1. CALALANG v WILLIAMS 3. ID.; ID.; SOCIAL JUSTICE.

— Social justice is "neither communism, nor despotism,

[ G.R. No. 47800, December 02, 1940 ] nor atomism, nor anarchy," but the humanization of laws and the equalization of
social and economic forces by the State so that justice in its rational and objectively
secular conception may at least be approximated. Social justice means the promotion
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648;
of the welfare of all the people, the adoption by the Government of measures
DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS
calculated to insure economic stability of all the competent elements of society,
AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO PROMULGATE
through the maintenance of a proper economic and social equilibrium in the
RULES AND REGULATIONS. — The provisions of section 1 of Commonwealth Act No.
interrelations of the members of the community, constitutionally, through the
648 do not confer legislative power upon the Director of Public Works and the
adoption of measures legally justifiable, or extra-constitutionally, through the
Secretary of Public Works and Communications. The authority therein conferred upon
exercise of powers underlying the existence of all governments on the time-honored
them and under which they promulgated the rules and regulations now complained
principle of salus populi est suprema lex. Social justice, therefore, must be founded
of is not to determine what public policy demands but merely to carry out the
on the recognition of the necessity of interdependence among divers and diverse units
legislative policy laid down by the National Assembly in said Act, to wit, "to promote
of a society and of the protection that should be equally and evenly extended to all
safe transit upon, and avoid obstructions on, roads and streets designated as national
groups as a combined force in our social and economic life, consistent with the
roads by acts of the National Assembly or by executive orders of the President of the
fundamental and paramount objective of the state of promoting the health, comfort,
Philippines" and to close them temporarily to any or all classes of traffic "whenever
and quiet of all persons, and of bringing about "the greatest good to the greatest
the condition of the road or the traffic thereon makes such action necessary or
number."
advisable in the public convenience and interest." The delegated power, if at all,
therefore, is not the determination of what the law shall be, but merely the
ascertainment of the facts and circumstances upon which the application of said law DECISION
is to be predicated. To promulgate rules and regulations on the use of national roads LAUREL, J.:
and to determine when and how long a national road should be closed to traffic, in
view of the condition of the road or the traffic thereon and the requirements of public
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila,
convenience and interest, is an administrative function which cannot be directly
brought before this court this petition for a writ of prohibition against the respondents,
discharged by the National Assembly. It must depend on the discretion of some other
A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as
government official to whom is confided the duty of determining whether the proper
Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and
occasion exists for executing the law. But it cannot be said that the exercise of such
Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan
discretion is the making of the law.
Dominguez, as Acting Chief of Police of Manila.

2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY. —

It is alleged in the petition that the National Traffic Commission, in its resolution of
Commonwealth Act No. 548 was passed by the National Assembly in the exercise of
July 17, 1940, resolved to recommend to the Director of Public Works and to the
the paramount police power of the state. Said Act, by virtue of which the rules and
Secretary of Public Works and Communications that animal-drawn vehicles be
regulations complained of were promulgated, aims to promote safe transit upon and
prohibited from passing along Rosario Street extending from Plaza Calderon de la
avoid obstructions on national roads, in the interest and convenience of the public. In
Barca to Dasmariñas Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to
enacting said law, therefore, the National Assembly was prompted by considerations
5:30 p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo
of public convenience and welfare. It was inspired by a desire to relieve congestion
Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the
of traffic, which is, to say the least, a menace to public safety. Public welfare, then,
date of the opening of the Colgante Bridge to traffic; that the Chairman of the National
lies at the bottom of the enactment of said law, and the state in order to promote the
Traffic Commission, on July 18, 1940 recommended to the Director of Public Works
general welfare may interfere with personal liberty, with property, and with business
the adoption of the measure proposed in the resolution aforementioned, in pursuance
and occupations. Persons and property may be subjected to all kinds of restraints and
of the provisions of Commonwealth Act No. 548 which authorizes said Director of
burdens, in order to secure the general comfort, health, and prosperity of the state
Public Works, with the approval of the Secretary of Public Works and Communications,
(U.S. v. Gomer Jesus, 31 Phil., 218). To this fundamental aim of our Government the
to promulgate rules and regulations to regulate and control the use of and traffic on
rights of the individual are subordinated. Liberty is a blessing without which life is a
national roads; that on August 2, 1940, the Director of Public Works, in his first
misery, but liberty should not be made to prevail over authority because then society
indorsement to the Secretary of Public Works and Communications, recommended to
will fall into anarchy. Neither should authority be made to prevail over liberty because
the latter the approval of the recommendation made by the Chairman of the National
then the individual will fall into slavery. The citizen should achieve the required
Traffic Commission as aforesaid, with the modification that the closing of Rizal Avenue
balance of liberty and authority in his mind through education and, personal discipline,
to traffic to animal-drawn vehicles be limited to the portion thereof extending from
so that there may be established the resultant equilibrium, which means peace and
the railroad crossing at Antipolo Street to Azcarraga Street; that on August 10, 1940,
order and happiness for all. The moment greater authority is conferred upon the
the Secretary of Public Works and Communications, in his second indorsement
government, logically so much is withdrawn from the residuum of liberty which
addressed to the Director of Public Works, approved the recommendation of the latter
resides in the people. The paradox lies in the fact that the apparent curtailment of
that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn vehicles,
liberty is precisely the very means of insuring its preservation.
between the points and during the hours as above indicated, for a period of one year
from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila
and the Acting Chief of Police of Manila have enforced and caused to be enforced the

1|AMCVB - LABSTAN
rules and regulations thus adopted; that as a consequence of such enforcement, all
animal-drawn vehicles are not allowed to pass and pick up passengers in the places
above-mentioned to the detriment not only of their owners but of the riding public as
well.
It is contended by the petitioner that Commonwealth Act No. 548 by which the
Director of Public Works, with the approval of the Secretary of Public Works and
Communications, is authorized to promulgate rules and regulations for the regulation
and control of the use of and traffic on national roads and streets is unconstitutional
because it constitutes an undue delegation of legislative power. This contention is
untenable. As was observed by this court in Rubi v. Provincial Board of Mindoro (39
Phil, 660, 700), "The rule has nowhere been better stated than in the early Ohio case
decided by Judge Ranney, and since followed in a multitude of cases, namely: ’The
true distinction therefore is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The
first cannot be done; to the latter no valid objection can be made.’ (Cincinnati, W. &
Z. R. Co. v. Comm’rs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief
Justice Marshall in Wayman v. Southard (10 Wheat., 1) may be committed by the
Legislature to an executive department or official. The Legislature may make
decisions of executive departments or subordinate officials thereof, to whom it has
committed the execution of certain acts, final on questions of fact. (U.S. v. Kinkead,
248 Fed., 141.) The growing tendency in the decisions is to give prominence to
the ’necessity’ of the case."cralaw virtua1aw library
Section 1 of Commonwealth Act No. 548
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines, the Director of Public Works, with the
approval of the Secretary of Public Works and Communications, shall promulgate the
necessary rules and regulations to regulate and control the use of and traffic on such
roads and streets. Such rules and regulations, with the approval of the President, may
contain provisions controlling or regulating the construction of buildings or other
structures within a reasonable distance from along the national roads. Such roads
may be temporarily closed to any or all classes of traffic by the Director of Public
Works and his duly authorized representatives whenever the condition of the road or
the traffic thereon makes such action necessary or advisable in the public convenience
and interest, or for a specified period, with the approval of the Secretary of Public
Works and Communications."cralaw virtua1aw library
is to be predicated. To promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should be closed to traffic, in
view of the condition of the road or the traffic thereon and the requirements of public
convenience and interest, is an administrative function which cannot be directly
discharged by the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that the exercise of such
discretion is the making of the law. As was said in Locke’s Appeal (72 Pa. 491): "To
assert that a law is less than a law, because it is made to depend on a future event
or act, is to rob the Legislature of the power to act wisely for the public welfare
whenever a law is passed relating to a state of affairs not yet developed, or to things
future and impossible to fully know." The proper distinction the court said was this:
"The Legislature cannot delegate its power to make the law; but it can make a law to
delegate a power to determine some fact or state of things upon which the law makes,
or intends to make, its own action depend. To deny this would be to stop the wheels
of government. There are many things upon which wise and useful legislation must
depend which cannot be known to the law-making power, and, must, therefore, be a
subject of inquiry and determination outside of the halls of legislation." (Field v. Clark,
143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmeña, G.R. Nos. 46076 and 46077,
promulgated June 12, 1939, and in Pangasinan Transportation v. The Public Service
Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to
observe that the principle of separation of powers has been made to adapt itself to
the complexities of modern governments, giving rise to the adoption, within certain
limits, of the principle of "subordinate legislation," not only in the United States and
England but in practically all modern governments. Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the laws, the rigidity of the
theory of separation of governmental powers has, to a large extent, been relaxed by
permitting the delegation of greater powers by the legislative and vesting a larger
amount of discretion in administrative and executive officials, not only in the
execution of the laws, but also in the promulgation of certain rules and regulations
calculated to promote public interest.
The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to
personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed
by the National Assembly in the exercise of the paramount police power of the state.

Said Act, by virtue of which the rules and regulations complained of were promulgated,
The above provisions of law do not confer legislative power upon the Director of Public
aims to promote safe transit upon and avoid obstructions on national roads, in the
Works and the Secretary of Public Works and Communications. The authority therein
interest and convenience of the public. In enacting said law, therefore, the National
conferred upon them and under which they promulgated the rules and regulations
Assembly was prompted by considerations of public convenience and welfare. It was
now complained of is not to determine what public policy demands but merely to carry
inspired by a desire to relieve congestion of traffic. which is, to say the least, a menace
out the legislative policy laid down by the National Assembly in said Act, to wit, "to
to public safety. Public welfare, then, lies at the bottom of the enactment of said law,
promote safe transit upon and avoid obstructions on, roads and streets designated as
and the state in order to promote the general welfare may interfere with personal
national roads by acts of the National Assembly or by executive orders of the President
liberty, with property, and with business and occupations. Persons and property may
of the Philippines" and to close them temporarily to any or all classes of traffic
be subjected to all kinds of restraints and burdens, in order to secure the general
"whenever the condition of the road or the traffic makes such action necessary or
comfort, health, and prosperity of the state (U.S. v. Gomez Jesus, 31 Phil., 218). To
advisable in the public convenience and interest." The delegated power, if at all,
this fundamental aim of our Government the rights of the individual are subordinated.
therefore, is not the determination of what the law shall be, but merely the
Liberty is a blessing without which life is a misery, but liberty should not be made to
ascertainment of the facts and circumstances upon which the application of said law
2|AMCVB - LABSTAN
prevail over authority because then society will fall into anarchy. Neither should Avanceña, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.
authority be made to prevail over liberty because then the individual will fall into
slavery. The citizen should achieve the required balance of liberty and authority in his
mind through education and personal discipline, so that there may be established the
resultant equilibrium, which means peace and order and happiness for all. The
moment greater authority is conferred upon the government, logically so much is
withdrawn from the residuum of liberty which resides in the people. The paradox lies
in the fact that the apparent curtailment of liberty is precisely the very means of
insuring its preservation.

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

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

Social justice, therefore, must be founded on the recognition of the necessity of

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

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

3|AMCVB - LABSTAN
 2. ALALAYAN v NATIONAL POWER CORPORATION have finally decided or disposed, by final judgment, of the issues raised in this
G.R. No. L-24396 July 29, 1968 petition; (3) After due hearing, to declare the rider or Section 3 of Republic Act No.
3043 null and void for being illegal and unconstitutional, and to issue a permanent
injunction requiring respondent NPC to refrain from enforcing or implementing the
FERNANDO, J.:
provisions of the same law."11

This declaratory relief proceeding was started in the lower court by petitioners,
Soon after, petitioner Philippine Power and Development Company moved that insofar
Alalayan and Philippine Power and Development Company, both franchise holders of
as it was concerned, the case be dismissed, which motion was granted by the lower
electric plants in Laguna, to test the validity of a section of an amendatory
court on January 25, 1963.12 The sole petitioner is therefore Santiago P. Alalayan,
act,1 empowering respondent National Power Corporation "in any contract for the
suing in his behalf and for the benefit of all other persons having common or general
supply of electric power to a franchise holder," receiving at least 50% of its electric
interest with him. Respondent National Power Corporation filed an opposition on
power and energy from it to require as a condition that such franchise holder "shall
February 15, 1963, opposing the issuance of a writ for preliminary injunction.13 On
not realize a net profit of more than twelve percent annually of its investments plus
March 21, 1963, the lower court, considering that there was "no sufficient ground for
two-month operating expenses." Respondent, under such provision, could likewise
the issuance of the writ for preliminary injunction," denied the same.14
"renew all existing contracts with franchise holders for the supply of electric power
and energy," so that the provisions of the Act could be given effect.2 This statutory
provision was assailed on the ground that, being a rider, it is violative of the There was in the answer, dated March 29, 1963, an admission of the main facts
constitutional provision requiring that a bill, which may be enacted into law, cannot alleged, with a denial of the legal conclusion which petitioner would deduce therefrom,
embrace more than one subject, which shall be expressed in its title,3 as well as the respondent National Power Corporation upholding the validity of the challenged
due process guarantee, the liberty to contract of petitioners being infringed upon. The provision. Then, came a partial stipulation of facts submitted on October 1, 1964,
lower court sustained its validity. We sustain the lower court in this appeal. consisting of a resolution of the Philippine Electric Plant Owners Association to take
the necessary steps to stop respondent National Power Corporation from enforcing its
announced increase, samples of contracts between electric plant operators on the one
In the petition for declaratory relief, after the usual allegations as to parties, it was
hand and respondent National Power Corporation on the other, the contract with
stated that respondent National Power Corporation "has for some years now been,
petitioner Alalayan, dated May 26, 1956, showing that he did purchase and take
and still is, by virtue of similar, valid and existing contracts entered into by it with
power and energy as follows: "Sixty (60) kilowatts and of not less than 140,000
one hundred and thirty seven (137) natural persons and corporations distributed all
kilowatt-hours in any contract year at the rate of P120.00 per kilowatt per year"
over the country, supplying, distributing, servicing and selling electric power and
payable in twelve equal monthly installments, "plus an energy charge of P0.013 per
energy at fixed rites schedules to the latter who have for some years now been and
kilowatt hour, payable on the basis of monthly delivery"; a letter of June 22, 1962 of
still are, legally engaged in resupplying, redistributing, reservicing and reselling the
respondent National Power Corporation to petitioner approving his 17.5% rate
said electric power and energy to individual customers within the coverage of their
increase of power so that beginning July 1, 1962, the demand charge would be P10.00
respective franchises."4 Petitioners are included among the said 197 natural persons
per kilowatt per month and the energy charge would be P0.02 per kilowatt hour; a
and entities.5 Then, reference was made to the particular contracts petitioners
letter of August 15, 1962, wherein respondent National Power Corporation notified
entered into with respondent, the contracts to continue indefinitely unless and until
petitioner that it deferred the effectivity of the new rates, but it will be enforced on
either party would give to the other two years previous notice in writing of its intention
November 1, 1962; a letter of June 25, 1963 enforcing respondent National Power
to terminate the same.6After which, it was noted that on June 18, 1960, an act
Corporation deferring once again the effectivity of the new rates until January 1,
authorizing the increase of the capital stock of the National Power Corporation to P100
1964; as well as the congressional transcripts on House Bill No. 5377 and Senate Bill
million took effect.7 A year later, on June 17, 1961, it was alleged that the challenged
No. 613, now Republic Act No. 3043.15
legislation became a law, purportedly to increase further the authorized capital stock,
but including the alleged rider referred to above, which, in the opinion of petitioners,
transgressed the constitutional provision on the subject matter and title of bills as In an order of November 5, 1964, the lower court gave the parties a period of twenty
well as the due process clause.8 Mention was then made of the National Power days within which to submit simultaneously their respective memoranda. After the
Corporation approving a rate increase of at least 17.5%, the effectivity of which, was submission thereof, the lower court, in a decision of January 30, 1965, sustained the
at first deferred to November 1, 1962, then subsequently to January 15, 1963, with validity and constitutionality of the challenged provision. Hence, this appeal.
the threat that in case petitioners would fail to sign the revised contract providing for
the increased rate, respondent National Power Corporation would then cease "to
As was set forth earlier, this appeal cannot prosper. We share the view of the lower
supply, distribute and service electric power and energy to them." 9
court that the provision in question cannot be impugned either on the ground of its
being violative of the constitutional requirement that a bill cannot embrace more than
That would be, in the opinion of petitioners, violative of their rights, proceeding from one subject to be expressed in its title or by virtue of its alleged failure to satisfy the
legislation suffering from constitutional infirmities.10 A declaration of due process criterion.
unconstitutionality was therefore sought by them. It was prayed: "(1) To give due
course to this petition; (2) To issue a writ of preliminary injunction, upon the posting
1. We consider first the objection that the statute in question is violative of the
of the requisite bond, enjoining respondent NPC from carrying or prosecuting its
constitutional provision that no bill "which may be enacted into law shall embrace
threat to enforce the provisions of the rider or Section 3 of Republic Act No. 3043 ...
more than one subject which shall be expressed in [its] title ... "16This provision is
in the manner stated in paragraph 18 of this petition until this Honorable Court shall
4|AMCVB - LABSTAN
similar to those found in many American State Constitutions. It is aimed against the
evils of the so-called omnibus bills and log-rolling legislation as well as surreptitious
or unconsidered enactments.17 Where the subject of a bill is limited to a particular
matter, the lawmakers along with the people should be informed of the subject of
proposed legislative measures. This constitutional provision thus precludes the
insertion of riders in legislation, a rider being a provision not germane to the subject
matter of the bill. Petitioner Alalayan asserts that the provision objected to is such a
rider.
To lend approval to such a plea is to construe the above constitutional provision as to
cripple or impede proper legislation. To impart to it a meaning which is reasonable
and not unduly technical, it must be deemed sufficient that the title be comprehensive
enough reasonably to include the general object which the statute seeks to effect
without expressing each and every end and means necessary for its accomplishment.
Thus, mere details need not be set forth. The legislature is not required to make the
title of the act a complete index of its contents. The provision merely calls for all parts
of an act relating to its subject finding expression in its title.18 More specifically, if the
law amends a section or part of a statute, it suffices if reference be made to the
legislation to be amended, there being no need to state the precise nature of the
amendment.19
It was in 1938, in Government v. Hongkong & Shanghai Bank,20 where, for the first
time after the inauguration of the Commonwealth, this Court passed upon a provision
of that character. We held there that the Reorganization Law,21providing for the mode
in which the total annual expenses of the Bureau of Banking could be reimbursed
through assessment levied upon all banking institutions subject to inspection by the
Bank Commissioner was not violative of such a requirement in the Jones Law, the
previous organic act. Justice Laurel, however, vigorously dissented, his view being
that while the main subject of the act was reorganization, the provision assailed did
not deal with reorganization but with taxation. This case of Government v. Hongkong
& Shanghai Bank was decided by a bare majority of four justices against three.
Thereafter, it would appear that the constitutional requirement is to be given the
liberal test as indicated in the majority opinion penned by Justice Abad Santos, and
not the strict test as desired by the minority headed by Justice Laurel.
Such a trend is made manifest in the cases beginning with Sumulong v. Commission
on Elections,22 up to and including Felwa v. Salas,23 a 1966 decision, the opinion
coming from Chief Justice Concepcion. There is nothing in Lidasan v. Commission on
Elections,24 where a statute25 was annulled on this ground, to indicate the contrary.
As aptly expressed by Justice Sanchez: "Of course, the Constitution does not require
Congress to employ in the title of an enactment, language of such precision as to
mirror, fully index or catalogue all the contents and the minute details therein. It
suffices if the title should serve the purpose of the constitutional demand that it inform
the legislators, the persons interested in the subject of the bill, and the public, of the
nature, scope and consequences of the proposed law and its operation. And this, to
lead them to inquire into the body of the bill, study and discuss the same, take
appropriate action thereon, and, thus, prevent surprise or fraud upon the legislators."
We thus hold that there is no violation of the constitutional provision which requires
that any bill enacted into law shall embrace only one subject to be expressed in the
title thereof.
2. Nor is petitioner anymore successful in his plea for the nullification of the challenged
provision on the ground of his being deprived of the liberty to contract without due
process of law.
It is to be admitted of course that property rights find shelter in specific constitutional
provisions, one of which is the due process clause. It is equally certain that our
fundamental law framed at a time of "surging unrest and dissatisfaction",26 when
there was the fear expressed in many quarters that a constitutional democracy, in
view of its commitment to the claims of property, would not be able to cope effectively
with the problems of poverty and misery that unfortunately afflict so many of our
people, is not susceptible to the indictment that the government therein established
is impotent to take the necessary remedial measures. The framers saw to that. The
welfare state concept is not alien to the philosophy of our Constitution.27 It is implicit
in quite a few of its provisions. It suffices to mention two.
There is the clause on the promotion of social justice to ensure the well-being and
economic security of all the people,28 as well as the pledge of protection to labor with
the specific authority to regulate the relations between landowners and tenants and
between labor and capital.29 This particularized reference to the rights of working men
whether in industry and agriculture certainly cannot preclude attention to and concern
for the rights of consumers, who are the objects of solicitude in the legislation now
complained of. The police power as an attribute to promote the common weal would
be diluted considerably of its reach and effectiveness if on the mere plea that the
liberty to contract would be restricted, the statute complained of may be characterized
as a denial of due process. The right to property cannot be pressed to such an
unreasonable extreme.
It is understandable though why business enterprises, not unnaturally evincing lack
of enthusiasm for police power legislation that affect them adversely and restrict their
profits could predicate alleged violation of their rights on the due process clause,
which as interpreted by them is a bar to regulatory measures. Invariably, the
response from this Court, from the time the Constitution was enacted, has been far
from sympathetic. Thus, during the Commonwealth, we sustained legislation
providing for collective bargaining,30 security of tenure,31 minimum
wages,32 compulsory arbitration,33 and tenancy regulation.34 Neither did the
objections as to the validity of measures regulating the issuance of securities35 and
public services36 prevail.
For it is to be remembered that the liberty relied upon is not freedom of the mind,
which occupies a preferred position, nor freedom of the person, but the liberty to
contract, associated with business activities, which, as has been so repeatedly
announced, may be subjected, in the interest of the general welfare under the police
power, to restrictions varied in character and wide ranging in scope as long as due
process is observed. In Calalang v. Williams,37 this Court found no objection to an
enactment limiting the use of and traffic in the national roads and streets as against
the assertion that the exercise of such an authority amounted to an unlawful
interference with legitimate business and abridgment of personal liberty. The opinion
by Justice Laurel explains why such an argument was far from persuasive. Thus: "In
enacting said law, therefore, the National Assembly was prompted by considerations
of public convenience and welfare. It was inspired by a desire to relieve congestion
of traffic, which is, to say the least, a menace to public safety. Public welfare, then,
lies at the bottom of the enactment of said law, and the state in order to promote the
general welfare may interfere with personal liberty, with property, and with business
5|AMCVB - LABSTAN
and occupations. Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of the state ...
"38 The above doctrine, valid then and equally valid now, constituted more than
sufficient justification for statutes curtailing the liberty enjoyed by business
enterprises, whether conducted by natural or juridical persons, to satisfy the needs
of public welfare.
So it continues to be under the Republic. This Court has invariably given the seal of
approval to statutes intended to improve the lot of tenants,39 who thereafter were
given the option to transform their relationship with landowners to one of lease, which
grant of authority was sustained in 1964.40 Retail trade was nationalized, the measure
receiving judicial approval as against due process objection,41 a decision
foreshadowed earlier with the favorable action taken on legislation granting
preference to Filipino citizens in the lease of public market stalls.42 It is easily
understandable why the regulation of practice of medicine;43 limitation of the hours
of labor;44 imposition of price control;45requirement of separation pay for one
month46 as well as a social security scheme47 cannot be impugned as unconstitutional.
While not exhaustive, the above decisions manifest in no certain terms the inherent
difficulty of assailing regulatory legislation based on alleged denial of due process.
It would thus appear that unless this Court is prepared to overturn a doctrine so firmly
adhered to in a number of cases notable for the unanimity of their response to an
objection similar to the one here raised, petitioner Alalayan cannot prevail. Certainly,
this Court is not prepared to take that step. For in the face of a constitutional provision
that allows deprivation of liberty, including liberty of contract, as long as due process
is observed, the alleged nullity of a legislative act of this character can only be shown
if in fact there is such a denial. The relevant question then is, what does due process
require?
The holding of this Court in Ermita-Malate Hotel and Motel Operators Asso. v. City
Mayor,48 sheds some light. Thus: "There is no controlling and precise definition of due
process. It furnishes though a standard to which governmental action should conform
in order that deprivation of life, liberty or property, in each appropriate case, be valid.
What then is the standard of due process which must exist both as a procedural and
as substantive requisite to free the challenged ordinance, or any governmental action
for that matter, from the imputation of legal infirmity sufficient to spell its doom? It
is responsiveness to the supremacy of reason, obedience to the dictates of justice.
Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy the due
process requirement, official action, to paraphrase Cardozo, must not outrun the
bounds of reason and result in sheer oppression. Due process is thus hostile to any
official action marred by lack of reasonableness. Correctly has it been identified as
freedom from arbitrariness. It is the embodiment of the sporting idea of fair play. It
exacts fealty "to those strivings for justice" and judges the act of officialdom of
whatever branch "in the light of reason drawn from considerations of fairness that
reflect [democratic] traditions of legal and political thought." It is not a narrow or
"technical conception with fixed content unrelated to time, place and circumstances,"
decisions based on such a clause requiring a "close and perceptive inquiry into
fundamental principles of our society." Questions of due process are not to be treated
narrowly or pedantically in slavery to form or phrases." .
The due process objection is sought to be bolstered by an allegation that such power
conferred in the challenged legislation to limit the net profits to "12% annually of
[petitioner's] investments plus two-month operating expenses" has a confiscatory
aspect. This argument has the ring of futility. Precisely, in Manila Electric Co. v. Public
Service Commission,49 this Court in an opinion by the present Chief Justice upheld
such a figure as against the contention that it was rather too generous to the public
utility. To speak of it as confiscatory then is to employ the language by hyperbole.
Moreover, in the absence any evidence to demonstrate the alleged confiscatory effect
of the provision in question, there would be no basis for its nullification, in view of the
well-known presumption of validity that every statute has in its favor.50
In the light of the above, there is thus clearly no occasion for yielding assent to the
claim of petitioner that the legislation assailed contravenes the due process
clause. 1äwphï1.ñët
3. While not explicitly avowed by petitioner, there is the intimation that to apply the
challenged legislation to contracts then in existence would be an infringement of the
constitutional prohibition against any law impairing the obligation of contracts.51 No
such fear need be entertained. A citation from a 1940 decision of this Court,
in Pangasinan Transportation Co. v. Public Service Commission,52 is particularly
relevant. In the language of Justice Laurel, speaking for the Court: "Upon the other
hand, statutes enacted for the regulation of public utilities, being a proper exercise
by the state of its police power, are applicable not only to those public utilities coming
into existence after its passage, but likewise to those already, existence established
and in operation."53 Such a doctrine was followed in the case of a tenancy legislation,
the Congress undoubtedly having in mind and not having failed to take notice "of the
existence of contracts" which stipulated a division of the crops on a 50-50 basis and
therefore must have intended to regulate the same. There was thus no impairment
of an obligation of contract, such an enactment under the police power being remedial
in nature, the non-applicability of which to existing conditions would be self-defeating
in character.54
In Abe v. Foster Wheeler Corp.,55 Justice Barrera, speaking for the Court, took note
of the contention "that as the contracts of employment were entered into at a time
when there was no law granting the workers said right, the application as to them of
the subsequent enactment restoring the same right constitutes an impairment of their
contractual obligations." Then he, made clear why the Court was of a contrary view
as, "the constitutional guaranty of non-impairment ... is limited by the exercise of the
police power of the State, in the interest of public health, safe, morals and general
welfare." Thus was reaffirmed what previously had been announced as the rule. Such
a doctrine was reiterated early this year in Philippine American Life Insurance Co. v.
Auditor General,56 where this Court found no objection to the applicability of the
Margin Law,57 even if it be assumed that a reinsurance treaty was already in existence
and had imposed the corresponding obligation on the parties prior to its enactment.
This is not to say that in each and every case the invocation of the protection of the
non-impairment clause would be unavailing once the legislation complained of is
shown to be an exercise of the police power. Otherwise, that would render nugatory
the constitutional guarantee of non-impairment, and for that matter both the equal
protection and due process clauses which equally serve to protect property rights.
Here, as in other cases where governmental authority may trench upon property
rights, the process of balancing, adjustment or harmonization is called for.
Rutter v. Esteban58 lends support to such an approach. In that leading case, the
continued operation and enforcement of the Moratorium Act59 which allowed an eight-
6|AMCVB - LABSTAN
year period of grace for the payment of pre-war obligations on the part of debtors
who suffered as a consequence of World War II was, in a 1953 decision, held
"unreasonable and oppressive, and should not be prolonged a minute longer" for
being violative of the constitutional provision prohibiting the impairment of the
obligation of the contracts "and, therefore, ... should be declared null and void and
without effect."60 As of the date of its enactment in 1948, the police power could be
relied upon to sustain its validity, in view of the serious economic condition faced by
the country upon liberation and the state of penury that then afflicted a greater
portion of the Filipino people. By 1953 however, the Moratorium Act could be rightfully
considered as an infringement of the non-impairment clause, as the economy had in
the meanwhile considerably changed for the better.

There is no clearer instance then of the process of harmonization and balancing which
is incumbent upon the judiciary to undertake whenever a regulatory measure under
the police power is assailed as violative of constitucess or equal protection, all of
which are intended to safeguard property rights. Three leading decisions of the United
States Supreme Court, Home Building & Loan Astional guarantees, whether of non-
impairment, due prosociation v. Blaisdell,61 Nebbia v. New York,62 and Norman v.
Baltimore and Ohio Railroad Co.,63 speak similarly.

Even if, therefore, reliance be had on the non-impairment clause by petitioner and
the process of adjustment or harmonization be undertaken to ascertain whether the
applicability of the statutory provision assailed to existing contracts would run counter
to such a guarantee, still the same conclusion emerges. There is a failure to make out
a case for its invalidity.

WHEREFORE, there being no showing that Section 3 of Republic Act No. 3043 is
unconstitutional, the decision of the lower court, dismissing the petition, is affirmed.
With costs against petitioner Alalayan.

7|AMCVB - LABSTAN
 2. AGABON v NLRC
G.R. No. 158693 November 17, 2004
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor
Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioners
Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January
2, 19922 until February 23, 1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision declaring
the dismissals illegal and ordered private respondent to pay the monetary claims. The
dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the
complainants illegal. Accordingly, respondent is hereby ordered to pay them
their backwages up to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1)
month for every year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and
service incentive leave pay for the years 1996, 1997 and 1998 as well as
their premium pay for holidays and rest days and Virgilio Agabon's 13th
month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY
(P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos
for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon,
as per attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners
had abandoned their work, and were not entitled to backwages and separation pay.
The other money claims awarded by the Labor Arbiter were also denied for lack of
evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for
certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal
because they had abandoned their employment but ordered the payment of money
claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is
REVERSED only insofar as it dismissed petitioner's money claims. Private
respondents are ordered to pay petitioners holiday pay for four (4) regular
holidays in 1996, 1997, and 1998, as well as their service incentive leave
pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th
month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally
dismissed.7
Petitioners assert that they were dismissed because the private respondent refused
to give them assignments unless they agreed to work on a "pakyaw" basis when they
reported for duty on February 23, 1999. They did not agree on this arrangement
because it would mean losing benefits as Social Security System (SSS) members.
Petitioners also claim that private respondent did not comply with the twin
requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not dismissed
but had abandoned their work.9 In fact, private respondent sent two letters to the last
known addresses of the petitioners advising them to report for work. Private
respondent's manager even talked to petitioner Virgilio Agabon by telephone
sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers
involving 40,000 square meters of cornice installation work. However, petitioners did
not report for work because they had subcontracted to perform installation work for
another company. Petitioners also demanded for an increase in their wage to P280.00
per day. When this was not granted, petitioners stopped reporting for work and filed
the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by substantial
evidence. This is especially so when such findings were affirmed by the Court of
Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter are
conflicting, as in this case, the reviewing court may delve into the records and
examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that
petitioners' dismissal was for a just cause. They had abandoned their employment
and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid
cause but also enjoins the employer to give the employee the opportunity to be heard
and to defend himself.13 Article 282 of the Labor Code enumerates the just causes for
termination by the employer: (a) serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or the latter's representative in
connection with the employee's work; (b) gross and habitual neglect by the employee
8|AMCVB - LABSTAN
of his duties; (c) fraud or willful breach by the employee of the trust reposed in him
by his employer or his 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.
Abandonment is the deliberate and unjustified refusal of an employee to resume his
employment.14 It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer.15 For a valid finding of abandonment, these two factors
should 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 as the more determinative factor which is manifested by overt acts
from which it may be deduced that the employees has no more intention to work. The
intent to discontinue the employment must be shown by clear proof that it was
deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an
installation work for another company. Subcontracting for another company clearly
showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January 1996, they did not
report for work because they were working for another company. Private respondent
at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their
employer-employee relationship. The record of an employee is a relevant
consideration in determining the penalty that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented
from work without leave or permission from his employer, for the purpose of looking
for a job elsewhere, is considered to have abandoned his job. We should apply that
rule with more reason here where petitioners were absent because they were already
working in another company.
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 conduct19 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.20
After establishing that the terminations were for a just and valid cause, we now
determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d)
of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of
termination of employment, the following standards of due process shall be
substantially observed:
I. For termination of employment based on just causes as defined in Article
282 of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable opportunity
within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him; and
(c) 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.
In case of termination, the foregoing notices shall be served on the
employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable to the
employee while dismissals based on authorized causes involve grounds under the
Labor Code which allow the employer to terminate employees. A termination for an
authorized cause requires payment of separation pay. When the termination of
employment is declared illegal, reinstatement and full backwages are mandated under
Article 279. If reinstatement is no longer possible where the dismissal was unjust,
separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a hearing or opportunity
to be heard if requested by the employee before terminating the employment: a
notice specifying the grounds for which dismissal is sought a hearing or an opportunity
to be heard and after hearing or opportunity to be heard, a notice of the decision to
dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and
284, the employer must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is
for a just cause under Article 282 of the Labor Code, for an authorized cause under
Article 283, or for health reasons under Article 284, and due process was observed;
(2) the dismissal is without just or authorized cause but due process was observed;
(3) the dismissal is without just or authorized cause and there was no due process;
and (4) the dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not
suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of seniority
rights and other privileges and full backwages, inclusive of allowances, and other
9|AMCVB - LABSTAN
benefits or their monetary equivalent computed from the time the compensation was
not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. 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.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed.
We held that the violation by the employer of the notice requirement in termination
for just or authorized causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the employer must pay full
backwages from the time of termination until it is judicially declared that the dismissal
was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the
The present case squarely falls under the fourth situation. The dismissal should be
significant number of cases involving dismissals without requisite notices. We
upheld because it was established that the petitioners abandoned their jobs to work
concluded that the imposition of penalty by way of damages for violation of the notice
for another company. Private respondent, however, did not follow the notice
requirement was not serving as a deterrent. Hence, we now required payment of full
requirements and instead argued that sending notices to the last known addresses
backwages from the time of dismissal until the time the Court finds the dismissal was
would have been useless because they did not reside there anymore. Unfortunately
for a just or authorized cause.
for the private respondent, this is not a valid excuse because the law mandates the
twin notice requirements to the employee's last known address.21 Thus, it should be
held liable for non-compliance with the procedural requirements of due process. Serrano was confronting the practice of employers to "dismiss now and pay later" by
imposing full backwages.
A review and re-examination of the relevant legal principles is appropriate and timely
to clarify the various rulings on employment termination in the light of Serrano v. We believe, however, that the ruling in Serrano did not consider the full meaning of
National Labor Relations Commission.22 Article 279 of the Labor Code which states:

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee ART. 279. Security of Tenure. – In cases of regular employment, the
was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor employer shall not terminate the services of an employee except for a just
Relations Commission,23 we reversed this long-standing rule and held that the cause or when authorized by this Title. An employee who is unjustly
dismissed employee, although not given any notice and hearing, was not entitled to dismissed from work shall be entitled to reinstatement without loss of
reinstatement and backwages because the dismissal was for grave misconduct and seniority rights and other privileges and to his full backwages, inclusive of
insubordination, a just ground for termination under Article 282. The employee had a allowances, and to his other benefits or their monetary equivalent computed
violent temper and caused trouble during office hours, defying superiors who tried to from the time his compensation was withheld from him up to the time of his
pacify him. We concluded that reinstating the employee and awarding backwages actual reinstatement.
"may encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe."24 We further held that:
This means that the termination is illegal only if it is not for any of the justified or
authorized causes provided by law. Payment of backwages and other benefits,
Under the circumstances, the dismissal of the private respondent for just including reinstatement, is justified only if the employee was unjustly dismissed.
cause should be maintained. He has no right to return to his former
employment.
The fact that the Serrano ruling can cause unfairness and injustice which elicited
strong dissent has prompted us to revisit the doctrine.
However, the petitioner must nevertheless be held to account for failure to
extend to private respondent his right to an investigation before causing his
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
dismissal. The rule is explicit as above discussed. The dismissal of an
embodies a system of rights based on moral principles so deeply imbedded in the
employee must be for just or authorized cause and after due process.
traditions and feelings of our people as to be deemed fundamental to a civilized
Petitioner committed an infraction of the second requirement. Thus, it must
society as conceived by our entire history. Due process is that which comports with
be imposed a sanction for its failure to give a formal notice and conduct an
the deepest notions of what is fair and right and just.26 It is a constitutional restraint
investigation as required by law before dismissing petitioner from
on the legislative as well as on the executive and judicial powers of the government
employment. Considering the circumstances of this case petitioner must
provided by the Bill of Rights.
indemnify the private respondent the amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer.25 Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under
the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process
The rule thus evolved: where the employer had a valid reason to dismiss an employee
requirements for dismissal are found in the Implementing Rules of P.D. 442, as
but did not follow the due process requirement, the dismissal may be upheld but the
amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I,
employer will be penalized to pay an indemnity to the employee. This became known
Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due
as the Wenphil or Belated Due Process Rule.

10 | A M C V B - L A B S T A N
process requirements violate the Labor Code. Therefore statutory due process should This would encourage frivolous suits, where even the most notorious violators of
be differentiated from failure to comply with constitutional due process. 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
Constitutional due process protects the individual from the government and assures
employee is caught stealing or threatens the lives of his co-employees or has become
him of his rights in criminal, civil or administrative proceedings; while statutory due
a criminal, who has fled and cannot be found, or where serious business losses
process found in the Labor Code and Implementing Rules protects employees from
demand that operations be ceased in less than a month. Invalidating the dismissal
being unjustly terminated without just cause after notice and hearing.
would not serve public interest. It could also discourage investments that can
generate employment in the local economy.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just
and valid cause but the employee was not accorded due process. The dismissal was
The constitutional policy to provide full protection to labor is not meant to be a sword
upheld by the Court but the employer was sanctioned. The sanction should be in the
to oppress employers. The commitment of this Court to the cause of labor does not
nature of indemnification or penalty, and depends on the facts of each case and the
prevent us from sustaining the employer when it is in the right, as in this
gravity of the omission committed by the employer.
case.32 Certainly, an employer should not be compelled to pay employees for work
not actually performed and in fact abandoned.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the
employee was not given due process, the failure did not operate to eradicate the just
The employer should not be compelled to continue employing a person who is
causes for dismissal. The dismissal being for just cause, albeitwithout due process,
admittedly guilty of misfeasance or malfeasance and whose continued employment is
did not entitle the employee to reinstatement, backwages, damages and attorney's
patently inimical to the employer. The law protecting the rights of the laborer
fees.
authorizes neither oppression nor self-destruction of the employer.33

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v.
It must be stressed that in the present case, the petitioners committed a grave
National Labor Relations Commission,30 which opinion he reiterated in Serrano,
offense, i.e., abandonment, which, if the requirements of due process were complied
stated:
with, would undoubtedly result in a valid dismissal.

C. Where there is just cause for dismissal but due process has not been
An employee who is clearly guilty of conduct violative of Article 282 should not be
properly observed by an employer, it would not be right to order either the
protected by the Social Justice Clause of the Constitution. Social justice, as the term
reinstatement of the dismissed employee or the payment of backwages to
suggests, should be used only to correct an injustice. As the eminent Justice Jose P.
him. In failing, however, to comply with the procedure prescribed by law in
Laurel observed, social justice must be founded on the recognition of the necessity of
terminating the services of the employee, the employer must be deemed to
interdependence among diverse units of a society and of the protection that should
have opted or, in any case, should be made liable, for the payment of
be equally and evenly extended to all groups as a combined force in our social and
separation pay. It might be pointed out that the notice to be given and the
economic life, consistent with the fundamental and paramount objective of the state
hearing to be conducted generally constitute the two-part due process
of promoting the health, comfort, and quiet of all persons, and of bringing about "the
requirement of law to be accorded to the employee by the employer.
greatest good to the greatest number."34
Nevertheless, peculiar circumstances might obtain in certain situations
where to undertake the above steps would be no more than a useless
formality and where, accordingly, it would not be imprudent to apply the res This is not to say that the Court was wrong when it ruled the way it did
ipsa loquitur rule and award, in lieu of separation pay, nominal damages to in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas
the employee. x x x.31 set in stone. It has to allow for changing times and circumstances.

After carefully analyzing the consequences of the divergent doctrines in the law on Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-
employment termination, we believe that in cases involving dismissals for cause but management relations and dispense justice with an even hand in every case:
without observance of the twin requirements of notice and hearing, the better rule is
to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal
We have repeatedly stressed that social justice – or any justice for that
was for just cause but imposing sanctions on the employer. Such sanctions, however,
matter – is for the deserving, whether he be a millionaire in his mansion or
must be stiffer than that imposed in Wenphil. By doing so, this Court would be able
a pauper in his hovel. It is true that, in case of reasonable doubt, we are to
to achieve a fair result by dispensing justice not just to employees, but to employers
tilt the balance in favor of the poor to whom the Constitution fittingly extends
as well.
its sympathy and compassion. But never is it justified to give preference to
the poor simply because they are poor, or reject the rich simply because
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized they are rich, for justice must always be served for the poor and the rich
causes but not complying with statutory due process may have far-reaching alike, according to the mandate of the law.35
consequences.

11 | A M C V B - L A B S T A N
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided in favor
of labor, as management has rights that should be fully respected and enforced by
this Court. As interdependent and indispensable partners in nation-building, labor and
management need each other to foster productivity and economic growth; hence, the
need to weigh and balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory
due process should not nullify the dismissal, or render it illegal, or ineffectual.
However, the employer should indemnify the employee for the violation of his
statutory rights, as ruled in Reta v. National Labor Relations Commission.36 The
indemnity to be imposed should be stiffer to discourage the abhorrent practice of
"dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction
should be in the nature of indemnification or penalty and should depend on the facts
of each case, taking into special consideration the gravity of the due process violation
of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered
by him.37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an
employer is liable to pay indemnity in the form of nominal damages to an employee
who has been dismissed if, in effecting such dismissal, the employer fails to comply
with the requirements of due process. The Court, after considering the circumstances
therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's
one month salary. This indemnity is intended not to penalize the employer but to
vindicate or recognize the employee's right to statutory due process which was
violated by the employer.39
The violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages. The
amount of such damages is addressed to the sound discretion of the court, taking
into account the relevant circumstances.40 Considering the prevailing circumstances
in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of
damages would serve to deter employers from future violations of the statutory due
process rights of employees. At the very least, it provides a vindication or recognition
of this fundamental right granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to
pay petitioners' holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private
respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th
month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where
the employee must allege non-payment, the general rule is that the burden rests on
the employer to prove payment, rather than on the employee to prove non-payment.
The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents – which will show that overtime, differentials,
service incentive leave and other claims of workers have been paid – are not in the
possession of the worker but in the custody and absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and
service incentive leave pay, it could have easily presented documentary proofs of
such monetary benefits to disprove the claims of the petitioners. But it did not, except
with respect to the 13th month pay wherein it presented cash vouchers showing
payments of the benefit in the years disputed.42 Allegations by private respondent
that it does not operate during holidays and that it allows its employees 10 days leave
with pay, other than being self-serving, do not constitute proof of payment.
Consequently, it failed to discharge the onus probandi thereby making it liable for
such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay, we find the same to be unauthorized. The evident intention
of Presidential Decree No. 851 is to grant an additional income in the form of the 13th
month pay to employees not already receiving the same43 so as "to further protect
the level of real wages from the ravages of world-wide inflation."44 Clearly, as
additional income, the 13th month pay is included in the definition of wage under
Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the 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 services rendered or to be rendered and includes the
fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee…"
from which an employer is prohibited under Article 11345 of the same Code from
making any deductions without the employee's knowledge and consent. In the instant
case, private respondent failed to show that the deduction of the SSS loan and the
value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized
by the latter. The lack of authority to deduct is further bolstered by the fact that
petitioner Virgilio Agabon included the same as one of his money claims against
private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor
Arbiter ordering the private respondent to pay each of the petitioners holiday pay for
four regular holidays from 1996 to 1998, in the amount of P6,520.00, service
incentive leave pay for the same period in the amount of P3,255.00 and the balance
of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the
Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that
12 | A M C V B - L A B S T A N
petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering private
respondent to pay each of the petitioners holiday pay for four regular holidays from
1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same
period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth
month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as
nominal damages for non-compliance with statutory due process.

No costs.

SO ORDERED.

13 | A M C V B - L A B S T A N
 4. PHILIPPINE AIRLINES v NLRC
G.R. No. 85985 August 13, 1993
MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or
not the formulation of a Code of Discipline among employees is a shared responsibility
of the employer and the employees.
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966
Code of Discipline. The Code was circulated among the employees and was
immediately implemented, and some employees were forthwith subjected to the
disciplinary measures embodied therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed
a complaint before the National Labor Relations Commission (NLRC) for unfair labor
practice (Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary
implementation of PAL's Code of Discipline without notice and prior discussion with
Union by Management" (Rollo, p. 41). In its position paper, PALEA contended that
PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice,
specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code.
PALEA alleged that copies of the Code had been circulated in limited numbers; that
being penal in nature the Code must conform with the requirements of sufficient
publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights
of the employees. It prayed that implementation of the Code be held in abeyance;
that PAL should discuss the substance of the Code with PALEA; that employees
dismissed under the Code be reinstated and their cases subjected to further hearing;
and that PAL be declared guilty of unfair labor practice and be ordered to pay damages
(pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer
to prescibe rules and regulations regarding employess' conduct in carrying out their
duties and functions, and alleging that by implementing the Code, it had not violated
the collective bargaining agreement (CBA) or any provision of the Labor Code.
Assailing the complaint as unsupported by evidence, PAL maintained that Article 253
of the Labor Code cited by PALEA reffered to the requirements for negotiating a CBA
which was inapplicable as indeed the current CBA had been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor
Code was violated when PAL unilaterally implemented the Code, and cited provisions
of Articles IV and I of Chapter II of the Code as defective for, respectively, running
counter to the construction of penal laws and making punishable any offense within
PAL's contemplation. These provisions are the following:
Sec. 2. Non-exclusivity. — This Code does not contain the entirety
of the rules and regulations of the company. Every employee is
bound to comply with all applicable rules, regulations, policies,
procedures and standards, including standards of quality,
productivity and behaviour, as issued and promulgated by the
company through its duly authorized officials. Any violations thereof
shall be punishable with a penalty to be determined by the gravity
and/or frequency of the offense.
Sec. 7. Cumulative Record. — An employee's record of offenses
shall be cumulative. The penalty for an offense shall be determined
on the basis of his past record of offenses of any nature or the
absence thereof. The more habitual an offender has been, the
greater shall be the penalty for the latest offense. Thus, an
employee may be dismissed if the number of his past offenses
warrants such penalty in the judgment of management even if each
offense considered separately may not warrant dismissal. Habitual
offenders or recidivists have no place in PAL. On the other hand,
due regard shall be given to the length of time between commission
of individual offenses to determine whether the employee's conduct
may indicate occasional lapses (which may nevertheless require
sterner disciplinary action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference
but they failed to appear at the scheduled date. Interpreting such failure as a waiver
of the parties' right to present evidence, the labor arbiter considered the case
submitted for decision. On November 7, 1986, a decision was rendered finding no bad
faith on the part of PAL in adopting the Code and ruling that no unfair labor practice
had been committed. However, the arbiter held that PAL was "not totally fault free"
considering that while the issuance of rules and regulations governing the conduct of
employees is a "legitimate management prerogative" such rules and regulations must
meet the test of "reasonableness, propriety and fairness." She found Section 1 of the
Code aforequoted as "an all embracing and all encompassing provision that makes
punishable any offense one can think of in the company"; while Section 7, likewise
quoted above, is "objectionable for it violates the rule against double jeopardy thereby
ushering in two or more punishment for the same misdemeanor." (pp. 38-39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code was amply
circulated." Noting that PAL's assertion that it had furnished all its employees copies
of the Code is unsupported by documentary evidence, she stated that such "failure"
on the part of PAL resulted in the imposition of penalties on employees who thought
all the while that the 1966 Code was still being followed. Thus, the arbiter concluded
that "(t)he phrase ignorance of the law excuses no one from compliance . . . finds
application only after it has been conclusively shown that the law was circulated to all
the parties concerned and efforts to disseminate information regarding the new law
have been exerted. (p. 39, Rollo.) She thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby
ordered as follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under
the New Code of Discipline and remand the same for further
hearing; and
14 | A M C V B - L A B S T A N
 3. Discuss with PALEA the objectionable provisions specifically
tackled in the body of the decision.
All other claims of the complainant union (is) [are] hereby,
dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner
Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice committed by PAL and affirmed
the dismissal of PALEA's charge. Nonetheless, the NLRC made the following
observations:
Indeed, failure of management to discuss the provisions of a
contemplated code of discipline which shall govern the conduct of
its employees would result in the erosion and deterioration of an
otherwise harmonious and smooth relationship between them as
did happen in the instant case. There is no dispute that adoption of
rules of conduct or discipline is a prerogative of management and
is imperative and essential if an industry, has to survive in a
competitive world. But labor climate has progressed, too. In the
Philippine scene, at no time in our contemporary history is the need
for a cooperative, supportive and smooth relationship between
labor and management more keenly felt if we are to survive
economically. Management can no longer exclude labor in the
deliberation and adoption of rules and regulations that will affect
them.
The complainant union in this case has the right to feel isolated in
the adoption of the New Code of Discipline. The Code of Discipline
involves security of tenure and loss of employment — a property
right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness and
openness by Management and participation by the union,
representing its members. In fact, our Constitution has recognized
the principle of "shared responsibility" between employers and
workers and has likewise recognized the right of workers to
participate in "policy and decision-making process affecting their
rights . . ." The latter provision was interpreted by the Constitutional
Commissioners to mean participation in "management"' (Record of
the Constitutional Commission, Vol. II).
In a sense, participation by the union in the adoption of the code if
conduct could have accelerated and enhanced their feelings of
belonging and would have resulted in cooperation rather than
resistance to the Code. In fact, labor-management cooperation is
now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original
Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed
decision in the sense that the New Code of Discipline should be
reviewed and discussed with complainant union, particularly the
disputed provisions [.] (T)hereafter, respondent is directed to
furnish each employee with a copy of the appealed Code of
Discipline. The pending cases adverted to in the appealed decision
if still in the arbitral level, should be reconsidered by the respondent
Philippine Air Lines. Other dispositions of the Labor Arbiter are
sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public respondents with
grave abuse of discretion in: (a) directing PAL "to share its management prerogative
of formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in
ordering PAL to share said prerogative with the union; (c) deciding beyond the issue
of unfair labor practice, and (d) requiring PAL to reconsider pending cases still in the
arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is
whether management may be compelled to share with the union or its employees its
prerogative of formulating a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was no law which
mandated the sharing of responsibility therefor between employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715,
amending Article 211 of the Labor Code, that the law explicitly considered it a State
policy "(t)o ensure the participation of workers in decision and policy-making
processes affecting the rights, duties and welfare." However, even in the absence of
said clear provision of law, the exercise of management prerogatives was never
considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held
that management's prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]),
we upheld the company's right to implement a new system of distributing its products,
but gave the following caveat:
So long as a company's management prerogatives are exercised in
good faith for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court
will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of managerial prerogatives
is not unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of Sto. Tomas
vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories
(Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative
being invoked is clearly a managerial one.
15 | A M C V B - L A B S T A N
A close scrutiny of the objectionable provisions of the Code reveals that they are not
purely business-oriented nor do they concern the management aspect of the business
of the company as in the San Miguel case. The provisions of the Code clearly have
repercusions on the employee's right to security of tenure. The implementation of the
provisions may result in the deprivation of an employee's means of livelihood which,
as correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation
Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which
border on infringement of constitutional rights, we must uphold the constitutional
requirements for the protection of labor and the promotion of social justice, for these
factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is
doubt, in favor of the worker" (Employees Association of the Philippine American Life
Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of the employees. In treating the
latter, management should see to it that its employees are at least properly informed
of its decisions or modes action. PAL asserts that all its employees have been
furnished copies of the Code. Public respondents found to the contrary, which finding,
to say the least is entitled to great respect.
amplified by Republic Act No 6715 when it decreed the "participation of workers in
decision and policy making processes affecting their rights, duties and welfare." PAL's
position that it cannot be saddled with the "obligation" of sharing management
prerogatives as during the formulation of the Code, Republic Act No. 6715 had not
yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be
sustained. While such "obligation" was not yet founded in law when the Code was
formulated, the attainment of a harmonious labor-management relationship and the
then already existing state policy of enlightening workers concerning their rights as
employees demand no less than the observance of transparency in managerial moves
affecting employees' rights.
Petitioner's assertion that it needed the implementation of a new Code of Discipline
considering the nature of its business cannot be overemphasized. In fact, its being a
local monopoly in the business demands the most stringent of measures to attain safe
travel for its patrons. Nonetheless, whatever disciplinary measures are adopted
cannot be properly implemented in the absence of full cooperation of the employees.
Such cooperation cannot be attained if the employees are restive on account, of their
being left out in the determination of cardinal and fundamental matters affecting their
employment.

PAL posits the view that by signing the 1989-1991 collective bargaining agreement, WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No
on June 27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and special pronouncement is made as to costs. SO ORDERED.
enforce company rules and regulations to carry out the functions of
management without having to discuss the same with PALEA and much less, obtain
the latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180-
181, Rollo.) Petitioner's view is based on the following provision of the agreement:

The Association recognizes the right of the Company to determine

matters of management it policy and Company operations and to
direct its manpower. Management of the Company includes the
right to organize, plan, direct and control operations, to hire, assign
employees to work, transfer employees from one department, to
another, to promote, demote, discipline, suspend or discharge
employees for just cause; to lay-off employees for valid and legal
causes, to introduce new or improved methods or facilities or to
change existing methods or facilities and the right to make and
enforce Company rules and regulations to carry out the functions of
management.

The exercise by management of its prerogative shall be done in a

just reasonable, humane and/or lawful manner.

Such provision in the collective bargaining agreement may not be interpreted as

cession of employees' rights to participate in the deliberation of matters which may
affect their rights and the formulation of policies relative thereto. And one such mater
is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just
participation in the discussion of matters affecting their rights. Thus, even before
Article 211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it
was already declared a policy of the State, "(d) To promote the enlightenment of
workers concerning their rights and obligations . . . as employees." This was, of course,
16 | A M C V B - L A B S T A N
 5. MANILA ELECTRIC COMPANY vs.Hon. SECRETARY OF LABOR LEONARDO
exclude confidential
QUISUMBING and MERALCO EMPLOYEES and WORKERS ASSOCIATION CBU - include
employees
(MEWA)
Union security - maintenance of membership closed shop
G.R. No. 127598 February 22, 2000
Contracting out - no need to consult union consult first
RESOLUTION existing terms and
All benefits - all terms
conditions
YNARES-SANTIAGO, J.:
Dec. 28, 1996-Dec. 27,
Retroactivity - from Dec. 1, 1995
199(9)
In the Decision promulgated on January 27, 1999, the Court disposed of the case as
follows:
Dissatisfied with the Decision, some alleged members of private respondent union
WHEREFORE, the petition is granted and the orders of public respondent (Union for brevity) filed a motion for intervention and a motion for reconsideration of
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set the said Decision. A separate intervention was likewise made by the supervisor's
aside to the extent set forth above. The parties are directed to execute a union (FLAMES2) of petitioner corporation alleging that it has bona fide legal interest
Collective Bargaining Agreement incorporating the terms and conditions in the outcome of the case.3 The Court required the "proper parties" to file a comment
contained in the unaffected portions of the Secretary of Labor's orders of to the three motions for reconsideration but the Solicitor-General asked that he be
August 19, 1996 and December 28, 1996, and the modifications set forth excused from filing the comment because the "petition filed in the instant case was
above. The retirement fund issue is remanded to the Secretary of Labor for granted" by the Court.4 Consequently, petitioner filed its own consolidated comment.
reception of evidence and determination of the legal personality of the An "Appeal Seeking Immediate Reconsideration" was also filed by the alleged newly
MERALCO retirement fund.1 elected president of the Union.5 Other subsequent pleadings were filed by the parties
and intervenors.
The modifications of the public respondent's resolutions include the following:
The issues raised in the motions for reconsideration had already been passed upon
by the Court in the January 27, 1999 decision. No new arguments were presented for
Secretary's consideration of the Court. Nonetheless, certain matters will be considered herein,
January 27, 1999 decision
resolution particularly those involving the amount of wages and the retroactivity of the Collective
Bargaining Agreement (CBA) arbitral awards.
Wages - P1,900.00 for 1995-96 P2,200.00
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the
X'mas bonus - modified to one month 2 months
Secretary is allowed, it would simply pass the cost covering such increase to the
Retirees - remanded to the Secretary granted consumers through an increase in the rate of electricity. This is a non sequitur. The
Court cannot be threatened with such a misleading argument. An increase in the
Loan to coops - denied granted prices of electric current needs the approval of the appropriate regulatory government
agency and does not automatically result from a mere increase in the wages of
GHSIP, HMP petitioner's employees. Besides, this argument presupposes that petitioner is capable
and of meeting a wage increase. The All Asia Capital report upon which the Union relies
Housing loans - granted up to P60,000.00 granted to support its position regarding the wage issue cannot be an accurate basis and
conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of
Signing bonus - denied granted Evidence provides:

Union leave - 40 days (typo error)
High - not apply to those who are
voltage/pole not exposed to the risk
Collectors - no need for cash bond, no
need to reduce quota and
MAPL
30 days Commercial lists and the like. — Evidence of statements of matters of
interest to persons engaged in an occupation contained in a list, register,
members of a team
periodical, or other published compilation is admissible as tending to prove
the truth of any relevant matter so stated if that compilation is published for
use by persons engaged in that occupation and is generally used and relied
upon by them therein.

17 | A M C V B - L A B S T A N
Under the afore-quoted rule, statement of matters contained in a periodical, may be
admitted only "if that compilation is published for use by persons engaged in that
occupation and is generally used and relied upon by them therein." As correctly held
in our Decision dated January 27, 1999, the cited report is a mere newspaper account
and not even a commercial list. At most, it is but an analysis or opinion which carries
no persuasive weight for purposes of this case as no sufficient figures to support it
were presented. Neither did anybody testify to its accuracy. It cannot be said that
businessmen generally rely on news items such as this in their occupation. Besides,
no evidence was presented that the publication was regularly prepared by a person
in touch with the market and that it is generally regarded as trustworthy and reliable.
Absent extrinsic proof of their accuracy, these reports are not admissible.6 In the
same manner, newspapers containing stock quotations are not admissible in evidence
when the source of the reports is available.7 With more reason, mere analyses or
projections of such reports cannot be admitted. In particular, the source of the report
in this case can be easily made available considering that the same is necessary for
compliance with certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was
P5.1 billion.8 An estimate by the All Asia financial analyst stated that petitioner's net
operating income for the same year was about P5.7 billion, a figure which the Union
relies on to support its claim. Assuming without admitting the truth thereof, the figure
is higher than the P4.171 billion allegedly suggested by petitioner as its projected net
operating income. The P5.7 billion which was the Secretary's basis for granting the
P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner.
It would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for
the two years of the CBA award. For 1992, the agreed CBA wage increase for rank-
and-file was P1,400.00 and was reduced to P1,350.00; for 1993; further reduced to
P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the
years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on
the foregoing figures, the P2,000.00 increase for the two-year period awarded to the
rank-and-file is much higher than the highest increase granted to supervisory
employees.9 As mentioned in the January 27, 1999 Decision, the Court does "not seek
to enumerate in this decision the factors that should affect wage determination"
because collective bargaining disputes particularly those affecting the national
interest and public service "requires due consideration and proper balancing of the
interests of the parties to the dispute and of those who might be affected by the
dispute."10 The Court takes judicial notice that the new amounts granted herein are
significantly higher than the weighted average salary currently enjoyed by other rank-
and-file employees within the community. It should be noted that the relations
between labor and capital is impressed with public interest which must yield to the
common good.11 Neither party should act oppressively against the other or impair the
interest or convenience of the public.12Besides, matters of salary increases are part
of management prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had
its origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-
year period thereof is concerned. When the Secretary of Labor assumed jurisdiction
and granted the arbitral awards, there was no question that these arbitral awards
were to be given retroactive effect. However, the parties dispute the reckoning period
when retroaction shall commence. Petitioner claims that the award should retroact
only from such time that the Secretary of Labor rendered the award, invoking the
1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v.
NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the
parties was promulgated on June 5, 1989, the expiry date of the past CBA.
Based on the provision of Section 253-A, its retroactivity should be agreed
upon by the parties. But since no agreement to that effect was made, public
respondent did not abuse its discretion in giving the said CBA a prospective
effect. The action of the public respondent is within the ambit of its authority
vested by existing law.
On the other hand, the Union argues that the award should retroact to such time
granted by the Secretary, citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to the
date of the expiration of the previous CBA, contrary to the position of
petitioner. Under the circumstances of the case, Article 253-A cannot be
properly applied to herein case. As correctly stated by public respondent in
his assailed Order of April 12, 1991 dismissing petitioner's Motion for
Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions
awarded; we would stress that the provision of law invoked by the
Hospital, Article 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting
retroactivity of the effectivity of arbitral awards issued by the Secretary of
Labor pursuant to Article 263(g) of the Labor Code, such as herein involved,
public respondent is deemed vested with plenary and discretionary powers
to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine
and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the
CBA negotiations between management and the union. The Secretary of
Labor assumed jurisdiction and ordered the retroaction of the CBA to the
date of expiration of the previous CBA. As in this case, it was alleged that
the Secretary of Labor gravely abused its discretion in making his award
retroactive. In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting
retroactive of the effectivity of arbitral awards issued by the
Secretary of Labor pursuant to Article 263(g) of the Labor Code,
such as herein involved, public respondent is deemed vested with
plenary and discretionary powers to determine the effectivity
thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective
for a period of 2 years counted from December 28, 1996 up to December 27, 1999."
Parenthetically, this actually covers a three-year period. Labor laws are silent as to
when an arbitral award in a labor dispute where the Secretary had assumed
jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In general, a
18 | A M C V B - L A B S T A N
CBA negotiated within six months after the expiration of the existing CBA retroacts to
the day immediately following such date and if agreed thereafter, the effectivity
depends on the agreement of the parties.18 On the other hand, the law is silent as to
the retroactivity of a CBA arbitral award or that granted not by virtue of the mutual
agreement of the parties but by intervention of the government. Despite the silence
of the law, the Court rules herein that CBA arbitral awards granted after six months
from the expiration of the last CBA shall retroact to such time agreed upon by both
employer and the employees or their union. Absent such an agreement as to
retroactivity, the award shall retroact to the first day after the six-month period
following the expiration of the last day of the CBA should there be one. In the absence
of a CBA, the Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement
voluntarily entered into by the parties because it requires the interference and
imposing power of the State thru the Secretary of Labor when he assumes jurisdiction.
However, the arbitral award can be considered as an approximation of a collective
bargaining agreement which would otherwise have been entered into by the
parties.19 The terms or periods set forth in Article 253-A pertains explicitly to a CBA.
But there is nothing that would prevent its application by analogy to an arbitral award
by the Secretary considering the absence of an applicable law. Under Article 253-A:
"(I)f any such agreement is entered into beyond six months, the parties shall agree
on the duration of retroactivity thereof." In other words, the law contemplates
retroactivity whether the agreement be entered into before or after the said six-month
period. The agreement of the parties need not be categorically stated for their acts
may be considered in determining the duration of retroactivity. In this connection,
the Court considers the letter of petitioner's Chairman of the Board and its President
addressed to their stockholders, which states that the CBA "for the rank-and-file
employees covering the period December 1, 1995 to November 30, 1997 is still with
the Supreme Court,"20 as indicative of petitioner's recognition that the CBA award
covers the said period. Earlier, petitioner's negotiating panel transmitted to the Union
a copy of its proposed CBA covering the same period inclusive.21 In addition,
petitioner does not dispute the allegation that in the past CBA arbitral awards, the
Secretary granted retroactivity commencing from the period immediately following
the last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no
reason to retroact the subject CBA awards to a different date. The period is herein
set at two (2) years from December 1, 1995 to November 30, 1997.
(30) days as granted by the Secretary of Labor and affirmed in the Decision of this
Court.
The added requirement of consultation imposed by the Secretary in cases of
contracting out for six (6) months or more has been rejected by the Court. Suffice it
to say that the employer is allowed to contract out services for six months or more.
However, a line must be drawn between management prerogatives regarding
business operationsper se and those which affect the rights of employees, and in
treating the latter, the employer should see to it that its employees are at least
properly informed of its decision or modes of action in order to attain a harmonious
labor-management relationship and enlighten the workers concerning their
rights.23 Hiring of workers is within the employer's inherent freedom to regulate and
is a valid exercise of its management prerogative subject only to special laws and
agreements on the matter and the fair standards of justice.24 The management
cannot be denied the faculty of promoting efficiency and attaining economy by a study
of what units are essential for its operation. It has the ultimate determination of
whether services should be performed by its personnel or contracted to outside
agencies. While there should be mutual consultation, eventually deference is to be
paid to what management decides.25 Contracting out of services is an exercise of
business judgment or management prerogative.26 Absent proof that management
acted in a malicious or arbitrary manner, the Court will not interfere with the exercise
of judgment by an employer.27 As mentioned in the January 27, 1999 Decision, the
law already sufficiently regulates this matter.28 Jurisprudence also provides adequate
limitations, such that the employer must be motivated by good faith and the
contracting out should not be resorted to circumvent the law or must not have been
the result of malicious or arbitrary actions.29 These are matters that may be
categorically determined only when an actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed
Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December
1, 1995 to November 30, 1997; and (2) the award of wage is increased from the
original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand
Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the
monetary advances granted by petitioner to its rank-and-file employees during the
pendency of this case assuming such advances had actually been distributed to them.
The assailed Decision is AFFIRMED in all other respects.SO ORDERED.

On the allegation concerning the grant of loan to a cooperative, there is no merit in

the union's claim that it is no different from housing loans granted by the employer.
The award of loans for housing is justified because it pertains to a basic necessity of
life. It is part of a privilege recognized by the employer and allowed by law. In contrast,
providing seed money for the establishment of the employee's cooperative is a matter
in which the employer has no business interest or legal obligation. Courts should not
be utilized as a tool to compel any person to grant loans to another nor to force parties
to undertake an obligation without justification. On the contrary, it is the government
that has the obligation to render financial assistance to cooperatives and the
Cooperative Code does not make it an obligation of the employer or any private
individual.22

Anent the 40-day union leave, the Court finds that the same is a typographical error.
In order to avoid any confusion, it is herein declared that the union leave is only thirty

19 | A M C V B - L A B S T A N
6. PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC.
(PESALA), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
ANGEL V. ESQUEJO, respondent.
[G.R. No. 105963. August 22, 1996]
DECISION
PANGANIBAN, J.:
Is an employee entitled to overtime pay for work rendered in excess of eight hours
a day, given the fact that his employment contract specifies a twelve-hour workday
at a fixed monthly salary rate that is above the legal minimum wage? This is the
principal question answered by this Court in resolving this petition which challenges
the validity and legality of the Decision[1] of public respondent National Labor
Relations Commission[2] promulgated on April 23, 1992 in NLRC NCR CA No. 002522-
91 entitled Angel V. Esquejo vs. PAL Employees Savings and Loan Association which
Decision modified (slightly as to amount) the earlier decision[3] dated November 11,
1991 of the labor arbiter granting private respondents claim for overtime pay.
The Facts and the Case Below
On October 10, 1990, private respondent filed with public respondent a complaint
docketed as NLRC NCR Case No. 10-05457-90 for non-payment of overtime pay and
non-payment of the P25.00 statutory minimum wage increase mandated by Republic
Act No. 6727.
Subsequently, private respondent filed a supplemental complaint for illegal
suspension with prayer for reinstatement and payment of backwages. However,
before the case was submitted for resolution, private respondent filed a Motion to
Withdraw Supplemental Complaint on the ground that a separate action for illegal
suspension, illegal dismissal, etc. had been filed and was pending before another labor
arbiter. Hence, the issue decided by public respondent and which is under review by
this Court in this petition involves only his claim for overtime pay.
On November 26, 1990, private respondent filed his position paper [4] with the
labor arbiter alleging the following facts constituting his cause of action:
Complainant (herein private respondent) started working with respondent
(PESALA) sometime last March 1, 1986 as a company guard and was receiving a
monthly basic salary of P1,990.00 plus an emergency allowance in the amount of
P510.00. He was required to work a (sic) twelve (12) hours a day, a (sic) xerox copies
of his appointment are hereto attached and marked as Annexes C and D of this
position paper;
That on December 10, 1986, respondent Board of Directors in its board meeting
held on November 21, 1986 approved a salary adjustment for the complainant
increasing his monthly basic salary to P2,310.00 and an emergency allowance of
P510.00, a xerox copy of the salary adjustment is hereto attached and marked as
Annex E hereof;
That on August 25, 1987, because of his impressive performance on his assigned
job, another adjustment was approved by the President of the association increasing
his monthly basic salary to P2,880.00, a xerox copy of the salary adjustment is hereto
attached and marked as Annex F hereof;
That from January 4, 1988 up to June 1990, several salary adjustments were made
by the respondent on the monthly basic salary of the complainant including a letter
of appreciation for being as (sic) one of the outstanding performers during the first
half of 1988, the latest salary prior to the filing of the complaint was P3,720.00, a
(sic) xerox copies of all the documents relative to the salary adjustments are hereto
attached and marked as annexes G, H, I, J and K of this position paper;
That during his entire period of employment with respondent, the former was
required to perform overtime work without any additional compensation from the
latter. It was also at this point wherein the respondent refused to give the P25.00
increase on the minimum wage rates as provided for by law. On October 12, 1990,
complainant was suspended for the period of thirty seven (37) days for an offense
allegedly committed by the respondent sometime last August 1989.
On December 13, 1990, petitioner PESALA filed its position paper[5] alleging
among other things:
On 01 March, 1986, complainant was appointed in a permanent status as the
company guard of respondent. In the Appointment Memorandum dated February 24,
1986 which has the conformity of complainant, it is expressly stipulated therein that
complainant is to receive a monthly salary of P1,900.00 plus P510.00 emergency
allowance for a twelve (12) hours work per day with one (1) day off. A copy of said
appointment memorandum is hereto attached as Annex A and made an integral part
hereof.
On 01 December, 1986, the monthly salary of complainant was increased to
P2,310.00 plus P510.00 emergency allowance. Later, or on 01 January, 1988, the
monthly salary of complainant was again increased to P3,420.00. And still later, or
on 01 February, 1989, complainants monthly salary was increased to P3,720.00.
Copies of the memoranda evidencing said increase are hereto attached as Annexes
B, B-1 and B-2 and are made integral parts hereof.
On 29 November, 1989, the manager of respondent in the person of Sulpicio
Jornales wrote to complainant informing the latter that the position of a guard will be
abolished effective November 30, 1989, and that complainant will be re-assigned to
the position of a ledger custodian effective December 1, 1989.
Pursuant to the above-mentioned letter-agreement of Mr. Jornales, complainant
was formally appointed by respondent as its ledger custodian on December 1,
1989. The monthly salary of complainant as ledger custodian starting on December
20 | A M C V B - L A B S T A N
1, 1989 was P3,720.00 for forty (40) working hours a week or eight (8) working hours
a day. A copy of said Appointment memorandum is hereto attached as Annex C and
made an integral part hereof.
On 29 August, 1990, complainant was administratively charged with serious
misconduct or disobedience of the lawful orders of respondent or its officers, and
gross and habitual neglect of his duties, committed as follows:
1. Sometime in August, 1989, you (referring to complainant Esquejo) forwarded
the checks corresponding to the withdrawals of Mr. Jose Jimenez and Mr.
Anselmo dela Banda of Davao and Iloilo Station, respectively, without the
signature of the Treasurer and the President of PESALA, in violation of your
duty and function that you should see to it that the said checks should be
properly signed by the two PESALA officials before you send out said
checks of their addresses. As a result of which, there was a substantial
delay in the transmission of the checks to its owners resulting to an
embarrassment on the part of the PESALA officers and damage and injury
to the receipients (sic) of the checks since they needed the money badly.
2. Sometime in August, 1989, before you (complainant) went on your vacation,
you failed to leave or surrender the keys of the office, especially the keys
to the main and back doors which resulted to damage, injury and
embarrassment to PESALA. This is a gross violation of your assigned duties
and you disobeyed the instruction of your Superior.
xxx xxx xxx
Herein complainant was informed of the aforequoted charges against him and was
given the opportunity to be heard and present evidence in his behalf as shown by the
Notice of Hearing (Annex D hereof) sent to him. Complainant did in fact appeared
(sic) at the hearing, assisted by his counsel, Atty. Mahinardo G. Mailig, and presented
his evidence in the form of a Counter-Affidavit. A copy of said Counter-Affidavit is
hereto attached as Annex E and made an integral part hereof.
On 12 October, 1990, after due deliberation on the merits of the administrative
charges filed against herein complainant, the Investigating Officer in the person of
Capt. Rogelio Enverga resolved the same imposing a penalty of suspension of herein
complainant, thus:
PENALTY: 1. For the first offense, you (referring to complainant Esquejo) are
suspended for a period of thirty (30) working days without
pay effective October 15, 1990.
2. For the second offense, your (sic) are suspended for a period of seven (7)
working days without pay effective from the date the first
suspension will expire.
On March 7, 1991, private respondent filed a detailed and itemized computation
of his money claims totaling P107,495.90, to which petitioner filed its comment on
April 28, 1991. The computation filed on March 7, 1991 was later reduced to
P65,302.80. To such revised computation, the petitioner submitted its comment on
April 28, 1991.
Thereafter, labor arbiter Cornelio L. Linsangan rendered a decision dated
November 11, 1991 granting overtime pay as follows:
WHEREFORE, judgment is hereby rendered:
1. Granting the claim for overtime pay covering the period October 10,
1987 to November 30, 1989 in the amount of P28,344.55.
2. The claim for non-payment of P25.00 salary increase pursuant to
Republic Act No. 6727 is dismissed for lack of merit.
Aggrieved by the aforesaid decision, petitioner appealed to public
respondent NLRC only to be rejected on April 23, 1992 via the herein assailed
Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the award is reduced to an amount of TWENTY
EIGHT THOUSAND SIXTY-SIX PESOS AND 45/100 (P28,066.45). In all other respects,
the Decision under review is hereby AFFIRMED and the appeal DISMISSED for lack of
merit.
No motion for reconsideration of the Decision was filed by the petitioner.[6]
What transpired afterwards is narrated by the Solicitor General in his
memorandum,[7] which we presume to be correct since petitioner did not contradict
the same in its memorandum:
x x x Petitioner did not appeal the Decision of respondent NLRC. When it became
final, the parties were called to a conference on June 29, 1992 to determine the
possibility of the parties voluntary compliance with the Decision (Order of Labor
Arbiter Linsangan, dated July 23, 1992).
x x x In their second conference, held on July 15, 1992, petitioner proposed to
private respondent a package compromise agreement in settlement of all pending
claims. Private respondent for his part demanded P150,000.00 as settlement of his
complaint which was turned down by petitioner as too excessive. Unfortunately, no
positive results were achieved.
As a result, a pleading was filed by petitioner captioned: Motion to Defer Execution
and Motion to Re-Compute alleged overtime pay. Petitioner states that quite recently,
the Employee Payroll Sheets pertaining to the salaries, overtime pay, vacation and
sick leave of Angel Esquejo were located.
x x x Petitioners Motion to Defer Execution and Motion to Re-Compute respondents
overtime pay was denied in an Order dated July 23, 1992.
x x x Petitioner moved to reconsider the Denial Order on July 27, 1992. Private
respondent opposed.
21 | A M C V B - L A B S T A N
 In the meantime, petitioner filed the instant special civil action for certiorari before
this Court on July 10, 1992. Later, on July 17, 1992, citing as reason that x x x quite
recently, the Employee Payroll Sheets which contained the salaries and overtime pay
received by respondent Esquejo were located in the bodega of the petitioner and
based on said Payroll Sheets, it appears that substantial overtime pay have been paid
to respondent Esquejo in the amount of P24,283.22 for the period starting January
1987 up to November 1989, petitioner asked this Court for the issuance of a
temporary restraining order or writ of preliminary injunction. On the same date of
July 17, 1992, a Supplemental Petition Based On Newly Discovered Evidence was filed
by petitioner to which was attached photocopies of payroll sheets of the aforestated
period.
On July 29, 1992, this Court issued a temporary restraining order enjoining the
respondents from enforcing the Decision dated April 23, 1992 issued in NLRC NCR CA
No. 002522-91, the case below subject of the instant petition.
The Issues
For issues have been raised by the petitioner in its effort to obtain a reversal of
the assailed Decision, to wit:
I comply with the mandatory requirement of filing a motion for reconsideration from
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION WHEN IT
RULED THAT PRIVATE RESPONDENT IS ENTITLED TO OVERTIME PAY WHEN THE
SAME IS A GROSS CONTRAVENTION OF THE CONTRACT OF EMPLOYMENT BETWEEN
PETITIONER AND RESPONDENT ESQUEJO AND A PATENT VIOLATION OF ARTICLES
1305, 1306 AND 1159 OF THE CIVIL CODE.
II
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN
AWARDING OVERTIME PAY OF P28,066.45 TO PRIVATE RESPONDENT WHEN THE
SAME IS A CLEAR VIOLATION OF ARTICLE 22 OF THE CIVIL CODE ON UNJUST
ENRICHMENT.
III
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSED OF DISCRETION WHEN IT
RULED THAT PRIVATE RESPONDENT WAS NOT PAID THE OVERTIME PAY BASED ON
THE COMPUTATION OF LABOR ARBITER CORNELIO LINSANGAN WHICH WAS
AFFIRMED BY SAID RESPONDENT NLRC WHEN THE SAME IS NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE AND IT, THEREFORE, VIOLATED THE CARDINAL PRIMARY
RIGHTS OF PETITIONER AS PRESCRIBED IN ANG TIBAY VS. CIR 69 PHIL. 635.
IV
WHETHER OR NOT THE PETITIONERS SUPPLEMENTAL PETITION BASED ON NEWLY
DISCOVERED EVIDENCE MAY BE ADMITTED AS PART OF ITS EVIDENCE IT BEING
VERY VITAL TO THE JUDICIOUS DETERMINATION OF THE CASE.(Rollo, p. 367)
In essence the above issues boil down to this query: Is an employee entitled to
overtime pay for work rendered in excess of the regular eight hour day given the fact
that he entered into a contract of labor specifying a work-day of twelve hours at a
fixed monthly rate above the legislative minimum wage?
The Courts Ruling
At the outset, we would like to rectify the statement made by the Solicitor General
that the petitioner did not appeal from the Decision of (public) respondent NLRC. The
elevation of the said case by appeal is not possible. The only remedy available from
an order or decision of the NLRC is a petition for certiorari under Rule 65 of the Rules
of Court alleging lack or excess of jurisdiction or grave abuse of discretion. [8] The
general rule now is that the special civil action of certiorari should be instituted within
a period of three months.[9] Hence, when the petition was filed on July 10, 1992, three
months had not yet elapsed from petitioners receipt of the assailed Decision (should
really be from receipt of the order denying the motion for reconsideration).
However, aside from failing to show clearly grave abuse of discretion on the part
of respondent NLRC, which we shall discuss shortly, the petitioner also failed to
the Decision of the Public respondent before resorting to the remedy of certiorari. We
have previously held that:
x x x. The implementing rules of respondent NLRC are unequivocal in requiring
that a motion for reconsideration of the order, resolution, or decision of respondent
commission should be seasonably filed as a precondition for pursuing any further or
subsequent remedy, otherwise the said order, resolution, or decision shall become
final and executory after ten calendar days from receipts thereof. Obviously, the
rationale therefor is that the law intends to afford the NLRC an opportunity to rectify
such errors or mistakes it may have lapsed into before resort to the courts of justice
can be had. This merely adopts the rule that the function of a motion for
reconsideration is to point to the court the error that it may have committed and to
give it a chance to correct itself.[10]
Additionally, the allegations in the petition clearly show that petitioner failed to file
a motion for reconsideration of the assailed Resolution before filing the instant
petition. As correctly argued by private respondent Rolando Tan, such failure
constitutes a fatal infirmity x x x. The unquestioned rule in his jurisdiction is that
certiorari will lie only if there is no appeal or any other plain, speedy and adequate
remedy in the ordinary course of law against the acts of public respondent. In the
instant case, the plain and adequate remedy expressly provided by law was a motion
22 | A M C V B - L A B S T A N
for reconsideration of the assailed decision, based on palpable or patent errors, to be work.[13] By its computations,[14] petitioner tried to illustrate that private respondent
made under oath and filed within ten (10) calendar days from receipt of the was paid more than the legally required minimum salary then prevailing.
questioned decision. And for failure to avail of the correct remedy expressly provided
by law, petitioner has permitted the subject Resolution to become final and executory To prove its contention, petitioner argues that:
after the lapse of the ten day period within which to file such motion for
reconsideration.[11]
The legal minimum wage prescribed by our statutes, the legally computed
overtime pay and the monthly salaries being paid by petitioner to respondent Esquejo
In brief, the filing of the instant petition was premature and did not toll the running
would show that indeed, the overtime pay has always been absorbed and included in
of the 3 month period. Thus, the assailed Decision became final and executory. On
the said agreed monthly salaries.
this ground alone, this petition must therefore be dismissed.

However, in view of the importance of the substantial query raised in the petition, In 1986, the legal minimum salary of Esquejo is computed as follows (per
we have resolved to decide the case on the merits also. Appointment Memoranda dated February 4, 1986 and June 6, 1986 [Annex C and D
of Annex B of this Petition]):
54 x 314 days
12 months = P1,413.00 monthly salary
The First Issue: Was Overtime Pay Included?
The hourly overtime pay is computed as follows:
The main disagreement between the parties centers on how the contract of
54/8 hours = P6.75 x 4 hrs. = P27.00
employment of the private respondent should be interpreted. The terms and P27.00 x 1.25 = P33.75 x 20 (should be 26) days = P887.50
conditions thereof read as follows:
(should be P877.50)
Date: February 24, 1986 P1,413.00 - legal minimum wage
NAME : ESQUEJO, ANGEL + 887.50(877.50) - legal overtime pay
NATURE OF ACTION : APPOINTMENT
FROM : P2,290.50 - amount due to respondent
POSITION TITLE : COMPANY GUARD Esquejo under the law
TO :
STATUS : PERMANENT P2,500.00 - gross salary of Esquejo per contract
EFFECTIVE DATE : MARCH 1, 1986 -2,290.50
FROM : P1,990.00 per month P 209.50 - Difference (Rollo, p. 371).
plus P510.00 emergency
allowance On the other hand, private respondent in his position paper claims that overtime
SALARY :
TO : pay is not so incorporated and should be considered apart from the P1,990.00 basic
------------------------------ salary.[15]
REMARKS : To confirm permanent
appointment as company We find for the private respondent and uphold the respondent NLRCs ruling that
guard who will render 12 he is entitled to overtime pay.
hours a day with one (1)
day off Based on petitioners own computations, it appears that the basic salary plus
------------------------------ emergency allowance given to private respondent did not actually include the
RECOMMENDED BY: APPROVED BY: overtime pay claimed by private respondent. Following the computations it would
(Signed) (Signed) appear that by adding the legal minimum monthly salary which at the time was
SULPICIO B. JORNALES CATALINO F. BANEZ P1,413.00 and the legal overtime pay P877.50, the total amount due the private
(Signed) respondent as basic salary should have been P2,290.50. By adding the emergency
ANGEL V. ESQUEJO[12] cost of living allowance (ECOLA) of P510.00 as provided by the employment contract,
the total basic salary plus emergency allowance should have amounted to P2,800.50.
Petitioner faults the public respondent when it said that there was no meeting of
However, petitioner admitted that it actually paid private respondent P1,990.00 as
minds between the parties, since the employment contract explicitly states without
basic salary plus P510.00 emergency allowance or a total of only
any equivocation that the overtime pay for work rendered for four (4) hours in excess
P2,500.00. Undoubtedly, private respondent was shortchanged in the amount of
of the eight (8) hour regular working period is already included in the P1,990.00 basic
P300.50. Petitioners own computations thus clearly establish that private respondents
salary. This is very clear from the fact that the appointment states 12 hours a day
claim for overtime pay is valid.
23 | A M C V B - L A B S T A N
Side Issue: Meeting of the Minds?
The petitioner contends that the employment contract between itself and the
private respondent perfectly satisfies the requirements of Article 1305 of the Civil
Code as to the meeting of the minds such that there was a legal and valid contract
entered into by the parties. Thus, private respondent cannot be allowed to question
the said salary arrangements for the extra 4 hours overtime pay after the lapse of 4
years and claim only now that the same is not included in the terms of the
employment contract.[16]
We disagree. Public respondent correctly found no such agreement as to overtime
pay. In fact, the contract was definite only as to the number of hours of work to be
rendered but vague as to what is covered by the salary stipulated. Such ambiguity
was resolved by the public respondent, thus:
In resolving the issue of whether or not complainants overtime pay for the four (4)
hours of work rendered in excess of the normal eight hour work period is incorporated
in the computation of his monthly salary, respondent invokes its contract of
employment with the complainant. Said contract appears to be in the nature of a
document identifiable as an appointment memorandum which took effect on March 1,
1986 (Records, p. 56) by virtue of which complainant expressed conformity to his
appointment as company guard with a work period of twelve (12) hours a day with
one (1) day off. Attached to this post is a basic salary of P1,990.00 plus P510.00
emergency allowance. It is (a) cardinal rule in the interpretation of a contract that if
the terms thereof are clear and leave no doubt upon the intention of the contracting
parties, then the literal meaning of its stipulations shall control. (Art. 1370, Civil Code
of the Philippines). To this, respondent seeks refuge. Circumstances, however, do not
allow us to consider this rule in the light of complainants claim for overtime pay which
is an evident indication that as to this matter, it cannot be said that there was a
meeting of the minds between the parties, it appearing that respondent considered
the four (4) hours work in excess of the eight hours as overtime work and
compensated by way of complainants monthly salary while on the latters part, said
work rendered is likewise claimed as overtime work but yet unpaid in view of
complainants being given only his basic salary. Complainant claims that the basic
salary could not possibly include therein the overtime pay for his work rendered in
excess of eight hours. Hence, respondents Appointment Memorandum cannot be
taken and accorded credit as it is so worded in view of this ambiguity. We therefore
proceed to determine the issue in the light of existing law related thereto. While it is
true that the complainant received a salary rate which is higher that the minimum
provided by law, it does not however follow that any additional compensation due the
complainant can be offset by his salary in excess of the minimum, especially in the
absence of an express agreement to that effect. To consider otherwise would be in
disregard of the rule of nondiminution of benefits which are above the minimum being
extended to the employees. Furthermore, such arrangement is likewise in disregard
of the manner required by the law on how overtime compensation must be
determined. There is further the possibility that in view of subsequent increases in
the minimum wage, the existing salary for twelve (12) hours could no longer account
for the increased wage level together with the overtime rate for work rendered in
excess of eight hours. This fertile ground for a violation of a labor standards provision
can be effectively thwarted if there is a clear and definite delineation between an
employees regular and overtime compensation. It is, further noted that a reading of
respondents Appointment Memoranda issued to the complainant on different dates
(Records, pp. 56-60) shows that the salary being referred to by the respondent which
allegedly included complainants overtime pay, partakes of the nature of a basic salary
and as such, does not contemplate any other compensation above thereof including
complainants overtime pay. We therefore affirm complainants entitlement to the
latter benefit.[17]
Petitioner also insists that private respondents delay in asserting his right/claim
demonstrates his agreement to the inclusion of overtime pay in his monthly salary
rate. This argument is specious. First of all, delay cannot be attributed to the private
respondent. He was hired on March 1, 1986. His twelve-hour work periods continued
until November 30, 1989. On October 10, 1990 (just before he was suspended) he
filed his money claims with the labor arbiter. Thus, the public respondent in upholding
the decision of the arbiter computed the money claims for the three year period from
the date the claims were filed, with the computation starting as of October 10, 1987
onwards.
In connection with the foregoing, we should add that even if there had been a
meeting of the minds in the instant case, the employment contract could not have
effectively shielded petitioner from the just and valid claims of private
respondent. Generally speaking, contracts are respected as the law between the
contracting parties, and they may establish such stipulations, clauses, terms and
conditions as they may see fit; and for as long as such agreements are not contrary
to law, morals, good customs, public policy or public order, they shall have the force
of law between them.[18] However, x x x, while it is the inherent and inalienable right
of every man to have the utmost liberty of contracting, and agreements voluntarily
and fairly made will be held valid and enforced in the courts, the general right to
contract is subject to the limitation that the agreement must not be in violation of the
Constitution, the statute or some rule of law (12 Am. Jur. pp. 641-642).[19] And under
the Civil Code, contracts of labor are explicitly subject to the police power of the State
because they are not ordinary contracts but are impressed with public
interest.[20] Inasmuch as in this particular instance the contract is question would have
been deemed in violation of pertinent labor laws, the provisions of said laws would
prevail over the terms of the contract, and private respondent would still be entitled
to overtime pay.
Moreover, we cannot agree with petitioners assertion that by judging the intention
of the parties from their contemporaneous acts it would appear that the failure of
respondent Esquejo to claim such alleged overtime pay since 1986 clearly
demonstrate(s) that the agreement on his gross salary as contained in his
appointment paper is conclusive on the matter of the inclusion of overtime pay. (Rollo,
pp. 13-15; also, Rollo, pp. 378-380). This is simply not the case here. The
interpretation of the provision in question having been put in issue, the Court is
constrained to determine which interpretation is more in accord with the intent of the
parties.[21] To ascertain the intent of the parties, the Court is bound to look at their
contemporaneous and subsequent acts.[22] Private respondents silence and failure to
claim his overtime pay since 1986 cannot be considered as proving the understanding
on his part that the rate provided in his employment contract covers overtime
pay. Precisely, that is the very question raised by private respondent with the arbiter,
because contrary to the claim of petitioner, private respondent believed that he was
not paid his overtime pay and that such pay is not covered by the rate agreed upon
and stated in his Appointment Memorandum. The subsequent act of private
respondent in filing money claims negates the theory that there was clear agreement
as to the inclusion of his overtime pay in the contracted salary rate. When an
employee fails to assert his right immediately upon violation thereof, such failure
cannot ipso facto be deemed as a waiver of the oppression. We must recognize that
the worker and his employer are not equally situated. When a worker keeps silent
inspite of flagrant violations of his rights, it may be because he is seriously fearful of
losing his job. And the dire consequences thereof on his family and his dependents
24 | A M C V B - L A B S T A N
prevent him from complaining. In short, his thoughts of sheer survival weigh heavily
against launching an attack upon his more powerful employer.
The petitioner contends that the agreed salary rate in the employment contract
should be deemed to cover overtime pay, otherwise serious distortions in wages
would result since a mere company guard will be receiving a salary much more that
the salaries of other employees who are much higher in rank and position than him
in the company. (Rollo, p. 16) We find this argument flimsy and undeserving of
consideration. How can paying an employee the overtime pay due him cause serious
distortions in salary rates or scales? And how can other employees be aggrieved when
they did not render any overtime service?
Petitioners allegation that private respondent is guilty of laches is likewise devoid
of merit. Laches is defined as failure or neglect for an unreasonable and unexplained
length of time to do that which, by exercising due diligence, could or should have
been done earlier. It is negligence or omission to assert a right within an unreasonable
time, warranting the presumption that the party entitled to assert it has either
abandoned or declined to assert it.[23] The question of laches is addressed to the sound
discretion of the court, and since it is an equitable doctrine, its application is controlled
by equitable considerations. It cannot work to defeat justice or to perpetrate fraud
and injustice.[24] Laches cannot be charged against any worker when he has not
incurred undue delay in the assertion of his rights. Private respondent filed his
complaint within the three-year reglementary period. He did not sleep on his rights
for an unreasonable length of time.[25]
Second Issue: Unjust Enrichment?
Petitioner contends that the award of overtime pay is plain and simple unjust and
illegal enrichment. Such award in effect sanctioned and approved the grant of
payment to respondent Esquejo which will result in double payment for the overtime
work rendered by paid employee.[26] Also, per petitioner, (n)othing in the Labor Code
nor in the Rules and Regulations issued in the implementation thereof prohibits the
manner of paying the overtime pay (by) including the same in the salary.[27]
This is begging the issue. To reiterate, the main question raised before the labor
tribunals is whether the provision on wages in the contract of employment already
included the overtime pay for four (4) working hours rendered six days a week in
excess of the regular eight-hour work. And we hold that the tribunals below were
correct in ruling that the stipulated pay did not include overtime. Hence, there can be
no undue enrichment in claiming what legally belongs to private respondent.
Third Issue: Basis of NLRCs Decision?
Petitioner assails respondent NLRC for adopting that portion of the decision of the
labor arbiter, which reads as follows:
x x x Our conclusion is quite clear considering the fact that at the time of his
employment in March 1986, during which the minimum wage was P37.00 a day for 8
hours work, complainants total take-home-pay working 12 hours a day including
ECOLA, was only P2,500.00 a month. And immediately prior to his appointment as
Ledger Custodian effective December 1, 1989, with the working hours reduced to 8
hours or 40 hours a week, complainants monthly salary was P3,420.00 (instead of
P5,161.01 minimum monthly with 4 hours overtime work everyday, or a difference
of P1,741.01 a month).
Accordingly, the claim for overtime pay reckoned from October 10, 1987 up to
November 30, 1989 should be, as it is hereby, granted.[28] (Rollo, p. 201).
Petitioner believes that by adopting the above-quoted portion of the arbiters
decision, respondent NLRC violated the cardinal rule that its decisions must be
supported by substantial evidence. In doing so, petitioner claims that
the NLRC violated its primary rights as enunciated in the case of Ang Tibay
vs. CIR.[29] In other words, petitioner holds the view that the arbiters decision failed
to explain how the amount of P5,161.01 was arrived at.[30]
Petitioner is in error. The public respondent did not adopt in toto the aforequoted
portion of the arbiters decision. It made its own computations and arrived at a slightly
different amount, with a difference of P278.10 from the award granted by the labor
arbiter. To refute petitioners claim, public respondent attached (as Annexes 1, 1-A 1-
B and 1-C) to its Comment, the computations made by the labor arbiter in arriving at
the sum of P5,161.00. On the other hand, public respondent made its own
computation in its assailed Decision and arrived at a slightly different figure from that
computed by the labor arbiter:
Respondent claims that the award of P28,344.55 is bereft of any factual basis.
Records show that as per computation of the office of the Fiscal Examiner, (Records,
p. 116) the said amount was arrived at.The computation was however based on the
assumption that the complainant regularly reported for work. Records however show
that the complainant absented himself from work for one day in August 1989.(Records,
p. 63) For this unworked day, no overtime pay must be due. As to the rest of his
period of employment subject to the three year limitation rule which dates from
October 10, 1987 up to his appointment as Ledger Custodian on December 1, 1989
after which is regular work period was already reduced to eight hours, there being no
showing that the complainant absented himself from work, and he being then required
to work for a period of twelve hours daily, We therefore rule on complainants
entitlement to overtime compensation for the duration of the aforesaid period in
excess of one working day.Consequently, complainants overtime pay shall be
computed as follows:
OVERTIME PAY: (4 HRS/DAY)
October 10, 1987 December 13, 1987 = 2.10 mos.
P54/8 hrs. = P6.75 x 4 hrs. = P27.00
P27 x 1.25 = P33.75 x 26 x 2.10 mos. = P1,842.75
December 14, 1987 June 30, 1989 = 18.53 mos.
P64/8 hrs. = P8 x 4 hrs. = P32.00
P32 x 1.25 = P40 x 26 x 18.53 = P19,271.20
July 1, 1989 November 30, 1989 = 5 mos.
P89/8 hrs. = P11.12 x 4 hrs. = P44.50
P44.50 x 1.25 = P55.62 x 25 x 5 mos. = P6,952.50(P6,953.125)
TOTAL OVERTIME PAY
P28,066.45(P28,067.075) (Rollo, pp. 210-212).
Prescinding therefrom, it is evident that petitioner had no basis to argue that
respondent NLRC committed any grave abuse of discretion in quoting the questioned
portion of the labor arbiters holding.
Fourth Issue: Newly Discovered Evidence?
In its Supplemental Petition filed on July 17, 1996, petitioner alleges in part:
2. That only recently, the petitioner was able to locate the Employees Payroll
Sheets which contained the salaries, overtime pay, vacation and sick leaves of
respondent Esquejo which pertains to the period starting from January 1, 1987 up to
25 | A M C V B - L A B S T A N
November 1989. Therefore, said total amount of overtime pay paid to and received
by respondent Esquejo should be deducted from the computed amount of P28,066.45
based on the questioned decision. (Rollo, p. 220).

Contrary to petitioners claim however, said documents consisting of payroll sheets,

cannot be considered as newly-discovered evidence since said papers were in its
custody and possession all along, petitioner being the employer of private respondent.

Furthermore, petitioner offers no satisfactory explanation why these documents

were unavailable at the time the case was being heard by the labor arbiter. In its
Memorandum, petitioner excused itself for its failure to present such evidence before
the labor arbiter and respondent NLRC by saying that petitioner(s office) appeared to
be in disorder or in a state of confusion since the then officers (of petitioner) were
disqualified by the Monetary Board on grounds of misappropriation of funds of the
association and other serious irregularities. There was no formal turn-over of the
documents from the disqualified set of officers to the new officers of petitioner.[31] We
find such excuse weak and unacceptable, the same not being substantiated by any
evidence on record. Moreover, payroll records are normally not in the direct custody
and possession of corporate officers but of their subordinates, i.e., payroll clerks and
the like. In the normal course of business, such payroll sheets are not the subject of
formal turnovers by outgoing officers to their successors in office. And if indeed it is
true that petitioner had been looking for such records or documents during the
pendency of the case with the labor arbiter and with public respondent, petitioner
never alleged such search before the said labor tribunals a quo. Hence, such bare
allegations of facts cannot now be fairly appreciated in this petition for certiorari,
which is concerned only with grave abuse of discretion or lack (or excess) of
jurisdiction.

The Solicitor General quotes with approval a portion of private respondents

Opposition to petitioners motion for reconsideration thus:

It is clear from the payroll, although the substantial pages thereof do not show
that the net amount indicated therein have been received or duly acknowledged to
have been received by the complainant, THAT OVERTIME PAYMENTS THAT WERE
MADE REFER TO WORK RENDERED DURING COMPLAINANTS OFF DAYS. What has
been rightfully claimed by the complainant and awarded by this Honorable Office is
the overtime works (sic) rendered by the complainant daily for six (6) days a week
computed at four (4) hours per day. This computation is based on the evidence thus
submitted by the parties. All appointments issued by the respondent carries (sic) with
it (sic) that the basic salary of the complainant is equivalent to 12 hours work
everyday for six (6) days a week, hence, the four (4) hours overtime daily was not
considered and therefore not paid by the respondent. (Rollo, p. 327).

It has been consistently held that factual issues are not proper subjects of a
petition for certiorari, as the power of the Supreme Court to review labor cases is
limited to questions of jurisdiction and grave abuse of discretion.[32] The introduction
in this petition of so-called newly discovered evidence is unwarranted. This Court is
not a trier of facts and it is not its function to examine and evaluate the evidence the
evidence presented (or which ought to have been presented) in the tribunals below.[33]

WHEREFORE, in view of the foregoing considerations, the Petition is DISMISSED,

the temporary restraining order issued on July 30, 1992 LIFTED, and the assailed
decision of the public respondent AFFIRMED. Costs against petitioner.
SO ORDERED.

26 | A M C V B - L A B S T A N
 7. INNODATA PHILIPPINES, INC., v JOCELYN L. QUEJADA-LOPEZ 1998 and the case of Joaquin Servidad vs. National Labor Relations
and ESTELLA G. NATIVIDAD PASCUAL Commission, et al., G.R. No. 128682 dated March 18, 1999, arguing
October 12, 2006 that the Highest Court has already ruled with finality that the nature
of employment at [petitioner] corporation is regular and not on a
fixed term basis, as the job in the company is necessary and
DECISION desirable to the usual business of the corporation.

On the other hand, [petitioner] contends that [respondents]

PANGANIBAN, CJ: employment contracts expired, for [these were] only for a fixed
A contract that misuses a purported fixed-term employment to block the acquisition period of one (1) year. [Petitioner] company further invoked
the Brent School case by saying that since the period expired,
of tenure by the employees deserves to be struck down for being contrary to law,
[respondents] employment was likewise terminated.
morals, good customs, public order and public policy.
After examination of the pleadings filed, Labor
Arbiter Donato G. Quinto rendered a judgment in favor of
The Case complainants, the dispositive portion of which reads:
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to
WHEREFORE, foregoing premises
reverse the September 18, 2003 Decision[2] of the Court of Appeals (CA) in CA-GR SP considered, judgment is hereby
rendered:
No. 73416, as well as its March 15, 2004 Resolution[3] denying petitioners Motion for
Reconsideration. The decretal portion of the Decision states: (1) Holding
complainants Estella
G. Natividad and
WHEREFORE, the challenged decision of November 27,
Jocelyn Quejada to
2001 and resolution of July 22, 2002 of the National Labor Relations
have been illegally
Commission are SET ASIDE, and the decision of the Labor Arbiter
dismissed by
of December 29, 1999 in NLRC NCR CASE NO. 00-03-02732-98
[Petitioners] Innodata
is REINSTATED and AFFIRMED in all respect.[4]
Philippines
Incorporated
and Innodata Processi
ng Corporation and
ordering said
The Facts
[petitioners] to
reinstate them to their
The factual antecedents are narrated by the CA as follows: former position
without los[s] of
Innodata Philippines, Inc., is engaged in the encoding/data seniority rights, or to a
conversion business. It employs encoders, indexers, formatters, substantially
programmers, quality/quantity staff, and others, to maintain its equivalent position,
business and do the job orders of its clients. and to pay them
Estrella G. Natividad and Jocelyn L. Quejada were employed as jointly and
formatters by Innodata Philippines, Inc. They [worked] from March severally, backwages
4, 1997, until their separation on March 3, 1998. computed from the
time they were
Claiming that their job was necessary and desirable to the usual illegally dismissed on
business of the company which is data processing/conversion and March 3, 1998 up to
that their employment is regular pursuant to Article 280 of the the date of this
Labor Code, [respondents] filed a complaint for illegal dismissal and decision in the amount
for damages as well as for attorneys fees against Innodata Phils., of P112,535.28 EACH,
Incorporated, Innodata Processing Corporation and Todd or in the total amount
Solomon. [Respondents] further invoke the stare decicis doctrine in of P225,070.56 for
the case of Juanito Villanueva vs. National Labor Relations the two of them;
Commission, et al., G.R. No. 127448 dated September 17,

27 | A M C V B - L A B S T A N
 (2) Further, Whether or not the Court of Appeals committed serious reversible
[petitioners] are error when it failed to take into consideration the nature of the
ordered to pay, jointly business of petitioner vis--vis its resort to fixed-term employment
and severally, contracts.
[respondents]
attorneys fees in the III
amount equivalent to
10% of their Whether or not the Court of Appeals seriously erred when it failed
respective awards; to consider the fixed-term employment contracts between
and petitioner and respondents as valid.

(3) All other claims IV

are hereby dismissed
for lack of merit. Whether or not the Court of Appeals seriously erred when it held
that regularity of employment is always premised on the fact that
SO ORDERED. it is directly related to the business of the employer.

Not satisfied, [petitioner] corporation interposed an appeal in the V

National Labor Relations Commission, which reversed and set aside
the Labor Arbiters decision and dismissed [respondents] complaint
for lack of merit. It declared that the contract between [respondents]
and [petitioner] company was for a fixed term and therefore, the
dismissal of [respondents], at the end of their one year term agreed
upon, was valid.
Whether or not the Court of Appeals committed serious reversible
error in setting aside the Decision of the National Labor Relations
Commission, dated 27 November 2001 and Resolution of 22 July
2002, respectively[,] and reinstated the decision of the Labor
Arbiter dated 29 December 1999.[7]

A motion for reconsideration was filed but was denied in an order The foregoing issues may be reduced into one question: whether the alleged fixed-
dated July 22, 2002.[5] term employment contracts entered into by petitioner and respondents are valid.

The Courts Ruling

Ruling of the Court of Appeals
The Petition has no merit.
The CA ruled that respondents were regular employees in accordance with Section
280 of the Labor Code. It said that the fixed-term contract prepared by petitioner was Sole Issue:
Validity of the Fixed-Term Contract
a crude attempt to circumvent respondents right to security of tenure.
Hence, this Petition.[6]
Petitioner contends that the regularity of the employment of respondents does not
Issues
depend on whether their task may be necessary or desirable in the usual business of
Petitioner raises the followings issues for the Courts consideration: the employer. It argues that the use of fixed-term employment contracts has long
been recognized by this Court.

I Petitioner adds that Villanueva v. NLRC[8] and Servidad v. NLRC[9] do not apply to the
Whether or not the Court of Appeals committed serious reversible
error when it did not take into consideration that fixed-term
employment contracts are valid under the law and prevailing
jurisprudence.
present factual circumstances. These earlier cases struck down the employment
contracts prepared by herein Petitioner Innodata for being devious, but crude,
attempts to circumvent [the employees] right to security of tenure x x x. Petitioner
avers that the present employment contracts it entered into with respondents no
longer contain the so-called double-bladed provisions previously found objectionable
by the Court.
Petitioners contentions have no merit.

II While this Court has recognized the validity of fixed-term employment contracts in a
number of cases,[10] it has consistently emphasized that when the circumstances of a

28 | A M C V B - L A B S T A N
case show that the periods were imposed to block the acquisition of security of tenure,
they should be struck down for being contrary to law, morals, good customs, public
order or public policy.[11]
In a feeble attempt to conform to the earlier rulings of this Court
in Villanueva[12] and Servidad,[13] petitioner has reworded its present employment
contracts. A close scrutiny of the provisions, however, show that the double-bladed
scheme to block the acquisition of tenurial security still exists.
To stress, Servidad struck down the following objectionable contract provisions:
Section 2. This Contract shall be effective for a period of 1 [year]
commencing on May 10, 1994, until May 10, 1995 unless sooner
terminated pursuant to the provisions hereof.
From May 10, 1994 to November 10, 1994, or for a period of six
(6) months, the EMPLOYEE shall be contractual during which the
EMPLOYER can terminate the EMPLOYEES services by serving
written notice to that effect. Such termination shall be immediate,
or at whatever date within the six-month period, as the EMPLOYER
may determine. Should the EMPLOYEE continue his employment
beyond November 10, 1994, he shall become a regular employee
upon demonstration of sufficient skill in the terms of his ability to
meet the standards set by the EMPLOYER. If the EMPLOYEE fails to
demonstrate the ability to master his task during the first six
months he can be placed on probation for another six (6) months
after which he will be evaluated for promotion as a regular
employee.[14]
In comparison, the pertinent portions of the present employment contracts in dispute
read as follows:
TERM/DURATION
1. The EMPLOYER hereby employs, engages and hires
the EMPLOYEE, and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective March 04,
1997 to March 03, 1998, a period of one (1) year.
xxxxxxxxx
TERMINATION
7.1 This Contract shall automatically terminate on March 03,
1998 without need of notice or demand.
xxxxxxxxx
7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into
this Contract upon his express representation that he/she
is qualified and possesses the skills necessary and
desirable for the position indicated herein. Thus, the
EMPLOYER is hereby granted the right to pre-
terminate this Contract within the first three (3)
months of its duration upon failure of the EMPLOYEE
to meet and pass the qualifications and standards
set by the EMPLOYER and made known to the
EMPLOYEE prior to execution hereof. Failure of the
EMPLOYER to exercise its right hereunder shall be without
prejudice to the automatic termination of
the EMPLOYEEs employment upon the expiration of this
Contract or cancellation thereof for other causes provided
herein and by law.[15] (Emphasis supplied)
Like those in Villanueva and Servidad, the present contracts also provide for two
periods. Aside from the fixed one-year term set in paragraph 1, paragraph 7.4
provides for a three-month period during which petitioner has the right to pre-
terminate the employment for the failure of the employees to meet and pass the
qualifications and standards set by the employer and made known to the employee
prior to their employment. Thus, although couched in ambiguous language,
paragraph 7.4 refers in reality to a probationary period.
Clearly, to avoid regularization, petitioner has again sought to resort alternatively to
probationary employment and employment for a fixed term.Noteworthy is the
following pronouncement of this Court in Servidad:
If the contract was really for a fixed term, the [employer] should
not have been given the discretion to dismiss the [employee] during
the one year period of employment for reasons other than the just
and authorized causes under the Labor Code. Settled is the rule that
an employer can terminate the services of an employee only for
valid and just causes which must be shown by clear and convincing
evidence.
xxxxxxxxx
The language of the contract in dispute is truly a double-bladed
scheme to block the acquisition of the employee
of tenurial security. Thereunder, [the employer] has two options. It
can terminate the employee by reason of expiration of contract, or
it may use failure to meet work standards as the ground for the
employees dismissal. In either case, the tenor of the contract
jeopardizes the right of the worker to security of tenure guaranteed
by the Constitution.[16]
In the interpretation of contracts, obscure words and provisions shall not
favor the party that caused the obscurity.[17] Consequently, the terms of the present
contract should be construed strictly against petitioner, which prepared it.[18]
Article 1700 of the Civil Code declares:
Art. 1700. The relations between capital and labor are not
merely contractual. They are so impressed with public interest that
labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective
29 | A M C V B - L A B S T A N
 bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.

Indeed, a contract of employment is impressed with public interest. For this reason,
provisions of applicable statutes are deemed written into the contract.Hence, the
parties are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each
other.[19] Moreover, in case of doubt, the terms of a contract should be construed in
favor of labor.[20]

Lastly, petitioner claims that it was constrained by the nature of its business to enter
into fixed-term employment contracts with employees assigned to job orders. It
argues that inasmuch as its business is that of a mere service contractor, it relies on
the availability of job orders or undertakings from its clients.Hence, the continuity of
work cannot be ascertained.

Petitioners contentions deserve little consideration.

By their very nature, businesses exist and thrive depending on the continued
patronage of their clients. Thus, to some degree, they are subject to the whims of
clients who may decide to discontinue patronizing their products or services for a
variety of reasons. Being inherent in any enterprise, this entrepreneurial risk may not
be used as an excuse to circumvent labor laws; otherwise, no worker could ever attain
regular employment status.

Finally, it is worth noting that after its past employment contracts had been declared
void by this Court, petitioner was expected to ensure that the subsequent contracts
would already comply with the standards set by law and by this Court. Regrettably,
petitioner failed to do so.

WHEREFORE, the Petition is DENIED, and the assailed Decision and

Resolution are AFFIRMED. Costs against petitioner.

SO ORDERED.

30 | A M C V B - L A B S T A N
8. CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE WORKERS,
vs. CIRTEK ELECTRONICS, INC.,
G.R. No. 190515 November 15, 2010
DECISION
CARPIO MORALES, J.:
Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated
inside the Laguna Technopark, had an existing Collective Bargaining Agreement (CBA)
with Cirtek Employees Labor Union-Federation of Free Workers (petitioner) for the
period January 1, 2001 up to December 31, 2005. Prior to the 3rd year of the CBA,
the parties renegotiated its economic provisions but failed to reach a settlement,
particularly on the issue of wage increases. Petitioner thereupon declared a bargaining
deadlock and filed a Notice of Strike with the National Conciliation and Mediation
Board-Regional Office No. IV (NCMB-RO IV) on April 26, 2004. Respondent, upon the
other hand, filed a Notice of Lockout on June 16, 2004.
While the conciliation proceedings were ongoing, respondent placed seven union
officers including the President, a Vice President, the Secretary and the Chairman of
the Board of Directors under preventive suspension for allegedly spearheading a
boycott of overtime work. The officers were eventually dismissed from employment,
prompting petitioner to file another Notice of Strike which was, after conciliation
meetings, converted to a voluntary arbitration case. The dismissal of the officers was
later found to be legal, hence, petitioner appealed.
In the meantime, as amicable settlement of the CBA was deadlocked, petitioner went
on strike on June 20, 2005. By Order1 dated June 23, 2005, the Secretary of Labor
assumed jurisdiction over the controversy and issued a Return to Work Order which
was complied with.
Before the Secretary of Labor could rule on the controversy, respondent created a
Labor Management Council (LMC) through which it concluded with the remaining
officers of petitioner a Memorandum of Agreement (MOA)2providing for daily wage
increases of ₱6.00 per day effective January 1, 2004 and ₱9.00 per day effective
January 1, 2005. Petitioner submitted the MOA via Motion and Manifestation3 to the
Secretary of Labor, alleging that the remaining officers signed the MOA under
respondent’s assurance that should the Secretary order a higher award of wage
increase, respondent would comply.
By Order4 dated March 16, 2006, the Secretary of Labor resolved the CBA deadlock
by awarding a wage increase of from ₱6.00 to ₱10.00 per day effective January 1,
2004 and from ₱9.00 to ₱15.00 per day effective January 1, 2005, and adopting all
other benefits as embodied in the MOA.
Respondent moved for a reconsideration of the Decision as petitioner’s vice-president
submitted a "Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang
ika-4 ng Agosto 2005,"5 stating that the union members were waiving their rights and
benefits under the Secretary’s Decision. Reconsideration of the Decision was denied
by Resolution6 of August 12, 2008, hence, respondent filed a petition for certiorari
before the Court of Appeals.
By Decision7 of September 24, 2009, the appellate court ruled in favor of respondent
and accordingly set aside the Decision of the Secretary of Labor. It held that the
Secretary of Labor gravely abused his discretion in not respecting the MOA. It did not
give credence to the minutes of the meeting8 that attended the forging of the MOA as
it was not verified, nor to the "Paliwanag"9 submitted by respondent union members
explaining why they signed the MOA as it was not notarized.
Petitioner’s motion for reconsideration having been denied by Resolution10 of
December 2, 2009, the present petition was filed, maintaining that the Secretary of
Labor’s award is in order, being in accord with the parties’ CBA history ─ respondent
having already granted ₱15.00 per day for 2001, ₱10.00 per day for 2002, and ₱10.00
per day for 2003, and that the Secretary has the power to grant awards higher than
what are stated in the CBA.
Respecting the MOA, petitioner posits that it was "surreptitiously entered into [in] bad
faith," it having been forged without the assistance of the Federation of Free Workers
or counsel, adding that respondent could have waited for the Secretary’s resolution
of the pending CBA deadlock or that the MOA could have been concluded before
representatives of the Secretary of Labor.
The relevant issues for resolution are 1) whether the Secretary of Labor is authorized
to give an award higher than that agreed upon in the MOA, and 2) whether the MOA
was entered into and ratified by the remaining officers of petitioner under the
condition, which was not incorporated in the MOA, that respondent would honor the
Secretary of Labor’s award in the event that it is higher.
The Court resolves both issues in the affirmative.
It is well-settled that the Secretary of Labor, in the exercise of his power to assume
jurisdiction under Art. 263 (g)11of the Labor Code, may resolve all issues involved in
the controversy including the award of wage increases and benefits.12 While an
arbitral award cannot per se be categorized as an agreement voluntarily entered into
by the parties because it requires the intervention and imposing power of the State
thru the Secretary of Labor when he assumes jurisdiction, the arbitral award can be
considered an approximation of a collective bargaining agreement which would
otherwise have been entered into by the parties, hence, it has the force and effect of
a valid contract obligation.13
That the arbitral award was higher than that which was purportedly agreed upon in
the MOA is of no moment. For the Secretary, in resolving the CBA deadlock, is not
limited to considering the MOA as basis in computing the wage increases. He could,
as he did, consider the financial documents14 submitted by respondent as well as the
parties’ bargaining history and respondent’s financial outlook and improvements as
stated in its website.15
It bears noting that since the filing and submission of the MOA did not have the effect
of divesting the Secretary of his jurisdiction, or of automatically disposing the
31 | A M C V B - L A B S T A N
controversy, then neither should the provisions of the MOA restrict the Secretary’s
leeway in deciding the matters before him.1avvphi1

The appellate court’s brushing aside of the "Paliwanag" and the minutes of the
meeting that resulted in the conclusion of the MOA because they were not verified
and notarized, thus violating, so the appellate court reasoned, the rules on parol
evidence, does not lie. Like any other rule on evidence, parol evidence should not be
strictly applied in labor cases.

The reliance on the parol evidence rule is misplaced. In labor cases pending before
the Commission or the Labor Arbiter, the rules of evidence prevailing in courts of law
or equity are not controlling. Rules of procedure and evidence are not applied in a
very rigid and technical sense in labor cases. Hence, the Labor Arbiter is not precluded
from accepting and evaluating evidence other than, and even contrary to, what is
stated in the CBA.16(emphasis supplied)

While a contract constitutes the law between the parties, this is so in the present case
with respect to the CBA, not to the MOA in which even the union’s signatories had
expressed reservations thereto. But even assuming arguendo that the MOA is treated
as a new CBA, since it is imbued with public interest, it must be construed liberally
and yield to the common good.

While the terms and conditions of a CBA constitute the law between the parties, it is
not, however, an ordinary contract to which is applied the principles of law governing
ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700
of the Civil Code of the Philippines which governs the relations between labor and
capital, is not merely contractual in nature but impressed with public interest, thus,
it must yield to the common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is negotiated
and purpose which it is intended to serve.17 (emphasis and underscoring supplied)

WHEREFORE, the petition is GRANTED. The Decision dated September 24, 2009 and
the Resolution dated December 2, 2009 of the Court of Appeals are REVERSED and
SET ASIDE and the Order dated March 16, 2006 and Resolution dated August 12,
2008 of the Secretary of Labor are REINSTATED.

SO ORDERED.

32 | A M C V B - L A B S T A N
 9. MISAMIS ORIENTAL II ELECTRIC SERVICE COOPERATIVE (MORESCO
II), Petitioner, v.VIRGILIO M. CAGALAWAN, Respondent.
[G.R. NO. 175170 - September 5, 2012]
DECISION
DEL CASTILLO, J.:
In labor cases, strict adherence with the technical rules is not required.1ςrνll This
literal policy, however, should still conform with the rudiments of equitable principles
of law. For instance, belated submission of evidence may only be allowed if the delay
is adequately justified and the evidence is clearly material to establish the party's
cause.2ςrνllςrνll
By this Petition for Review on Certiorari,3ςrνll petitioner Misamis Oriental II Electric
Service Cooperative (MORESCO II) assails the Decision4ςrνll dated July 26, 2005 of
the Court of Appeals (CA) in CA-G.R. SP No. 84991, which reversed and set aside the
Resolutions dated February 27, 20045ςrνll and April 26, 20046ςrνll of the National
Labor Relations Commission (NLRC), and thereby reinstated the Labor Arbiter s
Decision7ςrνlldated September 30, 2003 pronouncing respondent Virgilio M.
Cagalawan (Cagalawan) to have been constructively dismissed from employment.
Also assailed is the CA Resolution8ςrνll dated September 6, 2006 which denied
MORESCO II s Motion for Reconsideration and granted Cagalawan s Partial Motion for
Reconsideration.
Factual Antecedents
On September 1, 1993, MORESCO II, a rural electric cooperative, hired Cagalawan
as a Disconnection Lineman on a probationary basis. On March 1, 1994 Cagalawan
was appointed to the same post this time on a permanent basis.9ςrνll On July 17,
2001, he was designated as Acting Head of the disconnection crew in Area III sub-
office of MORESCO II in Balingasag, Misamis Oriental (Balingasag sub-office).10ςrνll In
a Memorandum11ςrνll dated May 9, 2002, MORESCO II General Manager Amado B.
Ke-e (Ke-e) transferred Cagalawan to Area I sub-office in Gingoog City, Misamis
Oriental (Gingoog sub-office) as a member of the disconnection crew. Said
memorandum stated that the transfer was done "in the exigency of the service."
In a letter12ςrνll dated May 15, 2002, Cagalawan assailed his transfer claiming he was
effectively demoted from his position as head of the disconnection crew to a mere
member thereof. He also averred that his transfer to the Gingoog sub-office is
inconvenient and prejudicial to him as it would entail additional travel expenses to
and from work. He likewise sought clarification on what kind of exigency exists as to
justify his transfer and why he was the one chosen to be transferred.
In a Memorandum13ςrνll dated May 16, 2002, Ke-e explained that Cagalawan s
transfer was not a demotion since he was holding the position of Disconnection Head
only by mere designation and not by appointment. Ke-e did not, however, state the
basis of the transfer but instead advised Cagalawan to just comply with the order and
not to question management s legitimate prerogative to reassign him.
In reply, Cagalawan claimed that he was transferred because he executed an
Affidavit14ςrνll in support of his co-employee Jessie Rances, who filed an illegal
dismissal case against MORESCO II.15ςrνll He emphasized though that his action was
not an act of disloyalty to MORESCO II, contrary to what was being accused of him.
Nonetheless, Cagalawan still reported for work at Gingoog sub-office on May 27, 2002
but reserved his right to contest the legality of such transfer.16ςrνllςrνll
Meanwhile and in view of Cagalawan s transfer, Ke-e issued an order17ςrνll recalling
the former s previous designation as Acting Head of the disconnection crew of the
Balingasag sub-office.
Cagalawan eventually stopped reporting for work. On July 1, 2002, he filed a
Complaint for constructive dismissal before the Arbitration branch of the NLRC against
MORESCO II and its officers, Ke-e and Danilo Subrado (Subrado), in their capacities
as General Manager and Board Chairman, respectively.
Proceedings before the Labor Arbiter
When the Labor Arbiter, in an Order18ςrνll dated September 13, 2002, directed the
parties to submit their respective verified position papers, only Cagalawan
complied.19ςrνll He alleged that his transfer was unnecessary and was made only in
retaliation for his having executed an affidavit in favor of a co-worker and against
MORESCO II. In support of his contention, Cagalawan submitted a
certification20ςrνll executed by the Head of the disconnection crew of the Gingoog sub-
office, Teodoro Ortiz (Ortiz), attesting that the said sub-office was not undermanned.
In fact, when Cagalawan stopped working, no other employee was transferred or
hired in his stead, a proof that there were enough disconnection crew members in
Gingoog sub-office who can very well handle the assigned tasks. Moreover,
Cagalawan claimed that his transfer constituted a demotion from his position as Acting
Head of the disconnection crew which he had occupied for almost 10 months. As such,
he should be considered regular in that position and entitled to its corresponding
salary.
Cagalawan further alleged that his transfer from Balingasag to Gingoog sub-office
was tantamount to illegal constructive dismissal for being prejudicial and inconvenient
as he had to spend an additional amount of P 197.0021ςrνll a day, leaving him nothing
of his salary. He therefore had no choice but to stop working.
Aside from reinstatement and backwages, Cagalawan sought to recover damages and
attorney s fees because to him, his transfer was effected in a wanton, fraudulent,
oppressive or malevolent manner. Apart from MORESCO II, he averred that Ke-e and
Subrado should also be held personally liable for damages since the two were guilty
of bad faith in effecting his transfer. He believed that Subrado had a hand in his
arbitrary transfer considering that he is the son-in-law of Subrado s opponent in the
recent election for directorship in the electric cooperative. In fact, Subrado even asked
a certain Cleopatra Moreno Manuel to file a baseless complaint against him as borne
out by the declaration of Bob Abao in an affidavit.22ςrνllςrνll
In view of MORESCO II s failure to file a position paper, Cagalawan filed a
Motion23ςrνll for the issuance of an order to declare the case submitted for decision.
This was granted in an Order24ςrνll dated March 14, 2003.
33 | A M C V B - L A B S T A N
On September 30, 2003, the Labor Arbiter rendered a Decision25ςrνll declaring that
Cagalawan s transfer constituted illegal constructive dismissal. Aside from finding
merit in Cagalawan s uncontroverted allegation that the transfer became grossly
inconvenient for him, the Labor Arbiter found no sufficient reason for his transfer and
that the same was calculated to rid him of his employment, impelled by a vindictive
motive after he executed an Affidavit in favor of a colleague and against MORESCO
II.
Thus, the Labor Arbiter ordered Cagalawan s reinstatement to the position of Collector
and awarded him backwages from the date of his transfer on May 16, 2002 up to his
actual reinstatement. However, the Labor Arbiter denied his prayer for regularization
as head of the disconnection crew since the period of six months which he claimed as
sufficient to acquire regular status applies only to probationary employment. Hence,
the fact that he was acting as head of the disconnection crew for 10 months did not
entitle him to such position on a permanent basis. Moreover, the decision to promote
him to the said position should only come from the management.
With respect to damages, the Labor Arbiter found Ke-e to have acted capriciously in
effecting the transfer, hence, he awarded moral and exemplary damages to
Cagalawan. Attorney s fees was likewise adjudged in his favor.
The dispositive portion of the Decision reads:ςrαlαω
WHEREFORE, premises considered, judgment is rendered declaring the transfer of
complainant as tantamount to constructive dismissal and ordering respondents to
reinstate complainant to his position as collector in Balingasag, Misamis Oriental
without loss of seniority rights and to pay complainant the following:
1. Backwages - P 189,096.00
2. Exemplary damages - P 10,000.00
3. Moral damages - P 20,000.00
4. Attorney's fee 10% - P 21,909.60
GRAND TOTAL AWARD � �P 241,005.60
SO ORDERED.26ςrνllςrνll
chanrobles virtual law library
Proceedings before the National Labor Relations Commissionςηαñrοblεš �νιr†υαl�lαω
�lιbrαrÿ
MORESCO II and Cagalawan both appealed the Labor Arbiter s Decision.chanrobles
virtual law library
In its Memorandum on Appeal,27ςrνll MORESCO II invoked the liberal application of
the rules and prayed for the NLRC to admit its evidence on appeal. MORESCO II
denied that Cagalawan s transfer was done in retaliation for executing an affidavit in
favor of a co-worker. MORESCO II explained that the transfer was in response to the
request of the area manager in Gingoog sub-office for additional personnel in his
assigned area. To substantiate this, it submitted a letter28ςrνll dated May 8, 2002
from Gingoog sub-office Area Manager, Engr. Ronel B. Canada (Engr. Canada),
addressed to Ke-e. In said letter, Engr. Canada requested for two additional
disconnection linemen in order to attain the collection quota allocated in his area.
MORESCO II then averred that as against this letter of Engr. Canada who is a
managerial employee, the certification issued by Ortiz should be considered as
incompetent since the latter is a mere disconnection crew.
Moreover, Cagalawan s claim of additional expenses brought about by his transfer,
specifically for meal and transportation, deserves no appreciation at all since he would
still incur these expenses regardless of his place of assignment and also considering
that he was provided with a rented motorcycle with fuel and oil allowance.
Also, MORESCO II intimated that it has no intention of removing Cagalawan from its
employ especially since his father-in-law was its previous Board Member. In fact, it
was Cagalawan himself who committed an act of insubordination when he abandoned
his job.
In his Reply29ςrνll to MORESCO II s Memorandum of Appeal, Cagalawan averred that
the latter cannot present any evidence for the first time on appeal without giving any
valid reason for its failure to submit its evidence before the Labor Arbiter as provided
under the NLRC rules. Further, the evidence sought to be presented by MORESCO II
is not newly discovered evidence as to warrant its admission on appeal. In particular,
he claimed that the May 8, 2002 letter of Engr. Canada should have been submitted
at the earliest opportunity, that is, before the Labor Arbiter. MORESCO II s failure to
present the same at such time thus raises suspicion that the document was merely
fabricated for the purpose of appeal. Moreover, Cagalawan claimed that if there was
indeed a request from the Area Manager of Gingoog sub-office for additional personnel
as required by the exigency of the service, such reason should have been mentioned
in Ke-e s May 16, 2002 Memorandum. In this way, the transfer would appear to have
a reasonable basis at the outset. However, no such mention was made precisely
because the transfer was without any valid reason.
Anent Cagalawan s partial appeal,30ςrνll he prayed that the decision be modified in
that he should be reinstated as Disconnection Lineman and not as Collector.
The NLRC, through a Resolution31ςrνll dated February 27, 2004, set aside and vacated
the Decision of the Labor Arbiter and dismissed Cagalawan s complaint against
MORESCO II. The NLRC admitted MORESCO II s evidence even if submitted only on
appeal in the interest of substantial justice. It then found said evidence credible in
showing that Cagalawan s transfer to Gingoog sub-office was required in the exigency
of the cooperative s business interest. It also ruled that the transfer did not entail a
demotion in rank and diminution of pay as to constitute constructive dismissal and
thus upheld the right of MORESCO II to transfer Cagalawan in the exercise of its
sound business judgment.
Cagalawan filed a Motion for Reconsideration32ςrνll but the same was denied by the
NLRC in a Resolution33ςrνlldated April 26, 2004.
34 | A M C V B - L A B S T A N
Proceedings before the Court of Appeals
Cagalawan thus filed a Petition for Certiorari34ςrνll with the CA. In a
Decision35ςrνll dated July 26, 2005, the CA found the NLRC to have gravely abused
its discretion in admitting MORESCO II s evidence, citing Section 3, Rule V of the
NLRC Rules of Procedure36ςrνll which prohibits the parties from making new
allegations or cause of action not included in the complaint or position paper, affidavits
and other documents. It held that what MORESCO II presented on appeal was not
just an additional evidence but its entire evidence after the Labor Arbiter rendered a
Decision adverse to it. To the CA, MORESCO II s belated submission of evidence
despite the opportunities given it cannot be countenanced as such practice "defeats
speedy administration of justice" and "smacks of unfairness."ςηαñrοblεš �νιr†υαl
�lαω �lιbrαrÿ
The dispositive portion of the CA Decision reads:ςrαlαω
IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is
reinstated with the modification that if reinstatement of petitioner is not feasible, he
should be paid separation pay in accordance with law.ςηαñrοblεš �νιr†υαl �lαω
�lιbrαrÿ
SO ORDERED.37ςrνllςrνllnrobles virtual law library
MORESCO II filed a Motion for Reconsideration38ςrνll insisting that it may present
evidence for the first time on appeal as the NLRC is not precluded from admitting the
same because technical rules are not binding in labor cases. Besides, of paramount
importance is the opportunity of the other party to rebut or comment on the appeal,
which in this case, was afforded to Cagalawan.
Cagalawan, for his part, filed a Partial Motion for Reconsideration,39ςrνll seeking
modification of the Decision by ordering his reinstatement to the position of
Disconnection Lineman instead of Collector.
In a Resolution ςrνll dated September 6, 2006, the CA maintained its ruling that
40
MORESCO II s unexplained failure to present evidence or submit a position paper
before the Labor Arbiter for almost 12 months from receipt of Cagalawan s position
paper is intolerable and cannot be permitted. Hence, it denied its Motion for
Reconsideration. With respect to Cagalawan s motion, the same was granted by the
CA, viz:ςηαñrοblεš �νιr†υαl �lαω �lιbrαrÿ
Anent petitioner s Partial Motion for Reconsideration, We find the same meritorious.
The records of this case reveal that prior to his constructive dismissal, petitioner was
a Disconnection Lineman, not a Collector, assigned at Balingasag, Misamis Oriental.
Hence, We modify the dispositive portion of Our July 26, 2005 Decision, to
read:ςηαñrοblεš �νιr†υαl �lαω �lιbrαrÿ
IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is
reinstated with modification that petitioner be reinstated to his position as
Disconnection Lineman in Balingasag, Misamis Oriental with further modification that
if reinstatement of petitioner is not feasible, he should be paid separation pay in
accordance with law.41ςrνll (Emphasis in the original.)hanrobles virtual law library
Issues
MORESCO II thus filed this petition raising the following issues:ςrαlαω
(1) Was the respondent constructively dismissed by the petitioner?
(2) Did the Court of Appeals err in reversing the NLRC?42ςrνllςrνllhanrobles virtual law
library
MORESCO II insists that Cagalawan s transfer was necessary in order to attain the
collection quota of the Gingoog sub-office. It contests the credibility of Ortiz s
certification which stated that there was no need for additional personnel in the
Gingoog sub-office. According to it, Ortiz is not a managerial employee but merely a
disconnection crew who is not competent to make declarations in relation to
MORESCO II s business needs. It likewise refutes Cagalawan s claim of incurring
additional expenses due to his transfer which caused him inconvenience. In sum, it
claims that Cagalawan was not constructively dismissed but instead had voluntarily
abandoned his job.
MORESCO II avers that the CA s ruling is not in accordance with jurisprudence on the
matter of admitting evidence on appeal in labor cases. It submits that the NLRC is
correct in accepting its evidence submitted for the first time on appeal in line with the
basic precepts of equity and fairness. The NLRC also correctly ruled in its favor after
properly appreciating its evidence which had been rebutted and contradicted by
Cagalawan.
Our Rulingςηαñrοblεš �νιr†υαl �lαω �lιbrαrÿ
The petition has no merit.anrobles virtual law library
MORESCO II s belated submission of
evidence cannot be permitted.
Labor tribunals, such as the NLRC, are not precluded from receiving evidence
submitted on appeal as technical rules are not binding in cases submitted before
them.43ςrνll However, any delay in the submission of evidence should be adequately
explained and should adequately prove the allegations sought to be proven.44ςrνllςrνll
In the present case, MORESCO II did not cite any reason why it had failed to file its
position paper or present its cause before the Labor Arbiter despite sufficient notice
and time given to do so. Only after an adverse decision was rendered did it present
its defense and rebut the evidence of Cagalawan by alleging that his transfer was
made in response to the letter-request of the area manager of the Gingoog sub-office
asking for additional personnel to meet its collection quota. To our mind, however,
the belated submission of the said letter-request without any valid explanation casts
doubt on its credibility, specially so when the same is not a newly discovered evidence.
For one, the letter-request was dated May 8, 2002 or a day before the memorandum
35 | A M C V B - L A B S T A N
for Cagalawan s transfer was issued. MORESCO II could have easily presented the
letter in the proceedings before the Labor Arbiter for serious examination. Why it was
not presented at the earliest opportunity is a serious question which lends credence
to Cagalawan s theory that it may have just been fabricated for the purpose of appeal.
It should also be recalled that after Cagalawan received the memorandum for his
transfer to the Gingoog sub-office, he immediately questioned the basis thereof
through a letter addressed to Ke-e. If at that time there was already a letter-request
from the Gingoog area manager, Ke-e could have easily referred to or specified this
in his subsequent memorandum of May 16, 2002 which served as his response to
Cagalawan s queries about the transfer. However, the said memorandum was silent
in this respect. Nevertheless, Cagalawan, for his part, faithfully complied with the
transfer order but with the reservation to contest its validity precisely because he was
not adequately informed of its real basis.
The rule is that it is within the ambit of the employer s prerogative to transfer an
employee for valid reasons and according to the requirement of its business, provided
that the transfer does not result in demotion in rank or diminution of salary, benefits
and other privileges.45ςrνll This Court has always considered the management s
prerogative to transfer its employees in pursuit of its legitimate interests. But this
prerogative should be exercised without grave abuse of discretion and with due regard
to the basic elements of justice and fair play, such that if there is a showing that the
transfer was unnecessary or inconvenient and prejudicial to the employee, it cannot
be upheld.46ςrνllςrνll
Here, while we find that the transfer of Cagalawan neither entails any demotion in
rank since he did not have tenurial security over the position of head of the
disconnection crew, nor result to diminution in pay as this was not sufficiently proven
by him, MORESCO II s evidence is nevertheless not enough to show that said transfer
was required by the exigency of the electric cooperative s business interest. Simply
stated, the evidence sought to be admitted by MORESCO II is not substantial to prove
that there was a genuine business urgency that necessitated the transfer.
Notably, the only evidence adduced by MORESCO II to support the legitimacy of the
transfer was the letter-request of Engr. Canada. However, this piece of evidence
cannot in itself sufficiently establish that the Gingoog sub-office was indeed suffering
from losses due to collection deficiency so as to justify the assignment of additional
personnel in the area. Engr. Canada s letter is nothing more than a mere request for
additional personnel to augment the number of disconnection crew assigned in the
area. While it mentioned that the area s collection efficiency should be improved and
that there is a shortage of personnel therein, it is, standing alone, self-serving and
thus cannot be considered as competent evidence to prove the accuracy of the
allegations therein. MORESCO II could have at least presented financial documents
or any other concrete documentary evidence showing that the collection quota of the
Gingoog sub-office has not been met or could not be reached. It should have also
submitted such other documents which would show the lack of sufficient personnel in
the area. Unfortunately, the area manager s letter provides no more than bare
allegations which deserve not even the slightest credit.
When there is doubt between the evidence submitted by the employer and that
submitted by the employee, the scales of justice must be tilted in favor of the
employee.47ςrνll This is consistent with the rule that an employer s cause could only
succeed on the strength of its own evidence and not on the weakness of the employee
s evidence.48ςrνll Thus, MORESCO II cannot rely on the weakness of Ortiz s
certification in order to give more credit to its own evidence. Self-serving and
unsubstantiated declarations are not sufficient where the quantum of evidence
required to establish a fact is substantial evidence, described as more than a mere
scintilla.49ςrνll "The evidence must be real and substantial, and not merely
apparent."50ςrνll MORESCO II has miserably failed to discharge the onus of proving
the validity of Cagalawan s transfer.
Clearly, not only was the delay in the submission of MORESCO II s evidence not
explained, there was also failure on its part to sufficiently support its allegation that
the transfer of Cagalawan was for a legitimate purpose. This being the case,
MORESCO II s plea that its evidence be admitted in the interest of justice does not
deserve any merit.
Ke-e and Subrado, as corporate officers, could not be held personally liable for
Cagalawan s monetary awards.
In the Decision of the Labor Arbiter, the manager of MORESCO II was held to have
acted in an arbitrary manner in effecting Cagalawan s transfer such that moral and
exemplary damages were awarded in the latter s favor. However, the said Decision
did not touch on the issue of bad faith on the part of MORESCO II s officers, namely,
Ke-e and Subrado. Consequently, no pronouncement was made as to whether the
two are also personally liable for Cagalawan s money claims arising from his
constructive dismissal.
Still, we hold that Ke-e and Subrado cannot be held personally liable for Cagalawan s
money claims.
"Bad faith does not simply connote bad judgment or negligence; it imputes a
dishonest purpose or some moral obliquity and conscious doing of a wrong; a breach
of sworn duty through some motive or intent or ill will; it partakes of the nature of
fraud."51ςrνll Here, although we agree with the Labor Arbiter that Ke-e acted in an
arbitrary manner in effecting Cagalawan s transfer, the same, absent any showing of
some dishonest or wrongful purpose, does not amount to bad faith.
Suffice it to say that bad faith must be established clearly and convincingly as the
same is never presumed.52ςrνll Similarly, no bad faith can be presumed from the fact
that Subrado was the opponent of Cagalawan s father-in-law in the election for
directorship in the cooperative. Cagalawan's claim that this was one of the reasons
why he was transferred is a mere allegation without proof. Neither does Subrado 's
alleged instruction to file a complaint against Cagalawan bolster the Iatter's claim that
the former had malicious intention against him. As the Chairman of the Board of
Directors of MORESCO II, Subrado has the duty and obligation to act upon complaints
of its clients. On the contrary, the Court finds that Subrado had no participation
whatsoever in Cagalawan's illegal dismissal; hence. the imputation of bad faith
against him is untenable.
WHEREFORE, the petition is DENIED. The Decision dated July 26, 2005 or the Court
of Appeals in CA-G.R. SP No. 84991 and its Resolution dated September 6, 2006,
are AFFIRMED.ςrSO ORDERED.
36 | A M C V B - L A B S T A N
10. Pp v Vera, 67 phil 190

37 | A M C V B - L A B S T A N