JUANITO A. GARCIA and ALBERTO J.

DUMAGO,
Petitioners,
Versus
PHILIPPINE AIRLINES, INC.,
Respondent.
FACTS:
The case stemmed from the administrative charge filed by Philippine Airlines (PAL)
against its employees-herein petitioners after they were allegedly caught in the act
of sniffing shabu when a team of company security personnel and law enforcers
raided the PAL Technical Centers Toolroom Section on July 24, 1995.
After due notice, PAL dismissed petitioners for transgressing the PAL Code of
Discipline, prompting them to file a complaint for illegal dismissal and damages
which was resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter
alia, immediately comply with the reinstatement aspect of the decision.
Subsequently, the Labor Arbiter issued a Writ of Execution respecting the
reinstatement decision and issued a Notice of Garnishment.
Respondent elevated the matter to the appellate court which issued the herein
challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds,
essentially espousing that:
(1) a subsequent finding of a valid dismissal removes the basis for implementing the
reinstatement aspect of a labor arbiters decision; and
(2) the impossibility to comply with the reinstatement order due to corporate
rehabilitation provides a reasonable justification for the failure to exercise the
options under Article 223 of the Labor Code (the second ground).
HENCE, this Petition.
RULING:
Amplification of the First Ground:

The Court reaffirms the prevailing principle that even if the order of reinstatement of
the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer
to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court.
It settles the view that the Labor Arbiters order of reinstatement is immediately
executory and the employer has to either re-admit them to work under the same
terms and conditions prevailing prior to their dismissal, or to reinstate them in the
payroll, and that failing to exercise the options in the alternative, employer must
pay the employees salaries.
Amplification of the Second Ground
The Court sustains the appellate courts finding that the peculiar predicament of a
corporate rehabilitation rendered it impossible for respondent to exercise its option
under the circumstances.
The test is two-fold: (1) there must be actual delay or the fact that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2) the
delay must not be due to the employers unjustified act or omission. If the delay is
due to the employers unjustified refusal, the employer may still be required to pay
the salaries notwithstanding the reversal of the Labor Arbiters decision.
WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals
Decision and Resolution annulling the NLRC Resolutions affirming the validity of the
Writ of Execution and the Notice of Garnishment are concerned, the Court finds no
reversible error.
SO ORDERED.
G.R. No. 172149 February 8, 2010
SESSION DELIGHTS ICE CREAM AND FAST FOODS vs. CA
FACTS:Adonis Flora filed a complaint for illegal dismissal against Session Delights,
which was ruled favourably by the LaborArbiter. The decision ordered Session
Delights to pay Flora back wages, separation pay in lieu of reinstatement, indemnity
and attorneys fees. Upon appeal, NLRC also ruled in favor of complainant. CA
Decision affirmed but deleted the
proportional 13
th
month pay and the award of indemnity (P5000) for failure to observe due process.
In the course of theexecution of the judgement, the Finance Analyst submitted an
updated computation of the award which included theproportionate amount of 13
th

month pay. This was objected by Session, claiming that this was not consistent with
thedecision but the same was denied by NLRC. The CA, however, partially granted
the petition by deleting the awardedproportionate 13th month pay.ISSUE: WON the
updated computation was properHeld: Yes, the updated computation was proper.
The issue in the case at bar is not the correctness of the awards, the
finality of the CAs judgment, nor the petitioners failure to appeal. Rather, it is the
propriety of the computation of the
awards made, whether this violated the principle of immutability of final
judgments.The question is whether a recomputation in the course of execution, of the labor arbiters original computation
of the
awards made pegged as of the time the decision was rendered and confirmed with
modification by a final CA decision, islegally proper.The Court held that under the
terms of the decision under execution, no essential change is made by a recomputationas this step is a necessary consequence that flows from the nature of
the illegality of dismissal declared in that decision. Are-computation (or an original
computation, if no previous computation has been made) is a part of the law

specifically,Article 279 of the Labor Code and the established jurisprudence on this
provision

that is read into the decision. By thenature of an illegal dismissal case, the reliefs
continue to add on until full satisfaction, as expressed under Article 279 ofthe Labor
Code. The re-computation of the consequences of illegal dismissal upon execution
of the decision does notconstitute an alteration or amendment of the final decision
being implemented. The illegal dismissal ruling stands; onlythe computation of the
monetary consequences of this dismissal is affected and this is not a violation of the
principle ofimmutability of final judgments.Assailed decision is AFFIRMED. Labor
Arbiter is asked to conduct another RE-COMPUTATION to determine actual award
based on Courts directives
Timoteo Sarona vs. National Labor Relations Commission, Royale Security
Agency, et.al. [GR No. 185280, January 18, 2012]
Post under case digests, labor law at Wednesday, February 17, 2016 Posted
by Schizophrenic Mind
FACTS: The petitioner, who was hired by Sceptre as a security guard, was asked by
Karen Therese Tan, Sceptre's Operations Manager, to submit a resignation letter as
the same was supposedly required for applying for a position at Royale.
Martin informed him that he would no longer be given any assignment per the
instructions of Aida Sabalones-Tan, general manager of Sceptre. This prompted him
to file a complaint for illegal dismissal. While complainant is entitled to backwages,
we are aware that his stint with respondent Royale lasted only for one (1) month
and three (3) days such that it is our considered view that his backwages should be
limited to only three (3) months. The petitioner does not deny that he has received

the full amount of his backwages and separation pay as provided under the NLRC's
November 2005 Decision. However, he claims that this does not preclude this Court
from modifying a decision that is tainted with grave abuse of discretion or issued
without jurisdiction.
ISSUE: Whether the petitioner's backwages should be limited to his salary for three
(3) months
RULING: No. In case separation pay is awarded and reinstatement is no longer
feasible, backwages shall be computed from the time of illegal dismissal up to the
finality of the decision should separation pay not be paid in the meantime. It is
the employee's actual receipt of the full amount of his separation pay that will
effectively terminate the employment of an illegaly dismissed employee. Otherwise,
the employer-employee relationship subsists and the illegally dismissed employee is
entitled to backwages, taking into account the increases and other benefits,
including the 13th month pay, that were received by his co-employees who are not
dismissed. It is the obligation of the employer to pay an illegally dismissed
employee or worker the whole amount of the salaries or wages, plus all other
benefits and bonuses and general increases, to which he would have been normally
entitled had he not been dismissed and had not stopped working.
ECISION
ABAD, J.:

This case is about the proper computation of the monetary awards of an illegally
dismissed employee.

The Facts and the Case

On May 9, 2000 petitioner Albino Belen (Belen) filed a complaint [1] against
respondents Javellana Farms, Inc. and Daniel Javellana, Jr. (Javellana) for illegal

dismissal and underpayment or non-payment of salaries, overtime pay, holiday pay,

service incentive leave pay (SILP), 13 th month pay, premium pay for holiday, and
rest day as well as for moral and exemplary damages and attorneys fees. [2]
Petitioner Belen alleged that respondent Javellana hired him as company
driver on January 31, 1994[3] and assigned him the tasks of picking up and
delivering live hogs, feeds, and lime stones used for cleaning the pigpens. [4] On
August 19, 1999 Javellana gave him instructions to (a) pick up lime stones in
Tayabas, Quezon; (b) deliver live hogs at Barrio Quiling, Talisay, Batangas; (c) have
the delivery truck repaired; and (d) pick up a boar at Joliza Farms in Norzagaray,
Bulacan.[5]
Petitioner Belen further alleged that his long and arduous day finally ended at
4:30 a.m. of the following day, August 20, 1999. But after just three hours of sleep,
respondent Javellana summoned him to the office. When he arrived at 8:20 a.m.,
Javellana had left. After being told that the latter would not be back until 4:00 p.m.,
Belen decided to go home and get some more sleep. [6]
Petitioner Belen was promptly at the office at 4:00 p.m. but respondent
Javellana suddenly blurted out that he was firing Belen from work. Deeply worried
that he might not soon get another job, Belen asked for a separation pay. When
Javellana offered him only P5,000.00, he did not accept it.[7]
Respondent Javellana claimed, on the other hand, that he hired petitioner
Belen in 1995, not as a company driver, but as family driver. [8] Belen did not do work
for his farm on a regular basis, but picked up feeds or delivered livestock only on
rare occasions when the farm driver and vehicle were unavailable. [9]
Regarding petitioner Belens dismissal from work, respondent Javellana
insisted that he did it for a reason. Belen intentionally failed to report for work on
August 20, 1999 and this warranted his dismissal. [10]
In a decision[11] dated November 25, 2002, the Labor Arbiter found petitioner
Belen to be a company driver as evidenced by the pay slips [12] that the farm issued
to him. Since his abrupt dismissal from work violated his right to due process, it was

illegal.[13] The Labor Arbiter awarded him backwages, separation pay, 13 th month
pay, SILP, holiday pay, salary differential, and attorneys fees. [14]
On appeal, the National Labor Relations Commission (NLRC) issued a
resolution[15] dated October 23, 2003, modifying the decision of the Labor
Arbiter. The NLRC was convinced that respondent Javellana hired petitioner Belen as
a family driver but required him to make certain errands that were related to the
farm business. Like the Labor Arbiter, the NLRC also found Belen to have been
illegally dismissed. But since he was but a family driver, the NLRC deleted the award
of backwages and separation pay and instead ordered Javellana to pay him 15 days
salary by way of indemnity pursuant to Article 149 of the Labor Code. Belen moved
for reconsideration, but the NLRC denied his motion. [16]
Aggrieved, petitioner Belen elevated the matter to the Court of Appeals (CA),
[17]

which in its Decision[18] dated September 12, 2007, reverted back to the decision

of the Labor Arbiter. The CA held that Belen was a company driver since, aside from
driving respondent Javellana and his family, he also did jobs that were needed in
Javellanas business operations, such as hauling and delivering live hogs, feeds, and
lime stones for the pig pens. [19] The CA also said that Javellanas abrupt dismissal of
Belen for an isolated case of neglect of duty was unjustified. [20] The appellate court,
however, modified the award of backwages and separation pay, as it found the
computation to be erroneous.[21]
Both respondent Javellana and petitioner Belen moved for reconsideration of the
decision but the CA denied them both on March 3, 2008. [22] Undaunted, they both
took recourse to this Court in G.R. 181913 and G.R. 182158, respectively.
The Court consolidated the two cases in its Resolution of July 2, 2008. [23] But on July
16, 2008, having initially examined the petition in G.R. 181913, the Court denied
due course to it for respondent Javellanas failure to sufficiently show reversible error
in the assailed decision.[24] Javellana moved for reconsideration but the Court denied
it with finality on September 22, 2008.[25]
Questions Presented
The questions presented in this case are:

1. Whether or not the Labor Arbiter correctly computed petitioner Belens

backwages and separation pay; and
2. Whether or not the monetary award in his favor should run until the finality
of the decision in his case.
The Courts Rulings
One. Petitioner Belen points out that the Labor Arbiter correctly computed his
monetary award although he appeared to have been awarded more than what was
right because of a typographical error in the statement of the period that
his backwages covered. The Labor Arbiters approved computation gave the period
as from August 20, 1999 to November 19, 2000 when the proper period was from
August 20, 1999, the date he was dismissed from work, to November 25, 2002, the
date the Labor Arbiter rendered his decision in the case. [26]
For the same reason, petitioner Belen claims that his separation pay should
be computed from January 31, 1994, when he was hired, up to November 25, 2002,
when the Labor Arbiter rendered his decision. Belen also insists that the 10%
attorneys fees awarded to him be based on the total amount arrived at, not by the
appellate court, but by the Labor Arbiter. [27]
After taking such position initially, petitioner Belen claims that the amount
awarded to him by the Labor Arbiter merely represents a portion of what he was
entitled to. The award of backwages to which he was entitled should continue to run
until the decision in his favor has become final. [28]
Respondent Javellana points out, however, that the Labor Arbiters decision
clearly shows that he intended to award backwages and separation pay only until
November 19, 2000.[29] Javellana also disagreed that the monetary award should be
reckoned until the finality of the decision in petitioner Belens favor. The Labor
Arbiter expressly limited the amount of that award since he granted Belens request
to be given separation pay instead of being reinstated. [30]
It is obvious from a reading of the Labor Arbiters decision that the date
November 19, 2000 stated

in

the

computation

was

mere

typographical

error. Somewhere in the body of the decision is the categorical statement that
petitioner Belen is entitled to backwages from August 20, 1999 up to the date of
this decision.[31] Since the Labor Arbiter actually rendered his decision on
November 25, 2002,[32]it would be safe to assume that he caused the computation
of the amount of backwages close to that date or on November 19, 2002. The same
could be said of the computation of petitioner Belens separation pay.
Two. This leads us to the question, does the amount that the Labor Arbiter awarded
petitioner Belen represent all that he will get when the decision in his case becomes
final or does it represent only the amount that he was entitled to at the time the
Labor Arbiter rendered his decision, leaving room for increase up to the date the
decision in the case becomes final?
Article 279 of the Labor Code, as amended by Section 34 of Republic Act
6715 instructs:
Art. 279. Security of Tenure. In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
Clearly, the law intends the award of backwages and similar benefits to accumulate
past the date of the Labor Arbiters decision until the dismissed employee is actually
reinstated.[33] But if, as in this case, reinstatement is no longer possible, this Court
has consistently ruled that backwages shall be computed from the time of illegal
dismissal until the date the decision becomes final. [34]
As it happens, the parties filed separate petitions before this Court. The petition in
G.R. 181913, filed by respondent Javellana, questioned the CAs finding of illegality
of dismissal while the petition in G.R. 182158, filed by petitioner Belen, challenged
the amounts of money claims awarded to him. The Court denied the first with
finality in its resolution of September 22, 2008; [35] the second is the subject of the
present case. Consequently, Belen should be entitled to backwages from August 20,

1999, when he was dismissed, to September 22, 2008, when the judgment for
unjust dismissal in G.R. 181913 became final.
Separation pay, on the other hand, is equivalent to one month pay for every
year of service, a fraction of six months to be considered as one whole year. [36] Here
that would begin from January 31, 1994 when petitioner Belen began his
service. Technically the computation of his separation pay would end on the day he
was dismissed on August 20, 1999 when he supposedly ceased to render service
and his wages ended. But, since Belen was entitled to collect backwages until the
judgment for illegal dismissal in his favor became final, [37] here on September 22,
2008, the computation of his separation pay should also end on that date.
Further, since the monetary awards remained unpaid even after it became
final on September 22, 2008 because of issues raised respecting the correct
computation of such awards, it is but fair that respondent Javellana be required to
pay 12% interest per annum on those awards from September 22, 2008 until they
are paid. The 12% interest is proper because the Court treats monetary claims in
labor cases the equivalent of a forbearance of credit. [38] It matters not that the
amounts of the claims were still in question on September 22, 2008. What is
decisive is that the issue of illegal dismissal from which the order to pay monetary
awards to petitioner Belen stemmed had been long terminated. [39]
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the decision of
the Court of Appeals dated September 12, 2007 and its resolution dated March 3,
2008 in CA-G.R. SP 83354,REINSTATES the decision of the Labor Arbiter dated
November 25, 2002 in NLRC-NCR Case 30-09-04294-01 with the modification that
the awards of backwages be computed from August 20, 1999 to September 22,
2008 and the separation pay, from January 31, 1994 to September 22, 2008; the
10% attorneys fees be based on the awards so computed; and that the amounts
due be made to bear interest of 12% per annum from September 22, 2008 until fully
paid.
Let the records of the case be remanded to the National Labor Relations
Commission upon the finality of this judgment for computation of the exact amounts
due petitioner Albino Belen from respondents Javellana Farms, Inc. and Daniel
Javellana, Jr.

.R. No.170904

November 13, 2013

BANI RURAL BANK INC. ENOC THEATER I AND II and/or RAFAEL DE

GUZMAN, Petitioners,
vs.
TERESA DE GUZMAN, EDGAR C. TAN and TERESA G. TAN, Respondents.
DECISION
BRION, J.:
We pass upon the petition for review on certiorari 1 under Rule 45 of the Rules of
Court filed by petitioners Bani Rural Bank, Inc., ENOC Theater I and II, and Rafael de
Guzman. They assail the decision2 dated September 1, 2005 and the
resolution3 dated December 14, 2005 of the Court of Appeals CA) in CA-G.R. SP No.
70085. The assailed CA rulings, in turn, affirmed the computation of the backwages
due respondents Teresa de Guzman and Edgar C. Tan 4 made by the National Labor
Relations Commission (NLRC).
The Facts
The respondents were employees of Bani Rural Bank, Inc. and ENOC Theatre I and II
who filed a complaint for illegal dismissal against the petitioners. The complaint was
initially dismissed by Labor Arbiter Roque B. de Guzman on March 15, 1994. On
appeal, the National Labor Relations Commission (NLRC) reversed Labor Arbiter De
Guzman's findings, and ruled that the respondents had been illegally dismissed. In a
resolution5 dated March 17, 1995 the NLRC ordered the petitioners to:
... [R]einstate the two complainants to their former positions, without loss o
seniority rights and other benefits and privileges, with backwages from the time o
their dismissal (constructive) until their actual reinstatement, less earnings
elsewhere.6
The parties did not file any motion for reconsideration or appeal. The March 17,
1995 resolution of the NLRC became final and executory and the computation of the
awards was remanded to the labor arbiter for execution purposes.
The first computation of he monetary award under the March ,17 1995 resolution of
the NLRC
The computation of the respondents' backwages, under the terms of the March 17
1995 NLRC resolution was remanded to Labor Arbiter Rolando D. Gambito. First,
Labor Arbiter Gambito deducted the earnings derived by the respondents either
from Bani Rural Bank, Inc. or ENOC Theatre I and II. Second, Labor Arbiter Gambito
fixed the period of backwages from the respondents' illegal dismissal until August

25 1995 or the date when the respondents allegedly manifested that they no longer
wanted to be reinstated.7
The respondents appealed Labor Arbiter Gambito's computation with the NLRC. In a
Decision8 dated July 31, 1998, the NLRC modified the terms of the March 17, 1995
resolution insofar as it clarified the phrase less earnings elsewhere. The NLRC
additionally awarded the payment of separation pay, in lieu of reinstatement, under
the following terms:
The decision of this Commission is hereby MODIFIED to the extent that: (1) the
phrase earnings elsewhere in its dispositive portion shall exclude the complainants'
salaries from the Rural Bank of Mangantarem; and (2) in lieu of reinstatement, the
respondents are hereby ordered to pay the complainants separation pay equivalent
to one month salary for every year of service computed from the start of their
employment up to the date of the finality of the decision. 9
The NLRC justified the award of separation pay on account of the strained relations
between the parties. In doing so, the NLRC ruled:
Insofar as the second issue is concerned, it should be noted: (1) that in his report
dated November 8, 1995, the NLRC Sheriff stated that on October 5, 1995, he went
to the Sub-Arbitration Branch to serve the writ of execution upon the complainants;
that they did not appear, but instead, sent a representative named Samuel de la
Cruz who informed him that they were interested, not on being reinstated, but only
in the monetary award; (2) that in a letter dated October 9, 1995, the complainants
authorized one Samuel de la Cruz to get a copy of the writ of execution; and (3) that
during the pre-execution conference, the respondents' counsel manifested that the
respondents were requiring the complainants to report for work on Monday and, in
turn, the complainants' counsel manifested that the complainants were asking to be
reinstated. The proceedings already protracted as it is-would be delayed further if
this case were to be remanded to the Labor Arbiter for a hearing to ascertain the
correctness of the above-mentioned sheriff's report. Besides, if both parties were
really interested in the complainants being reinstated, as their counsels stated
during the pre-execution conference, the said reinstatement should already have
been effected. Since neither party has actually done anything to implement the
complainants' reinstatement, it would appear that the relations between them have
been strained to such an extent as to make the resumption of the employeremployee relationship unpalatable to both of them. Under the circumstances,
separation pay may be awarded in lieu of reinstatement. 10
The respondents filed a motion for reconsideration on whether the award of
backwages was still included in the judgment. The NLRC dismissed the motion for
having been filed out of time.

On January 29, 1999, the July 31, 1998 decision of the NLRC lapsed to finality and
became executory.
The second computation of the monetary awards under the July 31, 998 decision of
the NLRC
The recomputation of the monetary awards of the respondents' backwages and
separation pay, according to the decision dated July 31, 1998 and the modified
terms of the March 17, 1995 resolution of the NLRC, was referred to Labor Arbiter
Gambito. In the course of the recomputation, the petitioners filed before Labor
Arbiter Gambito a Motion to Quash Writ of
Execution and Suspend Further Execution they reiterated their position that the
respondents backwages should be computed only up to August 25, 1995, citing the
alleged manifestation made by the respondents, through Samuel de la Cruz, as their
basis.
In an order11 dated July 12, 2000, Labor Arbiter Gambito computed the respondents
backwages only up to August 25, 1995.
The NLRCs Ruling
The respondents appealed the July 12, 2000 order of Labor Arbiter Gambito to the
NLRC, which reversed Labor Arbiter Gambito s order. In its decision 12 dated
September 28, 2001, the NLRC ruled that the computation of the respondents
backwages should be until January 29 1999 which was the date when the July 31,
1998 decision attained finality:
WHEREFORE, the Order of Labor Arbiter Rolando D. Gambito dated July 12, 2000 is
SET ASIDE. In lieu thereof, judgment is hereby rendered by ordering respondents to
p y complainants backwages up to January 29, 1999 as above discussed. 13
The NLRC emphasized that the issue relating to the computation of the respondents
backwages had been settled in its July 31, 1998 decision. In a resolution dated
January 23, 2002, the NLRC denied the motion for reconsideration filed by the
petitioners.
The petitioners disagreed with the NLRC s ruling and filed a petition for certiorari
with the CA, raising the following issues:
(A) THE COMMISSION ACTED WITHOUT JURISDICTION AND WITH GRAVE .
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
REVERSED AND SET ASIDE THE ORDER OF LABOR ARBITER ROLANDO D.
GAMBITO DATED JULY 12, 2000 AND ORDERED THE COMPUTATION OF
PRIVATE RESPONDENTS BACKWAGES TO COVER THE PERIOD AFTER AUGUST

25, 1995, OR UNTIL JANUARY 29, 1999, THE DATE OF FINALITY OF THE
SECOND RESOLUTION OF THE COMMISSION.
(B) THE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION FOR DENYING PETITIONERS MOTION
FOR RECONSIDERA TION.14
The CA Rulings
The CA found the petition to be without merit. It held that certiorari was not the
proper remedy since no error of jurisdiction was raised or no grave abuse of
discretion was committed by the NLRC. The CA stated that:
The extraordinary remedy of certiorari is proper if the tribunal, board or officer
exercising judicial or quasi-judicial functions acted without or in grave abuse of
discretion amounting to lack or excess of jurisdiction and there is no appeal or any
plain, speedy, and adequate remedy in law. When a court, tribunal or officer has
jurisdiction over the person and the subject matter of dispute, the decision on all
other questions arising in the case is an exercise of that jurisdiction. Consequently,
all errors committed in the exercise of said jurisdiction are merely errors of
judgment. Under prevailing procedural rules and jurisprudence, errors of judgment
are not proper subjects of a special civil action for certiorari. 15
Thus, the CA echoed the NLRCs conclusions:
As explained in the assailed Decision, what is controlling for purposes of the
backwages is the NLRC s Resolution dated 17 March 1995 which decreed that
private respondents are entitled to backwages from the time of their dismissal
(constructive) until their actual reinstatement; and considering that the award of
reinstatement was set aside by the NLRC in its final and executory Decision dated 3
July 1998 which ordered the payment of separation pay in lieu of reinstatement to
be computed up to the finality on 29 January 1999 of said Decision dated 3 July
1998, then the computation of the backwages should also end on said date, which
is 29 January 1999.16
Citing the case of Chronicle Securities Corp. v. NLRC, 17 the CA held that backwages
are granted to an employee or worker who had been illegally dismissed from
employment. If reinstatement is no longer possible, the backwages shall be
computed from the time of the illegal termination up to the finality of the decision.
The Present Petition
The petitioners argue that the following reversible errors were committed by the CA,
namely:

(1) In ruling that no grave abuse of discretion was committed by the NLRC
when it issued the September 28, 2001 decision, the January 23, 2002
resolution and the July 31, 1998 decision, which modified the final and
executory resolution dated March 17, 1995 of the NLRC computing the
backwages only until the reinstatement of the respondents;
(2) When it manifestly overlooked or misappreciated relevant facts, i.e. Labor
Arbiter Gambito s computation did conform to the NLRC s March 17, 1995
resolution considering the manifestation of Samuel that the respondents no
longer wanted to be reinstated, in response to the order of execution dated
August 25, 1995; and
(3) When it declared that only errors o judgment, and not jurisdiction, were
committed by the NLRC.
In their Comment,18 the respondents contend that the computation of the
backwages until January 29, 1999 was consistent with the tenor of the decision
dated July 31, 1998 and the modified March 17, 1995 resolution of the NLRC.
After the petitioners filed their Reply,19 the Court resolved to give due course to the
petition; in compliance with our directive, the parties submitted their respective
memoranda repeating the arguments in the pleadings earlier filed. 20
The Issue
As presented, the issue boils down to whether the respondents backwages had
been correctly computed under the decision dated September 28, 2001 of the
NLRC, as confirmed by the CA, in light of the circumstance that there were two final
NLRC decisions affecting the computation of the backwages.
The Court s Ruling
We find the petition unmeritorious.
Preliminary considerations
In Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth
Division),21 we held that a decision in an illegal dismissal case consists essentially of
two components:
The first is that part of the decision that cannot now be disputed because it has
been confirmed with finality. This is the finding of the illegality of the dismissal and
the awards of separation pay in lieu of reinstatement, backwages.
The second part is the computation of the awards made. 22

The first part of the decision stems from the March 17, 1995 NLRC resolution finding
an illegal dismissal and defining the legal consequences of this dismissal. The
second part involves the computation of the monetary award of backwages and the
respondents' reinstatement. Under the terms of the March 17, 1995 resolution, the
respondents' backwages were to be computed from the time of the illegal dismissal
up to their reinstatement.
In the first computation of the backwages, Labor Arbiter Gambito confronted the
following circumstances and the Sheriffs Report dated November 8, 1995: 23 first,
how to interpret the phrase less earnings elsewhere as stated in the dispositive
portion of the March 17, 1995 resolution of the NLRC; second, the effect of the
alleged manifestation (dated October 9, 1995) of Samuel that the respondents were
only interested in the monetary award, not in their reinstatement; and third, the
effect of the respondents' counsel's statement during the pre-execution proceedings
that the respondents simply wanted to be reinstated.
The records indicate that the respondents denied Samuel's statement and asked for
reinstatement through their counsel. Nevertheless, Labor Arbiter Gambito relied on
Samuel's statement and fixed the computation date of the respondents' backwages
to be up to and until August 25, 1995 or the date the order of execution was issued
for the NLRC's March 17, 1995 decision. As stated in his July 12, 2000 order, 24 Labor
Arbiter Gambito found it fair and just that in the execution of the NLRC's decision,
the computation of the respondents' backwages should "stop at that time when it
was put on record by them [respondents] that they had no desire to return to
work."25
The NLRC disregarded Labor Arbiter Gambito's first computation. In the dispositive
portion of its July 31, 1998 decision, the NLRC modified the final March 17, 1995
resolution. The first part of this decision -the original ruling of illegal dismissal -was
left untouched while the second part of the decision -the monetary award and its
computation -was altered to conform with the strained relations between the parties
that became manifest during the execution phase of the March 17, 1995 resolution.
The effect of the modification of the March 17, 1995 resolution of the NLRC was twofold: , the reinstatement aspect of the March 1 7, 1995 resolution was expressly
substituted by an order of payment of separation pay; and two the July 31, 1998
decision of the NLRC now provided for two monetary awards (backwages and
separation pay). The July 31, 1998 decision of the NLRC became final since neither
parties appealed.
Immutability of Judgment
That there is already a final and executory March 17, 1995 resolution finding that
respondents have been illegally dismissed, and awarding backwages and
reinstatement, is not disputed. That there, too, is the existence of another final and

executory July 31, 1998 decision modifying the reinstatement aspect of the March
17, 1995 resolution, by awarding separation pay, is likewise beyond dispute.
As a rule, "a final judgment may no longer be altered, amended or modified, even if
the alteration, amendment or modification is meant to correct what is perceived to
be an erroneous conclusion of fact or law and regardless of what court, be it the
highest Court of the land, rendered it. Any attempt on the part of the x x x entities
charged with the execution of a final judgment to insert, change or add matters not
clearly contemplated in the dispositive portion violates the rule on immutability of
judgments."26 An exception to this rule is the existence of supervening
events27 which refer to facts transpiring after judgment has become final and
executory or to new circumstances that developed after the judgment acquired
finality, including matters that the parties were not aware of prior to or during the
trial as they were not yet in existence at that time. 28
Under the circumstances of this case, the existence of the strained relations
between the petitioners and the respondents was a supervening event that justified
the NLRC s modification of its final March 17, 1995 resolution. The NLRC, in its July
31, 1998 decision, based its conclusion that strained relations existed on the
conduct of the parties during the first execution proceedings before Labor Arbiter
Gambito. The NLRC considered the delay in the respondents reinstatement and the
parties conflicting claims on whether the respondents wanted to be
reinstated.29 The NLRC also observed that during the intervening period from the
first computation (which was done in 1995) to the appeal and resolution of the
correctness of the first computation (subject of the NLRC s July 31, 1998 decision),
neither party actually did anything to implement the respondents reinstatement.
The NLRC considered these, actions as indicative of the strained relations between
the parties so that neither of them actually wanted to implement the reinstatement
decree in the March 17, 1995 resolution. The NLRC concluded that the award of
reinstatement was no longer possible; thus, it awarded separation pay, in lieu of
reinstatement. Unless exceptional reasons are presented, these above findings and
conclusion can no longer be disturbed after they lapsed to finality.
Appeal of labor case under Rule 45
A review of the CA s decision in a labor case, brought to the Court via Rule 45 of the
Rules of Court, is limited to a review of errors of law imputed to the CA. In Montoya
v. Transmed Manila Corporation,30 we laid down the basic approach in reviews of
Rule 45 decisions of the CA in labor cases, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in
contrast with the review for jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of law raised against the
assailed CA decision. In ruling for legal correctness, we have to view the CA decision
in the same context that the petition for certiorari it ruled upon was presented to it;
we have to examine the CA decision from the prism of whether it correctly

determined the presence or absence of grave abuse of discretion in the NLRC

decision before it, not on the basis of whether the NLRC decision on the merits of
the case was correct. In other words, we have to be keenly aware that the CA
undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should be basic in a Rule 45 review of
a CA ruling in a labor case. In question form, the question to ask is: Did the C
correctly determine whether the NLRC committed grave abuse of discretion in ruling
on the case?
This manner of review was reiterated in Holy Child Catholic School v Hon. Patricia
Sta. Tomas, etc., et al.,31 where the Court limited its review under Rule 45 of the CA
s decision in a labor case to the determination of whether the CA correctly resolved
the presence or absence of grave abuse of discretion in the decision of the
Secretary of Labor, and not on the basis of whether the latter's decision on the
merits of the case was strictly correct.
Grave abuse of discretion, amounting to lack or excess of jurisdiction, has been
defined as the capricious and whimsical exercise of judgment amounting to or
equivalent to lack of jurisdiction.32 There is grave abuse of discretion when the
power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and must be so patent and so gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all
in contemplation of law."33
With this standard in mind, we find no reversible error committed by the CA when it
found no grave abuse of discretion in the NLRC's ruling. We find the computation of
backwages and separation pay in the September 28, 2001 decision of the NLRC
consistent with the provisions of law and jurisprudence. The computation conforms
to the terms of the March 17, 1995 resolution (on illegal dismissal and payment of
backwages) and the July 31, 1998 decision (on the computation of the backwages
and the payment of separation pay).
Article 279 of the Labor Code, as amended,34 provides backwages and
reinstatement as basic awards and consequences of illegal dismissal:
Article 279. Security of Tenure. -x x x An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.
"By jurisprudence derived from this provision, separation pay may [also] be
awarded to an illegally dismissed employee in lieu of reinstatement." 35 Section 4(b),
Rule I of the Rules Implementing Book VI of the Labor Code provides the following
instances when the award of separation pay, in lieu of reinstatement to an illegally
dismissed employee, is proper: (a) when reinstatement is no longer possible, in

cases where the dismissed employee s position is no longer available; (b) the
continued relationship between the employer and the employee is no longer viable
due to the strained relations between them; and (c) when the dismissed employee
opted not to be reinstated, or the payment of se aration benefits would be for the
best interest of the parties involved.36 In these instances, separation pay is the
alternative remedy to reinstatement in addition to the award of backwages. 37 The
payment of separation pay and reinstatement are exclusive remedies. The payment
of separation pay replaces the legal consequences of reinstatement to an employee
who was illegally dismissed.38
For clarity, the bases for computing separation pay and backwages are different.
Our ruling in Macasero v. Southern Industrial Gases Philippines 39 provides us with
the manner these awards should be computed:
[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee
who is dismissed without just cause and without due process is entitled to
backwages and reinstatement or payment of separation pay in lieu thereof:
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement. The two reliefs provided are separate and distinct. In instances
where reinstatement is no longer feasible because of strained relations between the
employee and the employer, separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement
without loss of seniority rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. 40
The computation of separation pay is based on the length of the employee s
service; and the computation of backwages is based on the actual period when the
employee was unlawfully prevented from working. 41
The basis of computation of backwages
The computation of backwages depends on the final awards adjudged as a
consequence of illegal dismissal, in that:
First, when reinstatement is ordered, the general concept under Article 279 of the
Labor Code, as amended, computes the backwages from the time of dismissal until
the employees reinstatement. The computation of backwages (and similar benefits
considered part of the backwages) can even continue beyond the decision of the
labor arbiter or NLRC and ends only when the employee is actually reinstated. 42

Second, when separation pay is ordered in lieu of reinstatement (in the event that
this aspect of the case is disputed) or reinstatement is waived by the employee (in
the event that the payment of separation pay, in lieu, is not disputed), backwages is
computed from the time of dismissal until the finality of the decision ordering
separation pay.
Third, when separation pay is ordered after the finality of the decision ordering the
reinstatement by reason of a supervening event that makes the award of
reinstatement no longer possible (as in the case), backwages is computed from the
time of dismissal until the finality of the decision ordering separation pay.
The above computation of backwages, when separation pay is ordered, has been
the Court s consistent ruling. In Session Delights Ice Cream and Fast Foods v. Court
Appeals Sixth Division, we explained that the finality of the decision becomes the
reckoning point because in allowing separation pay, the final decision effectively
declares that the employment relationship ended so that separation pay and
backwages are to be computed up to that point. 43
We may also view the proper computation of backwages (whether based on
reinstatement or an order of separation pay) in terms of the life of the employment
relationship itself.1wphi1
When reinstatement is ordered, the employment relationship continues. Once the
illegally dismissed employee is reinstated, any compensation and benefits
thereafter received stem from the employee s continued employment. In this
instance, backwages are computed only up until the reinstatement of the employee
since after the reinstatement, the employee begins to receive compensation from
his resumed employment.
When there is an order of separation pay (in lieu of reinstatement or when the
reinstatement aspect is waived or subsequently ordered in light of a supervening
event making the award of reinstatement no longer possible), the employment
relationship is terminated only upon the finality of the decision ordering the
separation pay. The finality of the decision cuts-off the employment relationship and
represents the final settlement of the rights and obligations of the parties against
each other. Hence, backwages no longer accumulate upon the finality of the
decision ordering the payment of separation pay since the employee is no longer
entitled to any compensation from the employer by reason of the severance of his
employment.
The computation of the respondents backwages
As the records show, the contending parties did not dispute the NLRC s order of
separation pay that replaced the award of reinstatement on the ground of the
supervening event arising from the newly-discovered strained relations between the
parties. The parties allowed the NLRC s July 31, 1998 decision to lapse into finality

and recognized, by their active participation in the second computation of the

awards, the validity and binding effect on them of the terms of the July 31, 1998
decision.
Under these circumstances, while there was no express modification on the period
for computing backwages stated in the dispositive portion of the July 31, 1998
decision of the NLRC, it is nevertheless clear that the award of reinstatement under
the March 17, 1995 resolution (to which the respondents backwages was initially
supposed to have been computed) was substituted by an award of separation pay.
As earlier stated, the awards of reinstatement and separation pay are exclusive
remedies; the change of awards (from reinstatement to separation pay) under the
NLRC s July 31, 1998 not only modified the awards granted, but also changed the
manner the respondents backwages is to be computed. The respondents
backwages can no longer be computed up to the point of reinstatement as there is
no longer any award of reinstatement to speak of.
We also emphasize that the payment of backwages and separation pay cannot be
computed from the time the respondents allegedly expressed their wish to be paid
separation pay. In the first place, the records show that the alleged manifestation by
the respondents, through Samuel, was actually a mere expression of interest. 44 More
importantly, the alleged manifestation was disregarded in the NLRC's July 31, 1998
decision where the NLRC declared that the award of separation pay was due to the
supervening event arising from the strained relations (not a waiver of
reinstatement) that justified the modification of the NLRC's final March 17, 1995
resolution on the award of reinstatement. Simply put, insofar as the computation of
the respondents' backwages, we are guided by the award, modified to separation
pay, under the NLRC's July 31, 1998 decision.
Thus, the computation of the respondents' backwages must be from the time of the
illegal dismissal from employment until the finality of the decision ordering the
payment of separation pay. It is only when the NLRC rendered its July 31, 1998
decision ordering the payment of separation pay (which both parties no longer
questioned and which thereafter became final) that the issue of the respondents'
employment with the petitioners was decided with finality, effectively terminating it.
The respondents' backwages, therefore, must be computed from the time of their
illegal dismissal until January 29, 1999, the date of finality of the NLRC's July 31,
1998 Decision. As a final point, the CA s ruling must be modified to include legal
interest commencing from the finality of the NLRC's July 31, 1998 decision. The CA
failed to consider that the NLRC's July 31, 1998 decision, once final, becomes a
judgment for money from which another consequence flows -the payment of
interest in case of delay.45 Under the circumstances, the payment of legal interest of
six percent (6) upon the finality of the judgment is proper. It is not barred by the
principle of immutability of judgment as it is compensatory interest arising from the
final judgment.46

WHEREFORE, premises considered, we DENY the petition and thus effectively

AFFIRM with MODIFICATION the decision dated September 1 2005 and the resolution
dated December 14, 2005 of the Court of Appeals in CA-G.R. SP No. 70085. The
petitioners Bani Rural Bank, Inc., Enoc Theatre I and II and/or Rafael de Guzman, are
ORDERED to PAY respondents Teresa de Guzman, Edgar C. Tan and Teresa G. Tan the
following:
(a) Backwages computed from the date the petitioners illegally dismissed the
respondents up to January 29, 1999, the date of the finality of the decision
dated July 31, 1998 of the National Labor Relations Commission in NLRC CN.
SUB-RAB-01-07- 7-0136-93 CA No. L-001403 and NLRC CN. SUB-RAB-01-07-70137-93 CA No. L-001405;
(b) Separation pay computed from respondents' first day of employment up
to January 29, 1999 at the rate of one (1) month pay per year of service; and
(c) Legal interest of six percent (6) per annum of the total monetary awards
computed from January 29, 1999 until their full satisfaction.
The labor arbiter is hereby ORDERED to make another recomputation according to
the above directives.
Facts:

Petitioner, a security guard in Sceptre since April 1976, was asked by

Sceptres operations manager on June 2003, to submit a resignation letter as
a requirement for an application in Royale and to fill up an employment
application form for the said company. He was then assigned at Highlight
Metal Craft Inc. from July 29 to August 8, 2003 and was later transferred to
Wide Wide World Express Inc. On September 2003, he was informed that his
assignment at WWWE Inc. was withdrawn because Royale has been allegedly
replaced by another security agency which he later discovered to be untrue.
Nevertheless, he was once again assigned at Highlight Metal sometime in
September 2003 and when he reported at Royales office on October 1, 2003,
he was informed that he would no longer be given any assignment as
instructed by Sceptres general manager.

He thus filed acomplaint for illegal dismissal. The LA ruled in petitioners

favor as he found him illegally dismissed and was not convinced by the
respondents claim on petitioners abandonment.
Respondents were ordered to pay back wages computed from the day he
was dismissed up to the promulgation of his decision on May 11, 2005.The LA
also ordered for the payment of separation pay but refused to pierce Royales
corporate veil.

Respondents appealed to the NLRC claiming that the LA acted with grave
abuse of discretion upon ruling on the illegal dismissal of petitioner. NLRC
partially affirmed the LAs decision with regard to petitioners illegal dismissal
and separation pay but modified the amount of backwages and limited it to
only 3 months of his last month salary reducing P95, 600 to P15, 600 since he
worked for Royale for only 1 month and 3 days.
Petitioner did not appeal to LA but raised the validity of LAs findings on
piercing Royales corporate personality and computation of his separation
pay and such petition was dismissed by the NLRC. Petitioner elevated NLRCs
decision to the CA on a petition for certiorari, and the CA disagreed with
the NLRCs decision of not proceeding to review the evidence for determining
if Royale is Sceptres alter ego that would warrant the piercing of its
corporate veil.
Issue:

Whether or not petitioners back wages should be limited to his salary for 3
months
The way on how petitioner was made to resign from Sceptre then later on
made an employee of Royale, reflects the use of the legal fiction of the
separate corporate personality and is an implication of continued
employment. Royale is a continuation or successor or Sceptre since the
employees of Sceptre and of Royale are the same and said companies have
the same principal place of business.
Because petitioners rights were violated and his employer has not changed,
he is entitled to separation pay which must be computed from the time he
was hired until the finality of this decision. Royale is also ordered to pay him
backwages from his dismissal on October 1, 2003 until the finality of this
decision.
However, the amount already received by petitioner from the respondents
shall be deducted. He is also awarded moral and exemplary damages
amounting to P 25, 000.00 each for his dismissal which was tainted with bad
faith and fraud. Petition is granted. CAs decision is reversed and set aside.