aforestated order of November 25, 1985,
private respondent was awarded 15% of the total backpay of the RCPI employees as its
union service fee, with petitioner being directed to deposit said amount with the NCR
office. Yet, on November 29, 1985, petitioner, despite timely notice of said order and in
total disregard thereof, directly paid its employees the full amount of their backpay,
without deducting the union service fee. 17
Again, as is evident in the aforequoted provisions of the compromise agreement,

petitioner was bound to pay only 30% of the amount due each employee on November
30, 1985, while the balance of 70% would still be the subject of renegotiation by the
parties on July 31, 1986. Yet, despite such conditions beneficial to it, petitioner paid in
full the backpay of its employees on November 29, 1985, ignoring the service fee due
the private respondent.
Worse, petitioner supposedly paid to one Atty. Rodolfo M. Capocyan the 10% fee that
properly pertained to herein private respondent, an unjustified and baffling diversion of
funds. It tried to explain away such obvious tergiversation by claiming that said 10% fee
corresponded to the other claims embraced in the compromise agreement but not the
liability under Wage Order No. 1, an apocryphal contradiction of its contrary admission
in Paragraph 7 of its Reply 18and the provisions of Paragraph 2(c) of the compromise
agreement.
On top of that, the records do not show any rejoinder or explanation by petitioner of this
grave revelation and accusation of the Solicitor General:
But the spurious and fraudulent character of such disposition made by

petitioner is clearly inferable from the circumstances that: ... (2) there is no
such Atty. Rodolfo Capocyan in the Attorney's Rollo of this Court (See
Communication from the Office of the Bar Confidant of the Supreme Court
dated March 17, 1986 found on page 459 of the record). Atty. Capocyan,
being a mere fictitious character, his 'attorney's fees' which included the
claim of private respondent, necessarily devolved upon petitioner.
'It would now appear that petitioner had a secret interest over the 10%
fees due and owing to private respondent and thru the manipulations of
petitioner's agents were given the appearance of attorney's fees' to a
certain Atty. Rodolfo Capocyan. It cannot be denied that by such
fraudulent method, private respondent was deprived of its just and lawful
fees.19
Even the employment of the term "novation" in the compromise agreement appears to
have been dictated by the dubious motive to secure dismissal with prejudice of the
decision of the National Wages Council. For, despite the express, albeit improper use of
such term, there could have been no valid novation of the prior judgment for the simple
reason that the pre-existing obligation thereunder and the new one sought to be created
are not absolutely incompatible. On the contrary, the compromise agreement expressly
recognizes the respective obligations of the parties in said judgment and precisely
provides a method by which the same shall be extinguished, which method is, as
expressly stated in said contract, by installment payments. The contract, instead of
containing provisions incompatible with the obligations in the judgment, expressly
ratifies such obligations and contains provisions for satisfying them. The said agreement
simply gave the petitioner a method and more time for the satisfaction of said judgment.
It did not extinguish the obligations contained in the judgment, until the terms of said
agreement had been fully complied with. Had the petitioner continued to comply with the
conditions of said agreement, it could have successfully invoked its provisions against
the issuance of a writ of execution upon said judgment. The contract and the punctual
compliance with its terms only delayed the right of the respondent union to the
execution of the judgment. The judgment was not satisfied and the obligations existing
thereunder still subsisted until the terms of the agreement had been fully complied
with.20
Finally, petitioner cannot invoke the lack of an individual written authorization from the
employees as a shield for its fraudulent refusal to pay the service fee of private
respondent. Prior to the payment made to its employees, petitioner was ordered by the
Regional Director to deduct the 15% attorney's fee from the total amount due its
employees and to deposit the same with the Regional Labor Office. Petitioner failed to
do so allegedly because of the absence of individual written authorizations. Be that as it
may, the lack thereof was remedied and supplied by the execution of the compromise
agreement whereby the employees, expressly approved the 10% deduction and held
petitioner RCPI free from any claim, suit or complaint arising from the deduction thereof.
When petitioner was thereafter again ordered to pay the 10% fees to respondent union,
it no longer had any legal basis or subterfuge for refusing to pay the latter.
We agree that Article 222 of the Labor Code requiring an individual written authorization
as a prerequisite to wage deductions seeks to protect the employee against
unwarranted practices that would diminish his compensation without his knowledge and
consent. 21 However, for all intents and purposes, the deductions required of the
petitioner and the employees do not run counter to the express mandate of the law
since the same are not unwarranted or without their knowledge and consent. Also, the
deductions for the union service fee in question are authorized by law and do not
require individual check-off authorizations. 22
On the foregoing considerations, We find no cogent reason to disturb the order of the
Secretary of Labor and Employment finding petitioner liable for the union service fee of
private respondent.
WHEREFORE, the order of the Secretary of Labor of August 16, 1986 is hereby
AFFIRMED and the petition at bar is DISMISSED, with double costs against petitioner.
The temporary restraining order issued pursuant to the Resolution of the Court of June
22, 1987 is LIFTED and declared of no further force and effect.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.
Five J Taxi vs. NLRC, 235 SCRA 556, GR 111474, August 22, 1974
G.R. No. 111474 August 22, 1994
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and
GILBERTO SABSALON, respondents.
Edgardo G. Fernandez for petitioners.
R E SO L U T I O N
REGALADO, J.:
Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action
for certiorari to annul the decision 1 of respondent National Labor Relations Commission
(NLRC) ordering petitioners to pay private respondents Domingo Maldigan and Gilberto
Sabsalon their accumulated deposits and car wash payments, plus interest thereon at
the legal rate from the date of promulgation of judgment to the date of actual payment,
and 10% of the total amount as and for attorney's fees.
We have given due course to this petition for, while to the cynical the de
minimis amounts involved should not impose upon the valuable time of this Court, we
find therein a need to clarify some issues the resolution of which are important to small
wage earners such as taxicab drivers. As we have heretofore repeatedly demonstrated,
this Court does not exist only for the rich or the powerful, with their reputed monumental
cases of national impact. It is also the Court of the poor or the underprivileged, with the
actual quotidian problems that beset their individual lives.
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the
petitioners as taxi drivers 2 and, as such, they worked for 4 days weekly on a 24-hour
shifting schedule. Aside from the daily "boundary" of P700.00 for air-conditioned taxi or
P450.00 for non-air-conditioned taxi, they were also required to pay P20.00 for car
washing, and to further make a P15.00 deposit to answer for any deficiency in their
"boundary," for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he
already failed to report for work for unknown reasons. Later, petitioners learned that he
was working for "Mine of Gold" Taxi Company. With respect to Sabsalon, while driving a
taxicab of petitioners on September 6, 1983, he was held up by his armed passenger
who took all his money and thereafter stabbed him. He was hospitalized and after his
discharge, he went to his home province to recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the
same terms and conditions as when he was first employed, but his working schedule
was made on an "alternative basis," that is, he drove only every other day. However, on
several occasions, he failed to report for work during his schedule.
On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for the
previous day. Also, he abandoned his taxicab in Makati without fuel refill worth P300.00.
Despite repeated requests of petitioners for him to report for work, he adamantly
refused. Afterwards it was revealed that he was driving a taxi for "Bulaklak Company."
Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily
cash deposits for 2 years, but herein petitioners told him that not a single centavo was
left of his deposits as these were not even enough to cover the amount spent for the
repairs of the taxi he was driving. This was allegedly the practice adopted by petitioners
to recoup the expenses incurred in the repair of their taxicab units. When Maldigan
insisted on the refund of his deposit, petitioners terminated his services. Sabsalon, on
his part, claimed that his termination from employment was effected when he refused to
pay for the washing of his taxi seat covers.
On November 27, 1991, private respondents filed a complaint with the Manila
Arbitration Office of the National Labor Relations Commission charging petitioners with
illegal dismissal and illegal deductions. That complaint was dismissed, the labor arbiter
holding that it took private respondents two years to file the same and such
unreasonable delay was not consistent with the natural reaction of a person who
claimed to be unjustly treated, hence the filing of the case could be interpreted as a
mere afterthought.
Respondent NLRC concurred in said findings, with the observation that private
respondents failed to controvert the evidence showing that Maldigan was employed by
"Mine of Gold" Taxi Company from February 10, 1987 to December 10, 1990; that
Sabsalon abandoned his taxicab on September 1, 1990; and that they voluntarily left
their jobs for similar employment with other taxi operators. It, accordingly, affirmed the
ruling of the labor arbiter that private respondents' services were not illegally terminated.
It, however, modified the decision of the labor arbiter by ordering petitioners to pay
private respondents the awards stated at the beginning of this resolution.
Petitioners' motion for reconsideration having been denied by the NLRC, this petition is
now before us imputing grave abuse of discretion on the part of said public respondent.
This Court has repeatedly declared that the factual findings of quasi-judicial agencies
like the NLRC, which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only respect but, at times, finality if such
findings are supported by substantial evidence. 3 Where, however, such conclusions are
not supported by the evidence, they must be struck down for being whimsical and
capricious and, therefore, arrived at with grave abuse of discretion. 4
Respondent NLRC held that the P15.00 daily deposits made by respondents to defray
any shortage in their "boundary" is covered by the general prohibition in Article 114 of
the Labor Code against requiring employees to make deposits, and that there is no
showing that the Secretary of Labor has recognized the same as a "practice" in the taxi
industry. Consequently, the deposits made were illegal and the respondents must be
refunded therefor.
Article 114 of the Labor Code provides as follows:
Art. 114. Deposits for loss or damage. No employer shall require his
worker to make deposits from which deductions shall be made for the
reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deposits is a
recognized one, or is necessary or desirable as determined by the
Secretary of Labor in appropriate rules and regulations.
It can be deduced therefrom that the said article provides the rule on deposits for loss or
damage to tools, materials or equipments supplied by the employer. Clearly, the same
does not apply to or permit deposits to defray any deficiency which the taxi driver may
incur in the remittance of his "boundary." Also, when private respondents stopped
working for petitioners, the alleged purpose for which petitioners required such
unauthorized deposits no longer existed. In other case, any balance due to private
respondents after proper accounting must be returned to them with legal interest.
However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:
YEAR DEPOSITS SHORTAGES VALES

1987 P 1,403.00 P 567.00 P 1,000.00
1988 720.00 760.00 200.00
1989 686.00 130.00 1,500.00
1990 605.00 570.00
1991 165.00 2,300.00
P 3,579.00 P 4,327.00 P 2,700.00
The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw
his deposits through vales or he incurred shortages, such that he is even indebted to
petitioners in the amount of P3,448.00. With respect to Maldigan's deposits, nothing
was mentioned questioning the same even in the present petition. We accordingly
agree with the recommendation of the Solicitor General that since the evidence shows
that he had not withdrawn the same, he should be reimbursed the amount of his
accumulated cash deposits. 5
On the matter of the car wash payments, the labor arbiter had this to say in his decision:
"Anent the issue of illegal deductions, there is no dispute that as a matter of practice in
the taxi industry, after a tour of duty, it is incumbent upon the driver to restore the unit
he has driven to the same clean condition when he took it out, and as claimed by the
respondents (petitioners in the present case), complainant(s) (private respondents
herein) were made to shoulder the expenses for washing, the amount doled out was
paid directly to the person who washed the unit, thus we find nothing illegal in this
practice, much more (sic) to consider the amount paid by the driver as illegal deduction
in the context of the law." 6 (Words in parentheses added.)
Consequently, private respondents are not entitled to the refund of the P20.00 car wash
payments they made. It will be noted that there was nothing to prevent private
respondents from cleaning the taxi units themselves, if they wanted to save their
P20.00. Also, as the Solicitor General correctly noted, car washing after a tour of duty is
a practice in the taxi industry, and is, in fact, dictated by fair play.
On the last issue of attorney's fees or service fees for private respondents' authorized
representative, Article 222 of the Labor Code, as amended by Section 3 of Presidential
Decree No. 1691, states that non-lawyers may appear before the NLRC or any labor
arbiter only (1) if they represent themselves, or (2) if they represent their organization or
the members thereof. While it may be true that Guillermo H. Pulia was the authorized
representative of private respondents, he was a non-lawyer who did not fall in either of
the foregoing categories. Hence, by clear mandate of the law, he is not entitled to
attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover
from his client a reasonable compensation for his services 7 necessarily imports the
existence of an attorney-client relationship as a condition for the recovery of attorney's
fees, and such relationship cannot exist unless the client's representative is a lawyer. 8
WHEREFORE, the questioned judgment of respondent National Labor Relations

Commission is hereby MODIFIED by deleting the awards for reimbursement of car
wash expenses and attorney's fees and directing said public respondent to order and
effect the computation and payment by petitioners of the refund for private respondent
Domingo Maldigan's deposits, plus legal interest thereon from the date of finality of this
resolution up to the date of actual payment thereof.
SO ORDERED.
Narvasa, C.J., Padilla, Puno and Mendoza, JJ., concur.
Maranaw Hotels vs. NLRC, 303 SCRA 540, GR 123880, February 23, 1999
THIRD DIVISION
[G.R. No. 123880. February 23, 1999]
MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Park Sheraton

Manila), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
EDDIE DAMALERIO, respondents.
DECISION
PURISIMA, J.:
This special civil action for certiorari under Rule 65 of the Revised Rules of Court
seeks to annul and set aside the Decision, dated September 18, 1995, of the National
Labor Relations Commission (NLRC)[1], and the Order[2], dated January 30, 1996,
denying petitioner's motion for reconsideration in NLRC-NCR-CA No. 005642-93, on the
ground of lack or excess of jurisdiction or grave abuse of discretion.
On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant of the Century Park
Sheraton Hotel, operated by Maranaw Hotel and Resort Corporation, was seen by hotel
guest Jamie Glaser (Glaser) with left hand inside the latter's suitcase. Confronted with
what he was doing, Damalerio explained that he was trying to tidy up the room. Not
satisfied with the explanation of Damalerio, Glaser lodged a written complaint before
William D. Despuig, shift-in-charge of security of the hotel. Glaser also reported that
Damalerio had previously asked from him souvenirs, cassettes, and other
giveaways. The complaint was later brought by Despuig to the attention of Major Eddie
Buluran, chief of Security of the hotel.
On April 3, 1992, Damalerio was given a Disciplinary Action Notice (DAN). The next
day, an administrative hearing was conducted on the matter. Among those present at the
hearing were: 1) Lourdes Ricardo (room attendant), 2) Angelito Torres (floor
supervisor), 3) Major Eddie Buluran (chief of security), 4) Susan
Dino (Personnel representative), 5) Alfredo San Gabriel (senior floor supervisor) and 6)
Ben Hur Amador (union representative).
Taking the witness stand on his own behalf, Damalerio denied the accusation against
him, theorizing that when he found the room of Glaser in disarray, and was about to make
the bed, he noticed some belongings, such as socks and T-shirts of the said hotel guest
scattered around, so much so that he thought of placing the same in his luggage. While
doing so, Glaser arrived. When asked by the latter if something was wrong, he
(Damalerio) said "I'm just cleaning your room," and Glaser remarked, "Good work," and
then, the two of them chatted about Glaser's concert at the Araneta Coliseum.
On April 13, 1992, Damalerio received a memorandum[3] issued by Alfredo San
Gabriel, Sr., Floor Supervisor, bearing the approval of Nicolas R. Kirit, Executive
Housekeeper, stating that he (Damalerio) was found to have committed qualified theft in
violation of House Rule No. 1, Section 3 of Hotel Rules and Regulations. The same
memorandum served as a notice of termination of his employment.
On May 19,1992, Damalerio filed with the Labor Arbiter a Complaint for illegal
dismissal against the petitioner.
On August 20, 1993, after the parties had sent in their position papers, Labor Arbiter
Ceferina J. Diosana decided the case; disposing, thus:
"WHEREFORE, judgment is hereby rendered finding the dismissal of complainant to be

illegal and ordering the respondents to reinstate him to his former or equivalent position
without loss of seniority rights and with backwages from April 15, 1992 when he was
preventively suspended up to actual reinstatement and other benefits, including but not
limited to his share in the charges and/or tips which he failed to receive, and all other
CBA benefits that have accrued since his dismissal.
SO ORDERED.
From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the NLRC,
which modified the appealed decision by giving petitioner the option of paying Damalerio
a separation pay equivalent to one (1) month pay for every year of service, instead of
reinstating him.
On November 22, 1995, petitioner interposed a motion for reconsideration but to no
avail. NLRC denied the same on January 30, 1996.
Undaunted, petitioner has come to this Court via the present petition; posing the
questions:
1. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING
THAT PETITIONER FAILED TO ADDUCE CONCLUSIVE EVIDENCE IN
SUPPORT OF ITS VERSION OF THE INCIDENT, CONSIDERING THE
FACT THAT THE EVIDENCE ON RECORD INELUCTABLY SHOWS THAT
PRIVATE RESPONDENT WAS CAUGHT IN FLAGRANTE DELICTO; and
2. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT
REVERSING THAT PORTION OF THE DECISION OF THE LABOR
ARBITER ORDERING HEREIN PETITIONER TO PAY PRIVATE
RESPONDENT HIS SHARE IN THE SERVICE CHARGE WHICH WAS
COLLECTED DURING THE TIME HE WAS NOT WORKING IN THE HOTEL.
The petition is barren of merit.
Petitioner's theory that Damalerio was caught committing qualified theft in flagrante
delicto is anemic of evidentiary support. Records disclose petitioner's failure to
substantiate such imputation against him. During the investigation presided over by the
Labor Arbiter, Damalerio narrated a plausible and satisfactory explanation for his behavior
complained of. According to him, he was then cleaning the hotel room of Glaser, and
while in the process of placing inside the luggage the personal belongings of Glaser
scattered near the bed, the latter entered the room. Glaser did not bother to testify as all
his things were intact.
Although it was not completely proper for Damalerio to be touching the things of a
hotel guest while cleaning the hotel rooms, personal belongings of hotel guests being off-
limits to roomboys, under the attendant facts and circumstances, we believe that the
dismissal of Damalerio was unwarranted. To be sure, the investigation held by the hotel
security people did not unearth enough evidence of culpability. It bears repeating that
subject hotel guest lost nothing. Albeit petitioner may have reasons to doubt the honesty
and trustworthiness of Damalerio, as a result of what happened, absent sufficient proof
of guilt, he (Damalerio), who is a rank-and-file employee, cannot be legally
dismissed.[4] Unsubstantiated suspicions and baseless conclusions by employers are not
legal justification for dismissing employees. The burden of proving the existence of a valid
and authorized cause of termination is on the employer.[5]Any doubt should be resolved
in favor of the employee, in keeping with the principle of social justice enshrined in the
Constitution.[6]
All things studiedly considered and viewed in proper perspective, the dismissal of
Damalerio, under the premises, cannot be countenanced.
As regards the share of Damalerio in the service charges collected during the period
of his preventive suspension, the same form part of his earnings, and his dismissal having
been adjudged to be illegal, he is entitled not only to full backwages but also to other
benefits, including a just share in the service charges, to be computed from the start of
his preventive suspension until his reinstatement.
However, mindful of the animosity and strained relations between the parties,
emanating from this litigation, we uphold the ruling a quo that in lieu of reinstatement,
separation pay may be given to the private respondent, at the rate of one (1) month pay
for every year of service. Should petitioner opt in favor of separation pay, the private
respondent shall no longer be entitled to share in the service charges collected during his
preventive suspension.
WHEREFORE, the petition is hereby DISMISSED and the Court affirms the
questioned Decision of the National Labor Relations Commission, to be implemented
according to law and this disposition. No pronouncement as to costs.
SO ORDERED.
Romero (Chairman), Panganiban, and Gonzaga-Reyes, JJ., concur.
Vitug, J., on official leave.
Ace Navigation vs. CA, 338 SCRA 70, GR 140364, August 15, 2000
FIRST DIVISION
[G.R. No. 140364. August 15, 2000]

ACE NAVIGATION CO., INC. and/or CONNING SHIPPING LTD., petitioners,
vs. COURT OF APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR
RELATIONS COMMISSION (FIRST DIVISION) and ORLANDO
ALONSAGAY, respondents.
DECISION
PUNO, J.:
This is a petition for review of the resolutions[1] of the Court of Appeals[2] that
dismissed the petition for certiorari filed by petitioners and which denied their
motion for reconsideration, respectively.
First, the facts.
In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private
respondent Orlando Alonsagay to work as a bartender on board the vessel M/V
"Orient Express" owned by its principal, Conning Shipping Ltd. (Conning). Under
their POEA approved contract of employment, Orlando shall receive a monthly
basic salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including
overtime pay for 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00)
per passenger per day. He, was also entitled to 2.5 days of vacation leave with
pay each month. The contract was to last for one (1) year.
Petitioners alleged that on June 13, 1994, Orlando was deployed and
boarded M/V "Orient Express" at the seaport of Hong Kong. After the expiration
of the contract on June 13, 1995, Orlando returned to the Philippines and
demanded from Ace Nav his vacation leave pay. Ace Nav did not pay him
immediately. It told him that he should have been paid prior to his disembarkation
and repatriation to the Philippines. Moreover, Conning did not remit any amount
for his vacation leave pay. Ace Nav, however, promised to verify the matter and
asked Orlando to return after a few days. Orlando never returned.
On November 25, 1995, Orlando filed a complaint[3] before the labor arbiter
for vacation leave pay of four hundred fifty U.S. dollars (U.S. $450.00) and unpaid
tips amounting to thirty six, thousand U.S. dollars (U.S. $36,000.00). [4] On
November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and Conning
to pay jointly and severally Orlando his vacation leave pay of US$450.00. The
claim for tips of Orlando was dismissed for lack of merit.[5]
Orlando appealed[6] to the National Labor Relations Commission (NLRC)
on February 3, 1997. In a decision[7] promulgated on November 26, 1997, the
NLRC ordered Ace Nav and Conning to pay the unpaid tips of Orlando which
amounted to US$36,000.00 in addition to his vacation leave pay. Ace Nav and
Conning filed a motion for reconsideration on February 2, 1998 which was denied
on May 20, 1999.[8]
On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the
Court of Appeals to annul the decision of the NLRC. On July 28, 1999, the Court
of Appeals promulgated a three-page resolution[9] dismissing the petition. Their
motion for reconsideration filed on September 8, 1999 was denied on October 8,
1999. Hence this appeal.
In assailing the dismissal of their petition on technical grounds, petitioners
argued that the Court of Appeals erred in rigidly and technically applying Section
13, Rule 13[10] and Section 1, Rule 65[11] of the 1997 Rules of Civil
Procedure.[12] They also contend that the respondent court erred in ruling that
they are the ones liable to pay tips to Orlando. They point out that if tips will be
considered as part of the salary of Orlando, it will make him the highest paid
employee on M/V "Orient Express." The ship captain, the highest ranking officer,
receives U.S.$3,000.00 per month without tips. Orlando, who is a bartender, will
receive U.S.$3,450.00 per month. Allegedly, this will compel foreign ship owners
to desist from hiring Filipino bartenders. It will create an unfavorable precedent
detrimental to the future recruitment, hiring and deployment of Filipino overseas
workers specially in service oriented businesses. It will also be a case of double
compensation that will unjustly enrich Orlando at the expense of petitioners. They
also stress that Orlando never complained that they should pay him the said tips.
Respondent filed a two-page comment to the petition adopting the resolution
of the Court of Appeals dated July 28, 1999.
We find merit in the petition.
Rules of procedure are used to help secure and not override substantial
justice.[13] Even the Rules of Court mandates a liberal construction in order to
promote their objective of securing a just, speedy and inexpensive disposition of
every action and proceeding.[14] Since rules of procedure are mere tools designed
to facilitate the attainment of justice, their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial justice
must always be avoided.[15] Thus, the dismissal of an appeal on purely technical
ground is frowned upon especially if it will result to unfairness.
We apply these sound rules in the case at bar. Petitioners' petition
for certiorari before the Court of Appeals contained the certified true copy of the
NLRC's decision dated November 26, 1997,[16] its order dated May 2,
1999[17] and the sworn certification of non-forum shopping.[18] Petitioners also
explained that their counsel executed an affidavit of proof of service and
explanation in the afternoon of July 1, 1999. However, he forgot to attach it when
he filed their petition the following day because of the volume and pressure of
work and lack of office personnel. However, the Registry Receipt,[19] which is the
proof of mailing to Orlando's counsel, issued by the Central Post Office was
attached on the original petition they filed with the respondent court. It was also
stamped[20] by the NLRC which is proof of receipt of the petition by the latter. The
affidavit of service, which was originally omitted, was attached on their motion for
reconsideration.[21] Significantly, it was dated July 1, 1999. In view of the
surrounding circumstances, the subsequent filing of the affidavit of service may
be considered as substantial compliance with the rules.
We now come to the merits of the case. The issue is whether petitioners are
liable to pay the tips to Orlando.
The word [tip] has several meanings, with origins more or less obscure,
connected with "tap" and with "top." In the sense of a sum of money given for
good service, other languages are more specific, e.g., Fr. pourboire, for drink. It
is suggested that [the word] is formed from the practice, in early 18th c. London
coffeehouses, of having a box in which persons in a hurry would drop a small
coin, to gain immediate attention. The box was labelled To Insure Promptness;
then just with the initials T.I.P.[22]
It is more frequently used to indicate additional compensation, and in this
sense "tip" is defined as meaning a gratuity; a gift; a present; a fee; money given,
as to a servant to secure better or more prompt service. A tip may range from
pure gift out of benevolence or friendship, to a compensation for a service
measured by its supposed value but not fixed by an agreement, although usually
the word is applied to what is paid to a servant in addition to the regular
compensation for his service in order to secure better service or in recognition of
it. It has been said that a tip denotes a voluntary act, but it also has been said
that from the very beginning of the practice of tipping it was evident that, whether
considered from the standpoint of the giver or the recipient, a tip lacked the
essential element of a gift, namely, the free bestowing of a gratuity without a
consideration, and that, despite its apparent voluntariness, there is an element of
compulsion in tipping.[23]
Tipping is done to get the attention and secure the immediate services of a
waiter, porter or others for their services. Since a tip is considered a pure gift out
of benevolence or friendship, it can not be demanded from the customer.
Whether or not tips will be given is dependent on the will and generosity of the
giver. Although a customer may give a tip as a consideration for services
rendered, its value still depends on the giver. They are given in addition to the
compensation by the employer. A gratuity given by an employer in order to inspire
the employee to exert more effort in his work is more appropriately called a bonus.
The NLRC and the Court of Appeals held that petitioners were liable to pay
tips to Orlando because of the contract of employment. Thus:
"The contract of employment entered into by and between the complainant and Ace
Navigation Co., Inc. (p. 82, Record) clearly provides xxx:
'That the employee shall be employed on board under the following terms and
conditions:
1.1 Duration of Contract: (12 months) 10 months remaining duration of contract
1.2 Position: Bartender
1.3 Basic Monthly Salary: U.S.$450.00 Flat rate including overtime pay for
1.4 Hours of Work: 12 hrs. work daily.
1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.
1.6 Vacation Leave with Pay: 2.5 days/mo.' (record, p. 82)
"The record of this case shows that the respondent, in the Contract of Employment xxx
undertook to pay to complainant 'tips of U.S.$2.00 per passenger per day.' Yet, there is
no showing that the said undertaking was complied with by the respondents.
"It was thus a serious error on the part of the Labor Arbiter to rule that the tips were
already paid, much less to rule that said tips were directly paid to the crew of M/V
"ORIENT PRINCESS." With Article 4 of the Labor Code reminding us that doubts
should be resolved in favor of labor, we all the more find it compelling to rule that the
complainant is still entitled to the contractually covenanted sum of US$36,000.00. xxx."
We disagree. The contract of employment between petitioners and Orlando

is categorical that the monthly salary of Orlando is US$450.00 flat rate. This
already included his overtime pay which is integrated in his 12 hours of work. The
words "plus tips of US$2.00 per passenger per day" were written at the line for
overtime. Since payment for overtime was included in the monthly salary of
Orlando, the supposed tips mentioned in the contract should be deemed included
thereat.
The actuations of Orlando during his employment also show that he was
aware his monthly salary is only US$450.00, no more no less. He did not raise
any complaint about the non-payment of his tips during the entire duration of his
employment. After the expiration of his contract, he demanded payment only of
his vacation leave pay. He did not immediately seek the payment of tips. He only
asked for the payment of tips when he filed this case before the labor arbiter. This
shows that the alleged non-payment of tips was a mere afterthought to bloat up
his claim. The records of the case do not show that Orlando was deprived of any
monthly salary. It will now be unjust to impose a burden on the employer who
performed the contract in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary
and common meaning of the word "tip." As a bartender, Orlando can not feign
ignorance on the practice of tipping and that tips are normally paid by customers
and not by the employer.
It is also absurd that petitioners intended to give Orlando a salary higher than
that of the ship captain. As petitioners point out, the captain of M/V "Orient
Princess" receives US$3,000.00 per month while Orlando will receive
US$3,450.00 per month if the tip of US$2.00 per passenger per day will be given
in addition to his US$450.00 monthly salary. It will be against common sense for
an employer to give a lower ranked employee a higher compensation than an
employee who holds the highest position in an enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied
this liability by raising the defense that the usual practice is that vacation leave
pay is given before repatriation. But as the labor arbiter correctly observed,
petitioners did not present any evidence to prove that they already paid the
amount. The burden of proving payment was not discharged by the petitioners.
IN VIEW WHEREOF, the resolutions of the Court of Appeals in CA G.R. SP
No. 53508 are reversed and set aside. The decision of the labor arbiter ordering
petitioners to pay jointly and severally the unpaid vacation leave pay of private
respondent, Orlando Alonsagay, in the amount of US$450.00 and dismissing his
other claim for lack of merit is reinstated.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago,
JJ., concur.
Boie Takeda vs. Dela Serna, 228 SCRA 329, GR L-92174, Dec. 10, 1983
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC., petitioner,

vs.
HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and

Employment, respondent.
G.R. No. L-102552 December 10, 1993
PHILIPPINE FUJI XEROX CORP., petitioner,

vs.
CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and

Employment, and PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents.
Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc.
and Phil Xerox Corp.
The Solicitor General for public respondents.
NARVASA, C.J.:
What items or items of employee remuneration should go into the computation of

thirteenth month pay is the basic issue presented in these consolidated petitions.
Otherwise stated, the question is whether or not the respondent labor officials in
computing said benefit, committed "grave abuse of discretion amounting to lack of
jurisdiction," by giving effect to Section 5 of the Revised Guidelines on the
implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated
by then Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling
petitioner's contention that said provision constituted a usurpation of legislative power
because not justified by or within the authority of the law sought to be implemented
besides being violative of the equal protection of the law clause of the Constitution.
Resolution of the issue entails, first, a review of the pertinent provisions of the laws and
implementing regulations.
Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read
as follows:
Sec 1. All employees are hereby required to pay all their employees
receiving basic salary of not more than P1,000.00 a month, regardless of
the nature of the employment, a 13th month pay not later than December
24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister
Blas Ople on December 22, 1975 contained the following relevant provisions relative to
the concept of "thirteenth month pay" and the employers exempted from giving it, to wit:
Sec. 2. Definition of certain terms. . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary
of an employee within a calendar year;
b) "Basic Salary" shall include all remunerations or earnings paid by an

employer to an employee for services rendered but may not include cost
of living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit sharing payments, and all allowances
and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the promulgation
of the Decree on December 16, 1975.
Sec. 3. Employers covered. . . . (The law applies) to all employers

except to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more in

calendar year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or

task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such
workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) shall include Christmas
bonus, mid-year bonus, profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary but shall not include
cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the employee's
basic salary, the employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were subsequently

issued by Minister Ople which inter alia set out items of compensation not included in
the computation of the 13th month pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not
part of the basic salary shall not be included in the computation of the 13th
month pay.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order

No. 28, which contained a single provision modifying Presidential Decree No. 851 by
removing the salary ceiling of P1,000.00 a month set by the latter, as follows:
Section 1 of Presidential Decree No. 851 is hereby modified to the extent

that all employers are hereby required to pay all their rank-and-file
employees a 13th month pay not later than December 24, of every year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the
Implementation of the 13th Month Pay Law were promulgated by then Labor Secretary
Franklin Drilon which, among other things, defined with particularity what remunerative
items were and were not embraced in the concept of 13th month pay, and specifically
dealt with employees who are paid a fixed or guaranteed wage plus commission. The
relevant provisions read:
4. Amount and payment of 13th Month Pay.
xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th
month pay shall include all remunerations or earnings paid by the
employer for services rendered but does not include allowances and
monetary benefits which are not considered or integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night differential and holiday
pay, and cost-of-living allowances. However, these salary-related benefits
should be included as part of the basic salary in the computation of the
13th month pay if by individual or collective agreement, company practice
or policy, the same are treated as part of the basic salary of the
employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. Employees who are paid on piece work
basis are by law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay based on their total earnings
during the calendar year, i.e., on both their fixed or guaranteed wage and
commission.
This was the state of the law when the controversies at bar arose out of the following
antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the
premises of petitioner Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the commissions
earned by its medical representatives in the computation of their 13th month pay,
Ramos served a Notice of Inspection Results 1 on Boie-Takeda through its president,
Mr. Benito Araneta, requiring Boie-Takeda within ten (10) calendar days from notice to
effect restitution or correction of "the underpayment of 13th month pay for the year(s)
1986, 1987 and 1988 of Med Rep (Revised Guidelines on the Implementation of 13th
month pay # 5) in the total amount of P558,810.89."
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results,
and expressing the view "that the commission paid to our medical representatives are
not to be included in the computation of the 13th month pay . . . (since the) law and its
implementing rules speak of REGULAR or BASIC salary and therefore exclude all other
remunerations which are not part of the REGULAR salary." It pointed out that, "if no
sales is (sic) made under the effort of a particular representative, there is no
commission during the period when no sale was transacted, so that commissions are
not and cannot be legally defined as regular in nature. 2
Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on
June 9 and 16, 1989. On the appointed dates, however, and despite due notice, no one
appeared for Boie-Takeda, and the matter had perforce to be resolved on the basis of
the evidence at hand. On July 24, 1989, Director Piezas issued an Order 3 directing
Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total

amount of FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED
FORTY SIX AND FORTY SEVEN CENTAVOS (P565,746.47)
representing underpayment of thirteenth (13th) month pay for the years
1986, 1987, 1988, inclusive, pursuant to the . . . revised guidelines within
ten (10) days from receipt of this Order.
A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of

August 3, 1989. Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the
July 24, 1989 Order with modification that the sales commissions earned by Boie-
Takeda's medical representatives before August 13, 1989, the effectivity date of
Memorandum Order No. 28 and its Implementing Guidelines, shall be excluded in the
computation of their 13th month pay. 5
Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of
Philippine Fuji Xerox Corp. on September 7, 1989 pursuant to Routine Inspection
Authority No. NCR-LSED-RI-494-89. In his Notice of Inspection Results, 6 addressed to
the Manager, Mr. Nicolas O. Katigbak, Senior Labor and Employment Officer Nicanor
M. Torres noted the following violation committed by Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less

pursuant to Revised Guidelines on the Implementation of the 13th month
pay law for the period covering 1986, 1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted
violation within five (5) working days from notice.
No action having been taken thereon by Philippine Fuji Xerox,

Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor
Secretary Franklin Drilon requesting a follow-up of the inspection findings. Messrs.
Nicolas and Gonzales were summoned to appear before Labor Employment and
Development Officer Mario F. Santos, NCR Office, Department of Labor for a
conciliation conference. When no amicable settlement was reached, the parties were
required to file their position papers.
Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23,
1990, 7 disposing as follows:
WHEREFORE, premises considered, Respondent PHILIPPINE FUJI

XEROX is hereby ordered to restitute to its salesmen the portion of the
13th month pay which arose out of the non-implementation of the said
revised guidelines, ten (10) days from receipt hereof, otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is
hereby Ordered to proceed to the premises of the Respondent for the
purpose of computing the said deficiency (sic) should respondent fail to
heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of
Labor. In an Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano
denied the appeal for lack of merit. Hence, the petition in G.R. No. 102552, which was
ordered consolidated with G.R. No. 92174 as involving the same issue.
In their almost identically-worded petitioner, petitioners, through common counsel,

attribute grave abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the
questioned Orders of January 17, 1990 and October 10, 1991, respectively. They
maintain that under P.D. 851, the 13th month pay is based solely on basic salary. As
defined by the law itself and clarified by the implementing and Supplementary Rules as
well as by the Supreme Court in a long line of decisions, remunerations which do not
form part of the basic or regular salary of an employee, such as commissions, should
not be considered in the computation of the 13th month pay. This being the case, the
Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then
Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were
issued in excess of the statutory authority conferred by P.D. 851. According to
petitioners, this conclusion becomes even more evident when considered in light of the
opinion rendered by Labor Secretary Drilon himself in "In Re: Labor Dispute at the
Philippine Long Distance Telephone Company" which affirmed the contemporaneous
interpretation by then Secretary Ople that commissions are excluded from the basic
salary. Petitioners further contend that assuming that Secretary Drilon did not exceed
the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and
void as they violate the equal protection of the law clause.
Respondents through the Office of the Solicitor General question the propriety of
petitioners' attack on the constitutionality of the Revised Guidelines in a petition
for certiorari which, they contend, should be confined purely to the correction of errors
and/or defects of jurisdiction, including matters of grave abuse of discretion amounting
to lack or excess of jurisdiction and not extend to a collateral attack on the validity
and/or constitutionality of a law or statute. They aver that the petitions do not advance
any cogent reason or state any valid ground to sustain the allegation of grave abuse of
discretion, and that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay
Law has already been amended by Memorandum Order No. 28 issued by President
Corazon C. Aquino on August 13, 1986 so that commissions are now imputed into the
computation of the 13th Month Pay. They add that the Revised Guidelines issued by
then Labor Secretary Drilon merely clarified a gray area occasioned by the silence of
the law as to the nature of commissions; and worked no violation of the equal protection
clause of the Constitution, said Guidelines being based on reasonable classification.
Respondents point to the case of Songco vs. National Labor Relations Commission,
183 SCRA 610, wherein the Court declared that Article 97(f) of the Labor Code is
explicit that commission is included in the definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal,

supersede or abrogate P.D. 851. As may be gleaned from the language of the
Memorandum Order No. 28, it merely "modified" Section 1 of the decree by removing
the P1,000.00 salary ceiling. The concept of 13th Month Pay as envisioned, defined and
implemented under P.D. 851 remained unaltered, and while entitlement to said benefit
was no longer limited to employees receiving a monthly basic salary of not more than
P1,000.00, said benefit was, and still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. Thus, the interpretation given to the
term "basic salary" as defined in P.D. 851 applies equally to "basic salary" under
Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the
coverage of the term "basic salary" as used in P.D. 851. We said at some length:
Under Presidential Decree 851 and its implementing rules, the basic
salary of an employee is used as the basis in the determination of his 13th
month pay. Any compensations or remunerations which are deemed not
part of the basic pay is excluded as basis in the computation of the
mandatory bonus.
Under the Rules and Regulations implementing Presidential Decree 851,
the following compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential

Decree 525 and Letter of Instructions No. 174;
b) Profit-sharing payments;
c) All allowances and monetary benefits which are not

considered or integrated as part of the regular basic salary of
the employee at the time of the promulgation of the Decree
on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing

Presidential Decree 851 Presidential Decree 851 issued by then Labor
Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th
month pay.
The exclusion of the cost-of-living allowances under Presidential Decree

525 and Letter of Instructions No. 174, and profit-sharing payments
indicate the intention to strip basic salary of other payments which are
properly considered as "fringe" benefits. Likewise, the catch-all
exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the
intention to strip basic salary of any and all additions which may be in the
form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing

Presidential Decree 851 is even more emphatic in declaring that earnings
and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to
include all remunerations or earnings paid by an employer to an
employee, this cloud is dissipated in the later and more controlling
Supplementary Rules and Regulations which categorically exclude from
the definitions of basic salary earnings and other remunerations paid by
an employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is
now a subject of broad exclusion. The Supplementary Rules and
Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
The all embracing phrase "earnings and other remunerations" which are
deemed not part of the basic salary includes within its meaning payments
for sick, vacation, or maternity leaves, premium for works performed on
rest days and special holidays, pays for regular holidays and night
differentials. As such they are deemed not part of the basic salary and
shall not be considered in the computation of the 13th-month pay. If they
were not excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th month
pay. Then the exclusionary provision would prove to be idle and with no
purpose.
This conclusion finds strong support under the Labor Code of the
Philippines. To cite a few provisions:
Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a
day provided that the employee is paid for the overtime work, additional
compensation equivalent to his regular wage plus at least twenty-five
(25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and

added to the regular wage or basic salary, for reason of which such is
categorically excluded from the definition of basic salary under the
Supplementary Rules and Regulations Implementing Presidential Decree
851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional

compensation of at least thirty percent (30%) of the regular wage of the
employee.
It is likewise clear the premiums for special holiday which is at least 30%
of the regular wage is an additional pay other than and added to the
regular wage or basic salary. For similar reason, it shall not be considered
in the computation of the 13th month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its
common, generally-accepted meaning, i.e., as a rate of pay for a standard work period
exclusive of such additional payments as bonuses and overtime. 8 This is how the term
was also understood in the case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn.
630, which held that in statutes providing that pension should not less than 50 percent
of "basic salary" at the time of retirement, the quoted words meant the salary that an
employee (e.g., a policeman) was receiving at the time he retired without taking into
consideration any extra compensation to which he might be entitled for extra work. 9
In remunerative schemes consisting of a fixed or guaranteed wage plus commission,

the fixed or guaranteed wage is patently the "basic salary" for this is what the employee
receives for a standard work period. Commissions are given for extra efforts exerted in
consummating sales or other related transactions. They are, as such, additional pay,
which this Court has made clear do not form part of the "basic salary."
Respondents would do well to distinguish this case from Songco vs. National Labor
Relations Commission, supra, upon which they rely so heavily. What was involved
therein was the term "salary" without the restrictive adjective "basic". Thus, in said case,
we construed the term in its generic sense to refer to all types of "direct remunerations
for services rendered," including commissions. In the same case, we also took judicial
notice of the fact "that some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone, although an employer-employee
relationship exists," which statement is quite significant in that it speaks of a "basic
salary" apart and distinct from "commissions" and "allowances". Instead of supporting
respondents' stand, it would appear that Songco itself recognizes that commissions are
not part of "basic salary."
In including commissions in the computation of the 13th month pay, the second
paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th
Month Pay Law unduly expanded the concept of "basic salary" as defined in P.D. 851. It
is a fundamental rule that implementing rules cannot add to or detract from the
provisions of the law it is designed to implement. Administrative regulations adopted
under legislative authority by a particular department must be in harmony with the
provisions of the law they are intended to carry into effect. They cannot widen its scope.
An administrative agency cannot amend an act of Congress. 10
Having reached this conclusion, we deem it unnecessary to discuss the other issues
raised in these petitions.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second

paragraph of Section 5 (a) of the Revised Guidelines on the Implementation of the 13th
Month Pay Law issued on November 126, 1987 by then Labor Secretary Franklin M.
Drilon is declared null and void as being violative of the law said Guidelines were issued
to implement, hence issued with grave abuse of discretion correctible by the writ of
prohibition and certiorari. The assailed Orders of January 17, 1990 and October 10,
1991 based thereon are SET ASIDE.
SO ORDERED.
Padilla, Regalado, Nocon and Puno, JJ., concur.
Kamaya Point Hotel vs. NLRC, 177 SCRA 160,

GR 75289, Aug. 31, 1989
G.R. No. 75289 August 31, 1989
KAMAYA POINT HOTEL, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, FEDERATION OF FREE WORKERS
and MEMIA QUIAMBAO, respondents.
FERNAN, C.J.:
This petition for review on certiorari filed by herein petitioner Kamaya Point Hotel seeks
to set aside the decision 1 of the National Labor Relations Commission dated June 25,
1986 in NLRC Case No. RAB III-4-1191-83 which affirmed with modification the
decision of the Labor Arbiter dated May 31, 1984.
Respondent Memia Quiambao with thirty others who are members of private
respondent Federation of Free Workers (FFW) were employed by petitioner as hotel
crew. On the basis of the profitability of the company's business operations,
management granted a 14th month pay to its employees starting in 1979. In January
1982, operations ceased to give way to the hotel's conversion into a training center for
Libyan scholars. However, due to technical and financing problems, the Libyans pre-
terminated the program on July 7, 1982, leaving petitioner without any business, aside
from the fact that it was not paid for the use of the hotel premises and in addition had to
undertake repairs of the premises damaged by the Libyan students. All in all petitioner
allegedly suffered losses amounting to P2 million.
Although petitioner reopened the hotel premises to the public, it was not able to pick-up
its lost patronage. In a couple of months it effected a retrenchment program until finally
on January 7, 1984, it totally closed its business. 2
On April 18, 1983, private respondent Federation of Free Workers (FFW); a legitimate
labor organization, filed with the Ministry of Labor and Employment, Bataan Provincial
Office, Bataan Export Processing Zone, Mariveles, Bataan, a complaint against
petitioner for illegal suspension, violation of the CBA and non-payment of the 14th
month pay. 3 Records however show that the case was submitted for decision on the
sole issue of alleged non-payment of the 14th month pay for the year 1982 .4
After the hearing, Executive Labor Arbiter Francisco M. Jose, Jr. rendered a decision
dated May 31, 1984, the dispositive portion of which reads:
WHEREFORE, IN VIEW OF ALL THE FOREGOING, judgment is hereby

rendered:
1. Ordering the respondent Kamaya Point Hotel to pay the 14th month pay
for 1982 of all its rank and file employees;
2. Ordering the same respondent to pay the monetary equivalent of the

benefits mentioned in Section 6 of Article XII and Sections I and 2 of
Article XII of the then existing Collective Bargaining Agreement which will
expire on 1 July 1984. 5
On appeal, the National Labor Relations Commission (NLRC) in its decision dated June
25, 1986 set aside the award of monetary benefits under the CBA but affirmed the grant
of the 14th month pay adopting the Labor Arbiter's reasoning, thus:
xxx xxx xxx
We agree with respondent that there is no law granting a 14th month pay.
We likewise agree with respondent that there is no provision in the
Collective Bargaining Agreement granting a 14th month pay. Despite all
these, however, we believe that individual complainants herein are still
entitled to the 14th month pay for 1982 because to our mind, the granting
of this 14th month pay has already ripened into a company practice which
respondent company cannot withdraw unilaterally. This 14th month pay is
now an existing benefit which cannot be withdrawn without violating article
100 of the Labor Code. To allow its withdrawal now would certainly
amount to a diminution of existing benefits which complainants are
presently enjoying. Premised on the above, the individual complainants
are entitled to the 14th month pay for 1982 and respondent should pay the
same. (Emphasis supplied) 6
Before this Court, petitioner now seeks to reverse the decision of the NLRC arguing that
the latter tribunal committed grave abuse of discretion when it adopted the Labor
Arbiter's decision saying that the 14th month pay cannot be withdrawn without violating
Article 100 of the Labor Code which states:
Prohibition against elimination or diminution of benefits.- Nothing in this

Book shall be construed to eliminate or in any way diminish supplements,
or other employee benefits being enjoyed at the time of promulgation of
this Code.
We find it difficult to comprehend why the NLRC and the Labor Arbiter, despite their
admission that the 14th month pay has no contractual or legal basis, still chose to rule in
favor of private respondents. It is patently obvious that Article 100 is clearly without
applicability. The date of effectivity of the Labor Code is May 1, 1974. In the case at bar,
petitioner extended its 14th month pay beginning 1979 until 1981. What is demanded is
payment of the 14th month pay for 1982. Indubitably from these facts alone, Article 100
of the Labor Code cannot apply.
Moreover, there is no law that mandates the payment of the 14th month pay. This is
emphasized in the grant of exemption under Presidential Decree 851 (13th Month Pay
Law) which states: "Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree." Necessarily then, only the 13th month pay is
mandated. Having enjoyed the additional income in the form of the 13th month pay,
private respondents' insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
Also contractually, as gleaned from the collective bargaining agreement between

management and the union, there is no stipulation as to such extra remuneration.
Evidently, this omission is an acknowledgment that such benefit is entirely contilagent or
dependent on the profitability of the company's operations.
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore,
gratuitous in nature. The granting of the 14th month pay is a management prerogative
which cannot be forced upon the employer. It is something given in addition to what is
ordinarily received by or strictly due the recipient. It is a gratuity to which the recipient
has no right to make a demand. 7
This Court is not prepared to compel petitioner to grant the 14th month pay solely
because it has allegedly ripened into a company practice" as the labor arbiter has put it.
Having lost its catering business derived from Libyan students, Kamaya Hotel should
not be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of paying the 13th month
pay in addition to bonuses or other benefits aside from the employee's basic salaries or
wages. 8 Restated differently, we rule that an employer may not be obliged to assume
the onerous burden of granting bonuses or other benefits aside from the employee's
basic salaries or wages 8 in addition to the required 13th month pay.
WHEREFORE, the petition is hereby GRANTED. The portion of the decision of the
National Labor Relations Commission dated June 25, 1986 ordering the payment of
14th month pay to private respondents is set aside.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
American Wire Cable Union vs. American Wire Cable, 457 SCRA 684,
GR 1550059, Apr. 29, 2005
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, petitioner, vs.
AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF
APPEALS, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a special civil action for certiorari, assailing the Decision[1] of the Special
Eighth Division of the Court of Appeals dated 06 March 2002. Said Decision upheld the
Decision[2] and Order[3] of Voluntary Arbitrator Angel A. Ancheta of the National
Conciliation and Mediation Board (NCMB) dated 25 September 2001 and 05 November
2001, respectively, which declared the private respondent herein not guilty of violating
Article 100 of the Labor Code, as amended. Assailed likewise, is the Resolution [4] of the
Court of Appeals dated 12 July 2002, which denied the motion for reconsideration of the
petitioner, for lack of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of
wires and cables. There are two unions in this company, the American Wire and Cable
Monthly-Rated Employees Union (Monthly-Rated Union) and the American Wire and
Cable Daily-Rated Employees Union (Daily-Rated Union).
On 16 February 2001, an original action was filed before the NCMB of the Department
of Labor and Employment (DOLE) by the two unions for voluntary arbitration. They
alleged that the private respondent, without valid cause, suddenly and unilaterally
withdrew and denied certain benefits and entitlements which they have long enjoyed.
These are the following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the work rendered during
Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28
and 29;
c. Christmas Party; and
d. Promotional Increase.
A promotional increase was asked by the petitioner for fifteen (15) of its members
who were given or assigned new job classifications. According to petitioner, the new job
classifications were in the nature of a promotion, necessitating the grant of an increase in
the salaries of the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the parties before the Office
for Voluntary Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their respective position papers with
the Office of the Voluntary Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision[5] was rendered by Voluntary Arbitrator Angel A.
Ancheta in favor of the private respondent. The dispositive portion of the said Decision is
quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby declared that the
Company is not guilty of violating Article 100 of the Labor Code, as amended, or
specifically for withdrawing the service award, Christmas party and 35% premium for
work rendered during Holy Week and Christmas season and for not granting any
promotional increase to the alleged fifteen (15) Daily-Rated Union Members in the
absence of a promotion. The Company however, is directed to grant the service award
to deserving employees in amounts and extent at its discretion, in consultation with the
Unions on grounds of equity and fairness.[6]
A motion for reconsideration was filed by both unions [7] where they alleged that the
Voluntary Arbitrator manifestly erred in finding that the company did not violate Article
100 of the Labor Code, as amended, when it unilaterally withdrew the subject benefits,
and when no promotional increase was granted to the affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary Arbitrator Angel A.
Ancheta. Part of the Order is quoted hereunder:
Considering that the issues raised in the instant case were meticulously evaluated and
length[i]ly discussed and explained based on the pleadings and documentary evidenc[e]
adduced by the contending parties, we find no cogent reason to change, modify, or
disturb said decision.
WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are
hereby, denied for lack of merit. Our decision dated 25 September 2001 is affirmed en
toto.[9]
An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the
Daily-Rated Union before the Court of Appeals[10] and docketed as CA-G.R. SP No.
68182. The petitioner averred that Voluntary Arbitrator Angel A. Ancheta erred in finding
that the company did not violate Article 100 of the Labor Code, as amended, when the
subject benefits were unilaterally withdrawn. Further, they assert, the Voluntary Arbitrator
erred in adopting the companys unaudited Revenues and Profitability Analysis for the
years 1996-2000 in justifying the latters withdrawal of the questioned benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent company was
promulgated by the Special Eighth Division of the Court of Appeals in CA-G.R. SP No.
68182. The decretal portion of the decision reads:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE

COURSE and accordingly DISMISSED, for lack of merit. The Decision of Voluntary
Arbitrator Angel A. Ancheta dated September 25, 2001 and his Order dated November
5, 2001 in VA Case No. AAA-10-6-4-2001 are hereby AFFIRMED and UPHELD.[12]
A motion for reconsideration[13] was filed by the petitioner, contending that the Court
of Appeals misappreciated the facts of the case, and that it committed serious error when
it ruled that the unaudited financial statement bears no importance in the instant case.
The Court of Appeals denied the motion in its Resolution dated 12 July
2002[14] because it did not present any new matter which had not been considered in
arriving at the decision. The dispositive portion of the Resolution states:
WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.[15]
Dissatisfied with the court a quos ruling, petitioner instituted the instant special civil
action for certiorari,[16] citing grave abuse of discretion amounting to lack of jurisdiction.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:

I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT
VIOLATE ARTICLE 100 OF THE LABOR CODE, AS AMENDED, WHEN IT
UNILATERALLY WITHDREW THE BENEFITS OF THE MEMBERS OF PETITIONER
UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS
INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN
FACT SAID BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME
IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED COMPANY PRACTICE,
WITH THE FURTHER FACT THAT THE SAME NOT BEING DEPENDENT ON
PROFITS.
II
THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND
SINKER, THE RESPONDENT COMPANYS SELF SERVING AND UNAUDITED
REVENUES AND PROFITABILITY ANALYSIS FOR THE YEARS 1996-2000 WHICH
THEY SUBMITTED TO FALSELY JUSTIFY THEIR UNLAWFUL ACT OF
UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE
PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE
AWARD IS NOT DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT
BE UNILATERALLY WITHDRAWN BY RESPONDENT COMPANY.
ISSUE
Synthesized, the solitary issue that must be addressed by this Court is whether or not
private respondent is guilty of violating Article 100 of the Labor Code, as amended, when
the benefits/entitlements given to the members of petitioner union were withdrawn.
THE COURTS RULING
Before we address the sole issue presented in the instant case, it is best to first
discuss a matter which was raised by the private respondent in its Comment. The private
respondent contends that this case should have been dismissed outright because of
petitioners error in the mode of appeal. According to it, the petitioner should have elevated
the instant case to this Court through a petition for review on certiorari under Rule 45, and
not through a special civil action for certiorari under Rule 65, of the 1997 Rules on Civil
Procedure.[17]
Assuming arguendo that the mode of appeal taken by the petitioner is improper, there
is no question that the Supreme Court has the discretion to dismiss it if it is defective.
However, sound policy dictates that it is far better to dispose the case on the merits, rather
than on technicality.[18]
The Supreme Court may brush aside the procedural barrier and take cognizance of
the petition as it raises an issue of paramount importance. The Court shall resolve the
solitary issue on the merits for future guidance of the bench and bar. [19]
With that out of the way, we shall now resolve whether or not the respondent company
is guilty of violating Article 100 of the Labor Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.

Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of promulgation of
this Code.
The petitioner submits that the withdrawal of the private respondent of the 35%
premium pay for selected days during the Holy Week and Christmas season, the holding
of the Christmas Party and its incidental benefits, and the giving of service awards violated
Article 100 of the Labor Code. The grant of these benefits was a customary practice that
can no longer be unilaterally withdrawn by private respondent without the tacit consent of
the petitioner. The benefits in question were given by the respondent to the petitioner
consistently, deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an error in interpretation, or a
construction of a difficult question of law, but simply, the grant has been a practice over
a long period of time. As such, it cannot be withdrawn from the petitioner at respondents
whim and caprice, and without the consent of the former. The benefits given by the
respondent cannot be considered as a bonus as they are not founded on profit. Even
assuming that it can be treated as a bonus, the grant of the same, by reason of its long
and regular concession, may be regarded as part of regular compensation. [20]
With respect to the fifteen (15) employees who are members of petitioner union that
were given new job classifications, it asserts that a promotional increase in their salaries
was in order. Salary adjustment is a must due to their promotion.[21]
On respondent companys Revenues and Profitability Analysis for the years 1996-
2000, the petitioner insists that since the former was unaudited, it should not have justified
the companys sudden withdrawal of the benefits/entitlements. The normal and/or legal
method for establishing profit and loss of a company is through a financial statement
audited by an independent auditor.[22]
The petitioner cites our ruling in the case of Saballa v. NLRC,[23] where we held
that financial statements audited by independent auditors constitute the normal method
of proof of the profit and loss performance of the company. Our ruling in the case of Bogo-
Medellin Sugarcane Planters Association, Inc., et al. v. NLRC, et al.[24] was likewise
invoked. In this case, we held:
The Court has previously ruled that financial statements audited by independent
external auditors constitute the normal method of proof of the profit and loss
performance of a company.
On the matter of the withdrawal of the service award, the petitioner argues that it is
the employees length of service which is taken as a factor in the grant of this benefit, and
not whether the company acquired profit or not.[25]
In answer to all these, the respondent corporation avers that the grant of all subject
benefits has not ripened into practice that the employees concerned can claim a
demandable right over them. The grant of these benefits was conditional based upon the
financial performance of the company and that conditions/circumstances that existed
before have indeed substantially changed thereby justifying the discontinuance of said
grants. The companys financial performance was affected by the recent political turmoil
and instability that led the entire nation to a bleeding economy. Hence, it only necessarily
follows that the companys financial situation at present is already very much different from
where it was three or four years ago.[26]
On the subject of the unaudited financial statement presented by the private
respondent, the latter contends that the cases cited by the petitioner indeed uniformly
ruled that financial statements audited by independent external auditors constitute the
normal method of proof of the profit and loss performance of a company. However, these
cases do not require that the only legal method to ascertain profit and loss is through an
audited financial statement. The cases only provide that an audited financial statement is
the normal method.[27]
The respondent company likewise asseverates that the 15 members of petitioner
union were not actually promoted. There was only a realignment of positions.[28]
From the foregoing contentions, it appears that for the Court to resolve the issue
presented, it is critical that a determination must be first made on whether the
benefits/entitlements are in the nature of a bonus or not, and assuming they are so,
whether they are demandable and enforceable obligations.
In the case of Producers Bank of the Philippines v. NLRC[29] we have characterized
what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employers business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of
bigger profits. The granting of a bonus is a management prerogative, something given
in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is
not a demandable and enforceable obligation, except when it is made part of the wage,
salary or compensation of the employee.
Based on the foregoing pronouncement, it is obvious that the benefits/entitlements

subjects of the instant case are all bonuses which were given by the private respondent
out of its generosity and munificence. The additional 35% premium pay for work done
during selected days of the Holy Week and Christmas season, the holding of Christmas
parties with raffle, and the cash incentives given together with the service awards are all
in excess of what the law requires each employer to give its employees. Since they are
above what is strictly due to the members of petitioner-union, the granting of the same
was a management prerogative, which, whenever management sees necessary, may be
withdrawn, unless they have been made a part of the wage or salary or compensation of
the employees.
The consequential question therefore that needs to be settled is if the subject
benefits/entitlements, which are bonuses, are demandable or not. Stated another way,
can these bonuses be considered part of the wage or salary or compensation making
them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties,[30] or it must have had a fixed amount[31] and had
been a long and regular practice on the part of the employer.[32]
The benefits/entitlements in question were never subjects of any express agreement
between the parties. They were never incorporated in the Collective Bargaining
Agreement (CBA). As observed by the Voluntary Arbitrator, the records reveal that these
benefits/entitlements have not been subjects of any express agreement between the
union and the company, and have not yet been incorporated in the CBA. In fact, the
petitioner has not denied having made proposals with the private respondent for the
service award and the additional 35% premium pay to be made part of the CBA. [33]
The Christmas parties and its incidental benefits, and the giving of cash incentive
together with the service award cannot be said to have fixed amounts. What is clear from
the records is that over the years, there had been a downtrend in the amount given as
service award.[34] There was also a downtrend with respect to the holding of the Christmas
parties in the sense that its location changed from paid venues to one which was free of
charge,[35] evidently to cut costs. Also, the grant of these two aforementioned bonuses
cannot be considered to have been the private respondents long and regular practice. To
be considered a regular practice, the giving of the bonus should have been done over a
long period of time, and must be shown to have been consistent and deliberate.[36] The
downtrend in the grant of these two bonuses over the years demonstrates that there is
nothing consistent about it. Further, as held by the Court of Appeals:
Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator
that the same was merely sponsored by the respondent corporation out of generosity
and that the same is dependent on the financial performance of the company for a
particular year[37]
The additional 35% premium pay for work rendered during selected days of the Holy
Week and Christmas season cannot be held to have ripened into a company practice that
the petitioner herein have a right to demand. Aside from the general averment of the
petitioner that this benefit had been granted by the private respondent since time
immemorial, there had been no evidence adduced that it had been a regular practice. As
propitiously observed by the Court of Appeals:
. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the
same was in excess of that provided by the law, the same however did not ripen into a
company practice on account of the fact that it was only granted for two (2) years and
with the express reservation from respondent corporations owner that it cannot continue
to rant the same in view of the companys current financial situation.[38]
To hold that an employer should be forced to distribute bonuses which it granted out
of kindness is to penalize him for his past generosity.[39]
Having thus ruled that the additional 35% premium pay for work rendered during
selected days of the Holy Week and Christmas season, the holding of Christmas parties
with its incidental benefits, and the grant of cash incentive together with the service award
are all bonuses which are neither demandable nor enforceable obligations of the private
respondent, it is not necessary anymore to delve into the Revenues and Profitability
Analysis for the years 1996-2000 submitted by the private respondent.
On the alleged promotion of 15 members of the petitioner union that should warrant
an increase in their salaries, the factual finding of the Voluntary Arbitrator is revealing, viz:
Considering that the Union was unable to adduce proof that a promotion indeed
occur[ed] with respect to the 15 employees, the Daily Rated Unions claim for
promotional increase likewise fall[s] there being no promotion established under the
records at hand.[40]
WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of
the Court of Appeals dated 06 March 2002 and 12 July 2002, respectively, which affirmed
and upheld the decision of the Voluntary Arbitrator, are hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
Mla Electric vs. Banamira, 463 SCRA 331,

GR No. 145271, July 14, 2005
SECOND DIVISION
MANILA ELECTRIC COMPANY, G.R. No. 145271

Petitioner,
- versus -
Present:
ROGELIO BENAMIRA, ERNIE
DE SAGUN[1], DIOSDADO PUNO, Chairman,
YOGARE, FRANCISCO MORO , [2] AUSTRIA-MARTINEZ,
[3]
OSCAR LAGONOY , ROLANDO CALLEJO, SR.,
[4]
BENI, ALEX BENI, RAUL DE TINGA, and
GUIA, ARMED SECURITY & CHICO-NAZARIO, JJ.
DETECTIVE AGENCY, INC.,
(ASDAI) andADVANCE FORCES
SECURITY & INVESTIGATION Promulgated:
SERVICES, INC., (AFSISI),
Respondents. July 14, 2005
x------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision,[5] dated September 27, 2000, of the Court of Appeals (CA) in CA-
G.R. SP No. 50520 which declared petitioner Manila Electric Company (MERALCO) as
the direct employer of individual respondents Rogelio Benamira, Ernie De Sagun,
Diosdado Yogare, Francisco Moro, Oscar Lagonoy, Rolando Beni, Alex Beni and Raul
De Guia (individual respondents for brevity).
The factual background of the case is as follows:
The individual respondents are licensed security guards formerly employed by

Peoples Security, Inc. (PSI) and deployed as such at MERALCOs head office in Ortigas
Avenue, Pasig, Metro Manila.
On November 30, 1990, the security service agreement between PSI and
MERALCO was terminated.
Immediately thereafter, fifty-six of PSIs security guards, including herein eight

individual respondents, filed a complaint for unpaid monetary benefits against PSI and
MERALCO, docketed as NLRC-NCR Case No. 05-02746-90.
Meanwhile, the security service agreement between respondent Armed Security
& Detective Agency, Inc., (ASDAI) and MERALCO took effect on December 1, 1990. In
the agreement, ASDAI was designated as the AGENCY while MERALCO was designated
as the COMPANY. The pertinent terms and conditions of the agreement are as follows:
1. The AGENCY shall initially provide the COMPANY with TWO

HUNDRED TWENTY (220) licensed, uniformed, bonded and armed
security guards to be assigned at the COMPANYs MERALCO CENTER,
complete with nightsticks, flashlights, raincoats, and other paraphernalias
to work on eight (8) hours duty. The COMPANY shall determine the number
of security guards in accordance with its needs and the areas of
responsibility assigned to each, and shall have the option to increase or
decrease the number of guards at any time provided the AGENCY is
notified within twenty four (24) hours of the contemplated reduction or
increase of the guards in which case the cost or consideration shall be
adjusted accordingly.
2. The COMPANY shall furnish the AGENCY copies of written

specific instruction to be followed or implemented by the latters personnel
in the discharge of their duties and responsibilities and the AGENCY shall
be responsible for the faithful compliance therewith by its personnel
together with such general and specific orders which shall be issued from
time to time.
3. For and in consideration of the services to be rendered by the

AGENCY to the COMPANY, the COMPANY during the term of this contract
shall pay the AGENCY the amount of THREE THOUSAND EIGHT
HUNDRED PESOS (P3,800.00) a month per guard, FOUR THOUSAND
PESOS (P4,000.00) for the Shift Leader and FOUR THOUSAND TWO
HUNDRED PESOS (P4,200.00) for the Detachment Commander for eight
(8) hours work/day, Saturdays, Sundays and Holidays included, payable
semi-monthly.
xxx
5. The AGENCY shall assume the responsibility for the proper and
efficient performance of duties by the security guards employed by it and it
shall be solely responsible for any act of said security guards during their
watch hours, the COMPANY being specifically released from any and all
liability to third parties arising from the acts or omission of the security
guards of the AGENCY.
6. The AGENCY also agrees to hold the COMPANY entirely free

from any liability, cause or causes of action or claims which may be filed by
said security guards by reason of their employment with the AGENCY
pursuant to this Agreement or under the provisions of the Labor Code, the
Social Security Act, and other laws, decrees or social legislations now
enacted or which hereafter may be enacted.
7. Discipline and Administration of the security guards shall conform

with the rules and regulations of the AGENCY, and the COMPANY reserves
the right to require without explanation the replacement of any guard whose
behavior, conduct or appearance is not satisfactory to the COMPANY and
that the AGENCY cannot pull-out any security guard from the COMPANY
without the consent of the latter.
8. The AGENCY shall conduct inspections through its duly

authorized inspector at least two (2) times a week of guards assigned to all
COMPANY installations secured by the AGENCY located in the
Metropolitan Manila area and at least once a week of the COMPANYs
installations located outside of the Metropolitan Manila area and to further
submit its inspection reports to the COMPANY. Likewise, the COMPANY
shall have the right at all times to inspect the guards of the AGENCY
assigned to the COMPANY.
9. The said security guards shall be hired by the AGENCY and this
contract shall not be deemed in any way to constitute a contract of
employment between the COMPANY and any of the security guards hired
by the AGENCY but merely as a contract specifying the conditions and
manner under which the AGENCY shall render services to the COMPANY.
10. Nothing herein contained shall be understood to make the

security guards under this Agreement, employees of the COMPANY, it
being clearly understood that such security guards shall be considered as
they are, employees of the AGENCY alone, so that the AGENCY shall be
responsible for compliance with all pertinent labor laws and regulations
included but not limited to the Labor Code, Social Security Act, and all other
applicable laws and regulations including that providing for a withholding
tax on income.
xxx
13. This contract shall take effect on the 1st day of December, 1990
and shall continue from year to year unless sooner terminated by the
COMPANY for cause or otherwise terminated by either party without cause
upon thirty (30) days written notice by one party to the other.[6]
Subsequently, the individual respondents were absorbed by ASDAI and retained

at MERALCOs head office.
On June 29, 1992, Labor Arbiter Manuel P. Asuncion rendered a decision in

NLRC-NCR Case No. 05-02746-90 in favor of the former PSI security guards, including
the individual respondents.
Less than a month later, or on July 21, 1992, the individual respondents filed
another complaint for unpaid monetary benefits, this time against ASDAI and MERALCO,
docketed as NLRC-NCR Case No. 00-07-03953-92.
On July 25, 1992, the security service agreement between respondent Advance
Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO took effect,
terminating the previous security service agreement with ASDAI.[7] Except as to the
number of security guards,[8] the amount to be paid the agency,[9] and the effectivity of the
agreement,[10] the terms and conditions were substantially identical with the security
service agreement with ASDAI.
On July 29, 1992, the individual respondents amended their complaint to implead
AFSISI as party respondent. On August 11, 1992 they again amended their complaint to
allege that AFSISI terminated their services on August 6, 1992 without notice and just
cause and therefore guilty of illegal dismissal.
The individual respondents alleged that: MERALCO and ASDAI never paid their
overtime pay, service incentive leave pay, premium pay for Sundays and
Holidays, P50.00 monthly uniform allowance and underpaid their 13 th month pay; on July
24, 1992, when the security service agreement of ASDAI was terminated and AFSISI took
over the security functions of the former on July 25, 1992, respondent security guard
Benamira was no longer given any work assignment when AFSISI learned that the former
has a pending case against PSI, in effect, dismissing him from the service without just
cause; and, the rest of the individual respondents were absorbed by AFSISI but were not
given any assignments, thereby dismissing them from the service without just cause.
ASDAI denied in general terms any liability for the claims of the individual
respondents, claiming that there is nothing due them in connection with their services.
On the other hand, MERALCO denied liability on the ground of lack of employer-
employee relationship with individual respondents. It averred that the individual
respondents are the employees of the security agencies it contracted for security
services; and that it has no existing liability for the individual respondents claims since
said security agencies have been fully paid for their services per their respective security
service agreement.
For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not
absorb or hire the individual respondents, the latter were merely hold-over guards from
ASDAI; it is not obliged to employ or absorb the security guards of the agency it replaced
since there is no provision in its security service agreement with MERALCO or in law
requiring it to absorb and hire the guards of ASDAI as it has its own guards duly trained
to service its various clients.
On January 3, 1994, after the submission of their respective evidence and position
papers, Labor Arbiter Pablo C. Espiritu, Jr. rendered a Decision holding ASDAI and
MERALCO jointly and solidarily liable to the monetary claims of individual respondents
and dismissing the complaint against AFSISI. The dispositive portion of the decision
reads as follows:
WHEREFORE, conformably with the above premises, judgment is

hereby rendered:
1. Declaring ASDAI as the employer of the complainants and as such

complainants should be reinstated as regular security guards of ASDAI
without loss of seniority rights, privileges and benefits and for ASDAI to
immediately post the complainants as security guards with their clients. The
complaint against AFSISI is Dismissed for lack of merit.
2. Ordering both respondents, ASDAI and MERALCO to jointly and

solidarily pay complainants monetary claims (underpayment of actual
regular hours and overtime hours rendered, and premium pay for holiday
and rest day) in the following amounts:
NAME OVERTIME DIFFERENTIALS AND PREMIUM PAY FOR HOLIDAY
& REST DAY
1. Rogelio Benamira P14,615.75

2. Ernie De Sagun 21,164.31
3. Diosdado Yogare 7,108.77
4. Francisco Maro 26,567.11
5. Oscar Lagonay 18,863.36
6. Rolando Beni 21,834.12
7. Alex Beni 21,648.80
8. Ruel De Guia 14,200.33
3. Ordering Respondents ASDAI and MERALCO to jointly and
solidarily pay complainants 10% attorneys fees in the amount
of P14,600.25 based on the total monetary award due to the complainants
in the amount of P146,002.55.
All other claims of the complainants are hereby DISMISSED for lack
of merit.
The counter-claim of respondent AFSISI for damages is hereby

dismissed for want of substantial evidence to justify the grant of damages.
SO ORDERED.[11]
All the parties, except AFSISI, appealed to the National Labor Relations
Commission (NLRC).
Individual respondents partial appeal assailed solely the Labor Arbiters declaration
that ASDAI is their employer. They insisted that AFSISI is the party liable for their illegal
dismissal and should be the party directed to reinstate them.
For its part, MERALCO attributed grave abuse of discretion on the part of the Labor
Arbiter in failing to consider the absence of employer-employee relationship between
MERALCO and individual respondents.
On the other hand, ASDAI took exception from the Labor Arbiters finding that it is
the employer of the individual respondents and therefore liable for the latters unpaid
monetary benefits.
On April 10, 1995, the NLRC affirmed in toto the decision of the Labor
Arbiter.[12] On April 19, 1995, the individual respondents filed a motion for partial
reconsideration but it was denied by the NLRC in a Resolution dated May 23, 1995.[13]
On August 11, 1995, the individual respondents filed a petition for certiorari before
us, docketed as G.R. No. 121232.[14] They insisted that they were absorbed by AFSISI
and the latter effected their termination without notice and just cause.
After the submission of the responsive pleadings and memoranda, we referred the
petition, in accordance with St. Martin Funeral Homes vs. NLRC,[15] to the CA which,
on September 27, 2000, modified the decision of the NLRC by declaring MERALCO as
the direct employer of the individual respondents.
The CA held that: MERALCO changed the security agency manning its premises
three times while engaging the services of the same people, the individual respondents;
MERALCO employed a scheme of hiring guards through an agency and periodically
entering into service contract with one agency after another in order to evade the security
of tenure of individual respondents; individual respondents are regular employees of
MERALCO since their services as security guards are usually necessary or desirable in
the usual business or trade of MERALCO and they have been in the service of MERALCO
for no less than six years; an employer-employee relationship exists between MERALCO
and the individual respondents because: (a) MERALCO had the final say in the selection
and hiring of the guards, as when its advice was proved to have carried weight in AFSISIs
decision not to absorb the individual respondents into its workforce; (b) MERALCO paid
the wages of individual respondents through ASDAI and AFSISI; (c) MERALCOs
discretion on matters of dismissal of guards was given great weight and even finality since
the record shows that the individual respondents were replaced upon the advice of
MERALCO; and, (d) MERALCO has the right, at any time, to inspect the guards, to require
without explanation the replacement of any guard whose behavior, conduct or
appearance is not satisfactory and ASDAI and AFSISI cannot pull out any security guard
from MERALCO without the latters consent; and, a labor-only contract existed between
ASDAI and AFSISI and MERALCO, such that MERALCO is guilty of illegal dismissal
without just cause and liable for reinstatement of individual respondents to its workforce.
The dispositive portion of the CAs Decision reads as follows:
WHEREFORE, in view of the foregoing premises, the Resolution

subject of this petition is hereby AFFIRMED with MODIFICATION in the
sense that MERALCO is declared the employer of the petitioners.
Accordingly, private respondent MERALCO is hereby ordered as follows:
1. To reinstate petitioners into MERALCOs work force as regular
security guards without loss of seniority rights and other privileges; and
2. To pay the petitioners full backwages, inclusive of allowances, and

other benefits or their monetary equivalent computed from the time their
compensation was withheld from them up to the time of their actual
reinstatement, for which the Labor Arbiter Pablo C. Espiritu, Jr. is hereby
directed to undertake the necessary computation and enforcement thereof.
With respect to the rest of the dispositive portion of the assailed

Resolution which affirmed the decision of the Labor Arbiter Pablo C.
Espiritu, Jr., particularly the joint and solidary liabilities of both ASDAI and
MERALCO to the petitioners, the same are hereby AFFIRMED.
SO ORDERED.[16]
Hence, the present petition for review on certiorari, filed by MERALCO, anchored
on the following grounds:
A. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE

ERROR AND GRAVE ABUSE OF DISCRETION IN HOLDING THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN
PETITIONER MERALCO AND INDIVIDUAL RESPONDENTS.
B. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN

HOLDING THAT INDIVIDUAL RESPONDENTS ARE REGULAR
EMPLOYEES OF PETITIONER MERALCO.
C. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE

ERROR IN ALLOWING INDIVIDUAL RESPONDENTS TO RAISE FOR
THE FIRST TIME ON APPEAL, THE ISSUE THAT PETITIONER WAS
THEIR DIRECT EMPLOYER.
D. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN

FINDING THAT PETITIONER MERALCO IS GUILTY OF ILLEGAL
DISMISSAL.
E. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
INDIVIDUAL RESPONDENTS ARE ENTITLED TO REINSTATEMENT
INTO PETITIONERS WORKFORCE.
F. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING

THAT PETITIONER MERALCO IS ENTITLED TO REIMBURSEMENT
FROM RESPONDENT ASDAI FOR THE MONETARY CLAIMS
PETITIONER PAID TO INDIVIDUAL RESPONDENTS PURSUANT TO
THE SECURITY SERVICE AGREEMENT.[17]
Anent the first ground, MERALCO submits that the elements of four-fold test to
determine the existence of an employer-employee relation, namely: (1) the power to hire,
(2) the payment of wages, (3) the power to dismiss, and (4) the power to control, are not
present in the instant case.
Regarding the power to hire, MERALCO contends that the records are bereft of
any evidence that shows that it participated in or influenced the decision of PSI and ASDAI
to hire or absorb the individual respondents.
As to the payment of wages, MERALCO maintains that the individual respondents

received their wages from their agency.
With regard to the power to dismiss, MERALCO argues that the security service
agreement clearly provided that the discipline and administration of the security guards
shall conform to the rules and regulations of the agency.
Concerning the power of control, MERALCO asserts that there is no evidence that
individual respondents were subjected to its control as to the manner or method by which
they conduct or perform their work of guarding of MERALCOs premises.
Furthermore, MERALCO insists that ASDAI and AFSISI are not labor-only
contractors since they have their own equipment, machineries and work premises which
are necessary in the conduct of their business and the duties performed by the security
guards are not necessary in the conduct of MERALCOs principal business.
With respect to the second ground, MERALCO argues that the individual
respondents cannot be considered as regular employees as the duties performed by them
as security guards are not necessary in the conduct of MERALCOs principal business
which is the distribution of electricity.
As regards the third ground, MERALCO argues that it was denied due process
when the individual respondents raised for the first time in the CA the issue that
MERALCO is their direct employer since the individual respondents have always
considered themselves as employees of AFSISI and nowhere in the Labor Arbiter or the
NLRC did they raise the argument that MERALCO is their direct employer.
Regarding the fourth ground, MERALCO asserts that it is not guilty of illegal
dismissal because it had no direct hand or participation in the termination of the
employment of individual respondents, who even insisted in their petition for certiorari in
the CA that it was AFSISI which terminated their employment.
As to the fifth ground, MERALCO maintains that the individual respondents are not
entitled to reinstatement into its workforce because no employer-employee relationship
exists between it and the individual respondents.
With regard to the sixth ground, MERALCO asserts that since it is not the direct
employer of the individual respondents, it has a right of reimbursement from ASDAI for
the full amount it may pay to the individual respondents under Articles 106 and 107 of the
Labor Code.
In contrast, the individual respondents maintain that the CA aptly found that all the
elements in employer-employee relationship exist between them and MERALCO and
there is no cogent reason to deviate from such factual findings.
For its part, ASDAI contends that the instant petition raises factual matters beyond
the jurisdiction of this Court to resolve since only questions of law may be raised in a
petition for review on certiorari. It submits that while the rule admits of exceptions,
MERALCO failed to establish that the present case falls under any of the exceptions.
On the other hand, AFSISI avers that there is no employer-employee relationship

between MERALCO and the security guards of any of the security agencies under
contract with MERALCO.
It is a settled rule that in the exercise of the Supreme Courts power of review, the
Court is not a trier of facts and does not normally undertake the re-examination of the
evidence presented by the contending parties during the trial of the case considering that
the findings of facts of the CA are conclusive and binding on the Court. However,
jurisprudence has recognized several exceptions in which factual issues may be resolved
by this Court, to wit:
(1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of
facts are conflicting; (6) when in making its findings the Court of Appeals
went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on
record; and (11) when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.[18]
In the present case, the existence of an employer-employee relationship is a

question of fact which is well within the province of the CA. Nonetheless, given the reality
that the CAs findings are at odds to those of the NLRC, the Court is constrained to look
deeper into the attendant circumstances obtaining in the present case, as appearing on
record.
At the outset, we note that the individual respondents never alleged in their
complaint in the Labor Arbiter, in their appeal in the NLRC and even in their petition
for certiorari in the CA that MERALCO was their employer. They have always advanced
the theory that AFSISI is their employer. A perusal of the records shows it was only in
their Memorandum in the CA that this thesis was presented and discussed for the first
time. We cannot ignore the fact that this position of individual respondents runs contrary
to their earlier submission in their pleadings filed in the Labor Arbiter, NLRC and even in
the petition for certiorari in the CA that AFSISI is their employer and liable for their
termination. As the object of the pleadings is to draw the lines of battle, so to speak,
between the litigants and to indicate fairly the nature of the claims or defenses of both
parties, a party cannot subsequently take a position contrary to, or inconsistent, with his
pleadings.[19]
Moreover, it is a fundamental rule of procedure that higher courts are precluded

from entertaining matters neither alleged in the pleadings nor raised during the
proceedings below, but ventilated for the first time only in a motion for reconsideration or
on appeal.[20] The individual respondents are bound by their submissions that AFSISI is
their employer and they should not be permitted to change their theory. Such
a change of theory cannot be tolerated on appeal, not due to the strict application of
procedural rules but as a matter of fairness. A change of theory on appeal is
objectionable because it is contrary to the rules of fair play, justice and due process. [21]
Thus, the CA should not have considered the new theory offered by the individual
respondents in their memorandum.
The present petition for review on certiorari is far from novel and, in fact, not
without precedence. We have ruled in Social Security System vs. Court of
Appeals[22] that:
...The guards or watchmen render their services to private

respondent by allowing themselves to be assigned by said respondent,
which furnishes them arms and ammunition, to guard and protect the
properties and interests of private respondent's clients, thus enabling that
respondent to fulfill its contractual obligations. Who the clients will be, and
under what terms and conditions the services will be rendered, are matters
determined not by the guards or watchmen, but by private respondent. On
the other hand, the client companies have no hand in selecting who among
the guards or watchmen shall be assigned to them. It is private respondent
that issues assignment orders and instructions and exercises control and
supervision over the guards or watchmen, so much so that if, for one reason
or another, the client is dissatisfied with the services of a particular guard,
the client cannot himself terminate the services of such guard, but has to
notify private respondent, which either substitutes him with another or metes
out to him disciplinary measures. That in the course of a watchman's
assignment the client conceivably issues instructions to him, does not in the
least detract from the fact that private respondent is the employer of said
watchman, for in legal contemplation such instructions carry no more weight
than mere requests, the privity of contract being between the client and
private respondent, not between the client and the guard or watchman.
Corollarily, such giving out of instructions inevitably spring from the client's
right predicated on the contract for services entered into by it with private
respondent.
In the matter of compensation, there can be no question at all that

the guards or watchmen receive compensation from private respondent and
not from the companies or establishments whose premises they are
guarding. The fee contracted for to be paid by the client is admittedly not
equal to the salary of a guard or watchman; such fee is arrived at
independently of the salary to which the guard or watchman is entitled under
his arrangements with private respondent.[23]
and reiterated in American President Lines vs. Clave,[24] thus:
In the light of the foregoing standards, We fail to see how the

complaining watchmen of the Marine Security Agency can be considered
as employees of the petitioner. It is the agency that recruits, hires, and
assigns the work of its watchmen. Hence, a watchman can not perform any
security service for the petitioner's vessels unless the agency first accepts
him as its watchman. With respect to his wages, the amount to be paid to a
security guard is beyond the power of the petitioner to determine. Certainly,
the lump sum amount paid by the petitioner to the agency in consideration
of the latter's service is much more than the wages of any one watchman.
In point of fact, it is the agency that quantifies and pays the wages to which
a watchman is entitled.
Neither does the petitioner have any power to dismiss the security
guards. In fact, We fail to see any evidence in the record that it wielded such
a power. It is true that it may request the agency to change a particular
guard. But this, precisely, is proof that the power lies in the hands of the
agency.
Since the petitioner has to deal with the agency, and not the
individual watchmen, on matters pertaining to the contracted task, it stands
to reason that the petitioner does not exercise any power over the
watchmen's conduct. Always, the agency stands between the petitioner and
the watchmen; and it is the agency that is answerable to the petitioner for
the conduct of its guards.[25]
In this case, the terms and conditions embodied in the security service agreement
between MERALCO and ASDAI expressly recognized ASDAI as the employer of
individual respondents.
Under the security service agreement, it was ASDAI which (a) selected, engaged
or hired and discharged the security guards; (b) assigned them to MERALCO according
to the number agreed upon; (c) provided the uniform, firearms and ammunition,
nightsticks, flashlights, raincoats and other paraphernalia of the security guards; (d) paid
them salaries or wages; and, (e) disciplined and supervised them or principally controlled
their conduct. The agreement even explicitly provided that [n]othing herein contained shall
be understood to make the security guards under this Agreement, employees of the
COMPANY, it being clearly understood that such security guards shall be considered as
they are, employees of the AGENCY alone. Clearly, the individual respondents are the
employees of ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek
replacement of any guard whose behavior, conduct or appearance is not satisfactory,
such merely confirms that the power to discipline lies with the agency. It is a standard
stipulation in security service agreements that the client may request the replacement of
the guards to it. Service-oriented enterprises, such as the business of providing security
services, generally adhere to the business adage that the customer or client is always
right and, thus, must satisfy the interests, conform to the needs, and cater to the
reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard from
MERALCO without its consent an indication of control. It is simply a security clause
designed to prevent the agency from unilaterally removing its security guards from their
assigned posts at MERALCOs premises to the latters detriment.
The clause that MERALCO has the right at all times to inspect the guards of the
agency detailed in its premises is likewise not indicative of control as it is not a unilateral
right. The agreement provides that the agency is principally mandated to conduct
inspections, without prejudice to MERALCOs right to conduct its own inspections.
Needless to stress, for the power of control to be present, the person for whom the
services are rendered must reserve the right to direct not only the end to be achieved but
also the means for reaching such end.[26] Not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the former.[27] Rules which serve as
general guidelines towards the achievement of the mutually desired result are not
indicative of the power of control.[28]
Verily, the security service agreements in the present case provided that all
specific instructions by MERALCO relating to the discharge by the security guards of their
duties shall be directed to the agency and not directly to the individual respondents. The
individual respondents failed to show that the rules of MERALCO controlled their
performance.
Moreover, ASDAI and AFSISI are not labor-only contractors. There is labor only
contract when the person acting as contractor is considered merely as an agent or
intermediary of the principal who is responsible to the workers in the same manner and
to the same extent as if they had been directly employed by him. On the other hand, job
(independent) contracting is present if the following conditions are met: (a) the contractor
carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the
performance of the work except to the result thereof; and (b) the contractor has substantial
capital or investments in the form of tools, equipment, machineries, work premises and
other materials which are necessary in the conduct of his business. [29] Given the above
distinction and the provisions of the security service agreements entered into by petitioner
with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job
contracting.
The individual respondents can not be considered as regular employees of the

MERALCO for, although security services are necessary and desirable to the business
of MERALCO, it is not directly related to its principal business and may even be
considered unnecessary in the conduct of MERALCOs principal business, which is the
distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for unpaid
monetary benefits against ASDAI is a clear indication that the individual respondents
acknowledge that ASDAI is their employer.
We cannot give credence to individual respondents insistence that they were

absorbed by AFSISI when MERALCOs security service agreement with ASDAI was
terminated. The individual respondents failed to present any evidence to confirm that
AFSISI absorbed them into its workforce. Thus, respondent Benamira was not retained
in his post at MERALCO since July 25, 1992 due to the termination of the security service
agreement of MERALCO with ASDAI. As for the rest of the individual respondents, they
retained their post only as hold-over guards until the security guards of AFSISI took over
their post on August 6, 1992.[30]
In the present case, respondent Benamira has been off-detail for seventeen days
while the rest of the individual respondents have only been off- detail for five days when
they amended their complaint on August 11, 1992 to include the charge of illegal
dismissal. The inclusion of the charge of illegal dismissal then was premature.
Nonetheless, bearing in mind that ASDAI simply stopped giving the individual
respondents any assignment and their inactivity clearly persisted beyond the six-month
period allowed by Article 286[31] of the Labor Code, the individual respondents were, in
effect, constructively dismissed by ASDAI from employment, hence, they should be
reinstated.
The fact that there is no actual and direct employer-employee relationship between
MERALCO and the individual respondents does not exonerate MERALCO from liability
as to the monetary claims of the individual respondents. When MERALCO contracted for
security services with ASDAI as the security agency that hired individual respondents to
work as guards for it, MERALCO became an indirect employer of individual respondents
pursuant to Article 107 of the Labor Code, which reads:
ART. 107. Indirect employer - The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
When ASDAI as contractor failed to pay the individual respondents, MERALCO as

principal becomes jointly and severally liable for the individual respondents wages,
under Articles 106 and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. - Whenever an employer

enters into a contract with another person for the performance of the
former[s] work, the employees of the contractor and of the latter[s]
subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to pay the

wages of his employees in accordance with this Code, the employer shall
be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed
by him. xxx
ART. 109. Solidary liability - The provisions of existing laws to the

contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purpose of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.
ASDAI is held liable by virtue of its status as direct employer, while MERALCO is
deemed the indirect employer of the individual respondents for the purpose of paying their
wages in the event of failure of ASDAI to pay them. This statutory scheme gives the
workers the ample protection
consonant with labor and social justice provisions of the 1987 Constitution. [32]
However, as held in Mariveles Shipyard Corp. vs. Court of Appeals,[33] the solidary
liability of MERALCO with that of ASDAI does not preclude the application of Article 1217
of the Civil Code on the right of reimbursement from his co-debtor by the one who
paid,[34] which provides:
ART. 1217. Payment made by one of the solidary debtors

extinguishes the obligation. If two or more solidary debtors offer to pay, the
creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the
share which corresponds to each, with the interest for the payment already
made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency,

reimburse his share to the debtor paying the obligation, such share shall be
borne by all his co-debtors, in proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCOs payments to it were
inadequate for the individual respondents lawful compensation. As an employer, ASDAI
is charged with knowledge of labor laws and the adequacy of the compensation that it
demands for contractual services is its principal concern and not any others. [35]
WHEREFORE, the present petition is GRANTED. The assailed Decision,

dated September 27, 2000, of the CA is REVERSED and SET ASIDE. The Decision of
the Labor Arbiter dated January 3, 1994 and the Resolution of the NLRC dated April 10,
1995 are AFFIRMED with the MODIFICATION that the joint and solidary liability of ASDAI
and MERALCO to pay individual respondents monetary claims for underpayment of
actual regular hours and overtime hours rendered, and premium pay for holiday and rest
day, as well as attorneys fees, shall be without prejudice to MERALCOs right of
reimbursement from ASDAI.
Barayoga vs. Asset Privatization Trust,
473 SCRA 690, GR No. 160073
THIRD DIVISION
ABUNDIO BARAYOGA and G.R. No. 160073

BISUDECO-PHILSUCOR
CORFARM WORKERS UNION Present:
(PACIWU CHAP-TPC),
Petitioners, Panganiban, J., Chairman,
Sandoval-Gutierrez,
Corona,
- versus - Carpio Morales, and
Garcia, JJ
ASSET PRIVATIZATION Promulgated:
TRUST,*
Respondent. October 24, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- x
DECISION
PANGANIBAN, J.:
R esponsibility for the liabilities of a mortgagor towards its employees cannot be

transferred via an auction sale to a purchaser who is also the mortgagee-creditor of the
foreclosed assets and chattels. Clearly, the mortgagee-creditor has no employer-
__________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p.
480.
employee relations with the mortgagors workers. The mortgage constitutes a lien on the
determinate properties of the employer-debtor, because it is a specially preferred credit
to which the workers monetary claims is deemed subordinate.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing
the January 30, 2003 Decision[2] and the August 27, 2003 Resolution[3] of the Court of
Appeals (CA), in CA-GR SP No. 58813. The disposition or fallo of the questioned
Decision reads as follows:
IN VIEW OF ALL THE FOREGOING, the instant petition

is GRANTED and the assailed NLRC Decision dated February 18, 2000 is
hereby RECALLED and SET ASIDE insofar as herein petitioner APT is
concerned. No cost.[4]
The reversed Decision[5] of the National Labor Relations Commission (NLRC) disposed
as follows:
WHEREFORE, premises considered, the decision appealed from is AFFIRMED

with modifications as follows:
1. Complainants are awarded their monetary claims for

underpayment of salaries and payment of allowances per
their computation on pp. 97-99 and 142-144 of the records;
2. Complainants are declared to have been illegally

dismissed and should be paid their backwages from 01 May
1991 to 30 October 1992.[6]
The challenged August 27, 2003 Resolution denied petitioners Motion for
Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we

quote:
Bisudeco-Philsucor Corfarm Workers Union is composed of workers
of Bicolandia Sugar Development Corporation (BISUDECO), a sugar
plantation mill located in Himaao, Pili, Camarines Sur.
On December 8, 1986, [Respondent] Asset Privatization Trust

(APT), a public trust was created under Proclamation No. 50, as amended,
mandated to take title to and possession of, conserve, provisionally manage
and dispose of non-performing assets of the Philippine government
identified for privatization or disposition.
Pursuant to Section 23 of Proclamation No. 50, former President

Corazon Aquino issued Administrative Order No. 14 identifying certain
assets of government institutions that were to be transferred to the National
Government. Among the assets transferred was the financial claim of the
Philippine National Bank against BISUDECO in the form of a secured loan.
Consequently, by virtue of a Trust Agreement executed between the
National Government and APT on February 27, 1987, APT was constituted
as trustee over BISUDECOs account with the PNB.
Sometime later, on August 28, 1988, BISUDECO contracted the

services of Philippine Sugar Corporation (Philsucor) to take over the
management of the sugar plantation and milling operations until August 31,
1992.
Meanwhile, because of the continued failure of BISUDECO to pay its

outstanding loan with PNB, its mortgaged properties were foreclosed and
subsequently sold in a public auction to APT, as the sole bidder. On April 2,
1991, APT was issued a Sheriffs Certificate of Sale.
On July 23, 1991, the union filed a complaint for unfair labor practice,
illegal dismissal, illegal deduction and underpayment of wages and other
labor standard benefits plus damages.
In the meantime, on July 15, 1992, APTs Board of Trustees issued a

resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI)
to buy the sugar plantation and mill. Again, on September 23, 1992, the
board passed another resolution authorizing the payment of separation
benefits to BISUDECOs employees in the event of the companys
privatization. Then, on October 30, 1992, BAPCI purchased the foreclosed
assets of BISUDECO from APT and took over its sugar milling operations
under the trade name Peafrancia Sugar Mill (Pensumil).
On December 17, 1992, the union filed a similar complaint, later to

be consolidated with its earlier complaint and docketed as RAB V Case No.
07-00184-91.
On March 2, 1993, it filed an amended complaint, impleading as

additional party respondents APT and Pensumil.
In their Position Paper, the union alleged that when Philsucor initially
took over the operations of the company, it retained BISUDECOs existing
personnel under the same terms and conditions of employment.
Nonetheless, at the start of the season sometime in May 1991, Philsucor
started recalling workers back to work, to the exception of the union
members. Management told them that they will be re-hired only if they
resign from the union. Just the same, thereafter, the company started to
employ the services of outsiders under the pakyaw system.
BISUDECO, Pensumil and APT all interposed the defense of lack of

employer-employee relationship.
xxxxxxxxx
After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T.

Aurellano disposed as follows:
WHEREFORE, premises considered, respondent APT is

hereby ordered to pay herein complainants of the mandated
employment benefits provided for under Section 27 of
Proclamation No. 50 which benefits had been earlier
extended to other employees similarly situated.
SO ORDERED.
Both the union and APT elevated the labor arbiters decision before
NLRC.[7]
The NLRC affirmed APTs liability for petitioners money claims. While no employer-
employee relationship existed between members of the petitioner union and APT, at the
time of the employees illegal dismissal, the assets of BISUDECO had been transferred
to the national government through APT. Moreover, the NLRC held that APT should have
treated petitioners claim as a lien on the assets of BISUDECO. The Commission opined
that APT should have done so, considering its awareness of the pending complaint of
petitioners at the time BISUDECO sold its assets to BAPCI, and APT started paying
separation pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their money
claims for underpayment, labor-standard benefits, and ECOLA. It also awarded them their
back wages, computed at the prevailing minimum wage, for the period May 1, 1991 (the
date of their illegal dismissal) until October 30, 1992 (the sale of BISUDECO assets to
the BAPCI). On the other hand, the NLRC ruled that petitioners were not entitled to
separation pay because of the huge business losses incurred by BISUDECO, which had
resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the
Rules of Court.
Ruling of the Court of Appeals
The CA ruled that APT should not be held liable for petitioners claims for unfair
labor practice, illegal dismissal, illegal deduction and underpayment of wages, as well as
other labor-standard benefits plus damages. As found by the NLRC, APT was not the
employer of petitioners, but was impleaded only for possessing BISUDECOs mortgaged
properties as trustee and, later, as the highest bidder in the foreclosure sale of those
assets.
Citing Batong Buhay Gold Mines v. Dela Serna,[8] the CA concluded that
petitioners claims could not be enforced against APT as mortgagee of the foreclosed
properties of BISUDECO.
Hence, this Petition.[9]
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
I. Whether or not the Court of Appeals erred in ruling that Respondent Asset
Privatization Trust (APT) should not be held liable for the petitioner unions
claim for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages and other labor standard benefits plus damages.
II. Whether or not the claims of herein petitioners cannot be enforced

against APT/PNB as mortgagee of the foreclosed properties of
BISUDECO.
III. Whether or not the entitlement of petitioners upon their claims against
Respondent APT is recognized under the law.[10]
In brief, the main issue raised is whether Respondent APT is liable for petitioners
monetary claims.
The Courts Ruling
The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14,
Series of 1987,[11] PNBs assets, loans and receivables from its borrowers were
transferred to APT as trustee of the national government. Among the liabilities transferred
to APT was PNBs financial claim against BISUDECO, not the latters assets and chattel.
Contrary to petitioners assertions, BISUDECO remained the owner of the mortgaged
properties in August 1988, when the Philippine Sugar Corporation (Philsucor) undertook
the operation and management of the sugar plantation until August 31, 1992, under a so-
called Contract of Lease between the two corporations. At the time, APT was merely a
secured creditor of BISUDECO.[12]
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO
because of the latters continued failure to pay outstanding loan obligations to PNB/APT.
The properties were sold at public auction to APT, the highest bidder, as indicated in the
Sheriffs Certificate of Sale issued on April 2, 1991. It was only in September 1992 (after
the expiration of the lease/management Contract with Philsucor in August 1992),
however, when APT took over BISUDECO assets, preparatory to the latters privatization.
In the present case, petitioner-unions members who were not recalled to work by
Philsucor in May 1991 seek to hold APT liable for their monetary claims and allegedly
illegal dismissal. Significantly, prior to the actual sale of BISUDECO assets to BAPCI on
October 30, 1992, the APT board of trustees had approved a Resolution on September
23, 1992. The Resolution authorized the payment of separation benefits to the employees
of the corporation in the event of its privatization. Not included in the Resolution, though,
were petitioner-unions members who had not been recalled to work in May 1991.
The question now before the Court is whether APT is liable to pay petitioners
monetary claims, including back wages from May 1, 1991, to October 30, 1992 (the date
of the sale of BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its
monetary liabilities to its employees, were not all automatically assumed by APT as
purchaser of the foreclosed properties at the auction sale. Any assumption of liability must
be specifically and categorically agreed upon. In Sundowner Development Corp. v.
Drilon,[13] the Court ruled that, unless expressly assumed, labor contracts like collective
bargaining agreements are not enforceable against the transferee of an enterprise. Labor
contracts are in personam and thus binding only between the parties.
No succession of employment rights and obligations can be said to have taken

place between the two. Between the employees of BISUDECO and APT, there is no
privity of contract that would make the latter a substitute employer that should be
burdened with the obligations of the corporation. To rule otherwise would result in unduly
imposing upon APT an unwarranted assumption of accounts not contemplated in
Proclamation No. 50 or in the Deed of Transfer between the national government and
PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the latters
employees.[14] The most that the purchasing company may do, for reasons of public policy
and social justice, is to give preference of reemployment to the selling companys qualified
separated employees, who in its judgment are necessary to the continued operation of
the business establishment.[15]
In any event, the national government (in whose trust APT previously held the mortgage
credits of BISUDECO) is not the employer of petitioner-unions members, who had been
dismissed sometime in May 1991, even before APT took over the assets of the
corporation. Hence, under existing law and jurisprudence, there is no reason to expect
any kind of bailout by the national government.[16] Even the NLRC found that no employer-
employee relationship existed between APT and petitioners. Thus, the Commission
gravely abused its discretion in nevertheless holding that APT, as the transferee of the
assets of BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of

Appeals,[17] this Court supposedly ruled that the sale of a business of a going concern
does not ipso factoterminate the employer-employee relations insofar as the successor-
employer is concerned, and that change of ownership or management of an
establishment or company is not one of the just causes provided by law for termination of
employment[.][18]
A careful reading of the Courts Decision in that case plainly shows that it does not
contain the words quoted by counsel for petitioners. At this juncture, we admonish their
counsel[19]of his bounden duty as an officer of the Court to refrain from misquoting or
misrepresenting the text of its decisions.[20] Ever present is the danger that, if not faithfully
and exactly quoted, they may lose their proper and correct meaning, to the detriment of
other courts, lawyers and the public who may thereby be misled. [21]
In that case, contrary to the assertions of petitioners, the Court held as follows:
There can be no controversy for it is a principle well-recognized, that it is

within the employers legitimate sphere of management control of the
business to adopt economic policies or make some changes or adjustments
in their organization or operations that would insure profit to itself or protect
the investment of its stockholders. As in the exercise of such management
prerogative, the employer may merge or consolidate its business with
another, or sell or dispose all or substantially all of its assets and properties
which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted
in such a manner as to permit the employer to escape payment of
termination pay. x x x.
In a number of cases on this point, the rule has been laid down that the sale
or disposition must be motivated by good faith as an element of exemption
from liability. Indeed, an innocent transferee of a business establishment
has no liability to the employees of the transferor to continue employing
them. Nor is the transferee liable for past unfair labor practices of the
previous owner, except, when the liability therefor is assumed by the new
employer under the contract of sale, or when liability arises because of the
new owners participation in thwarting or defeating the rights of the
employees.[22] (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not enforceable
against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2)
the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the
monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECOs assets.
Moreover, it should be remembered that APT merely became a transferee of

BISUDECOs assets for purposes of conservation because of its lien on those assets -- a
lien it assumed as assignee of the loan secured by the corporation from PNB.
Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the
foreclosed properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by
Republic Act No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the event of
bankruptcy or liquidation of the employers business, his workers shall enjoy
first preference as regards their unpaid wages and other monetary
claims shall be paid in full before the claims of the Government and other
creditors may be paid.[23]
This Court has ruled in a long line of cases[24] that under Articles 2241 and 2242
of the Civil Code, a mortgage credit is a special preferred credit that enjoys preference
with respect to a specific/determinate property of the debtor. On the other hand, the
workers preference under Article 110 of the Labor Code is an ordinary preferred credit.
While this provision raises the workers money claim to first priority in the order of
preference established under Article 2244 of the Civil Code, the claim has no preference
over special preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of
their employer cannot have any preference over the latters mortgage credit. In other
words, being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special
preferred lien that must be satisfied first before the claims of the workers.
Development Bank of the Philippines v. NLRC[25] explained the rationale of this

ruling as follows:
x x x. A preference applies only to claims which do not attach to specific

properties. A lien creates a charge on a particular property. The right of first
preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers.
It is but a preference of credit in their favor, a preference in application. It is
a method adopted to determine and specify the order in which credits
should be paid in the final distribution of the proceeds of the insolvents
assets. It is a right to a first preference in the discharge of the funds of the
judgment debtor. x x x
Furthermore, workers claims for unpaid wages and monetary benefits cannot be
paid outside of a bankruptcy or judicial liquidation proceedings against the employer.[26] It
is settled that the application of Article 110 of the Labor Code is contingent upon the
institution of those proceedings, during which all creditors are convened, their claims
ascertained and inventoried, and their preferences determined. [27] Assured thereby is an
orderly determination of the preference given to creditors claims; and preserved in
harmony is the legal scheme of classification, concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone.
In holding that the latter, which has never really been an employer of petitioners, is not
liable for their claims, this Court is not reversing or ruling upon their entitlement to back
wages and other unpaid benefits from their previous employer.
On the basis of the foregoing clarification, the Court finds no reversible error in the
questioned CA Decision, which set aside the February 8, 2000 Decision of the NLRC. As
a mere transferee of the mortgage credit and later as the purchaser in a public auction of
BISUDECOs foreclosed properties, APT cannot be held liable for petitioners claims
against BISUDECO: illegal dismissal, unpaid back wages and other monetary benefits.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Associate Justice
Chairman, Third Division
W E C O N C U R:
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice
CONCHITA CARPIO MORALES CANCIO C. GARCIA

Associate Justice Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Associate Justice
Chairman, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans
Attestation, it is hereby certified that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
HILARIO G. DAVIDE, JR.

Chief Justice
Nasipit Lumber vs. NWCP, 289 SCRA 339,

GR No. 128296, Sep. 8, 2003
THIRD DIVISION
[G.R. No. 128296. September 8, 2003]
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD CORPORATION AND

ANAKAN LUMBER COMPANY, petitioners, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION, UNITED LUMBER AND GENERAL WORKERS
OF THE PHILIPPINES and WESTERN AGUSAN WORKERS
UNION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for certiorari with prayer for issuance of a temporary restraining
order and/or writ of preliminary injunction which seeks to set aside the Decision [1]dated
July 3, 1996 and Resolution[2] dated November 27, 1996 of the National Wages and
Productivity Commission (NWPC) in the consolidated NWPC Case Nos. E-95-099, E-95-
100 and E-95-101, entitled In Re: Application for Extension of Exemption from Wage
Order No. RX-03 of Applicants-Appellants Nasipit Lumber Company, Philippine
Wallboard Corporation and Anakan Lumber Company.
The undisputed facts of this case are as follows:
On November 19, 1993, the Regional Tripartite Wages and Productivity Board
(RTWPB) of Region X, Northern Mindanao, Cagayan de Oro City, issued Wage Order
No. RX-03.[3] This Wage Order mandated a P7.00 increase in the minimum daily wage of
all workers and employees in the private sector in Region X receiving a daily wage of not
more than P130.00 per day and an additional P10.00 allowance per day.
Subsequently or on March 17, 1994, Nasipit Lumber Company, Philippine Wallboard
Corporation and Anakan Lumber Company (herein petitioners) filed their separate
application for exemption from compliance with Wage Order No. RX-03, claiming they are
distressed establishments whose paid-up capital has been impaired by at least twenty-
five percent (25%).
After finding that the petitioners indeed sustained financial losses which impaired their
respective paid-up capital, the RTWPB, in a consolidated Order dated December 3, 1994,
granted petitioners a full exemption from compliance with the said Wage Order for a
period of one (1) year or from December 8, 1993 to December 7, 1994.
On December 8, 1994, petitioners, citing the continuous business decline in the wood
processing industry, filed a consolidated petition for extension of their full exemption from
compliance with Wage Order No. RX-03 for another year or from December 8, 1994 to
December 8, 1995.
However, in a Resolution No. 95-01 dated February 24, 1995, the RTWPB denied
petitioners consolidated application for extension of exemption. In justifying its denial, the
RTWPB relied on Section 7 of the NWPC Revised Guidelines No. 1, Series of 1992, thus:
Establishments shall be granted full exemption of one (1) year from effectivity of the
Order for all categories of exemption.
From the said Resolution, petitioners interposed an appeal to the NWPC.

On July 3, 1996, the NWPC rendered a Decision denying the appeal for lack of
merit. The NWPC ratiocinated as follows:
Thus, the principal issue to be resolved in this case is whether or not the period of
exemption under Wage Order RX-03 can be extended for more than one (1) year.
We rule in the negative.

Section 7 of the NWPC Revised Guidelines on Exemption, which is the applicable rule
on this matter, provides for the duration and extent of exemption that can be granted to
a qualified applicant establishment, to wit:
Establishments shall be granted full exemption of one (1) year from effectivity of the
Order for all categories of exemption.
xxx
As set forth by the aforecited rule, the maximum period of exemption that can be
accorded to a qualified applicant is only for one (1) year from the effectivity of the Wage
Order. This non-extendable one year period of exemption, which had been consistently
applied to all analogous cases in the past involving companies seeking extension of the
period of their exemption, remains and continues to be the existing policy on the
matter. Precisely, the rationale behind this policy is to afford protection to workers who
may be unfairly affected by the deleterious effect of a prolonged exemption which is not
in accord with the very purpose of the issuance of a Wage Order.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of
merit. Board Resolution No. 95-01, Series of 1995 dated 24 February 1995 is
AFFIRMED.
SO ORDERED.
Unswayed, petitioners filed on August 14, 1996, a consolidated motion for

reconsideration.
However, the NWPC remained steadfast with its earlier Decision and denied
petitioners motion in its Resolution dated November 27, 1996.
Hence, this petition for certiorari. Petitioners contend they are entitled to an extension
for another year of their full exemption as distressed establishments on the basis of
paragraph 4, Section 3 of Wage Order No. RX-03 which expressly provides: (D)istressed
establishments, as defined by the Board upon due and proper application with the Board,
may also be exempted either partly or fully for a period of one year renewable for another
year provided the conditions still persist and warrant the exemption, provided further that
they qualify under the implementing guidelines issued by the Board.
More specifically, petitioners claim that the NWPC exceeded its jurisdiction (1) in
deleting the phrase renewable for another year provided the conditions still persist and
warrant the exemption from paragraph 4, Section 3 of Wage Order No. RX-03 issued by
the RTWPB; (2) in overriding the clear intention of the RTWPB to extend the exemption
of distressed establishments; and (3) in applying Section 7 of the NWPC Guideline No.
01, Series of 1992, limiting the duration of exemption to one (1) year, contrary to Republic
Act No. 6727.[4]
Article 121 of the Labor Code, as amended by Republic Act No. 6727, partly provides:
ART. 121. Powers and Functions of the Commission. The Commission shall have the
following powers and functions:
xxx
(c) To prescribe rules and guidelines for the determination of appropriate minimum
wage and productivity measures at the regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed guidelines
and national development plans;
xxx
Interpreting the above provision, this Court through Justice Artemio V. Panganiban,
in Nasipit Lumber Company, Inc. vs. National Wages and Productivity
Commission,[5] held:
The foregoing clearly grants the NWPC, x x x, the power to prescribe the rules and
guidelines for the determination of minimum wage and productivity measures. x x x, the
NWPC has the power not only to prescribe guidelines to govern wage orders, but also
to issue exemptions therefrom, x x x. In short, the NWPC lays down the guidelines
which the RTWPB implements.
In affirming the RTWPBs Resolution denying petitioners application for extension for
another year of their full exemption from compliance with Wage Order No. RX-03, the
NWPC did not act with grave abuse of discretion. On the contrary, it merely applied its
own Guideline No. 01, Series of 1992 limiting the duration of exemption to only one (1)
year.
It is noteworthy that the RTWPB, for its part, implemented to the letter the said
Guideline.
WHEREFORE, the petition is hereby DISMISSED. The assailed Decision dated July
3, 1996 and Resolution dated November 27, 1996 of the National Wages and Productivity
Commission (NWPC) are hereby AFFIRMED.
SO ORDERED.
Panganiban, (Acting Chairman), Corona, and Carpio-Morales, JJ., concur.
Puno, J., (Chairman), on official leave.
Bankard Employees vs. NLRC, 423 SCRA 148,

GR No. 140689, Feb. 17, 2004
THIRD DIVISION
[G.R. No. 140689. February 17, 2004]
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner,

vs. NATIONAL LABOR RELATIONS COMMISSION and BANKARD,
INC., respondents.
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the Rules of Court
raises the issue of whether the unilateral adoption by an employer of an upgraded salary
scale that increased the hiring rates of new employees without increasing the salary rates
of old employees resulted in wage distortion within the contemplation of Article 124 of the
Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II,
Level III, Level IV, and Level V. On May 28, 1993, its Board of Directors approved a New
Salary Scale, made retroactive to April 1, 1993, for the purpose of making its hiring rate
competitive in the industrys labor market. The New Salary Scale increased the hiring rates
of new employees, to wit: Levels I and V by one thousand pesos (P1,000.00), and Levels
II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries of employees
who fell below the new minimum rates were also adjusted to reach such rates under their
levels.
Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly
certified exclusive bargaining agent of the regular rank and file employees of Bankard, to
press for the increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no obligation on the part of the
management to grant to all its employees the same increase in an across-the-board
manner.
As the continued request of petitioner for increase in the wages and salaries of
Bankards regular employees remained unheeded, it filed a Notice of Strike on August 26,
1993 on the ground of discrimination and other acts of Unfair Labor Practice (ULP).
A director of the National Conciliation and Mediation Board treated the Notice of Strike
as a Preventive Mediation Case based on a finding that the issues therein were not
strikeable.
Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal
to bargain, discrimination, and other acts of ULP - union busting. The strike was averted,
however, when the dispute was certified by the Secretary of Labor and Employment for
compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding no wage
distortion, dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the case was, by Resolution
of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R.
121970. In accordance with its ruling in St. Martin Funeral Homes v. NLRC,[1] the petition
was referred to the Court of Appeals which, by October 28, 1999, denied the same for
lack of merit.
Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that under Bankards
new wage structure, the old salary gaps between the different classification or
level of employees were still reflected by the adjusted salary rates[2]; and
(2) It erred in concluding that wage distortion does not appear to exist, which
conclusion is manifestly contrary to law and jurisprudence.[3]
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending,
among others, Article 124 of the Labor Code) on June 9, 1989, the term wage distortion
was explicitly defined as:
... a situation where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate
the distinctions embodied in such wage structure based on skills, length of service, or
other logical bases of differentiation.[4]
Prubankers Association v. Prudential Bank and Trust Company[5] laid down the four
elements of wage distortion, to wit: (1.) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one; (3) The elimination of
the distinction between the two levels; and (4) The existence of the distortion in the same
region of the country.
Normally, a company has a wage structure or method of determining the wages of its
employees. In a problem dealing with wage distortion, the basic assumption is that there
exists a grouping or classification of employees that establishes distinctions among them
on some relevant or legitimate bases.[6]
Involved in the classification of employees are various factors such as the degrees of
responsibility, the skills and knowledge required, the complexity of the job, or other logical
basis of differentiation. The differing wage rate for each of the existing classes of
employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the classification is not one
based on levels or ranks but on two groups of employees, the newly hired and the old, in
each and every level, and not between and among the different levels or ranks in the
salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes petitioners
position, however. It, through the Office of the Solicitor General, essays in its Comment
of April 12, 2000 as follows:
To determine the existence of wage distortion, the historical classification of the

employees prior to the wage increase must be established. Likewise, it must be shown
that as between the different classification of employees, there exists a historical gap or
difference.
xxx
The classification preferred by petitioner is belied by the wage structure of private

respondent as shown in the new salary scale it adopted on May 28, 1993, retroactive to
April 1, 1993, which provides, thus:
Hiring Minimum Maximum

Level From To From To From To
I 3,100 4,100 3,200 4,200 7,200 9,250
II 3,200 4,100 3,300 4,200 7,500 9,500
III 3,300 4,200 3,400 4,300 8,000 10,000
IV 3,500 4,400 3,600 4,500 8,500 10,500
V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been historically classified into levels,
i.e. I to V, and not on the basis of their length of service. Put differently, the entry of new
employees to the company ipso facto place[s] them under any of the levels mentioned
in the new salary scale which private respondent adopted retroactive [to] April 1,
1993. Petitioner cannot make a contrary classification of private respondents employees
without encroaching upon recognized management prerogative of formulating a wage
structure, in this case, one based on level.[7] (Emphasis and underscoring supplied)
The issue of whether wage distortion exists being a question of fact that is within the
jurisdiction of quasi-judicial tribunals,[8] and it being a basic rule that findings of facts of
quasi-judicial agencies, like the NLRC, are generally accorded not only respect but at
times even finality if they are supported by substantial evidence, as are the
findings in the case at bar, they must be respected. For these agencies have acquired
expertise, their jurisdiction being confined to specific matters.[9]
It is thus clear that there is no hierarchy of positions between the newly hired and
regular employees of Bankard, hence, the first element of wage distortion provided
in Prubankers is wanting.
While seniority may be a factor in determining the wages of employees, it cannot be
made the sole basis in cases where the nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion, employees
cannot create their own independent classification and use it as a basis to demand an
across-the-board increase in salary.
As National Federation of Labor v. NLRC, et al.[10] teaches, the formulation of a wage
structure through the classification of employees is a matter of management judgment
and discretion.
[W]hether or not a new additional scheme of classification of employees for

compensation purposes should be established by the Company (and the legitimacy or
viability of the bases of distinction there embodied) is properly a matter of management
judgment and discretion, and ultimately, perhaps, a subject matter for bargaining
negotiations between employer and employees. It is assuredly something that falls
outside the concept of wage distortion.[11] (Emphasis and underscoring supplied)
As did the Court of Appeals, this Court finds that the third element provided
in Prubankers is also wanting. For, as the appellate court explained:
In trying to prove wage distortion, petitioner union presented a list of five (5)
employees allegedly affected by the said increase:
Pay of Old/ Pay of Newly Difference
Regular Employees Hired Employees
A. Prior to April 1, 1993
Level I P4,518.75 P3,100 P1,418.75
(Sammy Guce)
Level II P6,242.00 P3,200 P3,042.00
(Nazario Abello)
Level III P4,850.00 P3,300 P1,550.00
(Arthur Chavez)
Level IV P5,339.00 P3,500 P1,839.00
Melissa Cordero)
Level V P7,090.69 P3,700 P3,390.69
(Ma. Lourdes Dee)
B. Effective April 1, 1993
Level I P4,518.75 P4,100 P418.75
Sammy Guce)
Level II P6,242.00 P4,100 P2,142.00
(Nazario Abello)
Level III P4,850.00 P4,200 P650.00
(Arthur Chavez)
Level IV P5,330.00 P4,400 P939.00
(Melissa Cordero)
Level V P7,090.69 P4,700 P2,390.69
(Ma. Lourdes Dee)
Even assuming that there is a decrease in the wage gap between the pay of the old
employees and the newly hired employees, to Our mind said gap is not significant as
to obliterate or result in severe contraction of the intentional quantitative
differences in the salary rates between the employee group. As already stated, the
classification under the wage structure is based on the rank of an employee, not on
seniority. For this reason, ,wage distortion does not appear to exist.[12] (Emphasis and
underscoring supplied)
Apart from the findings of fact of the NLRC and the Court of Appeals that some of the
elements of wage distortion are absent, petitioner cannot legally obligate Bankard to
correct the alleged wage distortion as the increase in the wages and salaries of the newly-
hired was not due to a prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the legislators to cover
all kinds of wage adjustments, then the language of the law should have been broad, not
restrictive as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
Where the application of any prescribed wage increase by virtue of a law or Wage
Order issued by any Regional Board results in distortions of the wage structure within
an establishment, the employer and the union shall negotiate to correct the
distortions. Any dispute arising from the wage distortions shall be resolved through the
grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.
x x x (Italics and emphasis supplied)
Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found

in CHAPTER V on WAGE STUDIES, WAGE AGREEMENTS AND WAGE
DETERMINATION which principally deals with the fixing of minimum wage. Article 124
should thus be construed and correlated in relation to minimum wage fixing, the intention
of the law being that in the event of an increase in minimum wage, the distinctions
embodied in the wage structure based on skills, length of service, or other logical bases
of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct wage distortion is applied
to voluntary and unilateral increases by the employer in fixing hiring rates which is
inherently a business judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular group is justified
due to a re-evaluation of the high productivity of a particular group, or as in the present
case, the need to increase the competitiveness of Bankards hiring rate. An employer
would be discouraged from adjusting the salary rates of a particular group of employees
for fear that it would result to a demand by all employees for a similar increase, especially
if the financial conditions of the business cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to support its claim that
the obligation to rectify wage distortion is not confined to wage distortion resulting from
government decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the obligation therein to rectify
the wage distortion was not by virtue of Article 124 of the Labor Code, but on account of
a then existing company practice that whenever rank-and-file employees were paid a
statutorily mandated salary increase, supervisory employees were, as a matter
of practice, also paid the same amount plus an added premium. Thus this Court held in
said case:
We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had,
unlike the rank-and-file employees, no CBA governing the terms and conditions of their
employment, had the right to rely on the company practice of unilaterally correcting the
wage distortion effects of a salary increase given to the rank-and-file employees, by
giving the supervisory employees a corresponding salary increase plus a premium. . .
.[14] (Emphasis supplied)
Wage distortion is a factual and economic condition that may be brought about by
different causes. In Metro Transit, the reduction or elimination of the normal differential
between the wage rates of rank-and-file and those of supervisory employees was due to
the granting to the former of wage increase which was, however, denied to the latter group
of employees.
The mere factual existence of wage distortion does not, however, ipso facto result to
an obligation to rectify it, absent a law or other source of obligation which requires its
rectification.
Unlike in Metro Transit then where there existed a company practice, no such
management practice is herein alleged to obligate Bankard to provide an across-the-
board increase to all its regular employees.
Bankards right to increase its hiring rate, to establish minimum salaries for specific
jobs, and to adjust the rates of employees affected thereby is embodied under Section 2,
Article V (Salary and Cost of Living Allowance) of the parties Collective Bargaining
Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without prejudice to
the right of the Company to establish such minimum salaries as it may hereafter find
appropriate for specific jobs, and to adjust the rates of the employees thereby affected
to such minimum salaries thus established.[15] (Italics and underscoring supplied)
This CBA provision, which is based on legitimate business-judgment prerogatives of

the employer, is a valid and legally enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates by an
employer was done arbitrarily and illegally for the purpose of circumventing the laws or
was devoid of any legitimate purpose other than to discriminate against the regular
employees, this Court will not step in to interfere with this management prerogative.
Employees are of course not precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through a CBA.
This Court, time and again, has shown concern and compassion to the plight of
workers in adherence to the Constitutional provisions on social justice and has always
upheld the right of workers to press for better terms and conditions of employment. It does
not mean, however, that every dispute should be decided in favor of labor, for employers
correspondingly have rights under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.
III. Assignment for Nov. 11, 2017

Statutory Reference: Art. 296 and 297 ONLY and related provisions in the Omnibus
Rules
DOLE Department Order No. 147-15, series of 2015

*pdf
https://www.dole.gov.ph/files/Dept%20Order%20No_%20147-15.pdf
Cases:
Quijano vs. Bartolabac, 480 SCRA 204,
AC No. 5629, January 27, 2006
ADM. CASE No. 5649 January 27, 2006
DANDY V. QUIJANO, Complainant,

vs.
GEOBEL A. BARTOLABAC (Labor Arbiter, NLRC-NCR South), and ALBERTO R.
QUIMPO (Commissioner, NLRC-First Division), Respondents.
RESOLUTION
TINGA, J.:
On 19 March 2002, complainant Dandy Quijano filed before this Court a verified
complaint1 written in Pilipino against herein respondents Atty. Geobel A. Bartolabac
(Bartolabac), Labor Arbiter of the National Labor Relations Commission (NLRC), and
Commissioner Alberto R. Quimpo (Quimpo) of the same Commission for violating
Canon 12 and Rule 1.013 of the Code of Professional Responsibility.
According to complainant, respondents violated his constitutional right to due process in
failing to execute the final and executory judgment of this Court in G.R. No. 126561
entitled Quijano v. Mercury Drug Corporation.4
The antecedent facts are as follows:
Complainant was dismissed from service by the Mercury Drug Corporation

(corporation). He filed a complaint for illegal dismissal before the NLRC. Eventually, the
case was elevated to this Court. On 8 July 1998, the Court promulgated its Decision in
favor of herein complainant ordering, among others, his reinstatement.5 The
corporations motion for reconsideration was denied by this Court in its Resolution dated
5 July 1999.
Complainant relates that he filed with respondent Labor Arbiter Bartolabac a motion for
execution on 9 December 1998 but despite the final resolution of his case, Bartolabac
issued an order that in effect changed the tenor of the final judgment. 6 While the
decision of this Court had mandated complainants reinstatement, Bartolabac instead
awarded backwages and separation pay.
The Court, upon learning this, issued a Resolution7 on 17 November 1999 directing
Bartolabac to fully comply with its Decision dated 8 July 1998 and Resolution dated 5
July 1999 within a non-extendible period of five (5) days from receipt thereof and to
explain in writing why he should not be punished for indirect contempt for his actuations
in handling the case and defiance of the Courts directives.
Pursuant to the Resolution of this Court, Bartolabac issued an alias writ of execution on
18 February 2000. However, respondent Bartolabac allegedly again unilaterally issued
another order dated 5 April 2000, amending his previous order and assigning the
complainant to the position of self-service attendant of the corporation instead of his
original position of warehouseman. Subsequently, respondent Commissioner Quimpo
overturned the above order of Bartolabac and directed the payment of separation pay
rather than reinstatement to a substantially similar position as ordered by this Court.
Complainant adds that he had filed a motion to cite counsel for respondent corporation
in contempt8 and an answer to the order dated 5 April 2000, but these were disregarded
by Bartolabac on the ground that an appeal was already underway at the NLRC by the
corporation.
Further, he states that he was not given a copy of the appeal memorandum filed by the
corporation with the NLRC; yet, the NLRC First Division headed by Quimpo disposed of
the same. He also alleges that the corporation did not post a cash bond for the appeal
nor did they give him a temporary reinstatement or payroll reinstatement, which
according to complainant, is mandatory. Despite this, and without giving complainant
any opportunity to comment on the appeal memorandum, Quimpo nonetheless issued a
resolution dated 26 September 2000 which ordered the corporation to pay complainant
separation pay plus backwages. Complainant asserts that Quimpo should have
inhibited himself from deciding the case as he, or the NLRC First Division, was the
public respondent in the Supreme Court case.
Complainant admits having received the monetary award in the amount of P449,062.98
from the corporation in satisfaction of this Courts ruling in G.R. No. 126561 but
contends that the award cannot be considered a cash bond for the appeal
memorandum before the NLRC as the same was computed until 24 November 1999
only and he has a right to the award because his case had long become final and
executory.
Thus, complainant asserts that his constitutional right to due process has been seriously
violated by Bartolabac and Quimpo.
On 22 April 2002, this Court issued a Resolution9 requiring respondents to file their
respective comments on the complaint within ten (10) days from notice.
In his comment10 filed on 4 July 2002, Bartolabac states that the present complaint is a
rehash of several complaints against him which complainant filed before different fora,
including this Court and the Office of the Ombudsman.
As to the issue of monetary award and reinstatement due the complainant, Bartolabac
argues that the records of G.R. No. 126561 reveal that the corporation had already
released to complainant the sum of P297,930.75 as cash bond deposit. The amount
of P449,062.98 had been deposited to the cashier of the NLRC. Out of the said
remaining amount, Bartolabac directed the release of P250,660.62 to complainant. The
remaining balance of P198,402.36 was to answer for complainants MEDICARE and
SSS contributions, withholding tax, loans, etc., which had yet to be determined at that
time. Bartolabac gave both parties the opportunity to dispute or defend their respective
claims but complainant failed to cooperate either by not attending the scheduled hearing
called for that purpose on 27 March 2000, or by failing to file controverting evidence to
dispute the claimed deductions by the corporation.11
Before Bartolabac could adjudicate the proper monetary award for complainant, the
latter filed a complaint against him before the Office of the Ombudsman for oppression
and grave misconduct. Due to this supervening event, Bartolabacs sense of propriety
compelled him to inhibit himself from further participating in the adjudication of the
remaining balance of P198,402.36. But most importantly, he adds, the case was re-
raffled to Labor Arbiter Gaudencio P. Demaisip, Jr. who awarded the whole amount
of P449,062.36 which complainant has already received.
Offering another perspective of the case at bar, Bartolabac avers that after the Supreme
Court had rendered its decision in G.R. No. 126561 on 8 July 1998, the case was re-
raffled to Labor Arbiter Renell Joseph R. Dela Cruz for the satisfaction of judgment. At
that point, the exact monetary award and reinstatement aspects were raised. Both
parties submitted conflicting computations on the monetary award. The corporation also
asserted that they had abolished the position of warehouseman and there was no
substantially equivalent vacant position. Labor Arbiter Dela Cruz then ordered the
parties to submit their respective position papers but eleven (11) days thereafter, said
labor arbiter issued an order inhibiting himself from handling the case as he allegedly
could not bear with complainant dictating the rules of the proceedings.12
The labor case was re-raffled to Bartolabac on 20 April 1999. Unaware of the pending
motion for reconsideration of the corporation in G.R. No. 126561 where the feasibility of
reinstatement was at issue, he issued an order on 24 June 1999 ruling out
complainants reinstatement, awarding separation pay instead and the amount
of P573,228.00 (less necessary deductions) as backwages.
As a consequence, this Court on 17 November 1999 reproached Bartolabac for

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

shopping for while complainant knew of the existence of the corporations motion for
reconsideration with this Court, he remained insistent that Bartolabac resolve the
reinstatement issue.15
He also stresses that he did not incur delay in the disposition of the labor case. After he
received the 17 November 1999 Resolution of this Court on 22 November 1999, he
issued an alias writ of execution on 24 November 1999 directing the sheriff to garnish
the amount of P449,062.98 and to cause the reinstatement of complainant to a
substantially equivalent position. When the sheriff returned the writ unsatisfied for failure
of the corporation to comply with the reinstatement aspect as the open positions were
only for pharmacist, pharmacy assistant, cashier and self-service attendant, he lost no
time in resolving that, while the first three positions need college graduates, the self-
service attendant position may be sufficiently performed by complainant even though he
is not a college graduate.16
Lastly, Bartolabac declares that with the filing of the appeal from the order of
reinstatement with the NLRC, he lost jurisdiction over the issue.
For his part, Quimpo alleges that his inclusion in the present administrative case was
due to his participation in disposing of the corporations appeal on the issue of
complainants reinstatement as self-service attendant. He asserts that by law, the
Commission has exclusive appellate jurisdiction to hear and decide all decisions,
awards or orders rendered by the labor arbiter.17 He adds that said authority was even
tacitly recognized by the Court in its Resolution dated 7 June 2000 in relation to G.R.
No. 126561. The pertinent portions of the resolution read:
"On the issue of reinstatement, the Labor Arbiter issued an Order on April 5, 2000,
directing the private respondent to reinstate petitioner to the position of self-service
attendant. The reinstatement order was impugned by the private respondent as the
petitioner was allegedly not qualified for the position and there was already strained
relations between the parties. The reinstatement order is now pending appeal before
the NLRC.
As the NLRC has acquired jurisdiction over the issue of petitioners reinstatement and
the amount of deduction on petitioners monetary award is subject to proof and/or
dispute by the respective parties before the Labor Arbiter, the letter-complaints of the
petitioner are thus hereby NOTED.
IN VIEW THEREOF, Labor Arbiter Geobel A. Bartolabac is hereby directed to

determine with dispatch the amount still owning the petitioner, if any, and to see to it
that no further delay would hamper the proceedings before him. Public respondent
NLRC, on the other hand, is requested to expedite the proceedings before it on the
issue of petitioners reinstatement.18
Hence, Quimpo adds, the NLRC did not abuse its discretion when it assumed
jurisdiction over the corporations appeal.
Quimpo likewise explains that in resolving the appeal, he took judicial notice of the
various resolutions issued by this Court and with utmost good faith and fidelity tried to
implement the directive to reinstate the complainant to his former position or to a
substantially equivalent position. However, due to certain supervening events that
transpired after the resolution of the labor case and up to the time of execution,
reinstatement had become improbable and so it was the ruling of the Commission that
separation pay instead of reinstatement would be the most logical, sensible and
practical solution.19
As to complainants claim that he was not furnished a copy of the corporations appeal
memorandum, records show that a copy of the appeal memorandum was furnished his
counsel and in any event, complainant admitted his knowledge of the existing appeal
when he filed a Reiteration of Motion to Release Monetary Award dated 20 June 2000,
arguing that his monetary award should be released to him since only the issue of
reinstatement is being appealed to the Commission.20
Furthermore, Quimpo states that complainant filed a similar complaint with the Office of
the Ombudsman for neglect of duty but the same was dismissed. Complainants motion
for reconsideration was denied with finality on 21 February 2002. Complainants act of
re-filing another administrative complaint is designed primarily to harass and intimidate
him.21
He also notes that complainant already received the full satisfaction of his monetary
award which only shows that the Commission has complied in good faith with the
directive to execute the judgment award in favor of complainant.22
Without waiting for this Courts action, complainant filed his Reply to Both
Respondent[s] Comments23 on 23 July 2002. He substantially reiterates the arguments
he made in his complaint.
On 19 August 2002, this Court resolved, among others, to refer this case to the
Integrated Bar of the Philippines (IBP) for investigation, report and recommendation. On
6 May 2003, the IBP submitted its resolution adopting and approving the report and
recommendation of Investigating Commissioner Lydia A. Navarro dismissing the
complaint against respondents.24
Complainant filed a motion for reconsideration with the IBP but it was subsequently
denied since the matter had already been endorsed to this Court and the IBP no longer
had jurisdiction over the case.25
We nonetheless resolve to treat the motion for reconsideration as a petition for review
on certiorari of the IBP resolution.26
We now go to the main issue at bar, i.e., whether or not respondents are liable for their
acts in deviating from the final and executory judgment of this Court in G.R. No. 126561.
The Court is unyielding in its adjudication that complainant must be reinstated to his
former position as warehouseman or to a substantially equivalent position. This was
stated in its Decision dated 8 July 1998, reiterated in the Resolution dated 5 July 1999,
and again stressed in the Resolution dated 17 November 1999. In the latter resolution, it
was particularly expressed that:
Indeed, private respondents [Mercury Drug Corporation] contention, as erroneously

upheld by the labor arbiter, that there is no substantially equivalent position for
petitioners reinstatement has been categorically discounted by this Court. We took
judicial notice of the fact that private respondent Mercury Drug Corporation operates
nationwide and has numerous branches all over the Philippines. Petitioner, as
warehouseman, occupied a clerical/rank and file position in said company and we find it
highly inconceivable that no other substantially equivalent position exists to effect his
reinstatement.27
Clearly, the Court is unwilling to accept the corporation and respondent labor arbiters
reason that reinstatement is no longer feasible because the position of warehouseman
had already been abolished and there is no substantially equivalent position in the
corporation.
Both respondents labor arbiter and commissioner do not have any latitude to depart
from the Courts ruling. The Decision in G.R. No. 126561 is final and executory and may
no longer be amended. It is incumbent upon respondents to order the execution of the
judgment and implement the same to the letter. Respondents have no discretion on this
matter, much less any authority to change the order of the Court. The acts of
respondent cannot be regarded as acceptable discretionary performance of their
functions as labor arbiter and commissioner of the NLRC, respectively, for they do not
have any discretion in executing a final decision. The implementation of the final and
executory decision is mandatory.
As held in Siy v. National Labor Relations Commission and Embang: 28
Once the case is decided with finality, the controversy is settled and the matter is laid to
rest. The prevailing party is entitled to enjoy the fruits of his victory while the other party
is obliged to respect the courts verdict and to comply with it. We reiterate our
pronouncement in Salicdan v. Court of Appeals:29
well-settled is the principle that a decision that has acquired finality becomes
immutable and unalterable and may no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will
be made by the court that rendered it or by the highest court of the land.
The reason for this is that litigation must end and terminate sometime and somewhere,
and it is essential to an effective and efficient administration of justice that, once a
judgment has become final, the winning party be not deprived of the fruits of the verdict.
Courts must guard against any scheme calculated to bring about that result and must
frown upon any attempt to prolong the controversies.
The Court recognizes Bartolabacs efforts to adjudicate and advance the cause of
complainant, albeit erroneously. In his desire to settle the issue of reinstatement, he
determined that complainant, a high school graduate, be appointed to the position of
self-service attendant which requires the appointee to hold a college degree, since the
corporation "failed to rationalize the need for a college graduate for the position of self-
service attendantandcomplainant has exhibited before [the NLRC] that he has a
reasonable degree of comprehension to understand and perform the functions of a self-
service attendant."30 Complainant had pointed out several job openings31 in the
corporation to which he would be qualified, but respondent made no effort to verify it.
Instead, he took at face value the corporations representation that there were limited
vacancies. It is inconceivable that a company as large as the corporation, operating
nationwide, could not accommodate complainant and appoint him to one of its
numerous rank and file positions.
Again, we are unceasing in emphasizing that the decision in the labor case has become
final and executory since 1999. There can be no justification for the overturning of the
Courts reinstatement order by the NLRC First Division and full satisfaction of the
monetary award of only three (3) years after the finality of the judgment.lawphil.net
The Court is not wont to compel the corporation to instantly restore the position of
warehouseman if it has been already abolished. Indeed, the Court granted that
complainant could be reinstated to a substantially equivalent or similar position as a
viable alternative for the corporation to carry out.lavvphil.net
Our Constitution mandates that no person shall be deprived of life, liberty, and property
without due process of law.32 It should be borne in mind that employment is considered
a property right and cannot be taken away from the employee without going through
legal proceedings. In the instant case, respondents wittingly or unwittingly dispossessed
complainant of his source of living by not implementing his reinstatement. In the
process, respondents also run afoul of the public policy enshrined in the Constitution
ensuring the protection of the rights of workers and the promotion of their welfare. 33
As a final word, we note that the IBPs report and recommendation falls far short of the
Courts expectations. After a lengthy account of the allegations of the parties, the
investigating commissioner concluded its report with a two-paragraph uncommendably
bare exoneration, thus:
A detailed examination and evaluation of the evidence submitted by the parties showed
that respondents Labor Arbiter Geobel A. Bartolabac and Commissioner Alberto R.
Quimpo only performed the duties required of them under the Rules and Procedure of
Law particularly that pertaining to the NLRC Rules and Procedures and the Labor Code;
as Labor Arbiter and Commissioner.
In fact, complainants complaints against them before the Ombudsman relative to the
same case were dismissed with finality which office has jurisdiction over respondents
relative to the performance of their duties as Labor Arbiter and Commissioner and not
on a lawyer-client relationship nor on the practice of the professions as lawyer or
members of the Bar.34
How the IBP investigating commissioner arrived at that supposition or in what manner
were the acts of herein respondents regularly done cannot be extracted from its scanty
determination.
WHEREFORE, premises considered, the Court finds respondents liable for violating
Canon 1 and Rule 1.01 of the Code of Professional Responsibility. Respondents Labor
Arbiter Geobel A. Bartolabac and Commissioner Alberto R. Quimpo are hereby
SUSPENDED from the practice of law for a period of THREE (3) months.
Let a copy of this Resolution be furnished the Bar Confidant for appropriate annotation
on the records of the respondents.
SO ORDERED.
DANTE O. TINGA
Associate Justice
Central Pangasinan Elec. Corp vs. Macaraeg, 395 SCRA 720,

GR No. 145800, Jan. 22, 2003
THIRD DIVISION
[G.R. No. 145800. January 22, 2003]
CENTRAL PANGASINAN ELECTRIC COOPERATIVE, INC., petitioner, vs. GERONIMA

MACARAEG and MARIBETH DE VERA, respondents.
DECISION
PUNO, J.:
In this petition for review on certiorari, petitioner Central Pangasinan Electric

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

MACARAEG and MARIBETH DE VERA to their former positions without loss of
seniority rights;
(3) Pay complainants their backwages to be reckoned from the time their employment
has been [sic] illegally terminated up to their actual reinstatement based on their last
salary.
Parties are hereby enjoined to be faithful with their commitment to abide by this
Decision which under their Collective Bargaining Agreement is final, executory and not
subject to appeal.
SO ORDERED.[3]
Petitioner appealed to the Court of Appeals via a petition for review. On August 17,
2000, the Court of Appeals rendered a decision dismissing the petition and affirming the
decision of the voluntary arbitrator. Hence, the present course of action.
Petitioner claims that:
(1) The Honorable Court of Appeals gravely abused its discretion in finding that the
procedure leading to the termination of respondents Maribeth de Vera and Geronima
Macaraeg was in violation of the provisions of the Collective Bargaining Agreement
(CBA) particularly Steps 1-4, Article XIII of the said Agreement.
(2) The Honorable Court of Appeals gravely abused its discretion in holding that
petitioner illegally terminated the services of herein private respondents. [4]
The petition is impressed with merit.

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

GR 122046, January 16, 1998
SECOND DIVISION
[G.R. No. 117963. February 11, 1999]
AZCOR MANUFACTURING INC., FILIPINAS PASO and/or ARTURO

ZULUAGA/Owner, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC) AND CANDIDO CAPULSO, respondents.
DECISION
BELLOSILLO, J.:
AZCOR MANUFACTURING, INC., Filipinas Paso and Arturo Zuluaga instituted this
petition for certiorari under Rule 65 of the Rules of Court to assail, for having been
rendered with grave abuse of discretion amounting to lack or excess of jurisdiction, the
Decision of the National Labor Relations Commission which reversed the decision of the
Labor Arbiter dismissing the complaint of respondent Candido Capulso against
petitioners.[1]
Candido Capulso filed with the Labor Arbiter a complaint for constructive illegal
dismissal and illegal deduction of P50.00 per day for the period April to September
1989. Petitioners Azcor Manufacturing, Inc. (AZCOR) and Arturo Zuluaga who were
respondents before the Labor Arbiter (Filipinas Paso was not yet a party then in that case)
moved to dismiss the complaint on the ground that there was no employer-employee
relationship between AZCOR and herein respondent Capulso; that the latter became an
employee of Filipinas Paso effective 1 March 1990 but voluntarily resigned therefrom a
year after. Capulso later amended his complaint by impleading Filipinas Paso as
additional respondent before the Labor Arbiter.
On 14 January 1992, Labor Arbiter Felipe T. Garduque II denied the motion to dismiss
holding that the allegation of lack of employer-employee relationship between Capulso
and AZCOR was not clearly established. Thereafter, the Labor Arbiter ordered that
hearings be conducted for the presentation of evidence by both parties.
The evidence presented by Capulso showed that he worked for AZCOR as ceramics
worker for more than two (2) years starting from 3 April 1989 to 1 June 1991 receiving a
daily wage of P118.00 plus other benefits such as vacation and sick leaves. From April
to September 1989 the amount of P50.00 was deducted from his salary without informing
him of the reason therefor.
In the second week of February 1991, upon his doctors recommendation, Capulso
verbally requested to go on sick leave due to bronchial asthma. It appeared
that his illness was directly caused by his job as ceramics worker where, for lack of the
prescribed occupational safety gadgets, he inhaled and absorbed harmful ceramic
dusts. His supervisor, Ms. Emily Apolinaria, approved his request. Later, on 1 June 1991,
Capulso went back to petitioner AZCOR to resume his work after recuperating from his
illness. He was not allowed to do so by his supervisors who informed him that only the
owner, Arturo Zuluaga, could allow him to continue in his job. He returned five (5) times
to AZCOR but when it became apparent that he would not be reinstated, he immediately
filed the instant complaint for illegal dismissal.[2]
Capulso presented the following documentary evidence in support of his claim: (a)
His affidavit and testimony to prove that he was terminated without just cause and without
due process;[3] (b) Identification card issued by AZCOR which he continued to use even
after his supposed employment by Filipinas Paso;[4] (c) Certification of SSS premium
payments;[5](d) SSS Member Assistance Form wherein he stated that he worked with
AZCOR from March 1989 to April 1991;[6] (e) Certification of Employee Contribution with
SSS;[7] and, (f) Payslips issued by AZCOR.[8]
On the other hand, petitioners alleged that Capulso was a former employee of
AZCOR who resigned on 28 February 1990 as evidenced by a letter of resignation and
joined Filipinas Paso on 1 March 1990 as shown by a contract of employment; in February
1991 Capulso allegedly informed his supervisor, Ms. Emilia Apolinaria, that he intended
to go on terminal leave because he was not feeling well; on 1 March 1991 he submitted
a letter of resignation addressed to the President of Filipinas Paso, Manuel Montilla; and,
in the early part of June 1991 Capulso tried to apply for work again with Filipinas Paso but
there was no vacancy.
Petitioners submitted the following documentary evidence: (a) Sworn Statement of
Ms. Emilia Apolinaria and her actual testimony to prove that respondent indeed resigned
voluntarily from AZCOR to transfer to Filipinas Paso, and thereafter, from Filipinas Paso
due to failing health;[9] (b) Contract of Employment between Filipinas Paso and
respondent which took effect 1 March 1991;[10] (c) Letter of resignation of respondent from
AZCOR dated 28 February 1990, to take effect on the same date;[11] (d) Undated letter of
resignation of respondent addressed to Filipinas Paso to take effect 1 March 1991;[12] (e)
BIR Form No. W-4 filed 6 June 1990;[13] (f) Individual Income Tax Return of respondent
for 1990;[14] and, (g) BIR Form 1701-B which was an alphabetical list of employees of
Filipinas Paso for the year ending 31 December 1990.[15]
On 29 December 1992 the Labor Arbiter rendered a decision dismissing the
complaint for illegal dismissal for lack of merit, but ordered AZCOR and/or Arturo Zuluaga
to refund to Capulso the sum of P200.00 representing the amount illegally deducted from
his salary.
On appeal by Capulso, docketed as NLRC CA No. 004476-93 (NLRC NCR 00-09-
05271-91), "Capulso v. Azcor Manufacturing Inc., Filipinas Paso and/or Arturo
Zuluaga/owner," the NLRC modified the Labor Arbiters decision by: (a) declaring the
dismissal of Capulso as illegal for lack of just and valid cause; (b) ordering petitioners to
reinstate Capulso to his former or equivalent position without loss of seniority rights and
without diminution of benefits; and, (c) ordering petitioners to jointly and solidarily pay
Capulso his back wages computed from the time of his dismissal up to the date of his
actual reinstatement. The NLRC held in part -
x x x x the contract of employment (Exh. 2, p. 187, Rollo) issued to complainant

indicates that the work to be done during the period was contracted with Filipinas Paso.
The said contract was signed by the Personnel Officer of Ascor Manufacturing Inc.
Likewise, the contract period is for six (6) months, which establishes a presumption that
the said contract could pass either as to cover the probationary period, or job
contracting, the completion of which automatically terminates employment, whichever
will work to respondents advantage should the case be filed. However, appellant
continued working with respondent after the lapse of the contract and until the alleged
termination of employment of appellant.
Secondly, the two resignation letters allegedly executed by appellant are exactly
worded, which only shows that the same were prepared by respondents-appellees plus
after the fact that complainant denied having executed and signed the same.
x x x x the letter of resignation (Exh. 3, p. 188, Rollo) supposed to have been executed
by complainant-appellant shows that he resigned from Ascor Mfg., Inc. on February 28,
1990 while Exhibit 2, page 187, Rollo, which was the contract of Employment issued to
Candido Capulso by the personnel officer of Ascor Mfg., Inc. shows that appellant was
being hired from March 1, 1990 to August 31, 1990 by respondent Ascor Mfg., Inc. to do
jobs for Filipinas Paso. A run-around of events and dates.
The events that transpired clearly show that there was no interruption in the service of
complainant with Ascor Mfg., Inc. from April 13 1989 up to June 1, 1991 when
complainant was unceremoniously dismissed.
Considering that Ascor Mfg., Inc. and Filipinas Paso orchestrated the events that
appeared to be in order with the alleged execution of resignation letters which was
disputed by complainant and confirmed spurious as explained above, likewise
overwhelmingly show the bad faith of respondents in the treatment of their employees.
Petitioners motion for reconsideration was denied by the NLRC through its Resolution
of 14 October 1994; hence, the instant petition. Meanwhile, during the pendency of the
case before this Court, Capulso succumbed to asthma and heart disease.
The issue to be resolved is whether the NLRC committed grave abuse of discretion
in declaring that private respondent Capulso was illegally dismissed and in holding
petitioners jointly and solidarily liable to Capulso for back wages.
As a rule, the original and exclusive jurisdiction to review a decision or resolution of
respondent NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not
include a correction of its evaluation of the evidence but is confined to issues of jurisdiction
or grave abuse of discretion. The NLRCs factual findings, if supported by substantial
evidence, are entitled to great respect and even finality, unless petitioner is able to show
that it simply and arbitrarily disregarded the evidence before it or had misappreciated the
evidence to such an extent as to compel a contrary conclusion if such evidence had been
properly appreciated.[16] We find no cogent reason to disturb the findings of the NLRC.
Petitioners insist that Capulso was not really dismissed but he voluntarily resigned
from AZCOR and Filipinas Paso, and that there was nothing illegal or unusual in the
letters of resignation he executed.
We disagree. To constitute a resignation, it must be unconditional and with the
intent to operate as such. There must be an intention to relinquish a portion of the term
of office accompanied by an act of relinquishment.[17] In the instant case, the fact that
Capulso signified his desire to resume his work when he went back to petitioner AZCOR
after recuperating from his illness, and actively pursued his case for illegal dismissal
before the labor courts when he was refused admission by his employer, negated any
intention on his part to relinquish his job at AZCOR.
Moreover, a closer look at the subject resignation letters readily reveals the
following: (a) the resignation letter allegedly tendered by Capulso to Filipinas Paso was
identically worded with that supposedly addressed by him to AZCOR; (b) both were pre-
drafted with blank spaces filled up with the purported dates of effectivity of his resignation;
and, (c) it was written in English, a language which Capulso was not conversant with
considering his low level of education. No other plausible explanation can be drawn from
these circumstances than that the subject letters of resignation were prepared by a
person or persons other than Capulso. And the fact that he categorically disowned the
signatures therein and denied having executed them clearly indicates that the resignation
letters were drafted without his consent and participation.
Even assuming for the sake of argument that the signatures were genuine, we still
cannot give credence to those letters in the absence of any showing that Capulso
was aware that whathe was signing then were in fact resignation letters or that he fully
understood the contents thereof. Having introduced those resignation letters in evidence,
it was incumbent upon petitioners to prove clearly and convincingly their genuineness
and due execution, especially considering the serious doubts on their
authenticity. Petitioners miserably failed in this respect.
The Labor Arbiter held that Capulsos repudiation of the signatures affixed in the
letters of resignation was weakened by the fact that he filed the case only after almost
four (4) months from the date of his dismissal. But it should be noted that private
respondent still wanted his job and thus, understandably, refrained from filing the illegal
dismissal case against his employer so as not to jeopardize his chances of continuing
with his employment. True enough, when it became apparent that he was no longer
welcome at AZCOR he immediately instituted the instant case.
In addition, an action for reinstatement by reason of illegal dismissal is one based on
an injury which may be brought within four (4) years from the time of dismissal pursuant
to Art. 1146 of the Civil Code. Hence, Capulsos case which was filed after a measly delay
of four (4) months should not be treated with skepticism or cynicism. By law and settled
jurisprudence, he has four (4) years to file his complaint for illegal dismissal. A delay of
merely four (4) months in instituting an illegal dismissal case is more than sufficient
compliance with the prescriptive period. It may betray an unlettered mans lack of
awareness of his rights as a lowly worker but, certainly, he must not be penalized for his
tarrying.
In illegal dismissal cases like the present one, the onus of proving that the dismissal
of the employee was for a valid and authorized cause rests on the employer[18] and failure
to discharge the same would mean that the dismissal is not justified and therefore
illegal.[19] Petitioners failed in this regard.
Petitioners also contend that they could not be held jointly and severally liable to
Capulso for back wages since AZCOR and Filipinas Paso are separate and distinct
corporations with different corporate personalities; and, the mere fact that the businesses
of these corporations are interrelated and both owned and controlled by a single
stockholder are not sufficient grounds to disregard their separate corporate entities.
We are not persuaded. The doctrine that a corporation is a legal entity or a person in
law distinct from the persons composing it is merely a legal fiction for purposes of
convenience and to subserve the ends of justice. This fiction cannot be extended to a
point beyond its reason and policy.[20] Where, as in this case, the corporate fiction was
used as a means to perpetrate a social injustice or as a vehicle to evade obligations or
confuse the legitimate issues, it would be discarded and the two (2) corporations would
be merged as one, the first being merely considered as the
instrumentality, agency, conduit or adjunct of the other. [21]
In this particular case, there was much confusion as to the identity of Capulsos
employer - whether it was AZCOR or Filipinas Paso; but, for sure, it was petitioners' own
making, as shown by the following: First, Capulso had no knowledge that he was already
working under petitioner Filipinas Paso since he continued to retain his AZCOR
Identification card; Second, his payslips contained the name of AZCOR giving the
impression that AZCOR was paying his salary; Third, he was paid the same salary and
he performed the same kind of job, in the same work area, in the same location, using
the same tools and under the same supervisor; Fourth, there was no gap in his
employment as he continued to work from the time he was hired up to the last day of his
work; Fifth, the casting department of AZCOR where Capulso was working was abolished
when he, together with six (6) others, transferred to Filipinas Paso; and Sixth, the
employment contract was signed by an AZCOR personnel officer, which showed that
Capulso was being hired from 1 March 1990 to 31 August 1990 by AZCOR to do jobs for
Filipinas Paso. The employment contract provided in part:
The contract is for a specific job contract only and shall be effective for the period
covered, unless sooner terminated when the job contract is completed earlier or
withdrawn by client, or when the employee is dismissed for just and lawful causes
provided by law and the companys rules and regulations, in which case the employment
contract will automatically terminate.
As correctly observed by the NLRC, the contract was only for six (6) months, which
could pass either as a probationary period or a job contracting, the completion of which
automatically terminated the employment. Observe further, however, that respondent
continued working even after the lapse of the period in the contract - for whom it was not
clear. It may be asked: Was the six (6)-month period probationary in
nature, in which case, after the lapse of the period he became a regular employee of
Filipinas Paso? Or was the period job-contracting in character, in which case, after the
period he was deemed to have come back to AZCOR?
Interestingly, petitioners likewise argue that it was grave abuse of discretion for the
NLRC to hold them solidarily liable to Capulso when the latter himself testified that he
was not even an employee of Filipinas Paso.[22] After causing much confusion, petitioners
have the temerity to use as evidence the ignorance of Capulso in identifying his true
employer. It is evident from the foregoing discussion that Capulso was led into believing
that while he was working with Filipinas Paso, his real employer was AZCOR. Petitioners
never dealt with him openly and in good faith, nor was he informed of the developments
within the company, i.e., his alleged transfer to Filipinas Paso and the closure of AZCORs
manufacturing operations beginning 1 March 1990.[23] Understandably, he sued AZCOR
alone and was constrained to implead Filipinas Paso as additional respondent only when
it became apparent that the latter also appeared to be his employer.
In fine, we see in the totality of the evidence a veiled attempt by petitioners to deprive
Capulso of what he had earned through hard labor by taking advantage of his low level
of education and confusing him as to who really was his true employer - such a callous
and despicable treatment of a worker who had rendered faithful service to their company.
However, considering that private respondent died during the pendency of the case
before this Court, reinstatement is no longer feasible. In lieu thereof, separation pay shall
be awarded.With respect to the amount of back wages, it shall be computed from the time
of private respondents illegal dismissal up to the time of his death.
WHEREFORE, the petition is DISMISSED. The NLRC Decision of 12 September
1994 is MODIFIED. Petitioners AZCOR MANUFACTURING, INC., FILIPINAS PASO and
ARTURO ZULUAGA are ORDERED to pay, jointly and solidarily, the heirs of private
respondent Candido Capulso the amounts representing his back wages, inclusive of
allowances and other benefits, and separation pay to be computed in accordance with
law.
SO ORDERED.
Puno, Mendoza, Quisumbing, and Buena, JJ., concur.
Molina vs. Pacific Plans, 484 SCRA 498,
GR 165476, March 10, 2006

G.R. No. 165476 March 10, 2006
AGRIPINO V. MOLINA, Petitioner,
vs.
PACIFIC PLANS, INC., Respondent.
DECISION
CALLEJO, SR.,J.:
Before us is a Petition for Review on Certiorari assailing the Decision1 and

Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 81298 reversing the
Decision3 of the National Labor Relations Commission (NLRC) in NLRC-NCR (South)
Case No. 30-07-03393-01.
Pacific Plans, Inc. (PPI) is a domestic corporation engaged in the business of selling
pre-need plans, such as educational, pension, and memorial plans.4 It maintains
regional offices throughout the Philippines. At the time material to this case, Metro
Manila regional offices were divided into two sales divisions - the South Sales Division
and the North Sales Division. Metro Manila VI was part of the North Sales
Division.5 Among the corporate officers of PPI were Geoffrey Martinez, Executive Vice-
President for Finance; Luciano Abia, Senior Assistant Vice-President, Metro Manila
Marketing Division; and Atty. Manuel Reyes, the Head of the Legal Department.6 Roy
Padiernos then occupied the position of Regional Manager of Metro Manila VI. 7
PPI solicited subscribers and buyers of its pre-need plans through clusters of sales
associates. One of them was Ruth Padiernos, wife of Roy Padiernos.8
Sometime in October 1994, PPI hired Agripino Molina as Regional Manager of Metro
Manila VI, replacing Roy Padiernos who was promoted as First Vice-President for
Marketing Operations. As Regional Manager, Molina performed both administrative and
marketing functions, whose duties and responsibilities included the following:
a. formulating and recommending short and long range marketing plans for the
Region and executing approved plans;
b. generating new and conserving existing pre-need plan businesses;
c. motivating, training, and developing a dedicated and effective counselor force;
d. conducting researches to determine sales potentials and share of the market,

pricing, and profitability of Company's products, competition and the directing of
product development for the Region;
e. hiring and terminating counselors, unit managers or group managers in
accordance with policies previously laid out;
f. recommending the creation of additional positions or termination of services of

any employee within the Region;
g. recommending promotions or changes in salaries of personnel within the

Region and lateral shifts of supervisor, their assistants, understudies of positions
of equal rank;
h. training and developing understudies for each position within the Region to
provide immediate replacement whenever vacated;
i. changing methods and procedures not affecting the other Regions, provided,
however, that radical changes should first be cleared with [the] superior;
j. controlling the operations of the Region and establishing a system of periodic

work reporting;
k. coordinating the Regions activities with those of the other Regions;
l. keeping [the] superior informed of [the] Region's activities and specially of [the]
decision on matters for which he may be held responsible;
m. realizing the Companys objective for service, growth, and profit;
n. establishing and maintaining harmonious and dignified relationship with plan

holders, counselors, employees, the public, government instrumentalities, other
pre-need plan companies; [and]
o. further enhancing the prestige of the Company and maintaining its position of
leadership in its field.9
Since Metro Manila VI was consistently on top in terms of nationwide sales and
productivity, Molina was promoted Assistant Vice-President with the same functions as
those of a regional manager of the same sales region.10
Caritas Health Shield, Inc. (Caritas for brevity), a health maintenance organization
(HMO) engaged in selling health and hospitalization plans, was established on
December 16, 1998. Geoffrey Martinez resigned as Executive Vice-President of PPI
and became the President and Chief Executive Officer of Caritas. 11 Among the
incorporators and members of the Board of Directors were Luciano Abia and Atty.
Manuel Reyes.12 Molina was hired as Assistant Vice-President and Marketing Head of
Area 10. His wife, Fe Molina, was the head of a sales agency of Caritas.
In the meantime, from February 2000, there was a considerable decrease in the sales
output production of PPIs Metro Manila Region VI.13
On March 21, 2000, Molina received a Memorandum from PPI, through its Senior
Assistant Vice-President for Human Relations, Patricio A. Picazo, informing him that,
based on written reports, he committed the following: 1) recruiting and pirating activities
in favor of Caritas, in particular, initiating talks and enticing associates to join Caritas,
and a number of associates have already signed up; 2) he called for a meeting with his
associates sometime in November 1999, and solicited contributions from them for the
bill but later asked for reimbursement from the company; and 3) acts of misdemeanor
on several occasions, such as coming to the office under the influence of liquor,
initiating a smear campaign against PPI, and other acts inimical to the companys
interest.14 Molina was also required to submit, on March 23, 2000, a written explanation
why he should not be held administratively liable for said acts which, it opined, might
constitute conduct unbecoming of an officer, conflict of interest, and breach of trust and
confidence. Molina was also informed that he was preventively suspended pending
formal investigation effective immediately until April 24, 2000.15
In a letter addressed to Picazo dated March 22, 2000, Molina categorically denied the
acts attributed to him. He, however, requested that he be furnished with copies of the
alleged written reports to enable him to prepare the required written
explanation.16 However, instead of acceding to the request of copies of the written
reports, Picazo wrote a letter dated April 3, 2000, citing the particulars of the charges
against Molina, thus:
I. Conflict of Interest
1. Recruiting and pirating activities in favor of Caritas Health Shield, Inc.
* You have acted as conduit for Caritas in recruiting/pirating Mr.

Restie Acosta on March 04, 2000 and Ms. Eppie Acosta on March
06, 2000.
*Your failure to stop and/or tolerating your wife's activities in

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

1. Solicitation of associates' personal funds in the amount of P200.00 per
person, to which 12 persons contributed for a total P2,400.00, for payment
of official function during the meeting held at Barrio Fiesta last November
27, 1999. Amount solicited was subsequently reimbursed from the
company but not returned to the associates concerned.
III. Dereliction of Duties
1. You failed to prevent associates from leaving the company in favor of

competitors, thus causing demoralization among your sales associates.
2. You even encouraged associates to transfer to Caritas.
IV. Conduct unbecoming of a Company Officer
1. Often reporting to office under the influence of liquor.
2. Sowing intrigue in the case of Vilma del Rosario which almost caused
her early retirement from the company and transfer to Caritas.
3. Sowing intrigues between Mr. Roy Padiernos and Mr. Abia.
4. Showing disrespect to immediate superior, Mr. Roy Padiernos, by

shouting at him and walking out in one of the meetings called by him after
the retirement of Atty. Haceta.17
During the investigation the following day, April 4, 2000, Molina reiterated his request to
be provided with a copy of the written reports.18 Picazo denied the request in a
Memorandum dated April 6, 2000, and reiterated his order for Molina to submit his
written explanation on April 11, 2000, and to address his concerns during the
investigation scheduled on April 14, 2000.19 Molina failed to submit any written
explanation. On April 24, 2000, PPI issued a Memorandum advising Molina that he
would be reinstated in the payroll effective April 25, 2000 without requiring him to report
for work during the pendency of his investigation.20
Molina filed a "Motion to Dismiss Complaints and Motion for Full Reinstatement" on May
2, 2000.21 He asserted that the charges should be dismissed since he was compelled to
prepare a written explanation on the basis of "summarized specific acts," denying him
the right to be informed of the exact charges and to confront those who made written
reports against him. As to the issue of reinstatement, he alleged that he should be
allowed to report for work, conformably with Rule XIV, Section 4 of the Implementing
Rules of the Labor Code.22
On May 11, 2000, Picazo wrote Molina that his motion to dismiss the charges would be
resolved after the investigation. He was warned that his non-appearance at the
investigation would be considered a waiver of his right to be heard. 23
On the same day, May 11, 2000, Abia issued an inter-office Memorandum announcing
the appointment of Sercy F. Picache as the Officer-In-Charge (OIC) for Metro VI and
XVI effective May 6, 2000.24
Molina and his counsel attended the May 19, 2000 investigation and filed a Motion to
Suspend Proceedings,25praying that the administrative investigation be deferred until
the resolution of the "prejudicial" issues raised in his previous motion.26
When Picazo failed to respond, Molina filed, on June 1, 2000, a complaint for damages
with a prayer for a temporary restraining order and preliminary injunction based on
Article 19 of the New Civil Code. PPI filed a Motion to Dismiss, maintaining that the
courts have no jurisdiction over matters arising from employee-employer relationship.
The trial court denied the motion as well as PPIs motion for reconsideration. 27
Meanwhile, in letter dated June 13, 2000, Molina was notified of the termination of
administrative investigation. PPI considered his failure to submit a written explanation
as a waiver of his right to be heard, and as such, the investigating committee had
evaluated the evidence at hand and submitted its recommendations to the "higher
management" for decision. Also, it confirmed the denial of his Motion to Suspend
Proceedings.28
On June 23, 2000, the trial court issued an Order granting Molina's prayer for temporary
restraining order, which was later made permanent per its Order dated July 12, 2000.
The motion for reconsideration filed by PPI on July 26, 2000 was likewise denied.
Thereafter, it filed a petition for certiorari before the CA, assailing the writ of preliminary
injunction issued by the RTC and its order denying the motion to dismiss the complaint.
On July 16, 2001, the CA rendered judgment in favor of PPI and nullified the writ of
preliminary injunction issued by the RTC as well as the order denying the motion of PPI
for the dismissal of the complaint.29
On July 30, 2001, PPI resolved to dismiss Molina from employment on its finding that
the latter violated its standard operating procedure.30
Molina forthwith filed a complaint with the NLRC against PPI and Alfredo C. Antonio,
Patricio A. Picazo, and Certerio B. Uy, in their capacity as President, Senior Assistant
Vice-President of Human Resources Development, and Division Head, respectively, for
illegal dismissal and illegal suspension with claim for monetary benefits.
In his Position Paper,31 Molina principally argued that he was denied the right to due
process due to the failure of PPI to furnish him a copy of the written reports of the sales
associates and co-employees, the basis of the accusations against him. Since an OIC
for his position was already appointed even before all his pending motions were
resolved, he surmised that there were really no such reports, and that the alleged
accusations were merely concocted in order to replace him with someone close to
Picazo. Molina maintained that since he was denied the opportunity to dispute the
authenticity and substantive contents of the reports, his alleged violations of company
rules and policies were hearsay and, therefore, lacked probative value. Besides, the
termination of his employment was made without the 30-day prior notice; his dismissal
from employment took effect immediately, only six days after PPI received the CA
decision decreeing that the NLRC has the rightful jurisdiction over the case. Thus, he
prayed for the following relief:
1. Total Money Claims
a) Salary with (overriding) commission from March 21 to April 24, 2000 -

suspended w/o pay - P45,000.00 (P25,000[.00] mo. salary & P20,000[.00]
[overriding])
b) Unpaid (overriding) commission from April 25, 2000 to present

- P400,000[.00]
c) Unpaid salary from August 1, 2001 to present - P125,000[.00]
d) One mo. salary for every yr. of service in lieu of reinstatement - 7 years
= P175,000.00
2. Leave Credits - P100,000.00 for 7 years
3. Profit Bonus for Year 2000 & 2001 - P400,000.00
4. Moral Damages - P300,000.00
5. Exemplary Damages - P500,000.00
6. Actual Damages - for lifetime medical attendance and medicines at 16 more

years life expectancy - P1,249,384.00
7. Attorney's Fees - P300,000.00

8. Amount debited from complainant's ATM [as partial payment for hospitalization
expenses incurred by him which PPI had advanced] - P12,000.00
9. Retention of complainant's car, as additional penalty for illegal dismissal. 32
For its part, PPI stressed that Caritas was its competitor in the pre-need plans business,
and that Molina and his wife recruited and enticed some of the sales associates of PPI
to work for Caritas, in violation of its policy against conflict of interest. Some of these
sales associates were the spouses Eppie and Restie Acosta, Lenita Gatmaitan, Lolita
Casaje, Lydia Magalso, Lydia San Miguel, and Alice Halili, and including Vilma del
Rosario, the secretary of Roy Padiernos. PPI, likewise, averred that Molina had the
habit of coming to the office under the influence of liquor; he constantly shouted to lady
employees and solicited money from his sales associates in connection with an official
company function without returning the same after PPI reimbursed him for the expenses
incurred; disseminated intrigues and created divisiveness among the employees and
PPIs senior officers; and disrespected Padiernos, his superior, by shouting at him
during one of the meetings with other senior officers, and walked out of the meeting
afterwards. Supporting its claims that Molina committed breach of trust, serious
misconduct, fraud, and gross neglect of duty by reason thereof, PPI appended to its
position paper the statements/affidavits of Marivic Uy, Ruth and Roy Padiernos, Eppie
and Restie Acosta, Celeste Villena, and Vilma del Rosario.33
On the claim of Molina that he was denied due process, PPI averred that he was given
sufficient opportunity to present his personal submissions before finally issuing the
notice of dismissal but Molina persistently refused to submit his explanation. 34 PPI
further argued that he was not entitled to the payment of 13th and 14th month salaries,
overriding commission, profit bonus, actual, moral or exemplary damages, and
attorneys fees. PPI maintained that, under Article 217(a) of the Labor Code, as
amended, and the ruling of this Court in Baez v. Valdevilla,35 Molina should be held
liable for P1,000,000 as moral damages and an amount not less than P428,400.00 for
the salary he received during the time when the restraining order/ writ of injunction was
erroneously enforced.36
In his Reply, Molina averred that the affidavits submitted by PPI were antedated since
he was never furnished copies of said reports/affidavits despite demands. PPI even
failed to present the reports/affidavits before the RTC where his complaint for damages
against PPI and its officers was pending. He and Roy Padiernos had been at odds
because the latter appointed his brother and wife as agency manager and group
manager of PPI to which he objected. Molina averred that the P200.00 collected from
each of the employees of PPI during their luncheon meeting was a voluntary
contribution, and that they spent P4,000.00, more than the amount collected from the
employees. He contended that he had no motive to recruit sales associates or
employees of PPI to be employed by Caritas because the depletion of sales associates
would diminish his effectiveness as an area manager, including his overriding
commission, profit bonus and fringe benefits. He admitted that he may have raised his
voice in the heat of arguing a point during meetings, but averred that it should not be
considered as disrespect or misdemeanor.
Molina further emphasized that Caritas was not a competitor of PPI, as the former was
engaged in selling health care and is supervised by the Department of Health (DOH),
while the latter is into the business of selling pre-need plans and supervised by the
Securities and Exchange Commission (SEC). Finally, he averred that the so-called
"associates" of PPI were not actually employees but "independent journeymen" who
derived income on commission basis, free to engage in any kind of selling activities not
in direct competition with PPI.
Molina admitted having had drinking sessions with Certerio Uy, Ilustre Acosta and
Reynaldo Villena, who provided the hard liquor and pulutan, but only after office hours.
He claimed that his officemates mistook him for being drunk when he went to his office
even after office hours because of his "mestizo complexion."
In its response, PPI averred that, based on the sales data, the acts of Molina caused
demoralization of the sales associates, resulting in a sudden decrease of the region's
output from P343,009,643.00 in 1998 to P263,099,773.00 in 1999,
and P228,752,090.00 in 2000.37 PPI insisted that he should be held liable for not less
than P507,348.00, P2,000,000, and P1,000,000 as actual, moral and exemplary
damages, and attorney's fees, respectively, and P273,600.00 which was the balance on
his car plan agreement with PPI.38
In his Rejoinder39 and Sur-Rejoinder40 Molina submitted the affidavit of Geoffrey

Martinez, who belied the reports of Uy, Villena, Del Rosario, and the spouses Padiernos
and Acosta.41 He also appended the affidavits of Natividad Gatchalian,42 San
Miguel,43 Gatmaitan,44 and Magalso,45 who all disputed, in one way or another, Molina's
alleged violations. To counter the imputations of conflict of interest, Molina also alleged
that Abia and Atty. Reyes were incorporators of Caritas,46 and that Villena had in her
possession a license to sell Caritas products.47 With regard to the declining sales output
of his region, Molina attributed the same to the Asian regional crisis that hit the
Philippines sometime in 1997. He noted, however, that the same records revealed that
despite the financial bane, Metro VI still managed to be on top from 1998 up to 2000 in
terms of its sales relative to the other regions.
Molina denied any liability for the car plan, claiming that he already settled the obligation
when PPI demanded full payment as, in fact, all the papers related thereto, including the
Release of Mortgage, were already in his possession.
In its Sur-Rejoinder,48 PPI stressed its claim that Caritas was a business competitor, as
may be inferred from the benefits available under its health care agreement and the pre-
need contract of PPI. Particularly with regard to the pension plan contract, it noted the
following similarities: (a) Caritas also provides Term Life Insurance, Accidental Death
Insurance, Credit Life Insurance, and Waiver of Installment Due to Disability; (b) there
are similarities in the provisions on contract price, grace period, cancellation,
reinstatement, and transfer and termination; and (c) unlike other health care programs
that provide a one-year coverage, renewable every year thereafter, Caritas offers a
continuous five year coverage and sells the same in units payable in five-year
installment basis, with maturity period and guaranteed return of investment in the form
of Full-Term Medical Expense Fund computed at P10,000.00 for every unit purchased
with increment of 10% yearly after the maturity period, which may be withdrawn in cash
by its member. It stressed that this was similar to the pension program offered by PPI
which was also sold in per unit basis, payable by installment in certain number of years
or lump sum payment, and upon maturity also gives P10,000.00 pension benefit per unit
purchased by the plan holder. With respect to the alleged interest of Atty. Reyes with
Caritas, PPI adduced in evidence a Deed of Sale to prove that as early as February
1999 he had already divested his stockholdings in Caritas.49
On November 18, 2002, Labor Arbiter Roma C. Asinas rendered a

Decision50 dismissing the complaint and the counterclaims for lack of merit. The labor
arbiter ruled that Molina was lawfully dismissed from his employment for serious
misconduct in office and fraud or willful breach of trust and confidence. It declared that
Molinas mere denial of the charges against him did not overthrow the overwhelming
evidence against him tending to show that he committed the allegations against him.
Moreover, his wife was then an agency manager of Caritas, and some PPI sales
associates were with Caritas because they were recruited by Molina. The labor arbiter
also ruled that other employees of respondent attested to the fact that they were being
recruited and enticed by the complainant to join Caritas. This act of pirating constituted
serious misconduct in office, fraud or willful breach of trust and confidence, which are
just causes for termination of employment under Article 282 of the Labor Code, as
amended. As such, PPI could not legally be compelled to continue Molinas employment
due to breach of trust.
The labor arbiter likewise held that Molina was afforded his right to due process, but that
he refused to give an answer to the charges leveled against him, and instead insisted
that he be furnished a copy of the alleged reports against him. Since he was given
ample opportunity to answer the charges and explain his side during the investigation,
and a formal or trial-type hearing is not at all times essential, Molinas right to due
process was not violated. The labor arbiter stressed that the requirements of due
process are satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy at hand.51
Molina appealed the decision to the NLRC, which rendered judgment in his favor. The
NLRC reversed the decision of the Labor Arbiter and ordered Molinas immediate
reinstatement to his former position as Assistant Vice President without demotion in
rank and salary; and the payment of his backwages from August 1, 2001 up to his
actual reinstatement, and other accrued monetary benefits. However, the NLRC denied
all other claims for damages.52
According to the NLRC, the charges of coming to the office under the influence of liquor
and making PPI reimburse the expenses already paid by Molina's co-employees were
not supported by the records. The "loss of trust and confidence" had no factual basis
since the alleged acts of Molina did not result to any loss in favor of PPI.
Anent Molinas recruitment activities, the NLRC ratiocinated that PPI failed to show that
Caritas was a competitor of PPI. Caritas caters to the health care needs of its clients
while PPI to the pre-need (pension, educational, and memorial) requirements of its plan
holders. Any similarity between PPI and Caritas extra features like term life insurance,
accidental death insurance, credit life insurance, and waiver of installment due to
disability, did not ipso facto make Caritas a competitor of PPI. Thus, there was no
conflict of interest in Molinas act of trying to recruit counselors for Caritas to help his
wife. Moreover, PPI failed to establish that recruiting for Caritas affected Molinas
decisions in the performance of his duties with PPI. According to the NLRC, the drop in
the sales and productivity of complainants area of responsibility may be due to market
forces and depressed economic condition at that time; absent any clear and convincing
proof, it cannot be attributed to the alleged acts of Molina which constituted willful
breach of trust or confidence.53
PPI filed a motion for reconsideration, and appended a Letter dated June 13, 2002 from
the SEC to Caritas, indicating that its HMO Plan was similar to the previous plans
offered by pre-need companies, hence, under the regulatory suspension of the
SEC;54 another letter of SEC ordering Caritas to immediately desist from selling its HMO
plan with the full term medial expense fund;55 and the letter of Caritas, through counsel,
endorsing the objectionable features of the HMO plan.56
The NLRC, however, was not persuaded, and resolved to deny PPIs motion in its Order
dated September 30, 2003.57 On November 19, 2003, the NLRC declared its Decision
final and executory as of November 14, 2003.58
PPI filed a Petition for Certiorari with the CA for the nullification of the decision and
resolution of the NLRC and the reinstatement of the decision of the Labor Arbiter.59
On August 13, 2004, the CA rendered a decision reversing the Decision and Resolution
of the NLRC, and reinstating the November 18, 2002 Decision of the Labor
Arbiter.60 Later, the CA denied Molinas Motion for Reconsideration61 in its Resolution
dated September 27, 2004.62
The issues for resolution are the following: whether the decision of the NLRC was
already final and executory when PPI filed its petition for certiorari in the CA; and
whether the NLRC committed grave abuse of discretion amounting to excess or lack of
jurisdiction in issuing the assailed decision and resolution.
On the first issue, we find and so hold that the decision of the NLRC had become final
and executory when PPI filed its Petition for Certiorari in the CA. PPI received a copy of
the NLRC Decision on July 11, 2003 and filed the Motion for Reconsideration thereof on
July 18, 2003, which motion was denied on September 30, 2003. Under Rule VII,
Section 2 of the NLRC Omnibus Rules of Procedure, the decision of the NLRC
becomes final and executory after ten (10) calendar days from receipt of the same. PPI
received a copy of the NLRC decision on November 30, 2003; hence, such decision
became final and executory on December 3, 2003. Nonetheless, the Court ruled in St.
Martin Funeral Home v. NLRC63 that, although the 10-day period for finality of the NLRC
decision may have elapsed as contemplated in the last paragraph of Section 223 of the
Labor Code, the CA may still take cognizance of and resolve a petition for certiorari for
the nullification of the decision of the NLRC on jurisdictional and due process
considerations. Indeed, the remedy of the aggrieved party from an adverse decision of
the NLRC is to timely file a motion for reconsideration as a precondition for any further
or subsequent remedy, and if the motion is denied, such party may file a special civil
action in accordance with law and jurisprudence considering that these matters are
inseparable in resolving the main issue of whether the NLRC committed grave abuse of
discretion.
The Labor Arbiter and the NLRC act in quasi-judicial capacity in resolving cases after
hearing and on appeal, respectively. On the presumption that they have already
acquired expertise in their jurisdiction, which is confined on specific matters, their
findings of facts are oftentimes accorded not only with respect but even finality if
supported by substantial evidence. However, in spite of the statutory provision making
"final" the decision of the NLRC, the Court has taken cognizance of petitions
challenging such decision where there is a clear showing that there is want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
justice, or erroneous interpretation of law.64
In this case, the Labor Arbiter declared that there is substantial evidence on record
warranting the dismissal of petitioner as Assistant Vice President for serious misconduct
in office, fraud or willful breach of trust and confidence. The NLRC disagreed with the
Labor Arbiter and reversed the latters findings. The CA, for its part, concurred with the
findings of the Labor Arbiter. In view of the discordance between the findings of the
Labor Arbiter and the CA on one hand, and the NLRC on the other, there is a need for
the Court to review the factual findings and the conclusions based on the said findings.
As this Court held in Diamond Motors Corporation v. Court of Appeals:65
A disharmony between the factual findings of the Labor Arbiter and the National Labor
Relations Commission opens the door to a review thereof by this Court. Factual findings
of administrative agencies are not infallible and will be set aside when they fail the test
of arbitrariness. Moreover, when the findings of the National Labor Relations
Commission contradict those of the labor arbiter, this Court, in the exercise of its equity
jurisdiction, may look into the records of the case and reexamine the questioned
findings.66
Article 282 of the Labor Code of the Philippines provides:
Art. 282. Termination by employer. An employer may terminate an employment for

any of the following causes:
a. Serious misconduct or willful disobedience by the employee of the lawful

orders of his employer or representative in connection with his work;
b. Gross and habitual neglect by the employee of his duties;
c. Fraud or willful breach by the employee of his duties of the trust reposed in him
by his employer or duly authorized representative;
d. Commission of a crime or offense by the employee against the person of his

employer or any immediate member of his family or his duly authorized
representative; and
e. Other causes analogous to the foregoing.

Misconduct has been defined as improper or wrong conduct; the transgression of some
established and definite rule of action; a forbidden act, a dereliction of duty, unlawful in
character and implies wrongful intent and not mere error of judgment. The misconduct
to be serious must be of such grave and aggravated character and not merely trivial and
unimportant. Such misconduct, however, serious, must nevertheless, be in connection
with the employees work to constitute just cause for his separation.67
The loss of trust and confidence, in turn, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary breach will not suffice. A breach of
trust is willful if it is done intentionally, knowingly and purposely without justifiable
excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.68
The Court has laid down the guidelines for the application of the doctrine for loss of
confidence, thus:
1. the loss of confidence must not be simulated;
2. it should not be used as a subterfuge for causes which are illegal, improper or
unjustified;
3. it may not be arbitrarily asserted in the face of overwhelming evidence to the

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

bad faith; and
5. the employee involved holds a position of trust and confidence. 69
In Samson v. Court of Appeals,70 the Court enumerated the conditions for one to be
considered a managerial employee:
(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof;
(2) They customarily and regularly direct the work of two or more employees
therein;
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the
promotion or any other change of status of other employees are given particular
weight.71
As a general rule, employers are allowed wide latitude of discretion in terminating the
employment of managerial personnel.72 The mere existence of a basis for believing that
such employee has breached the trust and confidence of his employer would suffice for
his dismissal.73
In this case, petitioner was not a mere employee of respondent. He was the Assistant
Vice-President with the same functions of a regional manager of the same sales region,
Metro Manila VI. Taking into account his job description, he was one of the top
managers of the respondent, tasked to perform key and sensitive functions in the
interest of his employer and, thus, bound by the more exacting work ethic.
We find, however, that the charge of misappropriation of funds was not proven with
substantial evidence. As gleaned from the handwritten statement of Ilustre Acosta, the
General Manager of the Springs and Blessings General Agency under Metro Manila VI,
it appears that, aside from him and petitioner, there were 10 other attendees during the
luncheon conference on November 27, 1999 at the Barrio Fiesta, Cubao, Quezon City.
Petitioner received the amount of only P2,386.00 from respondent to pay for the cost of
the luncheon for the conference, based on Petty Cash Voucher signed by
petitioner,74 but the conferees spent more than P4,000.00. Upon petitioners suggestion,
the conferees agreed to contribute P200.00 each, or the total amount of P2000.00 to
answer for the difference. Petitioner had no obligation to return the contributions of the
conferees, nor was he liable for said amount. Significantly, except for Ilustre Acosta, the
other attendees in the conference never complained against petitioner or requested him
to return their respective contributions of P200.00.
Regarding the charge that the petitioner peddled false and malicious informations
against Abia and Padiernos, Abia has not executed any affidavit to confirm paragraph 9
of the affidavit of Roy Padiernos. As admitted by del Rosario, the informations allegedly
relayed to her by the petitioner pertaining to Roy Padiernos were confirmed by Zita
Domingo.75
The petitioner does not deny having had a heated exchange of words with Roy
Padiernos in the course of a meeting. However, such incident does not constitute proof
that the petitioner thereby showed disrespect to Roy Padiernos, nor a valid cause for
petitioners dismissal. It does happen that in the course of exchange of views during a
meeting, participants may become so assertive to the point of being overbearing or
unyielding and in the process lose their temper, on their sincere belief of being right.
There is no evidence on record that petitioner committed the same or similar acts
thereafter.
To prove its charge of conduct unbecoming of a company officer, more specifically of
drinking alcoholic beverages within the premises of the company during office hours or
going to work drunk, respondent relied on the statement/affidavit of Celeste Villena, the
Agency Manager of the Wondrous and Miraculous General Agency under Metro Manila
VI;76 and Marivic Uy, the General Manager of the DMBP General Agency under Metro
Manila VI. Both claimed that they always saw petitioner drunk during office hours, most
especially during cut-offs when many sales counselors were present.77 Petitioner
admitted having had drinking sessions with Certerio Uy, the husband of Marivic Uy,
Ilustre Acosta and Reynaldo Villena, the husband of Celeste Villena, and who,
according to petitioner, provided the hard liquor and the pulutan.78 He, however, denied
reporting to office drunk and insisted that he reported for work sober.
We are inclined to give credence to petitioners claim, noting that in her handwritten
letter-report to Norman Gonzales dated March 10, 2000, Villena made no mention of the
petitioner going to office drunk.79 It was only in her affidavit dated January 16, 2002 that
Villena made such declaration.80 Villena did not explain her failure to report the matter to
Gonzales on March 10, 2000, and why she made the charge for the first time in her
Affidavit dated January 16, 2002. Uy is the wife of no less than Certerio Uy, the Senior
Vice-President of the Manila North Sales Division of respondent. If petitioners "drinking
problem" had any ring of truth, she should have immediately reported the matter to her
husband or to other officials concerned. Uys unexplained silence until March 10, 2000
thus renders her report implausible.
Respondent avers that petitioner served directly as agent of Caritas, a business

competitor of the respondent, when he connived with his wife in recruiting Sales
Associates of the Metro Sales Division VI to transfer to Caritas as sales associates.
Respondent claims that, by his acts, petitioner failed to dedicate his full time on the job
with respondent and prevented said sales associates from doing the same. Aside from
violating its policy against conflict of interest, petitioners acts adversely affected his
decisions in the performance of his duties and obligations to respondent.81
Loyalty of an employee to his employer consists of certain very basic and common
sense obligations. An employee must not, while employed, act contrary to the
employers interest.82 The scope of the duty of loyalty that an employee owes to his
employer may vary with the nature of their relationship. Employees occupying a position
of trust and confidence owe a higher duty than those performing low-level tasks.
Assisting an employees competitor can even constitute a breach of the employees
duty of loyalty. An employees self-dealing may breach that duty.83However, it has been
ruled that
A reality of contemporary life is that many families will consist of two wage earners, one
wage earner with two jobs, or both. For some employees, particularly those earning low
or modest incomes, second sources of income are an economic necessity. For them, a
second job or "moonlighting" is the only way to make ends meet. Conversely,
employers need the assurance that employees will not disserve them by furthering their
own interests or those of competitors at the employers expense. 84
A slight assistance to a direct competitor could constitute a breach of the employees

duty of loyalty. However, when competition is indirect or minimal, the employer may be
required to show that the employee received substantial assistance from the competitor.
If an employee usurped a corporate opportunity or secretly profited from a competitive
activity, the employer may receive the value of the lost opportunity or the secret profit. 85
An employees skill, aptitude, and other subjective knowledge obtained in the course of
employment are not the property of his employer.86 However, an employee occupying a
managerial position or office is obliged to protect the trade secret of his employer
consisting of formula, process, device or compilation which it uses in its business and
gives it an opportunity to obtain an advantage over competitors who do not know of
such trade secret. However, the rule does not apply to a matter of public knowledge or
of general knowledge within the industry.87 Moreover, an employer has a protectible
interest in the customer relationships of its former employee established and/or nurtured
while employed by the employer, and is entitled to protect itself from the risk that a
former employee might appropriate customers by taking unfair advantage of the
contract developed while working for the employer.88 While acting as an agent of his
employer, an employee owes the duty of fidelity and loyalty. Being a fiduciary, he
cannot act inconsistently with his agency or trust. He cannot solicit his employers
customers or co-employees for himself or for a business competitor of his employer. If
such employee or officer connives with and induces another to betray his employer in
favor of a business competitor of his employer, he is held accountable for his mischief. 89
In this case, we are not persuaded that Caritas is the business competitor of
respondent. The evidence on record shows that while Abia, the Senior Vice-President of
respondents Metro Manila Marketing, is one of the incorporators of Caritas and is even
a member of the Board of Directors, respondent did not dismiss him from employment.
The Head of the Legal Division of the respondent, Atty. Reyes, was also an incorporator
of Caritas and a member of its Board of Directors, and although he appears to have
sold his shares to Herminigildo C. Belen for P127,312.34, he only did so on March 7,
1999. There is no evidence on record whether the transfer of such shares of stocks has
already been reflected in the books of Caritas. Celeste Villena, one of the Sales
Associates of respondent, is herself licensed by Caritas to sell plans for the latter.
Villena has likewise not been prohibited from selling pre-need plans for Caritas. Fe
Molina, who is the head of a sales agency of Caritas, is also a sales agency head of
respondent. Petitioner, his wife, and Villena were not charged nor meted any sanction
by the respondent for conflict of interest. Petitioner was the Assistant Vice-President,
Marketing Head, Area 10, of Caritas, and for a while, without any protest from
respondent. If Caritas is a business competitor of the respondent, it should have meted
sanctions not only on petitioner but also on Abia, Reyes, Fe Molina and Villena as well.
The truth of the matter is that, as averred by Caritas President Geoffrey Martinez,
Caritas is engaged in health care and hospitalization package, whereas respondent
sells educational, pension, and pre-need plans. Caritas is an HMO and is directly
supervised by the DOH, while respondent is under the supervision of the SEC. The so-
called sales associates of the respondent are non-salaried employees and are paid on
commission basis only. Their commissions are based on their individual initiative and
industry. That the contracts executed by the beneficiaries of both corporations have
similar provisions regarding contract price, grace period, cancellation, reinstatement,
transfer and termination, do not constitute proof that Caritas and respondent are
business competitors. There is also no proof that the two corporations compete with
each other in the same or similar business; in fact, the business of Caritas and that of
the respondent complement each other.
Respondent relied on the declarations of Ruth Padiernos, Spouses Eppie and Ilustre
Acosta, Celeste Villena, and Marivic Uy to prove its charge that Fe Molina pirated sales
associates working for respondent and that petitioner tolerated the actuations of his wife
and even connived with her.
The Court finds, however, that the evidence adduced by respondent insufficient to
warrant the petitioners dismissal from employment.
Ruth Padiernos, wife of Roy Padiernos, averred in her written statement dated March 8,
2000, that as far back as July 1999, she had a conference with her husband and Abia
where she reported that petitioner connived with his wife in pirating sales associates.
She was assured that something would be done to arrest the problem. 90 However, Ruth
Padiernos failed to name any such sales associate who was recruited by Fe Molina.
There is likewise no evidence that Abia ever confronted petitioner relative to the charge.
Roy Padiernos confronted petitioner, but the latter denied the charge. Since then, no
further action was taken against the petitioner by respondent, until the letter of Picazo
dated March 21, 2000 was sent to him. Roy Padiernos did not explain why he executed
his affidavit regarding the matter almost three years later, only on January 18, 2002. In
an Affidavit dated January 18, 2002, it was made to appear that Ruth Padiernos claimed
that petitioners wife, the Unit Manager of the Ark Group under Metro Manila Sales
Group VI and also an Agency Manager of Caritas, recruited sales associates under
respondent to work for Caritas, and that petitioner did the same; and that she
(Padiernos) learned that almost all the productive Sales Associates in Metro Manila VI
were already connected with Caritas, using "different names." 91 Although notarized, the
affidavit has no probative weight because it was unsigned.
Celeste Villena, for her part, declared in her handwritten statement dated March 10,
2000 that Fe Molina recruited Lenie Gatmaitan to join Caritas and that she confronted
petitioner.92 In her Affidavit dated January 16, 2002, she alleged that petitioner and his
wife, Fe Molina, recruited Gatmaitan to join Caritas.93 However, the signature of the
notary public does not appear in said affidavit. For his part, Ilustre Acosta, averred in his
handwritten statement dated March 11, 2000, that on March 4, 2000, petitioner informed
him that Geoffrey Martinez called petitioner to inquire if petitioner would have no
objection for him (Ilustre) to be with Caritas and that petitioner replied that he had no
objection if that was Ilustres decision.94 Ilustre maintained this claim in his Affidavit
dated January 16, 2002.95Eppie Acosta, the wife of Ilustre Acosta, averred in her
handwritten statement of March 12, 2000, that on March 6, 2000, petitioner commented
about their low sales production, and she retorted that he was the cause, hence, may
have grudges against him. Petitioner replied that he and his wife did not interfere with
each others business dealings, and that petitioner even declared "Mare, for all you
know, ikaw na lang ang hindi nag-ca-Caritas." She reiterated her claim in her affidavit
dated January 16, 2000.96 Marivic Uy averred that the wife of petitioner had been
pirating sales associates of respondent since 1999 to join Caritas and that she tried to
recruit Morena Siasoco, one of the Group Managers. Petitioner failed to stop his wife,
but rather tolerated her actuations.97 She reiterated her claim in her Affidavit dated
January 16, 2002.98
However, there is no evidence on record to prove that respondent expressly prohibited

its Sales Associates from selling for Caritas. Neither is there evidence on record to
prove that Caritas prohibited its sales associates from selling pre-need plans of
respondent.
Respondent likewise failed to present the affidavits of Siasoco, Casaje, Magalso, San
Miguel and Halili. In contrast to the evidence of respondent, Gatchalian, San Miguel,
Siasoco, and Gatmaitan executed their respective affidavits declaring that neither
petitioner nor his wife ever recruited them.99 They admitted that they sold plans for
Caritas, but without any prodding from petitioner and his wife. Geoffrey Martinez
declared, in his affidavit, that Siasoco, San Miguel, Casaje, Magalso, and Halili joined
Caritas voluntarily and individually, through him, and he was not aware that petitioner
and his wife recommended them to Caritas. Lenita Gatmaitan called him and inquired if
she could join Caritas, and he replied in the affirmative. He never called petitioner
concerning Ilustre Acosta; on the contrary, it was the latter who called to inquire if he
was entitled to a discount if he purchased a Caritas health plan. He talked to Vilma Del
Rosario and convinced her to apply as Branch Manager of Caritas, which she did, but
backed out later on.
IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The
August 13, 2004 Decision and September 27, 2004 Resolution of the Court of Appeals
are REVERSED AND SET ASIDE. The decision and resolution of the NLRC are
reinstated.
SO ORDERED.
ROMEO J. CALLEJO, SR.

Associate Justice
WE CONCUR:
Microsales vs. NLRC, 472 SCRA 328,

GR 155279, Oct. 11, 2005
FIRST DIVISION
MICRO SALES OPERATION NETWORK G.R. No. 155279

and WILLY BENDOL,
Petitioners,
Present:
Davide, Jr., C.J.,

(Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
THE NATIONAL LABOR RELATIONS

COMMISSION (SECOND DIVISION), Promulgated:
LARRY HERMOSA, LEONARDO G. DE
CASTRO and RAMIL BASINILLO, October 11, 2005
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are the Resolutions[1] dated November 28, 2001 and September
3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755. The said
Resolutions dismissed petitioners special civil action for certiorari against the National
Labor Relations Commission (NLRC) Resolution,[2] which affirmed the Labor Arbiters
Decision[3] finding petitioners herein liable for illegal dismissal.
The antecedent facts are as follows:
Petitioner Micro Sales Operation Network (company for brevity) is a domestic corporation
engaged in local transportation of goods by land. Petitioner Willy[4] Bendol was the
companys operations manager at the time of the controversy.
Private respondents Larry Hermosa, Leonardo de Castro, and Ramil Basinillo were
employed by the company as driver, warehouseman, and helper, respectively. Hermosa
was hired on November 17, 1997, de Castro on February 1, 1996, and Basinillo on
February 4, 1998.
Hermosa failed to promptly surrender the ignition key of the companys vehicle after
discharging his duties. Such failure was allegedly contrary to the companys standard
operating procedure. Thus, he was asked to explain within 24 hours why disciplinary
action should not be meted on him. He explained that he kept the ignition key because
the vehicle was stalled when its battery broke down. [5] Unsatisfied with Hermosas
explanation, the company dismissed him on January 9, 1999.
De Castro was suspected of firing a gun during the blessing of the companys warehouse
on December 10, 1998. The next day, he was placed under preventive suspension and
temporarily banned from entering the companys premises. He was also asked to explain
within 24 hours why he should not be terminated. He explained that he had no knowledge
of the said incident.[6] As his suspension was indefinite and he received no recall order
from petitioners, he no longer reported for work.
Basinillo alleged that sometime in September 1998, the companys security guard scolded
him for not wearing the employee ID. On October 17, 1998, he was dismissed.
Thus, on February 10, 1999, Hermosa, de Castro, and Basinillo collectively filed a
Complaint[7] for illegal dismissal before the Regional Arbitration Branch No. IV, docketed
as NLRC Case No. RAB-IV-2-10765-99-C.
In his Decision[8] dated February 21, 2000, Labor Arbiter Antonio R. Macam found
that private respondents were illegally dismissed. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring the dismissal of all complainants herein illegal and ordering
respondents to reinstate them to their former or equivalent positions and to
pay them full backwages, plus ten percent (10%) attorneys fees, computed
as follows:
LARRY HERMOSA
From January 9, 1999 to Feb. 21, 2000

= 1 yr. 1 mo. & 12 days or 13.36 mos.
P220.00 x 26 x 13.36 = P76,419.20

P76,419.20/12 = 6,368.27
P220.00 x 5 = 1,100.00 P83,887.47
----------------
LEONARDO DE CASTRO
From Dec. 12, 1998 to Feb. 21, 2000

= 1 yr. 2 mos. & 9 days or 14.30 mos.
P7,280.00 x 14.30 = P104,104.00
P104,104.00/12 = 8,675.33
P7,280.00/26 x 5 = 1,400.00 P114,179.33
----------------
RAMIL BASINILLO
From Oct. 17, 1998 to Feb. 21, 2000

= 1 yr., 4 mos. & 4 days or 16.13 mos.
P200.00 x 26 x 16.13 = P83,876.00

P83,876.00/12 = 6,989.67
P200.00 x 5 = 1,000.00 P 91,865.67
---------------- ---------------
Total Full Backwages = P289,932.47
Plus 10% Attorneys Fees = 28,993.25
---------------
GRAND TOTAL = P318,925.72
SO ORDERED.[9]
On appeal, the NLRC affirmed the Labor Arbiters decision. It also denied
petitioners motion for reconsideration.
Undaunted, petitioners filed with the Court of Appeals a special civil action for
certiorari. However, the appellate court dismissed the petition for being defective in form.
It found that only the company signed the verification and certification on non-forum
shopping. Petitioner Willy Bendol did not sign the same.
Petitioners motion for reconsideration was denied. The appellate court reasoned
that even if petitioner Willy Bendol was not impleaded as a real party in interest, records
showed that he was impleaded as a co-respondent before the Labor Arbiter. Thus, the
appellate court ruled, his failure to sign the verification and certification on non-forum
shopping is a ground for the dismissal of the petition.
Hence, the instant petition anchored on the following grounds:
A. THE HONORABLE COURT OF APPEALS PLAINLY

ERRED AND ACTED CONTRARY TO EXISTING LAW AND
JURISPRUDENCE IN DISMISSING THE PETITION
FOR CERTIORARI ON A MERE TECHNICALITY CONSIDERING
THAT WILLY BENDOL WAS JOINED MERELY AS A NOMINAL
PARTY TO THE PETITION.
B. MORE IMPORTANTLY, JUSTICE WOULD BE BEST

SERVED IF THE PETITION WAS GIVEN DUE COURSE
CONSIDERING THAT THE PUBLIC RESPONDENT COMMISSION
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE
DECISION OF LABOR ARBITER MACAM CONSIDERING THAT:
1. THERE IS NO FACTUAL OR EVIDENTIARY BASIS TO

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

FACT THAT THE LABOR ARBITERS FINDING OF ILLEGAL
DISMISSAL RESTS ON PURE SPECULATION,
CONJECTURE AND SURMISES.
3. PRIVATE RESPONDENT BASINILLO HIMSELF DENIED

THAT HE WAS DISMISSED BY PETITIONERS.
4. THE ACTS OF HERMOSA CONSTITUTE WILLFUL

DISOBEDIENCE JUSTIFYING HIS DISMISSAL.
5. THE HONORABLE COMMISSION COMPLETELY

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

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

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

disobedience as a just cause for Hermosas termination. Moreover, they posit that de
Castros preventive suspension constituted constructive dismissal because it was for an
indefinite period and no recall order was issued by the company. Private respondents
also argue that Basinillos purported unsworn statement has no probative value.
Lastly, petitioners contend the Labor Arbiter erroneously awarded separation pay
and attorneys fees not prayed for. On this point, private respondents quickly point out
that, contrary to petitioners claim, separation pay was not awarded at all. They also claim
that the award of attorneys fees was in accordance with law.
We resolve to give due course to the petition.
The requirement regarding verification of a pleading is not jurisdictional. Such

requirement is simply a condition affecting the form of the pleading, non-compliance with
which does not necessarily render the pleading fatally defective. [12]
The Court of Appeals relied on Loquias v. Office of the Ombudsman,[13] which held
that a certification on non-forum shopping signed by only one of two or more petitioners
is defective, unless he was duly authorized by his co-petitioner. However, the said ruling
applies when the co-parties are being sued in their individual capacities. Note that the
petitioners in Loquias[14] are the mayor, vice-mayor, and three members of the municipal
board of San Miguel, Zamboanga del Sur. The said co-parties were charged with violation
of Republic Act No. 3019[15] in their various capacities.
In the instant case, the petitioners are the company and its operations manager,
Willy Bendol. The latter was impleaded simply because he was a co-respondent in the
illegal dismissal complaint. He has no interest in this case separate and distinct from the
company, which was the direct employer of private respondents. Any award of
reinstatement, backwages, and attorneys fees in favor of private respondents will be
enforced against the company as the real party in interest in an illegal dismissal case.
Petitioner Bendol is clearly a mere nominal party in the case. His failure to sign the
verification and certification on non-forum shopping is not a ground for the dismissal of
the petition. The appellate court erred in dismissing outright petitioners special civil action
for certiorari solely on that ground.
The logical course of action now is to direct the Court of Appeals to give due course to
the special civil action for certiorari. However, to obviate further delay in the resolution of
this case, we shall bring the present controversy to rest.
After weighing the parties arguments and carefully reviewing the records of this
case, we agree with the findings and conclusions of the Labor Arbiter as affirmed by the
NLRC.
Hermosa was unjustly dismissed. For willful disobedience to be a valid cause for
dismissal, the following twin elements must concur: (1) the employee's assailed conduct
must have been willful, that is, characterized by a wrongful and perverse attitude; and (2)
the order violated must have been reasonable, lawful, made known to the employee and
must pertain to the duties which he had been engaged to discharge. [16]
Both elements are lacking. We find no hint of perverse attitude in Hermosas written
explanation.[17] On the contrary, it appears that the alleged company procedure for leaving
the ignition key of the companys vehicles within office premises was not even made
known to him.[18] Petitioners failed to prove Hermosa willfully disobeyed the said company
procedure. At any rate, dismissal was too harsh a penalty for the omission imputed to
him.
De Castro was likewise unlawfully terminated. Contrary to petitioners claim, records show
that de Castro was not merely suspended. He was dismissed for alleged abandonment
of work.[19] To constitute abandonment as a just cause for dismissal, there must be: (a)
absence without justifiable reason; and (b) a clear intention, as manifested by some overt
act, to sever the employer-employee relationship.[20]
Petitioners failed to prove that de Castro abandoned his job. A clear intention to
end the employer-employee relationship is missing. He did not report for work simply
because he was indefinitely suspended. Moreover, the fact that de Castro filed a case for
illegal dismissal against petitioners belies abandonment.[21]
In the case of Basinillo, petitioners rely solely on his purported unsworn statement
alleging he was never dismissed. However, not having been sworn to, the said document
has no probative value. While the Court is liberal in the conduct of proceedings for labor
cases, proof of authenticity as a condition for the admission of documents is nonetheless
required.[22]
Petitioners failed to present evidence of Basinillos continuous contribution to SSS

or uninterrupted pay slips to prove he remained under the companys employ. Hence, the
complaint[23] for illegal dismissal filed by Basinillo stands and speaks for itself. Once a
case for illegal dismissal is filed, the burden is on the employer to prove that the
termination was for valid cause.[24] Petitioners failed to discharge this burden
persuasively.
Finally, petitioners lament that the Labor Arbiter erred in granting respondents
separation pay and attorneys fees. We note, however, that separation pay was not
awarded at all; thus, any discussion on this matter would be futile. On the other hand, the
award of attorneys fees, though not prayed for, is sanctioned by law[25] and must be
upheld.
WHEREFORE, the assailed Resolutions dated November 28, 2001 and

September 3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755,
are SET ASIDE. The NLRC Resolution affirming the Labor Arbiters Decision, finding
petitioners liable for illegal dismissal, is AFFIRMED. Costs against petitioners.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:
Valiao vs. CA, 435 SCRA 543,

GR 146621, July 30, 2004
[G.R. No. 146621. July 30, 2004]
RENE P. VALIAO, petitioner, vs. HON. COURT OF APPEALS, NATIONAL LABOR

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

respondent West Negros College to pay complainant Rene P. Valiao (a) P3,300.00 as
salary for the period of his preventive suspension, and (b) P330.00 as attorneys fees, or
the total amount of THREE THOUSAND SIX HUNDRED THIRTY PESOS (P3,630.00).
Further, all other claims are DISMISSED for lack of merit.
SO ORDERED.[3]
The Labor Arbiter found no justifiable reason to place the petitioner under preventive
suspension as there was no serious or imminent threat to the life or property of his
employer or co-workers.
However, the Labor Arbiter found the dismissal of the petitioner from WNC to be valid
due to absenteeism and tardiness and after he was accorded the procedural due process
aspect of the law as reflected in the records showing that the petitioner was formally
investigated and given the opportunity to refute the alleged findings by the management
of WNC. The Labor Arbiter held that frequent absenteeism and tardiness of the petitioner
constituted not only willful disobedience but also gross and habitual neglect of duties,
which are valid grounds for termination of employment. He stressed that the petitioners
frequent absences without proper leave of absence was not only unfair to WNC and the
petitioners co-employees but also set an undesirable example to the employees under
his supervision, considering that the petitioner was not a mere rank-and-file employee but
one who owed more than the usual fealty to the organization.
On appeal to the NLRC, the latter affirmed the decision of the Labor Arbiter, sustained
the latters findings of facts, and made its own findings on the apprehension of the
petitioner for possession of prohibited drugs. The decretal portion of the decision reads
as follows:
WHEREFORE, premises considered, the appeal is DISMISSED and the decision of the
Executive Labor Arbiter is AFFIRMED in its entirety.
SO ORDERED.[4]
Petitioner then filed a Petition for Certiorari under Rule 65 before the Court of Appeals
but this was dismissed for lack of merit. The decretal portion of the decision reads as
follows:
WHEREFORE, the questioned Decision and Resolution dated December 11, 1998 and
July 7, 1999, respectively, of public respondent National Labor Relations Commission
are hereby AFFIRMED.
SO ORDERED.[5]
The Court of Appeals held that the petitioner was validly dismissed for serious
misconduct and gross habitual neglect of duties, which was aggravated by his arrest for
violation of Rep. Act No. 6425, as amended [the January 28, 1993 incident] and that he
was afforded the twin requirements of notice and hearing and the opportunity to defend
himself by the investigating committee. The appellate court noted that WNC had
presented sufficient evidence to support petitioners termination from employment after
taking into consideration the totality of the infractions or the number of violations
committed by petitioner during the period of employment and stressed that it properly
exercised its management prerogative by observing due process. Finally, the Court of
Appeals ruled that the NLRC correctly denied the claim for damages and attorneys fees
for lack of evidentiary support.
Petitioner duly filed a Motion of Reconsideration, which was denied by the Court of
Appeals.
Hence, this petition alleging that:
A. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS ERRED
IN HOLDING THAT THE DISMISSAL OF PETITIONER WAS VALID,
DESPITE THE FACT THAT THERE IS CLEAR AND BLATANT VIOLATION
OF THE BASIC CONSTITUTIONAL RIGHTS OF THE HEREIN PETITIONER
BOTH SUBSTANTIVE AND PROCEDURAL DUE PROCESS.
B. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS IN (SIC)
DISMISSING THE RELIEFS FOR MORAL AND EXEMPLARY DAMAGES
AND ATTORNEYS FEES.[6]
In our view, the only relevant issue for our resolution is whether or not the petitioner
was validly dismissed from employment on the ground of serious misconduct and gross
habitual neglect of duties, including habitual tardiness and absenteeism.
Petitioner claims that his outright dismissal from employment was not valid and too
harsh and that he was not dismissed from employment because of tardiness or absences
but because he was among those apprehended in a raid. Also, he was not accorded due
process because although his wife received the show cause notice, he did not have the
proper mind to reply as he was in jail and was psychologically disturbed.
Considering the submissions of the parties as well as the records before us, we find
the petition without merit. Petitioners dismissal from employment is valid and justified.
For an employees dismissal to be valid, (a) the dismissal must be for a valid cause
and (b) the employee must be afforded due process.[7]
Serious misconduct and habitual neglect of duties are among the just causes for
terminating an employee under the Labor Code of the Philippines. Gross negligence
connotes want of care in the performance of ones duties. Habitual neglect implies
repeated failure to perform ones duties for a period of time, depending upon the
circumstances.[8] The Labor Arbiters findings that petitioners habitual absenteeism and
tardiness constitute gross and habitual neglect of duties that justified his termination of
employment are sufficiently supported by evidence on record. Petitioners repeated acts
of absences without leave and his frequent tardiness reflect his indifferent attitude to and
lack of motivation in his work. More importantly, his repeated and habitual infractions,
committed despite several warnings, constitute gross misconduct unexpected from an
employee of petitioners stature. This Court has held that habitual absenteeism without
leave constitute gross negligence and is sufficient to justify termination of an employee. [9]
However, petitioner claims that he was dismissed not for his tardiness or absences
but for his arrest as a suspected drug user. His claim, however, is merely speculative. We
find such contention devoid of basis. First, the decisions of the Labor Arbiter, the NLRC,
and the Court of Appeals are indubitable. They show that indeed petitioner had incurred
numerous and repeated absences without any leave. Moreover, he was not punctual in
reporting for work. These unexplained absences and tardiness were reflected on the
summary reports submitted by WNC before the labor arbiter, but petitioner failed to
controvert said reports. Second, contrary to petitioners assertion, the NLRC did not base
its conclusions on the fact of the arrest of petitioner for violation of Rep. Act No. 6425 but
on the totality of the number of infractions incurred by the petitioner during the period of
his employment in different positions he occupied at WNC. Thus:
In the case of petitioner Valiao, his services were terminated by private respondent after
having been found guilty of serious misconduct and gross habitual neglect of duty which
was aggravated by the January 28, 1993 incident. In exercising such management
prerogative, due process was properly observed. Private respondent presented
sufficient evidence to support its act in terminating the services of petitioner. Private
respondent took into consideration the totality of the infractions or the number of
violations committed by petitioner during the period of employment. Furthermore, it
hardly needs reminding that, in view of petitioners position and responsibilities, he must
demonstrate a scrupulous regard for rules and policies befitting those who would be role
models for their young charges.[10] (Emphasis and italics supplied)
Indeed, even without the arrest incident, WNC had more than enough basis for
terminating petitioner from employment. It bears stressing that petitioners absences and
tardiness were not isolated incidents but manifested a pattern of habituality. In one case,
we held that where the records clearly show that the employee has not only been charged
with the offense of highgrading but also has been warned 21 times for absences without
official leave, these repeated acts of misconduct and willful breach of trust by an employee
justify his dismissal and forfeiture of his right to security of tenure. [11] The totality of
infractions or the number of violations committed during the period of employment shall
be considered in determining the penalty to be imposed upon an erring employee. The
offenses committed by him should not be taken singly and separately but in their
totality. Fitness for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct, and ability separate and independent of each
other.[12]
Needless to say, so irresponsible an employee like petitioner does not deserve a
place in the workplace, and it is within the managements prerogative of WNC to terminate
his employment. Even as the law is solicitous of the welfare of employees, it must also
protect the rights of an employer to exercise what are clearly management
prerogatives. As long as the companys exercise of those rights and prerogative is in good
faith to advance its interest and not for the purpose of defeating or circumventing the
rights of employees under the laws or valid agreements, such exercise will be upheld. [13]
Still, petitioner claims that he was not afforded due process so that his dismissal from
employment should be declared invalid. This contention deserves scant
consideration. The Court of Appeals held that the records reveal that petitioner was
afforded the twin requirements of notice and hearing and was likewise given the
opportunity to defend himself before the investigating committee. We find no reason to
set aside these factual findings of the Court of Appeals as they are supported by evidence
on record. Besides, we may not review the appellate courts findings of fact in an appeal
via certiorari,[14] since as a rule, the Supreme Courts review is limited to errors of law
allegedly committed by the appellate court.[15] Judicial review of labor cases does not go
as far as to evaluate the sufficiency of evidence upon which the Labor Arbiter and National
Labor Relations Commission based their determinations.[16]
In this case, petitioner was asked to explain his several absences and tardiness on many
occasions. A notice to explain was sent to him regarding the arrest incident wherein he was
able to reply. An investigation committee was formed by WNC to investigate the arrest
incident and the absences and tardiness of petitioner. It must be emphasized that
proceedings of the committee were duly recorded, and petitioner actively participated therein
by answering the various questions interposed by the panel members. Finally, a notice of his
termination was sent to petitioner, although he claims to have received it late as he was in
jail. It is an undeniable fact, however, that his wife had actually received the notice in his
house earlier, even before petitioners termination and this matter was later communicated to
him.
At any rate, petitioner was given enough opportunity to be heard, and his dismissal
was based on valid grounds. The essence of due process is simply an opportunity to be
heard, or as applied to administrative proceedings, an opportunity to explain ones side or
an opportunity to seek a reconsideration of the action or ruling complained of.A formal or
trial-type hearing is not at all times and in all instances essential, as the due process
requirements are satisfied where the parties are afforded fair and reasonable opportunity
to explain their side of the controversy at hand. What is frowned upon is the absolute lack
of notice and hearing.[17]
Finally, the Labor Arbiter found that petitioner is entitled to salary differentials for the
period of his preventive suspension, as there is no sufficient basis shown to justify his
preventive suspension. During the pendency of the investigation, the employer may place
the worker concerned under preventive suspension if his continued employment poses a
serious and imminent threat to life or property of the employer or of his co-workers.[18] But
in this case, there is no indication that petitioner posed a serious threat to the life and
property of the employer or his co-employees. Neither was it shown that he was in such
a position to unduly influence the outcome of the investigation. Hence, his preventive
suspension could not be justified, and the payment of his salary differentials is in order.
However, the award of attorneys fees to him cannot be sustained, in view of our
findings that petitioner was validly dismissed from employment. Said award lacks legal
basis and could not be granted properly in this case.
WHEREFORE, the assailed Decision dated August 22, 2000 and Resolution dated
November 22, 2000 of the Court of Appeals in CA-G.R. SP No. 55133 are AFFIRMED
with MODIFICATION in that the award of attorneys fees is deleted. No pronouncement
as to costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
Challenge Socks vs. CA, 474 SCRA 356,

GR 165268, November 8, 2005
IRST DIVISION
CHALLENGE SOCKS G.R. No. 165268
CORPORATION,
Petitioner, Present:
Davide, Jr., C.J. (Chairman),*
- versus - Quisumbing,**
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
COURT OF APPEALS (Former
First Division), NATIONAL LABOR
RELATIONS COMMISSION
(First Division), HON. ANTONIO
R. MACAM, in his capacity as Promulgated:
Labor Arbiter and ELVIE BUGUAT,
Respondents. November 8, 2005
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails the May
11, 2004 Decision[1] of the Court of Appeals in CA-G.R. SP No. 75761, and its September
13, 2004 Resolution[2] denying the motion for reconsideration.
The antecedent facts show that respondent Elvie Buguat was hired on January 17,
1997 by petitioner Challenge Socks Corporation as knitting operator. [3] In the course of
her employment, she incurred absences and tardiness without prior approval and had
been neglectful of her duties.[4] On May 25, 1998, she failed to check the socks she was
working on causing excess use of yarn and damage to the socks design. She was
suspended for five days and warned that a repetition of the same act would mean
dismissal from the service.[5] On February 2, 1999, she committed the same infraction
and was given a warning.[6] Despite the previous warnings, Buguat continued to be
habitually absent and inattentive to her task. On March 1, 1999, she again failed to
properly count the bundle of socks assigned to her. Thus, on March 2, 1999, petitioner
terminated her services on grounds of habitual absenteeism without prior leave, tardiness
and neglect of work.[7]
Thereafter, Buguat filed a complaint for illegal dismissal. [8]
On February 11, 2000, the labor arbiter[9] rendered a Decision[10] holding that Buguat was
illegally dismissed. The dispositive portion of the decision reads:
WHEREFORE, following the pronouncement in the case of ALU-

TUCP v. NLRC (G.R. No. 120450, February 10, 1999), judgment is hereby
rendered ordering respondents to reinstate complainants without loss of
seniority rights and benefits, but without backwages.
SO ORDERED.[11]
The labor arbiter found Buguats dismissal too harsh and disproportionate to the
infraction committed. It was observed that counting volumes of socks is tedious and the
worker is prone to commit mistakes especially if the counting is done on a regular basis.
The labor arbiter ruled that mistake in counting bundles of socks is tolerable and should
be punished by suspension only.[12]
The National Labor Relations Commission (NLRC) adopted the findings of the labor
arbiter. It denied[13] petitioners appeal and motion for reconsideration.
Petitioner filed a petition for certiorari before the Court of Appeals which rendered a
Decision on May 11, 2004 reversing and setting aside that of the labor arbiter and the
NLRC, the dispositive portion of which provides:
WHEREFORE, the Decision dated October 30, 2001 and the Order of
December 19, 2002 of the National Labor Relations Commission are hereby
REVERSED and SET ASIDE and a new one entered herein.
CHALLENGE SOCKS CORPORATION, having terminated private

respondent with just and valid cause but without observing the proper
procedure in terminating private respondents services, is ordered to pay
ELVIE BUGUAT full backwages from the time her employment was
terminated on March 2, 1999 up to the time the herein decision becomes
final. For this purpose, this case is REMANDED to the Regional Labor
Arbiter for the computation of the backwages due private respondent.
SO ORDERED.[14]
The appellate court found that there was just cause for terminating the services of Buguat
considering the series of infractions she committed.[15] However, it was noted that
petitioner failed to comply with the twin-notice requirement in terminating an employee
hence, the dismissal was considered ineffectual.[16] Petitioner was ordered to pay Buguat
her back wages computed from the time of her dismissal up to the finality of the
decision.[17]
Petitioner sought reconsideration of the appellate courts decision but the same was
denied on September 13, 2004.
The issue for resolution is the validity of Buguats termination.
One of the just causes for terminating an employment under Article 282 of the Labor Code
is gross and habitual neglect by the employee of her duties. This cause includes gross
inefficiency, negligence and carelessness. Such just causes is derived from the right of
the employer to select and engage his employees.[18]
In the instant case, there is no doubt that Buguat was habitually absent, tardy and
neglectful of her duties. We agree with the Court of Appeals that:
Elvies commission of three (3) violations of the companys rules and

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

of the same offense could be considered willful disobedience. Elvie, despite
the suspension and warning, continued to disregard the company rules and
regulations.[19]
Habitual neglect implies repeated failure to perform ones duties for a period of time.
Buguats repeated acts of absences without leave and her frequent tardiness reflect her
indifferent attitude to and lack of motivation in her work. Her repeated and habitual
infractions, committed despite several warnings, constitute gross misconduct. Habitual
absenteeism without leave constitute gross negligence and is sufficient to justify
termination of an employee.[20]
We find the penalty of dismissal from the service reasonable and appropriate to
Buguats infraction. Her repeated negligence is not tolerable; neither should it merit the
penalty of suspension only. The record of an employee is a relevant consideration in
determining the penalty that should be meted out. [21] Buguat committed several
infractions in the past and despite the warnings and suspension, she continued to display
a neglectful attitude towards her work. An employees past misconduct and present
behavior must be taken together in determining the proper imposable penalty.[22] The
totality of infractions or the number of violations committed during the period of
employment shall be considered in determining the penalty to be imposed upon an erring
employee. The offenses committed by him should not be taken singly and separately but
in their totality. Fitness for continued employment cannot be compartmentalized into tight
little cubicles of aspects of character, conduct, and ability separate and independent of
each other.[23] It is the totality, not the compartmentalization, of such company infractions
that Buguat had consistently committed which justified her dismissal.[24]
Besides, terminating an employment is one of petitioners prerogatives. As the

employer, petitioner has the right to regulate, according to its discretion and best
judgment, all aspects of employment, including work assignment, working methods,
processes to be followed, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of workers. Management has
the prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations.[25]
This Court has upheld a companys management prerogatives so long as they are
exercised in good faith for the advancement of the employers interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements.[26]
In the case at bar, petitioner exercised in good faith its management prerogative
as there is no dispute that Buguat had been habitually absent, tardy and neglectful of her
work, to the damage and prejudice of the company. Her dismissal was therefore proper.
The law imposes many obligations on the employer such as providing just compensation
to workers, observance of the procedural requirements of notice and hearing in the
termination of employment. On the other hand, the law also recognizes the right of the
employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the service will patently be
inimical to his interests.[27]
The employer has the burden of proving that the dismissed worker has been
served two notices: (1) one to apprise him of the particular acts or omissions for which
his dismissal is sought, and (2) the other to inform him of his employers decision to
dismiss him.[28]
As found by the Court of Appeals, petitioner failed to comply with this requirement, thus:
A review of the records shows that private respondent was served a

written termination notice on the very day she was actually dismissed from
the service. The case records are bereft of any showing that Challenge
Socks Corporation notified Elvie in advance of the charge or charges
against her. Likewise, she was not given an opportunity to refute the
charges made against her, thus, depriving her of the right to defend herself.
In other words, petitioner fell short in observing the two-notice rule required
by law.[29]
In Agabon v. National Labor Relations Commission,[30] we upheld as valid the dismissal

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

deleted. Instead, private respondent should be indemnified in the amount of P30,000.00
as nominal damages.[33]
WHEREFORE, the May 11, 2004 Decision and the September 13, 2004 Resolution
of the Court of Appeals in CA-G.R. SP No. 75761, which declared that petitioner
Challenge Socks Corporation did not comply with the statutory due process requirements
in terminating the employment of private respondent Elvie Buguat, are AFFIRMED with
the MODIFICATION that the award of backwages is DELETED. Petitioner is ordered to
pay private respondent Elvie Buguat nominal damages in the amount of P30,000.00.
No costs.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Standard Electric vs. Standard Electric Union, 468 SCRA 316,

GR 166111, August 25, 2005
ECOND DIVISION
STANDARD ELECTRIC G.R. No. 166111

MANUFACTURING
CORPORATION,
Petitioner, Present:
PUNO, J., Chairman,

AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
STANDARD ELECTRIC
EMPLOYEES UNION-NAFLU- Promulgated:
KMU and ROGELIO JAVIER,
Respondents. August 25, 2005
x--------------------------------------------------x
DECISION
CALLEJO, SR., J.:

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

(SEMC) on January 15, 1973 as radial spot machine operator in its Production
Department. Javier was a member of the Standard Electric Employees Union-NAFLU
(Union).[4]
On July 31, 1995, Javier failed to report for work. He failed to notify the SEMC of the
reason for his absences. On August 9, 1995, he was arrested and detained for the charge
of rape upon complaint of his neighbor, Genalyn Barotilla. After the requisite preliminary
investigation, an Information for rape was filed in the Regional Trial Court (RTC) of Pasig,
docketed as Criminal Case No. 108593.[5]
On January 13, 1996, the SEMC received a letter[6] from Javier, through counsel,
informing the SEMC that Javier was detained for the charge of rape and for that reason
failed to report for work. He requested the SEMC to defer the implementation of its
intention to dismiss him, citing the ruling of this Court in Magtoto v. NLRC.[7] The SEMC
denied Javiers request and issued a Memorandum terminating his employment for (a)
having been absent without leave (AWOL) for more than fifteen days from July 31, 1995;
and (b) for committing rape.[8]
On May 17, 1996, the RTC issued an Order[9] granting Javiers demurrer to evidence and
ordered his release from jail. Shortly thereafter, Javier reported for work, but the SEMC
refused to accept him back.
A grievance meeting between the Union, Javier and the SEMC was held, but SEMC
refused to re-admit Javier. On August 2, 1996, the Union and Javier filed a
Complaint[10] for illegal dismissal against the SEMC before the NLRC. He averred that
since the reason for his detention for rape was non-existent, the termination of his
employment was illegal. Javier cited the ruling of this Court in Magtoto v. NLRC.[11]
For its part, the SEMC averred that Javiers prolonged absences caused
irreparable damages to its orderly operation; he had to be replaced so that the continuity
and flow of production would not be jeopardized. It could not afford to wait for Javiers
indefinite return from detention, if at all. The SEMC insisted that conformably with its Rules
and Regulations, it was justified in dismissing Javier for being absent without leave for
fifteen days or so.
On January 14, 1997, the Labor Arbiter rendered judgment ordering the dismissal
of the complaint.[12] The Labor Arbiter ruled that the complaint was within the exclusive
jurisdiction of the Voluntary Arbitrators or Panel of Arbitrators. On appeal, the NLRC
reversed the Labor Arbiters decision
and ruled that the latter had jurisdiction over the complaint; it thus ordered the remand of
the case to the Labor Arbiter for resolution on the merits.[13]
On August 16, 1999, the Labor Arbiter rendered judgment ordering the dismissal of the
complaint.[14] However, the SEMC was ordered to pay separation pay to the complainant.
The dispositive portion reads:
WHEREFORE, in view of the foregoing, the complaint for illegal

dismissal is hereby ordered DISMISSED for lack of merit.
The respondents Standard Electric Manufacturing Corporation and

Mr. Jose Uy are, however, ordered to pay complainant Rogelio Javier the
amount of SEVENTY-ONE THOUSAND SEVEN HUNDRED SIXTY
PESOS (P71,760.00) representing his financial assistance/separation pay.
SO ORDERED.[15]
On appeal, the NLRC affirmed the Labor Arbiters ruling in its Resolution of September
24, 2002. The NLRC declared that:
Appellants contention is baseless. A perusal of the evidence on record

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

on which the findings of the Labor Arbiter were based, this Commission
finds no merit on complainants-appellants contention that the Labor Arbiter
had committed serious errors in his findings of facts and the law in this
instant case.
Hence, the assailed decision must stand for the matter of evaluating the
merits and demerits of the case, as long as the Decision is supported by the
facts and the evidence, is left to the sound discretion of the Labor Arbiter.
(Metropolitan Bank and Trust Company vs. NLRC, et al., 235 SCRA 400,
403).
WHEREFORE, in the light of the foregoing premises, [the] Decision of the

Labor Arbiter dated August 16, 1999 is hereby AFFIRMED.
SO ORDERED.[16]
When the NLRC denied the motion for reconsideration of the said decision, Javier and
the Union filed a petition for certiorari with the CA, questioning such ruling, as follows:
I
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION
IN NOT HOLDING THAT RESPONDENT COMPANY VIOLATED
PETITIONER ROGELIO JAVIERS RIGHT TO PRIOR NOTICE RELATIVE
TO THE LATTERS DISMISSAL.
II
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
IN HOLDING THAT PETITIONER ROGELIO JAVIER WENT AWOL
(ABSENCE WITHOUT LEAVE) FROM HIS JOB.
III
PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN NOT
APPLYING THE RULING IN MAGTOTO VS. NLRC TO THE INSTANT
CASE.[17]
In the Decision[18] dated August 19, 2004, the CA reversed the findings of the Labor
Arbiter and the NLRC. The fallo of the decision reads:
WHEREFORE, the NLRCs Resolution dated September 24, 2002

is ANNULLED and SET ASIDE. Private respondent Standard Electric
Manufacturing Corporation is hereby ORDERED to REINSTATE Rogelio
Javier to his former position, without loss of seniority rights and other
privileges appurtenant thereto, with full backwages from the time of his
dismissal until he is actually reinstated, or to pay him separation pay, if
reinstatement is no longer feasible.
SO ORDERED.
The appellate court cited the rulings of this Court in Magtoto v. NLRC[19] and City
Government of Makati City v. Civil Service Commission[20] as precedents. It declared that
it was not Javiers intention to abandon his job; his incarceration reasonably justified his
failure to report for work and negated the theory that he was on AWOL. Likewise, the CA
held that Javier could not be terminated on the ground of commission of a crime, as when
he was acquitted of the rape charges, the second ground relied upon by the
SEMC ceased to have factual basis. Hence, despite the fact that Javier was allegedly
afforded the opportunity to explain his side, the same was unnecessary since, in the first
place, there was no just or authorized cause for the dismissal.
The motion for reconsideration seasonably filed by the SEMC on August 19,
2004 was denied by the CA in its November 23, 2004 Resolution.[21] Hence, this
recourse.
The issues posed by the petitioner are the following:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN APPLYING THE
CASE OF MAGTOTO VS. NLRC IN THIS CASE.
II
WHETHER OF NOT THE HONORABLE COURT OF APPEALS
COMMITTED PATENT AND REVERSIBLE ERROR IN APPLYING THE
CASE OF CITY GOVERNMENT OF MAKATI CITY IN THIS CASE.
III
COMMITTED PATENT AND REVERSIBLE ERROR IN REINSTATING
[RESPONDENT] ROGELIO JAVIER AND GRANTING HIM FULL
BACKWAGES.
IV
COMMITTED PATENT AND REVERSIBLE ERROR IN TOTALLY
DISREGARDING THE FINDINGS OF THE NATIONAL LABOR
RELATIONS COMMISSION AND THE LABOR ARBITER A QUO.[22]
The Court finds that the petition is bereft of merit.
The petitioner asserts that the ruling of the Court in Magtoto finds no application in
the present case. It argues that in Magtoto, no criminal information was filed in the regular
court against the employee, as the city prosecutor found no probable cause to hold the
respondent therein for trial. The petitioner argues that respondent Javier was indicted for
the crime of rape in the RTC. Another difference, the petitioner points out, is that the
employee in the cited case was dismissed solely on account of his absences during his
imprisonment; respondent Javier was terminated due to truancy prior to his detention
from July 31, 1995, to his detention for rape on August 9, 1995, until his release on May
24, 1996. Respondent Javier never informed the petitioner why he was absent on the
said dates, and subsequent thereto. It was only on January 13, 1996 that respondent
Javier, through his counsel, informed the petitioner of his detention for rape for the first
time.
The petitioner avers that the ruling of this Court in City Government of Makati
City is not applicable because respondent Javier was dismissed on a demurrer to
evidence, and not because he did not commit the offense alleged. The case was
dismissed because of the prosecutions failure to prove his guilt beyond reasonable doubt.
In marked contrast, the petitioner notes, the employee in City Government of Makati
City was acquitted by reason of the prosecutions failure to prove her complicity in the
crime.
The petitioner maintains that the mere filing of the Information for the crime of rape
against respondent Javier rendered its Rules and Regulations operational, particularly
Serious Offense No. 7. It avers that substantial proof, not clear and convincing evidence
or proof beyond reasonable doubt, is sufficient basis for the imposition of any disciplinary
action over an erring employee.
The petitioners contentions are wrong.
Respondent Javier was dismissed by the petitioner effective February 5, 1996 for
(a) being AWOL from July 31, 1995 up to January 30, 1996; and (b) committing rape.
However, on demurrer to evidence, respondent Javier was acquitted of the charge. With
respondent Javiers acquittal, the cause of his dismissal from his employment turned out
to be non-existent.
In the Magtoto case, Alejandro Jonas Magtoto was arrested by virtue of an Arrest,
Search and Seizure Order dated September 1, 1980. He was
charged with violation of Article 136 (Conspiracy and Proposal to Commit Rebellion) and
Article 138 (Inciting to Rebellion or Insurrection) of the Revised Penal Code (RPC).
Although Magtoto informed his employer and pleaded that he be considered as on leave
until released, his employer denied the request. On April 10, 1981, or about seven (7)
months after his arrest, Magtoto was released after the City Fiscal dismissed the criminal
charges for lack of evidence. On the same date, he informed his employer of his intent to
start working again, but the employer rejected the offer. In ruling that his termination was
illegal, the Supreme Court ruled as follows:
The employer tries to distance itself from the detention by stressing

that the petitioner was dismissed due to prolonged absence. However, Mr.
Magtoto could not report for work because he was in a prison cell. The
detention cannot be divorced from prolonged absence. One caused the
other. Since the causes for the detention, which in turn gave the employer
a ground to dismiss the petitioner, proved to be non-existent, we rule that
the termination was illegal and reinstatement is warranted. A non-existent
cause for dismissal was explained in Pepito v. Secretary of Labor (96 SCRA
454).
... A distinction, however, should be made between a dismissal
without cause and a dismissal for a false or non-existent cause. In the
former, it is the intention of the employer to dismiss his employee for no
cause whatsoever, in which case the Termination Pay Law would apply. In
the latter case, the employer does not intend to dismiss the employee but
for a specific cause which turns out to be false or non-existent. Hence,
absent the reason which gave rise to his separation from employment, there
is no intention on the part of the employer to dismiss the employee
concerned. Consequently, reinstatement is in order. And this is the situation
here. Petitioner was separated because of his alleged involvement in the
pilferage in question. However, he was absolved from any responsibility
therefor by the court. The cause for his dismissal having been proved non-
existent or false, his reinstatement is warranted. It would be unjust and
unreasonable for the Company to dismiss petitioner after the latter had
proven himself innocent of the cause for which he was dismissed. [23]
The facts in Pedroso v. Castro[24] are similar to the set of facts in the present case.
The petitioners therein were arrested and detained by the military authorities by virtue of
a Presidential Commitment Order allegedly for the commission of Conspiracy to Commit
Rebellion under Article 136 of the RPC. As a result, their employer hired substitute
workers to avoid disruption of work and business operations. They were released when
the charges against them were not proven. After incarceration, they reported back to
work, but were refused admission by their employer. The Labor Arbiter and the NLRC
sustained the validity of their dismissal. Nevertheless, this Court again held that the
dismissed employees should be reinstated to their former positions, since their separation
from employment was founded on a false or non-existent cause; hence, illegal.
Respondent Javiers absence from August 9, 1995 cannot be deemed as an

abandonment of his work. Abandonment is a matter of intention and cannot lightly be
inferred or legally presumed from certain equivocal acts. To constitute as such, two
requisites must concur: first, the employee must have failed to report for work or must
have been absent without valid or justifiable reason; and second, there must have been
a clear intention on the part of the employee to sever the employer-employee relationship
as manifested by some overt acts, with the second element being the more determinative
factor. Abandonment as a just ground for dismissal requires clear, willful, deliberate, and
unjustified refusal of the employee to resume his employment. Mere absence or failure to
report for work, even after notice to return, is not tantamount to abandonment. [25]
Moreover, respondent Javiers acquittal for rape makes it more compelling to view
the illegality of his dismissal. The trial court dismissed the case for insufficiency of
evidence, and such ruling is tantamount to an acquittal of the crime charged, and proof
that respondent Javiers arrest and detention were without factual and legal basis in the
first place.
The petitioner acted with precipitate haste in terminating respondent Javiers

employment on January 30, 1996, on the ground that he had raped the complainant
therein. Respondent Javier had yet to be tried for the said charge. In fine, the petitioner
prejudged him, and preempted the ruling of the RTC. The petitioner had, in effect,
adjudged respondent Javier guilty without due process of law. While it may be true that
after the preliminary investigation of the complaint, probable cause for rape was found
and respondent Javier had to be detained, these cannot be made as legal bases for the
immediate termination of his employment.
Moreover, the petitioner did not accord respondent Javier an opportunity to explain
his absences from July 31, 1995. The petitioners reliance on the alleged Letter
dated August 17, 1995 is misplaced. There is no evidence on record that respondent
Javier received such letter, and its
sudden presence is highly suspect. The Court agrees with respondent Javiers
observation that the letter was not mentioned nor annexed in the petitioners Position
Paper, Rejoinder and even in its Opposition to the Appeal. The letter surfaced only on a
much later date, in 1999, when it was formally offered in evidence [26] and referred to in
the petitioners Memorandum[27] before the Labor Arbiter a clear inference that the said
letter was but an afterthought to justify petitioners termination of respondent Javiers
employment.
Further, we cannot subscribe to the petitioners contention that the due process
requirement relative to the dismissal of respondent Javier was duly complied with when
he was allowed to explain his side during the grievance machinery conferences. Indeed,
in the case at bar, the petitioner did not conduct any investigation whatsoever prior to his
termination, despite being informed of respondent Javiers predicament by the latters
siblings, his Union and his counsel.[28] The meetings held pursuant to the grievance
machinery provisions of the collective bargaining agreement were only done after his
dismissal had already taken effect on February 5, 1996. Clearly, well-meaning these
conferences might be, they can not cure an otherwise unlawful termination.
It bears stressing that for a dismissal to be validly effected, the twin requirements
of due process notice and hearing must be observed. In dismissing an employee, an
employer has the burden of proving that the
former worker has been served two notices: (1) one to apprise him of the particular acts
or omissions for which his dismissal is sought; and (2) the other to inform him of his
employers decision to dismiss him. As to the requirement of a hearing, the essence of
due process lies in an opportunity to be heard, and not always and indispensably in an
actual hearing.[29]
Finally, in line with the rulings of this Court in Magtoto and Pedroso on the matter
of backwages, respondent Javier is not entitled to any salary during the period of his
detention. His entitlement to full backwages commenced from the time the petitioner
refused his reinstatement. In the instant case, when respondent Javier was freed on May
24, 1996 by virtue of the judgment of acquittal dated May 17, 1996, he immediately
proceeded to the petitioner but was not accepted back to work; hence, the reckoning point
for the grant of backwages started therefrom.
IN LIGHT OF ALL THE FOREGOING, the instant petition is

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

Associate Justice
Floren Hotel vs NLRC, 458 SCRA 128,

GR 155264, May 6, 2005
[G.R. No. 155264. May 6, 2005]
FLOREN HOTEL and/or LIGAYA CHU, DELY LIM and JOSE CHUA LIM, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION, RODERICK A. CALIMLIM,
RONALD T. RICO, JUN A. ABALOS, LITO F. BAUTISTA and GLORIA B.
LOPEZ, respondents.
DECISION
QUISUMBING, J.:
Petitioners Floren Hotel, Ligaya Chu, Dely Lim and Jose Chua Lim seek to annul the
Decision,[1] dated September 10, 2002, of the Court of Appeals in CA-G.R. SP No. 60685
insofar as it ruled that petitioners had constructively dismissed private respondents
Roderick A. Calimlim and Ronald T. Rico, hence the petitioners are liable to the private
respondents for their proportionate 13th month pay, service incentive leave pay, and
indemnity.
At the time of their termination, private respondents Roderick A. Calimlim, Ronald T.
Rico and Jun A. Abalos were working in the hotel as room boys, private respondent Lito
F. Bautista as front desk man, and private respondent Gloria B. Lopez as waitress. They
all started working for the hotel in 1993, except for Jun A. Abalos who started only in
1995.
In the afternoon of June 6, 1998, petitioner Dely Lim randomly inspected the hotel
rooms to check if they had been properly cleaned. When she entered Room 301, she
found private respondent Lito F. Bautista sleeping half-naked with the air-conditioning on.
Lim immediately called the attention of the hotels acting supervisor, Diosdado Aquino,
who had supervision over Bautista. Lim admonished Aquino for not supervising Bautista
more closely, considering that it was Bautistas third offense of the same nature.
When she entered Room 303, she saw private respondents Calimlim and Rico
drinking beer, with four bottles in front of them. They had taken these bottles of beer from
the hotels coffee shop. Like Bautista, they had switched on the air conditioning in Room
303.
That same afternoon, Dely Lim prepared a memorandum for Bautista, citing the latter
for the following incidents: (1) sleeping in the hotel rooms; (2) entertaining a brother-in-
law for extended hours during duty hours; (3) use of hotel funds for payment of SSS loan
without management consent; (4) unauthorized use of hotels air-con; and (5) failure to
pay cash advance in the amount of P4,000.[2]
In the presence of Acting Supervisor Aquino as well as workers Jennifer Rico, Romel
Macaraeg, Mario Resquino and Charie Chua, Dely Lim tried to give Bautista a copy of
the memorandum but Bautista refused to receive it. Bautista then went on absence
without leave. Calimlim and Rico, embarrassed by the incident, went home. When they
returned to work the next day, they were served with a notice [3] of suspension for one
week.
Like Bautista, they refused to receive the notice of suspension, but opted to serve the
penalty. Upon their return on June 15, 1998, they saw a memorandum [4] dated June 13,
1998 on the bulletin board announcing (a) the suspension as room boys of Calimlim and
Rico, or alternately, (b) returning to work on probation as janitors for the following reasons:
unsatisfactory work, having a drinking spree inside the hotels rooms, cheating on the
Daily Time Record, being absent without valid reason, leaving work during duty time,
tardiness, and sleeping on the job. The memorandum also included Calimlim and Ricos
new work schedule.
Calimlim and Rico submitted handwritten apologies[5] and pleaded for another
chance, before they went AWOL (absent without leave).
On June 25, 1998,[6] Calimlim, Rico and Bautista filed separate complaints, for illegal
dismissal and money claims, before the Labor Arbiter in Dagupan City. Calimlim and Rico
claimed they were constructively dismissed, while Bautista claimed that Dely Lim orally
told him not to go back to work because he was already dismissed. Abalos and Lopez
later also filed separate complaints for underpayment of wages, non-payment of their
13th month pay, and service incentive leave pay. On July 7, 1998, after they stopped
working, Abalos and Lopez amended their complaints. They claimed that petitioners orally
dismissed them when they refused to withdraw their complaints.
Petitioners for their part, alleged that they did not dismiss private respondents but that
private respondents had abandoned their jobs.[7]
Private respondents filed a manifestation and motion [8] dated November 24, 1998,
praying that petitioners be ordered to reinstate them to their former positions since after
all, according to petitioners, they were not dismissed.
Petitioners opposed the motion and argued that private respondents cannot be
reinstated since they were not illegally dismissed but they had abandoned their jobs and
management simply considered them dismissed for abandonment.[9] There is no record,
however, that the Labor Arbiter resolved said motion.
On March 19, 1999, the Labor Arbiter dismissed the complaints but ordered
petitioners to pay private respondents their proportionate 13 th month pay, and service
incentive leave pay. He likewise ordered petitioners to pay Calimlim and Rico indemnity.
He decreed:
IN VIEW OF THE FOREGOING PREMISES, judgment is hereby rendered as follows:
1. Declaring that the five complainants in these consolidated cases were not
dismissed illegally from their work but they abandoned their work.
2. Ordering respondents Floren Hotel and/or Ligaya [Chu] and Dely Joson Lim to
pay the complainants proportionate 13th month pay for 1998 and incentive
leave pay equivalent to two and one half days salary (January to June 1998),
computed as follows:
Proportionate 13th month pay:
a) Roderick Calimlim (daily wage as of June 4, 1998 = P148.00 x

30 days [=] P4,440 x 6 months (Jan. to June 1998) = P26,640
divided by 12 (one year) = P2,220.00;
b) Ronald Rico = P2,220.00
c) Jun Abalos = P2,220.00
d) Lito Bautista = P2,220.00
e) Gloria Lopez = P2,220.00
Service Incentive Leave:
R. Calimlim (2 days salary) = P 369.00

R. Rico = 369.00
J. Abalos = 369.00
L. Bautista = 369.00
G. Lopez = 369.00
3. Ordering the same respondents to pay Roderick Calimlim and Ronald Rico one
thousand five hundred pesos each as indemnity;
Summary:
R. Calimlim = P4,089.00
R. Rico = 4,089.00
J. Abalos = 2,589.00
L. Bautista = 2,589.00
G. Lopez = 2,589.00
TOTAL AWARD = P15,945.00
All other claims of the complainants including moral and exemplary damages are
hereby denied/dismissed for want of merit.
SO ORDERED.[10]
The Labor Arbiter found that Calimlim, Rico, and Bautista did not report for work and
they did not show any order of dismissal, thus constructively, they abandoned their work
and were not illegally dismissed. The Labor Arbiter also ruled that Calimlim and Ricos
demotion and reassignment were valid exercises of management prerogatives. The
reassignment was intended to enable management to supervise them more closely and,
in any event, did not involve a diminution of wages. [11] The Labor Arbiter, however, held
petitioners liable for indemnity to Calimlim and Rico for not observing the twin notices
rule.
On the absence of any suspension order or notice of dismissal[12] concerning Abalos
and Lopez, the Labor Arbiter held that the allegation that they were orally dismissed was
insufficient, self-serving, and baseless.
Private respondents appealed to the National Labor Relations Commission (NLRC).
They averred that the Labor Arbiter committed grave abuse of discretion in ruling (1) that
they abandoned their work, and (2) that the immediate filing of their complaints for illegal
dismissal where they prayed for reinstatement, did not mean they abandoned their jobs.
They stressed that the two elements of abandonment were not proven and that petitioners
failed to comply with the two-notice rule.[13] Private respondents likewise insisted that
damages were due them, because their dismissal was attended with bad faith and
malice.[14]
On March 22, 2000, the NLRC rendered its decision.[15] It reversed the decision of
the Labor Arbiter and ordered the hotel management to immediately reinstate
complainants-appellants to their former positions without loss of seniority rights, with full
backwages and other benefits until they are actually reinstated. In the event that
reinstatement was no longer possible, the respondent-appellees should pay herein
private respondents their separation pay in addition to the payment of their full
backwages; their incentive leave pay and their 13 th month pay, together with P1,000 to
each of them as indemnity.[16]
The NLRC concluded that petitioners failed to prove that private respondents had
abandoned their work. Petitioners likewise failed to serve private respondents notices of
termination based on abandonment. The NLRC added that Calimlim and Rico were
constructively dismissed when they were demoted from room boys to janitors and
reclassified as probationary employees.[17] However, the NLRC denied private
respondents claim for damages and attorneys fees. It found no evidence that petitioners
acted maliciously or in bad faith in dismissing the five private respondents.[18]
Later, the NLRC also denied petitioners motion for reconsideration. [19] Hence, the
petitioners appealed to the Court of Appeals.[20]
On September 10, 2002, the Court of Appeals decided the petition as follows:
WHEREFORE, premises considered, the Court MODIFIES the Decision of the

respondent NLRC in this wise: (1) The Court declares that the private respondents
Roderick A. Calimlim and Jose Abalos [should be Ronald T. Rico] were illegally
dismissed by petitioner Floren Hotel/Ligaya Chu who is ORDERED to reinstate them to
their former positions without loss of [seniority] rights, with full backwages and other
benefits until they are actually reinstated; but if reinstatement is no longer possible,
Floren Hotel/Ligaya Chu shall pay their separation pay in addition to their backwages.
(2) Declaring private respondents Lito Bautista, Jun Abalos and Gloria Lopez to have
abandoned their employment, and, therefore, not entitled to either backwages nor
separation pay; and (3) ORDERING Floren Hotel/Ligaya Chu to pay all the private
respondents their 13th month pay and incentive leave pay as computed in the Decision
of the Labor Arbiter, to wit:
Proportionate 13th month pay:
a) Roderick Calimlim (daily wage as of June 4, 1998 = plus

P148.00 x 30 days
P4,440 x 6 months (Jan. to June 1998)
P26,640 divided by 12 (one year) = P2,220.00;
b) Ronald Rico = P2,220.00
c) Jun Abalos = P2,220.00
d) Lito Bautista = P2,220.00
e) Gloria Lopez = P2,220.00
Service Incentive Leave:
R. Calimlim (2 days salary) = P 369.00

R. Rico = 369.00
J. Abalos = 369.00
L. Bautista = 369.00
G. Lopez = 369.00
3. Ordering the same respondents to pay Roderick Calimlim and Ronald Rico
one thousand five hundred pesos each as indemnity;
Summary:
R. Calimlim = P4,089.00
R. Rico = 4,089.00
J. Abalos = 2,589.00
L. Bautista = 2,589.00
G. Lopez = 2,589.00
TOTAL AWARD = P15,945.00
SO ORDERED.[21]
The Court of Appeals agreed with the NLRC that the June 13, 1998, memorandum
demoting Calimlim and Rico to janitors and reclassifying them as probationary employees
constituted constructive discharge. The Court of Appeals likewise ruled that their right to
due process was violated when they were imposed the additional penalties of demotion
from room boys to janitors, reassignment as part-time employees, and change of their
status from regular to probationary for other alleged offenses for which they were not
given notice.[22]
But the Court of Appeals held that the NLRC committed grave abuse of discretion in
declaring that Bautista, Abalos and Lopez were illegally dismissed, since they presented
no other piece of evidence besides the allegations in their position papers. [23] The
appellate court brushed aside the issue that petitioners failure to serve notices of
termination was due to the immediate filing of the complaints for illegal dismissal which
made the service of such notices superfluous.[24]
Petitioners received a copy of the decision on September 20, 2002. On October 3,
2002, they filed the instant appeal, raising the following errors:
(a)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN

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

RESPONDENTS-EMPLOYEES THEIR PROPORTIONATE 13TH MONTH PAY AND
SERVICE INCENTIVE LEAVE AND IN ORDERING THE PETITIONERS TO PAY
RESPONDENTS CALIMLIM AND RICO P1,500.00 EACH AS INDEMNITY.[25]
Private respondents, for their part, received a copy of the decision on September 23,
2002. On October 7, 2002, the private respondents except Calimlim filed a motion for
reconsideration. They pointed out the typographical error in the dispositive portion of the
Court of Appeals decision which declared that it was Calimlim and a certain Jose Abalos
who were constructively dismissed.[26]
They raised the following errors:
...
II. The Honorable Court gravely erred in holding that Lito Bautista, Gloria Lopez
and Jun Abalos were not illegally dismissed as they abandoned their jobs.
III The Honorable Court gravely erred in giving due course to the petition despite
the fact that it was not sufficient in form as it was not accompanied by copies
of all pleadings and documents relevant and pertinent thereto. [27]
On November 20, 2002, the Court of Appeals required management, herein
petitioners, to comment on the motion. Upon receipt of petitioners comment, however,
the Court of Appeals issued a resolution on March 29, 2004, holding in abeyance the
action on said motion for reconsideration by the concerned employees, herein private
respondents, pending final resolution by this Court of the instant petition. [28]
In this petition now before us, we find four issues for our resolution: (1) whether the
Court of Appeals erred in giving due course to the petition for certiorari filed before the
appellate court; (2) whether the private respondents were illegally dismissed; (3) whether
the Court of Appeals erred in ordering petitioners to pay Calimlim and Rico indemnity
of P1,500; and (4) whether the appellate court erred in ordering petitioners to pay all of
private respondents their proportionate 13th month pay and incentive leave pay.
On the first issue, private respondents argue that the failure of petitioners to attach
copies of the position papers to their petition for certiorari before the Court of Appeals
was fatal to their cause. Private respondents point out that petitioners allegation (that the
NLRC decision holding that Bautista, Abalos and Lopez had been illegally dismissed) was
not supported by substantial evidence. They add that the NLRC erred in disregarding the
material evidence adduced by petitioners. Hence, it was essential that the evidence for
the parties contained in their position papers be attached to the petition as required by
Section 1, Rule 65 of the Rules of Court.[29]
We find no merit in private respondents insistence on procedural flaws. Acceptance
of a petition for certiorari as well as the grant of due course thereto is addressed to the
sound discretion of the court.[30] Section 1, Rule 65 of the Rules of Court in relation to
Section 3, Rule 46 of the same rules does not specify the precise documents, pleadings
or parts of the records that should be appended to the petition other than the judgment,
final order, or resolution being assailed. The Rules only state that such documents,
pleadings or records should be relevant or pertinent to the assailed resolution, judgment
or orders.[31] Here the pieces of evidence, which petitioners alleged had been arbitrarily
disregarded, were duly annexed to the petition. Also, the material allegations of the
position papers were summarized and discussed extensively in the decision of the Labor
Arbiter, a copy of which was also made part of the petition. It does not appear in this case
that in deciding to give due course to the petition for certiorari, the Court of Appeals
committed any error that prejudiced the substantial rights of the parties. There is,
therefore, no reason for this Court to disturb the appellate courts determination that the
copies of the pleadings and documents attached to the petition were sufficient to make
out a prima facie case.
Nonetheless, on the second issue, we find that the Court of Appeals erred in reversing
the NLRC decision and in holding that Bautista, Abalos and Lopez were not illegally
dismissed, but had abandoned their jobs.
Petitioners claimed that all five private respondents were guilty of abandoning their
jobs. Thus, it was incumbent upon petitioners to show that the two requirements for a
valid dismissal on the ground of abandonment existed in this case. Specifically,
petitioners needed to present, for each private respondent, evidence not only of the failure
to report for work or that absence was without valid or justifiable reasons, but also of some
overt act showing the private respondents loss of interest to continue working in his or
her job.[32]
In our view, petitioners failed to adduce sufficient evidence to prove the charge of
abandonment. Petitioners merely presented joint affidavits from hotel supervisors Agustin
Aninag and Lourdes Cantago and other hotel employees showing that Calimlim, Rico,
and Bautista simply went on absence without leave after they were confronted with certain
irregularities, and that Abalos and Lopez likewise just left their employment, also without
filing leaves of absence.[33] Those joint affidavits, however, are insufficient as they do not
show that the absence of Calimlim, Rico, Bautista, Abalos and Lopez were unjustified.
More important, they do not show any overt act that proves that private respondents
unequivocally intended to sever their working relationship with the petitioners. We have
held that mere absence from work does not constitute abandonment. [34]
If it was true that private respondents abandoned their jobs, then petitioners should
have served them with a notice of termination on the ground of abandonment as required
under Sec. 2, Rule XIV, Book V, Rules and Regulation Implementing the Labor Code, in
effect at that time. Said Section 2 provided that:
Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the workers
last known address.
But petitioners failed to comply with the foregoing requirement, thereby bolstering
further private respondents claim that they did not abandon their work but were illegally
dismissed.[35]
Indeed, we find that none of the private respondents in this case had any intention to
sever their working relationship. Just days after they were dismissed, private respondents
Calimlim, Rico, Bautista, Abalos and Lopez filed complaints to protest their dismissals.
The well-established rule is that an employee who takes steps to protest his layoff cannot
be said to have abandoned his work.[36]
That private respondents all desired to work in the hotel is further shown by the fact
that during the proceedings before the Labor Arbiter, shortly after private respondents
received petitioners position paper where the latter averred that private respondents were
never terminated, private respondents filed a manifestation and motion asking that
petitioners be ordered to allow them back to work. This is nothing if not an unequivocal
expression of eagerness to resume working.
We reiterate here the settled rule that in illegal dismissal cases, the employer bears
the burden of showing that the dismissal was for a just or authorized cause. [37]Failure by
the employer to discharge this burden, as in this case, would necessarily mean that the
dismissal is not justified, and therefore illegal.[38]
As regards Calimlim and Rico, the NLRC further found that petitioners constructively
dismissed both. Before us, petitioners now argue that the Court of Appeals misconstrued
the memorandum of June 13, 1998. They insist that they had no intention of dismissing
Calimlim and Rico, as shown by the very fact that the memorandum itself expressly allows
Calimlim and Rico to return to work after they submit their written explanations for the
drinking incident which happened on June 6, 1998.[39]Rather than a constructive
dismissal, petitioners argue that the temporary transfer of Calimlim and Rico to janitorial
positions was a valid exercise of the management prerogative to assign their employees
to where they would be of the most benefit to the hotel. This temporary reassignment,
according to the management, was intended solely to prevent Calimlim and Rico from
repeating their infractions by denying them access to the hotel rooms and keeping them
busy and easier to supervise in their new area assignments.[40]
Petitioners further argue that the terms of employment imposed in the memorandum
did not render continued employment impossible, unreasonable or unlikely because,
according to them, there was neither diminution of pay nor demotion involved. They
maintain that room boys and janitors receive the same wages and that the only difference
between the two is that room boys clean the rooms while janitors clean the common
areas.[41]
We are not persuaded by petitioners contention. For the transfer of the employee to
be considered a valid exercise of management prerogatives, the employer must show
that the transfer is not unreasonable, inconvenient or prejudicial to the employee; neither
would it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits. Should the employer fail to discharge this burden of proof, the employees
transfer shall be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely,
as in an offer involving a demotion in rank and diminution in pay.[42]
In this case, Calimlim and Rico were being forced to accept alternate work periods in
their new jobs as janitors, otherwise they would be unemployed. Not only did their new
schedule entail a diminution of wages, because they would only be allowed to work every
other week, the new schedule was also clearly for an undefined period. The June 13,
1998, memorandum did not state how long the schedule was to be effective. Indeed, it
appears that the period could continue for as long as management desired it. These
unreasonable new terms of employment were imposed in the memorandum of June 13,
1998, which was issued two days before Calimlim and Rico returned from their week-long
suspension. They were imposed for alleged past infractions for which neither Calimlim
nor Rico was given the chance to be heard. Under the circumstances, we fail to see how
the temporary transfer of Calimlim and Rico could be a valid exercise of management
prerogatives. Even the employers right to demote an employee requires the observance
of the twin-notice requirement.[43]
As to the third issue, Article 279 of the Labor Code gives to Calimlim and Rico the
right to reinstatement without loss of seniority rights and other privileges or separation
pay in case reinstatement is no longer possible, and to his full backwages, inclusive of
allowances and other benefits. It was thus error for the Court of Appeals to affirm the
NLRC decision to award Calimlim and Rico indemnity in addition to the measure of
damages provided in Article 279. The award of indemnity is a penalty awarded only when
the dismissal was for just or authorized cause but where the twin-notice requirement was
not observed.[44]
With respect to the fourth issue, petitioners fault the appellate court for failing to state
why petitioners should pay respondents their proportionate 13 th month pay and service
incentive leave pay.[45] On this matter, we find that the appellate court committed no error.
Petitioners did not question the propriety of the award of proportionate 13 th month pay
and service incentive leave in the Court of Appeals. They assailed the NLRC decision on
only one ground: Respondent NLRC committed grave abuse of discretion in reversing the
Labor Arbiters decision insofar as it relates to the issues of illegal dismissal. Hence, the
correctness of the cited award in the NLRC ruling was never brought before the appellate
court and is deemed to have been admitted by petitioners. It cannot therefore be raised
anymore in this petition. The office of a petition for review under Rule 45 is to review the
decision of the Court of Appeals, not the NLRC. The decision of the NLRC as regards the
award of 13th month pay and service incentive leave pay became binding on petitioners
because the failure to question it before the Court of Appeals amounts to an acceptance
of the ruling. In any event, the award appears to us amply supported by evidence and in
accord with law.
WHEREFORE, the Decision dated September 10, 2002, of the Court of Appeals in
CA-G.R. SP No. 60685 is hereby MODIFIED. Petitioners Floren Hotel/Ligaya Chu, Dely
Lim, and Jose Chua Lim are held liable for illegally dismissing private respondents
Roderick A. Calimlim, Ronald T. Rico, Jun A. Abalos, Lito F. Bautista and Gloria B. Lopez.
Petitioners are ordered, (1) to reinstate private respondents to their former positions
without loss of seniority rights, with full backwages and other benefits until they are
actually reinstated or to pay their separation pay in addition to their backwages, if
reinstatement is no longer feasible; (2) to jointly and solidarily pay P2,589.00 to each of
the private respondents as proportionate 13th month pay and service incentive leave pay
for the period January to June 1998, as computed in the decision dated March 19, 1999,
of the Labor Arbiter. No pronouncement as to costs.
SO ORDERED.
Stellar Industries vs. NLRC, 252 SCRA 323,

GR 117418, January 24, 1996
[G.R. No. 117418. January 24, 1996]
STELLAR INDUSTRIAL SERVICES, INC., petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION and ROBERTO H. PEPITO, respondents.
DECISION
REGALADO, J.:
Imputing grave abuse of discretion by public respondent as its cause of concern in

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

as illegal and ordering the respondent to immediately reinstate complainant to his
former position as Utilityman, without loss of seniority rights and with full backwages
and other rights and privileges appurtenant to his position until he is actually reinstated.
As computed, the judgment award in favor of the complainant is stated hereunder:
Backwages
1/27/91 - 12/27/92
at P118. 00 per day P82,550.83
Refund of amount
illegally deducted
(3 years) 288.00
Grand Total P82,838.83
The respondent is further ordered to pay the complainant reasonable attorneys fees
equivalent to 10% of the amount recoverable by the complainant.5
As hereinbefore stated, said judgment of the labor arbiter was affirmed by respondent
commission. Petitioners subsequent motion for reconsideration was likewise rebuffed by
the NLRC, hence the present remedial resort to this Court.
Petitioner contends that public respondent acted with grave abuse of discretion when
it discussed and resolved the issue of abandonment which petitioner had not, at any time,
raised before it for resolution. Further, petitioner considers it patently erroneous for public
respondent to rule that the medical certificate adduced by Pepito sufficiently established
the fact of sickness on his part which thereby justified his absences. Additionally, it claims
that respondent commission gravely erred when it did not carefully examine the evidence,
pointing out Pepitos errant behavior and conduct.6
Petitioner argues, moreover, that the award of back wages and attorneys fees was
not justified considering that Pepito was validly dismissed due to serious misconduct on
his part. Lastly, petitioner insists that the deductions it imposed upon and collected from
Pepitos salary was authorized by a board resolution of Stellar Employees Association, of
which private respondent was a member.7 The Court, however, is unable to perceive or
deduce facts constitutive of grave abuse of discretion in public respondents disposition of
the controversy which would suffice to overturn its affirmance of the labor arbiters
decision.
On the initial issue posed by petitioner, respondent commission should indeed have
refrained from passing upon the matter of abandonment, much less from considering the
same as the ground for petitioners termination of private respondents services. The
records of the case indicate that Pepito s employment was cut short by Stellar due to his
having violated a company rule which requires the filing of an official leave of absence
should an employee be unable to report for work, aside from the circumstance that Stellar
did not find credible Pepitos explanation that he was then suffering from severe stomach
and abdominal pains.
To be sure, public respondent may well have been misled by the fact that petitioner,
in dismissing Pepito, labelled his violation as Absent Without Official Leave
(AWOL)/Virtual Abandonment.8 Respondent NLRC should have noted that the matter of
abandonment was never brought up as an issue before it and that Stellar never
considered Pepito as having abandoned his job. As a matter of fact, private respondent
was only considered by petitioner as absent until December 10, 1990.9 Pepito was
dismissed from work simply for going on leave without prior official approval and for failing
to justify his absence. This is evident from the fact that petitioner did not assail Pepitos
allegations that, at the start of his extended absence, he had informed Stellar, through
telephone calls to his superior at MBC-PAL, that he could not report for work due to
illness. Thus, while abandonment is indisputably a valid legal ground for terminating ones
employment,10 it was a non-issue in this dispute. Be that as it may, that misapprehension
of the NLRC on this particular issue is not to be considered an abuse of discretion of such
gravity as to constitute reversible error.
In the main, therefore, what is truly at issue here is whether or not serious misconduct
for non-observance of company rules and regulations may be attributed to Pepito and, if
so, whether or not the extreme penalty of dismissal meted to him by Stellar may be
justified under the circumstances. We resolve both issues in the negative.
Stellars company rules and regulations on the matter could not be any clearer, to wit:
Absence Without Leave
Any employee who fails to report for work without any prior approval from his superior(s)
shall be considered absent without leave.
In the case of an illness or emergency for an absence of not more than one (1) day, a
telephone call or written note to the head office, during working hours, on the day of his
absence, shall be sufficient to avoid being penalized.
In the case of an illness or an emergency for an absence of two (2) days or more, a
telephone call to the head office, during regular working hours, on the first day of his
absence, or a written note to the head office, (ex. telegram) within the first three (3)
days of his absence, and the submission of the proper documents (ex. medical
certificate) on the first day he reports after his absence shall be sufficient to avoid being
penalized.
1st offense - three (3) days suspension
2nd offense - seven (7) days suspension
3rd offense - fifteen (15) days suspension
4th offense - dismissal (with a period of one (1) year.11

There was substantial compliance with said company rule by private respondent. He
immediately informed his supervisor at MBC-PAL of the fact that he could not report for
work by reason of illness. At the hearing, it was also established without contradiction that
Pepito was able to talk by telephone to one Tirso Pamplona, foreman at MBC-PAL, and
he informed the latter that he would be out for two weeks as he was not feeling
well.12 Added to this is his letter to the chief of personnel which states that, on November
2, 1990, he relayed to his supervisor at MBC-PAL his reason for not reporting for work
and that, thereafter, he made follow-up calls to their office when he still could not render
services.13 As earlier noted, these facts were never questioned nor rebutted by petitioner.
While there is no record to show that approval was obtained by Pepito with regard to
his absences, the fact remains that he complied with the company rule that in case of
illness necessitating absence of two days or more, the office should be informed
beforehand about the same, that is, on the first day of absence. Since the cause of his
absence could not have been anticipated, to require prior approval would be
unreasonable. On this score, then, no serious misconduct may be imputed to Pepito.
Necessarily, his dismissal from work, tainted as it is by lack of just cause, was clearly
illegal.
More importantly, private respondent duly presented the requisite medical certificate.
True, Stellar did not accept the veracity of the same, but it did so quite erroneously. Carlos
P. Callanga, petitioners vice-president for operations, interpreted the certificate submitted
by Pepito in the following strained and nitpicking manner:
a) The medical certificate merely states that Pepito suffered from alleged abdominal
pain from November 2, 1990 to December 14, 1990. It does not state that the
abdominal pain was so severe as to incapacitate him for (sic) work.
b) Because the medical certificate states that the abdominal pain was merely alleged, I
had reason to believe that the doctor who issued it did not personally know if such
abdominal pain really existed for the period in question.
c) From the medical certificate, I gathered that the doctor who signed it examined Pepito
only on December 14, 1990, which is the date it appears to have been issued. It does
not state that said doctor actually treated Pepito for the period of his absence.
d) The medical certificate also says Pepito was suffering from alleged abdominal pains
until December 14, 1990, but that he could resume work anytime thereafter. This
implies that he was physically fit to resume work anytime thereafter. However, our
records show that Pepito was absent only until December 10, 1990. If it is true that
Pepitos abdominal pains incapacitated him for (sic) work, he should have been absent
until December 14, 1990. These give me reason to believe that the medical certificate
was secured only as an afterthought and does not satisfactorily explain Pepito s
protracted absence.14
A careful perusal and objective appreciation of the medical certificate in question,

which was properly signed by a physician whose existence and professional license
number was not questioned by petitioner, convince us to conclude otherwise. Handwritten
by the issuing doctor, it states in no uncertain terms:
This is to inform that I had examined Roberto Pepito. He has already recovered from his
intestinal abdominal pains suffered last Nov. 2/90 to Dec. 14/90.
He may resume his work anytime.15
Thus, nowhere in said certificate is there any indication that the abdominal pain
suffered by Pepito was only as alleged by him. It definitely states that Pepito was
personally examined by the physician and it can be clearly deduced from the affirmative
statements (h)e has already recovered x x x and (h)e may resume his work anytime that
Pepito was really not in a position to report for work from November 2 to December 14,
1990 on account of actual, and not merely alleged, intestinal abdominal pains. The
certificate further confirms Pepitos earlier information given by him on November 2,
1990 and which he duly relayed to his supervisor as the true reason for his inability to
work. Callanga obviously misread, we hope unwittingly, intestinal abdominal pain as
alleged abdominal pain.
Again, there is no logic in Callangas assumption that the certificate was obtained only
as an afterthought. It should be noted that Callanga required Pepito to make a written
explanation regarding his absences only on December 18, 1990.16 Pepito accordingly
complied with the same and he attached therewith the medical certificate which showed
its date of issuance as December 14, 1990.17 Thus, even before he was made to explain
his absences, he already had the medical certificate to prove the reason therefor. To
characterize the procurement of the certificate as an afterthought is consequently
baseless, especially considering that it bears all the earmarks of regularity in its issuance.
Labor is entitled to at least elementary fairness from management.
Petitioners reliance on Pepitos past infractions as sufficient grounds for his eventual
dismissal, in addition to his prolonged absences, is likewise unavailing. The correct rule
is that previous infractions may be used as justification for an employees dismissal from
work in connection with a subsequent similar offense.18 That is not the case here. Stellar
contends that Pepitos service record shows that he was under preventive suspension in
October, 1979 due to gambling and that, at various days of certain months in 1986, 1987,
and 1988, he was issued several warnings for habitual tardiness. Then, in October, 1988,
he was asked to explain why he was carrying three sacks of rice in violation of company
rules.
In the present case, private respondents absences, as already discussed, were
incurred with due notice and compliance with company rules and he had not thereby
committed a similar offense as those he had committed in the past. Furthermore, as
correctly observed by the labor arbiter, those past infractions had either been
satisfactorily explained, not proven, sufficiently penalized or condoned by the respondent.
In fact, the termination notice furnished Pepito only indicated that he was being dismissed
due to his absences from November 2, 1990 to December 10, 1990 supposedly without
any acceptable excuse therefor. There was no allusion therein that his dismissal was due
to his supposed unexplained absences on top of his past infractions of company rules. To
refer to those earlier violations as added grounds for dismissing him is doubly unfair to
private respondent. Significantly enough, no document or any other piece of evidence
was adduced by petitioner showing previous absences of Pepito, whether with or without
official leave.
Regarding the amount deducted from Pepitos salary, Stellar stresses that said
deduction concerning death aid benefits is lawful since these were made in accordance
with Board Resolution No. 02-85 adopted on August 17, 1988 by the board of directors
of the Stellar Employees Association. However, Article 24 1(n) of the Labor Code and the
implementing rules thereon in Section 13(a), Rule VIII, Book III disallow such deductions.
Article 241(n) states that (n)o special assessment or other extraordinary fees may be
levied upon the members of a labor organization unless authorized by a written resolution
of a majority of all the members of a general membership meeting duly called for the
purpose. x x x.
The deduction could be characterized as a special assessment for a Death Aid
Program. Consequently, a mere board resolution of the directors, and not by the majority
of all the members, cannot validly allow such deduction. Also, a written individual
authorization duly signed by the employee concerned is a condition sine qua
non therefor. Employees are protected. by law from unwarranted practices that have for
their object the diminution of the hard-earned compensation due them.19 Private
respondent herein must be extended that protection, especially in view of his lowly
employment status.
IN VIEW OF THE FOREGOING, no grave abuse of discretion having been committed
by respondent National Labor Relations Commission in its decision and resolution
assailed in the case at bar, the instant petition of Stellar Industrial Services, Inc. is
hereby DISMISSED for lack of merit.
SO ORDERED.
Romero, Puno, and Mendoza, JJ., concur.
Chua-qua vs. Clave, 189 SCRA 117,
GR L-49549, August 30, 1990

G.R. No. 49549 August 30, 1990
EVELYN CHUA-QUA, petitioner,

vs.
HON. JACOBO C. CLAVE, in his capacity as Presidential Executive Assistant, and TAY
TUNG HIGH SCHOOL, INC., respondents.
William C. Gunitang and Jaime Opinion for petitioner.
Laogan Law Offices for private respondent.
REGALADO, J.:
This would have been just another illegal dismissal case were it not for the controversial
and unique situation that the marriage of herein petitioner, then a classroom teacher, to
her student who was fourteen (14) years her junior, was considered by the school
authorities as sufficient basis for terminating her services.
Private respondent Tay Tung High School, Inc. is an educational institution in Bacolod
City. Petitioner had been employed therein as a teacher since 1963 and, in 1976 when
this dispute arose, was the class adviser in the sixth grade where one Bobby Qua was
enrolled. Since it was the policy of the school to extend remedial instructions to its
students, Bobby Qua was imparted such instructions in school by petitioner. 1 In the
course thereof, the couple fell in love and on December 24, 1975, they got married in a
civil ceremony solemnized in Iloilo City by Hon. Cornelio G. Lazaro, City Judge of
Iloilo.2 Petitioner was then thirty (30) years of age but Bobby Qua being sixteen (16)
years old, consent and advice to the marriage was given by his mother, Mrs.
Concepcion Ong.3 Their marriage was ratified in accordance with the rites of their
religion in a church wedding solemnized by Fr. Nick Melicor at Bacolod City on January
10, 1976. 4
On February 4, 1976, private respondent filed with the sub-regional office of the
Department of Labor at Bacolod City an application for clearance to terminate the
employment of petitioner on the following ground: "For abusive and unethical conduct
unbecoming of a dignified school teacher and that her continued employment is inimical
to the best interest, and would downgrade the high moral values, of the school." 5
Petitioner was placed under suspension without pay on March 12, 1976. 6 Executive
Labor Arbiter Jose Y. Aguirre, Jr. of the National Labor Relations Commission, Bacolod
City, to whom the case was certified for resolution, required the parties to submit their
position papers and supporting evidence. Affidavits 7 were submitted by private
respondent to bolster its contention that petitioner, "defying all standards of decency,
recklessly took advantage of her position as school teacher, lured a Grade VI boy under
her advisory section and 15 years her junior into an amorous relation." 8 More
specifically, private respondent raised issues on the fact that petitioner stayed alone
with Bobby Qua in the classroom after school hours when everybody had gone home,
with one door allegedly locked and the other slightly open.
On September 17, 1976, Executive Labor Arbiter Jose Y. Aguirre, Jr., without
conducting any formal hearing, rendered an "Award" in NLRC Case No. 956 in favor of
private respondent granting the clearance to terminate the employment of petitioner. It
was held therein that
The affidavits . . . although self-serving but were never disputed by the

respondent pointed out that before the marriage of respondent to Bobby
Qua, fourteen (14) years her junior and during her employment with
petitioner, an amorous relationship existed between them. In the absence
of evidence to the contrary, the undisputed written testimonies of several
witnesses convincingly picture the circumstances under which such
amorous relationship was manifested within the premises of the school,
inside the classroom, and within the sight of some employees. While no
direct evidences have been introduced to show that immoral acts were
committed during these times, it is however enough for a sane and
credible mind to imagine and conclude what transpired and took place
during these times. . . . 9
Petitioner, however, denied having received any copy of the affidavits referred to. 10
On October 7, 1976, petitioner appealed to the National Labor Relations Commission

claiming denial of due process for not having been furnished copies of the aforesaid
affidavits relied on by the labor arbiter. She further contended that there was nothing
immoral, nor was it abusive and unethical conduct unbecoming of a dignified school
teacher, for a teacher to enter into lawful wedlock with her student. 11
On December 27, 1976, the National Labor Relations Commission unanimously
reversed the Labor Arbiter's decision and ordered petitioner's reinstatement with
backwages, with the following specific findings:
Affiant Maselliones deposed and said that he saw appellant and Qua
sitting on the student desk inside a classroom after classes. The
depositions of affiants Despi and Chin are of the same tenor. No
statements whatever were sworn by them that they were eyewitnesses to
immoral or scandalous acts.
xxx xxx xxx
Even if we have to strain our sense of moral values to accommodate the

conclusion of the Arbiter, we could not deduce anything immoral or
scandalous about a girl and a boy talking inside a room after classes with
lights on and with the door open.
xxx xxx xxx
Petitioner-appellee naively insisted that the clearance application was

precipitated by immoral acts which did not lend dignity to the position of
appellant. Aside from such gratuitous assertions of immoral acts or
conduct by herein appellant, no evidence to support such claims was
introduced by petitioner-appellee. We reviewed the the sequence of
events from the beginning of the relationship between appellant Evelyn
Chua and Bobby Qua up to the date of the filing of the present application
for clearance in search of evidence that could have proved detrimental to
the image and dignity of the school but none has come to our attention. . .
. 12
The case was elevated by private respondent to the Minister of Labor who, on March
30, 1977, reversed the decision of the National Labor Relations Commission. The
petitioner was, however, awarded six (6) months salary as financial assistance. 13
On May 20, 1977, petitioner appealed the said decision to the Office of the President of
the Philippines. 14 After the corresponding exchanges, on September 1, 1978 said
office, through Presidential Executive Assistant Jacobo C. Clave, rendered its decision
reversing the appealed decision. Private respondent was ordered to reinstate petitioner
to her former position without loss of seniority rights and other privileges and with full
back wages from the time she was not allowed to work until the date of her actual
reinstatement. 15
Having run the gamut of three prior adjudications of the case with alternating reversals,
one would think that this decision of public respondent wrote finis to petitioner's calvary.
However, in a resolution dated December 6, 1978, public respondent, acting on a
motion for reconsideration 16 of herein private respondent and despite opposition
thereto, 17 reconsidered and modified the aforesaid decision, this time giving due course
to the application of Tay Tung High School, Inc. to terminate the services of petitioner
as classroom teacher but giving her separation pay equivalent to her six (6) months
salary. 18
In thus reconsidering his earlier decision, public respondent reasoned out in his
manifestation/comment filed on August 14, 1979 in this Court in the present case:
That this Office did not limit itself to the legal issues involved in the case,
but went further to view the matter from the standpoint of policy which
involves the delicate task of rearing and educating of children whose
interest must be held paramount in the school community, and on this
basis, this Office deemed it wise to uphold the judgment and action of the
school authorities in terminating the services of a teacher whose
actuations and behavior, in the belief of the school authorities, had
spawned ugly rumors that had cast serious doubts on her integrity, a
situation which was considered by them as not healthy for a school
campus, believing that a school teacher should at all times act with utmost
circumspection and conduct herself beyond reproach and above
suspicion; 19
In this petition for certiorari, petitioner relies on the following grounds for the reversal of
the aforesaid resolution of public respondent, viz.:
1. The dismissal or termination of petitioner's employment, despite Tay

Tung's claim to the contrary, was actually based on her marriage with her
pupil and is, therefore, illegal.
2. Petitioner's right to due process under the Constitution was violated

when the hearsay affidavits of Laddy Maselliones, Eleuterio Despi, Pina D.
Chiu, and Ong Lee Bing, were admitted and considered in evidence
without presenting the affiants as witnesses and affording the petitioner
the right to confront and cross-examine them.
3. No sufficient proofs were adduced to show that petitioner committed

serious misconduct or breached the trust reposed on her by her employer
or committed any of the other grounds enumerated in Article 283 (Now
Article 282) of the Labor Code which will justify the termination of her
employment. 20
We first dispose of petitioner's claim that her right to due process was violated. We do
not agree. There is no denial of due process where a party was afforded an opportunity
to present his side. Also, the procedure by which issues are resolved based on position
papers, affidavits and other documentary evidence is recognized as not violative of such
right. Moreover, petitioner could have insisted on a hearing to confront and cross-
examine the affiants but she did not do so, obviously because she was convinced that
the case involves a question of law. Besides, said affidavits were also cited and
discussed by her in the proceedings before the Ministry of Labor.
Now, on the merits. Citing its upright intention to preserve the respect of the community
toward the teachers and to strengthen the educational system, private respondent
submits that petitioner's actuations as a teacher constitute serious misconduct, if not an
immoral act, a breach of trust and confidence reposed upon her and, thus, a valid and
just ground to terminate her services. It argues that as a school teacher who exercises
substitute parental authority over her pupils inside the school campus, petitioner had
moral ascendancy over Bobby Qua and, therefore, she must not abuse such authority
and respect extended to her. Furthermore, it charged petitioner with having allegedly
violated the Code of Ethics for teachers the pertinent provision of which states that a
"school official or teacher should never take advantage of his/her position to court a
pupil or student." 21
On the other hand, petitioner maintains that there was no ground to terminate her
services as there is nothing wrong with a teacher falling in love with her pupil and,
subsequently, contracting a lawful marriage with him. She argued that she was
dismissed because of her marriage with Bobby Qua This contention was sustained in
the aforesaid decision of the National Labor Relations Commission thus:
. . . One thing, however, has not escaped our observation: That the
application for clearance was filed only after more than one month elapsed
from the date of appellant's marriage to Bobby Qua Certainly, such
belated application for clearance weakens instead of strengthening the
cause of petitioner-appellee. The alleged immoral acts transpired before
the marriage and if it is these alleged undignified conduct that triggered
the intended separation, then why was the present application for
clearance not filed at that time when the alleged demoralizing effect was
still fresh and abrasive?22
After a painstaking perusal of the records, we are of the considered view that the
determination of the legality of the dismissal hinges on the issue of whether or not there
is substantial evidence to prove that the antecedent facts which culminated in the
marriage between petitioner and her student constitute immorality and/or grave
misconduct. To constitute immorality, the circumstances of each particular case must be
holistically considered and evaluated in the light of prevailing norms of conduct and the
applicable law. Contrary to what petitioner had insisted on from the very start, what is
before us is a factual question, the resolution of which is better left to the trier of facts.
Considering that there was no formal hearing conducted, we are constrained to review
the factual conclusions arrived at by public respondent, and to nullify his decision
through the extraordinary writ of certiorari if the same is tainted by absence or excess of
jurisdiction or grave abuse of discretion. The findings of fact must be supported by
substantial evidence; otherwise, this Court is not bound thereby.23
We rule that public respondent acted with grave abuse of discretion. As vividly and
forcefully observed by him in his original decision:
Indeed, the records relied upon by the Acting Secretary of Labor (actually
the records referred to are the affidavits attached as Annexes "A" to "D" of
the position paper dated August 10, 1976 filed by appellee at the
arbitration proceedings) in arriving at his decision are unbelievable and
unworthy of credit, leaving many question unanswered by a rational mind.
For one thing, the affidavits refer to certain times of the day during off
school hours when appellant and her student were found together in one
of the classrooms of the school. But the records of the case present a
ready answer: appellant was giving remedial instruction to her student and
the school was the most convenient place to serve the purpose. What is
glaring in the affidavits is the complete absence of specific immoral acts
allegedly committed by appellant and her student. For another, and very
important at that, the alleged acts complained of invariably happened from
September to December, 1975, but the disciplinenary action imposed by
appellee was sought only in February, 1976, and what is more, the
affidavits were executed only in August, 1976 and from all indications,
were prepared by appellee or its counsel. The affidavits heavily relied
upon by appellee are clearly the product of after-thought. . . . The action
pursued by appellee in dismissing appellant over one month after her
marriage, allegedly based on immoral acts committed even much earlier,
is open to basis of the action sought seriously doubted; on the question.
The basis of the action sought is seriously doubted; on the contrary, we
are more inclined to believe that appellee had certain selfish, ulterior and
undisclosed motives known only to itself. 24
As earlier stated, from the outset even the labor arbiter conceded that there was no
direct evidence to show that immoral acts were committed. Nonetheless, indulging in a
patently unfair conjecture, he concluded that "it is however enough for a sane and
credible mind to imagine and conclude what transpired during those times." 25 In
reversing his decision, the National Labor Relations Commission observed that the
assertions of immoral acts or conducts are gratuitous and that there is no direct
evidence to support such claim, 26 a finding which herein public respondent himself
shared.
We are, therefore, at a loss as to how public respondent could adopt the volte-face in
the questioned resolution, which we hereby reject, despite his prior trenchant
observations hereinbefore quoted. What is revealing however, is that the reversal of his
original decision is inexplicably based on unsubstantiated surmises and non
sequiturs which he incorporated in his assailed resolution in this wise:
. . . While admittedly, no one directly saw Evelyn Chua and Bobby Qua
doing immoral acts inside the classroom it seems obvious and this Office
is convinced that such a happening indeed transpired within the solitude of
the classrom after regular class hours. The marriage between Evelyn
Chua and Bobby Qua is the best proof which confirms the suspicion that
the two indulged in amorous relations in that place during those times of
the day. . . . 27
With the finding that there is no substantial evidence of the imputed immoral acts, it
follows that the alleged violation of the Code of Ethics governing school teachers would
have no basis. Private respondent utterly failed to show that petitioner took advantage
of her position to court her student. If the two eventually fell in love, despite the disparity
in their ages and academic levels, this only lends substance to the truism that the heart
has reasons of its own which reason does not know. But, definitely, yielding to this
gentle and universal emotion is not to be so casually equated with immorality. The
deviation of the circumstances of their marriage from the usual societal pattern cannot
be considered as a defiance of contemporary social mores.
It would seem quite obvious that the avowed policy of the school in rearing and
educating children is being unnecessarily bannered to justify the dismissal of petitioner.
This policy, however, is not at odds with and should not be capitalized on to defeat the
security of tenure granted by the Constitution to labor. In termination cases, the burden
of proving just and valid cause for dismissing an employee rests on the employer and
his failure to do so would result in a finding that the dismissal is unjustified.
The charge against petitioner not having been substantiated, we declare her dismissal
as unwarranted and illegal. It being apparent, however, that the relationship between
petitioner and private respondent has been inevitably and severely strained, we believe
that it would neither be to the interest of the parties nor would any prudent purpose be
served by ordering her reinstatement.
WHEREFORE, the petition for certiorari is GRANTED and the resolution of public
respondent, dated December 6, 1978 is ANNULLED and SET ASIDE. Private
respondent Tay Tung High School, Inc. is hereby ORDERED to pay petitioner
backwages equivalent to three (3) years, without any deduction or qualification, and
separation pay in the amount of one (1) month for every year of service.
SO ORDERED.
Melencio-Herrera (Chairman), Paras and Padilla, JJ., concur.
Sarmiento, J., is on leave.
Ramos vs. NLRC, 298 SCRA 225,

GR 130473, October 21, 1988
[G.R. No. 130473. October 21, 1998]
ELIZABETH RAMOS, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION

(Third Division) LABOR ARBITER JOSE G. DE VERA AND U.S. EMBASSY
FILIPINO EMPLOYEES CREDIT COOPERATIVE (USECO) and its President,
MARVIN RAMOS, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari filed by Elizabeth Ramos to reverse the ruling of the
National Labor Relations Commission[1] affirming her suspension and dismissal from
employment for loss of trust and confidence.
In 1978, petitioner was employed as a bookkeeper-accountant by respondent United
States Embassy Filipino Employees Credit Cooperative (USECO).[2] Nine years later, she
was promoted to the position of Management Assistant. Her latest salary was P18,278.46
per month.
In 1993, the members of USECO elected a new set of Board of Directors. The Board,
led by its President, respondent Marvin Santos, created an Audit and Inventory
Committee (AIC) to determine whether USECO has a sound financial management and
control mechanism.
The committee unearthed anomalies in USECOs lending transactions. Its findings
were taken up in the June 4, 1993 meeting of the Board of Directors. Petitioner and her
co-employees, Luz Coronel and Nanette Legaspi, were called to shed light on some items
in the Audit Committee Report, to wit:
1. Unrecorded Loans
xx xx xx xx
The case of Aida Halasan (former USECO Assistant Treasurer) was particularly
discussed in regard to her previous loan amounting to P76,140 which the AIC
discovered as unrecorded in her ledger. The transaction was recorded in the
Cash Disbursement book and the check was issued for the net amount
of P74,417. Her ledger also showed no record of payment in any manner.
2. Fabricated Ledger
Alex Lopez and Steve Roldans true ledgers were hidden by Beth Ramos
(herein petitioner) and Luz Coronel and new ones were fabricated to conceal
their loans amounting to more than the P120,000 limit. x x x Luz explained that
she was given instructions to keep them from the Audit Committees knowledge.
xxx
3. Falsification of documents
Beth admitted her serious offense in regard to falsification of documents.
4. Accommodations of Payroll Checks

USECO staff granted a special privilege to certain employees regarding the
encashment of payroll checks one day in advance of the date on the check. It
was stopped earlier in the past as it added to the normal workload and was
deemed to be disadvantageous for the USECO because the interest to be
earned by the money for that day has been lost.
5. Encashment of Check/CPAs
Why was Beths signature/initial needed for Citibank to encash the check when
the signatures of the authorized officers already appear on the check?
Why were CPAs in the past released and encashed without the authorized signatures?
6. Resigned Members
When asked by the Board to explain how recently resigned members and other
resigned employees in the past were able to secure loans, Beth replied that she
just wanted to help members without regard to existing policies.
- Raquel Maniquiz case Raquel was able to make a loan amounting to P80,000
after she resigned and her loan application was approved only by Aida Halasan
(?). Beth Ramos indicated that Raquel intended to pay said loan thru her CSR
payment and terminal leave pay. x x x
Aside from granting Raquel the loan of P80,000 she was allowed to withdraw
her remaining deposit with the USECO. Beth Ramos was asked to explain how
this withdrawal was made possible. As she was unable to give the answer
during the meeting, she was asked to include it in her written reply.
xx xx xx xx
8. Unrecorded Loan of Resigned Members
Batoys case was classified under this irregularity which the AIC discovered
during the internal audit. Batoys loan was recorded in the cash disbursement
book in the name of E. Ramos. However, E. Ramos ledger does not show a
record of said loan. Beth Ramos was required by the board to include her
explanation of this case in her written explanation.
9. Withdrawal of more than the deposits.

Paladays case was mentioned under this irregularity. It was mentioned,
however, that there could have been an error in the running balance.
Another case is Rafael Tans over withdrawal which AIC considers not in error in
the running balance but an accommodation since he made a deposit of the
same amount the following day. (emphasis ours)
On June 17, 1993, respondent Ramos directed petitioner to submit her written
explanation on the aforementioned irregularities.
In her letter, dated June 18, 1993, petitioner made the following explanation:
x x x I believe that the President was then, as he is now fully aware of the prevailing
conditions in USECUs (sic) operations with respect to loan processing and approval. To
support my statement that the loans are approved based on prerogatives of individuals
in authority, I respectfully invite the Presidents attention to the letter of Mr. Franco dated
March 15, 1993, in which he very succinctly expressed his views about loans and I
quote Personally, I would rather violate an existing rule that jeopardize (sic) the welfare
of USECU members since most of their reasons were to defray their medical/hospital
expenses (and) of that of their dependents. This view is not restricted to Mr. Franco, but
(was) likewise held and maintained by previous Boards these past many, many years.
Given in the context of our culture the terms of employer-employee relationship, it is

unfortunate that the USECU Staff had to resort to creating dummy records. But since
the loans are duly acknowledged by the borrowers in other legitimate documents, it is
readily apparent that the records were made simply to accommodate those borrowers
beyond the authorized limits, but never, never to defraud USECU. In this regard, the
President is respectfully urged to consider the positions held by the concerned
borrowers not only in the USECU hierarchy when the loans were obtained, but also their
positions in their respective places of work within the U.S. Mission. It would have been
the height of naivete for the USECU Staff to impose the USECU rules and act holier
than thou in contravention of prevailing practice as very well expressed in Mr. Francos
letter. It is pointed out that these borrowers exceeding the prescribed limits must be fully
aware of their financial status each and every time they submitted applications for
additional loans. And in the absence of authority superior to the Board and mere
employees of the Board, where could the USECU Staff go, assuming that for a moment
for the sake of discussion, that the staff did not subscribe to the practice?
On July 20, 1993, petitioner was preventively suspended for thirty (30) days. On
August 19, 1993, petitioner was placed on forced leave with pay, pending the completion
of the investigation.
USECO also commissioned an external auditing firm, J.D. Cayetano & Associates,
to examine the irregularities discovered in its lending practices. The external auditor not
only confirmed the irregularities but also discovered shortages in bank deposits
by P360,964.38.
The Board of Directors held another meeting to study the report of the external
auditor. It noted overages in the loan receivables in the amount of P2,275,544.38. The
overages were attributed to several factors, i.e., non-recording of loan payments and/or
unauthorized or fictitious loans which were entered in the Cash Disbursement Book but
not in the individual subsidiary ledgers.
On September 17, 1993, USECO dismissed the petitioner for loss of trust and
confidence. Petitioner countered with a complaint[3] against USECO for illegal dismissal,
illegal suspension, underpayment of salary, moral damages and attorneys fees. She
prayed for her reinstatement with backwages, or in the alternative, for the payment of
separation pay.
In a Decision[4] dated April 24, 1995, Labor Arbiter Jose G. De Vera sustained the
suspension and dismissal of petitioner but ordered the payment of her unpaid salary. Its
dispositive portion reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby

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

Decision[5] dated February 18, 1997, the NLRC reversed the labor arbiter. USECOs first
motion for reconsideration was denied for lack of merit.[6] Undaunted, USECO filed a
Second Motion for Reconsideration.[7] In its Resolution dated May 6, 1997, the NLRC
granted the motion and reinstated the decision of the labor arbiter.[8] The relevant portion
of the resolution reads:
x x x (w)e cannot blame respondents from suspending complainant (petitioner).

Obviously, the provision of law for the immediate suspension of what is believed to be a
dishonest employee is an appropriate measure of self-preservation, for the continuance
in office of such an employee poses grave danger to the viability and continued
existence of the cooperative.
In view of all the foregoing circumstances, we find that there is indeed justifiable cause
for complainants dismissal on the ground of breach of trust. There can be no doubt that
complainants continuance in the clearly sensitive and fiduciary position of Management
Assistant would patently inimical to the cooperatives interest. It would be oppressive
and unjust to order the respondent to take her back; for the law, in protecting the rights
of the worker, authorizes neither oppression nor self-destruction of the employer.
WHEREFORE, the instant motion is hereby GIVEN DUE COURSE. The Decision of 18
February 1997 as well as the Resolution of 26 March 1997 of this Commission are
hereby SET ASIDE and the 24 April 1995 decision of the Labor Arbiter, REINSTATED
and AFFIRMED.
It was petitioners turn to move for a reconsideration on the ground that a second
motion for reconsideration is not allowed under the New Rules of Procedure of the NLRC.
The motion was denied in a Resolution dated August 29, 1997. [9] The NLRC ruled:
Indeed, the rule is always in favor of liberality in the construction of procedural laws so
that the real matter in dispute, as in the instant case, may be submitted and decided
properly and in accordance with the law and established jurisprudence. Rigid
specifications (Rules of Procedure) set by the human mind may, at times, be relaxed so
as to give way to the sense of fair play as recognized by equity when the peculiar
circumstances of a case, like the one at bench, so warrant. After all, the Rules of
Procedure were never intended to override the ends of justice.
xxx xxx xxx
WHEREFORE, premises considered, the Motion for Reconsideration is hereby

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

bank reconciliation statements;
2. Renders budgetary advices to the Board of Directors and monitors the
Unions marketable securities and investments.
3. Pre-audits loan applications and vouchers, prepares checks, effects deposits

to the bank and performs USECUs (sic) small scale payroll.
4. Reconciles ledgers, maintains the Cash Disbursement books, prepares

correspondences and supervises the activities of the U.S. Embassy Credit
Union.
5. Supervises the accounting system and is responsible for overall general

upkeep of the USECU office and oversees the Unions central record files.
Loss of confidence is a valid ground for dismissal of an employee. [10] In the case at
bar, USECO proved that its loss of confidence on petitioner has a rational basis. The
findings of the labor arbiter on this factual issue are supported by the evidence and we
quote:
The evidence of irregular and anomalous transactions in the lending operations of

USECO is quite insurmountable. These were initially discovered by the Audit and
Inventory Committee when it embarked on the examination of pertinent records, books
of accounts, reports and other papers covering transactions for the period from
November 1, 1991 up to March 31, 1993. Due to these irregularities and anomalies, not
only were established policies of USECO violated but also the specter of huge losses
looms inasmuch as there is no assurance that outstanding loans granted to some
fortyfour (44) resigned members amounting to P1,047,015.45 may be collected.
Foremost among the policies that were ignored are those enumerated in USECO
Circular No. 91-02, as amended by USECO Circular No. 92-03 (Exh. 1 and 2)
specifying the following criteria before any loan may be extended:
1. Loans are available to all members regardless of grade, level, provided, the
borrower-members application is equivalent to 120% of his/her total gross annual
salary, fringe benefits included, but not to exceed P120,000.00, provided further , that
his/her pay check should not be less than 50% of his/her gross pay per pay period.
2. A borrower-members savings (including his share capital) must be no less than 50%
of the amount being loaned, prior to the submission of the loan application (with
guarantor) or 75% (without guarantor).x x x.
xx xx xx xx
4. Withdrawals will be authorized, provided that at least 50% of the loan balance (with
guarantor) will remain in his/her savings deposit or at least 75% if without guarantor.
5. No new loans may be granted unless 50% of the loan has been paid.
6. Loan applications from over P50,000.00 to P120,000.00 must be pre-audited by the

management staff, recommended for approval by the Credit Committee and must be
approved by all members of the Board of Directors. Loan applications of P50,000.00
and below must be approved by the Credit Committee.
7. Loans shall be extended only to members who have subscribed and fully paid the
required 100 shares or Pl,000.00 share capital.
Based on the report of the Audit and Inventory Committee (Exh. "3") as well as the
report of the external auditor, J.D. Cayetano & Associates (Exh. "9"), there were six (6)
cooperative members who were extended loans more than the allowed maximum
of P120,000.00, namely, Luz Coronel - P278,500.00; Myrna Legaspi - P153,275.00;
Primitivo Roldan P336,855.00; Cipriano Beltran - P135,000.00; Guillermo Corospe
- P175,511.00; and Alejandro Lopez - P1,331,725.00. Of their total loan
of P2,410,866.00, there is an excess of P1,690,866.0 over the maximum allowable loan
limit. One of the established control measures provided in the USECO Circulars
aforementioned is the pre-audit of loan applications by the complainant in her capacity
as management assistant. Apparently, she failed in her duty as such.
"The audit reports also show that there are thirty-three (33) borrowers who were able to
make out loans although their paid-in shares were less than 50% of the amount
borrowed. Of the total loans of P3,985,830.00, the required paid-in shares should have
been P1,992,916.00, but these thirty-three (33) member-borrowers only have a
cumulative deposit of P584,362.00. Again, there appears to be a failure on, the part of
the complainant in the exercise of her pre-audit functions.
"Further, it appears from the audit reports that there are twenty-nine (29) loan
applications with a total of P107,740.00 that were granted without the required approval
from the majority of the Board of Directors. Certainly, as a pre-auditor the complainant
may not pretend not to know this.
"More serious violation appears in the grant of loans to resigned employees who
automatically became non-members upon their resignation. There are forty-four (44) of
them with an aggregate loan of P1,047,015.45. Collecting this amount from said
borrowers is quite difficult at this point.
"The irregularities, deficiencies, or nonconformity with established rules or policies that
attended the abovementioned loans could not have escaped the complainant's notice
being the designated pre-audit personnel. Had she diligently stuck to her, role as such,
these questionable loans could not have been extended for she may deny the pre-audit
of the subject loan applications for failure to comply with established policies. Or better
still, she could always bring her observations to the board and recommend denial of
said loan applications. The conclusion of this Arbitration Branch is that nothing of this
sort was done by the complainant.
"Complainant was also found on audit that she signed without authority cash payment
advices (CPAS) on five (5) occasions, instead of the authorized signatories.
"There are cases of unrecorded loans such as that obtained by Adelaida Halasan on
December 12, 1991 in the amount of P76,417.00; it was found out that the transaction
was not posted in the ledger of Ms. Halasan and there was no record of subsequent
payments. Another unrecorded loan is that made out in the name of Benedicto Batoy
which stirs (sic) a mystery on the matter of how the loan was granted. We quote the
Committee Report (Exh. "3", p. 19), as follows:
'This member resigned June 23, 1986. he was granted a loan amount to
(sic) P5,000.00 on March 4, 1993 per Vou. no. C-131 and Check no. 651991 was
issued (Exhibit 17).
'A review of the application shows that it was not signed by Mr. Batoy. There were (sic)
no approval from any of the Board of Directors. A name of the company (PCC
Construction Company) was written on the bottom part of the application.
'This particular transaction was recorded in the Cash Disbursement Book under the
name of E. Ramos. However, this was not posted on E. Ramos' ledger nor was there a
record of payment. There was no ledger made for Mr. Batoy during FY 1992 to post this
transaction.
'Further, review of pertinent records shows that Ch #651991 is missing on the file of
paid checks. The bank statement, however, shows that the check was
presented/cleared to the bank.'
The Complainant was also found to have fabricated ledgers to conceal the correct
balance of a borrower. The Audit report states:
'During the time that audit is ongoing, it was discovered that Mr. Lopez has an
additional two (2) sets of ledgers. The first ledger has a deposit balance of P56,920.00,
loan balance of P585,800.00 as of March 4, 1993. The second ledger has a zero
deposit and a loan balance of P835,620.00 for the same date.
'When questioned, Beth Ramos and Luz Coronel admitted that the last two ledgers are
the correct account balances of Mr. Lopez. The first ledger which was presented during
the audit was a fabricated one. They confessed that they attempted to conceal the
correct balance of Mr. Lopez by creating another ledger.
'Further investigation revealed that USECO staff also fabricated the 1992 ledger of Mr.
Lopez. A review of 1992 records shows the existence of two (2) ledgers. The first ledger
has a deposit of P58,980.58 and loan balance of P623,800.00. The second ledger has a
zero deposit and loan balance of P844.620.00 (Exh. 131, p. 22).
Capping the foregoing irregularities abovestated is the finding of the external auditor of
a shortage in the cash in bank in the amount of P360,964.61, not to mention overages
in loans receivable in the sum of P2,275,544.38." (emphasis ours)
Petitioner's explanation that the "loan practices" were made for the benefit of the
borrowing members and not to defraud USECO cannot exonerate her. As aptly pointed
out by the Solicitor General, her unsound practices endangered the financial condition of
USECO because of the possibility that the loans could not be collected at all.
We also do not agree that petitioner was denied due process before she was
suspended and later dismissed. The records show that on June 4, 1993, petitioner was
called by the USECO Board of Directors and confronted with the findings of the Audit,
and Inventory Committee showing the irregularities she committed. On June 17, 1993,
she was asked to explain in writing these irregularities. The next day, petitioner submitted
her written explanation. Thus, petitioner cannot complain that she did not understand the
charges against her. She is educated and she immediately explained her side. Due
process simply demands an opportunity to be heard and this opportunity was not denied
her.
We also hold that the NLRC did not commit grave abuse of discretion in entertaining
the second motion for reconsideration filed by USECO. Section 14 of the Rules of the
NLRC provides:
"Section. 14. Motions for Reconsideration.--Motions for reconsideration of any order,

resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten (10)
calendar days from receipt of the order, resolution or decision, with proof of service that
a copy of the same has been furnished, within the reglementary period, the adverse
party, and provided further that only one such motion from the same party shall be
entertained."
The NLRC initially reversed the ruling of the labor arbiter on the grounds that: (1)
petitioner was denied procedural due process and (2) the criminal case for estafa filed
against her has been dismissed by the Manila Prosecutor's Office for insufficiency of
evidence, particularly, for lack of proof that the USECO was damaged by the acts
attributed to petitioner.
These are patent errors. As discussed above, petitioner was not denied due
process. Similarly, it is a well established rule that the dismissal of the criminal case
against an employee shall not necessarily be a bar to his dismissal from employment on
the ground of loss of trust and confidence.[11] The NLRC corrected these patent errors
when it granted private respondent's second motion for reconsideration. Section 14 of the
NLRC rules cannot be construed as to prevent the NLRC from relieving itself from patent
errors in order to render justice. Technical rules of procedure are not meant to frustrate
but to facilitate justice. This norm finds more application in administrative agencies which
were created to dispense justice with greater freedom from the strictures of technical rules
of procedure.
WHEREFORE, premises considered, the petition is dismissed for lack of merit. No
costs.
SO ORDERED.
Melo, (Acting Chairman), Mendoza, and Martinez, JJ., concur.
Globe vs. Florendo, 390 SCRA 201,

GR 150092, September 27, 2002
[G.R. No. 150092. September 27, 2002]
GLOBE TELECOM, INC., DELFIN LAZARO, JR., and ROBERTO GALANG, petitioners,
vs. JOAN FLORENDO-FLORES, respondent.
DECISION
BELLOSILLO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to annul and
set aside the Decision[1] of the Court of Appeals of 25 May 2001 in CA-G.R. SP No. 60284
which affirmed the Decision of the National Labor Relations Commission of 28 January
2000 in NLRC RAB-CAR 05-0170-98, NLRC NCR CA No. 020270-99.[2]
Petitioner GLOBE TELECOM, INC. (GLOBE) is a corporation duly organized and
existing under the laws of the Philippines. Petitioners Delfin Lazaro Jr. was its President
and Roberto Galang its former Director-Regional Sales. Respondent Joan Florendo-
Flores was the Senior Account Manager for Northern Luzon.
On 1 July 1998 Joan Florendo-Flores filed with the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC) an amended complaint for constructive
dismissal against GLOBE, Lazaro, Galang, and Cacholo M. Santos, her immediate
superior, Luzon Head-Regional Sales. In her affidavit submitted as evidence during the
arbitration proceedings, Florendo-Flores bared that Cacholo M. Santos never
accomplished and submitted her performance evaluation report thereby depriving her of
salary increases, bonuses and other incentives which other employees of the same rank
had been receiving; reduced her to a house-to-house selling agent (person-to-person
sales agent or direct sales agent) of company products ("handyphone") despite her rank
as supervisor of company dealers and agents; never supported her in the sales programs
and recommendations she presented; and, withheld all her other benefits, i.e., gasoline
allowance, per diems, representation allowance, and car maintenance, to her extreme
pain and humiliation.[3]
GLOBE and its co-petitioners claimed that after receiving her salary in the second
week of May 1998 Florendo-Flores went AWOL (Absent Without Leave) without signifying
through letter or any other means that she was resigning from her position; that
notwithstanding her absence and the filing of her case, respondent Florendo-
Flores' employment was not terminated as shown by the fact that salary was still provided
her until July 1998 to be released upon her presentation of the attendance-record sheet
indicating that she already returned and reported for work; that she continued to have the
use a of company car and company "handyphone" unit; that she was replaced only when
her absence became indefinite and intolerable as the marketing operations in Northern
Luzon began to suffer; that during the pre-trial conference it was learned that Florendo-
Flores' complaint rested on her alleged personal and private disagreement with her
immediate superior Cacholo M. Santos; that there was no official act from GLOBE or from
other officers of the company, including respondents Lazaro and Galang, which called for
Florendo-Flores' termination, diminution in rank, seniority and benefits, or would imply,
even remotely, any of the same; and, that Florendo-Flores filed the complaint without
going through the grievance process of GLOBE's Human Resources Department and
without informing its officers of her problems with Cacholo M. Santos.
Labor Arbiter Monroe C. Tabingan declared Florendo-Flores to have been illegally
dismissed and ordered petitioners to reinstate her without loss of seniority rights and full
benefits; and to pay full back wages, inclusive of basic pay, allowances and bonuses as
prayed for in the complaint amounting to P307,625.00, exemplary damages in the sum
of P200,000.00, and ten percent (10%) of the total monetary award as attorney's
fees. However, the Labor Arbiter set aside the claim of abandonment as the company
failed to send the requisite notice to Florendo-Flores,[4] hence, there was no adherence to
procedural due process. Although he recognized that the problem brewed and eventually
boiled over due to the acts of Cacholo M. Santos, GLOBE's former Head of Regional
Sales, Luzon Area, the Labor Arbiter found the company negligent in monitoring all its
key personnel, and thus assessed against it exemplary damages at the same time
deleting actual and moral damages.[5]
Petitioners appealed the decision to the NLRC which modified the judgment of the
Labor Arbiter. The NLRC ruled that petitioners did not dismiss Florendo-Flores but that
the latter actually abandoned her employment because of a disagreement with her
immediate superior which she failed to bring to the attention of GLOBE and its officers,
particularly petitioners Lazaro and Galang.[6] However, the NLRC declared that if only as
an act of grace for the latter's past services with the company, GLOBE, Lazaro and
Galang should be held accountable for the back wages of Florendo-Flores amounting
to P307,625.00 minus the amount of P63,000.00 for the value of the company car in
Florendo-Flores' possession, or the net amount of P244,625.00.[7]
Both parties elevated the NLRC decision to the Court of Appeals, each side through
a petition for certiorari. In its Resolution of 2 September 2000 the appellate court
dismissed the petition of Florendo-Flores for failure to append the required verification
and certification of non-forum shopping,[8] while it gave due course to the petition of
GLOBE, Lazaro and Galang.
In their petition before the appellate court, GLOBE, Lazaro and Galang averred that
the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction
when it ordered them to pay Florendo-Flores full back wages and damages despite its
express finding that they did not cause the dismissal of Florendo-Flores as the latter had
actually abandoned her employment on account of her personal differences with her
superior.
In its Decision of 25 May 2001 the Court of Appeals found that Florendo-Flores was
constructively dismissed and that payment of back wages and damages was in order. On
21 June 2001 GLOBE, Lazaro and Galang filed a motion for reconsideration but the
motion was denied in the appellate court's Resolution of 19 September 2001.
Petitioners pose the following questions in this petition: In a special civil action for
certiorari where factual findings are deemed to be final and conclusive, can the Court of
Appeals alter or substitute the findings of fact of the lower court/tribunal? In the face of
the finding of the NLRC that respondent abandoned her employment because of a
personal squabble with her immediate superior, and that petitioners had nothing to do
with the severance of Flores' employment, can petitioners be held legally liable for back
wages while the guilty party Cacholo M. Santos is legally absolved of liability?
Petitioners submit that the answers to both questions must be in the negative. They
argue that the appellate court can neither alter nor substitute the factual findings of the
NLRC as they are legally deemed to be final and conclusive in a
certiorari proceeding. They contend that a special civil action for certiorari is an
extraordinary remedy created not to correct mistakes in the factual findings or conclusions
of the lower court or tribunal, but a remedy intended to rectify jurisdictional errors and
grave abuse of discretion. Thus, the Court of Appeals cannot make its own factual
findings and substitute them for the factual findings of the NLRC, and on such basis
render a decision.
Petitioners further note that the appellate court failed to address the issues raised in
their petition. They reiterate their position that they cannot be held liable for payment of
back wages as an act of grace in view of the express finding by the NLRC that respondent
abandoned her employment because of a personal rift with her immediate superior and
not due to any act attributable to them. They stress that there can be no liability in the
absence of any wrongful act.
Invoking the principle of res inter alios acta declaring that the rights of a party cannot
be prejudiced by the act, declaration or omission of another, petitioners insist that since
the NLRC found that respondent's problems arose from the acts and deeds of Santos, he
alone should be held liable. Petitioners find special exception to the NLRC's application
of the concept of "act of grace" to justify the award since an "act of grace is not a source
of demandable obligation. They argue that it is not within the power of any judicial or
administrative agency to compel an employer to be liberal.
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion on the
part of the labor tribunal.[9] Hence, the Court refrains from reviewing factual assessments
of lower courts and agencies exercising adjudicative functions, such as the
NLRC.Occasionally, however, the Court is constrained to delve into factual matters
where, as in the instant case, the findings of the NLRC contradict those of the Labor
Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings.[10] As a corollary, this Court
is clothed with ample authority to review matters, even if they are not assigned as errors
in their appeal, if it finds that their consideration is necessary to arrive at a just decision
of the case.[11] The same principles are now necessarily adhered to and are applied by
the Court of Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a factual
determination of the matters and on that basis reversed the ruling of the NLRC.
Glaring however is the discrepancy between the text of the decision of the appellate
court which declares that respondent Florendo-Flores "was unlawfully constructively
dismissed" from employment,[12] and its dispositive portion which declares that "the
assailed judgment is affirmed."[13] It should be noted that the "assailed judgment" referred
to the NLRC Decision which declared that respondent was not illegally dismissed but that
she abandoned her employment. Even in the award of back wages and exemplary
damages the two (2) decisions are at odds: The award of back wages made by the NLRC
was a gratuity or an act of grace from petitioners while the award made by the Court of
Appeals could be assumed to be anchored on its finding of illegal dismissal. How should
the inconsistency be reconciled?
Where there is conflict between the dispositive portion of the decision and the body
thereof, the dispositive portion controls irrespective of what appears in the body. [14]While
the body of the decision, order or resolution might create some ambiguity in the manner
the court's reasoning preponderates, it is the dispositive portion thereof that finally invests
rights upon the parties, sets conditions for the exercise of those rights, and imposes the
corresponding duties or obligations.[15] Hence, for the Court of Appeals to have affirmed
the assailed judgment is to adopt and uphold the NLRC finding of abandonment and its
award of full back wages to respondent as an "act of grace" from petitioners.
However, we believe this is not the proper view as the records reveal that respondent
was constructively dismissed from service.
Constructive dismissal exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer
involving ademotion in rank and a diminution in pay."[16] All these are discernible in
respondent's situation. She was singularly edged out of employment by the unbearable
or undesirable treatment she received from her immediate superior Cacholo M. Santos
who discriminated against her without reason - not preparing and submitting her
performance evaluation report that would have been the basis for her increased salary;
not forwarding her project proposals to management that would have been the source of
commendation; diminishing her supervisor stature by assigning her to house-to-house
sales or direct sales; and withholding from her the enjoyment of bonuses, allowances and
other similar benefits that were necessary for her efficient sales performance. Although
respondent continued to have the rank of a supervisor, her functions were reduced to a
mere house-to-house sales agent or direct sales agent. This was tantamount to a
demotion. She might not have suffered any diminution in her basic salary but petitioners
did not dispute her allegation that she was deprived of all benefits due to another of her
rank and position, benefits which she apparently used to receive.
Far from pointing to Santos alone as the source of her woes, respondent attributes
her degraded state to petitioners as well. Florendo-Flores cited petitioners' apathy or
indifference to her plight as she was twice left out in a salary increase in August 1987 and
May 1998, without petitioners giving her any reason.[17] It eludes belief that petitioners
were entirely in the dark as the salary increases were granted to all employees across-
the-board but respondent was the only one left receiving a P19,100.00 per month basic
salary while the rest received a basic salary of almost P35,000.00 per month.[18] It is
highly improbable that the exclusion of respondent had escaped petitioners' notice. The
absence of an evaluation report from Santos should have been noted by petitioners and
looked into for proper action to have been made. If a salary increase was unwarranted,
then it should have been sufficiently explained by petitioners to respondent.
Petitioners argue that respondent Florendo-Flores could have brought to their
attention the deplorable treatment she received from Santos by resorting to the
company's grievance machinery so that the problems in her relationship with Santos
could then have been easily ironed out, but she did not. It remains uncontroverted that
respondent had inquired from petitioners the reason why her other benefits had been
withheld and sought clarification for her undeserved treatment but petitioner company and
Santos remained mum.[19]
Thus, contrary to the observation of the NLRC, the dispute was not a mere private
spat between respondent Florendo-Flores and her immediate superior Santos.Granting
that this was the case, it had exceeded the periphery of simple personal affairs that
overflowed into the realm of respondent's employment.
Respondent narrates that sometime in June 1997 Santos wrote her a baseless
accusatory letter, and he together with GLOBE Sales Director Roberto Galang, one
ofpetitioners herein, verbally told her that she should resign from her job, but she
refused.[20] Thereafter, in July 1997 and the months subsequent thereto all of
respondent's other benefits were withheld without any reason nor explanation from the
company.[21] Even as petitioners endeavored to lay the blame on Santos alone, he would
not have been able to single-handedly mastermind the entire affair as to influence Sales
Director Galang and manipulate the payroll. It only stands to reason that Santos was
acting pursuant to a management directive, or if not, then petitioners had condoned it, or
at the very least, were negligent in supervising all of their employees. As aptly observed
by the Labor Arbiter -
x x x x it would appear however that the respondent company was negligent in

monitoring all its key personnel. For it is the bounden duty of the corporate officialdom
to constantly monitor their managerial staff if only to ascertain the smooth flow of work
and operations, which includes the inter-personal relations of each and every key
segment of the corporate machinery. For such, it must be assessed with just and
reasonable exemplary damages.[22]
The unauthorized absence of respondent should not lead to the drastic conclusion
that she had chosen to abandon her work. To constitute abandonment, there must be: (a)
failure to report for work or absence without valid or justifiable reason; and, (b) a clear
intention, as manifested by some overt act, to sever the employer-employee
relationship,[23] requisites that are negated by the immediate filing by respondent
Florendo-Flores of a complaint for constructive dismissal against petitioners. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal
dismissal; more so, when it includes a prayer for reinstatement.[24]
The reduction of respondent's functions which were originally supervisory in nature
to a mere house-to-house sales agent or direct sales agent constitutes a demotion in
rank. For this act of illegal dismissal, she deserves no less than full back wages starting
from the time she had been illegally dismissed until her actual reinstatement to her former
position without loss of seniority rights and other benefits - earned, accrued and
demandable. She shall continue to enjoy her benefits, privileges and incentives including
the use of the company car and "handyphone."
The managerial prerogative to transfer personnel must be exercised without grave
abuse of discretion. It must always bear in mind the basic elements of justice and fair
play. Having the right should not be confused with the manner that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker.[25]
In constructive dismissal, the employer has the burden of proving that the transfer
and demotion of an employee are for just and valid grounds such as genuine business
necessity.[26] The employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee. It must not involve a demotion in rank or a
diminution of salary and other benefits. If the employer cannot overcome this burden of
proof, the employee's demotion shall be tantamount to unlawful constructive dismissal.
It should be noted that the award of back wages in the instant case is justified upon
the finding of illegal dismissal, and not under the principle of "act of grace" for past
services rendered. There are occasions when the Court exercises liberality in granting
financial awards to employees, but even then they contemplate only the award of
separation pay and/or financial assistance, and only as a measure of social justice when
the circumstances of the case so warrant, such as instances of valid dismissal for causes
other than serious misconduct or those reflecting on the employees' moral
character.[27] Proper regard for the welfare of the labor sector should not dissuade us from
protecting the rights of management such that an award of back wages should be
forthcoming only when valid grounds exist to support it.
An award of actual and moral damages is not proper as the dismissal is not shown to
be attended by bad faith, or was oppressive to labor, or done in a manner contrary to
morals, good customs or public policy.[28] Exemplary damages are likewise not proper as
these are imposed only if moral, temperate, liquidated or compensatory damages are
awarded.[29]
WHEREFORE, the judgment appealed from is MODIFIED. The Decision of the Court
of Appeals of 25 May 2001 in CA-G.R. SP No. 60284 affirming the Decision of the
National Labor Relations Commission of 28 January 2000 declaring that respondent Joan
Florendo-Flores had abandoned her work is SET ASIDE. Petitioners Globe Telecom, Inc.,
Delfin Lazaro, Jr., and Roberto Galang are ordered to pay respondent Joan Florendo-
Flores full back wages from the time she was constructively dismissed on 15 May 1998
until the date of her effective reinstatement, without qualification or
deduction. Accordingly, petitioners are ordered to cause the immediate reinstatement of
respondent to her former position, without loss of seniority rights and other benefits. No
pronouncement as to costs.
SO ORDERED.
Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.
Mendoza, J., on official leave.
IV. Assignment for Nov. 25, 2017
Statutory Reference: Arts. 298 to 301 of the Labor Code and related provisions in the
Omnibus Rules
Cases:
Escareal vs. NLRC, 213 SCRA 472,

GR 99359, Sep. 2, 1992
[G.R. No. 99359. September 2, 1992.]
ORLANDO M. ESCAREAL, Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION, HON. MANUEL P. ASUNCION, Labor Arbiter, NLRC, National Capital
Region, PHILIPPINE REFINING COMPANY, INC., CESAR BAUTISTA and GEORGE
B. DITCHING, Respondents.
R.S. Arlanza & Associates for Petitioner.

Siguion Reyna, Montecillo & Ongsiako for Private Respondents.
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;

REDUNDANCY IN PERSONNEL FORCE AS A GROUND; DEFINED. In Wiltshire
File Co., Inc. v. NLRC, (193 SCRA 665 [1991]) this Court held that redundancy, for
purposes of the Labor Code, exists where the services of an employee are in excess of
what is reasonably demanded by the actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as the overhiring of workers, a decreased volume
of business or the dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. Redundancy in an employers personnel
force, however, does not necessarily or even ordinarily refer to duplication of work. That
no other person was holding the same position which the dismissed employee held prior
to the termination of his services does not show that his position had not become
redundant.
2. ID.; ID.; ID.; NOT JUSTIFIED IN CASE AT BAR; REASON THEREFOR. Private
respondent PRC had no valid and acceptable basis to declare the position of Pollution
Control and Safety Manager redundant as the same may not be considered as
superfluous; by the express mandate of the provisions earlier cited, said positions are
required by law. Thus, it cannot be gainsaid that the services of the petitioner are in
excess of what is reasonably required by the enterprise. Otherwise, PRC would not
have allowed ten (10) long years to pass before opening its eyes to that fact; neither
would it have increased the petitioners salary to P23,100.00 a month effective 1 April
1988. The latter by itself is an unequivocal admission of the specific and special need
for the position and an open recognition of the valuable services rendered by the
petitioner. Such admission and recognition are inconsistent with the proposition that
petitioners positions are redundant. If based on the ground of redundancy, a
substitution of the petitioner by Miguelito S. Navarro would be invalid as the creation of
said position is mandated by the law; the same cannot therefore be declared redundant.
If the change was effected to consolidate the functions of the pollution control and
safety officer with the duties of the Industrial Engineering Manager, as private
respondent postulates, such substitution was done in bad faith for as had already been
pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was to
generate savings in terms of the salaries that PRC would not be paying the petitioner
any more as a result of the streamlining of operations for improved efficiency, such a
move could hardly be justified in the face of PRCs hiring of ten (10) fresh graduates for
the position of Management Trainee and advertising for vacant positions in the
Engineering/Technical Division at around the time of the termination. Besides, there
would seem to be no compelling reason to save money by removing such an important
position. As shown by their recent financial statements, PRCs year-end net profits had
steadily increased from 1987 to 1990. While concededly, Article 283 of the Labor Code
does not require that the employer should be suffering financial losses before he can
terminate the services of the employee on the ground of redundancy, it does not mean
either that a company which is doing well can effect such a dismissal whimsically or
capriciously. The fact that a company is suffering from business losses merely provides
stronger justification for the termination.
3. ID.; ID.; RIGHT OF EMPLOYEE ILLEGALLY DISMISSED; RULE; CASE AT BAR.

Since We have concluded that the petitioners dismissal was illegal and can not be
justified under a valid redundancy initiative, Article 283 of the Labor Code, as amended,
on the benefits to be received by the dismissed employee in the case of redundancy,
retrenchment to prevent losses, closure of business or the installation of labor saving
devices, is not applicable. Instead, We apply Article 279 thereof which provides, in part,
that an "employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
4. ID.; RIGHT OF EMPLOYEE TO SECURITY OF TENURE; CONSTRUED IN CASE

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

THEREIN; EXPLAINED; CASE AT BAR. An examination of the contents of the
contract of employment yields the conclusion arrived at by the Solicitor General. There
is no indication that PRC intended to offer uninterrupted employment until the petitioner
reached the mandatory retirement age; it merely informs the petitioner of the
compulsory retirement age and the terms pertaining to the retirement. In Brent School,
Inc. v. Zamora, (181 SCRA 702 [1990]) this Court, in upholding the validity of a contract
of employment with a fixed or specific period, declared that the "decisive determinant in
term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that
which must necessarily come, although it may not be known when." (Id., citing Article
1193 (third paragraph), Civil Code) The term period was further defined to be, "Length
of existence; duration. A point of time marking a termination as of a cause or an activity;
an end, a limit, a bound; conclusion; termination. A series of years, months or days in
which something is completed. A time of definite length. . . . the period from one fixed
date to another fixed date . . . ." (Id., citing Capiral v. Manila Electric Co., 119 Phil. 124
[1963], cited in MORENO, Philippine Law Dictionary, 3rd ed.)
6. ID.; SEPARATION PAY; DISTINGUISHED FROM BACKWAGES. In Torillo v.

Leogardo, Jr., (197 SCRA 471 [1991]) an amplification was made on Article 279 of the
Labor Code and the distinction between separation pay and backwages. Citing the case
of Santos v. NLRC, (154 SCRA 166 [1987]), We held in the former: "The normal
consequences of a finding that an employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement to his former position without loss
of seniority rights and, secondly, the payment of backwages corresponding to the period
from his illegal dismissal up to actual reinstatement . . . Though the grant of
reinstatement commonly carries with it an award to backwages, the inappropriateness
or non-availability of one does not carry with it the inappropriateness or non-availability
the other . . . Put a little differently, payment of backwages is a form of relief that
restores the income that was lost by reason of unlawful dismissal; separation pay, in
contrast, is oriented towards the immediate future, the transitional period the dismissed
employee must undergo before locating a replacement job."
DECISION
DAVIDE, JR., J.:
Petitioner seeks to set aside the Decision 1 dated 14 January 1991 and the Resolution
2 dated 13 May 1991 of the respondent National Labor Relations Commission
(hereinafter, NLRC) in NLRC Case No. 00-08-03412-88 entitled Orlando M. Escareal v.
Philippine Refining Company, Inc. The said Decision affirmed with modification the 19
February 1990 Decision 3 of the respondent Labor Arbiter Manuel P. Asuncion while the
Resolution denied the motion for a reconsideration of the former.cralawnad
The dispositive portion of the respondent Labor Arbiters Decision

reads:jgc:chanrobles.com.ph
"WHEREFORE, the respondent is hereby ordered to pay the complainant his

redundancy pay in accordance with existing company policy on the matter. This is
without prejudice to the grant of additional benefits offered by the respondent during the
negotiation stage of the case, though it never materialized for failure of the parties to
reach an agreement.
SO ORDERED."cralaw virtua1aw library
The controversy stemmed from the dismissal of the petitioner from the private
respondent Philippine Refining Company, Inc. (hereinafter, PRC) after almost eleven
(11) years of gainful employment.
Petitioner was hired by the PRC for the position of Pollution Control Manager effective
on 16 September 1977 with a starting monthly pay of P4,230 00; 4 the employment was
made permanent effective on 16 March 1978. 5 The contract of employment provides,
inter alia, that his "retirement date will be the day you reach your 60th birthday, but there
is provision (sic) for voluntary retirement when you reach your 50th birthday. Bases for
the hiring of the petitioner are Letter of Instruction (LOI) No. 588 implementing the
National Pollution Control Decree, P.D No. 984, dated 19 August 1977, the pertinent
portion of which reads:jgc:chanrobles.com.ph
"1. All local governments, development authorities, government-owned or controlled

corporations, industrial, commercial and manufacturing establishments, and all other
public and private entities, whose functions involve the discharge or emission of
pollutants into the water, air and/or land resources or the operation, installation or
construction of any anti-pollution device, treatment work or facility, sewerage or
sewerage disposal system, shall each appoint and/or designate a Pollution Control
Officer." chanrobles law library
and Memorandum Circular No. 02, 6 dated 3 August 1981 and implementing LOI No.
588, which amended Memorandum Circular No. 007, Series of 1977, issued by the
National Pollution Control Commission (NPCC), the pertinent portions of which
read:jgc:chanrobles.com.ph
"Section 3. Appointment/Designation of Pollution Control Officer. All local

governments, development authorities, government-owned or controlled corporations,
industrial and manufacturing establishments, and public and private entities falling
within the purview of Letter of Instruction No. 588, shall each appoint and/or designate a
Pollution Control Officer.
x x x
Section 6. Employment Status-In the employment of Pollution Control Officer, the

following additional requirements shall be observed:chanrob1es virtual 1aw library
x x x
(b) Private Entities
1. Industrial and Manufacturing establishment and other private entities with

capitalization of one million pesos and above shall employ a full time pollution control
officer.
x x x
Section 9. Accreditation of Pollution Control Officer. A (sic) duly appointed and/or

designated pollution control officers shall submit copies of their designation and/or
appointments to the Commission within thirty (30) days from the date of such
designation/appointment together with their biodata and curriculum vitae for
accreditation purposes. In case of the termination of the appointment/designation of a
pollution control officer for any reason whatsoever, it shall be the responsibility of his
employer to inform the Commission of the same immediately to appoint/designate his
successor within thirty (30) days after said termination. (Emphasis supplied)"
On 1 April 1979, petitioner was also designated as Safety Manager pursuant to Article
162 of the Labor Code (P.D. 442, as amended) and the pertinent implementing rule
thereon. At the time of such designation, petitioner was duly accredited as a Safety
Practitioner by the Bureau of Labor Standards, Department of Labor and Employment
(DOLE) and the Safety Organization of the Philippines. Article 162 of the Labor Code,
as amended, provides:chanrobles virtual lawlibrary
ARTICLE 162. Safety and Health Standard. The Secretary of Labor shall, by
appropriate orders, set and enforce mandatory occupational safety and health
standards to eliminate or reduce occupational safety and health hazards in all
workplaces and institute new, and update existing, programs to ensure safe and
healthful working conditions in all places of employment."cralaw virtua1aw library
In addition, the pertinent rules on Occupational Health and Safety implementing the
Labor Code provide for the designation of full-time safety men to ensure compliance
with the safety requirements prescribed by the Bureau of Labor Standards. 7
Consequently, petitioners designation was changed to Pollution Control and Safety
Manager.
In the course of his employment, petitioners salary was regularly upgraded; the last pay
hike was granted on 28 March 1988 when he was officially informed 8 that his salary
was being increased to P23,100.00 per month effective 1 April 1988. This last increase
is indisputably a far cry from his starting monthly salary of P4,230.00.
Sometime in the first week of November 1987, private respondent George B. Ditching,
who was then PRCs Personnel Administration Manager, informed petitioner about the
companys plan to declare the position of Pollution Control and Safety Manager
redundant. Ditching attempted to convince petitioner to accept the redundancy offer or
avail of the companys early retirement plan. Petitioner refused and instead insisted on
completing his contract as he still had about three and a half (3 1/2) years left before
reaching the mandatory retirement age of sixty (60).
On 15 June 1988, Jesus P. Javelona, PRCs Engineering Department Manager and

petitioners immediate superior, formally informed the petitioner that the position of
"Safety and Pollution Control Manager will be declared redundant effective at the close
of work hours on 15th July 1988." 9 Petitioner was also notified that the functions and
duties of the position to be declared redundant will be absorbed and integrated with the
duties of the Industrial Engineering Manager; as a result thereof, the petitioner "will
receive full separation benefits provided under the PRC Retirement Plan and additional
redundancy payment under the scheme applying to employees who are 50 years old
and above and whose jobs have been declared redundant by Management." chanrobles
law library : red
Petitioner protested his dismissal via his 22 June 1988 letter to Javelona. 10 This
notwithstanding, the PRC unilaterally circulated a clearance 11 dated 12 July 1988, to
take effect on 15 July 1988, indicating therein that its purpose is for the petitioners
"early retirement" and not redundancy. Petitioner confronted Javelona; the latter, in
his letter dated 13 July 1988, advised the former that the employment would be
extended for another month, or up to 15 August 1988. 12 Petitioner responded with a
letter dated 25 July 1988 threatening legal action. 13
Subsequently, or on 14 July 1988, Bernardo N. Jambalos III, respondent companys

Industrial Relations Manager, sent a Notice of Termination 14 to the Ministry of Labor
and Employment (MOLE) informing the latter that the petitioner was being terminated
on the ground of redundancy effective 15 August 1988.
On 5 August 1988, petitioner had a meeting with private respondent Cesar Bautista and
Dr. Reynaldo Alejandro, PRCs President and Corporate Affairs Director, respectively.
To his plea that he be allowed to finish his contract of employment as he only had three
(3) years left before reaching the mandatory retirement age, Bautista retorted that the
termination was final.
On 8 August 1988, petitioner presented to Javelona a computation 15 showing the

amount of P2,436,534.50 due him (petitioner) by way of employee compensation and
benefits.
On the date of the effectivity of his termination, petitioner was only fifty-seven (57) years
of age. He had until 21 July 1991, his sixtieth (60th) birth anniversary, before he would
have been compulsorily retired.
Also, on the date of effectivity of petitioners termination, 16 August 1988, Miguelito S.

Navarro, PRCs Industrial Engineering Manager, was designated as the Pollution
Control and Safety Officer. Such appointment is evidenced by two (2) company
correspondences. In its letter dated 6 September 1988 to the Laguna Lake
Development Authority, 16 PRC informed the said Authority, to
wit:jgc:chanrobles.com.ph
"With effect from 16 August 1988 the functions and duties of our Safety and Pollution
Control Officer has (sic) been integrated and absorbed with those of our Industrial
Engineering Manager.
x x x
The main tasks of our Industrial Engineering Manager, Mr. Miguelito S. Navarro, now
includes (sic) safety and pollution control.chanrobles.com:cralaw:red
Attached to (sic) the bio-data of Mr. Navarro for your accreditation as our designated
Pollution Control Officer."cralaw virtua1aw library
In its letter to the Safety Organization of the Philippines 17 dated 14 December 1988,
PRC articulated Mr. Miguelito S. Navarros designation as "Safety Officer of Phil.
Refining Company."cralaw virtua1aw library
In view of all this, petitioner filed a complaint for illegal dismissal with damages against
the private respondent PRC before the Arbitration Branch, NLRC, National Capital
Region; the case was docketed as NLRC-NCR Case No. 00-08-03412-88. 18 After trial,
respondent Labor Arbiter Manuel P. Asuncion rendered a decision dated 19 February
1990, the dispositive portion of which was quoted earlier.
Petitioner appealed the said decision to the NLRC which, in its decision of 14 January
1991, made the following findings:jgc:chanrobles.com.ph
"Respondent contended that complainant Orlando M. Escareal was employed as Safety

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

integral aspect of company prerogative, may not be questioned, the objective of which
being to (sic) achieve profitability. (Special Events Control Shipping Office Workers
Union v. San Miguel Corporation, 122 SCRA 557).
x x x
To submit to the argument of herein Complainant that there is no basis in the

managements decision to declare his position redundant is to deny the company of its
inherent prerogative, without due process of law.
x x x
Turning to another issue of whether or not a fixed period of employment has been
concluded, suffice it to say that it lacks legal and factual basis.chanrobles virtual
lawlibrary
x x x
If indeed, a fixed period of contract of employment has been concluded under the
circumstances, the complainant would not have acceded to have undergone a
probationary period. The (sic) latter being a condition sine-qua non before he became a
regular worker. Consequently, the averment of breach of Contract pursuant to Article
1159, 1306 and 1308 of the New Civil Code of the Phils., is not in point. Additionally, to
subscribe to the protestation of herein complainant that the reference of the retirement
age at 60 in the companys letter dated August 22, 1977 meant fixed duration is to tie
the hands of management in doing what is necessary to meet the exigencies of the
business . . ."cralaw virtua1aw library
and then ruled that:jgc:chanrobles.com.ph
"WHEREFORE, the appealed decision is hereby Affirmed, with modification ordering

respondent-company to pay complainant his retirement pay in accordance with the
company policy and other benefits granted to him thereunder, less outstanding
obligations of the complainant with the company at the time of his dismissal." 19
Undaunted by this second setback, the petitioner filed a Motion for Reconsideration 20
of this decision on 25 January 1991. Private respondent PRC also filed its own motion
for reconsideration on the ground that petitioner is entitled to only one (1) benefit, and
not to both. In a Resolution promulgated on 13 May 1991, the NLRCs First Division 21
ruled as follows:jgc:chanrobles.com.ph
"WHEREFORE, in view thereof, the complainants motion for reconsideration other than
his pecuniary interest is hereby Dismissed for lack of merit. Accordingly, respondent-
company (PRC) is ordered to pay Mr. Escareals redundancy benefits in accordance
with the company policy on the matter as follows:chanrob1es virtual 1aw library
(a) Retirement credit of 1.5 months pay for every year of service in the amount of
P363,825.00; and
(b) Ex-gratia, amounting to:chanrob1es virtual 1aw library
P81,496.80
TOTAL P445,321.80"
As a consequence thereof, the instant petition was filed on 29 May 1991. 22 Private
respondent PRC filed its Comment on 21 August 1991 23 while the public respondent,
through the Office of the Solicitor General, filed its Comment on 10 October 1991. 24
On 16 October 1991, 25 this Court resolved, inter alia, to give due course to the petition
and require the parties to file their respective Memoranda Petitioner complied with this
Resolution on 12 December 1991; 26 public respondent NLRC, on the other hand, filed
its Memorandum only on 24 March 1992. 27
In his thorough and exhaustive Memorandum, herein petitioner makes the following
assignment of errors:chanrobles law library : red
"I
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

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

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

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

NOT ENTITLED TO DAMAGES, NOTWITHSTANDING RESPONDENT PRCS AND
ITS OFFICERS EVIDENT BAD FAITH, WANTON AND PATENT VIOLATION OF
PETITIONERS WRITTEN CONTRACT OF EMPLOYMENT.
RESPONDENT NLRC GRAVELY ERRED IN NOT AWARDING PETITIONER AN

AMOUNT FOR ATTORNEYS FEE EQUIVALENT TO TEN (10%) PERCENT OF THE
AMOUNT DUE, NOTWITHSTANDING THAT PETITIONER WAS COMPELLED TO
LITIGATE BY REASON OF HIS ILLEGAL DISMISSAL AND OF RESPONDENT PRCS
AND ITS OFFICERS MALICIOUS AND WANTON ACTS." 28
We find for the petitioner.chanrobles law library : red
Article 283 of the Labor Code provides:jgc:chanrobles.com.ph
"ARTICLE 283. Closure of establishment and reduction of personnel. The employer

may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher A fraction of at least six (6) months shall be considered one (1) whole
year."cralaw virtua1aw library
In Wiltshire File Co., Inc. v. NLRC, 29 this Court held that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise; a position is
redundant when it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as the overhiring of workers, a decreased volume
of business or the dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. 30 Redundancy in an employers
personnel force, however, does not necessarily or even ordinarily refer to duplication of
work. That no other person was holding the same position which the dismissed
employee held prior to the termination of his services does not show that his position
had not become redundant.
Private respondent PRC had no valid and acceptable basis to declare the position of
Pollution Control and Safety Manager redundant as the same may not be considered as
superfluous; by the express mandate of the provisions earlier cited, said positions are
required by law. Thus, it cannot be gainsaid that the services of the petitioner are in
excess of what is reasonably required by the enterprise. Otherwise, PRC would not
have allowed ten (10) long years to pass before opening its eyes to that fact; neither
would it have increased the petitioners salary to P23,100.00 a month effective 1 April
1988. The latter by itself is an unequivocal admission of the specific and special need
for the position and an open recognition of the valuable services rendered by the
petitioner. Such admission and recognition are inconsistent with the proposition that
petitioners positions are redundant. It cannot also be argued that the said functions
were duplicative, and hence could be absorbed by the duties pertaining to the Industrial
Engineering Manager. If indeed they were, and assuming that the Industrial Engineering
department of the PRC had been created earlier, petitioners positions should not have
been created and filled up. If, on the other hand, the department was created later, and
there is no evidence to this effect, and it was to absorb the petitioners positions, then
there would be no reason for the unexplained delay in its implementation, the
restructuring then should have been executed long before the salary increases in
petitioners favor. That petitioners positions were not duplicitous is best evidenced by
the PRCs recognition of their imperative need thereof, this is underscored by the fact
that Miguelito S. Navarro, the companys Industrial Engineering Manager, was
designated as Pollution Control and Safety Manager on the very same day of
petitioners termination. While the petitioner had over ten (10) years of experience as a
pollution control and safety officer, Navarro was a virtual greenhorn lacking the requisite
training and experience for the assignment. A cursory perusal of his bio-data 31 reveals
that it was only several months after his appointment that he attended his first
Occupational Safety & Health Seminar (14-17 November 1988), moreover, it was only
after his second seminar (Loss Control Management Seminar 6-9 December 1988)
that the PRC requested his accreditation with the Safety Organization of the Philippines.
32 In trying to prop up Navarros competence for the position, PRC alleges that the
former finished from the University of the Philippines with a degree in Chemical
Engineering, took some units in pollution in the process and had "undergone job training
in pollution in cement firms through the Bureau of Mines." 33 Compared to the training
and experience of the petitioner, Navarros orientation would seem to pale.chanrobles
virtual lawlibrary
The private respondent alleges further 34 that its decision to declare petitioners position
as redundant "stemmed from its well-considered view that in order for the corporations
safety and pollution program to be more effective, such program would have to be tied
up with the functions of the Industrial Engineering Manager." It is further posited that
since the job of safety and pollution engineer "requires coordination with operating
departments, knowledge of the manufacturing processes, and adequate presence in
plant areas, a task which the companys safety and pollution control officer would not be
up to as he works singlehandedly, it is only the Industrial Engineer, commanding a
department of five (5) engineers and one (1) clerk, who can live up to corporate
expectations. Indeed, the proposition that a department manned by a number of
engineers presumably because of the heavy workload, could still take on the additional
responsibilities which were originally reposed in an altogether separate section headed
by the petitioner, is difficult to accept. It seems more reasonable to view the set-up
which existed before the termination as being more conducive to efficient operations.
And even if We were to sustain PRCs explanation, why did it so suddenly incorporate
functions after the separate position of Pollution and Safety Control Manager had
existed for over ten (10) years? No effort whatsoever was undertaken to gradually
integrate both functions over this span of time. Anent this specific point, all that the
private respondent has to say is that the declaration of redundancy was made pursuant
to its continuing program, which has been ongoing for the past ten (10) years, of
streamlining the personnel complement and maintaining a lean and effective
organization. 35
Furthermore, if PRC felt that either the petitioner was incompetent or that the task could
be performed by someone more qualified, then why is it that the person designated to
the position hardly had any experience in the field concerned? And why reward the
petitioner, barely five (5) months before the dismissal, with an increase in salary?
Assuming PRCs good faith, it would still seem quite surprising that it did not at least
provide a transition period wherein the Industrial Engineering Manager would be
adequately trained for his new assignment; such reckless conduct is not the expected
behavior of a well-oiled and progressive multinational company. Petitioner himself could
have very well supervised a training and familiarization program which could have taken
the remaining three (3) years of his employment. But no such move was initiated.
Instead, a clever scheme to oust the petitioner from a position held for so long was
hatched and implemented. On the very same day of petitioners termination, the position
vacated was resurrected and reconstituted as a component of the position of Industrial
Engineering Manager. After more than ten (10) years of unwavering service and loyalty
to the company, the petitioner was so cruelly and callously
dismissed.chanrobles.com:cralaw:red
What transpired then was a substitution of the petitioner by Miguelito S. Navarro. If

based on the ground of redundancy, such a move would be invalid as the creation of
said position is mandated by the law; the same cannot therefore be declared redundant.
If the change was effected to consolidate the functions of the pollution control and
safety officer with the duties of the Industrial Engineering Manager, as private
respondent postulates, such substitution was done in bad faith for as had already been
pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was to
generate savings in terms of the salaries that PRC would not be paying the petitioner
any more as a result of the streamlining of operations for improved efficiency, such a
move could hardly be justified in the face of PRCs hiring of ten (10) fresh graduates for
the position of Management Trainee 36 and advertising for vacant positions in the
Engineering/Technical Division at around the time of the termination. 37 Besides, there
would seem to be no compelling reason to save money by removing such an important
position. As shown by their recent financial statements, PRCs year-end net profits had
steadily increased from 1987 to 1990. 38 While concededly, Article 283 of the Labor
Code does not require that the employer should be suffering financial losses before he
can terminate the services of the employee on the ground of redundancy, it does not
mean either that a company which is doing well can effect such a dismissal whimsically
or capriciously. The fact that a company is suffering from business losses merely
provides stronger justification for the termination.
The respondent NLRC 39 relied on Wiltshire File Co., v. NLRC 40 in declaring that the
employer has no legal obligation to keep in its payroll more employees than are
necessary for the operation of its business. Aside from the fact that in the case at bar,
there was no compelling reason to dismiss the petitioner as the company was not
incurring any losses, the position declared redundant in the Wiltshire case was that of a
Sales Manager, a management created position. In the case at bar, petitioners position
is one created by law.
The NLRC adds further that the termination was effected in the exercise of
management prerogative and that account should also be taken of the "life of the
company which is . . . an active pillar of our economy and upon whose existence still
depends the livelihood of a great number of workers." 41 It goes on to observe that"
[t]he records are bereft of proof which could have been the basis of vengeful termination
other than the companys legitimate objective to trim its work force." 42 In the face of the
circumstances surrounding the dismissal, this Court finds it extremely difficult to give
credence to such conclusions.
Thus, it is evident from the foregoing that petitioners right to security of tenure was
violated by the private respondent PRC. Both the Constitution (Section 3, Article XIII)
and the Labor Code (Article 279, P.D. 442, as amended) enunciate this right as
available to an employee. In a host of cases, this Court has upheld the employees right
to security of tenure in the face of oppressive management behavior and management
prerogative. 43 Security of tenure is a right which may not be denied on mere
speculation of any unclear and nebulous basis. 44
In this regard, it could be concluded that the respondent PRC was merely in a hurry to
terminate the services of the petitioner as soon as possible in view of the latters
impending retirement; it appears that said company was merely trying to avoid paying
the retirement benefits the petitioner stood to receive upon reaching the age of sixty
(60). PRC acted in bad faith.chanrobles law library : red
Both the Labor Arbiter and the respondent NLRC clearly acted with grave abuse of
discretion in disregarding the facts and in deliberately closing their eyes to the unlawful
scheme resorted to by the PRC.
We cannot, however, subscribe to the theory of petitioner that his employment was for a
fixed definite period to end at the celebration of his sixtieth (60th) birthday because of
the stipulation as to the retirement age of sixty (60) years. The Solicitor Generals
refutation, to wit:jgc:chanrobles.com.ph
"A perusal of the provision in the August 22, 1977 letter cited by petitioner merely
informs him of the company policy which pegs the compulsory retirement age of its
employees at 60 and which commences on the date of the employees 60th birthday. It
likewise informs him that the company recognizes the right of the employee to retire
voluntarily, which option can be availed of when the employee reaches his 50th
birthday. Clearly, the cited provision is limited solely to the pertinent issue of retirement."
45
is correct.
An examination of the contents of the contract of employment 46 yields the conclusion

arrived at by the Solicitor General. There is no indication that PRC intended to offer
uninterrupted employment until the petitioner reached the mandatory retirement age, it
merely informs the petitioner of the compulsory retirement age and the terms pertaining
to the retirement.
In Brent School, Inc. v. Zamora, 47 this Court, in upholding the validity of a contract of
employment with a fixed or specific period, declared that the "decisive determinant in
term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that
which must necessarily come, although it may not be known when." 48 The term
period was further defined to be, "Length of existence; duration. A point of time marking
a termination as of a cause or an activity; an end, a limit, a bound; conclusion;
termination. A series of years, months or days in which something is completed. A time
of definite length. . . . the period from one fixed date to another fixed date . . ." 49
The letter to the petitioner confirming his appointment does not categorically state when
the period of employment would end. It stands to reason then that petitioners
employment was not one with a specific period.chanrobles law library
Coming to the third assigned error, since We have concluded that the petitioners
dismissal was illegal and can not be justified under a valid redundancy initiative, Article
283 of the Labor Code, as amended, on the benefits to be received by the dismissed
employee in the case of redundancy, retrenchment to prevent losses, closure of
business or the installation of labor saving devices, is not applicable. Instead, We apply
Article 279 thereof which provides, in part, that an "employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement."cralaw virtua1aw library
In Torillo v. Leagardo, Jr., 50 an amplification was made on Article 279 of the Labor
Code and the distinction between separation pay and backwages. Citing the case of
Santos v. NLRC, 51 We held in the former:jgc:chanrobles.com.ph
"The normal consequences of a finding that an employee has been illegally dismissed
are, firstly, that the employee becomes entitled to reinstatement to his former position
without loss of seniority rights and, secondly, the payment of backwages corresponding
to the period from his illegal dismissal up to actual reinstatement.
x x x
Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness
or non-availability of the other.
x x x
Put a little differently, payment of backwages is a form of relief that restores the income
that was lost by reason of unlawful dismissal, separation pay, in contrast, is oriented
towards the immediate future, the transitional period the dismissed employee must
undergo before locating a replacement job."cralaw virtua1aw library
Reinstatement then of the petitioner would have been proper. However, since he
reached the mandatory retirement age on 21 July 1991, reinstatement is no longer
feasible. He should thus be awarded his backwages from 16 August 1988 to 21 July
1991, inclusive of allowances and the monetary equivalent of the other benefits due him
for that period, plus retirement benefits under the PRCs compulsory retirement scheme
which he would have been entitled to had he not been illegally dismissed.
Finally, anent the last two (2) assigned errors, this Court notes that in his complaint and
the attached Affidavit-Complaint, 52 petitioner does not mention any claim for damages
and attorney s fees; furthermore, no evidence was offered to prove them. An award
therefor would not be justified.chanroblesvirtualawlibrary
WHEREFORE, judgment is hereby rendered GRANTING the petition, SETTING ASIDE

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

law library
SO ORDERED.
Gutierrez, Jr., Bidin and Romero, JJ., concur.
Feliciano, J., is on leave.
Asian Alcohol vs. NLRC, 305 SCRA 416,

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

ASIAN ALCOHOL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, FOURTH DIVISION, CEBU CITY and ERNESTO A. CARIAS,
ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO,
LEANDRO O. VERAYO and ERENEO S. TORMO, respondents.
DECISION
PUNO, J.:
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C.

Martinez, Rafael H. Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo,
was valid on the twin grounds of redundancy and retrenchment to prevent business
losses, petitioner Asian Alcohol Corporation (hereinafter referred to as Asian Alcohol) filed
this petition for certiorari. Asian Alcohol ascribes grave abuse of discretion to public
respondents National Labor Relations Commission[1] (hereinafter referred to as NLRC)
when, on May 30, 1997, it set aside[2] the decision[3] of the Executive Labor Arbiter
dismissing the illegal termination complaints filed by private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks
in Asian Alcohol, were driven by mounting business losses to sell their majority rights to
prior Holdings, Inc. (hereinafter referred to as Prior Holdings). The next month, Prior
Holdings took over its management and operation.[4]
To thwart further losses, Prior Holdings implemented a reorganizational plan and
other cost-saving measures. Some one hundred seventeen (117) employees out of a total
workforce of three hundred sixty (360) were separated. Seventy two (72) of them
occupied redundant positions that were abolished. Of these positions, twenty one (21)
were held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members [5] whose positions
were abolished due to redundancy. Private respondents Carias, Martinez, and Sendon
were water pump tenders; Amacio was a machine shop mechanic; Verayo was a
briquetting plant operator while Tormo was a plant helper under him. They were all
assigned at the Repair and Maintenance Section of the Pulupandan plant.[6]
In October, 1992, they received individual notices of termination effective November
30, 1992.[7] They were paid the equivalent of one month salary for every year of service
as separation pay, the money value of their unused sick, vacation, emergency and
seniority leave credits, thirteenth (13th) month pay for the year 1992, medicine allowance,
tax refunds, and goodwill cash bonuses for those with at least ten (10) years of
service.[8] All of them executed sworn releases, waivers and quitclaims. [9] Except for
Verayo and Tormo, they all signed sworn statements of conformity to the company
retrenchment program.[10] And except for Martinez, they all tendered letters of
resignation.[11]
On December 18, 1992, the six (6) private respondents files with the NLRC Regional
Arbitration Branch VI, Bacolod City, complaints for illegal dismissal with a prayer for
reinstatement with backwages, moral damages and attorneys fees. They alleged that
Asian Alcohol used the retrenchment program as a subterfuge for the union busting. They
claimed that they were singled out for separation by reason for their active participation
in the union. They also asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring.
The Executive Labor Arbiter dismissed the complaints. He explained, thus:
The fact that respondents AAC incurred losses in its business operations was not
seriously challenged by the complainants. The fact that it incurred substantial losses in
its business operations prior to the implementation of its retrenchment program is amply
supported by the documents on records, (sic) namely: (1) Balance Sheet of AAC as of
December 31, 1991 x x x, (2) Statement of Income and Deficit for the year ended
December 31, 1991 x x x, (3) Income Tax Return for Fiscal Year ending September 30,
1989 x x x, (4) Income Tax Return for the Fiscal Year ending December 31, 1989 x x x,
(5) Income Tax Return for Fiscal Year ending December 31, 1990 x x x, and (6) Income
Tax Return for the Fiscal Year ending December 31, 1991 x x x, indicating an
accumulated deficit of P26,117,889.00.
It has to be emphasized that the law allows an employer to retrench some of its
employees to prevent losses. In the case of respondent AAC, it implemented its
retrenchment program not only to prevent losses but to prevent further losses as it was
then incurring huge losses in its operations.
Complainants would want us to believe that their positions were abolished because they
are union members, and that they were replaced by casual employees. Complainants
pretense is rather untenable. For one thing, the retrenchment program of AAC affected
not only union members but also the non-union members. As earlier said, there were
117 employees of AAC who were affected by the reorganization. Of the 117 positions,
72 positions were abolished due to redundancy, 21 of which were occupied by union
members, while 51 were held by non-union members. Thus, the theory of complainants
that they were terminated from work on ground of their union membership is far from the
truth.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael
Sendon who were all Water Pump Tenders assigned to AACs water wells in Ubay,
Pulupandan, Negros Occidental which were drilled and operated before under the old
management by virtue of right-of-way with the landowner, were retrenched as an
offshoot to the termination of the lease agreement as the water thereunder had become
salty due to extensive prawn farming nearby, so that AAC could no longer use the water
for its purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez
and Rafael Sendon had become unnecessary, redundant and superfluous.
As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by
respondent AAC in support of its decision to retrench them are too convincing to be
ignored.Accordingly to respondent AAC, its boiler before was 100% coal fired. The
boiler was manned by a briquetting plant operator in the person of Leandro Verayo and
three (3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy
Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire its
boiler, its usage of coal had been drastically reduced to only 30% of its total fuel usage
in its production plant, thereby saving on fuel cost. For this reason, there was no more
need for the position of briquetting plant operator and the services for only two
briquetting helpers were determined to be adequate for the job of briquetting coal. Of
the three (3) briquetting helpers, Ereneo Tormo was the oldest, being already 41 years
old, the other two, Javier and Songaling, being only 28 and 35 respectively. Considering
the manual nature of the work of coal briquetting, younger workers are always preferred
for reasons of efficiency [sic]. Hence the abolition of the position of Ereneo Tormo. We
have to stress that Eriberto Songaling, Jr. and Rudy Javier, Jr. are also union members.
xxx
With respect to Carlos Amacio, he was retrenched not because of his being a union
member but because of his poor health condition which greatly affect[ed] his work
efficiency. Records show that Carlos Amacio was among the ten machine shop
mechanics employed by respondent AAC. Under AACs reorganization plan, it needs
only nine mechanics.
xxx
On the whole, therefore, the dismissal of complainants on ground of

redundancy/retrenchment was perfectly valid or legal.[12]
Private respondents appealed to the NLRC.

On May 30, 1997, the NLRC rendered the challenged decision. It rejected the
evidence proffered by Asian Alcohol to prove its business reversals. It ruled that the
positions of private respondents were not redundant for the simple reason that they were
replaced by casuals. The NLRC essayed this explanation:
In this case, [that] the respondent terminated complainants to protect the company from
future losses, does not create an impression of imminent loss. The company at the time
of retrenchment was not then in the state of business reverses. There is therefore no
reason to retrench. x x x
The alleged deficits of the corporations did not prove anything for the respondent. The
financial status as shown in the Statement of Income and Deficits and Income Tax
Returns from 1989 to 1991, submitted by respondent was before the respondent, new
management of Prior Holdings, Inc., took over the operation and management of the
corporation in October, 199[1]. This is no proof that on November 30, 1992 when the
termination of complainant[s] took effect the company was experiencing losses or at
least imminent losses. Possible future losses do not authorize retrenchment.
Secondly in the case of REDUNDANCY.
Redundancy exist where the service[s] of x x x employee[s] are in excess of what is

reasonably demanded by the actual requirements of the enterprise. The evidence,
however, proved that, in truth and in fact, the positions of the complainants were not
redundant for the simple reason that they were replaced by casuals.
xxx
Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were
operated by contractors. Otherwise stated, complainant[s] who are regular workers of
the respondent, performing jobs necessary and desirable to the business of the
company, were eased out in the guise of retrenchment or redundancy [so that] their jobs
[will] be performed by workers belonging to a contractor.
In summation, retrenchment and/or redundancy not having been proved, complainants,

therefore, were illegally dismissed.[13]
The dispositive portion of the decision of the NLRC provides as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby ordered

SET ASIDE and VACATED and in lieu thereof, the respondent Asian Alcohol
Corporation is hereby ordered to reinstate complainants with full backwages from the
time they were dismissed on November 30, 1992 and up to actual reinstatement. Plus
10% attorneys fees.
SO ORDERED.[14]
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing
decision. On September 25, 1997, the NLRC denied the motion.[15]
On January 12, 1998, Asian Alcohol filed in this Court a petition for certiorari assailing
both the decision of the NLRC and the resolution denying its reconsideration. It invoked
the following grounds:
6. GROUNDS FOR THE PETITION
6.1 Public respondent has committed, as hereinafter shown, a manifest grave abuse of
discretion amounting to lack or excess of jurisdiction in declaring in its assailed Decision
x x x and Resolution x x x that the termination of the employment of private respondents
by the petitioner herein is illegal and ordering their reinstatement with full backwages
from the time they were dismissed on November 30, 1992 up to their actual
reinstatement, plus 10% attorneys fees, said Decision and Resolution of the public
respondents being contrary to the established facts of the case, well-settled
jurisprudence and the law on the matter.
6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave
abuse of discretion amounting to lack or excess of jurisdiction by totally disregarding
and refusing to consider the factual findings of the Executive Labor Arbiter with respect
to the circumstances which rendered the positions of the private respondents
unnecessary, redundant and superfluous, thereby justifying the termination of their
employment.
6.3 Public respondents has furthermore committed, as hereinafter shown, a manifest

grave abuse of discretion amounting to lack or excess of jurisdiction in giving full credit
to the oral testimonies quoted in its assailed Decision x x x and taking them as
conclusive proof of the alleged replacement of the private respondents with casual
workers despite the fact that said quoted testimonies clearly amount to nothing but
speculations, surmises and conjectures.[16]
On March 25, 1998, we issued a Temporary Restraining Order[17] enjoining the NLRC
from enforcing its Decision and Resolution dated May 30, 1997 and September 25, 1997,
respectively.
We find the petition meritorious.
Out of its concern for those with less privilege in life, this Court has inclined towards
the worker and upheld his cause in his conflicts with the employer. [18] This favored
treatment is directed by the social justice policy of the Constitution.[19] But while tilting the
scales of justice in favor of workers, the fundamental law also guarantees the right of the
employer to reasonable returns from his investments.[20] Corollarily, the law allows an
employer to downsize his business to meet clear and continuing economic
threats.[21] Thus, this Court has upheld reductions in the work force to forestall business
losses or stop the hemorrhaging of capital.[22]
The right of management to dismiss workers during periods of business recession
and to install labor saving devices to prevent losses is governed by Art. 283 of the Labor
Code, as amended. It provides, viz.:
Art. 283. Closure of establishment and reduction of personnel.--The employer may also
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in case of
closures or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole
year.[emphasis ours]
Under the foregoing provisions, retrenchment and redundancy are just causes for the
employer to terminate the services of workers to preserve the viability of the business. In
exercising its right, however, management must faithfully comply with the substantive and
procedural requirements laid down by law and jurisprudence.[23]
The requirements for valid retrenchment which must be proved by clear and
convincing evidence are: (1) that the retrenchment is reasonably necessary and likely to
prevent business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer; [24] (2) that the employer served
written notice both to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment;[25] (3) that the employer pays
the retrenched employees separation pay equivalent to one month pay or at least month
pay for every year of service, whichever is higher;[26](4) that the employer exercises its
prerogative to retrench employees in good faith for the advancement of its interest and
not to defeat or circumvent the employees right to security of tenure;[27] and (5) that the
employer used fair and reasonable criteria[28] in ascertaining who would be dismissed and
who would be retained among the employees, such as status (i.e., whether they are
temporary, casual, regular or managerial employees), efficiency, seniority, [29] physical
fitness, age, and financial hardship for certain workers.[30]
The condition of business losses is normally shown by audited financial documents
like yearly balance sheets and profit and loss statements as well as annual income tax
returns.[31] It is our ruling that financial statements must be prepared and signed by
independent auditors.[32] Unless duly audited, they can be assailed as self-serving
documents.[33] But it is not enough that only the financial statements for the year during
which retrenchment was undertaken, are presented in evidence. For it may happen that
while the company has indeed been losing, its losses may be on a downward trend,
indicating that business is picking up and retrenchment, being a drastic move, should no
longer be resorted to.[34] Thus, the failure of the employer to show its income or loss for
the immediately preceding year or to prove that it expected no abatement of such losses
in the coming years, may bespeak the weakness of its cause.[35] It is necessary that the
employer also show that its losses increased through a period of time and that the
condition of the company is not likely to improve in the near future.[36]
In the instant case, private respondents never contested the veracity of the audited
financial documents proffered by Asian Alcohol before the Executive Labor
Arbiter. Neither did they object their admissibility. They show that petitioner has
accumulated losses amounting to P306,764,349.00 and showing nary sign of abating in
the near future. The allegation of union busting is bereft of proof. Union and non-union
members were treated alike. The records show that the positions of fifty one (51) other
non-union members were abolished due to business losses.
In rejecting petitioners claim of business losses, the NLRC stated that the alleged
deficits of the corporation did not prove anything for the [petitioners] [37] since they were
incurred before the take over of Prior Holdings. Theorizing that proof of losses before the
take over is no proof of losses after the take over, it faulted Asian Alcohol for retrenching
private respondent on the ground of mere possible future losses[38].
We do not agree. It should be observed that Article 283 of the Labor Code uses the
phrase retrenchment to prevent losses. In its ordinary connotation, this phrase means
that retrenchment must be undertaken by the employer before losses are actually
sustained.[39] We have, however, interpreted the law to mean that the employer need not
keep all his employees until after his losses shall have materialized.[40] Otherwise, the law
could be vulnerable to attack as undue taking of property for the benefit of another. [41]
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October
1991. Plain to see, the last quarter losses in 1991 were already incurred under the new
management. There were no signs that these losses would abate. Irrefutable was the fact
that losses have bled Asian Alcohol incessantly over a span of several years. They were
incurred under the management of the Parsons family and continued to be suffered under
the new management of Prior Holdings. Ultimately, it is Prior Holding that will absorb all
the losses, including those incurred under the former owners of the company. The law
gives the new management every right to undertake measures to save the company from
bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to
turn the business around were nor designed to bust the union of the private
respondent. Retrenched were one hundred seventeen (117) employees. Seventy two
(72) of them including private respondent were separated because their positions had
become redundant. In this context, what may technically be considered as redundancy
may verily be considered as retrenchment measures. [42] Their positions had to be
declared redundant to cut losses.
Redundancy exist when the service capability of the work is in excess of what is
reasonably needed to meet the demands on the enterprise. A redundant position is one
rendered superfluous by any number of factors, such as overhiring of workers, decreased
volume of business, dropping of a particular product line previously manufactured by the
company or phasing out of a service activity priorly undertaken by the business.[43] Under
these conditions, the employer has no legal obligation to keep in its payroll more
employees than are necessary for the operation of its business.[44]
For the implementation of a redundancy program to be valid, the employer must
comply with the following requisites: (1) written notice served on both the employees and
the Department of Labor and Employment at least one moth prior to the intended date of
retrenchment;[45] (2) payment of separation pay equivalent to at least one month pay or
at least one month pay for every year of service whichever is higher; (3) good faith in
abolishing the redundant positions;[46] and (4) fair and reasonable criteria in ascertaining
what positions are to be declared redundant and accordingly abolished.[47]
In the case at bar, private respondent Carias, Martinez and Sendon were water pump
tenders. They tended the water wells of Asian Alcohol located in Ubay, Pulupandan,
Negros Occidental. However, Asian Alcohol did not own the land where the wells stood. It
only leased them.
In 1992, the lease contract which also provided for a right of way leading to the site
of the wells, was terminated. Also, the water from the wells had become salty due to
extensive prawn farming nearby and could no longer be used by Asian Alcohol for its
purpose. The wells had to be closed and needless to say, the services of Carias, Martinez
and Sendon had to be terminated on the twin grounds of redundancy and retrenchment.
Private respondent Verayo was the briquetting plant operator in charge of the coal-
fired boiler. Private respondent Tormo was one of the three briquetting helpers. To
enhance production efficiency, the new management team shifted to the use of bunker
fuel by about seventy percent (70%) to fire its boiler. The shift meant substantial fuel cost
savings. In the process, however the need for a briquetting plant operator ceased as the
services of only two (2) helpers were all that was necessary to attend to the much lesser
amount of coal required to run the boiler. Thus, the positions of private respondent Verayo
had to be abolished. Of the three (3) briquetting helpers, Tormo, was the oldest, being
already 41 years old. The other two, Rudy Javier Jr. and Eriberto Songaling, Jr., were
younger, being only 28 and 35, respectively. Age, with the physical strength that comes
with it, was particularly taken into consideration by the management team in deciding
whom to separate. Hence, it was private respondent Tormo who was separated from
service. The management choice rested on a rational basis.
Private respondent Amacio was among the ten (10) mechanics who manned the
machine shop at the plant site. At their current production level, the new management
found that it was more cost efficient to maintain only nine (9) mechanics. In choosing
whom to separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient among them. It was
private respondent Amacio who appeared the least efficient because of his poor health
conditions.
Not one of the private respondents refuted the foregoing facts. They only contend
that the new management should have followed the policy of first in, last out in choosing
which positions to declare as redundant or whom to retrench to prevent further business
losses. No law mandates such a policy. And the reason is simple enough. A host of
relevant factors come into play in determining cost efficient measures and in choosing the
employees who will be retained or separated to save the company from closing shop. In
determining these issues, management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an exercise of business judgment on the part
of the employer.[48] It will be upheld as long as it passes the test of arbitrariness.[49]
Private respondents call our attention to their allegation that casuals were hired to
replace Carias, Martinez and Sendon as water pump tenders at the Ubay wells. They rely
on the testimony of Engr. Federico Palmares, Jr., the head of the Mechanical Engineering
Department who admitted the engagement of independent contractors to operate the
wells. A reading of the testimony of Engr. Palmares, however, will reveal that he referred
not to the Ubay wells which were tended by private respondents Carias, Martinez and
Sendon, but to the Laurawells. Thus, he declared in cross examinations:
ATTY. YMBALLA: (cross-examination of respondent witness, Federico Palmares)
Q But in the Laura well?
WITNESS:
A Mansteel was hired as contractor.
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of independent contractors?
WITNESS:
A I am not sure, maybe.[50]
In any event, we have held that an employers good faith in implementing a
redundancy program is not necessarily destroyed by availment of the services of an
independent contractor to replace the services of the terminated employees. We have
previously ruled that the reduction of the number of workers in a company made
necessary by the introduction of the services of an independent contractor is justified
when the latter is undertaken in order to effectuate more economic and efficient methods
of production.[51] In the case at bar, private respondent failed to proffer any proof that the
management acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells. Absent such proof, the Court has no
basis to interfere with the bona fide decision of management to effect more economic and
efficient methods of production.
Finally, private respondents now claim that they signed the quitclaims, waivers and
voluntary resignation letters only to get their separation package. They maintain that in
principle, they did not believe that their dismissal was valid.
It is true that this court has generally held that quitclaims and releases are contrary
to public policy and therefore, void. Nonetheless, voluntary agreements that represents a
reasonable settlement are binding on the parties and should not later be disowned. It is
only where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable, that the law will step in to
bail out the employees. While it is our duty to prevent the exploitation of employees, it is
also behooves us to protect the sanctity of contracts that do not contravene our laws.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary
resignation letters were executed by the private respondents under force or duress. In
truth, the documents embodied separation benefits that were well beyond what the
company was legally required to give private respondents. We note that out of more than
one hundred workers that were retrenched by Asian Alcohol, only these six (6) private
respondents were not impressed by the generosity of their employer. Their late
complaints have no basis and deserve our scant consideration.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor
Relations Commission dated May 30, 1997 and its Resolution dated September 25, 1997
are ANNULED AND SET ASIDE. The Decision of the Executive Labor Arbiter dated
January 10, 1996 in RAB Case No. 06-12-10893-92 is ORDERED REINSTATED. The
complaints for illegal dismissal filed by private respondents against Asian Alcohol
Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No cost.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena , JJ., concur.
Mayon Hotel vs. Adana, 458 SCRA 609,
GR 157634, May 16, 2005

[G.R. No. 157634. May 16, 2005]
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,

vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO
ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES
CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE
ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the
Court of Appeals (CA)[1] in CA-G.R. SP No. 68642, entitled Rolando Adana, Wenefredo
Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel &
Restaurant/Pacita O. Po, et al., and the Resolution[2] denying petitioners motion for
reconsideration. The assailed CA decision reversed the NLRC Decision which had
dismissed all of respondents complaints,[3] and reinstated the Joint Decision of the Labor
Arbiter[4] which ruled that respondents were illegally dismissed and entitled to their money
claims.
The facts, culled from the records, are as follows:[5]
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po,[6] whose mother, petitioner Josefa Po Lam, manages the
establishment.[7] The hotel and restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant
hired the following people, all respondents in this case, with the following jobs: [8]
1. Wenefredo Loveres Accountant and Officer-in-charge
2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. SantosBroola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. LourdesCamigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space
occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the
business were suspended on March 31, 1997.[9] The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the
construction of a new Mayon Hotel & Restaurant at Pearanda
[10]
Street, Legazpi City. Only nine (9) of the sixteen (16) employees continued working in
the Mayon Restaurant at its new site.[11]
On various dates of April and May 1997, the 16 employees filed complaints for
underpayment of wages and other money claims against petitioners, as follows:[12]
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal
dismissal, underpayment of wages, nonpayment of holiday and rest day pay; service
incentive leave pay (SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment
of wages; nonpayment of cost of living allowance (COLA) and overtime pay; premium
pay for holiday and rest day; SILP; nightshift differential pay and separation pay plus
damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages;
nonpayment of holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and
SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay,
holiday pay, SILP, and damages;[13] and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime

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

Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of

wages, and nonpayment of holiday pay, rest day premium, SILP, COLA,
overtime pay, and night shift differential pay?
It is petitioners contention that the above issues have already been threshed out
sufficiently and definitively by the NLRC. They therefore assail the CAs reversal of the
NLRC decision, claiming that based on the ruling in Castillo v. NLRC,[15] it is non
sequitur that the CA should re-examine the factual findings of both the NLRC and the
Labor Arbiter, especially as in this case the NLRCs findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRCs competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latters
findings.[16] But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.[17] And when the factual findings of the Labor Arbiter and
the NLRC are diametrically opposed and this disparity of findings is called into question,
there is, necessarily, a re-examination of the factual findings to ascertain which opinion
should be sustained.[18] As ruled in Asuncion v. NLRC,[19]
Although, it is a legal tenet that factual findings of administrative bodies are entitled to
great weight and respect, we are constrained to take a second look at the facts before
us because of the diversity in the opinions of the Labor Arbiter and the NLRC. A
disharmony between the factual findings of the Labor Arbiter and those of the NLRC
opens the door to a review thereof by this Court.[20]
The CA, therefore, did not err in reviewing the records to determine which opinion
was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC[21] that factual findings of administrative
bodies like the NLRC are affirmed only if they are supported by substantial evidence that
is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a
decision of a Labor Arbiter. Mere variance in evidentiary assessment between the
NLRC and the Labor Arbiter does not automatically call for a full review of the facts by
this Court. The NLRCs decision, so long as it is not bereft of substantial support from
the records, deserves respect from this Court. As a rule, the original and exclusive
jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its
evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of
discretion. Thus, the NLRCs factual findings, if supported by substantial evidence, are
entitled to great respect and even finality, unless petitioner is able to show that it simply
and arbitrarily disregarded the evidence before it or had misappreciated the evidence to
such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated. (citations omitted)[22]
After careful review, we find that the reversal of the NLRCs decision was in order
precisely because it was not supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa
Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed
this decision, the CA, on review, agreed with the Labor Arbiter that notwithstanding the
certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the
complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we
cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject
hotel and restaurant. There were conflicting documents submitted by Josefa
herself. She was ordered to submit additional documents to clearly establish ownership
of the hotel and restaurant, considering the testimonies given by the [respondents] and
the non-appearance and failure to submit her own position paper by Pacita Po. But
Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme
Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po
Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability on a party,
and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the evidence[,] if produced, would
operate to his prejudice, and support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant,
the labor arbiter relied also on the testimonies of the witnesses, during the hearing of
the instant case. When the conclusions of the labor arbiter are sufficiently corroborated
by evidence on record, the same should be respected by appellate tribunals, since he is
in a better position to assess and evaluate the credibility of the contending
parties.[23] (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that
petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the
documents they submitted to the Labor Arbiter sufficiently and clearly establish the fact
of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lams participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared
and submitted by respondent Loveres; and (c) visitation of the premises. [24] They also put
emphasis on the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.[25] This, they claim, is a judicial admission and is binding on respondents. They
protest the reliance the Labor Arbiter and the CA placed on their failure to submit
additional documents to clearly establish ownership of the hotel and restaurant, claiming
that there was no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary evidence of
ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that
petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the
Labor Arbiter. Despite receipt of the Labor Arbiters notice and summons, other notices
and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the Labor
Arbiter in these cases, nor file her position paper.[26] It was only on appeal with the NLRC
that Pacita Po signed the pleadings.[27] The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an establishment
would naturally be concerned when ALL her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lams claim that she is
merely an overseer. The findings of the Labor Arbiter on this question were based on
credible, competent and substantial evidence. We again quote the Joint Decision on this
matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner]

Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and
restaurant when the latter purchased the same from one Palanos in 1981, Josefa failed
to submit the document of sale from said Palanos to Pacita as allegedly the sale was
only verbal although the license to operate said hotel and restaurant is in the name of
Pacita which, despite our Order to Josefa to present the same, she failed to comply (p.
38, tsn. August 13, 1998). While several documentary evidences were submitted by
Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64,
65, 67 to 69; vol. I, rollo)[,] there were documentary evidences also that were submitted
by Josefa showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While
Josefa explained her participation and interest in the business as merely to help and
assist her daughter as the hotel and restaurant was near the formers store, the
testimonies of [respondents] and Josefa as well as her demeanor during the trial in
these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam previously
owned; it is Josefa to whom the employees submits (sic) reports, draws money for
payment of payables and for marketing, attending (sic) to Labor Inspectors during
ocular inspections. Except for documents whereby Pacita Po appears as the owner of
Mayon Hotel and Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The least
that can be said is that it is absurd for a person to purchase a hotel and restaurant in the
very heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners],
particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the
hotel and restaurant, considering the testimonies of [respondents], the former should
[have] submitted the lease contract between the owner of the building where Mayon
Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly
establish ownership by the latter of said enterprise. Josefa failed. We are not surprised
why some employers employ schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and
Restaurant and the proper respondent in these cases.[28]
Petitioners reliance on the rules of evidence, i.e., the certificate of registration being
the best proof of ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lams involvement in the
enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice.[29] The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and intention of the Labor Code
that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.[30] Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.[31]
Similarly, the fact that the respondents complaints contained no allegation that
petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial
admissions to respondents who are but lowly employees - would be to exact compliance
with technicalities of law that is contrary to the demands of substantial justice. Moreover,
the issue of ownership was an issue that arose only during the course of the proceedings
with the Labor Arbiter, as an incident of determining respondents claims, and was well
within his jurisdiction.[32]
Petitioners were also not denied due process, as they were given sufficient
opportunity to be heard on the issue of ownership. [33] The essence of due process in
administrative proceedings is simply an opportunity to explain ones side or an opportunity
to seek reconsideration of the action or ruling complained of.[34] And there is nothing in
the records which would suggest that petitioners had absolute lack of opportunity to be
heard.[35] Obviously, the choice not to present evidence was made by petitioners
themselves.[36]
But more significantly, we sustain the Labor Arbiter and the CA because even when
the case was on appeal with the NLRC, nothing was submitted to negate the Labor
Arbiters finding that Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor
with this Court. Considering that petitioners vehemently deny ownership by petitioner
Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to submit could
only mean that if produced, it would have been adverse to petitioners case.[37]
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam
is the owner of petitioner Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broola. [38]
The Labor Arbiter found that there was illegal dismissal, and granted separation pay
to respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and
Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal,
the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code
as amended.[39] The Labor Arbiter ruled that respondent Atractivo was not entitled to
separation pay because he had been transferred to work in the restaurant operations
in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio,
Macandog and Guades were also awarded damages.[40]
The NLRC reversed the Labor Arbiter, finding that no clear act of termination is
attendant in the case at bar and that respondents did not submit any evidence to that
effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own
surmises and conjectures.[41] In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that
none of the above-named respondents were illegally dismissed, or entitled to separation
or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that
when the illegal dismissal case was filed by respondents on April 1997, they had as yet
no cause of action. Petitioners therefore conclude that the filing by respondents of the
illegal dismissal case was premature and should have been dismissed outright by the
Labor Arbiter.[42] Petitioners also claim that since the validity of respondents dismissal is
a factual question, it is not for the reviewing court to weigh the conflicting evidence. [43]
We do not agree. Whether respondents are still working for petitioners IS a factual
question. And the records are unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and
Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the
other hand, was also laid-off when the Elizondo Street operations closed, as were all the
other respondents. Since then, respondents have not been permitted to work nor
recalled, even after the construction of the new premises at Pearanda Street and the
reopening of the hotel operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the
complaint was filed:[44]
[F]rom the records, more than six months had lapsed without [petitioner] having
resumed operation of the hotel. After more than one year from the temporary closure of
Mayon Hotel and the temporary transfer to another site of Mayon Restaurant, the
building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be
transferred has been finally constructed and the same is operated as a hotel with bar
and restaurant nevertheless, none of [respondents] herein who were employed at
Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other
respondents as they had not filed an amended complaint to question the cessation of
their employment after the closure of Mayon Hotel & Restaurant on March 31, 1997.[45]
The above factual finding of the Labor Arbiter was never refuted by petitioners in their
appeal with the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly
treated this uncontroverted factual finding by ruling that respondents have not introduced
any evidence to show that they were illegally dismissed, and that the Labor Arbiters
finding was based on conjecture.[46] It was a serious error that the NLRC did not inquire
as to the legality of the cessation of employment. Article 286 of the Labor Code is clear
there is termination of employment when an otherwise bona fide suspension of work
exceeds six (6) months.[47] The cessation of employment for more than six months was
patent and the employer has the burden of proving that the termination was for a just or
authorized cause.[48]
Moreover, we are not impressed by any of petitioners attempts to exculpate
themselves from the charges. First, in the proceedings with the Labor Arbiter, they
claimed that it could not be illegal dismissal because the lay-off was merely temporary
(and due to the expiration of the lease contract over the old premises of the
hotel). They specifically invoked Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual basis.[49] Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had
exceeded the six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the
Labor Code is misplaced, considering that the reason why private respondents were out
of work was not due to the fault of petitioners. The failure of petitioners to reinstate the
private respondents to their former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any evidence to prove their alleged
illegal dismissal. The petitioners cannot discern why they should be made liable to the
private respondents for their failure to be reinstated considering that the fact that they
were out of work was not due to the fault of petitioners but due to circumstances beyond
the control of petitioners, which are the termination and non-renewal of the lease
contract over the subject premises. Private respondents, however, argue in their
Comment that petitioners themselves sought the application of Article 286 of the Labor
Code in their case in their Position Paper filed before the Labor Arbiter. In refutation,
petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the
fact remains, and this bears stress and emphasis, that the temporary suspension of the
operations of the establishment arising from the non-renewal of the lease contract did
not result in the termination of employment of private respondents and, therefore, the
petitioners cannot be faulted if said private respondents were out of work, and
consequently, they are not entitled to their money claims against the petitioners. [50]
It is confounding how petitioners have fashioned their arguments. After having

admitted, in effect, that respondents have been laid-off since April 1997, they would have
this Court excuse their refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven the illegality of their
dismissal.
Petitioners arguments reflect their lack of candor and the blatant attempt to use
technicalities to muddle the issues and defeat the lawful claims of their employees. First,
petitioners admit that since April 1997, when hotel operations were suspended due to the
termination of the lease of the old premises, respondents Loveres, Macandog, Llarena,
Nicerio and Guades have not been permitted to work. Second, even after six months of
what should have been just a temporary lay-off, the same respondents were still not
recalled to work. As a matter of fact, the Labor Arbiter even found that as of the time
when he rendered his Joint Decision on July 2000 or more than three (3) years after the
supposed temporary lay-off, the employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been completed and the same
operated as a hotel with bar and restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the service on the initiative of the
employer regardless of the reasons therefor.[51]
On this point, we note that the Labor Arbiter and the CA are in accord that at the time
of the filing of the complaint, respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-off of the respondents was
merely temporary, pending construction of the new building at Pearanda Street.[52]
While the closure of the hotel operations in April of 1997 may have been temporary,
we hold that the evidence on record belie any claim of petitioners that the lay-off of
respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the
complaint for illegal dismissal immediately after the closure of the hotel operations
in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners allegations that the employees assigned to the hotel
operations knew about this beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the
employer-employee relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis.[53] But they made no
mention of any intent to recall these respondents to work upon completion of the new
premises. Third, the various pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lams affidavit on July 21, 1998, for
example, squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for
abusing her leniency and causing petitioner Mayon Hotel & Restaurant to sustain
continuous losses until it is closed. She then asserts that respondents are not entitled to
separation pay for they were not terminated and if ever the business ceased to operate it
was because of losses.[54] Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged that three (3) years prior to
the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially
due to Loveress mismanagement and abuse of petitioners trust and confidence. [55] Even
the petition filed in this court made reference to the separation of the respondents due to
severe financial losses and reverses, again imputing it to respondents
mismanagement.[56] The vehemence of petitioners accusation of mismanagement
against respondents, especially against Loveres, is inconsistent with the desire to recall
them to work. Fourth, petitioners memorandum on appeal also averred that the case was
filed not because of the business being operated by them or that they were supposedly
not receiving benefits from the Labor Code which is true, but because of the fact that the
source of their livelihood, whether legal or immoral, was stopped on March 31, 1997,
when the owner of the building terminated the Lease Contract. [57] Fifth, petitioners had
inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to
the closure,[58] i.e., in the petition filed with this court, they assert that there is no illegal
dismissal because there was only a temporary cessation or suspension of operations of
the hotel and restaurant due to circumstances beyond the control of petitioners, and that
is, the non-renewal of the lease contract...[59] And yet, in the same petition, they also
assert that: (a) the separation of respondents was due to severe financial losses and
reverses leading to the closure of the business; and (b) petitionerPacita Po had to close
shop and was bankrupt and has no liquidity to put up her own building to house Mayon
Hotel & Restaurant.[60] Sixth, and finally, the uncontroverted finding of the Labor Arbiter
that petitioners terminated all the other respondents, by not employing them when the
Hotel and Restaurant transferred to its new site on Pearanda Street.[61] Indeed, in this
same memorandum, petitioners referred to all respondents as former employees of
Mayon Hotel & Restaurant.[62]
These factors may be inconclusive individually, but when taken together, they lead
us to conclude that petitioners really intended to dismiss all respondents and merely used
the termination of the lease (on Rizal Street premises) as a means by which they could
terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997
was merely temporary, it became dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the
Labor Code.
We are not impressed by petitioners claim that severe business losses justified their
failure to reinstate respondents. The evidence to prove this fact is inconclusive. But more
important, serious business losses do not excuse the employer from complying with the
clearance or report required under Article 283 of the Labor Code and its implementing
rules before terminating the employment of its workers.[63] In the absence of justifying
circumstances, the failure of petitioners to observe the procedural requirements set out
under Article 284, taints their actuations with bad faith, especially since they claimed that
they have been experiencing losses in the three years before 1997. To say the least, if it
were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the giving of notices
was intended not only to enable the employees to look for another employment and
therefore ease the impact of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the opportunity to
ascertain the verity of the alleged authorized cause of termination. [64]
And even assuming that the closure was due to a reason beyond the control of the
employer, it still has to accord its employees some relief in the form of severance pay. [65]
While we recognize the right of the employer to terminate the services of an employee
for a just or authorized cause, the dismissal of employees must be made within the
parameters of law and pursuant to the tenets of fair play. [66] And in termination disputes,
the burden of proof is always on the employer to prove that the dismissal was for a just
or authorized cause.[67] Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal dismissal.[68]
Under these circumstances, the award of damages was proper. As a rule, moral
damages are recoverable where the dismissal of the employee was attended by bad faith
or fraud or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.[69] We believe that the dismissal of the
respondents was attended with bad faith and meant to evade the lawful obligations
imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from
employment in 1997 as a matter of fact, but without legal redress. This runs counter to
notions of fair play, substantial justice and the constitutional mandate that labor rights
should be respected. If doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter the employer
must affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause.[70] It is a time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the formers favor.[71] The policy is to extend
the doctrine to a greater number of employees who can avail of the benefits under the
law, which is in consonance with the avowed policy of the State to give maximum aid and
protection of labor.[72]
We therefore reinstate the Labor Arbiters decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog
and Llarena; (Santos Broola cannot be granted separation pay as he made
no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at
the time of dismissal were entitled to their retirement benefits pursuant to
Article 287 of the Labor Code as amended;[73] and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio,

Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRCs ruling, petitioners had not discharged the
burden of proving that the monetary claims of the respondents have been paid.[74]The CA
thus reinstated the Labor Arbiters grant of respondents monetary claims, including
damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as
there was no illegal dismissal, then respondents are not entitled to their monetary claims
or separation pay and damages. Petitioners arguments are not only tiring, repetitive and
unconvincing, but confusing and confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other documents the labor
standard benefits they are entitled to, and which they alleged that petitioners have failed
to pay them. It was therefore petitioners burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non payment. [75] This
petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners
submitted, i.e., affidavits executed by some of respondents during an ocular inspection
conducted by an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove payment.[76] Despite
repeated orders from the Labor Arbiter,[77] petitioners failed to submit the pertinent
employee files, payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for overtime work, night
shift differential, premium pay for work on holidays and rest day, and payment of these
as well as the COLA and the SILP documents which are not in respondents possession
but in the custody and absolute control of petitioners. [78] By choosing not to fully and
completely disclose information and present the necessary documents to prove payment
of labor standard benefits due to respondents, petitioners failed to discharge the burden
of proof.[79] Indeed, petitioners failure to submit the necessary documents which as
employers are in their possession, inspite of orders to do so, gives rise to the presumption
that their presentation is prejudicial to its cause.[80] As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party,
and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the evidence, if produced, would
operate to his prejudice, and support the case of his adversary.[81]
Petitioners next claim that the cost of the food and snacks provided to respondents
as facilities should have been included in reckoning the payment of respondents
wages. They state that although on the surface respondents appeared to receive minimal
wages, petitioners had granted respondents other benefits which are considered part and
parcel of their wages and are allowed under existing laws. [82] They claim that these
benefits make up for whatever inadequacies there may be in
[83]
compensation. Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an appropriate Facility Evaluation
Order issued by the Regional Director of the DOLE.[84] Petitioners also aver that they give
five (5) percent of the gross income each month as incentives. As proof of compliance of
payment of minimum wages, petitioners submitted the Notice of Inspection Results issued
in 1995 and 1997 by the DOLE Regional Office.[85]
The cost of meals and snacks purportedly provided to respondents cannot be
deducted as part of respondents minimum wage. As stated in the Labor Arbiters
decision:[86]
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo)
issued by the DOLE Regional Office whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the same as part of their
wages, We cannot consider the cost of meals in the Orders as applicable to
[respondents]. [Respondents] were not interviewed by the DOLE as to the quality and
quantity of food appearing in the applications of [petitioners] for facility evaluation prior
to its approval to determine whether or not [respondents] were indeed given such kind
and quantity of food. Also, there was no evidence that the quality and quantity of food
in the Orders were voluntarily accepted by [respondents]. On the contrary; while some
[of the respondents] admitted that they were given meals and merienda, the quality of
food serve[d] to them were not what were provided for in the Orders and that it was only
when they filed these cases that they came to know about said Facility Evaluation
Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa
herself, who applied for evaluation of the facility (food) given to [respondents], testified
that she did not inform [respondents] concerning said Facility Evaluation Orders (p. 34,
tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities,
such facilities could not be deducted without compliance with certain legal requirements.
As stated in Mabeza v. NLRC,[87] the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents written authorization. Indeed, the
Labor Arbiter found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was provided for in the
Facility Evaluation Orders and it was only when they filed the cases that they came to
know of this supposed Facility Evaluation Orders.[88]Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she had applied
for.[89]
Considering the failure to comply with the above-mentioned legal requirements, the
Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided
to respondents should be deducted as part of their salaries, on the ground that
respondents have availed themselves of the food given by petitioners. [90] The law is clear
that mere availment is not sufficient to allow deductions from employees wages.
More important, we note the uncontroverted testimony of respondents on record that
they were required to eat in the hotel and restaurant so that they will not go home and
there is no interruption in the services of Mayon Hotel & Restaurant. As ruled in Mabeza,
food or snacks or other convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose.[91] Considering, therefore, that hotel workers are required
to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners
business.[92] The deduction of the cost of meals from respondents wages, therefore,
should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of
the establishment can be considered as part of the respondents wages. We quote with
approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as
profit share, the same cannot be considered as part of their wages in determining their
claims for violation of labor standard benefits. Although called profit share[,] such is in
the nature of share from service charges charged by the hotel. This is more explained
by [respondents] when they testified that what they received are not fixed amounts and
the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had been agreed by them prior
to their employment. Further, how can the amounts receive[d] by [respondents] be
considered as profit share when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross receipt of an
enterprise. Profits are realized after expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the
Labor Arbiter. We note that petitioners themselves have admitted that the establishment
employs more or less sixteen (16) employees,[93] therefore they are estopped from
claiming that the applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that
this is not a defense to payment of labor standard benefits. The employer cannot exempt
himself from liability to pay minimum wages because of poor financial condition of the
company. The payment of minimum wages is not dependent on the employers ability to
pay.[94]
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents employment in an underhanded
manner, and have used and abused the quasi-judicial and judicial processes to resist
payment of their employees rightful claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances of this case
would have called for exemplary damages, as the dismissal was effected in a wanton,
oppressive or malevolent manner,[95] and public policy requires that these acts must be
suppressed and discouraged.[96]
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages
of P10,000.00 each to all respondents. While it is true that other forms of damages under
the Civil Code may be awarded to illegally dismissed employees, [97] any award of moral
damages by the Labor Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.[98] And the law is clear that exemplary damages can only be
awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory
damages.[99]
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and
Broola specifically claimed damages from petitioners, then only they are entitled to
exemplary damages.[sjgs1]
Finally, we rule that attorneys fees in the amount to P10,000.00 should be granted to
each respondent. It is settled that in actions for recovery of wages or where an employee
was forced to litigate and incur expenses to protect his rights and interest, he is entitled
to an award of attorney's fees.[100] This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17,
2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision
of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97
is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to
respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all
respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres,

Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents
except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
and
(6) Granting attorneys fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total
monetary benefits awarded and due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty
(30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.
Austria-Martinez, Callejo Sr., Tinga, and Chico-Nazario, JJ., concur.
Industrial Timber vs. Ababon, 480 SCRA 171,

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

VERGINITA GANGCA, RUPERTO GORGONIO,
ROMEO HERRERO, SERGIO HORO-HORO,
FRANCISCO IBARRA, ABRAHAM JALE, DANDY
LABITAD, ANTONINA LAMBANG, ERNESTO
LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR.,
ESCARLITO MADLOS, MARCOS MAKINANO,
REMEGIO MAKINANO, VICENTE MAKINANO,
REYNALDO MASUHAY, HELEN MARATAS,
ELIZABETH MENDOZA, GUILBERTA MONTEROSO,
GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO
NUEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA,
BALDEMAR PAGALAN, BARTOLOME PAGALAN,
DAMASO PALOMA, MANALO PLAZA, JEREMIAS
PELAEZ, FRANCISCO PICARDAL, HERMINIA
PUBLICO, ROMULO QUINTOS, FIDEL QUITA,
FELICIANO RANADA, RODOLFO RARU, LEAN
CILDRIC RODRIGUEZ, SAMUEL SAROMINES,
NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL
TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO,
PEDRO TABANAO, ROBERTO TABANAO, MARIA
TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO
TAMADA, MINDA TUMAOB and ROBERTO TUTOR,
Respondents.
x ---------------------------------------------------- x
VIRGILIO ABABON, IGNACIO G.R. No. 164965

ABACAJEN, ANGELINA ABAY-ABAY, EDITH
ABREA, SAMUEL ABREA, BIENVENIDO ACILO,
RODRIGO ACILO, VICTOR ACILO, ARTURO
ADVINCULA, GERTRUDES AMPARO, MILA
ARQUITA, VIRGILIO ANTONIO, PRUDENCIO
ARQUITA,
ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN,

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

ROGELIO TAMADA, MINDA TUMAOB, and
ROBERTO TUTOR,
Petitioners,
- versus -
THE HONORABLE COURT OF APPEALS,

INDUSTRIAL TIMBER CORPORATION,
INDUSTRIAL PLYWOOD GROUP
CORPORATION, TOMAS TANGSOC,
JR., LORENZO TANGSOC and Promulgated:
TOMAS TAN,
Respondents. January 25, 2006
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
Before us are two petitions for review under Rule 45 of the Rules of Court. G.R. No.
164518 assails the October 21, 2002 Decision[1] of the Court of Appeals, in CA-GR. SP
No. 51966, which set aside the May 24, 1995 Decision[2] of the National Labor Relations
Commission (NLRC), as well as the July 16, 2004 Resolution[3] denying its motion for
reconsideration. G.R. No. 164965 assails only the July 16, 2004 Resolution of the Court
of Appeals which denied their partial motion for reconsideration. These cases were
consolidated because they arose out of the same facts set forth below.
Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at
Agusan, Pequeo, Butuan City, leased to Industrial Timber Corporation (ITC) on August
30, 1985 for a period of five years.[4] Thereafter, ITC commenced operation of the plywood
plant and hired 387 workers.
On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and
its workers that effective March 19, 1990 it will undergo a no plant operation due to lack
of raw materials and will resume only after it can secure logs for milling. [5]
Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and
its intention not to renew the same.
On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown
due to the non-renewal of anti-pollution permit that expired in April 1990.[6] This fact and
the alleged lack of logs for milling constrained ITC to lay off all its workers until further
notice. This was followed by a final notice of closure or cessation of business operations
on August 17, 1990 with an advice for all the workers to collect the benefits due them
under the law and CBA.[7]
On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood
Processing Plant Permit No. WPR-1004-081791-042,[8] which included the anti-pollution
permit, by the Department of Environment and Natural Resources (DENR) coincidentally
on the same day the ITC ceased operation of the plant.
This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for
illegal dismissal, unfair labor practice and damages. They alleged, among others, that the
cessation of ITCs operation was intended to bust the union and that both corporations
are one and the same entity being controlled by one owner.
On January 20, 1992, after requiring both parties to submit their respective position
papers, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil
of corporate fiction for lack of evidence to prove that it was used to perpetuate fraud or
illegal act; upheld the validity of the closure; and ordered ITC to pay separation pay of
month for every year of service. The dispositive portion of the decision reads:
PREMISES CONSIDERED, judgment is hereby rendered ordering

respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven
individual complainants their separation pay at the rate of one-half (1/2)
months pay for every year of service, a fraction of at least six (6) months to
be considered as one whole year, reckoned until August 1990.
All other claims of complainants are hereby ordered DISMISSED for
want of merit.
SO ORDERED.[9]
Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision
of the Labor Arbiter and ordered the reinstatement of the employees to their former
positions, and the payment of full back wages, damages and attorneys fees. [10]
ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June
24, 1993.[11] However, it was dismissed for being filed out of time having been filed only
on the date of actual receipt by the NLRC on June 29, 1993, three days after the last day
of the reglamentary period.[12] Thus, they filed a Petition for Relief from
Resolution,[13] which was treated as a second motion for reconsideration by the NLRC
and dismissed for lack of merit in a Resolution dated September 29, 1994. [14]
From said dismissal, petitioners filed a Notice of Appeal with the Supreme
Court.[15] Subsequently, they filed a Motion for Reconsideration/Second Petition for Relief
with the NLRC.[16]
On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for
being a wrong mode of appeal from the NLRC decision.[17] On the other hand, the NLRC
granted the Second Petition for Relief and set aside all its prior decision and resolutions.
The dispositive portion of the May 24, 1995 decision reads:
WHEREFORE, the decision of this Commission dated May 10, 1993 and
its subsequent resolutions dated June 22, 1994 and September 29, 1994
are Set Aside and Vacated. Accordingly, the appeal of complainants is
Dismissed for lack of merit and the decision of the Labor Arbiter dated
January 20, 1992 is Reinstated and hereby Affirmed.
SO ORDERED.[18]
On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme
Court, which was docketed as G.R. No. 121977.[19] However, pursuant to our ruling in St.
Martins Funeral Home v. NLRC, we referred the petition to the Court of Appeals for
appropriate action and disposition.[20]
On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24,
1995 decision of the NLRC and reinstated its May 20, 1993 decision and September 29,
1993 resolution, thus:
WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995
of the National Labor Relations Commission is ANNULLED and SET
ASIDE, with the result that its decision dated May 20, 1993 and resolution
dated September 29, 1994 are REINSTATED.
SO ORDERED.[21]
Both parties filed their respective motions for reconsideration which were denied, hence,
the present consolidated petitions for review based on the following assigned errors:
In G.R. No. 164518
THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE

RULES OF PROCEDURE WITH RESPECT TO RESPONDENTS BUT
BEING RIGID IN ITS APPLICATION AS REGARDS PETITIONERS.[22]
In G.R. No. 164965
WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A

REVERSIBLE ERROR WHEN IT REFUSED TO APPLY SECTION 279 OF
THE LABOR CODE AS AMENDED BY RA 6715 TO MODIFY THE
DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES FOR
PETITIONERS.[23]
ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995
decision of the NLRC since its May 20, 1993 decision had become immutable for their
failure to file motion for reconsideration within the reglementary period. While they admit
filing their motion for reconsideration out of time due to excusable negligence of their
counsels secretary, however, they advance that the Court of Appeals should have relaxed
the rules of technicality in the paramount interest of justice, as it had done so in favor of
the employees, and ruled on the merits of the case; after all, the delay was just three
days.
Ordinarily, once a judgment has become final and executory, it can no longer be
disturbed, altered or modified. However, this rule admits of exceptions in cases of special
and exceptional nature as we held in Industrial Timber Corporation v. National Labor
Relations Commission:[24]
It is true that after a judgment has become final and executory, it can
no longer be modified or otherwise disturbed. However, this principle admits
of exceptions, as where facts and circumstances transpire which render its
execution impossible or unjust and it therefore becomes necessary, in the
interest of justice, to direct its modification in order to harmonize the
disposition with the prevailing circumstances.
A careful scrutiny of the facts and circumstances of these consolidated cases

warrants liberality in the application of technical rules and procedure. We agree with the
NLRC that substantial justice is best served by allowing the petition for relief despite
procedural defect of filing the motion for reconsideration three days late, for to rule
otherwise, a greater injustice would be done to ITC by ordering it to reinstate the
employees to their former positions that no longer exist due to valid and legitimate
cessation of business and pay huge judgment award.[25]
Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise
of its appellate powers, correct, amend, or waive any error, defect or irregularity whether
in substance or in form. Further, Article 221 of the same code provides that in any
proceeding before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention
of this Code that the Commission and its members and the Labor Arbiters shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process.[26]
Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC
that a motion for reconsideration of any order, resolution or decision of the Commission
shall not be entertained except when based on palpable or patent errors, provided that
the motion is under oath and filed within 10 calendar days from receipt of the order,
resolution or decisionshould not be interpreted as to sacrifice substantial justice to
technicality. It should be borne in mind that the real purpose behind the limitation of the
period is to forestall or avoid an unreasonable delay in the administration of justice, from
which the NLRC absolved ITC and IPGC because the filing of their motion for
reconsideration three days later than the prescribed period was due to excusable
negligence. Indeed, the Court has the power to except a particular case from the
operation of the rule whenever the purposes of justice requires it because what should
guide judicial action is that a party is given the fullest opportunity to establish the merits
of his action or defense rather than for him to lose life, honor, or property on mere
technicalities.[27]
We now come to the main issues of whether Ababon, et al. were illegally dismissed due
to the closure of ITCs business; and whether they are entitled to separation pay,
backwages, and other monetary awards.
Work is a necessity that has economic significance deserving legal protection. The
social justice and protection to labor provisions in the Constitution dictate so. On the other
hand, employers are also accorded rights and privileges to assure their self-determination
and independence, and reasonable return of capital. This mass of privileges comprises
the so-called management prerogatives. Although they may be broad and unlimited in
scope, the State has the right to determine whether an employer's privilege is exercised
in a manner that complies with the legal requirements and does not offend the protected
rights of labor. One of the rights accorded an employer is the right to close an
establishment or undertaking.[28]
The right to close the operation of an establishment or undertaking is one of the

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

employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
A reading of the foregoing law shows that a partial or total closure or cessation of
operations of establishment or undertaking may either be due to serious business losses
or financial reverses or otherwise. Under the first kind, the employer must sufficiently and
convincingly prove its allegation of substantial losses,[29] while under the second kind, the
employer can lawfully close shop anytime[30] as long as cessation of or withdrawal from
business operations was bona fide in character and not impelled by a motive to defeat or
circumvent the tenurial rights of employees,[31] and as long as he pays his employees
their termination pay in the amount corresponding to their length of service.[32] Just as no
law forces anyone to go into business, no law can compel anybody to continue the same.
It would be stretching the intent and spirit of the law if a court interferes with
management's prerogative to close or cease its business operations just because the
business is not suffering from any loss or because of the desire to provide the workers
continued employment.[33]
In sum, under Article 283 of the Labor Code, three requirements are necessary for
a valid cessation of business operations: (a) service of a written notice to the employees
and to the DOLE at least one month before the intended date thereof; (b) the cessation
of business must be bona fide in character; and (c) payment to the employees of
termination pay amounting to one month pay or at least one-half month pay for every year
of service, whichever is higher.
In these consolidated cases, we find that ITCs closure or cessation of business
was done in good faith and for valid reasons.
The records reveal that the decision to permanently close business operations was
arrived at after a suspension of operation for several months precipitated by lack of raw
materials used for milling operations, the expiration of the anti-pollution permit in April
1990, and the termination of the lease contract with IPGC in August 1990 over the
plywood plant at Agusan, Pequeo, Butuan City. We quote with approval the observation
of the Labor Arbiter:
As borne out from the records, respondent ITC actually underwent no plant
operation since 19 March 1990 due to lack of log supply. This fact is
admitted by complainants (Minutes of hearing, 28 October 1991). Since
then several subsequent incidents prevented respondent ITC to resume its
business operations e.g. expiration and non-renewal of the wood
processing plant permit, anti-pollution permit, and the lease contract on the
plywood plant. Without the raw materials respondent ITC has nothing to
produce. Without the permits it cannot lawfully operate the plant. And
without the contract of lease respondent ITC has no option but to cease
operation and turn over the plant to the lessor.[34] (Emphasis supplied)
Moreover, the lack of raw materials used for milling operations was affirmed in Industrial
Timber Corporation v. National Labor Relations Commission[35] as one of the reasons for
the valid closure of ITCs Butuan Logs Plant in 1989. In said case, we upheld the
management prerogative to close the plant as the only remedy available in order to
prevent imminent heavy losses on account of high production costs, erratic supply of raw
materials, depressed prices and poor market conditions for its wood products.
In Shoppers Gain Supermarket v. National Labor Relations Commission, [36] we held that
the non-renewal of petitioner corporations lease contract and its consequent closure and
cessation of operations may be considered an event beyond petitioners control, in the
nature of a force majeure situation. As such, it amounts to an authorized cause for
termination of the private respondents.
Having established that ITCs closure of the plywood plant was done in good faith
and that it was due to causes beyond its control, the conclusion is inevitable that said
closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to
be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue
regarding the computation of their backwages. However, they are entitled to separation
pay equivalent to one month pay or at least one-half month pay for every year of service,
whichever is higher.
Although the closure was done in good faith and for valid reasons, we find that ITC did
not comply with the notice requirement. While an employer is under no obligation to
conduct hearings before effecting termination of employment due to authorized
cause,[37] however, the law requires that it must notify the DOLE and its employees at
least one month before the intended date of closure.
In the case at bar, ITC notified its employees and the DOLE of the no plant operation on
March 16, 1990 due to lack of raw materials. This was followed by a shut down notice
dated June 26, 1990 due to the expiration of the anti-pollution permit. However, this
shutdown was only temporary as ITC assured its employees that they could return to
work once the renewal is acted upon by the DENR. On August 17, 1990, the ITC sent its
employees a final notice of closure or cessation of business operations to take effect on
the same day it was released. We find that this falls short of the notice requirement for
termination of employment due to authorized cause considering that the DOLE was not
furnished and the notice should have been furnished both the employees and the DOLE
at least one month before the intended date of closure.
In Ariola v. Philex Mining Corporation,[38] we held:
In Agabon v. National Labor Relations Commission and Jaka Food

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

valid or authorized causes but not complying with statutory
due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most

notorious violators of company policy are rewarded by
invoking due process. This also creates absurd situations
where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or
threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious
business losses demand that operations be ceased in less
than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can
generate employment in the local economy.
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code
but the employer failed to comply with the notice requirement, the sanction should be stiff
as the dismissal process was initiated by the employers exercise of his management
prerogative, as opposed to a dismissal based on a just cause under Article 282 with the
same procedural infirmity where the sanction to be imposed upon the employer should
be tempered as the dismissal process was, in effect, initiated by an act imputable to the
employee.[39]
In light of the factual circumstances of the cases at bar, we deem it wise and reasonable
to award P50,000.00 to each employee as nominal damages.
WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of
Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision of the
NLRC, as well as the July 16, 2004 Resolution denying ITCs motion for reconsideration,
are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision
of the Labor Arbiter finding the closure or cessation of ITCs business valid, is AFFIRMED
with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one
month pay or to at least one-half month pay for every year of service, whichever is higher,
and P50,000.00 as nominal damages to each employee.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
JAT General Services vs. NLRC, 421 SCRA 78,

GR 148340, Jan. 26, 2004
[G.R. No. 148340. January 26, 2004]
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs.

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

rendered ordering the respondents [herein petitioners] to pay complainant the
aggregate sum of P85,871.00.
SO ORDERED.[5]
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas dismissal was
unjustified because of petitioners failure to serve upon the private respondent and the
DOLE the required written notice of termination at least one month prior to the effectivity
thereof and to submit proof showing that petitioners suffered a business slowdown in
operations and sales effective January 1998; (2) private respondent may recover
backwages from March 1, 1998 up to March 1, 1999 or P66,924.00[6] and separation pay,
in lieu of reinstatement, at the rate of one (1) month pay for every year of service,
or P10,296.00;[7] (3) the payrolls submitted by JAT showed that effective May 1, 1997,
private respondents wages did not conform to the prevailing minimum wage, hence,
private respondent is entitled to salary differentials from May 1, 1997 to January 6, 1998,
in the amount of P1,066.00;[8] (4) that private respondent be awarded legal holiday pay in
the amount of P1,850.00,[9] service incentive leave pay in the amount of P925.00[10] and
13th month pay for 1997 in the amount of P4,810.00.[11]
On appeal, the NLRC affirmed the decision of the labor arbiter.[12] The NLRC found
that the financial statements submitted on appeal were questionable, unreliable and
inconsistent with petitioners allegations in the pleadings, particularly as to the date of the
alleged closure of operation; hence, they cannot be used to support private respondents
dismissal. The NLRC also affirmed the monetary awards because petitioners failed to
prove the payment of benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court
of Appeals, which the latter dismissed. The decretal portion of the decision reads as
follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in

fact and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the
assailed decision of the National Labor Relations Commission AFFIRMED, with costs to
petitioners.
SO ORDERED.[13]
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal
dismissal of the private respondent. The appellate court held that the petitioners failed to
prove by clear and convincing evidence their compliance with the requirements for valid
retrenchment. It cited the findings of the NLRC on the belated submission of the financial
statements during appeal that could not be given sufficient weight, and that the petitioners
late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of
Appeals.
Hence, the present petition alleging that the:
A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE

DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN
CASE OF TEMPORARY SUSPENSION OF BUSINESS;
B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT

IS ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE
RESPONDENT WAS NOT DISMISSED FROM SERVICE AT THE TIME THE
COMPLAINT WAS FILED;
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS
THE BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES;
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT

FAILED TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER
COURT (sic) ERRED IN AWARDING BACKWAGES AND/OR SEPARATION
PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS
FILED A NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE
LABOR DEPARTMENT.[14]
The relevant issues for our resolution are: (a) whether or not private respondent was
illegally dismissed from employment due to closure of petitioners business, and (b)
whether or not private respondent is entitled to separation pay, backwages and other
monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously
concluded that they are liable for illegal dismissal because of non-compliance of the
procedural and substantive requirements of terminating employment due to retrenchment
and cessation of business. They argued that there was no closure but only suspension of
operation in good faith in March 1998, when private respondent claimed to have been
illegally dismissed, due to the decline in sales and heavy losses incurred in its business
arising from the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the
Labor Code, a bona fide suspension of the operation of a business for a period not
exceeding six (6) months shall not terminate employment and no notice to an employee
is required. However, petitioners relate that JAT was compelled to permanently close its
operation eight (8) months later or on November 1998, when the hope of recovery
became nil but only after sending notices to all its workers and DOLE. Thus, petitioners
argue that it cannot be held liable for illegal dismissal in March 1998 since there was no
termination of employment during suspension of operations and a notice to employee is
not required, unlike in the case of permanent closure of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of
business under Article 286[15] of the Labor Code. This matter is not pertinent to, much
less determinative of, the disposition of this case. Suffice it to state that there is no
termination of employment during the period of suspension, thus the procedural
requirement for terminating an employee does not come into play yet. Rather, the issue
demanding a sharpened focus here concerns the validity of dismissal resulting from the
closure of JAT.
A brief discussion on the difference between retrenchment and closure of business
as grounds for terminating an employee is necessary. While the Court of Appeals defined
the issue to be the validity of dismissal due to alleged closure of business, it cited
jurisprudence relating to retrenchment to support its resolution and conclusion.While the
two are often used interchangeably and are interrelated, they are actually two separate
and independent authorized causes for termination of employment.Termination of an
employment may be predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby
there is a complete cessation of business operations and/or an actual locking-up of the
doors of establishment, usually due to financial losses. Closure of business as an
authorized cause for termination of employment aims to prevent further financial drain
upon an employer who cannot pay anymore his employees since business has already
stopped. On the other hand, retrenchment is reduction of personnel usually due to poor
financial returns so as to cut down on costs of operations in terms of salaries and wages
to prevent bankruptcy of the company. It is sometimes also referred to as down-
sizing. Retrenchment is an authorized cause for termination of employment which the law
accords an employer who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees. The purpose of
retrenchment is to save a financially ailing business establishment from eventually
collapsing.[16]
In the present case, we find the issues and contentions more centered on closure of
business operation rather than retrenchment. Closure or cessation of operation of the
establishment is an authorized cause for terminating an employee under Article 283 of
the Labor Code, to wit:
ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
the Department of Labor and Employment at least one (1) month before the intended
date thereof. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or to at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the
employer.[17] In the present case, JAT justifies its closure of business due to heavy losses
caused by declining sales. It belatedly submitted its 1997 Income Statement[18] and
Comparative Statement of Income and Capital for 1997 and 1998[19] to the NLRC to prove
that JAT suffered losses starting 1997. However, as noted earlier, these were not given
much evidentiary weight by the NLRC as well as the Court of Appeals, to wit:
The financial statements submitted by the respondents on appeal are questionable for
the following reasons: (1) the figures in Annexes D-2 and E of the appeal memorandum
(which both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on
March 1, 1998. Yet, their 1998 financial statement (Annex E) indicates operations up to
and ending December 31, 1998. In view of the foregoing, the above-mentioned financial
statements do not justify the complainants dismissal. [20]
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent
reason to set it aside. While business reverses or losses are recognized by law as an
authorized cause for terminating employment, it is an essential requirement that alleged
losses in business operations must be proven convincingly. Otherwise, said ground for
termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures in order to ease out
employees.[21] In this case, the financial statements were not only belatedly submitted but
were also bereft of necessary details on the extent of the alleged losses incurred, if
any. The income statements only indicated a decline in sales in 1998 as compared to
1997. These fell short of the stringent requirement of the law that the employer prove
sufficiently and convincingly its allegation of substantial losses. While the comparative
income statement shows a net loss of P207,091 in 1998, the income statement of 1997
still shows JAT posting a net income of P19,361. Both statements need interpretation as
to their impact on the companys termination of certain personnel as well as business
closure.
Having concluded that private respondent was not validly dismissed resulting from
closure of business operations due to substantial losses, we now proceed to determine
whether or not private respondent was validly dismissed on the ground of closure or
cessation of operations for reasons other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or
cessation of business operation as a valid and authorized ground of terminating
employment is not limited to those resulting from business losses or reverses. Said
provision in fact provides for the payment of separation pay to employees terminated
because of closure of business not due to losses, thus implying that termination of
employees other than closure of business due to losses may be valid.
Hence, in one case,[22] we emphasized that:
Art. 283 governs the grant of separation benefits in case of closures or cessation of
operation of business establishments NOT due to serious business losses or financial
reverses x x x.Where, however, the closure was due to business lossesas in the instant
case, in which the aggregate losses amounted to over P20 billionthe Labor Code
does not impose any obligation upon the employer to pay separation benefits, for
obvious reasons. There is no need to belabor this point. Even the public respondents, in
their Comment filed by the Solicitor General, impliedly concede this point.
In another case,[23] we held more emphatically that:
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees their termination pay in
the amount corresponding to their length of service. It would, indeed, be stretching the
intent and spirit of the law if we were to unjustly interfere in managements prerogative to
close or cease its business operations just because said business operation or
undertaking is not suffering from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses
to justify closure of the business, its income statement shows declining sales in 1998,
prompting the petitioners to suspend its business operations sometime in March 1998,
eventually leading to its permanent closure in December 1998. Apparently, the petitioners
saw the declining sales figures and the unsustainable business environment with no hope
of recovery during the period of suspension as indicative of bleak business prospects,
justifying a permanent closure of operation to save its business from further collapse. On
this score, we agree that undue interference with an employers judgment in the conduct
of his business is uncalled for. Even as the law is solicitous of the welfare of employees,
it must also protect the right of an employer to exercise what is clearly a management
prerogatives. As long as the companys exercise of the same is in good faith to advance
its interest and not for the purpose of defeating or circumventing the rights of employees
under the law or a valid agreement such exercise will be upheld.[24]
In the event, under Article 283 of the Labor Code, three requirements are necessary
for a valid cessation of business operations, namely: (a) service of a written notice to the
employees and to the DOLE at least one (1) month before the intended date thereof; (b)
the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to at least one-half (1/2) month pay for every
year of service, or one (1) month pay, whichever is higher.[25]
The closure of business operation by petitioners, in our view, is not tainted with bad
faith or other circumstance that arouses undue suspicion of malicious intent. The decision
to permanently close business operations was arrived at after a suspension of operation
for several months precipitated by a slowdown in sales without any prospects of
improving. There were no indications that an impending strike or any labor-related union
activities precipitated the sudden closure of business. Further, contrary to the findings of
the Labor Arbiter, petitioners had notified private respondent [26] and all other workers
through written letters dated November 25, 1998 of its decision to permanently close its
business and had submitted a termination report to the DOLE.[27] Generally, review of
labor cases elevated to this Court on a petition for review on certiorari is confined merely
to questions of law. But in certain cases, we are constrained to analyze or weigh the
evidence again if the findings of fact of the labor tribunals and the appellate court are in
conflict, or not supported by evidence on record or the judgment is based on a
misapprehension of facts.[28]
In this case, we are persuaded that the closure of JATs business is not
unjustified. Further we hold that private respondent was validly terminated, because the
closure of business operations is justified.
Nevertheless in this case, we must stress that the closure of business operation is
allowed under the Labor Code, provided separation pay be paid to the terminated
employee. It is settled that in case of closure or cessation of operation of a business
establishment not due to serious business losses or financial reverses, the employees
are always given separation benefits.[29] The amount of separation pay must be computed
from the time private respondent commenced employment with petitioners until the time
the latter ceased operations.[30]
Considering that private respondent was not illegally dismissed, however, no
backwages need to be awarded. Backwages in general are granted on grounds of equity
for earnings which a worker or employee has lost due to illegal dismissal. [31] It is well
settled that backwages may be granted only when there is a finding of illegal dismissal.[32]
The other monetary awards to private respondent are undisputed by petitioners and
unrefuted by any contrary evidence. These awards, namely legal holiday pay, service
incentive leave pay and 13th month pay, should be maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the
Court of Appeals in CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that
the award of P66,924.00 as backwages is deleted. The award of separation pay
amounting to P10,296.00 and the other monetary awards, namely salary differentials in
the amount of P1,066.00, legal holiday pay in the amount of P1,850.00, service incentive
leave pay in the amount of P925.00 and 13th month pay in the amount of P4,910, or a
total of P29,047.00 are maintained. No pronouncement as to costs.
SO ORDERED.
Genuino Ice vs. Magpantay, 493 SCRA 195,
GR No. 147790, June 27, 2006
enuino Ice Company, Inc. G.R. No. 147790
Petitioner,
Present:
PANGANIBAN, CJ., Chairperson,

YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.
Promulgated:
Alfonso S. Magpantay,
Respondent. June 27, 2006
x------------------------------------------------x
DECISION
Alfonso Magpantay (respondent) was employed as a machine operator with Genuino Ice
Company, Inc. (petitioner) from March 1988 to December 1995. On November 18, 1996,
respondent filed against petitioner a complaint for illegal dismissal with prayer for moral
and exemplary damages.[1] In his Position Paper, respondent alleged that he was
dismissed from service effective immediately by virtue of a memorandum, after which he
was not allowed anymore to enter the company premises. Respondent bewailed that his
termination from employment was done without due process.[2]
Petitioner countered that he was not illegally dismissed, since the dismissal was based
on a valid ground, i.e., he led an illegal strike at petitioners sister company, Genuino Agro
Industrial Development Corporation, which lasted from November 18 to 22, 1995,
resulting in big operation losses on the latters part. Petitioner also maintained that
respondents dismissal was made after he was accorded due process.[3]
Respondent replied, however, that assuming that he led such illegal strike, he could not
be liable therefore because it was done in petitioners sister company which is a separate
and distinct entity from petitioner.[4]
Petitioner initially claimed that respondents acts were tantamount to serious misconduct
or willful disobedience, gross and habitual neglect of duties, and breach of
trust. Subsequently, petitioner amended its position paper to include insubordination
among the grounds for his dismissal, since it came out during respondents cross-
examination, and the matter was reported only after the new personnel manager
assumed his position in August 1996.[5]
On August 14, 1998, the Labor Arbiter of the National Labor Relations Commission
(NLRC) dismissed the case for lack of merit[6] finding that petitioner had valid cause to
dismiss respondent.
Respondent appealed from the Labor Arbiters Decision. The NLRC,

in its Decision dated June 30, 1999, sustained the findings of the Labor
Arbiter and denied the appeal for lack of merit.[7]
Respondent filed a motion for reconsideration of the NLRC Decision, which was denied
in a Resolution dated August 31, 1999.[8]
On October 29, 1999, entry of judgment was made on the NLRC Resolution dated August
31, 1999.[9]
On February 7, 2000, respondent filed a special civil action for certiorari with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 57105. Respondents counsel stated that it
was on December 20, 1999 that he received the NLRC Resolution dated August 31,
1999.[10]
In his petition before the CA, respondent alleged that the Labor Arbiter committed an error
in ruling that his dismissal was for a valid cause; and reiterated his claim that his dismissal
was made without due process.[11]
Petitioner filed its Comment, contending that the petition was filed out of time, considering
that contrary to respondents claim that the NLRC Resolution dated August 31, 1999 was
received on December 20, 1999, it was actually received on September 15, 1999, as
shown in the registry return card. Petitioner also reiterated its arguments that respondent
was dismissed for cause and with due process.
On August 3, 2000, the CA[12] rendered the assailed Decision granting the
petition and declaring respondents dismissal as illegal. The dispositive
portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The dismissal of petitioner

is hereby declared as illegal. Respondent company is ORDERED to pay to
petitioner separation pay and full backwages. Let this case be remanded to
the labor arbiter for the computation of the aforesaid awards.
SO ORDERED.[13]
Petitioner filed a motion for reconsideration which the CA denied per its Resolution
dated March 16, 2001.[14]
Hence, herein petition for review on certiorari under Rule 45 of the Rules of Court stating
the following issues:
1. Whether or not the Court of Appeals erred and committed grave abuse
of discretion in giving due course to the respondents Petition for
Certiorari?
2. Whether or not the Court a quo erred and committed grave abuse of
discretion in declaring that the respondent was illegally dismissed
from employment?
3. Whether or not the Court a quo erred and committed grave abuse of
discretion in ordering the payment of separation pay and full
backwages to the respondent?[15]
At the outset, it should be stated that under Rule 45 of the Rules of Court, only
questions of law may be raised, the reason being that this Court is not a trier of facts. It
is not for this Court to reexamine and reevaluate the evidence on record. [16] However,
considering that the CA came up with an opinion different from that of the Labor Arbiter
and the NLRC, the Court is
now constrained to review the evidence on record.[17]
On the first issue, petitioner argues that the CA should have dismissed
respondents petition for having been filed out of time. According to petitioner, since the
registry return receipt shows that the NLRC Resolution dated August 31, 1999 denying
respondents motion for reconsideration was received on September 15, 1999, the petition
filed on February 7, 2000 was, therefore, 85 days late.
Respondent, however, counters that the person who received the NLRC Resolution dated
August 31, 1999 on September 15, 1999, a certain Mirela G. Ducut of the Computer
Services Department, was not a duly-authorized representative of the FEU Legal Aid
Bureau, as it is only Ellen Dela Paz, who is authorized to receive all communications
addressed to the office.
The CA sustained respondents contention that since the service was not made to an
authorized person, it was not legally effective, and the counting of the period should be
reckoned from the date of actual receipt by counsel, which was on December 20, 1999.
The New Rules of Procedure of the NLRC provides the rule for the service of notices and
resolutions in NLRC cases, to wit:
Sec. 4. Service of notices and resolutions. a) Notices or summons

and copies of orders, resolutions or decisions shall be served on the parties
to the case personally by the bailiff or the duly authorized public officer
within three (3) days from receipt thereof by registered mail; Provided, that
where a party is represented by counsel or authorized representative,
service shall be made on such counsel or authorized representative; x x x
The presumption is that the decision was delivered to a person in his office, who
was duly authorized to receive papers for him, in the absence of proof to the contrary. [18] It
is likewise a fundamental rule that unless the contrary is proven, official duty is presumed
to have been performed regularly and judicial proceedings regularly conducted, which
includes the presumption of regularity of service of summons and other notices. [19] The
registry return of the registered mail as having been received is prima facie proof of the
facts indicated therein.Thus, it was necessary for respondent to rebut that legal
presumption with competent and proper evidence.
In an attempt to disprove that there was proper receipt of the Resolution,

respondents counsel presented an Affidavit executed by Ellen dela Paz, who attested
that she is the only person authorized to receive communications for and in behalf of the
FEU Legal Aid Bureau; that she never received the NLRC Resolution dated August 31,
1999 on September 15, 1999; and that it was only on December 20, 1999, through
respondent, that they learned of said Resolution.[20]
Records show that Ducut is not an employee of the FEU Legal Aid Bureau, but is
connected with the Computer Services Department. The FEU Legal Aid Bureau has its
own personnel which include Ms. dela Paz who is the one authorized to receive
communications in behalf of the office. It has been ruled that a service of a copy of a
decision on a person who is neither a clerk nor one in charge of the attorneys office is
invalid.[21] This was the Courts ruling in Caete v. National Labor Relations
Commission,[22] to wit:
We have ruled that where a copy of the decision is served on a

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

Inc.,[24]
where the Court accepted the affidavit executed by Arlan Cayno denying that he
was an employee of Gella, Danguilan, Nabaza & Associates law firm authorized to
receive legal or judicial processes. Cayno likewise disclaimed knowledge of the
whereabouts of the notice. According to the Court, since Mr. Cayno was not an employee
of the said law firm authorized to receive notices in its behalf, his alleged receipt of the
notice is without any effect in law.
Hence, the CA was correct in ruling that the reckoning period should be the date
when respondents counsel actually received the NLRC Resolution dated August 31,
1999, which was on December 20, 1999.
Petitioner, however, pointed out that a certain Ruby D.G. Sayat received a copy of
their Motion for Reconsideration filed by registered mail on August 16,
2000.[25] Respondent contended that at the time Sayat received the motion, she was then
detailed at the office and was authorized to receive said pleading, and that it was an
isolated and exceptional instance.[26] On this matter, the FEU Acting Postmaster certified
that Sayat is a permanent employee of the FEU Legal Aid Bureau. [27] As such, she is
authorized to receive communications in behalf of the office and need not possess an
express authority to do so.
More importantly, the Court has consistently frowned upon the dismissal of an
appeal on purely technical grounds. While the right to appeal is a statutory, not a natural
right, it is, nonetheless, an essential part of our judicial system. Courts should proceed
with caution so as not to deprive a party of the right to appeal, but rather, ensure amplest
opportunity for the proper and just disposition of a cause, free from the constraints of
technicalities.[28]
On the issue of illegal dismissal, both the Labor Arbiter and the NLRC were one in
concluding that petitioner had just cause for dismissing respondent, as his act of leading
a strike at petitioners company for four days, his absence from work during such time,
and his failure to perform his duties during such absence, make up a cause for habitual
neglect of duties, while his failure to comply with petitioners order for him to transfer to
the GMA, Cavite Plant constituted insubordination or willful disobedience. The CA,
however, differed with said conclusion and found that respondents attitude has not been
proved to be visited with any wrongdoing, and that his four-day absence does not appear
to be both gross and habitual.
The Court sustains the CAs finding that respondents four-day absence does not
amount to a habitual neglect of duty; however, the Court finds that respondent was validly
dismissed on ground of willful disobedience or insubordination.
Under Article 282 of the Labor Code, as amended, an employer may terminate an
employment for any of the following causes: (a) serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in
connection with his work; (b) gross and habitual neglect by the employee of his duties;
(c) fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative; (d) commission of a crime or offense by the employee
against the person of his employer or any immediate member of his family or his duly
authorized representative; and, (e) other causes analogous to the foregoing. [29] The
employer has the burden of proving that the dismissal was for a just cause; failure to show
this would necessarily mean that the dismissal was unjustified and, therefore, illegal.[30]
Neglect of duty, to be a ground for dismissal, must be both gross and

habitual.[31] Gross negligence connotes want of care in the performance of ones
duties. Habitual neglect implies repeated failure to perform ones duties for a period of
time, depending upon the circumstances. On the other hand, fraud and willful neglect of
duties imply bad faith on the part of the employee in failing to perform his job to the
detriment of the employer and the latters business.[32] Thus, the single or isolated act of
negligence does not constitute a just cause for the dismissal of the employee. [33]
Thus, the Court agrees with the CA that respondents four-day absence is not
tantamount to a gross and habitual neglect of duty. As aptly stated by the CA, (W)hile he
may be found by the labor courts to be grossly negligent of his duties, he has never been
proven to be habitually absent in a span of seven (7) years as GICIs employee. The
factual circumstances and evidence do not clearly demonstrate that petitioners
[respondent] absences contributed to the detriment of GICIs operations and caused
irreparable damage to the company.[34]
Petitioner, however, insists that during his four-day absence, respondent was
leading an illegal strike in its sister company. In the first place, there is no showing that
the strike held at the Genuino Agro Industrial Development Corporation is illegal. It is a
basic rule in evidence that each party must prove his affirmative allegation. Since the
burden of evidence lies with the party who asserts the affirmative allegation, the plaintiff
or complainant has to prove his affirmative allegations in the complaint and the defendant
or the respondent has to prove the affirmative allegation in his affirmative defenses and
counterclaim.[35] Since it was petitioner who alleged that such strike is illegal, petitioner
must, therefore, prove it. Except for such bare allegation, there is a dearth of evidence in
this case proving the illegality of said strike.
However, as previously stated, the Court finds that respondent was validly
dismissed on the ground of insubordination or willful disobedience.
On this point, the CA opined that petitioner included insubordination as a mere

after-thought. It noted that petitioner seemed to be irresolute in stating the cause of
respondents dismissal, as in its Position Paper, it originally relied on respondents four-
day absence or participation in the illegal strike as a cause for dismissal but later on
amended its Position Paper to include insubordination.[36] Thus, the CA did not make any
factual finding or conclusion in its Decision vis--vis petitioners allegation of respondents
insubordination.
While its perception may be true, it should not have deterred the CA from making
any resolution on the matter. For one, respondent was able to argue against petitioners
allegation of insubordination before the Labor Arbiter[37] and the NLRC.[38] For another, it
was respondent himself who raised the subject before the CA, wherein he stated in his
Petition, inter alia, viz.:
37. Miserably, public respondent [NLRC] justified the validity of his
dismissal by holding that the 12 December 1995 Memorandum showed that
it was effected with due process. x x x
xxxx
38. How could the foregoing memorandum justify petitioners

dismissal for allegedly joining the four (4) days strike when it refers to his
alleged refusal to transfer? This memorandum shows glaring violations of
his right to substantive and procedural due process and reveal the true
circumstances of his dismissal, to wit: 1) petitioner was dismissed because
of his failure to abide with the managements decision to transfer
him, and not on his alleged participation in the four (4) day strike or his
absence on those dates; x x x;3) while the true cause of his dismissal is his
failure to abide with the decision to transfer, private respondent belatedly
and self-servingly claimed that he was dismissed because of the alleged
strike; 4) the Labor Arbiters decision that the dismissal is valid is based on
speculation in that while it was clear that petitioner was actually dismissed
for refusing the transfer, he held that the dismissal is justified because
petitioner absented for four (4) days to join the strike elsewhere;
x x x [39] (Emphasis supplied)
Further, the proceedings before the Labor Arbiter and the NLRC are non-litigious
in nature.[40] As such, the proceedings before it are not bound by the technical niceties of
the law and procedure and the rules obtaining in courts of law, [41] as dictated by Article
221 of the Labor Code:
ART. 221. Technical rules not binding and prior resort to amicable
settlement. In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not
be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and
all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the
interest of due process.
This rule applies equally to both the employee and the employer. In the interest of
due process, the Labor Code directs labor officials to use all reasonable means to
ascertain the facts speedily and objectively, with little regard to technicalities or
formalities.[42] What is essential is that every litigant is given reasonable opportunity to
appear and defend his right, introduce witnesses and relevant evidence in his
favor,[43] which undoubtedly, was done in this case.
Willful disobedience, or insubordination as otherwise branded in this case, as a
just cause for dismissal of an employee, necessitates the concurrence of at least two
requisites: (1) the employee's assailed conduct must have been willful, that is,
characterized by a wrongful and perverse attitude; and (2) the order violated must have
been reasonable, lawful, made known to the employee and must pertain to the duties
which he had been engaged to discharge.[44]
In Coca-Cola Bottlers, Phils. Inc v. Kapisanan ng Malayang Manngagawa sa

Coca-Cola-FFW, it was held that an employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on work-related activities of the employees
so long as they are exercised in good faith for the advancement of the employers interest
and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements. Company policies and regulations are generally
valid and binding on the parties and must be complied with until finally revised or
amended, unilaterally or preferably through negotiation, by competent authority. For
misconduct or improper behavior to be a just cause for dismissal, the same must be
related to the performance of the employees duties and must show that he has become
unfit to continue working for the employer.[45]
In the case at bench, petitioner informed respondent, through a Memorandum

dated November 14, 1995, that he was being transferred to its GMA, Cavite operations
effective November 20, 1995, to wit:
We have considered you to fill-up the maintenance position urgently

required in our GMA, Cavite business operations. After thorough evaluation
of qualified candidates, we find your qualifications most suited to
satisfactorily perform the maintenance activities at GMA, Cavite.
x x x x[46]
Due to his refusal to report to the Cavite plant, petitioner reiterated its order
transferring respondent in its Memorandum dated November 24, 1995,[47] where
respondent was also warned that his failure to report to the Cavite plant will be considered
as an absence without leave (AWOL) and insubordination. Respondent was required to
comply with the order within 24 hours from receipt, otherwise, disciplinary action will be
imposed on respondent. Respondent replied with a request that he remain in the Otis
plant since a transfer to the Cavite plant will entail additional expenditure and travel time
on his part.[48]
Petitioner again wrote respondent inviting him to appear before the Plant Level
Investigation on December 11, 1995 for the latter to be able to clarify his reasons for
refusing the transfer.[49]
Finally, petitioner issued its Memorandum dated December 12, 1995 informing
respondent of its decision to terminate his services. The Memorandum reads, in part:
The management panel has discussed and deliberated thoroughly

on your case regarding your transfer to GMA Plant in GMA, Cavite which
was supposed to be effective on 20 November, 1995 but unfortunately you
refused to comply despite our repeated instructions to you to assume your
new assignment while your case had been under grievance machinery.
On 09 December, 1995 a letter memorandum was served to you

informing you to appear at plant level investigation to be conducted on 11
December, 1995. The management panel in consideration to (sic) your
reasons for not transferring to GMA Plant as stated in your reply
dated December 07, 1995, offered you to provide monetary allowance to at
least compensate for your assumed additional expenses. However, you
turned down this action of good faith from the management.
xxxx
Your written explanation and the outcome of the plant level

investigation clearly showed your willful or intentional disobedience. It was
insubordination in its highest order. In this regard, much to our regret, we
have no other recourse but to terminate your services with us for cause and
causes cited in the foregoing effective 13 December 1995.
x x x x[50]
The rule is that the transfer of an employee ordinarily lies within the ambit of the
employers prerogatives. The employer exercises the prerogative to transfer an employee
for valid reasons and according to the requirement of its business, provided the transfer
does not result in demotion in rank or diminution of the employees salary, benefits and
other privileges.[51]
In this case, petitioners order for respondent to transfer to the GMA, Cavite Plant
is a reasonable and lawful order was made known to him and pertains to his duties as a
machine operator. There was no demotion involved or diminution of salary, benefits and
other privileges, and in fact, petitioner was even willing to provide respondent with
monetary allowance to defray whatever additional expenses he may incur with the
transfer.
In Allied Banking Corporation v. Court of Appeals,[52] the Court ruled that an

employee cannot validly refuse a transfer order on the ground of parental obligations,
additional expenses, and the anguish he would suffer if assigned away from his
family. Citing Homeowners Savings and Loan Association, Inc. v. National Labor
Relations Commission,[53] the Court stated:
The acceptability of the proposition that transfer made by an

employer for an illicit or underhanded purpose i.e., to defeat an employees
right to self-organization, to rid himself of an undesirable worker, or to
penalize an employee for union activities cannot be upheld is self-evident
and cannot be gainsaid. The difficulty lies in the situation where no such
illicit, improper or underhanded purpose can be ascribed to the employer,
the objection to the transfer being grounded solely upon the personal
inconvenience or hardship that will be caused to the employee by reason of
the transfer. What then?
This was the very same situation we faced in Phil. Telegraph and
Telephone Corp. v. Laplana. In that case, the employee, Alicia Laplana,
was a cashier at the Baguio City Branch of PT&T who was directed to
transfer to the companys branch office at Laoag City. In refusing the
transfer, the employee averred that she had established Baguio City as her
permanent residence and that such transfer will involve additional expenses
on her part, plus the fact that an assignment to a far place will be a big
sacrifice for her as she will be kept away from her family which might
adversely affect her efficiency. In ruling for the employer, the Court upheld
the transfer from one city to another within the country as valid as long as
there is no bad faith on the part of the employer. We held then:
Certainly the Court cannot accept the proposition that

when an employee opposes his employers decision to
transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the
employees wishes that should be made to prevail.
Such being the case, respondent cannot adamantly refuse to abide by the order
of transfer without exposing himself to the risk of being dismissed. Hence, his dismissal
was for just cause in accordance with Article 282 (a) of the Labor Code. Consequently,
respondent is not entitled to reinstatement or separation pay and backwages.
Lastly, on the issue of due process, Section 2 (d), Rule 1, Book VI of the Omnibus
Rules Implementing the Labor Code provides for the standards of due process, which
shall be substantially observed, to wit:
For termination of employment based on just causes as defined in

Article 282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or

grounds of termination, and giving said employee reasonable opportunity
within which to explain his side.
(ii) A hearing or conference during which the employee concerned,

with the assistance of counsel if he so desires is given opportunity to
respond to the charge, present his evidence, or rebut the evidence
presented against him.
(iii) A written notice of termination served on the employee indicating

that upon due consideration of all the circumstances, grounds have been
established to justify his termination.
Simply stated, the employer must furnish the employee a written notice containing
a statement of the cause for termination and to afford said employee ample opportunity
to be heard and defend himself with the assistance of his representative, if he so desires,
and the employee must be notified in writing of the decision dismissing him, stating clearly
the reasons therefor.[54]
The CA found that petitioner failed to observe the twin requirements of notice and
hearing, stating that its Memorandum dated December 13, 1995 does not squarely meet
the standards of due process. The circumstances surrounding respondents dismissal,
however, prove the contrary. The CA failed to take into account that prior to the
Memorandum dated December 13, 1995, petitioner sent respondent several memoranda
apprising him of the possible implications of his refusal to comply with the order of
transfer. Thus, in its Memorandum dated November 24, 1995, petitioner notified
respondent that his continued non-compliance with the order of transfer might bring about
disciplinary action.[55] Respondent replied to this memorandum, stating the reasons for
his refusal, i.e., additional expenses, longer travel time, and union concerns.[56] Petitioner
sent another Memorandum on December 9, 1995, asking respondent to appear
on December 11, 1995, for further clarification of his reasons for refusing the
transfer.[57] Despite the meeting, and since respondent, apparently, stubbornly refused to
heed petitioners order, it was then that the Memorandum dated December 13, 1995 was
issued to respondent informing him of the managements decision to terminate his
services.Clearly, respondents right to due process was not violated.
WHEREFORE, the petition is GRANTED. The CA Decision dated August 3,

2000 and Resolution dated March 16, 2001 are SET ASIDE, and the NLRC Decision
dated June 30, 1999 is REINSTATED.
No costs.
SO ORDERED.
Great Southern vs. Acuna, 425 SCRA 422,

GR 140189, February 28, 2005
[G.R. No. 140189. February 28, 2005]
GREAT SOUTHERN MARITIME SERVICES CORPORATION, FERRY CASINOS

LIMITED and PIONEER INSURANCE AND SURETY
CORPORATION, petitioners, vs. JENNIFER ANNE B. ACUA, HAYDEE ANNE B.
ACUA, MARITES T. CLARION, MARISSA C. ENRIQUEZ, GRACIELA M.
TORRALBA and MARY PAMELA A. SANTIAGO, respondents.
DECISION
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals dated June 30, 1999 in CA-G.R. SP No.
50504, which set aside the Decision of the National Labor Relations Commission (NLRC)
dated January 15, 1997 in NLRC CA No. 010186-96.
The factual background of the case is as follows:
Petitioner Great Southern Maritime Services Corporation (GSMSC) is a manning
agency organized and existing under Philippine laws. It is the local agent of petitioner
Ferry Casinos Limited. Petitioner Pioneer Insurance and Surety Corporation is the surety
company of petitioner GSMSC.
On October 7, 1993, respondents Jennifer Anne B. Acua, Haydee Anne B. Acua,
Marites T. Clarion, Marissa C. Enriquez, Graciela M. Torralba, and Mary Pamela A.
Santiago filed a complaint for illegal dismissal against petitioners before the Philippine
Overseas Employment Administration (POEA), docketed as POEA Case No. (M) 93-10-
1987.[2]
Respondents claim that: between the months of March and April 1993, they were
deployed by petitioner GSMSC to work as croupiers (card dealers) for petitioner Ferry
Casinos Limited under a six-month contract with monthly salaries of US$356.45 plus fixed
overtime pay of US$107 a month and vacation leave pay equivalent to two months salary
pro rata, except for respondent Jennifer Anne B. Acua who had a monthly salary of
US$250.56 plus fixed overtime pay of US$87.17 and vacation leave pay equivalent to two
months salary pro rata; sometime in July 1993, Sue Smits, the Casino Manager, informed
them that their services were no longer needed; considering that their plane tickets were
already ready and they were subjected to harassment, they had no alternative but to sign
documents on July 11 and 12, 1993 specifying that they were the ones who terminated
their employment; they were repatriated on July 25, 1993.[3]
Petitioners denied the allegations of respondents and averred that respondents
voluntarily resigned from employment. They contend that: respondents were hired by
petitioner Ferry Casinos Limited through petitioner GSMSC to work as croupiers for a
period of six months; sometime in July 1993, respondents intimated their desire to resign;
petitioner Ferry Casinos Limited did not allow them to resign as the simultaneous loss of
croupiers would paralyze casino operations; respondents thereafter exhibited lukewarm
attitude towards work, became defiant and rude; consequently, petitioner Ferry Casinos
Limited was forced to accede to respondents demands; and respondents executed
resignation letters and disembarked on July 27, 1993.[4]
On October 5, 1995, the POEA decided the case against petitioners, thus:
WHEREFORE, premises considered, respondent Great Southern Maritime Services

[Corporation] and Pioneer Insurance and Surety Corporation, are hereby ordered jointly
and severally liable to pay complainants the following amounts:
1. Jennifer B. Acua US $ 610.17

2. Marissa C. Enriquez 986.17
3. Marites T. Clarion 986.17
4. Graciela M. Torralba 986.17
5. Pamela Santiago 582.20
6. Haydee Anne B. Acua 582.20
representing their salaries for the unexpired portion of their contract. All other claims are
dismissed for lack of merit.
SO ORDERED.[5]
The POEA ruled that the respondents were illegally dismissed since petitioners failed to
prove that respondents voluntarily resigned from employment. It held that the alleged
resignation letters are only declarations of release and quitclaim.
Petitioners appealed to the NLRC[6] which, on January 15, 1997, set aside the
decision of the POEA and dismissed the complaint for illegal dismissal.[7] The NLRC held
that the contested letters are not only declarations of release and quitclaim but
resignations as well. It further held that there is no concrete evidence of undue pressure,
force and duress in the execution of the resignation letters. The NLRC gave credence to
petitioners claim that respondents pre-terminated their contracts en masse because two
of the respondents, Haydee Anne B. Acua and Marites T. Clarion, are now working in
Singapore.
Respondents filed a motion for reconsideration[8] but the NLRC denied the same in a
Resolution dated April 30, 1997.[9]
On July 18, 1997, respondents filed a petition for certiorari before us, docketed as
G.R. No. 129673.[10]
On October 3, 1997, petitioners, in their Comment, prayed for outright dismissal of
the petition for: (a) failure of respondents to submit a verified statement of the material
dates to show that the petition was filed on time, and (b) filing a certification on non-forum
shopping signed only by their counsel. In addition, petitioners argued that the issues
raised are factual and there is no showing that the NLRC committed grave abuse of
discretion.[11]
On January 27, 1998, the Solicitor General, in lieu of Comment, manifested that he
is unable to sustain the position of the NLRC because the allegation that respondents
voluntarily resigned was not substantially established and respondents non-compliance
with the formal requirements of the petition should be waived since the petition is
meritorious.[12]
The NLRC, in compliance with our Resolution dated March 16, 1998, [13] filed its own
Comment praying for the dismissal of the petition and the affirmance of its decision with
finality. It argued that in reversing the POEA, it focused its attention on the correct
evaluation of the evidence on record which substantially showed that petitioners did not
dismiss respondents but that the latter resigned en masse on July 12, 1993. [14]
In accordance with St. Martin Funeral Homes vs. NLRC,[15] we referred the petition to
the Court of Appeals which, on June 30, 1999, set aside the decision of the NLRC and
reinstated the decision of the POEA.[16] The Court of Appeals held that respondents were
illegally dismissed since the petitioners failed to substantiate their claim that respondents
voluntarily resigned from employment. It ruled that the quitclaims are not sufficient to
show valid terminations. Anent non-compliance with the formal requirements of the
petition, the Court of Appeals, adopting the observation of the Solicitor General, held that
the case is an exception to the rule on strict adherence to technicality.
On July 21, 1999, petitioners filed a motion for reconsideration but the Court of
Appeals denied it in a Resolution dated September 22, 1999.
Hence, the present petition for review on certiorari on the following grounds:
1. Under the law and applicable jurisprudence, the Petition for Certiorari filed by
respondents should have been denied outright for non-compliance with the
requirements for filing a Petition for Certiorari.[17]
2. Under the law and applicable jurisprudence, respondents cannot be considered to

have been dismissed from employment, because it was respondents who resigned from
their employment.[18]
Petitioners maintain that the petition for certiorari should have merited outright
dismissal for non-compliance with the mandatory requirements of the rules. There is no
statement indicating the material dates when the decision of the NLRC was received and
when the motion for reconsideration was filed. Likewise, the certification on non-forum
shopping was not signed by respondents but by their counsel. In any event, petitioners
insist that respondents voluntarily resigned from their employment.
In their Comment, respondents allege that the instant petition highlights the same
arguments already raised and squarely resolved by the Court of Appeals. Nevertheless,
they reiterate that they did not resign from employment but were abruptly and
unceremoniously terminated by petitioner Ferry Casinos Limited.[19]
Section 3[20] of Rule 46 of the Rules of Court provides that there are three material
dates that must be stated in a petition for certiorari brought under Rule 65: (a) the date
when notice of the judgment or final order or resolution was received, (b) the date when
a motion for new trial or for reconsideration when one such was filed, and, (c) the date
when notice of the denial thereof was received. This requirement is for the purpose of
determining the timeliness of the petition, since the perfection of an appeal in the manner
and within the period prescribed by law is jurisdictional and failure to perfect an appeal
as required by law renders the judgment final and executory.[21]
The same rule requires the pleader to submit a certificate of non-forum shopping to
be executed by the plaintiff or principal party. Obviously, it is the plaintiff or principal party,
and not the counsel whose professional services have been retained for a particular case,
who is in the best position to know whether he or it actually filed or caused the filing of a
petition in that case.[22]
As a general rule, these requirements are mandatory, meaning, non-compliance
therewith is a sufficient ground for the dismissal of the petition.[23]
In the case before us, the failure to comply with the rule on a statement of material
dates in the petition may be excused since the dates are evident from the records. A
thorough scrutiny of the records reveals that the January 15, 1997 decision of the NLRC
was received by respondents counsel on January 24, 1997.[24] On February 19, 1997,
respondents filed a motion for reconsideration[25] which was denied by the NLRC in a
Resolution dated April 30, 1997.[26] Respondents counsel received the resolution on May
30, 1997 and they filed the petition for certiorari on July 18, 1997.
In view of the retroactive application of procedural laws, [27] Section 4, Rule 65 of the
1997 Rules of Procedure, [28] as amended by A.M. No. 00-2-03 which took effect on
September 1, 2000, is the governing provision. It provides that when a motion for
reconsideration is timely filed, the 60-day period for filing a petition for certiorari shall be
counted from notice of the denial of said motion. While respondents motion for
reconsideration was filed 16 days late,[29] the NLRC nonetheless acted thereon and
denied it on the basis of lack of merit. In resolving the merits of the motion despite being
filed out of time, the NLRC undoubtedly recognized that it is not strictly bound by the
technicalities of law and procedure. Thus, the 60-day period for filing of a petition
for certiorari should be reckoned from the date of the receipt of the resolution denying the
motion for reconsideration, i.e., May 30, 1997, and thus, the filing made on July 18, 1997
was well within the 60-day reglementary period.
As regards the verification signed only by respondents counsel, this procedural lapse
could have warranted the outright dismissal of respondents petition for certioraribefore
the Court of Appeals. However, it must be remembered that the rules on forum shopping,
which were precisely designed to promote and facilitate the orderly administration of
justice, should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective which is the goal of all rules of procedure - that is, to
achieve substantial justice as expeditiously as possible.[30]
Needless to stress, rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid the court in
the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of
judicial discretion. In rendering justice, courts have always been, as they ought to be,
conscientiously guided by the norm that on the balance, technicalities take a backseat
against substantive rights, and not the other way around. Thus, if the application of the
Rules would tend to frustrate rather than promote justice, it is always within our power to
suspend the rules or except a particular case from its operation.[31]
As the Court eloquently stated in the case of Aguam vs. Court of Appeals:[32]
The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a
power conferred on the court, not a duty. The "discretion must be a sound one, to be
exercised in accordance with the tenets of justice and fair play, having in mind the
circumstances obtaining in each case." Technicalities, however, must be avoided. The
law abhors technicalities that impede the cause of justice. The court's primary duty is to
render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits unlike
duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts." Litigations must be decided on their merits and not on
technicality. Every party litigant must be afforded the amplest opportunity for the proper
and just determination of his cause, free from the unacceptable plea of technicalities.
Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of
procedure ought not to be applied in a very rigid, technical sense; rules of procedure are
used only to help secure, not override substantial justice. It is a far better and more
prudent course of action for the court to excuse a technical lapse and afford the parties
a review of the case on appeal to attain the ends of justice rather than dispose of the
case on technicality and cause a grave injustice to the parties, giving a false impression
of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.[33] (Emphasis supplied)
Thus, in Sy Chin vs. Court of Appeals,[34] we held that the procedural lapse of a partys
counsel in signing the certificate of non-forum shopping may be overlooked if the interests
of substantial justice would thereby be served. Further, in Damasco vs. NLRC,[35] we
noted that the certificate of non-forum shopping was executed by the petitioners counsel,
but nevertheless resolved the case on its merits for the reason that technicality should
not be allowed to stand in the way of equitably and completely resolving the equity and
obligations of the parties to a labor case.
Indeed, where a decision may be made to rest on informed judgment rather than rigid
rules, the equities of the case must be accorded their due weight because labor
determinations should not only be secundum rationem but also secundum caritatem.[36]
In this case, the Court of Appeals aptly found compelling reasons to disregard
respondents procedural lapses in order to obviate a patent injustice.
Time and again we have ruled that in illegal dismissal cases like the present one,
the onus of proving that the employee was not dismissed or if dismissed, that the
dismissal was not illegal, rests on the employer and failure to discharge the same would
mean that the dismissal is not justified and therefore illegal.[37] Thus, petitioners must not
only rely on the weakness of respondents evidence but must stand on the merits of their
own defense. A party alleging a critical fact must support his allegation with substantial
evidence for any decision based on unsubstantiated allegation cannot stand as it will
offend due process.[38] Petitioners failed to discharge this burden.
Petitioners complete reliance on the alleged resignation letters cum release and
quitclaim to support their claim that respondents voluntarily resigned is unavailing as the
filing of the complaint for illegal dismissal is inconsistent with resignation.[39] Resignation
is the voluntary act of employees who are compelled by personal reasons to dissociate
themselves from their employment. It must be done with the intention of relinquishing an
office, accompanied by the act of abandonment.[40] Thus, it is illogical for respondents to
resign and then file a complaint for illegal dismissal. We find it highly unlikely that
respondents would just quit even before the expiration of their contracts, after all the
expenses and the trouble they went through in seeking greener pastures and financial
upliftment, and the concomitant tribulations of being separated from their families, having
invested so much time, effort and money to secure their employment abroad. Considering
the hard economic times, it is incongruous for respondents to simply give up their work,
return home and be jobless once again.
Likewise, petitioners submission that respondents voluntarily resigned because of
their desire to seek employment elsewhere, as accentuated by the concurrent fact that
two of the respondents, Haydee Anne B. Acua and Marites T. Clarion, already have jobs
in Singapore is an unreasonable inference. The fact that these two have already found
employment elsewhere should not be weighed against their favor. It should be expected
that they would seek other means of income to tide them over during the time that the
legality of their termination is under litigation. They should not be faulted for seeking
employment elsewhere for their economic survival.
We further note that the alleged resignation letters, one of which reads:
In signing this document, I am declaring my decision to return to the Philippines with the
other eight employees of Ferry Casinos Limited and Great Southern Maritime
Corporation, on the 25th July 1993. I understand that my contract is uncompleted and I
fully understand the consequences of that. I do however promise to work to full for both
companies before my departure.
I realise (sic) that I may be dismissed by the captain or Purser of my assigned vessel, if
I am suspected of misconduct in the remaining weeks of my employment, until my
departure, and I understand that I will compansate (sic) both companies for the results
from (sic) my actions.
I sign to say that I will follow the instructions of Captain A. Sanchez upon my arrival in
the Philippines and that any previous arrangements to this date are nul (sic) and void.
I recognise (sic) that I have been fairly treated by both companies and for this I will not
jeopardise (sic) them upon my arrival in the Philippines.
I acknowledge and accept this as evidence for (sic) my departure to be shown to the
P.O.E.A. in the Philippines.[41]
which were all prepared by petitioner Ferry Casinos Limited, are substantially similarly
worded and of the same tenor. A thorough scrutiny of the purported resignation letters
reveals the true nature of these documents. In reality, they are waivers or quitclaims which
are not sufficient to show valid separation from work or bar respondents from assailing
their termination. The burden of proving that quitclaims were voluntarily entered into falls
upon the employer.[42] Deeds of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or from contesting the legality of
their dismissal.[43] The reason for this rule was laid down in the landmark case of Cario
vs. ACCFA:[44]
Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get hold of money. Because, out
of job, he had to face the harsh necessities of life. He thus found himself in no position
to resist money proffered. His, then, is a case of adherence, not of choice. One thing
sure, however, is that petitioners did not relent their claim. They pressed it. They are
deemed not to have waived any of their rights. Renuntiatio non praesumitur.
Thus, we are more than convinced that respondents did not voluntarily quit their jobs.
Rather, they were forced to resign or were summarily dismissed without just cause. The
Court of Appeals acted in the exercise of its sound discretion when it denied petitioners
insistence to dismiss the petition for certiorari, in light of the factual and antecedent milieu.
By so doing, the appellate court correctly gave more importance to the resolution of the
case on the merits.
WHEREFORE, the instant petition is DENIED and the assailed Decision of the Court
of Appeals dated June 30, 1999 in CA-G.R. SP No. 50504 is AFFIRMED. Costs against
petitioners.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
BPI Union vs. BPI, 454 SCRA 357,
GR 137863, March 31, 2005

[G.R. No. 137863. March 31, 2005]
BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION and ZENAIDA

UY, petitioners, vs. BANK OF THE PHILIPPINE ISLANDS, CARLOS FRAGANTE,
DELFIN SANTOS, ALBERTO JUGO and/or OSCAR CONTRERAS, respondents.
DECISION
CHICO-NAZARIO, J.:
This petition for review on certiorari under Rule 45 of the 1997 Rules on Civil
Procedure, as amended, seeks to partially reverse the Decision[1] of 28 October 1998 and
the Resolution[2] of 08 March 1999 of the Court of Appeals, in CA-G.R. SP No. 47363,
which affirmed with modification the Decision[3] rendered by the Accredited Voluntary
Arbitrator dated 31 December 1997, in VA Case No. 08-001-97. The case before the
Voluntary Arbitrator was for illegal transfer and termination, with the latter ruling in favor
of the petitioners herein.
The facts as narrated by the Court of Appeals are quoted hereunder:
On 26 October 1995, respondent[4] Zenaida V. Uy, former teller of the Escolta Branch of
BPI, shouted at her Senior Manager, petitioner[5] Delfin D. Santos (Santos for brevity).
Uy was told to go to the office of the petitioner Carlos B. Fragante, BPIs area head and
Assistant Vice President, to discuss her complaint. On the same date, AVP Fragante
told Uy to transfer to the nearby Plaza Cervantes Branch of BPI and report to its
operations manager to defuse (sic) the tense situation prevailing at the Escolta Branch.
On 27 October 1995, AVP Fragante received the report of the Escolta Branch Manager
(Santos) on the shouting incident, together with the written letter-reports of some branch
personnel. On the same day, AVP Fragante ordered Uy to transfer to the Plaza
Cervantes Branch. Upon receipt of the order, Uy commented that she will not transfer
and will await the result of the grievance meeting. The respondent BPI Employees
Union initiated a grievance proceeding against the BPI Management for the transfer of
Uy to the Plaza Cervantes Branch. A meeting was set for 30 October 1995. On 30
October 1995, AVP Fragante sent Uy a letter . . . directing her to explain within 24 hours
why no disciplinary action should be taken against her for insubordination, for not
paying heed to the order to transfer. Uy sent a reply on the same date . . . explaining
that she could not transfer from Escolta Branch because there was no proper turnover
of her accountabilities; that she was not able to do so on October 27, 1995 because she
was not allowed to open (as a teller); and, that since then she has been barred from
entering the bank premises. On the same day, a meeting was held to hear Uys
grievance relative to her transfer, but no agreement was reached. On 31 October 1995,
AVP Fragante sent Uy another letter . . . asking her to explain why no disciplinary action
should be taken against her for uttering disrespectful, discourteous, insulting and
unbecoming language to her superior, Senior Manager Delfin Santos. Uy sent an
undated reply thereto . . . reiterating why she could just not leave her position at the
Escolta Branch, and requesting that she be considered on leave starting November 2,
1995. On 13 November 1995, AVP Fragante wrote Uy another letter . . . directing her to
show cause on or before 16 November 1995 why no disciplinary action, including
possible termination, should be taken against her for the October 26, 1995 incident, for
insubordination or defiance to the transfer order, and for going on absence without
leave. A copy thereof was furnished the Union. Uy sent a reply letter dated November
20, 1995, asking for particulars relative to the alleged highly disrespectful, discourteous,
insulting, threatening, and unbecoming language and behavior towards your Manager,
Delfin Santos and on the alleged past instances when she was involved with quarrels
with your co-employees, and alleging that she felt binabastos mo ako (I was being
sexually harassed) when he uttered Dito ka na lang, marami and [ang] lalaki dito (You
just stay here, there are plenty of men here), and when she answered Hindi ako mahilig
sa lalaki (I am not fond of men), he retorted, Maski dito ka na lang sa kuwarto ko (You
may just stay here in my room . . .). The union asked for a suspension of the grievance
machinery and for investigation of the sexual harassment charge. On November 24,
1995, Uy requested Management through Mr. Oscar L. Cervantes, for transfer to the
Taft Avenue Branch to save on gasoline expenses. Two meetings were held between
the union side and the management side, represented by Mr. Fragantes superior,
Senior Vice President Alberto Jugo and Senior Manager Efren Tuble. When no
agreement was reached, the management advised Uy and the Union as well as their
counsel that the management had no choice but to terminate Uy. Both the union and Uy
were sent copies of the Notice of Termination . . . dated December 8, 1995, which had
the following tenor:
NOTICE OF TERMINATION
Dear Ms. Uy:

This is to advise you of the termination of your employment effective December 14,
1995 on the grounds of gross disrespect/discourtesy towards an officer, insubordination
and absence without leave.
It has been established that you used highly disrespectful, discourteous, insulting,
threatening and unbecoming language and behavior towards your branch manager,
Delfin Santos, last October 26. Despite being given the chance to explain or justify your
actions, you chose to skirt the issue by pointing out that I am in no position to make a
conclusion as I was not around when the incident happened. You know fully well that as
Sales Director of North Manila area having supervision over Escolta Branch, such
incident was reported to me. Mr. Delfin Santos appropriately inhibited himself from
conducting the investigation for obvious reasons. We disagree with you when you
dismissed the incident as trivial. Moreover, the explanations you gave at our Head
Office were found wanting in circumstances that would absolve you or mitigate your
wrongdoing as said explanations in fact confirmed the findings at the branch level. With
regard to quarrels with your officemates, you can be considered as recidivist. You can
of course recall your quarrels, using very strong and insulting words, with your co-
employees Ms. Teresa Manalang last year and with Jocelyn Ng this year.
You refused to follow the transfer instruction to report to Cervantes Branch last October
27 alleging failure to properly turn over your accountabilities despite being in the branch
for practically the whole day on October 27. We have adequate procedure for the
opening of pico boxes in the presence of witnesses in cases of refusal and AWOL.
In a further manifestation of your contempt towards managerial authority, you went on

absence without leave starting October 30. After refusing to receive all communications
sent to your residence, you tried to rectify this AWOL by sending an undated letter
received by us last November 6 wherein you declared yourself to be on leave beginning
November 2. You have since refused to report for work.
Under the circumstances, you left us with no alternative but to terminate your
employment with us.
(SGD.) CARLOS B. FRAGANTE

Asst. Vice President
Uy filed a case for illegal transfer and termination. On June 29, 1996, Labor Arbiter
Manuel R. Caday who initially heard and decided the case issued a decision declaring
the dismissal of Uy as illegal and ordering her reinstatement with full backwages and
10% attorneys fees BPI appealed the said decision to the National Labor Relations
Commission (NLRC) which rendered a decision on May 28, 1997, setting aside the
Labor Arbiters Decision for lack of jurisdiction, and ruling that the case falls under the
jurisdiction of a Voluntary Arbitrator.
The case was raffled to respondent Arbitrator Entuna, who requested the parties to
submit their respective position papers.[6]
The Voluntary Arbitrator, in his disputed Decision of 31 December 1997, adjudged:
WHEREFORE, premises considered, judgment is hereby rendered declaring the

dismissal of complainant Zenaida Uy as illegal and ordering the respondent Bank of the
Philippine Islands to immediately reinstate her to her position as bank teller of the
Escolta Branch without loss of seniority rights and with full backwages computed from
the time she was dismissed on December 14, 1995 until she is actually reinstated in the
service, and including all her other benefits which are benefits under their Collective
Bargaining Agreement (CBA).
For reasonable attorneys fees, respondent is also ordered to pay complainant the
equivalent of 10% of the recoverable award in this case.[7]
The Motion for Reconsideration of the herein respondents BPI, et al., was
subsequently denied.
Aggrieved, they then filed a Petition for Review before the Court of Appeals assailing
the aforestated decision.
On 28 October 1998, the Court of Appeals issued the assailed decision affirming the
finding of the Voluntary Arbitrator that indeed Uys employment was illegally terminated.
The appellate court, however, modified the award for backwages by limiting it to three
years as well as finding that there was strained relations between the parties, to wit:
WHEREFORE, the judgment appealed from is AFFIRMED with

the MODIFICATION that instead of reinstatement, the petitioner Bank of the Philippine
Islands is DIRECTED to pay Uy back salaries not exceeding three (3) years and
separation pay of one month for every year of service. The said judgment
is AFFIRMED in all other respects.[8]
Both parties seasonably filed their respective motions for partial reconsideration of
the aforesaid decision but the appellate court denied them in a Resolution dated 08 March
1999.
Hence, the parties individually went to this Court via a Petition for Review
on Certiorari.
The petition[9] filed by herein respondents BPI, et al., however, was denied for their
failure to submit a certification duly executed by themselves that no other action or
proceeding involving the same issues raised in this case has been filed or is pending
before this Court, the Court of Appeals, or in the different divisions thereof, or in any other
tribunal or quasi-judicial agency, with the undertaking to inform the Court of any similar
case filed or pending in any court, tribunal or quasi-judicial agency that may thereafter
come to their knowledge in accordance with Section 4(e), Rule 45 in relation to Section
5, Rule 7, Section 2, Rule 42, and Sections 4 and 5(d), Rule 56 of the Rules of Court. The
corresponding Entry of Judgment[10] was entered in the Book of Entries of Judgments on
22 September 1999.
For the reason above stated, only the following errors imputed by herein petitioners
Bank of the Philippine Islands Employees Union (BPIEU) and Uy to the appellate court
are in issue:
I
WITH DUE RESPECT, THE QUESTIONED RESOLUTION AND DECISION OF THE

HONORABLE COURT OF APPEALS ARE CONTRARY TO LAW INSOFAR AS THEY
LIMITED THE AWARD OF BACKWAGES TO THREE (3) YEARS; AND
II
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION IN HOLDING THAT STRAINED RELATIONS EXIST
BETWEEN THE BANK AND PETITIONER UY DESPITE THE FACT THAT THE
SHOUTING INCIDENT IS NOT SO SERIOUS AND IT INVOLVED ONLY PETITIONER
UY AND RESPONDENT DELFIN SANTOS.[11]
Anent the first issue, the petitioners contend that the decision of the appellate court
limiting the award of backwages to three (3) years is contrary to law and jurisprudence.
The petition is meritorious.
The rule providing for the entitlement of an illegally dismissed employee to only three
years backwages without deduction or qualification to obviate the need for further
proceedings in the course of execution, otherwise known as the Mercury Drug
Rule,[12] has long been abandoned.
In a long line of cases,[13] we have stated that the case of Mercury Drug, Co., Inc. v.
CIR,[14] is no longer applicable. To preclude the recurrence of the situation where the
employee, with folded arms, remains inactive in the expectation that windfall would come
to him and to speed up the process of execution, the aforementioned Mercury Drug case
provided a remedy by ruling that an employee whose illegal termination had lasted some
years was entitled to backwages for a fixed period without further qualifications, i.e.,
without need of taking account of whatever he might have earned during such period, and
deducting it from the amount of recovery, by providing a base period of three years. The
three-year-limit doctrine has been consistently and uniformly applied by this Court over
many years until the promulgation of Republic Act No. 6715 which amended Article 279
of the Labor Code in 1989.
With the new law before us, we clarified the computation of backwages due an
employee on account of his illegal dismissal from employment in the case of Osmalik
Bustamante, et al. v. NLRC and Evergreen Farms, Inc.[15] We held that the passing of
Republic Act No. 6715,[16] particularly Section 34,[17] which took effect on 21 March 1989,
amended Article 279 of the Labor Code, which now states in part:
ART. 279. Security of Tenure. - An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
Verily, the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted,
is that the backwages to be awarded to an illegally dismissed employee, should not, as a
general rule, be diminished or reduced by the earnings derived by him elsewhere during
the period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must still earn a living to
support himself and his family. Corollary thereto, full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing his employee.
Thus, a closer adherence to the legislative policy behind Rep. Act. No. 6715 points to full
backwages as meaning exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of his illegal dismissal.
In other words, the provision calling for full backwages to illegally dismissed employees
is clear, plain and free from ambiguity and, therefore, must be applied without attempted
or strained interpretation.[18]
Consequently, in accordance with Section 34, Rep. Act No. 6715, employees illegally
dismissed after 21 March 1989 are entitled to their full backwages, inclusive of other
benefits or their monetary equivalent, from the time their actual compensation was
withheld from them up to the time of their actual reinstatement.
Under the factual circumstances of the case, the law and jurisprudence prevailing,
therefore, we find that the Court of Appeals committed a reversible error in limiting the
award of backwages for a fixed period of three years. The illegal dismissal of petitioner
Uy was effected in 1995, or after Rep. Act No. 6715 took effect on 21 March 1989. Absent
any exceptional circumstance, it is now settled that an employee who is unjustly
dismissed from work shall be entitled to full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent from the time his compensation was
withheld from him up to the time of his actual reinstatement.[19]
Apropos the issue of non-reinstatement of petitioner Uy, the Court of Appeals held
that in a number of cases, the High Court had allowed mere payment of severance pay,
when reinstatement would no longer be beneficial to either party in view of strained
relations between them.[20] And, thus, in lieu of reinstatement, it ordered the payment of
separation pay instead.
The petitioners, on the other hand, posit that the material incidents of the case at bar
are but confined or personal to the individual respondents Delfin Santos and Carlos
Fragante. The other respondents, namely Alberto Jugo and Oscar Contreras were
impleaded merely because of their position in respondent BPIs Human Resources
Department. In the words of the petitioners, the controversy was a personal
matter between Ms. Uy and Messrs. Delfin Santos and Carlos Fragante.[21] In addition,
they bolstered their position by relying on what this Court had to say in Globe-Mackay
Cable and Radio Corp. v. NLRC:[22]
Obviously, the principle of strained relations cannot be applied indiscriminately.

Otherwise, reinstatement can never be possible simply because some hostility is
invariably engendered between the parties as a result of litigation. That is human
nature.
Besides, no strained relations should arise from a valid and legal act of asserting ones
right; otherwise an employee who shall assert his right could be easily separated from
the service, by merely paying his separation pay on the pretext that his relationship with
his employer had already become strained.
Petitioners reliance is well placed.

We have oft said that mere allegation of strained relations to bar reinstatement is
frowned upon.
In the case of PLDT, et al. v. Tolentino,[23] we reiterated our ruling in Quijano v.
Mercury Drug Corp.[24] wherein we propitiously said that the strained relations doctrine
should be strictly applied so as not to deprive an illegally dismissed employee of his right
to reinstatement. We further stated that:
Well-entrenched is the rule that an illegally dismissed employee is entitled to

reinstatement as a matter of right. Over the years, however, the case law developed
that where reinstatement is not feasible, expedient or practical, as where reinstatement
would only exacerbate the tension and strained relations between the parties, or where
the relationship between the employer and employee has been unduly strained by
reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent
to order payment of separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of this doctrine of
strained relations by using it as a cover to get rid of its employees and thus defeat their
right to job security.
To protect labors security of tenure, we emphasize that the doctrine of strained relations
should be strictly applied so as not to deprive an illegally dismissed employee of his
right to reinstatement. Every labor dispute almost always results in strained relations
and the phrase cannot be given an overarching interpretation, otherwise, an unjustly
dismissed employee can never be reinstated.
The said case went on further to quote our pronouncement in the case of Almira v.
B.F. Goodrich, Philippines, Inc.:[25]
This Court is cognizant of managements right to select the people who will manage its
business as well as its right to dismiss them. However, this right cannot be abused. Its
exercise must always be tempered with compassion and understanding. As former
Chief Justice Enrique Fernando eloquently put it:
Where penalty less severe would suffice, whatever missteps may be committees by
labor ought not to be visited with consequence so severe. It is not only because of the
laws concern for the workingmen. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those dependent on the wage-
earner. The misery and pain attendant on the loss of jobs then could be avoided if there
be acceptance of the view that under all the circumstances of a case, the workers
should not be deprived of their means of livelihood. Nor is this to condone what has
been done by them.
Moreover, it has been almost a decade since the incident that led to the dismissal of
petitioner Uy occurred. Petitioner Uy contends, and the respondents do not contradict,
that respondent Carlos Fragante has long been assigned in another area and Messrs.
Alberto Jugo and Oscar Contreras are no longer connected with respondent BPI.
Considering, thus, that there now appears no more basis for strained relations between
the present management and petitioner Uy, reinstatement is possible.
WHEREFORE, the instant petition is GRANTED. The assailed 28 October 1998
Decision and 8 March 1999 Resolution of the Court of Appeals are hereby MODIFIED as
follows: 1) respondent BPI is DIRECTED to pay petitioner Uy backwages from the time
of her illegal dismissal until her actual reinstatement; and 2) respondent BPI is ORDERED
to reinstate petitioner Uy to her former position, or to a substantially equivalent one,
without loss of seniority right and other benefits attendant to the position.
SO ORDERED.
Equitable vs. Sadac, 490 SCRA 380,

GR 164772, June 8, 2006
FIRST DIVISION
EQUITABLE BANKING G.R. No. 164772

CORPORATION (now known as
EQUITABLE-PCI BANK), Present:
Petitioner, PANGANIBAN,C.J.
Chairperson,
- versus - YNARES-SANTIAGO,*
AUSTRIA-MARTINEZ,**
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
RICARDO SADAC,
Respondent. Promulgated:
June 8, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to
the Court En Banc filed by Equitable Banking Corporation (now known as Equitable-PCI
Bank), seeking to reverse the Decision[1] and Resolution[2] of the Court of Appeals, dated
6 April 2004 and 28 July 2004, respectively, as amended by the Supplemental
Decision[3] dated 26 October 2004 in CA-G.R. SP No. 75013, which reversed and set
aside the Resolutions of the National Labor Relations Commission (NLRC), dated 28
March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President of the
Legal Department of petitioner Bank effective 1 August 1981, and subsequently General
Counsel thereof on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Banks
Legal Department, in a letter-petition to the Chairman of the Board of Directors, accused
respondent Sadac of abusive conduct, inter alia, and ultimately, petitioned for a change
in leadership of the department. On the ground of lack of confidence in respondent Sadac,
under the rules of client and lawyer relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases in which the latter was appearing
as its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing
and formal investigation but the same remained unheeded. On 9 November 1989,
respondent Sadac filed a complaint for illegal dismissal with damages against petitioner
Bank and individual members of the Board of Directors thereof. After learning of the filing
of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally,
on 10 August 1989, respondent Sadac was removed from his office and ordered
disentitled to any compensation and other benefits.[4]
In a Decision[5] dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr.,
dismissed the complaint for lack of merit. On appeal, the NLRC in its Resolution[6] of 24
September 1991 reversed the Labor Arbiter and declared respondent Sadacs dismissal
as illegal. The decretal portion thereof reads, thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision

of October 2, 1990 be, as it is hereby, SET ASIDE, and a new one
ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him
to his former position as bank Vice-President and General Counsel without
loss of seniority rights and other privileges, and to pay him full backwages
and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorneys fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from
November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees
equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.[7]
Petitioner Bank came to us for the first time via a Special Civil Action
for Certiorari assailing the NLRC Resolution of 24 September 1991 in Equitable Banking
Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467.[8]
In our Decision[9] of 13 June 1997, we held respondent Sadacs dismissal

illegal. We said that the existence of the employer-employee relationship between
petitioner Bank and respondent Sadac had been duly established bringing the case within
the coverage of the Labor Code, hence, we did not permit petitioner Bank to rely on Sec.
26, Rule 138[10] of the Rules of Court, claiming that the association between the parties
was one of a client-lawyer relationship, and, thus, it could terminate at any time the
services of respondent Sadac.Moreover, we did not find that respondent Sadacs
dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We
similarly found that petitioner Bank disregarded the procedural requirements in
terminating respondent Sadacs employment as so required by Section 2 and Section 5,
Rule XIV, Book V of the Implementing Rules of the Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is

AFFIRMED with the following MODIFICATIONS: That private respondent
shall be entitled to backwages from termination of employment until turning
sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.[11]
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became
final and executory.[12]
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
Execution[13] thereof. Likewise, petitioner Bank filed a Manifestation and
Motion[14] praying that the award in favor of respondent Sadac be computed and that after
payment is made, petitioner Bank be ordered forever released from liability under said
judgment.
Per respondent Sadacs computation, the total amount of the monetary award
is P6,030,456.59, representing his backwages and other benefits, including the general
increases which he should have earned during the period of his illegal
termination. Respondent Sadac theorized that he started with a monthly compensation
of P12,500.00 in August 1981, when he was appointed as Vice President of petitioner
Banks Legal Department and later as its General Counsel in December 1981. As of
November 1989, when he was dismissed illegally, his monthly compensation amounted
to P29,365.00 or more than twice his original compensation. The difference, he posited,
can be attributed to the annual salary increases which he received equivalent to 15
percent (15%) of his monthly salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of
the Philippines, and cited as authority the cases of East Asiatic Company, Ltd. v. Court
of Industrial Relations,[15] St. Louis College of Tuguegarao v. National Labor Relations
Commission,[16] and Sigma Personnel Services v. National Labor Relations
Commission.[17] According to respondent Sadac, the catena of cases uniformly holds that
it is the obligation of the employer to pay an illegally dismissed employee the whole
amount of the salaries or wages, plus all other benefits and bonuses and general
increases to which he would have been normally entitled had he not been dismissed; and
therefore, salary increases should be deemed a component in the computation of
backwages. Moreover, respondent Sadac contended that his check-up benefit, clothing
allowance, and cash conversion of vacation leaves must be included in the computation
of his backwages.
Petitioner Bank disputed respondent Sadacs computation. Per its computation, the
amount of monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion
of the latters general salary increases and other claimed benefits which, it maintained,
were unsubstantiated. The jurisprudential precedent relied upon by petitioner Bank in
assailing respondent Sadacs computation is Evangelista v. National Labor Relations
Commission,[18] citing Paramount Vinyl Products Corp. v. National Labor Relations
Commission,[19] holding that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner
Bank argued before the Labor Arbiter that the award of salary differentials is not allowed,
the established rule being that upon reinstatement, illegally dismissed employees are to
be paid their backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were not dismissed
or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order [20] adopting
respondent Sadacs computation. In the main, the Labor Arbiter relying on Millares v.
National Labor Relations Commission[21] concluded that respondent Sadac is entitled to
the general increases as a component in the computation of his backwages. Accordingly,
he awarded respondent Sadac the amount of P6,030,456.59 representing his backwages
inclusive of allowances and other claimed benefits, namely check-up benefit, clothing
allowance, and cash conversion of vacation leave plus 12 percent (12%) interest per
annum equivalent to P1,367,590.89 as of 30 June 1999, or a total
of P7,398,047.48. However, considering that respondent Sadac had already received the
amount of P1,055,740.48 by virtue of a Writ of Execution[22] earlier issued on 18 January
1999, the Labor Arbiter directed petitioner Bank to pay respondent Sadac the amount
of P6,342,307.00. The Labor Arbiter also granted an award of attorneys fees equivalent
to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%) interest
per annum reckoned from the finality of the judgment until the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an ALIAS Writ of

Execution be issued commanding the Sheriff, this Branch, to collect from
respondent Bank the amount of Ph6,342,307.00 representing the
backwages with 12% interest per annum due complainant.[23]
Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in
a Resolution,[24] promulgated on 28 March 2001. It ratiocinated that the doctrine on
general increases as component in computing backwages in Sigma Personnel
Services and St. Louis was merely obiter dictum. The NLRC found East Asiatic Co.,
Ltd. inapplicable on the ground that the original circumstances therein are not only
peculiar to the said case but also completely strange to the case of respondent
Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was being
granted and enjoyed by other employees of petitioner Bank. The award of attorneys fees
was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and

accordingly, the computation prepared by respondent Equitable Banking
Corporation on the award of backwages in favor of complainant Ricardo
Sadac under the decision promulgated by the Supreme Court on June 13,
1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is
hereby ordered.[25]
Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,[26] promulgated on 24 September 2002.
Aggrieved, respondent Sadac filed before the Court of Appeals a Petition
for Certiorari seeking nullification of the twin resolutions of the NLRC, dated 28 March
2001 and 24 September 2002, as well as praying for the reinstatement of the 2 August
1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-

up benefit, clothing allowance, and cash conversion of
vacation leave are included in the computation of full
backwages for illegally dismissed employees;
(2) Whether respondent is entitled to attorneys fees; and
(3) Whether respondent is entitled to twelve percent (12%) per

annum as interest on all accounts outstanding until full
payment thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered
a Decision on 6 April 2004, the dispositive portion of which is quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the

September 24, 2002 Resolutions of the National Labor Relations
Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999
Order of the Labor Arbiter is REVIVED to the effect that private respondent
is DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, representing
full back wages (sic) which sum includes annual general increases in basic
salary, check-up benefit, clothing allowance, cash conversion of vacation
leave and other sundry benefits plus 12% per annum interest on
outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.[27]
The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases
should be added as part of his backwages. According to the appellate court, respondent
Sadacs entitlement to the annual general increases has been duly proven by substantial
evidence that the latter, in fact, enjoyed an annual increase of more or less 15 percent
(15%). Respondent Sadacs check-up benefit, clothing allowance, and cash conversion
of vacation leave were similarly ordered added in the computation of respondent Sadacs
basic wage.
Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It
ruled that our Decision[28] of 13 June 1997 did not award attorneys fees in respondent
Sadacs favor as there was nothing in the aforesaid Decision, either in the dispositive
portion or the body thereof that supported the grant of attorneys fees. Resolving the final
issue, the Court of Appeals imposed a 12 percent (12%) interest per annum on the total
monetary award to be computed from 28 July 1997 or the date our judgment in G.R. No.
102467 became final and executory until fully paid at which time the quantification of the
amount may be deemed to have been reasonably ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration [29] of the 6
April 2004 Court of Appeals Decision insofar as the appellate court did not award him
attorneys fees. Similarly, petitioner Bank filed a Motion for Partial Reconsideration
thereon. Following an exchange of pleadings between the parties, the Court of Appeals
rendered a Resolution,[30] dated 28 July 2004, denying petitioner Banks Motion for Partial
Reconsideration for lack of merit.
Assignment of Errors
Hence, the instant Petition for Review by petitioner Bank on the following assignment of
errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary increases
should be included in the computation of full backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable authorities
in this case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St.
Louis College of Tuguegarao v. NLRC, 177 SCRA 151 (1989); (iii) Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv) Millares v.
NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor Code;
(ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista
v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430
(1996).
(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to
check-up benefit, clothing allowance and cash conversion of vacation
leaves notwithstanding that respondent did not present any evidence to
prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to
be paid legal interest even if the principal amount due him has not yet been
correctly and finally determined.[31]
Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental

Decision granting respondent Sadacs Partial Motion for Reconsideration and amending
the dispositive portion of the 6 April 2004 Decision in this wise, viz.:
WHEREFORE, premises considered, the March 24 (sic), 2001 and the

September 24, 2002 Resolutions of the National Labor Relations
Commission are hereby REVERSED and SET ASIDE and the August 2,
1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of
P6,342,307.00, representing full backwages which sum includes annual
general increases in basic salary, check-up benefit, clothing allowance,
cash conversion of vacation leave and other sundry benefits and attorneys
fees equal to TEN PERCENT (10%) of all the monetary award plus 12%
per annum interest on all outstanding balance from July 28, 1997 until full
payment.
Costs against private respondent.[32]
On 22 November 2004, petitioner Bank filed a Supplement to Petition for

Review[33] contending in the main that the Court of Appeals erred in issuing the
Supplemental Decision by directing petitioner Bank to pay an additional amount to
respondent Sadac representing attorneys fees equal to ten percent (10%) of all the
monetary award.
The Courts Ruling
I.
We are called to write finis to a controversy that comes to us for the second time. At
the core of the instant case are the divergent contentions of the parties on the manner of
computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of
the Philippines does not contemplate the inclusion of salary increases in the definition of
full backwages. It controverts the reliance by the appellate court on the cases of (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While it is in accord with the
pronouncement of the Court of Appeals that Republic Act No. 6715, in amending Article
279, intends to give more benefits to workers, petitioner Bank submits that the Court of
Appeals was in error in relying on East Asiatic to support its finding that salary increases
should be included in the computation of backwages as nowhere in Article 279, as
amended, are salary increases spoken of. The prevailing rule in the milieu of the East
Asiatic doctrine was to deduct earnings earned elsewhere from the amount of backwages
payable to an illegally dismissed employee.
Petitioner Bank posits that even granting that East Asiatic allowed general salary
increases in the computation of backwages, it was because the inclusion was purposely
to cushion the blow of the deduction of earnings derived elsewhere; with the amendment
of Article 279 and the consequent elimination of the rule on the deduction of earnings
derived elsewhere, the rationale for including salary increases in the computation of
backwages no longer exists. On the references of salary increases in the aforementioned
cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank contends
that the same were merely obiter dicta. In fine, petitioner Bank anchors its claim on the
cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations
Commission;[34] (ii) Evangelista v. National Labor Relations Commission; [35] and
(iii) Espejo v. National Labor Relations Commission,[36] which ruled that an unqualified
award of backwages is exclusive of general salary increases and the employee is paid at
the wage rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct when
it ruled that his backwages should include the general increases on the basis of the
following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and
(iv) Millares.
Resolving the protracted litigation between the parties necessitates us to revisit

our pronouncements on the interpretation of the term backwages. We said that
backwages in general are granted on grounds of equity for earnings which a worker or
employee has lost due to his illegal dismissal.[37] It is not private compensation or
damages but is awarded in furtherance and effectuation of the public objective of the
Labor Code. Nor is it a redress of a private right but rather in the nature of a command to
the employer to make public reparation for dismissing an employee either due to the
formers unlawful act or bad faith.[38] The Court, in the landmark case of Bustamante v.
National Labor Relations Commission,[39] had the occasion to explicate on the meaning
of full backwages as contemplated by Article 279[40] of the Labor Code of the Philippines,
as amended by Section 34 of Rep. Act No. 6715. The Court in Bustamante said, thus:
The Court deems it appropriate, however, to reconsider such earlier

ruling on the computation of backwages as enunciated in said Pines City
Educational Center case, by now holding that conformably with the evident
legislative intent as expressed in Rep. Act No. 6715, above-
quoted, backwages to be awarded to an illegally dismissed
employee, should not, as a general rule, be diminished or reduced by the
earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while
litigating the legality (illegality) of his dismissal, must still earn a living to
support himself and family, while full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing
his employee. The clear legislative intent of the amendment in Rep. Act
No. 6715 is to give more benefits to workers than was previously given them
under the Mercury Drug rule or the deduction of earnings elsewhere
rule. Thus, a closer adherence to the legislative policy behind Rep. Act
No.6715 points to full backwages as meaning exactly that, i.e., without
deducting from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal. In other
words, the provision calling for full backwages to illegally dismissed
employees is clear, plain and free from ambiguity and, therefore, must be
applied without attempted or strained
interpretation. Index animi sermo est. [41]
Verily, jurisprudence has shown that the definition of full backwages has forcefully
evolved. In Mercury Drug Co., Inc. v. Court of Industrial Relations,[42] the rule was that
backwages were granted for a period of three years without qualification and without
deduction, meaning, the award of backwages was not reduced by earnings actually
earned by the dismissed employee during the interim period of the separation. This came
to be known as the Mercury Drug rule.[43] Prior to the Mercury Drug ruling in 1974, the
total amount of backwages was reduced by earnings obtained by the employee
elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule was
subsequently modified in Ferrer v. National Labor Relations Commission[44] and Pines
City Educational Center v. National Labor Relations Commission,[45] where we allowed
the recovery of backwages for the duration of the illegal dismissal minus the total amount
of earnings which the employee derived elsewhere from the date of dismissal up to the
date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted,
and instead, the dismissed employee was paid backwages for the entire period that he
was without work subject to the deductions, as mentioned. Finally came our ruling
in Bustamante which superseded Pines City Educational Center and
allowed full recovery of backwages without deduction and without qualification pursuant
to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act No.
6715, i.e., without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his reinstatement, that is,
covering the entirety of the period of the dismissal.
The first issue for our resolution involves another aspect in the computation of full
backwages, mainly, the basis of the computation thereof. Otherwise stated, whether
general salary increases should be included in the base figure to be used in the
computation of backwages.
In so concluding that general salary increases should be made a component in the

computation of backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations,
40 SCRA 521 (1971) that general increases should be added as a part of
full backwages, to wit:
In other words, the just and equitable rule regarding the point
under discussion is this: It is the obligation of the employer to
pay an illegally dismissed employee or worker the whole
amount of the salaries or wages, plus all other benefits and
bonuses and general increases, to which he would have been
normally entitled had he not been dismissed and had not
stopped working, but it is the right, on the other hand of the
employer to deduct from the total of these, the amount
equivalent to the salaries or wages the employee or worker
would have earned in his old employment on the
corresponding days he was actually gainfully employed
elsewhere with an equal or higher salary or wage, such that if
his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St.
Louis College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v.
National Labor Relations Commission, 305 SCRA 500 (1999).
Private respondent, in opposing the petitioners contention, alleged in his
Memorandum that only the wage rate at the time of the employees illegal
dismissal should be considered private respondent citing the following
decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA
525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC,
255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic,
Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages
is the price or penalty that the employer must pay for having illegally
dismissed an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497

(1997) and Bustamante v. NLRC and Evergreen Farms, Inc. 265 SCRA 61
(1996) the Supreme Court held that the clear legislative intent in the
amendment in Republic Act 6715 was to give more benefits to workers than
was previously given them under the Mercury Drug rule or the deductions
of earnings elsewhere rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private

respondent are inapplicable to the case at bar. The doctrines therein came
about as a result of the old Mercury Drug rule, which was repealed with the
passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East
Asiatic, which was soon supplanted by the case of Bustamante v. NLRC
and Evergreen Farms, Inc., which held that the backwages to be awarded
to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period
of his illegal dismissal. Furthermore, the Mercury Drug rule was never
meant to prejudice the workers, but merely to speed the recovery of their
backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been
the intent of the Supreme Court to increase the backwages due an illegally
dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages
was interpreted to mean absolutely no deductions regardless of the duration
of the illegal dismissal. In Bustamante, the Supreme Court no longer
regarded equity as a basis when dealing with illegal dismissal cases
because it is not equity at play in illegal dismissals but rather, it is employers
obligation to pay full back wages (sic). It is an obligation of the employer
because it is the price or penalty the employer has to pay for illegally
dismissing his employee.
The applicable modern definition of full backwages is now found in Millares

v. National Labor Relations Commission 305 SCRA 500 (1999), where
although the issue in Millares concerned separation pay separation pay and
backwages both have employees wage rate at their foundation.
x x x The rationale is not difficult to discern. It is the obligation

of the employer to pay an illegally dismissed employee the
whole amount of his salaries plus all other benefits, bonuses
and general increases to which he would have been normally
entitled had he not been dismissed and had not stopped
working. The same holds true in case of retrenched
employees. x x x
xxxx
x x x Annual general increases are akin to allowances or other

benefits. [46] (Italics ours.)
We do not agree.
Attention must be called to Article 279 of the Labor Code of the Philippines, as
amended by Section 34 of Rep. Act No. 6715. The law provides as follows:
ART. 279. Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his
actual reinstatement.(Emphasis supplied.)
Article 279 mandates that an employees full backwages shall be inclusive
of allowances and other benefits or their monetary equivalent. Contrary to the ruling of
the Court of Appeals, we do not see that a salary increase can be interpreted as either
an allowance or a benefit. Salary increases are not akin to allowances or benefits, and
cannot be confused with either. The term allowances is sometimes used synonymously
with emoluments, as indirect or contingent remuneration, which may or may not be
earned, but which is sometimes in the nature of compensation, and sometimes in the
nature of reimbursement.[47] Allowances and benefits are granted to the employee apart
or separate from, and in addition to the wage or salary. In contrast, salary increases are
amounts which are added to the employees salary as an increment thereto for varied
reasons deemed appropriate by the employer. Salary increases are not separate grants
by themselves but once granted, they are deemed part of the employees salary. To
extend the coverage of an allowance or a benefit to include salary increases would be to
strain both the imagination of the Court and the language of law. As aptly observed by
the NLRC, to otherwise give the meaning other than what the law speaks for by itself, will
open the floodgates to various interpretations.[48] Indeed, if the intent were to include
salary increases as basis in the computation of backwages, the same should have been
explicitly stated in the same manner that the law used clear and unambiguous terms in
expressly providing for the inclusion of allowances and other benefits.
Moreover, we find East Asiatic inapplicable to the case at bar. In East

Asiatic, therein petitioner East Asiatic Company, Ltd. was found guilty of unfair labor
practices against therein respondent, Soledad A. Dizon, and the Court ordered her
reinstatement with back pay. On the question of the amount of backwages, the Court
granted the dismissed employee the whole amount of the salaries plus all general
increases and bonuses she would have received during the period of her lay-off with the
corresponding right of the employer to deduct from the total amounts, all the earnings
earned by the employee during her lay-off. The emphasis in East Asiatic is the duty of
both the employer and the employee to disclose the material facts and competent
evidence within their peculiar knowledge relative to the proper determination of
backwages, especially as the earnings derived by the employee elsewhere are
deductions to which the employer are entitled. However, East Asiatic does not find
relevance in the resolution of the issue before us. First, the material date to consider is 21
March 1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715,
otherwise known as the Herrera-Veloso Law, took effect. It is obvious that the backdrop
of East Asiatic, decided by this Court on 31 August 1971 was prior to the current state of
the law on the definition of full backwages. Second, it bears stressing that East
Asiatic was decided at a time when even as an illegally dismissed employee is entitled to
the whole amount of the salaries or wages, it was the recognized right of the employer to
deduct from the total of these, the amount equivalent to the salaries or wages the
employee or worker would have earned in his old employment on the corresponding days
that he was actually gainfully employed elsewhere with an equal or higher salary or wage,
such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.[49] It is for this reason the Court centered its
discussion on the duty of both parties to be candid and open about facts within their
knowledge to establish the amount of the deductions, and not leave the burden on the
employee alone to establish his claim, as well as on the duty of the court to compel the
parties to cooperate in disclosing such material facts. The inapplicability of East Asiatic to
respondent Sadac was sufficiently elucidated upon by the NLRC, viz.:
A full discernment of the pertinent portion of the judgment sought to

be executed in East Asiatic Co., Ltd. would reveal as follows:
x x x to reinstate Soledad A. Dizon immediately to her

former position with backwages from September 1, 1958 until
actually reinstated with all the rights and privileges acquired
and due her, including seniority and such other terms and
conditions of employment AT THE TIME OF HER LAY-OFF
The basis on which this doctrine was laid out was summed up by the
Supreme Court which ratiocinated in this light. To quote:
x x x on the other hand, of the employer to deduct from

the total of these, the amount equivalent to these salaries or
wages the employee or worker would have earned in his old
employment on the corresponding days that he was actually
gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what
has been actually earned x x x (Ibid, pp. 547-548).
But the Supreme Court, in the instant case, pronounced a clear but
different judgment from that of East Asiatic Co. decretal portion, in this wise:
WHEREFORE, the herein questioned Resolution of the

NLRC is AFFIRMED with the following MODIFICATIONS: that
private respondent shall be entitled to backwages from
termination of employment until turning sixty (60) years of age
(in 1995) and, thereupon, to retirement benefits in accordance
with law; xxx
Undisputably (sic), it was decreed in plain and unambiguous language

that complainant Sadac shall be entitled to backwages. No more, no less.
Thus, this decree for Sadac cannot be considered in any way,

substantially in essence, with the award of backwages as pronounced for
Ms. Dizon in the case of East Asiatic Co. Ltd.[50]
In the same vein, we cannot accept the Court of Appeals reliance on the doctrine
as espoused in Millares. It is evident that Millares concerns itself with the computation of
the salary base used in computing the separation pay of petitioners therein. The
distinction between backwages and separation pay is elementary. Separation pay is
granted where reinstatement is no longer advisable because of strained relations
between the employee and the employer. Backwages represent compensation that
should have been earned but were not collected because of the unjust dismissal. The
bases for computing the two are different, the first being usually the length of the
employees service and the second the actual period when he was unlawfully prevented
from working.[51]
The issue that confronted the Court in Millares was whether petitioners housing
and transportation allowances therein which they allegedly received on a monthly basis
during their employment should have been included in the computation of their separation
pay. It is plain to see that the reference to general increases in Millares citing East
Asiatic was a mere obiter.The crux in Millares was our pronouncement that the receipt of
an allowance on a monthly basis does not ipso facto characterize it as regular and
forming part of salary because the nature of the grant is a factor worth
considering. Whether salary increases are deemed part of the salary base in the
computation of backwages was not the issue in Millares.
Neither can we look at St. Louis of Tuguegarao to resolve the instant

controversy. What was mainly contentious therein was the inclusion of fringe benefits in
the computation of the award of backwages, in particular additional vacation and sick
leaves granted to therein concerned employees, it evidently appearing that the reference
to East Asiatic in a footnote was a mere obiter dictum. Salary increases are not akin to
fringe benefits[52] and neither is it logical to conceive of both as belonging to the same
taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to the
case at bar. The basic issue before the Court therein was whether the employee, Susan
Sumatre, a domestic helper in Abu Dhabi, United Arab Emirates, had been illegally
dismissed, in light of the contention of Sigma Personnel Services, a duly licensed
recruitment agency, that the former was a mere probationary employee who was, on top
of this status, mentally unsound.[53] Even a cursory reading of Sigma Personnel
Services citing St. Louis College of Tuguegarao would readily show that inclusion of
salary increases in the computation of backwages was not at issue. The same was not
on all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general

increases in basic salary deemed component in the computation of full backwages? The
weight of authority leans in petitioner Banks favor and against respondent Sadacs claim
for the inclusion of general increases in the computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means that the

employee is paid at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages

requires simply an application of judicial precedents defining the term
"backwages". Unfortunately, the Labor Arbiter erred in this regard. An
unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of
Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418;
Capital Garments Corporation v. Ople, G.R. No. 53627, September 30,
1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that
the base figure to be used in the computation of backwages due to the
employee should include not just the basic salary, but also the regular
allowances that he had been receiving, such as the emergency living
allowances and the 13th month pay mandated under the law [See Pan-
Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29,
1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721, September 21,
1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987,
155 SCRA 124; Insular Life Assurance Co., Ltd. v.
[54]
NLRC, supra.] (Emphasis supplied.)
There is no ambivalence in Paramount, that the base figure to be used in the computation
of backwages is pegged at the wage rate at the time of the employees dismissal, inclusive
of regular allowances that the employee had been receiving such as the emergency living
allowances and the 13th month pay mandated under the law.
In Evangelista v. National Labor Relations Commission,[55] we addressed the sole

issue of whether the computation of the award of backwages should be based on current
wage level or the wage levels at the time of the dismissal. We resolved that an unqualified
award of backwages means that the employee is paid at the wage rate at the time of his
dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs.

NLRC, the determination of the salary base for the computation of
backwages requires simply an application of judicial precedents defining the
term backwages. An unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal. Furthermore,
the award of salary differentials is not allowed, the established rule being
that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were
not dismissed or did not go on strike.[56]
The case of Paramount was relied upon by the Court in the latter case of Espejo
v. National Labor Relations Commission,[57] where we reiterated that the computation of
backwages should be based on the basic salary at the time of the employees dismissal
plus the regular allowances that he had been receiving. Further, the clarification made by
the Court in General Baptist Bible College v. National Labor Relations
Commission,[58] settles the issue, thus:
We also want to clarify that when there is an award of backwages

this actually refers to backwages without qualifications and
deductions. Thus, We held that:
The term backwages without qualification and deduction

means that the workers are to be paid their backwages fixed
as of the time of the dismissal or strike without deduction for
their earnings elsewhere during their layoff and without
qualification of their wages as thus fixed; i.e., unqualified by
any wage increases or other benefits that may have been
received by their co-workers who are not dismissed or did not
go on strike. Awards including salary differentials are not
allowed. The salary base properly used should, however,
include not only the basic salary but also the emergency cost
of living allowances and also transportation allowances if the
workers are entitled thereto.[59] (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Courts Decision
of 13 June 1997 in G.R. No. 102467, awarding backwages to respondent Sadac, readily
shows that the award of backwages therein is unqualified, ergo, without qualification of
the wage as thus fixed at the time of the dismissal and without deduction.
A demarcation line between salary increases and backwages was drawn by the Court
in Paguio v. Philippine Long Distance Telephone Co., Inc.,[60] where therein petitioner
Paguio, on account of his illegal transfer sought backwages, including an amount equal
to 16 percent (16%) of his monthly salary representing his salary increases during the
period of his demotion, contending that he had been consistently granted salary increases
because of his above average or outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the

reason for the grant of backwages. Backwages are granted on grounds of
equity to workers for earnings lost due to their illegal dismissal from
work. They are a reparation for the illegal dismissal of an employee based
on earnings which the employee would have obtained, either by virtue of a
lawful decree or order, as in the case of a wage increase under a wage
order, or by rightful expectation, as in the case of ones salary or wage. The
outstanding feature of backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had he not been
illegally terminated from his employment.
Petitioners claim, however, is based simply on expectancy or his

assumption that, because in the past he had been consistently rated for his
outstanding performance and his salary correspondingly increased, it is
probable that he would similarly have been given high ratings and salary
increases but for his transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in

the civil law, this contention is based merely on speculation. Furthermore, it
assumes that in the other position to which he had been transferred
petitioner had not been given any performance evaluation. As held by the
Court of Appeals, however, the mere fact that petitioner had been previously
granted salary increases by reason of his excellent performance does not
necessarily guarantee that he would have performed in the same manner
and, therefore, qualify for the said increase later. What is more, his claim is
tantamount to saying that he had a vested right to remain as Head of the
Garnet Exchange and given salary increases simply because he had
performed well in such position, and thus he should not be moved to any
other position where management would require his services.[61]
Applying Paguio to the case at bar, we are not prepared to accept that this degree
of assuredness applies to respondent Sadacs salary increases. There was no lawful
decree or order supporting his claim, such that his salary increases can be made a
component in the computation of backwages. What is evident is that salary increases are
a mere expectancy. They are, by its nature volatile and are dependent on numerous
variables, including the companys fiscal situation and even the employees future
performance on the job, or the employees continued stay in a position subject to
management prerogative to transfer him to another position where his services are
needed. In short, there is no vested right to salary increases. That respondent Sadac may
have received salary increases in the past only proves fact of receipt but does not
establish a degree of assuredness that is inherent in backwages. From the foregoing, the
plain conclusion is that respondent Sadacs computation of his full backwages which
includes his prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence speaks

only of wage and not salary, and therefore, the rule is inapplicable to him. It is respondent
Sadacs stance that he was not paid at the wage rate nor was he engaged in some form
of manual or physical labor as he was hired as Vice President of petitioner Bank. He
cites Gaa v. Court of Appeals[62] where the Court distinguished between wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa was
for the purpose of Article 1708 of the Civil Code which mandates that, [t]he laborers wage
shall not be subject to execution or attachment, except for debts incurred for food, shelter,
clothing and medical attendance. In labor law, however, the distinction appears to be
merely semantics.Paramount and Evangelista may have involved wage earners, but the
petitioner in Espejo was a General Manager with a monthly salary of P9,000.00 plus
privileges. That wage and salary are synonymous has been settled in Songco v. National
Labor Relations Commission.[63] We said:
Broadly, the word salary means a recompense or consideration made to a

person for his pains or industry in another mans business. Whether it be
derived from salarium, or more fancifully from sal, the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
wages and salary are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839,
841, 89 App. Div. 481; 38 Am. Jur. 496). Salary, the etymology of which is
the Latin word salarium, is often used interchangeably with wage, the
etymology of which is the Middle English word wagen. Both words generally
refer to one and the same meaning, that is, a reward or recompense for
services performed. Likewise, pay is the synonym of wages and salary
(Blacks Law Dictionary, 5th Ed). x x x[64] (Italics supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of Appeals
ruling that respondent Sadac is entitled to check-up benefit, clothing allowance and cash
conversion of vacation leaves notwithstanding that respondent Sadac did not present any
evidence to prove entitlement to these claims.[65]
The determination of respondent Sadacs entitlement to check-up benefit, clothing

allowance, and cash conversion of vacation leaves involves a question of fact. The well-
entrenched rule is that only errors of law not of facts are reviewable by this Court in a
petition for review.[66] The jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited
to reviewing only errors of law, not of fact, unless the factual findings being assailed are
not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.[67] This Court is also not precluded from delving into and
resolving issues of facts, particularly if the findings of the Labor Arbiter are inconsistent
with those of the NLRC and the Court of Appeals.[68] Such is the case in the instant
petition. The Labor Arbiter and the Court of Appeals are in agreement anent the
entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash
conversion of vacation leaves, but the findings of the NLRC were to the contrary. The
Labor Arbiter sustained respondent Sadacs entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Banks
acknowledgment in its computation that respondent Sadac is entitled to certain benefits,
namely, rice subsidy, tuition fee allowance, and medicine allowance, thus, there exists no
reason to deprive respondent Sadac of his other benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim that the
benefits sought by respondent Sadac are not granted to its employees and
officers. Similarly, the Court of Appeals ratiocinated that if ordinary employees are entitled
to receive these benefits, so it is with more reason for a Vice President, like herein
respondent Sadac to receive the same.
We find in the records that, per petitioner Banks computation, the benefits to be
received by respondent are monthly rice subsidy, tuition fee allowance per year, and
medicine allowance per year.[69] Contained nowhere is an acknowledgment of herein
claimed benefits, namely, check-up benefit, clothing allowance, and cash conversion of
vacation leaves. We cannot sustain the rationalization that the acknowledgment by
petitioner Bank in its computation of certain benefits granted to respondent Sadac means
that the latter is also entitled to the other benefits as claimed by him but not acknowledged
by petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Mere
allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.
III.
We come to the third assignment of error raised by petitioner Bank in its

Supplement to Petition for Review, assailing the 26 October 2004 Supplemental Decision
of the Court of Appeals which amended the fallo of its 6 April 2004 Decision to include
attorneys fees equal to TEN PERCENT (10%) of all the monetary award granted to
respondent Sadac. Petitioner Bank posits that neither the dispositive portion of our 13
June 1997 Decision in G.R. No. 102467 nor the body thereof awards attorneys fees to
respondent Sadac. It is postulated that the body of the 13 June 1997 Decision does not
contain any findings of facts or conclusions of law relating to attorneys fees, thus, this
Court did not intend to grant to respondent Sadac the same, especially in the light of its
finding that the petitioner Bank was not motivated by malice or bad faith and that it did
not act in a wanton, oppressive, or malevolent manner in terminating the services of
respondent Sadac.[70]
We do not agree.
At the outset it must be emphasized that when a final judgment becomes executory,
it thereby becomes immutable and unalterable. The judgment may no longer be modified
in any respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the modification is
attempted to be made by the Court rendering it or by the highest Court of the land. The
only recognized exceptions are the correction of clerical errors or the making of so-
called nunc pro tunc entries which cause no prejudice to any party, and, of course, where
the judgment is void.[71] The Courts 13 June 1997 Decision in G.R. No. 102467 became
final and executory on 28 July 1997. This renders moot whatever argument petitioner
Bank raised against the grant of attorneys fees to respondent Sadac. Of even greater
import is the settled rule that it is the dispositive part of the judgment that actually settles
and declares the rights and obligations of the parties, finally, definitively, and
authoritatively, notwithstanding the existence of inconsistent statements in the body that
may tend to confuse.[72]
Proceeding therefrom, we make a determination of whether the Court in Equitable

Banking Corporation v. National Labor Relations Commission,[73] G.R. No. 102467,
dated 13 June 1997, awarded attorneys fees to respondent Sadac. In recapitulation, the
dispositive portion of the aforesaid Decision is hereunder quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is

AFFIRMED with the following MODIFICATIONS: That private respondent
shall be entitled to backwages from termination of employment until turning
sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary
liability. No costs.[74]
The dispositive portion of the 24 September 1991 Decision of the NLRC awards
respondent Sadac attorneys fees equivalent to ten percent (10%) of the monetary
award, viz:
WHEREFORE, in view of all the foregoing considerations, let the

Decision of October 2, 1990 be, as it is hereby, SET ASIDE and a new one
ENTERED declaring the dismissal of the complainant as illegal, and
consequently ordering the respondents jointly and severally to reinstate him
to his former position as bank Vice-President and General Counsel without
loss of seniority rights and other privileges, and to pay him full backwages
and other benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorneys fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from
November 16, 1989 to September 15, 1991 (cut off date, subject to
adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorneys fees
equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.[75](Italics Ours.)
As can be gleaned from the foregoing, the Courts Decision of 13 June

1997 AFFIRMED with MODIFICATION the NLRC Decision of 24 September 1991, which
modification did not touch upon the award of attorneys fees as granted, hence, the award
stands. Juxtaposing the decretal portions of the NLRC Decision of 24 September
1991 with that of the Courts Decision of 13 June 1997, we find that what was deleted by
the Court was the award of moral and exemplary damages, but not the award of attorneys
fees equivalent to Ten Percent (10%) of the monetary award. The issue on the grant of
attorneys fees to respondent Sadac has been adequately and definitively threshed out
and settled with finality when petitioner Bank came to us for the first time on a Petition
for Certiorari in Equitable Banking Corporation v. National Labor Relations Commission,
docketed as G.R. No. 102467. The Court had spoken in its Decision of 13 June 1997 in
the said case which attained finality on 28 July 1997. It is now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent Sadac to

twelve percent (12%) interest per annum on the outstanding balance as of 28 July 1997,
the date when our Decision in G.R. No. 102467 became final and executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals,[76] the Court, speaking through
the Honorable Justice Jose C. Vitug, laid down the following rules of thumb:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the contravenor can
be held liable for damages. The provisions under Title XVIII on Damages
of the Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award of interest in the concept of

actual or compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of
the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money becomes

final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2 above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.[77]
It is obvious that the legal interest of twelve percent (12%) per annum shall be
imposed from the time judgment becomes final and executory, until full satisfaction
thereof. Therefore, petitioner Bank is liable to pay interest from 28 July 1997, the finality
of our Decision in G.R. No. 102467.[78] The Court of Appeals was not in error in
imposing the same notwithstanding that the parties were at variance in the computation
of respondent Sadacs backwages. What is significant is that the Decision of 13 June
1997 which awarded backwages to respondent Sadac became final and executory
on 28 July 1997.
V.
Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily
be denied as established in our foregoing discussion. We are not herein modifying or
reversing a doctrine or principle laid down by the Court en banc or in a division. The
instant case is not one that should be heard by the Court en banc.[79]
Fallo
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the

computation of the backwages, respondent Sadacs claimed prospective salary increases,
check-up benefit, clothing allowance, and cash conversion of vacation leaves are
excluded. The petition is PARTIALLY DENIED insofar as we AFFIRMED the grant of
attorneys fees equal to ten percent (10%) of all the monetary award and the imposition of
twelve percent (12%) interest per annum on the outstanding balance as of 28 July
1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision
dated 26 October 2004 are MODIFIEDin the following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R.
No. 102467 with a clarification that the award of
backwages EXCLUDES respondent Sadacs claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation
leaves;
(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all
monetary award; and
(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the
total sum of all monetary award from 28 July 1997, the date of finality of Our
Decision in G.R. No. 102467 until full payment of the said monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.
No costs.
SO ORDERED.
Eastern Shipping vs. Sedan, 486 SCRA 565,

GR 159354, April 7, 2006
THIRD DIVISION
EASTERN SHIPPING LINES, INC., G.R. No. 159354

and/or ERWIN L. CHIONGBIAN,
QUISUMBING, J., Chairperson,

- versus - CARPIO,
CARPIO MORALES, and
TINGA, JJ.
DIOSCORO D. SEDAN, Promulgated:

Respondent. April 7, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision[1] and Resolution,[2] dated February 14,
2003 and August 7, 2003, respectively, of the Court of Appeals in CA-G.R. SP No. 70836,
which reversed the October 4, 2001[3] Resolution of the National Labor Relations
Commission affirming the Labor Arbiters Decision of June 15, 2000.[4]
The antecedent facts, as culled from the records, are as follows:
On December 30, 1973, petitioners hired on a per-voyage basis private

respondent Dioscoro[5] Sedan as 3rd marine engineer and oiler in one of the vessels
owned by petitioners. His last voyage was on July 27, 1997 on board the
vessel M/V Eastern Universe. His monthly pay was P22,000.[6] Additionally, after each
voyage his earned leave credits are monetized and paid in cash. He said he was
disembarking because he was going to take the board examinations for marine
engineers.
Two months later, on September 27, 1997, Sedan sent a letter to petitioners
applying for optional retirement, citing as reason the death of his only daughter, hence
the retirement benefits he would receive would ease his financial burden. However,
petitioners deferred action on his application for optional retirement since his services on
board ship were still needed. Nonetheless, according to petitioners, the company
expressed intention to extend him a loan in order to defray the costs incurred for the burial
and funeral expenses of his daughter.
On October 28, 1997, Sedan sent petitioners another letter[7] insisting on the
release of half of his optional retirement benefits. Later, he said that he no longer wanted
to continue working on board a vessel for reasons of health.[8]
On December 1, 1997, Sedan sent another letter to petitioners threatening to file

a complaint if his application was not granted. In reply, according to petitioners, the
company management sent a telegram on December 9, 1997 informing Sedan that his
services were needed on board a vessel and that he should report immediately for work
as there was no available replacement. Sedan claims he did not receive the telegram,
nor was this fact proved by the company before the Labor Arbiter or the NLRC.
Sedan proceeded to file a complaint with the Labor Arbiter against petitioners,
docketed as NLRC-NCR CASE NO. 00-12-08578-97, demanding payment of his
retirement benefits, leave pay, 13th month pay and attorneys fees. The Labor Arbiter ruled
in favor of Sedan, as follows:
WHEREFORE, premises all considered, judgment is hereby

rendered as follows:
1. Ordering respondents to pay complainant retirement

gratuity/separation pay of P253,000.00 (23 yrs. x P22,000.00 at
month for every year of service).
2. Ordering respondents to pay complainant 10% of the total

monetary award by way of attorneys fees.
All other claims are dismissed for lack of merit.
SO ORDERED.[9]
Petitioners appealed the said decision to the National Labor Relations

Commission. However, the NLRC found the factual findings of the Labor Arbiter
consistent with the evidence on record. Hence, the NLRC dismissed the appeal for lack
of merit. Petitioners motion for reconsideration was likewise denied.
Dissatisfied, petitioners filed a special civil action for certiorari with the Court of
Appeals anchored on the following grounds:
1. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

AWARDING RETIREMENT GRATUITY/SEPARATION PAY TO THE
PRIVATE RESPONDENT BY HOLDING THAT THERE WAS NO
EVIDENCE TO SHOW THAT PRIVATE RESPONDENT WAS
INFORMED/NOTIFIED OF PETITIONERS NEED FOR HIS SERVICES OR
DIRECTING HIM TO REPORT FOR WORK, INCLUDING [ACTION] ON
HIS APPLICATION FOR OPTIONAL RETIREMENT.
2. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

AWARDING ATTORNEYS FEES TO THE PRIVATE RESPONDENT
CONSIDERING THAT PETITIONERS ACTED IN GOOD FAITH IN
REFUSING THE SUBJECT CLAIM.[10]
The Court of Appeals granted the petition and ruled that the retirement gratuity and
attorneys fees awarded by the Labor Arbiter and the NLRC had no basis in fact or law
since pursuant to the Agreement between the company and the employees, the granting
of optional retirement is the exclusive prerogative of the employer, herein
petitioners. Unless such prerogative was exercised arbitrarily or capriciously, private
respondent cannot demand it as a right. Nonetheless, the Court of Appeals ordered
petitioners to pay private respondent P200,000 as financial assistance, to wit:
WHEREFORE, FOREGOING PREMISES CONSIDERED, this

petition is GRANTED. The assailed Decision dated October 4, 2001 and the
Resolution dated April 22, 2002 of public respondent National Labor
Relations Commission in NLRC NCR Case No. 00-12-08578-97/NLRC CA
No. 026697-00 entitled, Dioscoro D. Sedan, complainant-appellee vs.
Eastern Shipping Lines, Inc. and/or Erwin L. Chiongbian, respondents-
appellants are hereby reversed and set aside for having been
rendered/issued with grave abuse of discretion amounting to lack or in
excess of jurisdiction and, in lieu thereof, petitioners are hereby ordered to
pay respondent Dioscoro D. Sedan the amount of Two Hundred Thousand
(P200,000.00) Pesos as financial assistance.
SO ORDERED.[11]
Petitioners filed a motion for reconsideration, but it was denied by the Court of
Appeals.
Hence, the instant petition raising as sole issue:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN
GIVING THE RESPONDENT PHP200,000.00 AS FINANCIAL
ASSISTANCE WHEN IN FACT IT WAS THE RESPONDENT WHO
REFUSED TO REPORT FOR WORK.[12]
Petitioners contend that by refusing to report for work and insisting on applying for
optional retirement, private respondent wrongly assumed that he was justified in
abandoning his job. Petitioners maintain that private respondents refusal to report back
to work, despite being duly notified of the need for his service, is tantamount to voluntary
resignation. Therefore, petitioners contend, the respondent should not be entitled to any
financial assistance.
Moreover, granting arguendo that private respondent was entitled to financial
assistance, petitioners protest the amount of the financial assistance awarded by the
Court of Appeals for being disproportionately excessive. Petitioners
[13]
cite Manggagawa ng Komunikasyon sa Pilipinas v. NLRC, where the employee was
given only P10,000 as financial assistance.
In his Comment, private respondent argues that the Court of Appeals awarded
him P200,000 for equity consideration. Private respondent claims that the retirement
policy of the company, which states that [i]t will be the exclusive prerogative and sole
option of this company to retire any covered employee,[14] must be interpreted in favor of
the working class. Otherwise, private respondent laments, he will be placed at the mercy
of the company, contrary to the constitutional mandate to afford full protection to labor.
At the outset, we rule for petitioners on the matter of optional retirement benefits.
Private respondent is not entitled to retirement benefits. The pertinent law

governing retirement is found in the Labor Code, which provides:
ART. 287. Retirement. Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such

retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided,
however, That an employees retirement benefits under any collective
bargaining and other agreements shall not be less than those provided
herein.
In the absence of a retirement plan or agreement providing for

retirement benefits of employees in the establishment, an employee upon
reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment may retire and shall
be entitled to retirement pay equivalent to at least one half (1/2) month
salary for every year of service, a fraction of at least six (6) months being
considered as one whole year.
xxx
The age of retirement is primarily determined by the existing agreement between

the employer and the employees. However, in the absence of such agreement, the
retirement age shall be fixed by law. Under the aforecited article of the Labor Code, the
legally mandated age for compulsory retirement is 65 years, while the set minimum age
for optional retirement is 60 years.
In the instant case, there is an agreement[15] between petitioner shipping company and
its employees. The agreement states:
xxx
B. Retirement under the Labor Code:
Any employee whether land-based office personnel or shipboard employee

who shall reach the age of sixty (60) while in active employment with this
company may retire from the service upon his written request in accordance
with the provisions of Art. 277 of the Labor Code and its Implementing
Rules, Book 6, Rule 1, Sec. 13 and he shall be paid termination pay
equivalent to fifteen (15) days pay for every year of service as stated in said
Labor Code and its Implementing Rules. However, the company may at its
own volition grant him a higher benefit which shall not exceed the benefits
provided for in the Retirement Gratuity table mentioned elsewhere in this
policy.
C. Optional Retirement:
It will be the exclusive prerogative and sole option of this company

to retire any covered employee who shall have rendered at least fifteen (15)
years of credited service for land based employees and 3,650 days actually
on board vessel for shipboard personnel. Such employee shall be entitled
to a Retirement Gratuity which shall be computed in accordance with the
following table:
Years of Service Monthly Basic Pay

(Percentage)
15 years 55%
16 years 56%
17 years 57%
18 years 58%
19 years 59%
20 years 60%
21 years 63%
22 years 66%
23 years 69%
24 years 72%
25 years 75%
26 years 80%
27 years 85%
28 years 90%
29 years 95%
30 years or above 100%
The computation of the benefit shall be based on the final basic pay,
for every year of credited service, a fraction of at least six (6) months being
considered as one whole year but shall be exclusive of fringe benefits and
other special emoluments.[16]
xxx
Clearly, the eligibility age for optional retirement is set at 60 years.[17] However,
employees of herein petitioners who are under the age of 60 years, but have rendered at
least 3650 days (10 years) on board ship or fifteen (15) years of service for land-based
employees may also avail of optional retirement, subject to the exclusive prerogative and
sole option of petitioner company.[18]
Records show that private respondent was only 48 years old[19] when he applied for
optional retirement. Thus he cannot claim optional retirement benefits as a matter of
right. His application for optional retirement was subject to the exclusive prerogative and
sole option of the shipping company pursuant to the abovecited agreement between the
workers and the company. In this regard, no error was committed by the appellate court
when it set aside the ruling of the Labor Arbiter and the NLRC granting herein private
respondent P253,000retirement gratuity/separation pay.
So now we come to the grant of financial assistance by the appellate court. We

are not unmindful of the rule that financial assistance is allowed only in instances where
the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character.[20] Neither are we unmindful of this Courts
pronouncements in Arc-Men Food Industries Corporation v.
[21] [22]
NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that
when there is no dismissal to speak of, an award of financial assistance is not in order.
But we must stress that this Court did allow, in several instances, the grant of
financial assistance.[23] In the words of Justice Sabino de Leon, Jr., now deceased,
financial assistance may be allowed as a measure of social justice and exceptional
circumstances, and as an equitable concession.[24] The instant case equally calls for
balancing the interests of the employer with those of the worker, if only to approximate
what Justice Laurel calls justice in its secular sense.[25]
In this instance, our attention has been called to the following circumstances: that
private respondent joined the company when he was a young man of 25 years and stayed
on until he was 48 years old; that he had given to the company the best years of his youth,
working on board ship for almost 24 years; that in those years there was not a single
report of him transgressing any of the company rules and regulations; that he applied for
optional retirement under the companys non-contributory plan when his daughter died
and for his own health reasons; and that it would appear that he had served the company
well, since even the company said that the reason it refused his application for optional
retirement was that it still needed his services; that he denies receiving the telegram
asking him to report back to work; but that considering his age and health, he preferred
to stay home rather than risk further working in a ship at sea.
In our view, with these special circumstances, we can call upon the same social
and compassionate justice cited in several cases[26] allowing financial assistance. These
circumstances indubitably merit equitable concessions, via the principle of
compassionate justice for the working class. Thus, we agree with the Court of Appeals to
grant financial assistance to private respondent. The only catch is whether, as the
shipping company alleges, the amount of P200,000 that the Court of Appeals granted him
is arbitrary and excessive.
The propriety of awarding financial assistance has long been tackled by this
Court. In Philippine Long Distance Telephone Co. v. NLRC,[27] we laid down the rule that
henceforth separation pay shall be allowed as a measure of social justice only in the
instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. A contrary rule, we said would have
the effect of rewarding rather than punishing an erring employee.
Subsequent to PLDT, in the 2004 case of Piero v. NLRC,[28] Piero who was dismissed for
an illegal strike was granted one-half () months pay for the 29 years of his service. His
infraction was deemed not so reprehensible nor unscrupulous as to warrant complete
disregard of his long years of service with no derogatory record. In Aparente, Sr. v.
NLRC,[29] for blatant disobedience of company rules, one-half () months pay for every
year of service was also deemed equitable. In the 1998 case of Salavarria v. NLRC,[30] for
the teacher who had previously been meted with a two week suspension for the same
offense, illegally soliciting contributions from students, the Court granted one months
salary for every year of service because, said the Court, she never took custody of the
illegally solicited funds.
Considering the doctrine in the abovecited NLRC cases and taking into account equitable
results in those cases, we find the grant of two hundred thousand pesos (P200,000) by
the Court of Appeals, neither arbitrary nor excessive. Private respondent who has no
derogatory record in his 23 years of service should be granted equitable assistance equal
to one-half months pay for each of his 23 years of service.
To conclude, in the instant case, private respondent has no claim against petitioners for
retirement benefits. We agree with the appellate court, however, that financial assistance
could be awarded him but only as an equitable concession under the special
circumstances of this case.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals granting
assistance to private respondent in the amount of two hundred thousand pesos
(P200,000) is AFFIRMED. No pronouncement as to cost.
SO ORDERED.
Hanford vs. Joseph, 454 SCRA 773,

GR 158251, March 31, 2005
T H I R D D I V I S I O N
HANFORD PHILIPPINES, G.R. No. 158251

INCORPORATED and VICTOR
TE,
PANGANIBAN,J., Chairman,
- versus - SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.
SHIRLEY JOSEPH,
Respondent. Promulgated:
March 31, 2005

x---------------------------------------------------------------------------------------------x
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision[1] of the Court of Appeals dated January
23, 2003and its Resolution dated April 29, 2003 in CA-G.R. SP No. 60701.
On July 17, 1978, petitioner Hanford Philippines, Inc. (Hanford) hired Shirley Joseph,
herein respondent, as a sewer.
On August 10, 1998, respondent voluntarily tendered her resignation effective September
17, 1998,[2] which petitioner accepted the following day.[3]
Petitioner then paid respondent her last salary, 13 th month pay and the cash conversion
of her unused vacation and sick leave.
On November 19, 1998,[4] respondent sent a letter to petitioner requesting

payment of her separation pay pursuant to Section 1, Article IV of the Collective
Bargaining Agreement (CBA) quoted as follows:
SECTION 1. Regular employees or workers separated by the

COMPANY because of reduction of personnel and employees or workers
who may be separated without cause, or those whose services are
terminated or are separated from work due to suspension or cessation of
operation shall be entitled to a termination pay in accordance with law. The
COMPANY shall give termination pay to those who voluntarily resign due
to the reasons heretofore statedsubject to the following terms and
conditions:
a) 1 to 30 years of service shall be paid 20 days for every year

of service;
b) 16 to 20 years of service to the COMPANY shall be paid 15
days pay for every year of service;
c) 11 to 15 years of service to the COMPANY shall be paid 10
days pay for every year of service; and
d) 5 to 10 years of service to the COMPANY shall be paid 5
days pay for every year of service.[5]
Petitioner denied respondents request on the ground that under the Labor Code,
voluntary resignation is not one of the grounds which justifies the grant of separation
pay.[6]
On December 17, 1998, respondent filed with the Office of the Labor Arbiter a complaint
for the payment of her separation pay against petitioner Hanford and co-petitioner Victor
Te, docketed as NLRC NCR CN. 00-12-10238-98.
On May 20, 1999, the Labor Arbiter rendered a Decision [7] granting respondents petition
and ordering petitioners to pay her separation pay in the amount of P93,820.00 as
authorized by Section 1, Article IV of the parties CBA.
On appeal, the National Labor Relations Commission (NLRC) rendered its

Resolution[8] dated April 14, 2000 affirming the Labor Arbiters Decision.
Forthwith, petitioners filed their motion for reconsideration
but was denied by the NLRC in its Resolution[9] dated July 24, 2000, prompting them
to file with the Court of Appeals a petition for certiorari under Rule 65 of the 1997 Rules
of Civil Procedure, as amended.
On January 23, 2003, the Appellate Court rendered its Decision[10] dismissing the petition.
The Court of Appeals held that the parties CBA clearly provides that
petitioner Hanford shall give termination pay to those who voluntarily resigned due to the
following reasons: reduction of personnel; employees or workers who may be separated
without cause; and those whose services are terminated due to suspension or cessation
of operation. Here, respondent voluntarily resigned. This separation from the service is
one without cause as provided by the CBA. Hence, pursuant thereto, petitioner is entitled
to a separation pay.
Petitioners filed a motion for reconsideration. However, it was denied by the Appellate
Court in a Resolution dated April 29, 2003.[11]
Hence, the present recourse. Petitioners contend that the Court of Appeals erred
in ruling that a resigned employee is entitled to separation pay under Section 1, Article IV
of the CBA.[12]
Respondent counters that the Decision of the Court of Appeals should not be
disturbed. She worked with petitioner company for twenty years but decided to resign
believing that pursuant to the CBA, she is entitled to a separation pay. She also avers
that several former employees of petitioner, namely: Astor Madamag, Danilo Suplito,
Domingo Bobis, Rosita Bobis, Evelyn Cunanan, Fe Viray, Doris Angeles and Dula
Imperia, were granted separation pay pursuant to the CBA and petitioners policy and
practice.[13]
It is well to note that there is no provision in the Labor Code which grants
separation pay to employees who voluntarily resign. Under the Code, separation pay may
be awarded only in cases when the termination of employment is due to: (a) installation
of labor saving devices, (b) redundancy, (c) retrenchment, (d) closing or cessation of
business operations, (e) disease of an employee and his continued employment is
prejudicial to himself or his co-employees, or (f) when an employee is illegally dismissed
but
reinstatement is no longer feasible.
In Hinatuan Mining Corporation and/or the Manager versus National Labor

Relations and Margo Batister,[14] we held that while it is true that under the Labor Code,
an employee who voluntarily resigns may not be granted separation pay, as in fact, the
general rule is that an employee who voluntarily resigns is not entitled to separation pay,
however, there is an exception, that is, when it is stipulated in the employment contract
or CBA or such payment is authorized by the employers practice or policy, as in this
case.[15]
As aptly held by the Labor Arbiter, the NLRC and the Court of Appeals, it is very
clear from the CBA that when an employee or worker voluntarily resigns due to, among
others, separation from the company without cause, such as voluntary resignation, then
he is entitled to a separation pay.
Moreover, records show that petitioners granted the employees mentioned earlier
their separation pay upon their separation by reason of their retirement. Under the Labor
Code, retirement is not also a ground for the grant of separation pay. If petitioners could
be liberal to those employees who retired, there is no reason why they should not also
extend such liberality to respondent considering that she served petitioner for twenty one
years.
Our ruling in Philippine National Construction vs. NLRC finds application here,
thus:
In the interpretation of an employers program providing for

separation benefits, all doubts should be construed in favor of labor. After
all, workers are the intended beneficiaries of such program and our
Constitution mandates a clear bias in favor of the working class.
WHEREFORE, the petition is hereby DENIED. Costs against petitioners.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
Tan vs Timbal, 434 SCRA 381,
GR 141926, July 14, 2004

[G.R. No. 141926. July 14, 2004]
CONRADO TAN, petitioner, vs. RESTITUTO TIMBAL, JR., respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals
in CA-G.R. SP No. 51404 which affirmed with modification the decision of the National
Labor Relations Commission (NLRC) in NLRC Case No. NCR-00-08-03596-89.
The antecedents are as follows:
On July 17, 1989, Restituto Timbal, Jr. and Ernesto Valenciano received a letter from
their employer, Nationwide Steel Corporation (NSC), through Conrado Tan, its general
manager, informing them that they were found to be among those employees who filed a
complaint with the Social Security System (SSS) in which they claimed that NSC was not
remitting its employees SSS premiums. Tan required the two to explain their side on the
matter within 24 hours.
After submitting their explanation, Timbal, Jr. and Valenciano were instructed by Tan
to report the following day for the resolution of the matter. However, when Timbal, Jr. and
Valenciano arrived the following day, they were not allowed entry by the security
guard. Both were handed a memorandum signed by Tan stating that they were being
suspended indefinitely. Timbal, Jr. and Valenciano refused to receive the memorandum
and tried to report for work the next day. Again, they were refused entry by the security
guard.
Aggrieved, Timbal, Jr. and Valenciano filed, on August 3, 1989, a complaint for illegal
dismissal with the NLRC, against NSC, and impleaded Conrado Tan as respondent, in
his capacity as general manager of the said corporation. [2] The case was docketed as
NLRC-NCR-00-08-03596-89.
The respondents alleged in their position papers that the complainants falsely
charged NSC of not paying the SSS premium contributions of its employees, and that
both complainants were indefinitely suspended as a result of the criminal case filed by
Benny Sy against them for their false charge.
At the conclusion of the proceedings, the Labor Arbiter rendered his decision on
August 9, 1990 in favor of the complainants and against the NSC only, the decretal portion
of which reads as follows:
WHEREFORE, finding the respondent company guilty of illegal dismissal as charged,

judgment is hereby rendered ordering it to reinstate complainants to their former or
equivalent positions without loss of seniority rights and to pay them full backwages and
other benefits.
SO ORDERED.[3]
Labor Arbiter Cornelio L. Linsangan found that the respondents failed to substantiate
the charge that Timbal, Jr. and Valenciano falsely accused NSC of not paying the SSS
premium contributions of its employees and failing to remit the said contributions. He also
declared that the evidence on record showed that the legal officer of the SSS [4] cleared
the complainants, through his letter, in which he stated that the SSS complaints against
the NSC were the result of an investigation conducted by their field representative, and
not by any of the employees of the NSC.
The decision became final and executory as no appeal from the decision was filed by
any of the parties.
On October 10, 1990, the Labor Arbiter issued a Writ of Execution directing the sheriff
to effect the complainants reinstatement and to collect from the respondent NSC the
accrued backwages, and remit the same to the complainants. The sheriff served a notice
of garnishment on the Philippine Banking Corporation. However, the Bank did not
respond to the notice, and the decision of the labor arbiter remained unsatisfied.[5]
The complainants filed an omnibus motion, praying that they be paid separation pay
instead of being reinstated, as part of the monetary award in their favor. They also prayed
for the issuance of an alias writ of execution enforceable against the respondent NSC
and its officers/stockholders. Appended to their motion was a copy of the Articles of
Incorporation of the NSC showing that Conrado Tan was one of its incorporators and
member of the Board of Directors. They averred that all of the incorporators had unpaid
subscribed capital stock, and that they had the right to collect their monetary claim from
Conrado Tans unpaid subscribed capital stock under the trust fund doctrine as provided
in the Corporation Code.
The Labor Arbiter granted the motion and issued his Order dated January 16, 1991,
ordering Conrado D. Tan, Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang
to pay to the respondent corporation, through the Office of the Labor Arbiter, their unpaid
subscribed capital stock in the total amount of P135,514.05 in order that the same may
be applied to satisfy the complainants backwages, failing which, an alias writ of execution
would be issued by his Office against their assets.[6] The Arbiter, thereafter, issued an
alias writ of execution.
On March 7, 1991, the respondent NSC filed an Urgent Motion to Set Aside the Alias
Writ of Execution filed by the complainants. However, the Labor Arbiter denied the said
motion in his Order dated May 2, 1991.[7]
Conrado Tan and William Ang filed with the NLRC a petition for the issuance of a writ
of preliminary injunction and a temporary restraining order to enjoin the implementation
of the alias writ of execution issued by the Labor Arbiter. They alleged that they were
never furnished copies of the omnibus motion filed by Timbal, Jr. and Valenciano; that
they were not notified of any hearing on the matter; and, that the Labor Arbiter acted in
excess or lack of jurisdiction when he issued an alias writ of execution ordering the sheriff
to collect from the respondent NSC their unpaid subscriptions.
On June 18, 1997, the NLRC rendered a Decision granting the motion of Tan and
Ang and setting aside the assailed order and alias writ of execution of the Labor
Arbiter. The NLRC ruled as follows:
It may be true that the petitioners were/are stockholders of Nation Wide (sic) Steel Corp.
and that accordingly, they have unpaid subscription to the letter but the records
likewise, readily show that petitioners were not impleaded as party respondents in
NLRC Case No. 08-3596-80 (sic). A stockholder who has an unpaid subscription is not
automatically held liable in case of judgment against the corporation where he has an
unpaid subscription. A separate complaint for the payment of the unpaid subscription
should be filed so that unpaid subscriptions of stockholders be made answerable and
liable to the obligations and debts of the corporation.
This Commission has not acquired jurisdiction over the stockholders of the respondent
corporation.[8]
The NLRC denied the complainants motion for reconsideration of the said decision.
Aggrieved, Restituto Timbal, Jr., filed his petition for certiorari under Rule 65, with this
Court for the nullification of the decision of the NLRC, asserting that the NLRC committed
a grave abuse of its discretion in setting aside the order and alias writ of execution issued
by the Labor Arbiter.[9]
On January 20, 1999, this Court issued a Resolution referring the case to the Court
of Appeals conformably to its ruling in St. Martin Funeral Homes vs. NLRC.[10]
After due proceedings, the Court of Appeals rendered a Decision on September 24,
1999, affirming the decision of the NLRC as far as William Ang was concerned, but
granting the petition and affirming the Order and Alias Writ of Execution of the Labor
Arbiter against Conrado Tan. The decretal portion of the decision reads:
IN VIEW OF ALL THE FOREGOING, the assailed NLRC decision dated June 18, 1997
is AFFIRMED insofar as Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang
are concerned. However, as regard (sic) Conrado D. Tan, the Orders of Labor Arbiter
Cornelio L. Linsangan dated January 16 and May 2, 1991, are REINSTATED,
SUSTAINED and UPHELD. No pronouncement as to costs.
SO ORDERED.[11]
After the CA denied petitioner Tans motion for reconsideration, the latter filed the
petition at bar contending that the Court of Appeals erred in finding him, jointly and
severally, liable with the NSC for the Labor Arbiters monetary award in favor of the
respondent on its finding that he acted in bad faith and with malice in suspending the
respondent.
The sole issue in this case is whether the petitioner is liable, either jointly or severally
with the NSC, for the monetary award in favor of the respondent herein in NLRC Case
No. NCR-00-08-03596-89.
The petitioner avers that under his decision, the Labor Arbiter found the NSC solely
liable for the monetary award issued in favor of the respondent. Hence, the alias writ of
execution issued by the Labor Arbiter should be directed only against the NSC and not
against him. As such, his property, real and personal, should not be burdened by the said
award. For his part, the respondent contends that the Court of Appeals did not err in
holding the petitioner, jointly and severally, liable with NSC for the monetary award in his
favor on its finding that the petitioner acted in bad faith and with malice in suspending
him.
The petition is meritorious.
Irrefragably, under the decision of the Labor Arbiter in NLRC Case No. NCR-00-08-
03596-89, only the NSC was found liable for the monetary awards in favor of the
complainants therein, including the herein respondent. The petitioner, although the
general manager of NSC, was not ordered to pay for the monetary award in favor of the
complainants, jointly or severally, with the NSC. The decision of the Labor Arbiter had
become final and executory; hence, immutable. As we held in Industrial Management
International Development Corporation vs. NLRC:[12]
It is an elementary principle of procedure that the resolution of the court in a given issue
as embodied in the dispositive part of a decision or order is the controlling factor as to
settlement of rights of the parties. Once a decision or order becomes final and
executory, it is removed from the power or jurisdiction of the court which rendered it to
further alter or amend it. It thereby becomes immutable and unalterable and any
amendment or alteration which substantially affects a final and executory judgment is
null and void for lack of jurisdiction, including the entire proceedings held for that
purpose. An order of execution which varies the tenor of the judgment or exceeds the
terms thereof is a nullity.
None of the parties in the case before the Labor Arbiter appealed the Decision dated
March 10, 1987; hence the same became final and executory. It was, therefore,
removed from the jurisdiction of the Labor Arbiter or the NLRC to further alter or amend
it. Thus, the proceedings held for the purpose of amending or altering the dispositive
portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ
of Execution is null and void because it varied the tenor of the judgment in that it sought
to enforce the final judgment against Antonio Gonzales/Industrial Management
Development Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and Gerardo
Sicat, which makes the liability solidary.[13]
Not even the NLRC, the Court of Appeals and this Court has any appellate jurisdiction
to alter or reverse the decision of the Labor Arbiter.
The Court of Appeals correctly cited our ruling in MAM Realty Development
Corporation vs. NLRC,[14] that in labor cases, corporate directors and officers are
solidarily liable with the corporation for the termination of employment of corporate
employees committed with malice or bad faith. The ruling applies in a case where a
corporate officer acts with malice or bad faith in suspending an employee. Whether or not
the petitioner acted with malice or bad faith in ordering the suspension of the respondent
is a question of fact submitted by the parties to the Labor Arbiter for resolution.
In the instant case, the Labor Arbiter did not make any finding in his decision in NLRC
Case No. NCR-00-08-03596-89 that the petitioner acted with malice or bad faith in
ordering the suspension of the respondent. Neither did he hold the petitioner liable, either
jointly or severally with the NSC, for the monetary award in favor of the complainants
therein including the respondent herein. The Court of Appeals had no jurisdiction to delve
into and resolve an issue already passed upon by the Labor Arbiter with finality. For the
Court of Appeals to do so in a petition for certiorari from the decision of the NLRC, by
granting the petitioners petition for a writ of injunction, is to do indirectly what it is
proscribed from doing directly.
Far from committing a grave abuse of its discretion amounting to excess or lack of
jurisdiction, the NLRC acted in accordance with law and current jurisprudence.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the
Court of Appeals in CA-G.R. SP No. 51404 is REVERSED and SET ASIDE. The assailed
decision of the NLRC is AFFIRMED. No costs.
Brion vs. South Philippine, 307 SCRA 497,

GR 135136, May 19, 1999
THIRD DIVISION
[G.R. No. 135136. May 19, 1999]

DELFIN A. BRION, petitioner, vs. SOUTH PHILIPPINE UNION MISSION OF THE
SEVENTH DAY ADVENTIST CHURCH, represented by PASTORS PATERNO
DIAZ, ULYSSES CAMAGAY, MANUEL DONATO and WENDELL
SERRANO, respondents.
DECISION
ROMERO, J.:
Blow, blow, thou winter wind,

Thou art not so unkind
As mans ingratitude
[Shakespeare: As You Like It, Act II, sc. 7, Line 174]
Vilified as an ingrate by his erstwhile church, accused of being possessed by the

devil, and likened to the dog that bit the hand that fed him, petitioner Delfin A. Brion comes
to this Court with a novel question of law: Must the conditions for eligibility for retirement
be met only at the time of retirement or are these conditions continuing ones which must
be complied with even after one has retired?
The facts are simple.
Petitioner Delfin A. Brion became a member of respondent South Philippine Union
Mission of the Seventh Day Adventist Church (hereafter SDA) sometime in 1949. He
worked his way up the ladder, starting as a literature evangelist, then a janitor or office
helper, until he became an ordained minister and president of the Northeastern Mindanao
Mission of the Seventh Day Adventist Church in Butuan City.
Respondent claims that due to corruption charges, petitioner was transferred to the
Davao Mission of the SDA. Thereafter, allegedly due to an act of indiscretion with a
masseuse, petitioner was demoted to the position of Sabbath School Director at the
Northern Mindanao Mission of the SDA located at Cagayan de Oro City. Here, petitioner
worked until he retired in 1983. As was the practice of the SDA, petitioner was provided
a monthly amount as a retirement benefit.
Sometime thereafter, petitioner got into an argument with Samuel Sanes, another
pastor of the SDA. This disagreement degenerated into a rift between petitioner and the
SDA, culminating in the establishment by petitioner of a rival religious group which he
called the Home Church. Petitioner succeeded in enticing a number of SDA members to
become part of his congregation even as he continued disparaging and criticizing the
SDA. Because of his actions, petitioner was excommunicated by the SDA and, on July 3,
1993, his name was dropped from the Church Record Book. As a consequence of his
disfellowship, petitioners monthly retirement benefit was discontinued by the SDA.
On December 21, 1995, petitioner filed an action for mandamus with the Regional
Trial Court of Cagayan de Oro City asking that the SDA restore his monthly retirement
benefit. On July 10, 1996, the trial court rendered a decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, the Court finds in favor of plaintiff and hereby
orders defendant to pay the retirement benefits due to the plaintiff from October 1995 to
the present and all subsequent monthly benefits that may be due to the plaintiff until his
demise. The Court finds no basis or no justification to the (sic) award any damages
considering that there is no showing of bad faith on the part of defendant, since the
latter acted in good faith and believing that it is within their right to withhold the benefits
that may be due to the plaintiff.
Without pronouncement as to cost.
SO ORDERED.[1]
Aggrieved by the trial courts decision, the SDA filed an appeal with the Court of
Appeals, docketed therein as CA-G.R. SP No. 43846. On March 19, 1998, the appellate
court set aside the decision of the trial court and ordered the dismissal of petitioners
complaint. Petitioner filed a motion for reconsideration, which was denied on August 3,
1998, hence this petition.
We find for petitioner.
The following provisions on retirement, contained in the General Conference Working
Policy of the SDA, are of primary importance in resolving the issue at hand:
[Paragraph] Z1010 Beneficiaries of Retirement Plan The benefits of the retirement plan
are designed for those who have devoted their lives to the work of the Seventh-day
Adventist Church and are eligible to retire for reasons of old age and/or disability.
xxxxxxxxx
[Paragraph] Z1025 Termination of Benefits The benefits shall terminate with the
decease of the beneficiary, except where there is an eligible surviving spouse and/or
children.[2]
On the basis of these two provisions, the trial court ruled in favor of petitioner. In its
own words:
Going over the aforecited provisions in the Retirement Plan of defendant church, it is
very clear that the benefit of retirement provided therein are designed for those who
have devoted their lives to the work of the SDA. The word have in the quoted
provision refers to past acts rendered by the retiree to the defendant church. There is no
doubt that plaintiff has devoted his life to the service. That is the reason he is qualified
to receive the retirement benefit.
The second quoted provision does not impose any other cause of termination of the
benefit except the death of the beneficiary. Since there is no other condition that is
attached to the same except the death of the beneficiary, then the plaintiff must be
entitled to receive the benefits provided. The retirement benefit is not conditional, but
rather it is for past services that have already been rendered. The grant of retirement
benefit is absolute since it is a reward for one who has devoted his life to the defendant
church up to the time plaintiff retired.[3]
The above declaration was, however, refuted by the Court of Appeals when it stated
in its decision that:
In the first place, its ruling that the wording of paragraph Z1010 that by using the word
have, both parties intended to refer to past acts rendered by the retiree to the Church is
erroneous.The provision was couched in the present perfect tense, the word have being
used as an auxiliary verb prefixed to the past participial form of the verb devote. It is an
elementary rule in grammar that the present perfect tense is used to refer to an action
or condition that began in the past and continues to the present or has just been
completed. Such being the case, the SDAs argument that a member must maintain
loyalty and fealty to the Church for him to continue to qualify for benefits gains
ground. The use of the word lives also implies that the beneficiary devoted all of his life
not just a part of it, to the work of the Church. On the other hand, the word work, instead
of service, connotes the ministry of the Church, to which one can be devoted by loyalty,
if no longer active participation.[4]
Furthermore, the Court of Appeals considered of great significance the fact that
petitioner had been disfellowed and expelled by SDA. Citing American Jurisprudence, the
appellate court held that:
It may preliminarily be observed that the profession of priest or minister of any

denomination is held subject to its laws; he acquires it by compact, and is not exempt
from the proper discipline and authority of his church. A minister, in the legal point of
view, is a voluntary member of the association to which he belongs. The position is not
forced upon him; he seeks it.He accepts it with all its burdens and consequences, with
all the rules and laws and canons subsisting or to be made by competent authority, and
may, at pleasure and with impunity, abandon it. While a member of the association,
however, and having a full share in the benefits resulting therefrom, he should adhere to
its discipline, conform to its doctrines and mode of worship, and obey its laws and
canons.
The continuance, powers, and emoluments of a priest or minister depend on the will of
the church, and the sentence of the church judicatory in a proper case deprives him of
the position and the right to further salary or emoluments; hence, upon the dissolution or
suspension of the pastoral relation, or upon the expulsion of a priest or minister from a
pastorate, all right to further salary ceases.
x x x x x x x x x.[5]
Retirement has been defined as a withdrawal from office, public station, business,
occupation, or public duty.[6] It is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter, after reaching a
certain age, agrees and/or consents to sever his employment with the former. [7] In this
connection, the modern socio-economic climate has fostered the practice of setting up
pension and retirement plans for private employees, initially through their voluntary
adoption by employers, and lately, established by legislation. Pension schemes, while
initially humanitarian in nature, now concomitantly serve to secure loyalty and efficiency
on the part of employees, and to increase continuity of service and decrease the labor
turnover by giving to the employees some assurance of security as they approach and
reach the age at which earning ability and earnings are materially impaired or at an end. [8]
It must be noted, however, that the nature of the rights conferred by a retirement or
pension plan depends in large measure upon the provisions of such particular plan. The
Labor Code provides:
Art. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement
and other agreements
xxxxxxxxx
From the above, it can be gleaned that employer and employee are free to stipulate
on retirement benefits, as long as these do not fall below the floor limits provided by law.
Again, it has been held that pension and retirement plans create a contractual
obligation in which the promise to pay benefits is made in consideration of the continued
faithful service of the employee for the requisite period.[9] In other words, before a right to
retirement benefits or pension vests in an employee, he must have met the stated
conditions of eligibility with respect to the nature of employment, age, and length of
service. This is a condition precedent to his acquisition of rights thereunder.
Under the SDAs theory, however, the right to a pension never really vests in an
employee, there being no fixed period for eligibility for retirement. The SDA insists that an
employee must devote his life to the work of the Seventh-day Adventist Church even after
retirement to continue enjoying retirement benefits. There is, thus, no definite length of
service provided as the SDA can withdraw retirement benefits at any time after retirement,
if it determines that a retired employee is not devoting his life to the work of the
church. Furthermore, the SDAs eligibility requirement as to length of service is even more
stringent than that required by law. Under the Labor Code, an employee upon reaching
the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said
establishment may retire and shall be entitled to retirement pay Under the law, service for
five years is enough to entitle an employee who meets the requisite age to retirement
benefits. However, the SDA would require its employees to serve it for all his lifetime. It
must be noted that petitioner has served the SDA for thirty-four (34) years.
Likewise, the SDAs theory negates the very concept of retirement. As earlier defined,
retirement means to withdraw from ones office, occupation, or duty. To require petitioner
to continue devoting his life to the work of the Seventh-day Adventist Church would mean
that petitioner never really withdraws from his office or occupation, that of working for the
church.It is an oxymoron to retire an employee and yet require him to continue working
for the same employer. This Court cannot, thus give its imprimatur to SDAs theory. We
rule that the conditions of eligibility for retirement must be met at the time of retirement at
which juncture the right to retirement benefits or pension, if the employee is eligible, vests
in him.
In the present case, petitioner was adjudged by the SDA in 1983, to be qualified for
retirement, such that when it began paying petitioner retirement benefits in said year, it
must have been convinced that petitioner had devoted his life to the work of the Seventh-
day Adventist Church. Having arrived at such a conclusion, it may not now reverse this
finding to the detriment of petitioner.
Furthermore, pension and retirement plans, in line with the Constitutional mandate of
affording full protection to labor,[10] must be liberally construed in favor of the employee,
it being the general rule that pension plans formulated by an employer are to be construed
most strongly against the employer.[11] Hence, where two constructions of a retirement
plan are possible, one of which requires the retiree to devote his life to the service of the
church even after retirement, and the other of which sanctions the severance by the
retiree of his employment thereto at retirement, this Court will not hesitate to adopt the
latter interpretation.
Bolstering this conclusion is this Courts observation in UST Faculty Union v.
NLRC[12] that upon the retirement of an employee or official in the public or private service
his employment is deemed terminated. With the termination of employment, the right of
the employer to control the employees conduct, the so-called control test also terminates;
hence, after retirement, the SDA may no longer require petitioner to devote his life to the
work of the church, it having lost control over its erstwhile employee.
Given the above disquisition, it can be seen that the importance placed by the
appellate court on petitioners excommunication and disfellowship is misplaced. While it
is true that upon the expulsion of a priest or minister from a pastorate, all right to further
salary ceases,[13] this presupposes that the priest or minister is still on active duty, so to
speak. Here, petitioner has already retired. Hence, he already had a vested right to
receive retirement benefits, a right which could not be taken away from him by expulsion
or excommunication, this not being a ground for termination of retirement benefits under
the SDAs retirement plan. In fact, under paragraph Z1025 of the SDAs General
Conference Working Policy, retirement benefits terminate only with the decease of the
beneficiary, an event which has not yet transpired here. The SDA must, thus, pay
petitioner his retirement benefits despite his establishment of a rival church and his
excommunication.
Again, while paying retirement benefits to petitioner may be odious and abhorrent to
the SDA, in the absence of any other stipulation for the termination of petitioners
retirement benefits, the SDA must comply with its contractual obligations, the contract
being the law between the parties. As correctly pointed out by the trial court:
While what plaintiff is doing may be inimical, despicable or repulsive to the view of
defendant, it is of no consequence. Dura lex sed lex, the law is hard but that is the
law. Since the only condition for the termination of the same is death of (sic) beneficiary,
then the defendant cannot legally cut off what is due to the plaintiff. [14]
In refutation of this point, the appellate court declared that:
[I]t is not only death which would terminate receipt of benefits under the retirement plan,
as per paragraph Z1025 of the GCWP; to this extent, the covenant must be deemed
subject to the implied condition that the beneficiary continues to be a member in good
standing of the church. The Court believes that such an understanding is inherent in
every relationship between the believer and his church.[15]
Obviously, the SDA would have petitioner cease and desist from organizing and
running a rival church. This is analogous to provisions limiting or prohibiting a retiree or
pensioner from engaging in a competitive business or accepting employment with a
business competitor, a clause not infrequently found in private retirement or pension
plans. The SDA, however, chose not to include such a provision in its General
Conference Working Policy. For its lack of foresight, it now seeks to extricate itself from
a messy situation through the assistance of the Court. This Courts pronouncement
in Vales v. Villa[16]seems particularly apropos:
Courts cannot follow [a person] every step of his life and extricate him from bad
bargains, protect him from unwise investments, relieve him from one-sided contracts, or
annul the effects of foolish acts. Courts cannot constitute themselves guardians of
persons who are not legally incompetent. Courts operate not because one person has
been defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them-indeed, all they have in the world; but not for that
alone can the law intervene and restore. There must be, in addition, a violation of law,
the commission of what the law knows as an actionable wrong, before the courts are
authorized to lay hold the situation and remedy it.
Petitioners establishment of a rival church hardly qualifies as an actionable wrong. In

fact, it is a perfectly legitimate exercise of ones freedom of religion enshrined in our
Constitution.
WHEREFORE, premises considered, the decision of the Court of Appeals dated
March 19, 1998 is hereby REVERSED and SET ASIDE and the decision of the trial court
dated July 10, 1996 AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.
Purisima, J., did not participate in the deliberations.
Sta. Catalina vs. NLRC, 416 SCRA 233,

GR 144483, NOv. 19, 2003
[G.R. No. 144483. November 19, 2003]
STA. CATALINA COLLEGE and SR. LORETA ORANZA, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and HILARIA G. TERCERO, respondents.
DECISION
CARPIO MORALES, J.:
From the April 28, 2000 decision of the Court of Appeals (CA) [1] affirming that of the
National Labor Relations Commission (NLRC) awarding retirement benefits in the
amount of P85,287.72 to private respondent Hilaria G. Tercero (Hilaria), petitioners Sta.
Catalina College and its former directress Sr. Loreta Oranza come to this Court on a
petition for review on certiorari.
In June 1955, Hilaria was hired as an elementary school teacher at
the Sta. Catalina College (petitioner school) in San Antonio, Bian, Laguna. In 1970, she
applied for and was granted a one year leave of absence without pay on account of the
illness of her mother. After the expiration in 1971 of her leave of absence, she had not
been heard from by petitioner school.
In the meantime, she was employed as a teacher at the San Pedro Parochial
School during school year 1980-1981 and at the Liceo de San Pedro, Bian, Laguna during
school year 1981-1982.
In 1982, she applied anew[2] at petitioner school which hired her with a monthly salary
of P6,567.95.[3]
On March 22, 1997, during the 51st Commencement Exercises of petitioner school,
Hilaria was awarded a Plaque of Appreciation for thirty years of service and P12,000.00
as gratuity pay.
On May 31, 1997, Hilaria reached the compulsory retirement age of 65. Retiring
pursuant to Article 287 of the Labor Code, as amended by Republic Act 7641, petitioner
school pegged her retirement benefits at P59,038.35,[4] computed on the basis of fifteen
years of service from 1982 to 1997. Her service from 1955 to 1970 was excluded in the
computation, petitioner school having asserted that she had, in 1971, abandoned her
employment.
From the P59,038.35 retirement benefits was deducted the amount
of P28,853.09[5] representing reimbursement of the employers contribution to her
retirement benefits under the Private Education Retirement Annuity Association (PERAA)
which Hilaria had already received. Deducted too was the amount of P12,000.00
representing the gratuity pay which was given to her. The remaining balance of the
retirement benefits due her thus amounted to P18,185.26.[6]
Hilaria insisted, however, that her retirement benefits should be computed on the
basis of her thirty years of service, inclusive of the period from 1955 to 1970; and that the
gratuity pay earlier given to her should not be deducted therefrom. She thus concluded
that she was entitled to P190,539.90, computed as follows:
Retirement Benefits = month salary for every year of service
One-half month salary
= (15 days x latest salary per day) + (5 days leave x latest salary per day)
+ 1/12 of 13th month pay
= (15 x 290.90) + (5 x 290.90) + 533.33
= P6,351.33
Retirement Benefits = P6,351.33 (30 years)
= P190,539.90[7]
The parties having failed to agree on how the retirement benefits should be
computed, Hilaria filed a complaint[8] before the NLRC Regional Arbitration, Branch No.
IV against petitioner school and/or petitioner Sr. Loreta Oranza for non-payment of
retirement benefits. The complaint was docketed as NLRC Case No. RAB-IV-3-9860.
By Decision of October 30, 1998, Labor Arbiter Pedro C. Ramos upheld petitioners
position, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering the

respondents to pay the complainant the amount of P18,185.26 only as the differential of
her retirement benefits.
SO ORDERED.[9]
On appeal, the NLRC, by Decision of April 27, 1999, set aside the Labor Arbiters
decision and disposed as follows:
WHEREFORE, on account of the foregoing, the judgment a quo is SET ASIDE.
Respondent-appellee is hereby ordered to pay the total amount of P85,287.72

computed as follows: P3,935.89 (total computation of the retirement components)
MULTIPLIED by 29 (number of years in service) EQUALS P114,140.81 (total retirement
package) LESS P28,287.72 (representing respondent-appellees contribution with the
PERAA proven to have already been received by complainant-appellant). However, the
gratuity pay earlier already given shall not be deducted from the retirement package.
SO ORDERED.[10]
Not satisfied with the NLRC decision, petitioners brought the case on certiorari[11] to
the CA which, by the assailed decision, dismissed it, holding that petitioners failed to
prove that Hilaria had abandoned her position in 1970, as petitioner school even gave her
a Plaque of Appreciation for thirty years of service precisely because of her thirty year
continuous service, and that petitioner school never sent notice to her dismissing her,
hence, the employer-employee relationship was not severed and, therefore, her services
for petitioner school during the period from 1955-1970 should be credited in the
computation of her retirement benefits. Held the CA:
x x x [D]espite the absence of the Private Respondent for a period of eleven (11) years
or so from 1970 to 1982 and her employment with the Liceo de San Pedro and San
Pedro Parochial School, her employer-employee juridical relationship, with the
Petitioner School, had not been severed, namely: (a) the Petitioner School never sent
any notice to the Private Respondent dismissing her from her employment on account
of her unexplained and prolonged absence as required by Section 2, Rule XIV, Book V
of the Omnibus Rules Implementing the Labor Code (Reno Foods, Inc. versus NLRC, et
al., 249 SCRA 386); (b) the Private Respondent did not receive any amount, from the
Petitioner School, by way of separation pay, indemnity pay, and her share of her
retirement contributions for the period from 1955 when she commenced her
employment with the Petitioner School until her leave of absence in 1970; (c) the
Petitioner School gave the Private Respondent a Plaque of Appreciation for her thirty
(30) year continuous service to the Petitioner School on the occasion of the
51st Commencement Exercise of her Petitioner School on March 22, 1997; (d) she was
given a gratuity of P12,000.00 on account of her exemplary services to the Petitioner
School until the time when she reached the compulsory retirement age of 65
years.[12] (Underscoring supplied)
With respect to the gratuity pay awarded to Hilaria, the CA upheld the NLRC ruling
that it should not be deducted from the retirement benefits due her.
Their motion for reconsideration[13] having been denied by the CA
Resolution[14] of August 11, 2000, petitioners lodged the present petition which imputes
the following error to the appellate court:
THE PUBLIC RESPONDENT CA ERRED IN AWARDING THE RETIREMENT
BENEFITS DIFFERENTIAL OF [HILARIA] COMPUTED BASED ON HER 29
YEARS OF SERVICE WHEN SHE MERELY RENDERED 15 CONTINUOUS
YEARS OF SERVICE PRIOR TO HER RETIREMENT. THE COURT OF
APPEALS COMPLETELY IGNORED THE RULING OF THIS HONORABLE
COURT IN CARANDANG V. DULAY, 188 SCRA 793 [1990] THAT
SEPARATION PAY SHOULD BE BASED ON THE NUMBER OF CONTINUOUS
YEARS OF SERVICE OF THE EMPLOYEE BEFORE THE DATE OF HIS
SEPARATION FROM EMPLOYMENT.[15]
Petitioners argue that when Hilaria did not report upon the expiration in 1971 of her
one year leave of absence without pay nor request for an extension thereof, she actually
voluntarily resigned from or abandoned her employment,[16] thus effectively forfeiting all
the benefits she had earned for services rendered from 1955 to 1970, hence, she ceased
to be an employee of the school. Prescinding from this ratiocination, petitioners conclude
that the period from 1955 to 1970 cannot be included in the determination of her
retirement benefits, for when she was rehired in 1982, she was a new employee.
In support of their position, petitioners cite the case of Carandang v. Dulay which held
that when therein petitioner was re-hired as teacher six years after resigning, she had to
start from zero experience and her previous years of service with the therein respondent
school could not be credited to her. What was in issue in Carandang, however, was the
therein petitioners separation, not retirement pay, this Court therein ruling that separation
pay should be computed on the basis of her last continuous period of service.
Petitioners further argue that the P12,000.00 gratuity earlier given to Hilaria should
be considered part of the retirement benefits due her since it was given precisely because
she had retired and was in addition to the amount that the school contributed to PERAA
for her retirement.
As a general rule, the factual findings and conclusions of quasi-judicial agencies such
as the NLRC are, on appeal, accorded great weight and respect and even finality as long
as they are supported by substantial evidence or that amount of relevant evidence which
a reasonable man might accept as adequate to justify a conclusion. [17]Where, as in the
present case, the findings of the NLRC contradict those of the Labor Arbiter, this Court
must of necessity examine the records and the evidence presented to determine which
finding should be preferred as more conformable with the evidentiary facts.[18]
The threshold issue is whether Hilarias services for petitioner school during the period
from 1955 to 1970 should be factored in the computation of her retirement benefits.
The inapplicability to the present case of the ruling in Carandang notwithstanding,
Hilaria cannot be credited for her services in 1955-1970 in the determination of her
retirement benefits. For, after her one year leave of absence expired in 1971 without her
requesting for extension thereof as in fact she had not been heard from until she
resurfaced in 1982 when she reapplied with petitioner school, she abandoned her
teaching position as in fact she was employed elsewhere in the interim and effectively
relinquished the retirement benefits accumulated during the said period.
For a valid finding of abandonment, two factors must be present: (1) the failure to
report for work, or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second element as the more
determinative factor, being manifested by some overt acts.[19]
To prove abandonment, the employer must show that the employee deliberately and
unjustifiably refused to resume his employment without any intention of
returning.[20] There must be a concurrence of the intention to abandon and some overt
acts from which an employee may be deduced as having no more intention to
work.[21] The law, however, does not enumerate what specific overt acts can be
considered as strong evidence of the intention to sever the employee-employer
relationship.[22]
It is not disputed that the approved one year leave of absence without pay of Hilaria
expired in 1971, without her, it bears repeating, requesting for extension thereof or
notifying petitioner school if and when she would resume teaching. Nor is it disputed that
she was rehired only in 1982 after filing anew an application, without her proffering any
explanation for her more than a decade of absence. Under the circumstances,
abandonment of work at petitioner school in 1971 is indubitably manifest.
As regards the requirement of notice of termination, it was error for the CA to apply
Sec 2, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code.[23] It should
be noted that when Hilaria abandoned her teaching position in 1971, the law in force was
Republic Act 1052 or the Termination Pay Law, as amended by Republic Act 1787,
Section 1 of which provides:
SEC. 1. In cases of employment, without a definite period, in a commercial, industrial, or

agricultural establishment or enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just cause in the case of an
employee by serving written notice on the employer at least one month in advance, or in
the case of an employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee, whichever is
longer, a fraction of at least six months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.
x x x (Emphasis and underscoring supplied)

Above-stated law should thus apply in the case at bar, so Mapua Institute of
Technology v. Manalo[24] instructs:
Without declaring that a private college or university like the Mapua Institute of
Technology is a commercial, industrial, or agricultural establishment, we believe
that there being no special law governing the dismissal or separation of professors from
colleges and universities, the provisions of Republic Act No. 1052, as amended by
Republic Act No. 1787, should be made to apply. Authority for such a course of action is
78 Corpus Juris Secundum 617, which says:
Contracts between private schools and teachers or other instructors are governed, in
general, by the rules applicable to other contracts of employment. (Underscoring
supplied)
Abandonment of work being a just cause for terminating the services of Hilaria,
petitioner school was under no obligation to serve a written notice to her.
That Hilaria was in 1997 given a plaque of appreciation for thirty years of service to
the school and awarded P12,000.00 as gratuity pay should not be taken against
petitioners, for acknowledgment of the total number of years of her service, which was
discontinuous, should not obliterate the fact that she abandoned her employment in 1971,
albeit she was rehired in 1982.
It was error too for the CA to conclude that since petitioner school did not award
separation pay and Hilarias share of her retirement contributions when she temporarily
stopped working after she left her teaching position in 1971, employer-employee relation
between them was not severed. It bears noting that an employee who is terminated for
just cause is generally not entitled to separation pay. Moreover, the PERAA, petitioner
schools substitute retirement plan, was only established in 1972, such that when Hilaria
abandoned her work in 1971, there were no retirement contributions to speak of.
As Hilaria was considered a new employee when she rejoined petitioner school upon
re-applying in 1982, her retirement benefits should thus be computed only on the basis
of her years of service from 1982 to 1997. This is what JAM Transportation Co., Inc. v.
Flores[25] teaches:
Private respondents re-employment as a new employee x x x would mean a demotion

in rank and privileges, retirement benefits, for example, as his entire previous eighteen
(18) years of service with petitioner, would simply be considered as non-existent.
This Court is not unmindful of Hilarias rendition of a total of thirty years of teaching in
petitioner school and should be accorded ample support in her twilight years.Petitioner
school in fact acknowledges her dedicated service to its students. She can, however, only
be awarded with what she is rightfully entitled to under the law. So Sosito v. Aguinaldo
Development Corporation dictates:[26]
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privilege in life, this Court has inclined more often than not
toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine.
As for the ruling of the CA affirming that of the NLRC that the P12,000.00 gratuity pay
earlier awarded to Hilaria should not be deducted from the retirement benefits due her,
the same is in order. Gratuity pay is separate and distinct from retirement benefits. It is
paid purely out of generosity. So Republic Planters Bank v. NLRC[27] holds:
Gratuity pay x x x is paid to the beneficiary for the past services or favor rendered purely
out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a
worker for actual services rendered or for actual performance. It is a money benefit or
bounty given to the worker, the purpose of which is to reward employees who have
rendered satisfactory service to the company. (Underscoring supplied)
Retirement benefits, on the other hand, are intended to help the employee enjoy the
remaining years of his life, releasing him from the burden of worrying for his financial
support, and are a form of reward for his loyalty to the employer.[28]
In Hilarias case, her retirement pay as computed by petitioners amounts
to P59,038.35, P28,853.09 of which had already been given to her under the
PERAA. Since the computed amount of her retirement pay is much lower than that
provided under the law, she is entitled to receive the difference between the actual
amount of her retirement benefits as required by law and that provided for under the
PERAA. Although she did not appeal from the NLRC decision awarding her P85,287.72,
this Court awards the entire amount of the retirement benefits to which she is rightfully
entitled under the law. Technical rules of procedure are not binding in labor cases.[29] The
application of technical rules of procedure may be relaxed to serve the demands of
substantial justice.[30]
Article 287 of the Labor Code, as amended by Republic Act 7641 or the New
Retirement Law, provides:
ART. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement
and other agreements: Provided, however, That an employees retirement benefits
under any collective bargaining and other agreements shall not be less than those
provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of

employees in the establishment, an employee upon reaching the age of sixty (60) years
or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as
one whole year.
Unless the parties provide for broader inclusions, the term one half (1/2) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
x x x (Emphasis Supplied)
Likewise, Section 3.3, Rule II of the Rules Implementing R.A. 7641 provides:
3.3 Where both the employer and the employee contribute to a retirement fund in
accordance with an individual or collective agreement or other applicable employment
contract, the employers total contribution thereto shall not be less than the total
retirement benefits to which the employee would have been entitled had there been no
such retirement fund. In case the employers contribution is less than the retirement
benefits provided under this Rule, the employer shall pay the difference.
Hence, Hilaria is entitled to receive P98,706.45 computed as follows:
One-half month salary = (15 days x latest salary per day) + (5 days leave x
latest salary per day) + (1/12 of 13th month pay)
= P4,512.30 + P1,504.10 + P547.33
= P6,563.73
Retirement Pay = number of years in service x one-half month salary
= 15 years x P6,580.43
= P98,455.95
Since petitioner school had already paid Hilaria P28,853.09 representing employer
contributions under the PERAA, the same should be deducted from the retirement pay
due her, to thereby leave a balance of P69,602.86 still due her.
WHEREFORE, the petition is GRANTED in part. The decision of the Court of Appeals
dated April 28, 2000 is hereby MODIFIED. Petitioners are directed to pay the balance of
the retirement benefits to private respondent Hilaria G. Tercero in the amount
of P69,602.86, as computed above.
SO ORDERED.
Vitug, (Chairman), Sandoval-Gutierrez and Corona, JJ., concur

Labor Standards Nov-Dec

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Labor Standards Nov-Dec

Uploaded by

Copyright:

Available Formats

LABOR STANDARDS

RA 8187 Paternity Leave Act

AN ACT GRANTING PATERNITY LEAVE OF SEVEN (7) DAYS WITH FULLPAY TO

Be it enacted by the Senate and House of Representatives of the Philippines in

SECTION 5. Any person, corporation, trust, firm, partnership, association or entity

If the violation is committed by a corporation, trust or firm, partnership, association or

SECTION 6. Nondiminution Clause. - Nothing in this Act shall be construed to reduce

SECTION 7. Repealing Clause. - All laws, ordinances, rules, regulations, issuances,

REPUBLIC ACT NO. 8972

AN ACT PROVIDING FOR BENEFITS AND PRIVILEGES TO SOLO PARENTS AND

Be it enacted by the Senate and House of Representatives of the Philippines Congress

A change in the status or circumstance of the parent claiming benefits

Section 5. Comprehensive Package of Social Development and Welfare Services. - A

(a) Livelihood development services which include trainings on livelihood skills,

(d) Critical incidence stress debriefing which includes preventive stress

Section 7. Work Discrimination. - No employer shall discriminate against any solo

(b) Coordinate the activities of various governmental and nongovernmental

Section 13. Implementing Rules and Regulations. - An interagency committee headed

JOSEPH EJERCITO ESTRADA

[G.R. No. L-48437. September 30, 1986.]

MANTRADE/FMMC DIVISION EMPLOYEES AND WORKERS UNION (represented by

3. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; APPROPRIATE

"CONSIDERING ALL THE ABOVE, We rule that Mantrade Development Corporation is

"Article 94 of the Labor Code, as amended by P.D. 850, provides:chanrob1es virtual

WHEREFORE, the questioned decision of respondent arbitrator is SET ASIDE and

Asian Transmission vs CA, 425 SCRA 478,

G.R. No. 144664 March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner,

The following facts, as found by the Court of Appeals, are undisputed:

The Department of Labor and Employment (DOLE), through Undersecretary

Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to

In accordance with Step 6 of the grievance procedure of the Collective Bargaining

1. New Years Day January 1

2. Maundy Thursday Movable Date

3. Good Friday Movable Date

4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)

5. Labor Day May 1

6. Independence Day June 12

7. National Heroes Day Last Sunday of August

8. Bonifacio Day November 30

9. Christmas Day December 25

10. Rizal Day December 30

By the present petition, petitioners raise the following issues:

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED

WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF

The petition is devoid of merit.

1. New Years Day (January 1st)

2. Holy Thursday (moveable)

3. Good Friday (moveable)

4. Araw ng Kagitingan (April 9th)

5. Labor Day (May 1st)

6. Independence Day (June 12th)

7. Bonifacio Day [November 30]

8. Christmas Day (December 25th)

9. Rizal Day (December 30th)

10. General Election designated by law, if declared public non-working holiday

11. National Heroes Day (Last Sunday of August)

Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.

Jose Rizal College vs NLRC, 156 SCRA 27,

G.R. No. L-65482 December 1, 1987

JOSE RIZAL COLLEGE, petitioner,