Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
VARORIENT SHIPPING CO., INC., and.,d G.R. No. 161934
ARIA MARITIME CO., LTD.,
Promulgated:
Petitioners,
October 6, 2010

- versus GIL A. FLORES,

Respondent.

x--------------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to set aside the
Decision[1] dated February 28, 2003, of the Court of Appeals (CA) in CA-G.R. SP.
No. 55512, entitled Varorient Shipping Co., Inc. and Aria Maritime Co., Ltd. v.
National Labor Relations Commission, Third Division and Gil A. Flores, which
affirmed with modification the Decision[2] dated May 25, 1999, and
Resolution[3] dated August 18, 1999, of the National Labor Relations Commission
(NLRC) in NLRC CN OCW RAB-IV-9-917-97-C, and its Resolution [4] dated
January 29, 2004, denying petitioners motion for reconsideration thereof. The
assailed CA Decision ordered petitioners Varorient Shipping Co., Inc. and Aria
Maritime Co., Ltd., jointly and severally, to pay respondent Gil A. Flores the
balance of sickness wages in the amount of US$3,790.00, or its peso equivalent at
the time of actual payment, and to reimburse his medical and surgical expenses in
the total amount of P15,373.26, instead of P13,579.76. However, it dismissed all
the other claims of respondent for lack of merit.

The antecedent facts are as follows:

On April 7, 1997, petitioners employed respondent, in behalf of its foreign
principal, Aria Maritime Co., Ltd. of Piraeus, Greece, for the position of Chief
Officer on board M/V Aria, per Contract of Employment [5] dated April 7, 1997,
duly approved by the Philippine Overseas Employment Administration (POEA),
for a period of 12 months, with a basic monthly salary of US$1,200.00 at 48 hours
of work weekly, overtime pay of US$600.00, allowance of US$200.00, and
vacation leave with pay of 30 days a year (or US$100.00 a month) or pro-rata. The
total fixed monthly salary of respondent was US$2,100.00.
On April 16, 1997, he was deployed aboard M/V Aria in Bangkok,
Thailand. During his employment, the master of the vessel sent respondent to the
Centre Medical de Ngodi at Doula, Cameroon, where he was treated for three days
due to the shooting pain in the lower extremities, particularly on his right foot. In
the Medical Certificate[6] dated June 19, 1997, the attending physician, Dr. R.
Mongou Tchouak, stated that he diagnosed respondent's pain on the right foot as
sciatic neuralgia and administered [drips], injection, and acupuncture. Respondent
was declared not fit to work. The doctor recommended respondents repatriation to
the Philippines for continuing treatment.
On June 21, 1997, respondent was repatriated to the Philippines. When he
reported back to work, he was referred to the company physician, Dr. John H.E.
Cusi who, in turn, referred him to Dr. Irene B. Roman-Igual, a neurologist at
Makati Medical Center. On June 30, 1997, respondent was subjected to the
Computed Tomography Scan (CT Scan), which yielded the following results:
CT scan examination of the lumbosacral spine demonstrates a large disc
herniation ventral and right lateral at the L5-S1 level encroaching into
the right neural exit foramina.There is compression of the right nerve
root at the same L5-S1 level.
Smaller disc protrusion is also noted ventral and bilateral at the L4-L5
interspace level obliterating the underlying epidural fatty plane.
The right nerve root appears relatively swollen when compared with the
left at the L5-S1.
The ligamentum flavum, however, is not hypertrophic.
The vertebral bodies, pedicles, laminae, facets and sacro-iliac joints are
intact.
There is straightening of the lumbar curvature, but with no compression
deformities nor spondylolisthesis.

IMPRESSION: Large disc herniation, ventral and right lateral at the L5S1 level with secondary right nerve root compression and edema. Small
disc protrusion also noted ventral and bilateral at the L4-L5. [7]

Dr. Igual observed that the CT scan showed large disc herniation L5-S1 with 2
nerve root compression and edema and recommended respondents confinement for
at least two weeks for P.T. [physical therapy] and medications; if not resolved, may
need surgical decompression.[8]
In a letter[9] to petitioner Varorient dated July 29, 1997, respondent, through
his counsel, stated that due to the gross and evident bad faith of petitioners in
refusing to grant him continued medical assistance until he becomes fit to work, as
recommended by their company doctors, he was forced to seek medical treatment
at his own expense.[10] Respondent demanded that petitioners should provide him
medical treatment and pay him sickness wages and disability compensation, within
five (5) days from receipt of the letter; otherwise, he would be constrained to
institute appropriate legal action against them.
In a Certification[11] dated November 7, 1997, Dr. Copernico J. Villaruel, Jr.,
attending orthopedic surgeon at the Philippine General Hospital, stated that
respondent has been admitted under his care from October 9 to 10, 1997 for
hemilaminectomy and foraminotomy of L4-L5 and L5-SI, due to the pain in his
right foot, and that respondent is now fit to go back to work.
Acting on the endorsement letter[12] dated November 24, 1997 by Labor
Arbiter Pedro C. Ramos, Dr. Francisco A. Estacio, Chief of the Medical and
Rehabilitation Division of the Employees Compensation Commission (ECC),
submitted the Disability Evaluation Report[13] dated December 15, 1997, conducted
on the health condition of respondent, with the following findings:
PHYSICAL EXAMINATION:
- Fairly developed fairly nourished
- Head, Eyes, Ears, Nose, and Throat no abnormal findings
- Heart and lungs no rales and no murmur appreciated
- Abdomen no abnormal finding
- Extremities no limitation of movements, no atrophy of muscles.
DIAGNOSIS:
- Large Herniated Disc L5 S1, with Nerve Roat Compression and Edema
- Small Disc Protrusion, L4 L5

RECOMMENDATION:
Based on ECC Schedule of Compensation, the Complainant deserves to
receive daily income benefit for the loss of income he incurred from
June 1997 to November 1997, plus reimbursement of hospital and
medical expenses for his injury, Herniated Disc.
On September 19, 1997, respondent filed a Complaint [14] against petitioners,
alleging that (1) per his employment contract, he boarded M/V Aria at Bangkok,
Thailand on April 16, 1997; (2) prior to his deployment, he was employed by
petitioner for the past 12 years; (3) during his employment and while in the
performance of his duties, he suffered injuries consisting of large disc herniation,
ventral and right lateral at the L5-S1 level with secondary right and nerve root
compression and edema, small disc protrusion also noted at ventral and bilateral at
the L4-L5; (4) due to petitioners refusal to provide for his medical treatment and
continued failure to pay his sickness wages amounting to US$4,800.00, he was
constrained to provide for his own medical expenses; (5) his injuries constituted
permanent and total disability which, under POEA Memorandum Circular No. 5,
series of 1994, would make petitioners liable for disability benefits under his
employment contract in the amount of US$60,000.00; and (6) his injury or
disability was directly and proximately due to the direct and vicarious acts of
negligence of petitioners and their agents. Respondent prayed that judgment be
rendered, declaring petitioners liable to reimburse his medical and hospital
expenses in the total amount of P103,969.00 and to pay him disability benefits in
the amount of US$60,000.00, sickness wages of US$4,800.00, compensatory
damages of US$604,800.00 (this amount was reduced to US$13,370.00 in his
Position Paper), moral damages of P1,100,000.00, and exemplary damages and
attorneys fees in such an amount as the labor arbiter may deem proper.

In his Position Paper,[15] respondent sought reimbursement of his medical expenses

and asserted that petitioners are liable to pay him sickness wages, compensatory
damages, moral damages, and attorney's fees. However, respondent withdrew his
claim for disability benefits with reservation to re-file a complaint should there be
a recurrence of his injury.
In their Position Paper,[16] petitioners countered that respondent is not entitled to the
benefits arising from his alleged permanent and total disability as he was later
declared to be fit to work per Certification dated November 7, 1997 by Dr.
Copernico J. Villaruel, Jr., the attending orthopedic surgeon at the Philippine
General Hospital; that respondent can no longer seek continuation of his medical
treatment and claim for sickness wages and reimbursement of medical expenses

because upon his repatriation, he had received the amount of US$1,010.00 (or the
equivalent then of about P40,400.00) as settlement for his sickness wages and
other benefits, as evidenced by the Receipt and Quitclaim[17] dated June 25, 1997,
executed by respondent; and that respondent is not entitled to moral and exemplary
damages and attorney's fees. By way of counterclaim, they sought recovery of
litigation expenses, actual damages, and attorney's fees in an amount not less
thanP20,000.00 and, also, exemplary damages in an amount at the discretion of the
labor arbiter.
In their Supplement to Position Paper,[18] petitioners averred that respondent
sought another employment with Tara Trading Shipmanagement, Inc. (for and in
behalf of Amethyst Shipping Co.), on board M/V Luna Azul, for a period of twelve
(12) months, with a basic monthly salary of US$967.00 at 48 hours of work
weekly, overtime pay of US$535.00/month (US$6.24 per hour beyond 105 hours),
and vacation leave with pay of 3 days a year (or US$98.00 a month), as evidenced
by his Contract of Employment,[19] Seafarer Info-Sheet[20] and POEA Overseas
Employment Certificate.[21]
On September 7, 1998, Acting Executive Labor Arbiter Pedro C.
Ramos dismissed respondent's complaint for permanent and total disability
benefits, sickness wages and all other claims and, likewise, petitioners'
counterclaim for damages, for
lack
of
merit. The labor arbiter found that
petitioners have substantially complied withall their obligations to
respondent under the POEA-approved employment contract. He debunked
respondent's claim for permanent and total disability benefits because respondent
had been duly proven and declared to be fit to work not only by the hospital of his
choice, i.e., Philippine General Hospital, but also by the Employees Compensation
Commission (ECC); that respondent withdrew his claim during the pendency of
the proceedings, although with reservation to re-file the same; and that respondent
is now on board M/V Luna Azul on an overseas deployment. He upheld the validity
of the Receipt and Quitclaim executed by respondent and stated that respondent
had received reimbursement of his medical expenses in the amount P4,896.50. He
declared that respondent is no longer entitled to sickness wages as it would amount
to double recovery of benefits, as provided for under Paragraph 11, Section 4 of the
POEA Standard Employment Contract.
On May 25, 1999, the NLRC rendered a Decision which reversed and set
aside the Decision of the labor arbiter. It ruled that respondent is entitled to

sickness wages and to free medical and hospital treatment for the injury he
sustained during the term of his contract, pursuant to Section C 4(b) and (c), Part II
of the Standard Employment Contract Governing All Filipino Seamen On Board
Ocean-Going Vessels, which obligates the employer to: (1) provide continuous
medical treatment to the repatriated injured seaman until such time he is declared
fit or the degree of his disability has been established by the company-designated
physician; and (2) pay the injured seaman one hundred percent (100%) of his basic
wages from the time he leaves the vessel for treatment until he is declared fit to
work, but in no case shall this period exceed 120 days. The NLRC observed that
petitioners cannot be considered to have adequately discharged their obligation in
providing continuous treatment for respondent, as they failed to follow through
their company-designated physicians recommendation, which required respondent
to undergo a two-week confinement and physical therapy and, if the injury remains
unresolved, for respondent to have surgical decompression. As a consequence,
respondent was constrained to seek treatment and surgery from a doctor other than
the company-designated physician. The NLRC also declared that respondent is
entitled to sickness wages equivalent to 120 days in the amount of US$4,800.00,
less the amount of US$1,010.00 which he had received, as full settlement of the
claim from the petitioners, per Receipt and Quitclaim dated June 25, 1997, or a net
total of US$3,790.00. However, the NLRC denied respondent's claim for
compensatory damages, as the contractual benefit of sickness wages provided for
under the Standard Contract is already a compensatory measure intended to assist
the injured seaman during the term of his contract. The dispositive portion of the
Decision reads:
WHEREFORE, the decision appealed from is hereby SET
ASIDE. Respondents Varorient Shipping Co., Inc. and Aria Maritime
Co., Ltd., are, jointly and severally, ordered to pay complainant Gil A.
Flores the Philippine Peso equivalent at the time of actual payment of
THREE THOUSAND SEVEN HUNDRED NINETY US DOLLARS
(US$3,790.00), plus THIRTEEN THOUSAND FIVE HUNDRED
SEVENTY-NINE and 76/00 PESOS (P13,579.76), representing the
balance of the sickness wages and reimbursement of medical and
surgical expenses.
All other claims are DISMISSED for lack of merit.
SO ORDERED.[22]

Both parties filed their respective motions for reconsideration. Petitioners sought
exoneration from liability, while respondent averred that the NLRC erred in

excluding certain items or receipts from the reimbursable medical expenses,

deducting US$1,010.00 from the award of sickness wages, not holding petitioners
liable for his entire wages up to the time he would be employed with another
company, and not awarding him compensatory and moral damages and attorneys
fees.
The NLRC denied respondent's motion for reconsideration in a Resolution dated
June 30, 1999 and, likewise, petitioners' motion for reconsideration in its
Resolution dated August 18, 1999.
On petition for review by petitioners, the CA affirmed the Decision dated May
25, 1999 and the Resolution dated August 18, 1999 of the NLRC with the
following disposition:
WHEREFORE, the Decision of the National Labor Relations
Commission

dated

May

25,

1999

is

AFFIRMED

with

MODIFICATION. Petitioners Varorient Shipping Co., Inc. and Aria Maritime

Co., Ltd., are, jointly and severally, ordered to pay private respondent Gil A.
Flores:

1) the balance of sickness wages in the amount of

US$3,790.00, or its peso equivalent at the time of actual
payment; and
2) reimbursement of medical and surgical expenses in the
total amount of P15,373.26, instead of P13,579.76.
All other claims are DISMISSED for lack of merit.[23]

As the CA denied their motion for reconsideration in the Resolution dated January
29, 2004, petitioners filed this present petition.
Petitioners contend that respondent is not entitled to sickness wages, as this would
be tantamount to unjust enrichment and double recovery on the part of
respondent.They maintain that they had paid him US$1,010.00 as full payment of
his salaries and benefits, including his medical treatment and, by reason thereof,
respondent executed the Receipt and Quitclaim. They also claim that prior to his
departure from the country and actual deployment overseas, respondent and his
wife received financial accommodations in the form of cash advances, i.e.,
US$1,000.00, per cash voucher dated April 16, 1997, signed by respondent; and

US$2,790.00, per cash voucher dated April 21, 1997, signed by Crisanta Flores
(wife of respondent), or the total amount of US$3,790.00. According to petitioners,
since the amount of US$3,790.00 remained unpaid by respondent and his wife,
therefore, they can properly offset the said amount with the sickness wages they
would be paying to respondent.
Respondent denies that he and his wife were given cash advances while he was on
board; that he had received the amount of US$1,010.00 from the petitioners as
settlement of all his claims; and that the Receipt and Quitclaim dated June 25,
1997, allegedly executed by him, was a falsified document as the signature
appearing therein was a forgery.
Contrary to petitioners' contention, respondent is entitled to sickness wages. The
shooting pain on his right foot is an injury which he suffered during the course of
his employment and, therefore, obligates petitioners to compensate him and
provide him the appropriate medical treatment.
This is in consonance with the mandated provisions under Section 20 B (1), (2),
(3), (4), and (5) of the Standard Terms and Conditions Governing the Employment
of Filipino Seafarers On Board Ocean-Going Vessels, [24] pursuant to Department
Order No. 4, series of 2000, of the Department of Labor and Employment (by then
Secretary Bienvenido E. Laguesma), adopted on May 31, 2000, which
provides that:
SECTION 20. COMPENSATION AND BENEFITS
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related
injury or illness during the term of his contract are as follows:
1. The employer shall continue to pay the seafarer his wages
during the time he is on board the vessel;
2. If the injury or illness requires medical and/or dental treatment in a
foreign port, the employer shall be liable for the full cost of such medical,
serious dental, surgical and hospital treatment, as well as board and
lodging, until the seafarer is declared fit to work or to be repatriated.
However, if after repatriation, the seafarer still requires medical attention
arising from said injury or illness, he shall be so provided at cost to the
employer until such time he is declared fit or the degree of his disability
has been established by the company-designated physician.

3. Upon sign-off from the vessel for medical treatment, the seafarer is
entitled to sickness allowance equivalent to his basic wage until he is
declared fit to work, or the degree of permanent disability has been
assessed by the company-designated physician, but in no case shall this
period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a postemployment medical examination by a company-designated physician
within three working days upon his return, except when he is physically
incapacitated to do so, in which case a written notice to the agency
within the same period is deemed as compliance. Failure of the seafarer
to comply with the mandatory reporting requirement shall result in his
forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment,
a third doctor may be agreed jointly between the employer and the seafarer. The
third doctor's decision shall be final and binding on both parties.
4. Those illnesses not listed in Section 32 of this Contract are disputably
presumed as work related.
5. Upon sign-off of the seafarer from the vessel for medical treatment,
the employer shall bear the full cost of repatriation in the event the
seafarer is declared (1) fit for repatriation; or (2) fit to work, but the
employer is unable to find employment for the seafarer on board his
former vessel or another vessel of the employer despite earnest efforts.
6. In case of permanent total or partial disability of the seafarer caused by either
injury or illness, the seafarer shall be compensated in accordance with the
schedule of benefits enumerated in Section 32 of his Contract. Computation of
his benefits arising from an illness or disease shall be governed by the rates and
the rules of compensation applicable at the time the illness or disease was
contracted.
On June 21, 1997, respondent was repatriated to the Philippines and declared fit to
work on November 7, 1997, or a total period of 141 days. Applying the said
provisions of the Standard Contract, respondent is entitled to receive sickness
wages, covering the maximum period of 120 days, or the amount of
US$4,800.00. The NLRC, as affirmed by the CA, found that petitioners are liable
to pay respondent the total amount of US$3,790.00 (US$4,800.00 less the amount
of US$1,010.00 which he already received by virtue of the Receipt and Quitclaim
dated June 25, 1997).

As pointed out by the CA, petitioners, in their motion for reconsideration of the
NLRC Decision dated May 25, 1999, raised for the first time that they had given

the amount of US$3,790.00 to respondent and belatedly submitted two (2) cash
vouchers, i.e., US$1,000.00, dated April 16, 1997, which was signed by
respondent; and US$2,290.00, dated April 21, 1997, which was signed by
respondent's wife Cristina Flores, or a total of US$3,790.00. The CA observed that
the said cash vouchers do not bear the name and logo of petitioners, unlike the
check voucher they issued for the reimbursement of the medical expenses of
respondent amounting toP4,896.50, and that these vouchers were supposedly
already in existence or in the possession of the petitioners since April 1997, but
they never interposed such fact in their pleadings, e.g., Position Paper, Supplement
to Respondent's Position Paper, or Opposition to Complainant's Appeal. The Court
sees no reason to disturb this factual finding.
Moreover, petitioners were remiss in providing continuous treatment for
respondent in accordance with the recommendation of their company physician
that respondent should undergo a two-week confinement and physical therapy and,
if his condition does not improve, then he would have to be subjected to surgical
decompression to alleviate the pain on his right foot. Respondent's ailment required
urgent medical response, thereby necessitating him to seek immediate medical
attention, even at his own expense. The CA enumerated the medical expenses of
respondent for which petitioner would be liable. Thus,
[w]hile we agree substantially with the NLRCs decision in
allowing the reimbursement of P13,579.76, we disagree with its findings
that the receipts for medicines were not covered by prescriptions. Dr.
Irene Igual recommended the continued use of neo-pyrozon, ne[u]robin,
and myonal [and], thus, respondent should accordingly be reimbursed for
the purchase of these medicines. The records disclose the following
purchases:
1. Mercury Drug Receipt No. 535112 (Annex F)
Myonal - P97.50
Neo-pyrozon - 71.50 - P169.00
2. Mercury Drug Receipt No. 532746 (Annex F-1)
Ne[u]robin - P76.00
Myonal - 97.50 - P173.50
3. Mercury Drug Receipt No. 533708 (Annex F-2)
Neo-pyrazon - P71.50
Neurobin - 76.00
Myonal - 97.50 - P244.00
4. Mercury Drug Receipt No. 251929 (Annex F-3)
Pyrazon - P71.50 - P71.50
5. Mercury Drug Receipt No. 251931 (Annex F-4)
Myonal - P97.50 - P97.50

6. Mercury Drug Receipt No. 534528 (Annex F-5)

Neo Pyrozon - P71.50
Myonal - 97.50 - P169.00
7. Mercury Drug Receipt No. 253117 (Annex F-6)
Myobal - P97.50
Neo-Pyrozon - 71.50 - P169.00
TOTAL - P1,093.50
xxxx
In the same vein, receipt numbers 630 and 0091, issued by the offices of
Dr. Betty Dy Mancao (Annex F-40) and Dr. Copernico J. Villaruel
(Annex F-39) for P300.00 andP400.00, respectively, should be
reimbursed to Flores. The PGH hospital bills do not include the doctors
fee, thus, it is safe to conclude that the doctors who attended to Flores
billed him personally. x x x
xxxx
In fine, private respondent is entitled to reimbursement of his medical
expenses totalling P15,373.26.[25]

In view of the foregoing, respondent should be reimbursed the amount

of P13,579.76, representing the balance of the sickness wages due him, the cost of
the prescribed medicines he purchased, and the surgical expenses he incurred, as
evaluated by the CA.
Petitioners argue that the Receipt and Quitclaim sufficed to cover the balance of the
sickness wages, after deducting the cash advances, which respondent would be
entitled to; while respondent questions the veracity of the said document.
The Receipt and Quitclaim executed by respondent lacks the elements of
voluntariness and free will and, therefore, does not absolve petitioners from
liability in paying him the sickness wages and other monetary claims.
Although respondent avers that his signature on the said quitclaim was a forgery,
the CA relied on the factual findings of the labor arbiter and the NLRC that gave
credence to it. Thus, the matter to be resolved would be whether the Receipt and
Quitclaim can be considered substantial compliance to the contractual obligation
by petitioners under the standard employment contract.
In More Maritime Agencies, Inc. v. NLRC,[26] the Court ruled that the law does not
consider as valid any agreement to receive less compensation than what a worker is

entitled to recover nor prevent him from demanding benefits to which he is

entitled. Quitclaims executed by the employees are thus commonly frowned upon
as contrary to public policy and ineffective to bar claims for the full measure of the
workers legal rights, considering the economic disadvantage of the employee and
the inevitable pressure upon him by financial necessity. Thus, it is never enough to
assert that the parties have voluntarily entered into such a quitclaim. There are
other requisites, to wit: (a) that there was no fraud or deceit on the part of any of
the parties; (b) that the consideration of the quitclaim is credible and reasonable;
and (c) that the contract is not contrary to law, public order, public policy, morals or
good customs, or prejudicial to a third person with a right recognized by law.
A perusal of the provisions of the Receipt and Quitclaim shows that respondent
would be releasing and discharging petitioners from all claims, demands, causes of
action, and the like in an all-encompassing manner, including the fact that he had
not contracted or suffered any illness or injury in the course of his employment and
that he was discharged in good and perfect health. These stipulations clearly placed
respondent in a disadvantageous position vis--vis the petitioners.
WHEREFORE, the petition is DENIED. The Decision dated February 28,
2003 and the Resolution dated January 29, 2004 of the Court of Appeals in CAG.R. SP No. 55512, which affirmed with modification the Decision dated May 25,
1999 and Resolution dated August 18, 1999 of the National Labor Relations
Commission, are AFFIRMED.
SO ORDERED.

Case Digest: ST. MARYS ACADEMY OF DIPOLOG CITY vs. TERESITA

PALACIO, ET AL.
G.R. No. 164913

08 September 2010

FACTS:
In the 1990s, Petitioner hired Respondents Calibod, Laquio, Santander, Saile
Padilla, Andalahao, Decipulo and Montederamos, as teachers, and respondent
Palacio as guidance counselor. In accordance to DECS Memorandum No. 10, S.
1998 pursuant to RA 7836, the Petitioner informed the respondents that they
cannot be re-accepted for the school year 2000-2001 for not having passed the LET
(Licensure Examinations for Teachers), nor can they continue with their teaching
profession.
They filed a complaint contesting that their termination as highly irregular and
premature. They averred their right to security of tenure despite the requirements
set by the PRC for they had special permits to teach and the civil service eligibility
required under the law. In addition to this, the deadline for teachers to register
under the Memorandum was set to 19 September 2000, but the petitioner decided
to terminate them as early as 31 March 2000. Lastly, the acceptance of the
Petitioner of other teacher who do not also possess the required eligibility under
the Memorandum showed evident bad faith.
LA Decision:
The LA adjudged the petitioner guilty of illegal dismissal. Thus, petitioner was
ordered to reinstate the respondents or to pay them separation pay at the rate of
month wage for every year of service, plus limited backwages.
NLRC Decision:
The NLRC upheld the LAs decision, stating that the grounds relied upon by the
petitioner or dismiss the respondents are not among those enumerated by the Labor
Code and that the respondents are regular employees, who cannot be removed
without just cause.

CA Decision:
The CA upheld both the decisions of the LA and the NLRC. It further held that the
Petitioner should have adopted a contingency plan if in case the respondents still
have not complied with the aforementioned requirements when the deadline has
arrived. The CA also observed that the petitioners ulterior motive for the
termination may have been the result of a confrontation between the principal and
the respondents. However, as regards to Padilla, Palacio, Andalahao and Decipulo,
the CA found them to be merely probationary; therefore, there is no illegal
dismissal to speak of.
ISSUE(S):
Whether the dismissal of the respondents were premature because it was effected
prior to the deadline set by the PRC to acquire their license.
Whether the respondents are entitled to backwages from March to 19 September
2000, because it is only on such date that they were already dismissible for cause.

HELD:
Yes. The Supreme Court agrees with the decisions of the LA, the NLRC and the
CA. It is incumbent upon the Court to afford full protection to labor.The law has
provided a specific timeframe within which respondents could comply, petitioner
has no right to deny them of this privilege accorded to them by law. In so far as
Palacio, Calibod, Laquio, Santander and Montedramos are concerned, being
dismissed on March 2000 was premature. However, Saile is not qualified to take
the LET, therefore, no prematurity is to speak of on her end. Petitioners intention
and desire not to put the students education and school operation in jeopardy is
neither a decisive consideration for respondents termination prior to the deadline
set by law. The prejudice that respondents retention would cause to the schoold
operation is only trivial.
Yes. The respondents are entitled to limited backwages computed from 31 March
2000 to September 2000 in favor of Palacio, Calibod, Laquio, Santander and
Montederamos. The Petitioner cannot possibly presume that respondents could not
timely comply with the requirements set by law.

Jumuad vs. KFC

On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her
employment with respondent Hi-Flyer Food, Inc. (Hi-Flyer), as management
trainee. Hi-Flyer is a corporation licensed to operate Kentucky Fried
Chicken (KFC) restaurants in the Philippines. Based on her performance through
the years, Jumuad received several promotions until she became the area manager
for the entire Visayas-Mindanao 1 region, comprising the provinces
of Cebu, Bacolod, Iloilo andBohol.[5]
Aside from being responsible in monitoring her subordinates, Jumuad was tasked
to: 1) be highly visible in the restaurants under her jurisdiction; 2) monitor and
support day-to-day operations; and 3) ensure that all the facilities and equipment at
the restaurant were properly maintained and serviced. [6] Among the branches under
her supervision were the KFC branches in Gaisano Mall, Cebu City (KFCGaisano); in Cocomall, Cebu City (KFC-Cocomall); and in Island City
Mall, Bohol(KFC-Bohol).
As area manager, Jumuad was allowed to avail of Hi-Flyers car loan program,
[7]
wherein forty (40%) percent of the total loanable amount would be subsidized by
Hi-Flyer and the remaining sixty (60%) percent would be deducted from her salary.
It was also agreed that in the event that she would resign or would be terminated
prior to the payment in full of the said car loan, she could opt to surrender the car
to Hi-Flyer or to pay the full balance of the loan.[8]
In just her first year as Area Manager, Jumuad gained distinction and was
awarded the 3rd top area manager nationwide. She was rewarded with a trip
toSingapore for her excellent performance.[9]
On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation
audit at KFC-Gaisano. The audit, denominated as CHAMPS Excellence
Review(CER), revealed several sanitation violations, such as the presence of
rodents and the use of a defective chiller for the storage of food. [10] When asked to
explain, Jumuad first pointed out that she had already taken steps to prevent the
further infestation of the branch. As to why the branch became infested with
rodents, Jumuad faulted managements decision to terminate the services of the
branchs pest control program and to rely solely on the pest control program of the
mall. As for the defective chiller, she explained that it was under repair at the time
of the CER.[11] Soon thereafter, Hi-Flyer ordered the KFC-Gaisano branch closed.

Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol

amid reports that certain employees were covering up cash shortages. As a result,
the following irregularities were discovered: 1) cash shortage amounting to
62,290.85; 2) delay in the deposits of cash sales by an average of three days; 3)
the presence of two sealed cash-for-deposit envelopes containing paper cut-outs
instead of cash; 4) falsified entries in the deposit logbook; 5) lapses in inventory
control; and 6) material product spoilage. [12] In her report regarding the incident,
Jumuad disclaimed any fault in the incident by pointing out that she was the one
responsible for the discovery of this irregularity.[13]
On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFCCocomall branch. Grout and leaks at the branchs kitchen wall, dried up spills from
the marinator, as well as a live rat under postmix, and signs of rodent
gnawing/infestation were found.[14] This time, Jumuad explained to management
that she had been busy conducting management team meetings at the other KFC
branches and that, at the date the CER was conducted, she had no scheduled visit at
the KFC-Cocomall branch.[15]
Seeking to hold Jumuad accountable for the irregularities uncovered in the
branches under her supervision, Hi-Flyer sent Jumuad an Irregularities
Report[16] and Notice of Charges[17] which she received on September 5, 2005.
On September 7, 2005 Jumuad submitted her written explanation.[18] On September
28, 2005, Hi-Flyer held an administrative hearing where Jumuad appeared with
counsel. Apparently not satisfied with her explanations, Hi-Flyer served her a
Notice of Dismissal[19] dated October 14, 2005, effecting her termination
on October 17, 2005.
This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R.
Montemayor (Montemayor) for illegal dismissal before the NLRC on October 17,
2005, praying for reinstatement and payment of separation pay, 13 th month pay,
service incentive leave, moral and exemplary damages, and attorneys fees. Jumuad
also sought the reimbursement of the amount equivalent to her forty percent (40%)
contribution to Hi-Flyers subsidized car loan program.

While the LA found that Jumuad was not completely blameless for the
anomalies discovered, she was of the view that the employers prerogative to
dismiss or layoff an employee must be exercised without abuse of discretion and
should be tempered with compassion and understanding.[20] Thus, the dismissal was

too harsh considering the circumstances. After finding that no serious cause for
termination existed, the LA ruled that Jumuad was illegally dismissed. The LA
disposed:
WHEREFORE, VIEWED FROM THE FOREGOING PREMISES,
judgment is hereby rendered declaring complainants dismissal as
ILLEGAL. Consequently, reinstatement not being feasible,
respondents HI-FLYER FOOD, INC. AND OR JESUS R.
MONTEMAYOR are hereby ordered to pay, jointly and severally,
complainant PAMELA FLORENTINA P. JUMUAD, the total
amount of THREE HUNDRED THIRTY-SIX THOUSAND FOUR
HUNDRED PESOS (336,400.00), Philippine currency,
representing Separation Pay, within ten (10) days from receipt
hereof, through the Cashier of this Arbitration Branch.
Further, same respondents are ordered to reimburse
complainant an amount equivalent to 40% of the value of her car
loaned pursuant to the car loan entitlement memorandum.
Other claims are DISMISSED for lack of merit.[21]

Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not
awarding backwages and damages despite its finding that she was illegally
dismissed. Hi-Flyer and Montemayor, on the other hand, assailed the finding that
Jumuad was illegally dismissed and that they were solidarily liable therefor. They
also questioned the orders of the LA that they pay separation pay and reimburse the
forty percent (40%) of the loan Jumuad paid pursuant to Hi-Flyers car entitlement
program.
Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the
NLRC affirmed in toto the LA decision dated August 10, 2006. In addition, the
NLRC noted that even before the Irregularities Report and Notice of Charges were
given to Jumuad on September 5, 2005, two (2) electronic mails (e-mails) between
Montemayor and officers of Hi-Flyer showed that Hi-Flyer was already determined
to terminate Jumuad. The first e-mail[22] read:
From: Jess R. Montemayor
Sent: Tuesday, August 16, 2005 5:59 PM
To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma
Ravela; Bernard Joseph A. Velasco
Cc: Odjie Belarmino; Jesse D. Cruz
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality
Violation

I agree if the sanctions are light we should change them. In the

case of Pamela however, the fact that Cebu Colon store had these
violations is not the first time this incident has happened in her
area. The Bohol case was also in her area and maybe these two
incidents is enough grounds already for her to be terminated or
maybe asked to resign instead of being terminated.
I know if any Ops person serves expired product this is ground for
termination. I think serving off specs products such as this lumpy
gravy in the case of Coco Mall should be grounds for termination.
How many customers have we lost due to this lumpy clearly out of
specs gravy? 20 customers maybe.
Jess.

The second e-mail,[23] sent by one Bebe Chaves of Hi-Flyer to Montemayor and
other officers of Hi-Flyer, reads:
From: bebe chaves
Sent: Sat 9/3/2005 3:45 AM
To: Maria Judith N. Marcelo
CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R.
Montemayor
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality
Violation

Jojo,
Just an update of our meeting yesterday with Jennifer. After
having reviewed the case and all existing documents, we have
decided that there is enough ground to terminate her services.
IR/Jennifer are working hand in hand to service due notice and
close the case.

According to the NLRC, these e-mails were proof that Jumuad was denied due
process considering that no matter how she would refute the charges hurled against
her, the decision of Hi-Flyer to terminate her would not change.[24]
Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40%
of the value of the car loan, the NLRC explained that Jumuad enjoyed this benefit
during her period of employment as Area Manager and could have still enjoyed the
same if not for her illegal dismissal.[25]
Finally, the NLRC held that the active participation of Montemayor in the
illegal dismissal of Jumuad justified his solidary liability with Hi-Flyer.
Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their
respective motions were denied on November 29, 2007.[26]
Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the
case before the CA in Cebu City.
On April 20, 2009, the CA rendered the subject decision reversing the decision of
the labor tribunal. The appellate court disposed:
WHEREFORE, in view of the foregoing, the Petition is
GRANTED. The Decision of the National Labor Relations
Commission (4th Division) dated 28 September 2007 in NLRC
Case No. V-000813-06 (RAB Case No. VII-10-2269-05, as well as
the Decision dated 10 August 2006 of the Honorable Labor
Arbiter Julie C. Ronduque, and the 29 November 2006 Resolution
of the NLRC denying petitioners Motion for Reconsideration
dated 08 November 2007, are hereby REVERSED and SET
ASIDE.
No pronouncement as to costs.
SO ORDERED.[27]

Contrary to the findings of the LA and the NLRC, the CA was of the opinion that
the requirements of substantive and procedural due process were complied with
affording Jumuad an opportunity to be heard first, when she submitted her written
explanation and then, when she was informed of the decision and the basis of her
termination.[28] As for the e-mail exchanges between Montemayor and the officers
of Hi-Flyer, the CA opined that they did not equate to a predetermination of

Jumuads termination. It was of the view that the e-mail exchanges were mere
discussions between Montemayor and other officers of Hi-Flyer on whether
grounds for disciplinary action or termination existed. To the mind of the CA, the
e-mails just showed that Hi-Flyer extensively deliberated the nature and cause of
the charges against Jumuad.[29]
On the issue of loss of trust and confidence, the CA considered the deplorable
sanitary conditions and the cash shortages uncovered at three of the seven KFC
branches supervised by Jumuad as enough bases for Hi-Flyer to lose its trust and
confidence in her.[30]

With regard to the reimbursement of the 40% of the car loan as awarded by the
labor tribunal, the CA opined that the terms of the car loan program did not provide
for reimbursement in case an employee was terminated for just cause and they, in
fact, required that the employee should stay with the company for at least three (3)
years from the date of the loan to obtain the full 40% subsidy. The CA further
stated that the rights and obligations of the parties should be litigated in a separate
civil action before the regular courts.[31]
The CA also exculpated Montemayor from any liability since it considered
Jumuads dismissal with a just cause and it found no evidence that he acted with
malice and bad faith.[32]
Hence, this petition on the following
GROUNDS:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN UPHOLD[ING] AS VALID THE TERMINATION
OF PETITIONERS SERVICES BY RESPONDENTS.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL
LABOR
RELATIONS
COMMISSION
TH
4 DIVISION OF CEBU CITY WHICH AFFIRMED THE
DECISION OF LABOR ARBITER JULUE RENDOQUE.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED WHEN IT REVERSED THE DECISION OF THE

NATIONAL
LABOR
RELATIONS
COMMISSION
TH
4 DIVISION OF CEBU CITY WHEN IT RULED THAT
PETITIONER IS NOT ENTITLED TO REIMBURSEMENT
OF FORTY PERCENT (40%) OF THE CAR VALUE
BENEFITS.

It is a hornbook rule that factual findings of administrative or quasi-judicial

bodies, which are deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect but even finality,
and bind the Court when supported by substantial evidence.[33] While this rule is
strictly adhered to in labor cases, the same rule, however, admits exceptions. These
include: (1) when there is grave abuse of discretion; (2) when the findings are
grounded on speculation; (3) when the inference made is manifestly mistaken; (4)
when the judgment of the Court of Appeals is based on a misapprehension of facts;
(5) when the factual findings are conflicting; (6) when the Court of Appeals went
beyond the issues of the case and its findings are contrary to the admissions of the
parties; (7) when the Court of Appeals overlooked undisputed facts which, if
properly considered, would justify a different conclusion; (8) when the facts set
forth by the petitioner are not disputed by the respondent; and (9) when the
findings of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.[34]
In the case at bench, the factual findings of the CA differ from that of the LA
and the NLRC. This divergence of positions between the CA and the labor tribunal
below constrains the Court to review and evaluate assiduously the evidence on
record.
The petition is without merit.
On whether Jumuad was illegally dismissed, Article 282 of the Labor Code
provides:
Art. 282. Termination by Employer. An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed
in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the

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

Jumuad was terminated for neglect of duty and breach of trust and
confidence. Gross negligence connotes want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Fraud and
willful neglect of duties imply bad faith of the employee in failing to perform his
job, to the detriment of the employer and the latters business. Habitual neglect, on
the other hand, implies repeated failure to perform one's duties for a period of time,
depending upon the circumstances. It has been said that a single or an isolated act
of negligence cannot constitute as a just cause for the dismissal of an employee.
[35]
To be a ground for removal, the neglect of duty must be both gross and habitual.
[36]

On the other hand, breach of trust and confidence, as a just cause for termination of
employment, is premised on the fact that the employee concerned holds a position
of trust and confidence, where greater trust is placed by management and from
whom greater fidelity to duty is correspondingly expected. The betrayal of this
trust is the essence of the offense for which an employee is penalized.[37]
It should be noted, however, that the finding of guilt or innocence in a charge
of gross and habitual neglect of duty does not preclude the finding of guilty or
innocence in a charge of breach of trust and confidence. Each of the charges must
be treated separately, as the law itself has treated them separately. To repeat, to
warrant removal from service for gross and habitual neglect of duty, it must be
shown that the negligence should not merely be gross, but also habitual. In breach
of trust and confidence, so long as it is shown there is some basis for management
to lose its trust and confidence and that the dismissal was not used as an occasion
for abuse, as a subterfuge for causes which are illegal, improper, and unjustified
and is genuine, that is, not a mere afterthought intended to justify an earlier action
taken in bad faith, the free will of management to conduct its own business affairs
to achieve its purpose cannot be denied.
After an assiduous review of the facts as contained in the records, the Court is
convinced that Jumuad cannot be dismissed on the ground of gross and habitual
neglect of duty. The Court notes the apparent neglect of Jumuad of her duty in

ensuring that her subordinates were properly monitored and that she had dutifully
done all that was expected of her to ensure the safety of the consuming public who
continue to patronize the KFC branches under her jursidiction. Had Jumuad
discharged her duties to be highly visible in the restaurants under her jurisdiction,
monitor and support the day to day operations of the branches and ensure that all
the facilities and equipment at the restaurant were properly maintained and
serviced, the deplorable conditions and irregularities at the various KFC branches
under her jurisdiction would have been prevented.
Considering, however, that over a year had lapsed between the incidences at KFCGaisano and KFC-Bohol, and that the nature of the anomalies uncovered were each
of a different nature, the Court finds that her acts or lack of action in the
performance of her duties is not born of habit.
Despite saying this, it cannot be denied that Jumuad willfully breached her duties
as to be unworthy of the trust and confidence of Hi-Flyer. First, there is no
denying that Jumuad was a managerial employee. As correctly noted by the
appellate court, Jumuad executed management policies and had the power to
discipline the employees of KFC branches in her area. She recommended
actions on employees to the head office. Pertinent is Article 212 (m) of the Labor
Code defining a managerial employee as one who is vested with powers or
prerogatives to lay down and execute management policies and/or hire, transfer,
suspend, lay off, recall, discharge, assign or discipline employees.
Based on established facts, the mere existence of the grounds for the loss of
trust and confidence justifies petitioners dismissal. Pursuant to the Courts ruling
inLima Land, Inc. v. Cuevas,[38] as long as there is some basis for such loss of
confidence, such as when the employer has reasonable ground to believe that the
employee concerned is responsible for the purported misconduct, and the nature of
his participation therein renders him unworthy of the trust and confidence
demanded of his position, a managerial employee may be dismissed.
In the present case, the CERs reports of Hi-Flyer show that there were anomalies
committed in the branches managed by Jumuad. On the principle
of respondeatsuperior or command responsibility alone, Jumuad may be held
liable for negligence in the performance of her managerial duties. She may not
have been directly involved in causing the cash shortages in KFC-Bohol, but her
involvement in not performing her duty monitoring and supporting the day to day
operations of the branches and ensure that all the facilities and equipment at the

restaurant were properly maintained and serviced, could have truly prevented the
whole debacle from ever occurring.
Moreover, it is observed that rather than taking proactive steps to prevent the
anomalies at her branches, Jumuad merely effected remedial measures. In the
restaurant business where the health and well-being of the consuming public is at
stake, this does not suffice. Thus, there is reasonable basis for Hi-Flyer to withdraw
its trust in her and dismissing her from its service.
The disquisition of the appellate court on the matter is also worth mentioning:
In this case, there is ample evidence that private respondent
indeed committed acts justifying loss of trust and confidence of
Hi-Flyer, and eventually, which resulted to her dismissal from
service. Private respondents mismanagement and negligence in
supervising the effective operation of KFC branches in the span of
less than a year, resulting in the closure of KFC-Gaisano due to
deplorable sanitary conditions, cash shortages in KFC-Bohol, in
which the said branch, at the time of discovery, was only several
months into operation, and the poor sanitation at KFC-Cocomall.
The glaring fact that three (3) out of the seven (7) branches under
her area were neglected cannot be glossed over by private
respondents explanation that there was no negligence on her part
as the sanitation problem was structural, that she had been
usually busy conducting management team meetings in several
branches of KFC in her area or that she had no participation
whatsoever in the alleged cash shortages.
xxx
It bears stressing that both the Labor Arbiter and the NLRC found
that private respondent was indeed lax in her duties. Thus, said
the NLRC: xxx [i]t is Our considered view that xxx complainant
cannot totally claim that she was not remiss in her duties xxx. [39]

As the employer, Hi-Flyer has the right to regulate, according to its

discretion and best judgment, all aspects of employment, including work
assignment, working methods, processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Management has the prerogative to discipline its

employees and to impose appropriate penalties on erring workers pursuant to

company rules and regulations.[40]
So long as they are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights
of the employees under special laws or under valid agreements, the employers
exercise of its management prerogative must be upheld.[41]
In this case, Hi-Flyer exercised in good faith its management prerogative as
there is no dispute that it has lost trust and confidence in her and her managerial
abilities, to its damage and prejudice. Her dismissal, was therefore, justified.
As for Jumuads claim for the reimbursement of the 40% of the value of the
car loan subsidized by Hi-Flyer under its car loan policy, the same must also be
denied. The rights and obligations of the parties to a car loan agreement is not a
proper issue in a labor dispute but in a civil one. [42] It involves the relationship of
debtor and creditor rather than employee-employer relations. [43] Jurisdiction,
therefore, lies with the regular courts in a separate civil action.[44]
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice and
hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct and loyalty. The
employer may not be compelled to continue to employ such persons whose
continuance in the service will patently be inimical to its interests.[45]
WHEREFORE, the petition is DENIED.
SO ORDERED.

PLDT v. Teves
GR No. 143511: November 15, 2010
Philippine Long Distance Telephone Company, Petitioner, v. Joey B. Teves,
Respondent
Peralta, J.:
FACTS:

Respondent was employed as Clerk of PLDT until he was terminated because he violated
the (3) unauthorized leaves of absence committed within 3 years, contrary to the policy of
PLDT. From 1990 and 1992, there were 3 instances of unauthorized leaves of absence from
the Respondent. On the final instance, the explanation of Teves was unmeritorious, which
led to his dismissal. He filed a complaint of illegal dismissal before the Labor Arbiter.
The Arbiter found out that the dismissal was legal, but it ordered PLDT to give 20,000 php to
Teves. Teves appealed to the NLRC, which reversed the Arbiters decision. It upheld the
validity of the absence on account of Teves wife having complications during childbirth.
PLDT filed a petition for Certiorari with the CA, which affirmed the decision of the NLRC.
The CA found that respondent's comportment cannot be characterized as grave so as to
constitute grave misconduct; that his first two leaves of absence were satisfactorily justified
ISSUE:
1. Whether the conduct of Teves warrants and justifies dismissal
HELD:
No. But the petition is partially granted.
Labor Law: Termination of Employment
Even assuming that respondent's absenteeism constitutes willful disobedience, such
offense does not warrant respondent's dismissal.Not every case of insubordination or willful
disobedience by an employee reasonably deserves the penalty of dismissal. There must be
a reasonable proportionality between the offense and the penalty.
While management has the prerogative to discipline its employees and to impose
appropriate penalties on erring workers, pursuant to company rules and regulations,
however, such management prerogatives must be exercised in good faith for the
advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws and valid agreements. The
Court is wont to reiterate that while an employer has its own interest to protect, and
pursuant thereto, it may terminate an employee for a just cause, such prerogative to dismiss
or lay off an employee must be exercised without abuse of discretion.Its implementation
should be tempered with compassion and understanding.The employer should bear in mind
that, in the execution of said prerogative, what is at stake is not only the employees
position, but his very livelihood,his very breadbasket.
However, since one of the instances is unjustified, it is to be subtracted from the
reinstatement.
Petition PARTIALLY GRANTED.

COCA-COLA
BOTTLERS
PHILIPPINES, INC.,

G.R. No. 163091

Petitioner,

Present:

CORONA, C.J.,
Chairperson,

- versus -

VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

ANGEL U. DEL VILLAR,

Promulgated:

Respondent.

October 6, 2010

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

DECISION

LEONARDO-DE CASTRO, J.:

Petitioner Coca-Cola Bottlers Philippines, Inc. (the Company) filed

this Petition for Review on Certiorari, under Rule 45 of the Rules of
Court, seeking the reversal of (1) the Decision [1] dated October 30,
2003 of the Court of Appeals in CA-G.R. SP No. 53815,
which reversed and set aside the Decision [2] dated February 26,

1999 of the National Labor Relations Commission (NLRC) in NLRC

CN. NCR-00-12-07634-96; and (2) the Resolution [3] dated March
29, 2004 of the appellate court in the same case, which denied for
lack of merit the Motion for Reconsideration of the Company.

The antecedent facts are as follows:

The Company, one of the leading and largest manufacturers of

beverages in the country, initially hired respondent Angel U. del
Villar (Del Villar) on May 1, 1990 as Physical Distribution Fleet
Manager with a job grade of S-7 and monthly salary
of P50,000.00, aside from the use of a company car, gasoline
allowance, and annual foreign travel, among other benefits. In
1992, as part of the reorganization of the Company, Del Villar
became the Transportation Services Manager, under the Business
Logistic Directorate, headed by Director Edgardo I. San Juan (San
Juan). As Transportation Services Manager, Del Villar prepares the
budget for the vehicles of the Company nationwide.

While serving as Transportation Services Manager, Del Villar

submitted a Report dated January 4, 1996 to the Company
President, Natale J. Di Cosmo (Di Cosmo), detailing an alleged
fraudulent scheme undertaken by certain Company officials in
conspiracy with local truck manufacturers, overpricing the trucks
purchased by the Company by as much as P70,000.00 each. In
the same Report, Del Villar implicated San Juan and Jose L.
Pineda, Jr. (Pineda), among other Company officials, as part of the
conspiracy. Pineda then served as the Executive Assistant in the
Business Logistic Directorate in charge of the Refrigeration
Services of the Company.

In 1996, the Company embarked on a reorganization of the

Business Logistic Directorate. As a result, the functions related to
Refrigeration were assigned to the Transportation Services
Manager, which was renamed the Transportation and

Refrigeration Services Manager. Mr. Nathaniel L. Evangelista, the

Physical Distribution Superintendent of the Zamboanga Plant, was
appointed the Corporate Transportation and Refrigeration Services
Manager, replacing both Del Villar and Pineda, who were in charge
of the Transportation Services and Refrigeration Services of the
Company, respectively. Pineda was then appointed as the
Corporate Purchasing and Materials Control Manager, while Del
Villar as Pinedas Staff Assistant. These new appointments took
effect on May 1, 1996.[4]

On July 8, 1996, seven months after the submission of his

Report on the fraudulent scheme of several company officials, Del
Villar received a Memorandum[5]from San Juan. Through said
Memorandum, San Juan informed Del Villar that (1) Del Villar was
designated as Staff Assistant to the Corporate Purchasing and
Materials Control Manager, with a job grade of NS-VII; (2) with Del
Villars new assignment, he ceased to be entitled to the benefits
accruing to an S-7 position under existing company rules and
policies; and (3) Del Villar was to turn over the vehicle assigned to
him as Transportation Services Manager to Pineda by July 10,
1996.

Although as the Staff Assistant of the Corporate Purchasing

and Materials Control Manager, Del Villar continued to receive the
same salary as Transportation Services Manager, but his car and
other privileges were withdrawn and he spent his time at his new
post sitting at a desk with no meaningful work whatsoever. [6] Del
Villar believed that he was demoted by the Company to force him
to resign. Unable to endure any further the harassment, Del Villar
filed with the Arbitration Branch of the NLRC on November 11,
1996 a complaint against the Company for illegal demotion and
forfeiture of company privileges. Del Villar also impleaded in his
complaint Company President Di Cosmo, Vice-President and
General Manager Jaime G. Oracion (Oracion), Senior VicePresident and Human Resources Director Rosa Maria Chua (Chua),
San Juan, and Pineda. The complaint was docketed as NLRC CN.
NCR-00-12-07634-96, assigned to Labor Arbiter Felipe Pati.

The Company failed to appear, despite due notice, at the

scheduled preliminary conference before the NLRC Arbitration
Branch.

Del Villar filed his Position Paper, supported by his Complaint

Affidavit.

The Company filed a Motion to Dismiss, instead of a position

paper, praying for the dismissal of Del Villars complaint on the
ground that Del Villar had no cause of action. The Company
reasoned that in appointing Del Villar as the Staff Assistant of the
Corporate Purchasing and Materials Control Manager, from his
former position as Transportation Services Manager, the Company
was merely exercising its inherent management prerogative to
transfer an employee from one position to another. The Company
also contended that Del Villar had no vested right to the privileges
he previously enjoyed as Transportation Services Manager. In an
Order dated July 24, 1997, the Labor Arbiter deferred action on
the Motion to Dismiss until after submission by the Company of its
Position Paper within 15 days from receipt of said order.

The Company filed on October 13, 1997 a Manifestation in

which it stated that it was adopting its Motion to Dismiss as its
Position Paper.

Thereafter, NLRC CN. NCR-00-12-07634-96 was submitted for

resolution.

On March 3, 1998, the Labor Arbiter rendered a Decision in

Del Villars favor. The Labor Arbiter held that the allegations in Del
Villars complaint sufficiently presented a cause of action against

the Company. The Company, in filing a Motion to Dismiss,

hypothetically admitted the truth of the facts alleged in the
complaint, and the failure of the Company to deny or rebut Del
Villars allegations of bad faith on the part of the Company, gave
rise to the presumption against the latter.

The Labor Arbiter proceeded to rule:

The issue as to whether or not [the Company] acted
illegally in demoting [Del Villar] is, therefore, answered in
the affirmative.

This office is inclined to believe and so holds that the

reorganization of [the Company] appears to have been
done sans the necessary requisite of good faith, after [Del
Villar] had filed his complaint to the company President
detailing the scam involving the purchase of the truck
fleet of 1996.

[Del Villar] was not outrightly dismissed; instead, he

was removed from his former position as Transportation
Services Manager, and demoted to Staff Assistant to the
Corporate
Purchasing
and
Materials
Control
Manager. Furthermore, as Staff Assistant [Del Villar]
allegedly receives his usual salary but his car privileges,
gasoline allowances, and foreign travel were withdrawn
and he now sits at a desk with no meaningful work
whatsoever.

[Del Villar] appears to have been singled out or

discriminated upon due to his having reported the 1996
truck scam, and his present isolation can be seen as a
punishment for acting in a righteous and forthright
manner. Otherwise, as a Staff Assistant [Del Villar] should
have been given some meaningful or responsible work
appurtenant to the job designation.

xxxx

This Office finds and so holds that in all the

foregoing
rulings,
the
concept
of
management
prerogative is limited or otherwise qualified. Procedurally
and substantively, [the Company] through its named
officers appears to have acted illegally and in bad faith in
its purported reorganization, in demoting [Del Villar] and
in removing [Del Villars] company privileges.

Had [Del Villar] resigned under the circumstances,

he could be said to have been constructively discharged
because a constructive discharge is defined as a quitting
because continued employment is rendered impossible,
unreasonable and unlikely, as an offer involving demotion
in rank and a diminution in pay. (Philippine Japan Active
Carbon Corporation and Tukuichi Satofuka vs. NLRC, G.R.
83239, Mar. 1989).[7]

For demoting Del Villar without justifiable cause, the Labor

Arbiter ruled that the Company was liable for the following:
As a consequence of [the Companys] acts [Del
Villar] suffered the effects of humiliation, a besmirched
repurtation, serious anxiety and sleepless nights which
justify an award of moral damages.

In order to serve as an example to other companies

who may be so inclined as to emulate [the Companys] act
of punishing their employees honesty and sense of fair
play, [the Company] must per force be assessed
exemplary damages.

In order to protect and vindicate his rights under the

Labor Code, [Del Villar] was constrained to retain counsel
for which [the Company] should be assessed attorneys
fees of not less than ten percent (10%) of the awarded
sum.

In the matter of the unlawful withdrawal of [Del

Villars] car, gasoline allowance and foreign travel by [the
Company], it is obligated to rectify the withdrawal of
privileges by returning to [Del Villar] the said Toyota car,
and if that is not possible, its value as of the time said car
was withdrawn including the value of the gasoline
allowance and foreign travel due him.[8]

In the end, the Labor Arbiter decreed:

WHEREFORE, premises considered judgment is
hereby rendered against [the Company and the
impleaded Company officials] and in favor of [Del Villar]
ordering [the Company] to (1) reinstate [Del Villar] to his
former job level; (2) to return the car to [Del Villar] or to
compensate [Del Villar] for the loss of his privileges such
as the value of the Toyota car as of the time of taking
including the value of the gasoline allowance and the
foreign travel due [Del Villar]; (3) indemnify [Del Villar]
moral damages ofP1,000,000.00 Pesos and exemplary
damages of P1,000,000.00 Pesos, aside from attorneys
fees of 10% of sums herein awarded.[9]

The Company expectedly appealed to the NLRC.

While the case was still pending appeal before the NLRC, Del
Villar received a letter dated April 28, 1998, signed by one Virgilio
B. Jimeno for the Company, which read:
Dear Mr. Del Villar:

Presently, the Company is implementing various

programs to ensure the accomplishment of its corporate
goals and objectives, and to increase the productivity of
its workforce.

Since the various programs will affect some of its

employees, the Company has initiated a special program
called Project New Start. This program is intended to
assist employees whose positions will be declared
redundant with the implementation of new distribution
systems, utilization of improved operational processes
and functional re-organizations.

Your position has been determined as no longer necessary

due to the reorganization of the Business Logistics
Directorate. The Transportation and Refrigeration Services
Department of the Technical Operations Directorate has
absorbed your function and our efforts to transfer you to
a similar position within the organization have not been
successful. Thus, you are considered separated from [the
Company] effective May 31, 1998.

Thank you for your kind understanding. We wish you

success and Gods blessings in all your future
undertakings.[10]

In a Decision dated February 26, 1999, the NLRC reversed

the Labor Arbiter, reasoning that:

Contrary to the Labor Arbiters pronouncement that

[the Company] should have rebutted allegations of bad
faith and malice, we are more inclined to apply the
presumption of good faith. Mere conclusions of fact and
law should not be used as bases for an automatic finding
of bad faith. As it is, we do not even see any disclosure of
the scam and his alleged demotion. If indeed the socalled great grandmother of Coca cola scams of 1996
were true, the logical consequence of such disclosure is
for the president of the company to dismiss the erring
employees and officers for their highly irregular acts and
not to penalize [Del Villar] for making such
disclosure. This is amply supported by the fact that the
[the Company] conducted a thorough investigation of the
reported scam and even obtained the services of an
independent auditor to determine whether the alleged
anomalous transactions were actually irregular and/or
questionable. This manifests that [Del Villars] disclosure
was taken seriously contrary to his claims of
discrimination. Accordingly, it cannot be said that the act
of the [Company] was retaliatory or penal in nature nor
tainted with bad faith and/or malice. Otherwise, [the
Company] would not have given grave attention to the
disclosure of [Del Villar].
On the issue of whether there was a demotion, we
are of the view that it was improper to conclude that [Del
Villars] movement from the position of Transportation
Services Manager to Staff Assistant to the Corporate
Purchasing and Materials Control Manager necessarily
indicated a demotion. The records show that there was no
diminution of salary. While it appears that his
transportation benefits were withheld, it does not follow
that his position as Staff Assistant is inferior to that of a
Transportation Services Manager. We take notice of the
fact that certain positions in a company involve traveling
from one place to another, hence the necessity to provide
for a car, and related benefits like allowances for gasoline
and maintenance. A company cannot, however, be
reasonably expected to provide the same benefits to an
employee whose position for example, requires that he

stays in the office during working hours. Benefits,

privileges and perquisites that attach to a certain position
do not provide sufficient bases for determining the
superiority or inferiority of the position so held. [11]

Hence, the NLRC concluded:

In fine We find that [Del Villar] was not demoted and
that the [Company] has not acted in bad faith or with
malice.

WHEREFORE, in view of the foregoing, the Decision

dated March 3, 1998 rendered by Labor Arbiter Felipe R.
Pati is hereby REVERSED and SET ASIDE and a new one
rendered DISMISSING the complaint for lack of merit. [12]

Del Villar moved for the reconsideration of the foregoing

NLRC Decision, but the NLRC denied such motion for lack of merit
in a Resolution dated April 26, 1999.[13]

Unsatisfied, Del Villar brought his case before the Court of

Appeals via a Petition for Certiorari under Rule 65 of the Rules of
Court, docketed as CA-G.R. SP No. 53815.

On October 30, 2003, the Court of Appeals promulgated its

Decision favoring Del Villar. According to the Court of Appeals, the
NLRC committed grave abuse of discretion by turning a blind eye
on several indicia that clearly showed Del Villar was demoted
without any lawful reason: (1) the very nomenclature used by the
Company designating Del Villars new job: from Transportation
Services Manager, Del Villar was suddenly designated as staff

assistant to another manager; (2) the diminution in the benefits

being enjoyed by Del Villar prior to his transfer, such as the use of
the company car, gasoline allowance, and annual foreign travel;
and (3) Del Villars new post in the Company did not require him to
perform any meaningful work, a far cry from his previous
responsibilities as Transportation Services Manager which include
the preparation of the budget of the Company for all of its
vehicles nationwide.

The Court of Appeals also made a finding of bad faith against

the Company:
It is true that Labor Arbiters cannot dictate business
owners on how to run their enterprises. Concededly,
employers and their managers have all the leeway to
make
the
necessary
adjustments
in
their
organizations. But the prerogative is not absolute. It must
be accompanied by good faith. x x x.

xxxx

We have reasonable ground to believe that the

reorganization theory poised by [the Company] was a
mere afterthought. If indeed [Del Villar] was a casualty of
a valid reorganization, officials of [the Company] could
have easily told him in the several memos they issued to
[Del Villar]. Edgardo San Juan, in a memo dated April 29,
1996, merely informed [Del Villar] the name of his
replacement as Transportation Services Manager (Rollo, p.
53). In his second memo dated May 8, 1996, San Juan
informed [Del Villar] that he would be under the direct
supervision of Mr. Jose L. Pineda, Jr. until an assignment, if
any, would have been determined for [Del Villar].

Two (2) subsequent memos were received by [Del

Villar] but still no hint on the reason behind his relief. Rosa

Marie Chua, in a memo dated June 11, 1996, simply

ordered [Del Villar] to return the company car (Rollo, p.
56). Again, Chua sent a memo dated June 17, 1996,
telling [Del Villar] that the car was part of perquisites of a
Transportation Services Manager and must be returned as
he was already relieved of his position (Rollo, 56).

In all four (4) memos, officials of [the Company]

never once attributed to company reorganization as the
reason behind [Del Villars] relief as Transportation
Services Manager. Instead, [the Company] waited for [Del
Villar] to file a complaint before it declared publicly its
reason for relieving him from his post.

It is unfortunate enough for [the Company] to give

San Juan, the very person charged by [Del Villar] of
committing fraud against the company, the free hand to
deal with his accuser. And whatever remains of [the
Companys] tattered claim to good faith towards [Del
Villar] evaporated by its absence of forthrightness to the
latter. [The Companys] lack of candor clearly lends
support to a conclusion that [Del Villars] relief was
occasioned by a reason alien to an alleged company
reorganization. The evidence presented by [Del Villar]
tend to show that he was demoted, not because of
company reorganization, but because of his authorship of
the report about the fraud being committed by certain
officials of [the Company].[14]

Just like the Labor Arbiter, the Court of Appeals held the
Company liable for the following but in reduced amounts:
Albeit We are inclined to reinstate the decision
dated March 3, 1998 of the Labor Arbiter, We feel,
however, that the amount of moral and exemplary
damages thereunder awarded to [Del Villar] to the tune

of P1 million each was excessive. To Our mind, the liability

of [the Company] is mitigated when it continued
providing [Del Villar] despite his demotion with the salary
he
was
receiving
as Transportation
Services
Manager. The moral and exemplary damages should
thus
be
reduced
to
the
reasonable
amount
[15]
ofP500,000.00, for each item.

The dispositive portion of the assailed Decision of the

appellate court stated:
WHER[E]FORE,
the
instant
petition
is
hereby GRANTED. Accordingly, the assailed Decision
dated February 26, 1999 and Resolution dated April
26, 1999 of the National Labor Relations Commission are
hereby SET ASIDE. Subject to the modification reducing
to P500,000.00 the amount of moral damages and
to P500,000.00 the amount of exemplary damages,
the decision dated March 3, 1998 of the Labor
Arbiter is hereby REINSTATED.[16]

Del Villar filed on November 20, 2003 a Motion for Partial

Reconsideration of the above-mentioned decision of the appellate
court, praying for the award of backwages to be reckoned from
May 31, 1998, the day he had been dropped from the payroll. The
Company also moved for the reconsideration of the same
judgment, asserting, among other arguments, that Del Villars
Petition for Certiorari in CA-G.R. SP No. 53815, was filed out of
time and should have been dismissed.

In its Resolution dated March 29, 2004, the Court of Appeals

denied the Motions for Reconsideration of both parties for lack of
merit.[17]

In this Petition for Review, the Company raises three grounds

for consideration of this Court:
A. THE HONORABLE COURT OF APPEALS GAVE DUE
COURSE TO THE PETITION DESPITE THE FACT THAT IT
WAS CLEARLY FILED BEYOND THE REGLEMENTARY
PERIOD PRESCRIBED BY LAW.

B. THE HONORABLE COURT OF APPEALS GAVE DUE

COURSE TO THE [Court of Appeals] PETITION DESPITE
THE FACT THAT [Del Villar] FAILED TO ESTABLISH THAT
THE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION IN
RENDERING THE 26 FEBRUARY 1999 DECISION AND 26
APRIL 1999 RESOLUTION.
C. THE HONORABLE COURT OF APPEALS EFFECTIVELY
DIRECTED [Del Villars] REINSTATEMENT TO HIS
FORMER JOB LEVEL DESPITE ITS IMPOSSIBILITY SINCE
HE HAD ALREADY BEEN VALIDLY SEPARATED FROM
SERVICE.[18]

The Company avers that the Court of Appeals erred in giving

due course to Del Villars Petition for Certiorari in CA-G.R. SP No.
53815 as the said remedy was filed out of time. Rule 65, Section 4
of the Rules of Court, as amended by Supreme Court Circular No.
39-98 on September 1, 1998, provided:
Sec. 4. Where and when petition to be filed. The
petition may be filed not later than sixty (60) days
from
notice
of
the
judgment,
order
or
resolution sought to be assailed in the Supreme Court
or, if it relates to the acts or omissions of a lower court or
of a corporation, board, officer or person, in the Regional
Trial Court exercising jurisdiction over the territorial area

as defined by the Supreme Court. It may also be filed in

the Court of Appeals whether or not the same is in aid of
its appellate jurisdiction, or in the Sandiganbayan if it is in
aid of its jurisdiction. If it involves the acts or omissions of
a quasi-judicial agency, and unless otherwise provided by
law or these Rules, the petition shall be filed in and
cognizable only by the Court of Appeals.

If the petitioner had filed a motion for new trial or

reconsideration in due time after notice of said
judgment, order or resolution, the period herein fixed
shall be interrupted. If the motion is denied, the
aggrieved party may file the petition within the
remaining period, but which shall not be less than
five (5) days in any event, reckoned from notice of
such denial. No extension of time to file the petition
shall be granted except for the most compelling reason
and in no case to exceed fifteen (15) days.(Emphases
ours.)

The Company points out that Del Villar received a copy of

the NLRC Decision dated February 26, 1999 on March 17,
1999. Twelve days later, on March 29, 1999, Del Villar filed a
Motion for Reconsideration, thus, interrupting the 60-day
reglementary period for filing a petition for certiorari. The NLRC
denied Del Villars Motion for Reconsideration in a Resolution
dated April 26, 1999, a copy of which Del Villar received on May
21, 1999. From May 21, 1999, Del Villar only had 48 days more,
or until July 8, 1999, within which to file his petition for certiorari;
but he only did so 60 days later, on July 20, 1999. Clearly, Del
Villars Petition for Certiorari in CA-G.R. SP No. 53815 was filed 12
days late and way beyond the reglementary period as provided
under the Rules of Court.

We do not agree.

While CA-G.R. SP No. 53815 was pending before the Court of

Appeals, Section 4 of Rule 65 of the Rules of Court was amended
anew by Supreme Court Circular No. 56-2000, which took effect
on September 1, 2000, to read:
Sec. 4. When and where petition filed. The petition
shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In case
a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty
(60) day period shall be counted from notice of the
denial of the said motion.
The petition shall be filed in the Supreme Court or, if
it relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial
Court exercising jurisdiction over the territorial area as
defined by the Supreme Court. It may also be filed in the
Court of Appeals whether or not the same is in the aid of
its appellate jurisdiction, or in the Sandiganbayan if it is in
aid of its appellate jurisdiction. If it involves the acts or
omissions of a quasi-judicial agency, unless otherwise
provided by law or these rules, the petition shall be filed
in and cognizable only by the Court of Appeals.
No extension of time to file the petition shall be
granted except for compelling reason and in no case
exceeding fifteen (15) days. (Emphases ours.)

It is clear that under Supreme Court Circular No. 56-2000, in

case a motion for reconsideration of the judgment, order, or
resolution sought to be assailed has been filed, the 60-day period
to file a petition for certiorari shall be computed from notice of the
denial of such motion.

The crucial question now is whether Supreme Court Circular

No. 56-2000 should be applied retroactively to Del Villars Petition
in CA-G.R. SP No. 53815.

We answer
Hermano[19]:

affirmatively. As

we

explained

in Perez

v.

Under this amendment, the 60-day period within

which to file the petition starts to run from receipt of
notice of the denial of the motion for reconsideration, if
one is filed.
In Narzoles v. National Labor Relations Commission [G.R.
No. 141959, 29 September 2000, 341 SCRA 533-538],
we described this latest amendment as curative in nature
as it remedied the confusion brought about by Circular
No. 39-98 because, historically, i.e., even before the 1997
revision to the Rules of Civil Procedure, a party had a
fresh period from receipt of the order denying the motion
for reconsideration to file a petition for certiorari.
Curative statutes, which are enacted to cure defects in a
prior law or to validate legal proceedings which would
otherwise be void for want of conformity with certain
legal requirements, by their very essence, are retroactive
and, being a procedural rule, we held in Sps. Ma. Carmen
and Victor Javellana v. Hon. Presiding Judge Benito
Legarda (G.R. No. 139067, 23 November 2004] that
procedural laws are construed to be applicable to actions
pending and undetermined at the time of their passage,
and are deemed retroactive in that sense and to that
extent.[20]

In the instant case, Del Villar filed a Motion for

Reconsideration of the NLRC Decision dated February 26,
1999. Del Villar received a copy of the NLRC Resolution dated
April 26, 1999, denying his Motion for Reconsideration, on May 21,
1999. As already settled by jurisprudence, Del Villar had a fresh

period of 60 days from May 21, 1999 within which to file his
Petition for Certiorari before the Court of Appeals. Keeping in mind
the rule that in computing a period, the first day shall be excluded
and the last day included, [21] exactly 60 days had elapsed from
May 21, 1999 when Del Villar filed his Petition with the appellate
court on July 20, 1999. Hence, without a doubt, Del Villars Petition
for Certiorari in CA-G.R. SP No. 53815 was seasonably filed.

We now turn our attention to the merits of the case.

The Company asserts that the Court of Appeals should not

have issued a writ of certiorari in Del Villars favor as there was no
grave abuse of discretion on the part of the NLRC in finding that
Del Villar was not demoted and that the Company had not acted
in bad faith or with malice.

The issue of whether the Company, in transferring Del Villar from

the position of Transportation Services Manager to Staff Assistant
to the Corporate Purchasing and Materials Control Manager,
validly exercised its management prerogative or committed
constructive dismissal, is a factual matter. It is a settled rule that
factual findings of labor officials, who are deemed to have
acquired expertise in matters within their respective jurisdictions,
are
generally
accorded
not
only
respect
but
even
finality. Moreover, in a petition for review on certiorari under Rule
45 of the Rules of Court, the Supreme Court reviews only errors of
law and not errors of facts.However, where there is divergence in
the findings and conclusions of the NLRC, on the one hand, from
those of the Labor Arbiter and the Court of Appeals, on the other,
the Court is constrained to examine the evidence, [22] to determine
which findings and conclusion are more conformable with the
evidentiary facts. Hence, in the instant Petition, we embark on
addressing not only the legal, but the factual issues as well.

Jurisprudence
recognizes
the
exercise
of
management
prerogative. For this reason, courts often decline to interfere in
legitimate business decisions of employers. In fact, labor laws
discourage interference in employers judgment concerning the
conduct of their business.[23]

In the pursuit of its legitimate business interest, management has

the prerogative to transfer or assign employees from one office or
area of operation to another provided there is no demotion in rank
or diminution of salary, benefits, and other privileges; and the
action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient
cause. The right of employees to security of tenure does not give
them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to
transfer them.[24]

Managerial prerogatives, however, are subject to limitations

provided by law, collective bargaining agreements, and general
principles of fair play and justice. [25] In the case of Blue Dairy
Corporation v. National Labor Relations Commission,[26] we
described in more detail the limitations on the right of
management to transfer employees:
But, like other rights, there are limits thereto. The
managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play. Having
the right should not be confused with the manner in
which that right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be
able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it
involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. Should the employer fail to
overcome this burden of proof, the employees transfer

shall be tantamount to constructive dismissal, which has

been defined as a quitting because continued
employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists
when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the
employee leaving him with no option but to forego with
his continued employment.[27]

In the case at bar, there is no dispute that Del Villar was

transferred by the Company from the position of Transportation
Services Manager to the position of Staff Assistant to the
Corporate Purchasing and Materials Control Manager. The burden
thus falls upon the Company to prove that Del Villars transfer was
not tantamount to constructive dismissal. After a careful scrutiny
of the records, we agree with the Labor Arbiter and the Court of
Appeals that the Company failed to discharge this burden of proof.

The Company and its officials attempt to justify the transfer of Del
Villar by alleging his unsatisfactory performance as Transportation
Services Manager. In its Petition, the Company disclosed that:
4.1. As Transportation Services Manager, [Del Villar]
displayed an utterly woeful performance. He was unable
to submit basic data as to type and brand of vehicles with
highest/lowest maintenance cost as requested. [Del Villar]
could not even update the records of his office. He never
complied with his commitments on submission of reports
and his claims of the availability of such reports were
never substantiated.

4.2. [Del Villar] could not work with minimum or no

supervision. His activities needed to be closely and
constantly monitored by his superiors. [Del Villar] lacked

initiative and had to be constantly reminded of what to

do. The work he performed and/or submitted, more often
than not, had to be redone. In his Performance and
Potential Evaluation Sheet for 1995, [Del Villar] merited a
mediocre grade of 2 in a scale of one (1) to five (5), the
latter number being the highest grade. Copies of the
Affidavit of Edgardo I. San Juan [San Juan], the Companys
then Business Logistic Director, and respondents
Performance and Potential Evaluation Sheet for 1995 are
attached as Annexes B and C, respectively.[28]

San Juan averred in his Affidavit that Del Villar was inept and
incompetent as Transportation Services Manager; and was even
more unqualified to take over the new position of Transportation
and Refrigeration Services Manager, which involved additional
functions related to Refrigeration. It was for this reason that Del
Villar was transferred to the position of Staff Assistant to the
Corporate Purchasing and Materials Control Manager.

In his Counter-Affidavit submitted before the NLRC, Pineda,

the Corporate Purchasing and Materials Control Manager, claimed
that:
3. As his evaluation would show, Mr. del Villar was
not a well-motivated employee. He could not perform his
job well and promptly with minimum or no supervision
and follow-up from his superiors. He repeatedly failed to
observe the deadlines which I set for the submission of
his reports and often procrastinates. His work product
likewise
suffered
from
accuracy
and
thoroughness. Despite several admonitions and guidance
from me as his immediate superior, he simply refused to
change his work attitude.[29]

We are unconvinced. The dismal performance evaluations of

Del Villar were prepared by San Juan and Pineda after Del Villar
already implicated his two superiors in his Report dated January 4,
1996 in an alleged fraudulent scheme against the Company. More
importantly, we give weight to the following instances
establishing that Del Villar was not merely transferred from the
position of Transportation Services Manager to the position of
Staff Assistant to the Corporate Purchasing and Materials Control
Manager; he was evidently demoted.
A transfer is a movement from one position to another which
is of equivalent rank, level or salary, without break in
service. Promotion, on the other hand, is the advancement from
one position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied by
an increase in salary.Conversely, demotion involves a situation
where an employee is relegated to a subordinate or less
important position constituting a reduction to a lower grade or
rank, with a corresponding decrease in duties and responsibilities,
and usually accompanied by a decrease in salary. [30]

First, as the Court of Appeals observed, Del Villars demotion

is readily apparent in his new designation. Formerly, he was
the Transportation Services Manager; then he was made
a Staff Assistant a subordinate to another manager, particularly,
the Corporate Purchasing and Materials Control Manager.

Second, the two posts are not of the same weight in terms of
duties and responsibilities. Del Villars position as Transportation
Services Manager involved a high degree of responsibility, he
being in charge of preparing the budget for all of the vehicles of
the Company nationwide. As Staff Assistant of the Corporate
Purchasing and Materials Control Manager, Del Villar contended
that he was not assigned any meaningful work at all. The
Company utterly failed to rebut Del Villars contention. It did not
even present, at the very least, the job description of such a Staff
Assistant. The change in the nature of work resulted in a

degrading work condition and reduction of duties and

responsibility constitute a demotion in rank. In Globe Telecom,
Inc. v. Florendo-Flores,[31] we found that there was a demotion in
rank even when the respondent therein continued to enjoy the
rank of a supervisor, but her function was reduced to a mere
house-to-house or direct sales agent.

Third, while Del Villars transfer did not result in the reduction
of his salary, there was a diminution in his benefits. The Company
admits that as Staff Assistant of the Corporate Purchasing and
Materials Control Manager, Del Villar could no longer enjoy the
use of a company car, gasoline allowance, and annual foreign
travel, which Del Villar previously enjoyed as Transportation
Services Manager.

Fourth, it was not bad enough that Del Villar was demoted, but he
was even placed by the Company under the control and supervision
of Pineda as the latters Staff Assistant. To recall, Pineda was one of
the Company officials who Del Villar accused of defrauding
the Company in his Report dated January 4, 1996. It is not too
difficult to imagine that the working relations between Del Villar,
the accuser, and Pineda, the accused, had been strained and
hostile. The situation would be more oppressive for Del Villar
because of his subordinate position vis--vis Pineda.

Fifth, all the foregoing caused Del Villar inconvenience and

prejudice, so unbearable for him that he was constrained to seek
remedy from the NLRC. The Labor Arbiter was correct in his
observation that had Del Villar resigned immediately after his
transfer, he could be said to have been constructively
dismissed. There is constructive dismissal when there is a
demotion in rank and/or diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.[32]

Eventually, however, the Company actually terminated Del

Villars services effective May 31, 1998, as his position was no
longer necessary or was considered redundant due to the
reorganization of the Business Logistic Directorate.

Redundancy is one of the authorized causes for the dismissal of an

employee. It is governed by Article 283 of the Labor Code, which
reads:
ART.
283. Closure
of
establishment
and
reduction of personnel. The employer may also
terminate the employment of any employee due to the
installation
of
labor-saving
devices,
redundancy,
retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at
least one (1) month before the intended date thereof. In
case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or to at least one-half (1/2) month
pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one
(1) whole year.

Redundancy, for purposes of the Labor Code, exists where

the services of an employee are in excess of what is reasonably
demanded
by
the
actual
requirements
of
the

enterprise. Succinctly put, a position is redundant where it is

superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by
the enterprise.[33]

The determination that the employee's services are no

longer necessary or sustainable and, therefore, properly
terminable for being redundant is an exercise of business
judgment of the employer. The wisdom or soundness of this
judgment is not subject to discretionary review of the Labor
Arbiter and the NLRC, provided there is no violation of law and no
showing that it was prompted by an arbitrary or malicious act. In
other words, it is not enough for a company to merely declare
that it has become overmanned. It must produce adequate proof
of such redundancy to justify the dismissal of the affected
employees.[34]

We mentioned in Panlilio v. National Labor Relations

Commission[35] that an employer may proffer new staffing pattern,
feasibility studies/proposal, on the viability of the newly created
positions, job description and the approval by the management of
the restructuring as evidence of redundancy. We further explained
inAMA Computer College Inc. v. Garcia[36] what constitutes
substantial evidence of redundancy:
ACC attempted to establish its streamlining program by
presenting its new table of organization. ACC also
submitted a certification by its Human Resources
Supervisor, Ma. Jazmin Reginaldo, that the functions and
duties of many rank and file employees, including the
positions of Garcia and Balla as Library Aide and Guidance
Assistant, respectively, are now being performed by the
supervisory employees. These, however, do not satisfy
the requirement of substantial evidence that a reasonable
mind might accept as adequate to support a conclusion.

As they are, they are grossly inadequate and mainly selfserving. More compelling evidence would have been
a comparison of the old and new staffing patterns,
a description of the abolished and newly created
positions, and proof of the set business targets
and failure to attain the same which necessitated
the reorganization or streamlining.[37] (Emphases
ours.)

In this case, other than its own bare and self-serving

allegation that Del Villars position as Staff Assistant of Corporate
Purchasing and Materials Control Manager had already become
redundant, no other evidence was presented by the
Company. Neither did the Company present proof that it had
complied with the procedural requirement in Article 283 of prior
notice to the Department of Labor and Employment (DOLE) of the
termination of Del Villars employment due to redundancy one
month prior to May 31, 1998. The notice to the DOLE would have
afforded the labor department the opportunity to look into and
verify whether there is truth as to the claim of the Company that
Del Villars position had become redundant with the
implementation of new distribution systems, utilization of
improved operational processes, and functional reorganization of
the Company. Compliance with the required notices would have
also established that the Company abolished Del Villars position
in good faith.[38]

Del Villars poor employee performance is irrelevant as regards the

issue on redundancy. Redundancy arises because there is no more
need for the employees position in relation to the whole business
organization, and not because the employee unsatisfactorily
performed the duties and responsibilities required by his position.
[39]

There being no authorized cause for the termination of Del Villars

employment, then he was illegally dismissed.
An employee who is illegally dismissed is entitled to the twin
reliefs of full backwages and reinstatement. If reinstatement is not
viable, separation pay is awarded to the employee. In awarding
separation pay to an illegally dismissed employee, in lieu of
reinstatement, the amount to be awarded shall be equivalent to
one month salary for every year of service. [40] Under Republic Act
No. 6715, employees who are illegally dismissed are entitled to
full backwages, inclusive of allowances and other benefits or their
monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their
actual reinstatement but if reinstatement is no longer possible,
the backwages shall be computed from the time of their illegal
termination up to the finality of the decision. We note that Del
Villars reinstatement is no longer possible because the position he
previously occupied no longer exists, per San Juans Affidavit
dated October 15, 1998.[41] Also, Del Villar had already received
his separation pay sometime in October 1998. [42]

Because of his unjustified dismissal, we likewise award in Del

Villars favor moral and exemplary damages. Award of moral and
exemplary damages for an illegally dismissed employee is proper
where the employee had been harrassed and arbitrarily
terminated by the employer. Moral damages may be awarded to
compensate one for diverse injuries such as mental anguish,
besmirched reputation, wounded feelings, and social humiliation
occasioned by the employers unreasonable dismissal of the
employee. We have consistently accorded the working class a
right to recover damages for unjust dismissals tainted with bad
faith; where the motive of the employer in dismissing the
employee is far from noble. The award of such damages is based
not on the Labor Code but on Article 220 of the Civil Code.
[43]
These damages, however, are not intended to enrich the
illegally dismissed employee, such that, after deliberations, we
find
the
amount
of P100,000.00
for
moral
damages
and P50,000.00 for exemplary damages sufficient to assuage the

sufferings experienced by Del Villar and by way of example or

correction for the public good.
WHEREFORE, premises considered, the instant petition
is DENIED for lack of merit. The Decision dated October 30, 2003
and Resolution dated March 29, 2004 of the Court of Appeals in
CA-G.R. SP No. 53815 are hereby AFFIRMED with the
following MODIFICATIONS: 1) the amount of backwages shall be
computed from the date of Del Villars illegal dismissal until the
finality of this judgment; and 2) the amount of moral and
exemplary damages are reduced toP100,000.00 and P50,000.00,
respectively. For this purpose, the case is hereby REMANDED to
the Labor Arbiter for the computation of the amounts due Angel
U. del Villar.

SO ORDERED

AGG Trucking vs. Yuag Digest

G.R. No. 195033 : October 12, 2011
AGG TRUCKING AND/OR ALEX ANG GAEID, Petitioners, v. MELANIO B. YUAG,
Respondent.
SERENO, J.:
FACTS:
Petitioner Alex Ang Gaeid had employed respondent Melanio Yuag as a driver since 28
February 2002.His clients were Busco Sugar Milling Co., Inc., operating in Quezon,
Bukidnon; and Coca-cola Bottlers Company in Davao City and Cagayan de Oro City.
Petitioner noticed that respondent had started incurring substantial shortages. It was also
reported that he had illegally sold bags of sugar along the way at a lower price, and that he
was banned from entering the premises of the Busco Sugar Mill.Petitioner asked for an
explanation from respondent who remained quiet.
Alarmed at the delivery shortages, petitioner took it upon himself to monitor all his drivers,
including respondent, by instructing them to report to him their location from time to time
through their mobile phones.He also required them to make their delivery trips in convoy, in
order to avoid illegal sale of cargo along the way.

Respondent, along with 20 other drivers, was tasked to deliver bags of sugar from Cagayan
de Oro City to Coca-Cola Bottlers Plant in Davao City on 4 December 2004.All drivers, with
the exception of Yuag who could not be reached through his cellphone, reported their
location as instructed.The Coca-Cola Plant in Davao later reported that the delivery had a
suspiciously enormous shortage.
When confronted about the shortage and his failure to report his loacation, respondent did
not respond to petitioner. Thereafter he was instructed to "just take a rest" which respondent
construed as a constructive dismissal. After respondent demanded that his separation be
made in writing, petitioner insisted that respondent return the next day and take a rest.
Respondent however, went to file a complaint with the BLR for illegal dismissal and asked
for his separation pay and 13th month pay; alleging that he was dismissed based on his
non-returned call.
The Labor Arbiter however, sustained the dismissal for lack of substantial proof to sustain
the allegation of illegal dismissal and that parties were under an employer-employee
relationship. Upon appeal with the NLRC, the LA decision was reversed because
respondent was deemed to be under preventive suspension without pay. A motion for
reconsideration was made but was denied for being filed out of the reglamentary period.
On appeal through certiorari to the Court of Appeals, the court ruled on the existence of an
employer-employee relationship and reversed the NLRC decision by reinstating the Labor
Arbiters decision instead with modification to the award for damages.
ISSUE:
Whether or not the Court of Appeals committed error in reversing the NLRC decision.
HELD:
Petitioner is correct in its argument that there must first be a finding on whether the NLRC
committed grave abuse of discretion and on what these acts were.In this case, the CA
seemed to have forgotten that its function in resolving a petition for certiorari was to
determine whether there was grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of public respondent NLRC.The CA proceeded to review the records
and to rule on issues that were no longer disputed during the appeal to the NLRC, such as
the existence of an employer-employee relationship.The pivotal issue before the NLRC was
whether petitioners telling respondent to take a rest, or to have a break, was already a
positive act of dismissing him.
Furthermore, the NLRC Resolution that reversed the LA Decision had nothing in it that was
whimsical, unreasonable or patentlyviolative of the law.It was the CA which erred in finding
faults that were inexistent in the NLRC Resolution.
In addition to this, the CA erroneously modified the NLRC decision when it can no longer be
modified for being filed out of time. It is not a mere technicality that the CA may brush aside.
The NLRC Resolution sought to be set aside had become final and executory 25 days
before respondent filed his Motion for Reconsideration.Thus, subsequent proceedings and
modifications are not allowed and are deemed null and void.

Republic of the Philippines

Supreme Court

Manila
THIRD DIVISION
ST.
PAUL
COLLEGE
QUEZON CITY, SR. LILIA
THERESE
TOLENTINO,
SPC, SR. BERNADETTE
RACADIO,
SPC, and SR.
SARAH MANAPOL,
Petitioners,

- versus-

G.R. No. 169905

Present:
VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
VILLARAMA, JR.,* and
MENDOZA, JJ.

REMIGIO MICHAEL A.
Promulgated:
ANCHETA II and CYNTHIA
A. ANCHETA,
September 7, 2011
Respondent.
x----------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:
This resolves the Petition for Review[1] dated November 18, 2005 of petitioners St.
Paul College, Quezon City, et al. which seeks to reverse and set aside the
Decision[2] dated July 8, 2005 of the Court of Appeals (CA) and its
Resolution[3] dated September 29, 2005, reversing the Decision[4] dated February
28, 2003 of the National Labor Relations Commission (NLRC) and the
Decision[5] dated November 20, 2000 of the Labor Arbiter.
As culled from the records, the antecedent facts are the following:
Petitioner St. Paul College, Quezon City (SPCQC) is a private Catholic educational
institution. It is represented by its President, petitioner Sr. Lilia Therese Tolentino,

SPC, the College Dean, Sr. Bernadette Racadio, SPC, and the Mass
Communication Program Director, Sr. Sarah Manapol, SPC. The respondents,
Spouses Remigio Michael A. Ancheta II and Cynthia A. Ancheta are former
teachers of the same school.
Respondent Remigio Michael was hired by the SPCQC as a teacher in the General
Education Department with a probationary rank in the School Year (SY) 19961997 which was renewed in the following SY 1997-1998. His wife, respondent
Cynthia was hired by the same school as a part time teacher of the Mass
Communication Department in the second semester of SY 1996-1997 and her
appointment was renewed for SY 1997-1998.
On February 13, 1998, respondent Remigio Michael wrote a letter [6] to petitioner
Sr. Lilia, signifying his intention to renew his contract with SPCQC for SY 19981999. A letter[7] of the same tenor was also written by respondent Cynthia
addressed to petitioner Sr. Lilia.
Petitioner Sr. Bernadette, on March 9, 1998, sent two letters [8] with the same
contents to the respondent spouses informing them that upon the recommendation
of the College Council, the school is extending to them new contracts for SY 19981999.
A letter[9] dated April 22, 1998 was sent to petitioner Sr. Bernadette and signed by
some of the teachers of SPCQC, including the respondent spouses. The said letter
contained the teachers' sentiments regarding two school policies, namely: first, the
policy of penalizing the delay in encoding final grades and, second, the policy of
withholding salaries of the teachers. Meanwhile, a letter[10] dated April 21, 1998
(the date, later on contested by respondent Remigio Michael to be ante-dated) was
written by petitioner Sr. Bernadette to respondent Remigio Michael, reiterating the
conversation that took place between them the day before the date of the said letter
(April 20, 1998). The letter enumerated the departmental and instructional policies
that respondent Remigio Michael failed to comply with, such as the late
submission of final grades, failure to submit final test questions to the Program
Coordinator, the giving of tests in the essay form instead of the multiple choice
format as mandated by the school and the high number of students with failing
grades in the classes that he handled.
Thereafter, petitioner Sr. Bernadette wrote a letter [11] dated April 30, 1998 to
petitioner Sr. Lilia, endorsing the immediate termination of the teaching services of
the respondent spouses on the following grounds:

1. Non-compliance with the departmental policy to submit their

final test questions to their respective program coordinators for
checking/comments (violating par. 7.1, p. 65 of the Faculty Manual).
This policy was formulated to ensure the validity and reliability of
test questions of teachers for the good of the students. This in effect can
minimize if not prevent unnecessary failure of students.
2. Non-compliance with the standard format (multiple choice) of
final test questions as agreed upon in the department. Mr. Ancheta
prepared purely essay questions for the students.
Well-prepared multiple choice questions are more objective, and
develop critical thinking among students.
3. Failure to encode their modular grade reports as required
(violating par. H. 8, p. 66 of our Faculty manual).
4. Failure to submit and update required modules (syllabi) of their
subject despite reminders (violating D, 1.5, p. 40 of our Faculty Manual).
5. Both spouses have a gross number of failure in their class.
Mr. Ancheta failed 27 in a class of 44 students, and had a total
number of 56 failures in his sections of Philippine History. Mrs. Ancheta
failed 11 students in a class of 37, and had a total number of 16 failures
in her 2 classes of Communication Theories.
When I talked to each of them to re-examine their bases of failure,
they refused saying that they had done this; otherwise, the number of
failures would have been more. I gathered data as to the mental ability of
the students who failed, and the number of students who incurred more
than one failure. In Mr. Ancheta's class of 44 students with 27 failures,
majority had average IQ's, 8 were on probation status, and 2 had aboveaverage IQ. Only 7 of his 27 failures were also failing in other subjects.
6. Failure to report to work on time <re: Mr. Ancheta> (violating
par. 1, 21, p. 63 of our Faculty Manual).
7. Both spouses are not open to suggestions to improve
themselves as teachers. They just see their points and their principles.

When I talked to Mr. Ancheta the second time telling him of the
data I gathered, including the information that statistics permits only 1 to
2% failures, he still refused to budge in to review his grades and his
quality of teaching. He stood firm in his conviction and ground that the
students were to blame for their failures, and reiterated his disagreement
with several school policies (which he violated) contained in his letter
which he had asked his wife to give to the dean's office. Not content on
writing down his personal disagreement on some policies, he also asked
some faculty members to read his letter and put their signatures on it if
they were in favor of one or all of his points.
In other words, said spouses had refused and continue to refuse to
evaluate the students' performance on the bases of an established grading
system to ensure just and fair appraisal (violating par. 1.4, p. 40 of our
Faculty Manual).[12]

Respondent spouses were given an opportunity to comment on the above letterrecommendation of petitioner Sr. Bernadette. [13] On May 4, 1998, respondent
spouses sent their respective comments[14] to petitioner Sr. Lilia. Subsequently, the
respondent spouses received their respective letters of termination [15] on May 14,
1998. Respondent spouses sent a letter[16] for reconsideration to petitioner Sr. Lilia,
but was eventually denied.[17]
Thus, respondent spouses filed a Complaint[18] for illegal dismissal with the
NLRC. On November 20, 2000, the Labor Arbiter dismissed the complaint, [19] the
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
DISMISSING the complaint of illegal dismissal for lack of merit. All
other claims are denied for lack of basis.
SO ORDERED.

The decision of the Labor Arbiter was appealed to the NLRC, but was affirmed by
the latter on February 28, 2003,[20] disposing the case as follows:
WHEREFORE, premises considered, the appeal is DISMISSED for lack
of merit and the Decision appealed from is AFFIRMED en toto.
SO ORDERED.

After the denial of their motion for reconsideration with the NLRC, [21] the
respondent spouses filed a petition for certiorari with the CA. In its
Decision[22] dated July 8, 2005, the CA granted the petition and reversed the
decisions of the Labor Arbiter and the NLRC, thus, it ruled:
WHEREFORE, finding grave abuse of discretion amounting to lack or
excess of jurisdiction, the court resolved to SET ASIDE the decision
dated February 28, 2003 of public respondent National Labor Relations
Commission. Private respondents are hereby ordered to pay, jointly and
severally, petitioners the following:
a) Separation pay equivalent to one (1) month's pay for
every year of continuous service;
b) Deficiency wages to be computed from the
unexpired portion of petitioners employment contract.
c) Moral damages in the amount of P250,000.00 to
each [of the] petitioners;
d) Exemplary damages also in the amount of P250,000.00
to each [of the] petitioners; and
e) Attorney's fees.
SO ORDERED.

In its Resolution[23] dated September 29, 2005, the CA denied the motion for
reconsideration of the petitioners herein; hence, the present petition.
The petitioners cited the following arguments:
I.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE
RESPECT, COMMITTED GRAVE AND REVERSIBLE ERROR IN
SETTING ASIDE THE FINDING IN THE DECISION DATED 20
NOVEMBER 2000 OF THE HONORABLE LABOR ARBITER IN
NLRC NCR CASE NO. 00-07-06018-98 THAT INDIVIDUAL
CONTRACTS OF EMPLOYMENT OF ATTY. REMIGIO MICHAEL
A. ANCHETA II AND MS. CYNTHIA A. ANCHETA HAD EXPIRED
AT THE END OF SY 1997-1998, I.E., 1 JUNE 1997- 31 MARCH 1998,

AND WAS NOT RENEWED FOR SY 1998-1999 AND,

ACCORDINGLY, THEY WERE NOT ILLEGALLY TERMINATED
BY ST. PAUL COLLEGE QUEZON CITY.
II.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE
RESPECT, COMMITTED GRAVE AND REVERSIBLE ERROR IN
SETTING ASIDE THE DECISION DATED 28 FEBRUARY 2003 OF
THE NATIONAL LABOR RELATIONS COMMISSION IN NLRC
NCR CA NO. 02775-01 FINDING THAT ATTY. REMIGIO MICHAEL
A. ANCHETA II AND MS. CYNTHIA A. ANCHETA WERE
DISMISSED FOR JUST CAUSE AND AFTER DUE PROCESS.
III.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE
RESPECT, COMMITTED GRAVE AND REVERSIBLE ERROR IN
RULING THAT ATTY. REMIGIO MICHAEL A. ANCHETA II AND
MS. CYNTHIA A. ANCHETA WERE (A) EXTENDED A
THIRD APPOINTMENT TO TEACH AS PROBATIONARY
TEACHERS FOR SY 1998-1999, (B) ILLEGALLY DISMISSED BY
ST. PAUL COLLEGE QUEZON CITY AS AN ACT OF RETALIATION
ON THE PART OF SR. BERNADETTE RACADIO, SPC AND (C)
ENTITLED TO SEPARATION PAY, DEFICIENCY WAGES, MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.[24]

The petition is impressed with merit.

Before this Court delves into the merits of the petition, it deems it necessary to
discuss the nature of the employment of the respondents. It is not disputed that
respondent Remigio Michael was a full-time probationary employee and his wife,
a part-time teacher of the petitioner school.
A reality we have to face in the consideration of employment on probationary
status of teaching personnel is that they are not governed purely by the Labor
Code.[25] The Labor Code is supplemented with respect to the period of probation
by special rules found in the Manual of Regulations for Private Schools. [26] On the
matter of probationary period, Section 92 of these regulations provides:
Section 92. Probationary Period. - Subject in all instances to
compliance with the Department and school requirements, the

probationary period for academic personnel shall not be more than three
(3) consecutive years of satisfactory service for those in the elementary
and secondary levels, six (6) consecutive regular semesters of
satisfactory service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary
level where collegiate courses are offered on a trimester basis.

A probationary employee or probationer is one who is on trial for an employer,

during which the latter determines whether or not he is qualified for permanent
employment.[27] The probationary employment is intended to afford the employer
an opportunity to observe the fitness of a probationary employee while at work,
and to ascertain whether he will become an efficient and productive employee.
[28]
While the employer observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for permanent employment, the
probationer, on the other hand, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment.
[29]
Thus, the word probationary, as used to describe the period of employment,
implies the purpose of the term or period, not its length.[30]
The common practice is for the employer and the teacher to enter into a contract,
effective for one school year.[31] At the end of the school year, the employer has the
option not to renew the contract, particularly considering the teacher's
performance.[32] If the contract is not renewed, the employment relationship
terminates.[33] If the contract is renewed, usually for another school year,
the probationary employment continues.[34] Again, at the end of that period, the
parties may opt to renew or not to renew the contract.[35] If renewed, this second
renewal of the contract for another school year would then be the last year since it
would be the third school year of probationary employment.[36] At the end of this
third year, the employer may now decide whether to extend a permanent
appointment to the employee, primarily on the basis of the employee having met
the reasonable standards of competence and efficiency set by the employer. [37] For
the entire duration of this three-year period, the teacher remains under probation.
[38]
Upon the expiration of his contract of employment, being simply on probation,
he cannot automatically claim security of tenure and compel the employer to renew
his employment contract.[39]
Petitioner school contends that it did not extend the contracts of respondent
spouses. It claims that, although, it has sent letters to the spouses informing them

that the school is extending to them new contracts for the coming school year, the
letters do not constitute as actual employment contracts but merely offers to teach
on the said school year. The respondent spouses wrote to the president, petitioner
Sr. Lilia:
Respondent Remigio Michael:
Dear Sister,
Peace!
This signifies my intention of renewing my contract of employment with
[SPCQC] for SY 1998-1999.
Thank you.[40]
Respondent Cynthia:
Dear Sister,
I wish to continue teaching in St. Paul College Quezon City for school
year 1998-99.
Thank you very much.[41]

In response to the above, the college dean, petitioner Sr. Bernadette wrote the
respondent spouses letters with the same contents, thus:
This is to acknowledge receipt of your letter of application to teach
during the School year of 1998-1999.
Upon the recommendation of the College Council, I am happy to inform
you that the school is extending to you a new contract for School year
1998-1999.
I wish to take this opportunity to thank you for the service which you
have rendered to our students and to the school during the past School
year 1997-1998. I hope you will again go out of your way and cooperate
in this apostolate that we are doing.
Congratulations and I look forward to a fruitful and harmonious time
with you.[42]

Section 91 of the Manual of Regulations for Private Schools, states that:

Section 91. Employment Contract. Every contract of employment
shall specify the designation, qualification, salary rate, the period and
nature of service and its date of effectivity, and such other terms and
condition of employment as may be consistent with laws and rules,
regulations and standards of the school. A copy of the contract shall be
furnished the personnel concerned.[43]

It is important that the contract of probationary employment specify the period or

term of its effectivity.[44] The failure to stipulate its precise duration could lead to
the inference that the contract is binding for the full three-year probationary
period.[45] Therefore, the letters sent by petitioner Sr. Racadio, which were void of
any specifics cannot be considered as contracts. The closest they can resemble to
are that of informal correspondence among the said individuals. As such, petitioner
school has the right not to renew the contracts of the respondents, the old ones
having been expired at the end of their terms.
Assuming, arguendo, that the employment contracts between the petitioner school
and the respondent spouses were renewed, this Court finds that there was a valid
and just cause for their dismissal. The Labor Code commands that before an
employer may legally dismiss an employee from the service, the requirement of
substantial and procedural due process must be complied with.[46] Under the
requirement of substantial due process, the grounds for termination of employment
must be based on just[47] or authorized causes.[48]
Petitioner school charged respondent Remigio Michael of non-compliance with a
school policy regarding the submission of final test questions to his program
coordinator for checking or comment. Following due process, the same respondent
admitted the charge in his letter,[49] stating that:
It is true that I failed to submit a copy of my final exam to my
program coordinator for checking or comment. But to single me out
(and Mrs. Cynthia Ancheta for that matter) and hold me accountable for
it would not only defy the basic tenets of fair play and equality. It is a
common knowledge that there are many teachers who do not comply
with this policy. To impose solely upon me the whole weight of this
particular policy, leaving the others who similarly violate the same
policy, would put me under the mercy of selective justice and the
exercise of gross abuse of discretion by the Dean. If the root cause of

this matter which I will discuss later had not happened, I know that my
attention would never be called to this policy, as what was the case in
the past. I plead to you, Sister, to find out how many of us have not
complied with this policy and how many were actually called their
attention for non-compliance. I do not disagree with the objective of this
policy; I am only shocked to find out that while many are noncompliant, only few are punished. So be it, I apologize for my violation.
[50]

Respondent Remigio Michael was further charged with non-compliance with the
standard format (multiple choice) of final test questions as agreed upon by the
different departments of petitioner school, to which the former replied:
I am not the only one who does not comply with this policy. Many
teachers do not give multiple choice exams at all; others do not give a
pure multiple choice exam. I urge you, Sister, to kindly do the rounds. x
xx
xxxx
Again, I apologize if I did not comply with this policy.[51]

He was also charged with failure to encode modular grade reports as required by
the school. On that charge, respondent Remigio Michael cited a letter dated April
22, 1998 that criticizes the school policy of penalizing the delays in encoding final
grades.
On the charge that he had a high failure rate in his classes, respondent Remigio
Michael claimed that he did not flunk students, but the latter failed. He further
commented that petitioner school did not consciously promote academic
excellence.
Finally, as to the charge that he constantly failed to report for work on time, the
same respondent admitted such tardiness but only with respect to his 7:30 a.m.
classes.
Respondent Remigio Michael's spouse shared the same defenses and admissions as
to the charges against her.

The plain admissions of the charges against them were the considerations taken
into account by the petitioner school in their decision not to renew the respondent
spouses' employment contracts. This is a right of the school that is mandated by
law and jurisprudence. It is the prerogative of the school to set high standards of
efficiency for its teachers since quality education is a mandate of the Constitution.
[52]
As long as the standards fixed are reasonable and not arbitrary, courts are not at
liberty to set them aside.[53] Schools cannot be required to adopt standards which
barely satisfy criteria set for government recognition.[54] The same academic
freedom grants the school the autonomy to decide for itself the terms and
conditions for hiring its teacher, subject of course to the overarching limitations
under the Labor Code.[55] The authority to hire is likewise covered and protected by
its management prerogative the right of an employer to regulate all aspects of
employment, such as hiring, the freedom to prescribe work assignments, working
methods, process to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of
workers.[56]
WHEREFORE, the Petition for Review dated November 18, 2005 of petitioners
St. Paul College, Quezon City, et al. is hereby GRANTED and the Decision dated
July 8, 2005 of the Court of Appeals and its Resolution dated September 29, 2005
are hereby REVERSED and SET ASIDE. Consequently, the Decision dated
February 28, 2003 of the National Labor Relations Commission and the Decision
dated November 20, 2000 of the Labor Arbiter are hereby REINSTATED.
SO ORDERED.