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Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the offices of ATM Marketing Corporation at Room 504,
Concorde Building, Legaspi Village, Makati City, Philippines.19
In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent directed said client
"to please communicate directly with us on any further questions associated with these payments or any future business. Do not
communicate with [Pacfor] and/or [ATM]."20
Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his
employment as resident manager of Pacfor Phils.21 In a memorandum to the employees of Pacfor Phils., dated January 29, 2001, he
stated:
I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all records to them effective December 19, 2000. The
company records were turned over only on January 26, 2001. This means our jobs with Pacific Forest were terminated effective
December 19, 2000. I am concerned about your welfare. I would like to help you by offering you to work with ATM Marketing Corporation.
Please let me know if you are interested.22
On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that he and Pacfor
likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also reiterated his demand for unpaid
commissions, and proposed to offset these with the remaining Christmas giveaway fund in his possession.23 Furthermore, he did not
renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor Phils., wherein he was the signatory to the
lease agreement.24
On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause why no
disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful disobedience and serious
misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged unpaid
commissions. Private respondent also alleged loss of confidence and gross neglect of duty on the part of petitioner for allegedly allowing
another corporation owned by petitioner's relatives, High End Products, Inc. (HEPI), to use the same telephone and facsimile numbers of
Pacfor, to possibly steal and divert the sales and business of private respondent for HEPI's principal, International Forest Products, a
competitor of private respondent.25
Petitioner denied the charges. He reiterated that he considered the import of Pacfor President William Gleason's letters as a "cessation of
his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies
Pacfor Phils.' office premises,26 and demanded payment of his separation pay.27 On February 15, 2001, petitioner filed his complaint for
illegal dismissal, recovery of separation pay, and payment of attorney's fees with the NLRC.28
In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a memorandum dated March 5, 2001, private
respondent directed petitioner to explain why he should not be disciplined for serious misconduct and conflict of interest. Private
respondent charged petitioner anew with serious misconduct for the latter's alleged act of fraud and misrepresentation in authorizing the
release of an additional peso salary for himself, besides the dollar salary agreed upon by the parties. Private respondent also accused
petitioner of disloyalty and representation of conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI.
In addition, petitioner allegedly solicited business for HEPI from a competitor company of private respondent Pacfor.29
Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn over all office
records and materials, regardless of whether he may have retained copies, private respondent Pacfor virtually deprived petitioner of his
job by the gradual diminution of his authority as resident manager. Petitioner's position as resident manager whose duty, among others,
was to maintain the security of its business transactions and communications was rendered meaningless. The dispositive portion of the
decision of the Labor Arbiter reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering herein respondents Cellmark AB and Pacific Forest
Resources, Inc., jointly and severally to compensate complainant Arsenio T. Mendiola separation pay equivalent to at least one month for
every year of service, whichever is higher (sic), as reinstatement is no longer feasible by reason of the strained relations of the parties
equivalent to five (5) months in the amount of $32,000.00 plus the sum of P250,000.00; pay complainant the sum of P500,000.00 as
moral and exemplary damages and ten percent (10%) of the amounts awarded as and for attorney's fees.
All other claims are dismissed for lack of basis.
SO ORDERED.30
Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001, the NLRC set aside the July 30, 2001
decision of the labor arbiter, for lack of jurisdiction and lack of merit.31 It held there was no employer-employee relationship between the
parties. Based on the two agreements between the parties, it concluded that petitioner is not an employee of private respondent Pacfor,
but a full co-owner (50/50 equity).
The NLRC denied petitioner's Motion for Reconsideration.32
Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the NLRC.
Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.
Hence, this appeal.34
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The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would not quit however, private respondent
Pacfor began to systematically deprive petitioner of his duties and benefits to make him feel that his presence in the company was no
longer wanted. First, private respondent Pacfor directed petitioner to turn over to it all records of Pacfor Phils. This would certainly make
the work of petitioner very difficult, if not impossible. Second, private respondent Pacfor ordered petitioner to remit the Christmas
giveaway fund intended for clients of Pacfor Phils. Then it ordered petitioner to transfer title and turn over to it the possession of the
service car. It also advised its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, not to deal with
petitioner and/or Pacfor Phils. Lastly, private respondent Pacfor appointed a new resident agent for Pacfor Phils.45
Although there is no reduction of the salary of petitioner, constructive dismissal is still present because continued employment of
petitioner is rendered, at the very least, unreasonable.46 There is an act of clear discrimination, insensibility or disdain by the employer
that continued employment may become so unbearable on the part of the employee so as to foreclose any choice on his part except to
resign from such employment.47
The harassing acts of the private respondent are unjustified. They were undertaken when petitioner sought clarification from the private
respondent about his supposed 50% equity on Pacfor Phils. Private respondent Pacfor invokes its rights as an owner. Allegedly, its
issuance of the foregoing directives against petitioner was a valid exercise of management prerogative. We remind private respondent
Pacfor that the exercise of management prerogative is not absolute. "By its very nature, encompassing as it could be, management
prerogative must be exercised in good faith and with due regard to the rights of labor verily, with the principles of fair play at heart and
justice in mind." The exercise of management prerogative cannot be utilized as an implement to circumvent our laws and oppress
employees.48
As resident agent of private respondent corporation, petitioner occupied a position involving trust and confidence. In the light of the
strained relations between the parties, the full restoration of an employment relationship based on trust and confidence is no longer
possible. He should be awarded separation pay, in lieu of reinstatement.
IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30,
2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations Commission, are ANNULED and SET ASIDE.
The July 30, 2001 Decision of the Labor Arbiter is REINSTATED with the MODIFICATION that the amount of P250,000.00 representing
an alleged increase in petitioner's salary shall be deducted from the grant of separation pay for lack of evidence.
SO ORDERED.
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