G.R. No.
164774 April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN
CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management
prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals
dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National
Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol),
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees
of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995, 2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a]
relative, up to [the] 3rd degree of relationship, already employed by the
company.
2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their employment
and then decided to get married, one of them should resign to preserve the
policy stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-
employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company
allegedly could have terminated her services due to immorality but she opted to resign on
December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein
that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that
they did not resign voluntarily; they were compelled to resign in view of an illegal
company policy. As to respondent Estrella, she alleges that she had a relationship with co-
worker Zuiga who misrepresented himself as a married but separated man. After he got
her pregnant, she discovered that he was not separated. Thus, she severed her relationship
with him to avoid dismissal due to the company policy. On November 30, 1999, she met
an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for
twenty-one (21) days. She returned to work on December 21, 1999 but she found out that
her name was on-hold at the gate. She was denied entry. She was directed to proceed to
the personnel office where one of the staff handed her a memorandum. The memorandum
stated that she was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has not been given
a chance to explain. The management asked her to write an explanation. However, after
submission of the explanation, she was nonetheless dismissed by the company. Due to
her urgent need for money, she later submitted a letter of resignation in exchange for her
thirteenth month pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the aforementioned company policy
is illegal and contravenes Article 136 of the Labor Code. They also contended that they
were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for
lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation
perceived as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and judgment all the
aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on
January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National
Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is
entered as follows:
(1) Declaring illegal, the petitioners dismissal from employment and ordering
private respondents to reinstate petitioners to their former positions without loss
of seniority rights with full backwages from the time of their dismissal until
actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to
10% of the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding
that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional
rights towards marriage and the family of employees and of Article 136 of the
Labor Code; and
2. x x x respondents resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the
following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion and
growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed
in favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case
at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege
that its policy "may appear to be contrary to Article 136 of the Labor Code" but it
assumes a new meaning if read together with the first paragraph of the rule. The rule does
not require the woman employee to resign. The employee spouses have the right to
choose who between them should resign. Further, they are free to marry persons other
than co-employees. Hence, it is not the marital status of the employee, per se, that is
being discriminated. It is only intended to carry out its no-employment-for-relatives-
within-the-third-degree-policy which is within the ambit of the prerogatives of
management.16
It is true that the policy of petitioners prohibiting close relatives from working in the
same company takes the nature of an anti-nepotism employment policy. Companies adopt
these policies to prevent the hiring of unqualified persons based on their status as a
relative, rather than upon their ability.17 These policies focus upon the potential
employment problems arising from the perception of favoritism exhibited towards
relatives.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note
that two types of employment policies involve spouses: policies banning only spouses
from working in the same company (no-spouse employment policies), and those
banning all immediate family members, including spouses, from working in the same
company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes 20 in the United States prohibiting marital
discrimination. Some state courts21 have been confronted with the issue of whether no-
spouse policies violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants
utilize two theories of employment discrimination: the disparate treatment and
the disparate impact. Under the disparate treatment analysis, the plaintiff must prove
that an employment policy is discriminatory on its face. No-spouse employment policies
requiring an employee of a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the employer from hiring
wives of male employees, but not husbands of female employees, is discriminatory on its
face.22
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be
required to transfer or leave the company, the policy often disproportionately affects one
sex.23
The state courts rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they
agree that the term "marital status" encompasses discrimination based on a person's status
as either married, single, divorced, or widowed, they are divided on whether the term has
a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse. They strike down
the no-spouse employment policies based on the broad legislative intent of the state
statute. They reason that the no-spouse employment policy violate the marital status
provision because it arbitrarily discriminates against all spouses of present employees
without regard to the actual effect on the individual's qualifications or work
performance.27 These courts also find the no-spouse employment policy invalid for
failure of the employer to present any evidence of business necessity other than the
general perception that spouses in the same workplace might adversely affect the
business.28 They hold that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one spouse due to the current
employment of the other spouse in the same office. 30 Thus, they rule that unless the
employer can prove that the reasonable demands of the business require a distinction
based on marital status and there is no better available or acceptable policy which would
better accomplish the business purpose, an employer may not discriminate against an
employee based on the identity of the employees spouse. 31 This is known as the bona
fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employers no-spouse rule, the exception is interpreted strictly and narrowly by these
state courts. There must be a compelling business necessity for which no alternative
exists other than the discriminatory practice. 32 To justify a bona fide occupational
qualification, the employer must prove two factors: (1) that the employment qualification
is reasonably related to the essential operation of the job involved; and, (2) that there is a
factual basis for believing that all or substantially all persons meeting the qualification
would be unable to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction.
We employ the standard of reasonableness of the company policy which is parallel to the
bona fide occupational qualification requirement. In the recent case of Duncan
Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company. We held
that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors. We
considered the prohibition against personal or marital relationships with employees of
competitor companies upon Glaxos employees reasonable under the circumstances
because relationships of that nature might compromise the interests of Glaxo. In laying
down the assailed company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain access to its secrets
and procedures.35
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case
of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the
employee was dismissed in violation of petitioners policy of disqualifying from work
any woman worker who contracts marriage. We held that the company policy violates the
right against discrimination afforded all women workers under Article 136 of the Labor
Code, but established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of
the job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be
valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more
of its employees related between the third degree by affinity and/or consanguinity" 38 is
lame. That the second paragraph was meant to give teeth to the first paragraph of the
questioned rule39 is evidently not the valid reasonable business necessity required by the
law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine
Operator, to Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. Neither did petitioners explain how this detriment
will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting
Department, who married Howard Comia, then a helper in the cutter-machine. The policy
is premised on the mere fear that employees married to each other will be less efficient. If
we uphold the questioned rule without valid justification, the employer can create
policies based on an unproven presumption of a perceived danger at the expense of an
employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the only way it could pass
judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a legitimate business concern
in imposing the questioned policy cannot prejudice the employees right to be free from
arbitrary discrimination based upon stereotypes of married persons working together in
one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our
jurisdiction is vast and extensive that we cannot prudently draw inferences from the
legislatures silence41 that married persons are not protected under our Constitution and
declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners
to present undisputed proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management prerogative. Corollarily, the issue
as to whether respondents Simbol and Comia resigned voluntarily has become moot and
academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the
singular fact that her resignation letter was written in her own handwriting. Both ruled
that her resignation was voluntary and thus valid. The respondent court failed to
categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated
along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in
dire need of money. We examined the records of the case and find Estrellas contention to
be more in accord with the evidence. While findings of fact by administrative tribunals
like the NLRC are generally given not only respect but, at times, finality, this rule admits
of exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due
to her alleged immoral conduct. At first, she did not want to sign the termination papers
but she was forced to tender her resignation letter in exchange for her thirteenth month
pay.
The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation,
she would not have gone back to work at all. Nor would she have filed a suit for illegal
dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for
illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the
resignation was voluntary, Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477
dated August 3, 2004 is AFFIRMED.1avvphil.net
SO ORDERED.
G.R. No. 187417, February 24, 2016
CHRISTINE JOY CAPIN-CADIZ, Petitioner, v. BRENT HOSPITAL AND
COLLEGES, INC., Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court assailing
the Resolutions dated July 22, 2008 2 and February 24, 20093 of the Court of Appeals
(CA) in CA-G.R. SP No. 02373-MIN, which dismissed the petition filed by petitioner
Christine Joy Capin-Cadiz (Cadiz) on the following grounds: (1) incomplete statement of
material dates; (2) failure to attach registry receipts; and (3) failure to indicate the place
of issue of counsel's Professional Tax Receipt (PTR) and Integrated Bar of the
Philippines (IBP) official receipts.
Antecedent Facts
Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges, Inc.
(Brent) at the time of her indefinite suspension from employment in 2006. The cause of
suspension was Cadiz's Unprofessionalism and Unethical Behavior Resulting to Unwed
Pregnancy. It appears that Cadiz became pregnant out of wedlock, and Brent imposed the
suspension until such time that she marries her boyfriend in accordance with law.
Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice,
Constructive Dismissal, Non-Payment of Wages and Damages with prayer for
Reinstatement.4
Ruling of the Labor Tribunals
In its Decision5 dated April 12, 2007, the LA found that Cadiz's indefinite suspension
amounted to a constructive dismissal; nevertheless, the LA ruled that Cadiz was not
illegally dismissed as there was just cause for her dismissal, that is, she engaged in
premarital sexual relations with her boyfriend resulting in a pregnancy out of
wedlock.6 The LA further stated that her "immoral conduct x x x [was] magnified as
serious misconduct not only by heir getting pregnant as a result thereof before and
without marriage, but more than that, also by the fact that Brent is an institution of the
Episcopal Church in the Philippines operating both a hospital and college where [Cadiz]
was employed."7 The LA also ruled that she was not entitled to reinstatement "at least
until she marries her boyfriend," to backwages and vacation/sick leave pay. Brent,
however, manifested that it was willing to pay her 1311 month pay. The dispositive
portion of the decision reads:
WHEREFORE, judgment is hereby rendered, ordering [Brent] to pay [Cadiz] 13th
month pay in the sum of Seven Thousand Nine Hundred Seventy & 11/100 Pesos
(P7,970.11).
All other charges and claims are hereby dismissed for lack of merit.
SO ORDERED.8.
Cadiz appealed to the National Labor Relations Commission (NLRC), which affirmed the
LA decision in its Resolution9 dated December 10, 2007. Her motion for reconsideration
having been denied by the NLRC in its Resolution 10 dated February 29, 2008, Cadiz
elevated her case to the CA on petition for certiorari under Rule 65.
Ruling of the CA
The CA, however, dismissed her petition outright due to technical defects in the petition:
(1) incomplete statement of material dates; (2) failure to attach registry receipts; and (3)
failure to indicate the place of issue of counsel's PTR and IBP official receipts. 11 Cadiz
sought reconsideration of the assailed CA Resolution dated July 22, 2008 but it was
denied in the assailed Resolution dated February 24, 2009.12 The CA further ruled that "a
perusal of the petition will reveal that public respondent NLRC committed no grave
abuse of discretion amounting to lack or excess of jurisdiction x x x holding [Cadiz's]
dismissal from employment valid."13
Hence, the present petition. Cadiz argues that -
I
THE HONORABLE [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT
HELD TFIAT [CADIZ'S] IMPREGNATION OUTSIDE OF WEDLOCK IS A GROUND
FOR THE TERMINATION OF [CADIZ'S] EMPLOYMENT 14
II
THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT UPHELD
THE DISMISSAL OF [CADIZ] ON THE GROUND THAT THE INDEFINITE
SUSPENSION WAS VALID AND REQUIRED [CADIZ] TO FIRST ENTER INTO
MARRIAGE BEFORE SHE CAN BE ADMITTED BACK TO HER EMPLOYMENT 15
III
RESPONDENT [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT DENIED
[CADIZ'S] CLAIM FOR BACKWAGES, ALLOWANCES, SICK LEAVE PAY,
MATERNITY PAY AND MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES16
IV
THE [CA] MISPLACED APPLICATION OF THE MATERIAL DATA RULE
RESULTING TO GRAVE ABUSE OF DISCRETION WHEN IT DISMISSED THE
APPEAL17
Cadiz contends, among others, that getting pregnant outside of wedlock is not grossly
immoral, especially when both partners do not have any legal impediment to marry.
Cadiz surmises that the reason for her suspension was not because of her relationship
with her then boyfriend but because of the resulting pregnancy. Cadiz also lambasts
Brent's condition for her reinstatement - that she gets married to her boyfriend - saying
that this violates the stipulation against marriage under Article 136 of the Labor Code.
Finally, Cadiz contends that there was substantial compliance with the rules of procedure,
and the CA should not have dismissed the petition.18
Brent, meanwhile, adopts and reiterates its position before the LA and the NLRC that
Cadiz's arguments are irrational and out of context. Brent argues, among others, that for
Cadiz to limit acts of immorality only to extra-marital affairs is to "change the norms,
beliefs, teachings and practices of BRENT as a Church institution of the x x x Episcopal
Church in the Philippines."19
Ruling of the Court
Ordinarily, the Court will simply gloss over the arguments raised by Cadiz, given that the
main matter dealt with by the CA were the infirmities found in the petition and which
caused the dismissal of her case before it. In view, however, of the significance of the
issues involved in Cadiz's dismissal from employment, the Court will resolve the petition
including the substantial grounds raised herein.
The issue to be resolved is whether the CA committed a reversible error in ruling that: (1)
Cadiz's petition is dismissible on ground of technical deficiencies; and (2) the NLRC did
not commit grave abuse of discretion in upholding her dismissal from employment.
Rules of procedure are mere
tools designed to facilitate the
attainment of justice
In dismissing outright Cadiz's petition, the CA found the following defects: (1)
incomplete statement of material dates; (2) failure to attach registry receipts; and (3)
failure to indicate the place of issue of counsel's PTR and IBP official receipts.
Rule 46, Section 3 of the Rules of Court states the contents of a petition filed with the CA
under Rule 65, viz, "the petition shall x x x indicate the material dates showing when
notice of the judgment or final order or resolution subject thereof was received, when a
motion for new trial or reconsideration, if any, was filed and when notice of the denial
thereof was received." The rationale for this is to enable the CA to determine whether the
petition was filed within the period fixed in the rules. 20Cadiz's failure to state the date of
receipt of the copy of the NLRC decision, however, is not fatal to her case since the more
important material date which must be duly alleged in a petition is the date of receipt of
the resolution of denial of the motion for reconsideration,21 which she has duly complied
with.22
The CA also dismissed the petition for failure to attach the registry receipt in the affidavit
of service.23 Cadiz points out, on the other hand, that the registry receipt number was
indicated in the petition and this constitutes substantial compliance with the requirement.
What the rule requires, however, is that the registry receipt must be appended to the paper
being served.24 Clearly, mere indication of the registry receipt numbers will not suffice. In
fact, the absence of the registry receipts amounts to lack of proof of
service.25 Nevertheless, despite this defect, the Court finds that the ends of substantial
justice would be better served by relaxing the application of technical rules of
procedure.26 With regard to counsel's failure to indicate the place where the IBP and PTR
receipts were issued, there was substantial compliance with the requirement since it was
indicated in the verification and certification of non-forum shopping, as correctly argued
by Cadiz's lawyer.27cralawred
Time and again, the Court has emphasized that rules of procedure are designed to secure
substantial justice. These are mere tools to expedite the decision or resolution of cases
and if their strict and rigid application would frustrate rather than promote substantial
justice, then it must be avoided.28
Immorality as a just cause for
termination of employment
Both the LA and the NLRC upheld Cadiz's dismissal as. one attended with just cause.
The LA, while ruling that Cadiz's indefinite suspension was tantamount to a constructive
dismissal, nevertheless found that there was just cause for her dismissal. According to the
LA, "there was just cause therefor, consisting in her engaging in premarital sexual
relations with Carl Cadiz, allegedly her boyfriend, resulting in her becoming pregnant out
of wedlock."29 The LA deemed said act to be immoral, which was punishable by
dismissal under Brent's rules and which likewise constituted serious misconduct under
Article 282(a) of the Labor Code. The LA also opined that since Cadiz was Brent's
ITuman Resource Officer in charge of implementing its rules against immoral conduct,
she should have been the "epitome of proper conduct."30 The LA ruled:
[Cadiz's] immoral conduct by having premarital sexual relations with her alleged boy
friend, a former Brent worker and her co-employee, is magnified as serious misconduct
not only by her getting pregnant as a result thereof before and without marriage, but more
than that, also by the fact that Brent is an institution of the Episcopal Church in the
Philippines xxx committed to "developing competent and dedicated professionals xxx
and in providing excellent medical and other health services to the community for the
Glory of God and Service to Humanity." x x x As if these were not enough, [Cadiz] was
Brent's Human Resource Officer charged with, among others, implementing the rules of
Brent against immoral conduct, including premarital sexual relations, or fornication xxx.
She should have been the epitome of proper conduct, but miserably failed. She herself
engaged in premarital sexual relations, which surely scandalized the Brent community, x
x x.31
The NLRC, for its part, sustained the LA's conclusion.
The Court, however, cannot subscribe to the labor tribunals' conclusions.
Admittedly, one of the grounds for disciplinary action under Brent's policies is
immorality, which is punishable by dismissal at first offense32 Brent's Policy Manual
provides:
CATEGORY IV
In accordance with Republic Act No. 1052,33 the following are just cause for terminating
an employment of an employee without a definite period:
xxxx
2. Serious misconduct or willful disobedience by the employee of the orders of his
employer or representative in connection with his work, such as, but not limited to the
following:
.
xxxx
b. Commission of immoral conduct or indecency within the company premises, such as
an act of lasciviousness or any act which is sinful and vulgar in nature.
c. Immorality, concubinage, bigamy.34.
Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts of immorality such as
scandalous behaviour, acts of lasciviousness against any person (patient, visitors, co-
workers) within hospital premises"35 as a ground for discipline and discharge. Brent also
relied on Section 94 of the Manual of Regulations for Private Schools (MRPS), which
lists "disgraceful or immoral conduct" as a cause for terminating employment. 36
Thus, the question that must be resolved is whether Cadiz's premarital relations with her
boyfriend and the resulting pregnancy out of wedlock constitute immorality. To resolve
this, the Court makes reference to the recently promulgated case of Cheryll Santos Lens
v. St. Scholastica 's College Westgrove and/or Sr. Edna Quiambao, OSB 37
Leus involved the same personal circumstances as the case at bench, albeit the employer
was a Catholic and sectarian educational institution and the petitioner, Cheryl 1 Santos
Leus (Leus), worked as an assistant to the school's Director of the Lay Apostolate and
Community Outreach Directorate. Leus was dismissed from employment by the school
for having borne a child out of wedlock. The Court ruled in Leus that the determination
of whether a conduct is disgraceful or immoral involves a two-step process: first, a
consideration of the totality of the circumstances surrounding the conduct; and second,
an assessment of the said circumstances vis-a-vis the prevailing norms of conduct, i.e.,
what the society generally considers moral and respectable.
In this case, the surrounding facts leading to Cadiz's dismissal are straightforward - she
was employed as a human resources officer in an educational and medical institution of
the Episcopal Church of the Philippines; she and her boyfriend at that time were both
single; they engaged in premarital sexual relations, which resulted into pregnancy. The
labor tribunals characterized these as constituting disgraceful or immoral conduct. They
also sweepingly concluded that as Human Resource Officer, Cadiz should have been the
epitome of proper conduct and her indiscretion "surely scandalized the Brent
community."38
The foregoing circumstances, however, do not readily equate to disgraceful and immoral
conduct. Brent's Policy Manual and Employee's Manual of Policies do not define what
constitutes immorality; it simply stated immorality as a ground for disciplinary action.
Instead, Brent erroneously relied on the standard dictionary definition of fornication as a
form of illicit relation and proceeded to conclude that Cadiz's acts fell under such
classification, thus constituting immorality.39
Jurisprudence has already set the standard of morality with which an act should be
gauged - it is public and secular, not religious.40 Whether a conduct is considered
disgraceful or immoral should be made in accordance with the prevailing norms of
conduct, which, as stated in Leus, refer to those conducts which are proscribed because
they are detrimental to conditions upon which depend the existence and progress of
human society. The fact that a particular act does not conform to the traditional moral
views of a certain sectarian institution is not sufficient reason to qualify such act as
immoral unless it, likewise, does not conform to public and secular standards. More
importantly, there must be substantial evidence to establish that premarital sexual
relations and pregnancy out of wedlock is considered disgraceful or immoral. 41
The totality of the circumstances of this case does not justify the conclusion that Cadiz
committed acts of immorality. Similar to Leus, Cadiz and her boyfriend were both single
and had no legal impediment to marry at the time she committed the alleged immoral
conduct. In fact, they eventually married on April 15, 2008.42 Aside from these, the labor
tribunals' respective conclusion that Cadiz's "indiscretion" "scandalized the Brent
community" is speculative, at most, and there is no proof adduced by Brent to support
such sweeping conclusion. Even Brent admitted that it came to know of Cadiz's
"situation" only when her pregnancy became manifest.43 Brent also conceded that "[a]t
the time [Cadiz] and Carl R. Cadiz were just carrying on their boyfriend-girlfriend
relationship, there was no knowledge or evidence by [Brent] that they were engaged also
in premarital sex."44 This only goes to show that Cadiz did not flaunt her premarital
relations with her boyfriend and it was not carried on under scandalous or disgraceful
circumstances. As declared in Leus, "there is no law which penalizes an unmarried
mother by reason of her sexual conduct or proscribes the consensual sexual activity
between two unmarried persons; that neither does such situation contravene[s] any
fundamental state policy enshrined in the Constitution."45 The fact that Brent is a
sectarian institution does not automatically subject Cadiz to its religious standard of
morality absent an express statement in its manual of personnel policy and regulations,
prescribing such religious standard as gauge as these regulations create the obligation on
both the employee and the employer to abide by the same. 46
Brent, likewise, cannot resort to the MRPS because the Court already stressed in Leus
that "premarital sexual relations between two consenting adults who have no impediment
to marry each other, and, consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality, does not amount to a disgraceful or immoral
conduct under Section 94(e) of the 1992 MRPS."47
Marriage as a condition for reinstatement
The doctrine of management prerogative gives an employer the right to "regulate,
according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and
recall of employees."48 In this case, Brent imposed on Cadiz the condition that she
subsequently contract marriage with her then boyfriend for her to be reinstated.
According to Brent, this is "in consonance with the policy against encouraging illicit or
common-law relations that would subvert the sacrament of marriage." 49
Statutory law is replete with legislation protecting labor and promoting equal opportunity
in employment. No less than the 1987 Constitution mandates that the "State shall afford
full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all." 50 The Labor Code of the
Philippines, meanwhile, provides:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a
condition of employment or continuation of employment that a woman employee shall
not get married, or to stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of her marriage.
With particular regard to women, Republic Act No. 9710 or the Magna Carta of
Women51 protects women against discrimination in all matters relating to marriage and
family relations, including the right to choose freely a spouse and to enter into
marriage only with their free and full consent.52
Weighed against these safeguards, it becomes apparent that Brent's condition is coercive,
oppressive and discriminatory. There is no rhyme or reason for it. It forces Cadiz to marry
for economic reasons and deprives her of the freedom to choose her status, which is a
privilege that inheres in her as an intangible and inalienable right. 53 While a marriage or
no-marriage qualification may be justified as a "bona fide occupational qualification,"
Brent must prove two factors necessitating its imposition, viz: (1) that the employment
qualification is reasonably related to the essential operation of the job involved; and
(2) that there is a factual basis for believing that all or substantially all persons meeting
the qualification would be unable to properly perform the duties of the job.54 Brent has
not shown the presence of neither of these factors. Perforce, the Court cannot uphold the
validity of said condition.
Given the foregoing, Cadiz, therefore, is entitled to 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 should be awarded as an alternative and as a form of
financial assistance.55 In the computation of separation pay, the Court stresses that it
should not go beyond the date an employee was deemed to have been actually
separated from employment, or beyond the date when reinstatement was rendered
impossible.56 In this case, the records do not show whether Cadiz already severed her
employment with Brent or whether she is gainfully employed elsewhere; thus, the
computation of separation pay shall be pegged based on the findings that she was
employed on August 16, 2002, on her own admission in her complaint that she was
dismissed on November 17, 2006, and that she was earning a salary of P9,108.70 per
month,57 which shall then be computed at a rate of one (1) month salary for every year of
service,58 as follows:
Monthly salary P9,108.70
multiplied by number of years x
in service (Aug 02 to Nov 06) 4
P36,434.80
The Court also finds that Cadiz is only entitled to limited backwages. Generally, the
computation of backwages is reckoned from the date of illegal dismissal until actual
reinstatement.59 In case separation pay is ordered in lieu of reinstatement or reinstatement
is waived by the employee, backwages is computed from the time of dismissal until the
finality of the decision ordering separation pay.60 Jurisprudence further clarified that the
period for computing the backwages during the period of appeal should end on the date
that a higher court reversed the labor arbitration ruling of illegal dismissal. 61 If applied in
Cadiz's case, then the computation of backwages should be from November 17, 2006,
which was the time of her illegal dismissal, until the date of promulgation of this
decision. Nevertheless, the Court has also recognized that the constitutional policy of
providing full protection to labor is not intended to oppress or destroy management. 62 The
Court notes that at the time of Cadiz's indefinite suspension from employment, Leus was
yet to be decided by the Court. Moreover, Brent was acting in good faith and on its
honest belief that Cadiz's pregnancy out of wedlock constituted immorality. Thus,
fairness and equity dictate that the award of backwages shall only be equivalent to one
(1) year or P109,304.40, computed as follows:
Monthly salary P9,108.70
 multiplied by one year x x DECISION
or 12 months 12
P109,304.40
Finally, with regard to Cadiz's prayer for moral and exemplary damages, the Court finds
the same without merit. A finding of illegal dismissal, by itself, does not establish bad
faith to entitle an employee to moral damages. 63 Absent clear and convincing evidence
showing that Cadiz's dismissal from Brent's employ had been carried out in an arbitrary,
capricious and malicious manner, moral and exemplary damages cannot be awarded. The
Court nevertheless grants the award of attorney's fees in the amount often percent (10%)
of the total monetary award, Cadiz having been forced to litigate in order to seek redress
of her grievances.64
WHEREFORE, the petition is GRANTED. The Resolutions dated July 22, 2008 and
February 24, 2009 of the Court of Appeals in CA-G.R. SP No. 02373-M1N
are REVERSED and SET ASIDE, and a NEW ONE ENTERED finding petitioner
Christine Joy Capin-Cadiz to have been dismissed without just cause.
Respondent Brent Hospital and Colleges, Inc. is hereby ORDERED TO PAY petitioner
Christine Joy Capin-Cadiz:
(1) One Hundred Nine Thousand Three Hundred Four Pesos and 40/100 (P109,304.40) as
backwages;
(2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and 80/100 (P36,434.80) as
separation pay; and
(3) Attorney's fees equivalent to ten percent (10%) of the total award.
The monetary awards granted shall earn legal interest at the rate of six percent (6%) per
annum from the date of the finality of this Decision until fully paid.
SO ORDERED
G.R. No. 163269 April 19, 2006
ROLANDO C. RIVERA, Petitioner, vs. SOLIDBANK
CORPORATION, Respondent.
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision 1 of the Court of Appeals
(CA) in CA-G.R. CV No. 52235 as well as its Resolution 2 denying the Motion for Partial
Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1, 1977. 3 He was
initially employed as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant
Accountant, and Assistant Manager. Prior to his retirement, he became the Manager of
the Credit Investigation and Appraisal Division of the Consumers Banking Group. In the
meantime, Rivera and his brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a) the
Ordinary Retirement Program (ORP), under which an employee would receive 85% of
his monthly basic salary multiplied by the number of years in service; and (b) the Special
Retirement Program (SRP), under which a retiring employee would receive 250% of the
gross monthly salary multiplied by the number of years in service. 4 Since Rivera was
only 45 years old, he was not qualified for retirement under the ORP. Under the SRP, he
was entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied
for retirement under the SRP. Solidbank approved the application and Rivera was entitled
to receive the net amount of P963,619.28. This amount included his performance
incentive award (PIA), and his unearned medical, dental and optical allowances in the
amount of P1,666.67, minus his total accountabilities to Solidbank amounting
to P106,973.00.6 Rivera received the amount and confirmed his separation from
Solidbank on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and
Quitclaim, which was notarized on March 1, 1995. 8 Rivera acknowledged receipt of the
net proceeds of his separation and retirement benefits and promised that "[he] would not,
at any time, in any manner whatsoever, directly or indirectly engage in any unlawful
activity prejudicial to the interest of Solidbank, its parent, affiliate or subsidiary
companies, their stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any kind." 9
Aside from acknowledging that he had no cause of action against Solidbank or its
affiliate companies, Rivera agreed that the bank may bring any action to seek an award
for damages resulting from his breach of the Release, Waiver and Quitclaim, and that
such award would include the return of whatever sums paid to him by virtue of his
retirement under the SRP.10 Rivera was likewise required to sign an undated Undertaking
as a supplement to the Release, Waiver and Quitclaim in favor of Solidbank in which he
declared that he received in full his entitlement under the law (salaries, benefits, bonuses
and other emoluments), including his separation pay in accordance with the SRP. In this
Undertaking, he promised that "[he] will not seek employment with a competitor bank or
financial institution within one (1) year from February 28, 1995, and that any breach of
the Undertaking or the provisions of the Release, Waiver and Quitclaim would entitle
Solidbank to a cause of action against him before the appropriate courts of law.11 Unlike
the Release, Waiver and Quitclaim, the Undertaking was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as
Manager of its Credit Investigation and Appraisal Division of its Consumers Banking
Group.12 Upon discovering this, Solidbank First Vice-President for Human Resources
Division (HRD) Celia J.L. Villarosa wrote a letter dated May 18, 1995, informing Rivera
that he had violated the Undertaking. She likewise demanded the return of all the
monetary benefits he received in consideration of the SRP within five (5) days from
receipt; otherwise, appropriate legal action would be taken against him. 13
When Rivera refused to return the amount demanded within the given period, Solidbank
filed a complaint for Sum of Money with Prayer for Writ of Preliminary
Attachment14 before the Regional Trial Court (RTC) of Manila on June 26, 1995.
Solidbank, as plaintiff, alleged therein that in accepting employment with a competitor
bank for the same position he held in Solidbank before his retirement, Rivera violated his
Undertaking under the SRP. Considering that Rivera accepted employment with
Equitable barely three months after executing the Undertaking, it was clear that he had no
intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus
interests therein, and attorneys fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond in such
amount as this Honorable Court may fix, a writ of preliminary attachment be
forthwith issued against the properties of the defendant as satisfaction of any
judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff the
following sums: NINE HUNDRED SIXTY-THREE THOUSAND SIX
HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28) PESOS, Philippine
Currency, as of 23 May 1995, plus legal interest of 12% per annum until fully
paid;
3. Such sum equivalent to 10% of plaintiffs claims plus P2,000.00 for every
appearance by way of attorneys fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises. 15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy
of the Release, Waiver and Quitclaim and Undertaking which Rivera executed. 16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of Riveras
properties not exempt from execution. Thus, the Sheriff levied on a parcel of land owned
by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he
received the net amount of P963,619.28 as separation pay. However, the employment ban
provision in the Undertaking was never conveyed to him until he was made to sign it on
February 28, 1995. He emphasized that, prior to said date, Solidbank never disclosed any
condition to the retirement scheme, nor did it impose such employment ban on the bank
officers and employees who had previously availed of the SRP. He alleged that the
undertaking not to "seek employment with any competitor bank or financial institution
within one (1) year from February 28, 1995" was void for being contrary to the
Constitution, the law and public policy, that it was unreasonable, arbitrary, oppressive,
discriminatory, cruel, unjust, inhuman, and violative of his human rights. He further
claimed that the Undertaking was a contract of adhesion because it was prepared solely
by Solidbank without his participation; considering his moral and economic
disadvantage, it must be liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging
therein that Rivera raised no genuine issue as to any material fact in his Answer except as
to the amount of damages. It prayed that the RTC render summary judgment against
Rivera. Solidbank alleged that whether or not the employment ban provision contained in
the Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It insisted
that Rivera signed the Undertaking voluntarily and for valuable consideration; and under
the Release, Waiver and Quitclaim, he was obliged to return the P963,619.28 upon
accepting employment from a competitor bank within the one-year proscribed period.
Solidbank appended to its motion the Affidavit of Villarosa, where she declared that
Rivera was employed by Equitable on May 1, 1995 for the same position he held before
his retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of the parties
as well as Villarosas Affidavit, there are genuine issues as to material facts which call for
the presentation of evidence. He averred that there was a need for the parties to adduce
evidence to prove that he did not sign the Undertaking voluntarily. He claimed that he
would not have been allowed to avail of the SRP if he had not signed it, and
consequently, his retirement benefits would not have been paid. This was what Ed Nallas,
Solidbank Assistant Vice-President for HRD and Personnel, told him when he received
his check on February 28, 1995. Senior Vice-President Henry Valdez, his superior in the
Consumers Banking Group, also did not mention that he would have to sign such
Undertaking which contained the assailed provision. Thus, he had no choice but to sign
it. He insisted that the question of whether he violated the Undertaking is a genuine issue
of fact which called for the presentation of evidence during the hearing on the merits of
the case. He also asserted that he could not cause injury or prejudice to Solidbanks
interest since he never acquired any sensitive or delicate information which could
prejudice the banks interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had been faithful
to the provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had not
committed any act or done or said anything to cause injury to Solidbank. 18
Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he
had to sign the Undertaking containing the employment ban provision, otherwise his
availment of the SRP would not push through. There was no truth to the banks allegation
that, "in exchange for receiving the larger amount of P1,045,258.95 under the SRP,
instead of the very much smaller amount of P224,875.81 under the ORP, he agreed that
he will not seek employment in a competitor bank or financial institution within one year
from February 28, 1995." It was the bank which conceived the SRP to streamline its
organization and all he did was accept it. He stressed that the decision whether to allow
him to avail of the SRP belonged solely to Solidbank. He also pointed out that the
employment ban provision in the Undertaking was not a consideration for his availment
of the SRP, and that if he did not avail of the retirement program, he would have
continued working for Solidbank for at least 15 more years, earning more than what he
received under the SRP. He alleged that he intended to go full time into the poultry
business, but after about two months, found out that, contrary to his expectations, the
business did not provide income sufficient to support his family. Being the breadwinner,
he was then forced to look for a job, and considering his training and experience as a
former bank employee, the job with Equitable was all he could find. He insisted that he
had remained faithful to Solidbank and would continue to do so despite the case against
him, the attachment of his family home, and the resulting mental anguish, torture and
expense it has caused them.19
In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it
was the only kind of work he knew. The ban was, in fact, practically absolute since it
applied to all financial institutions for one year from February 28, 1995. He pointed out
that he could not work in any other company because he did not have the qualifications,
especially considering his age. Moreover, after one year from February 28, 1995, he
would no longer have any marketable skill, because by then, it would have been rendered
obsolete by non-use and rapid technological advances. He insisted that the ban was not
necessary to protect the interest of Solidbank, as, in the first place, he had no access to
any "secret" information which, if revealed would be prejudicial to Solidbanks interest.
In any case, he was not one to reveal whatever knowledge or information he may have
acquired during his employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the
1995 SRP is purely a management prerogative. It was not for Rivera to question and
decry the banks policy to protect itself from unfair competition and disclosure of its trade
secrets. The substantial monetary windfall given the retiring officers was meant to tide
them over the one-year period of hiatus, and did not prevent them from engaging in any
kind of business or bar them from being employed except with competitor
banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary Judgment. 22 The fallo
of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and
against defendant ordering the latter to pay to plaintiff bank the amount of NINE
HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
(P963,619.28) PESOS, Philippine Currency, as of May 23, 1995, plus legal interest at
12% per annum until fully paid, and the costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed
to meet again and sit down to find out how they can finally end this rift and litigation, all
in the name of equity, for after all, defendant had worked for the bank for some 18
years.23
The trial court declared that there was no genuine issue as to a matter of fact in the case
since Rivera voluntarily executed the Release, Waiver and Quitclaim, and the
Undertaking. He had a choice not to retire, but opted to do so under the SRP, and, in fact,
received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not
unreasonable. To allow Rivera to be excused from his undertakings in said deed and, at
the same time, benefit therefrom would be to allow him to enrich himself at the expense
of Solidbank. The RTC ruled that Rivera had to return the P963,619.28 he received from
Solidbank, plus interest of 12% per annum from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14,
2002 partially granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is
AFFIRMED with the modification that the attachment and levy upon the family home
covered by TCT No. 51621 of the Register of Deeds, Las Pias, Metro Manila, is hereby
SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact except as to
the amount of damages. It ratiocinated that the agreement between Rivera and Solidbank
was the law between them, and that the interpretation of the stipulations therein could not
be left upon the whims of Rivera. According to the CA, Rivera never denied signing the
Release, Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the proscribed
one-year period. The alleged defenses of Rivera, the CA declared, could not prevail over
the admissions in his pleadings.1avvphil.netMoreover, Riveras justification for taking
the job with Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in its
execution. Having executed the said deed and thereafter receiving the benefits under the
SRP, he is deemed to have waived the right
to assail the same, hence, is estopped from insisting or retaining the said amount
of P963,619.28.
However, the CA ruled that the attachment made upon Riveras family home was void,
and, pursuant to the mandate of Article 155, in relation to Article 153 of the Family Code,
must be discharged.
Hence, this recourse to the Court.
Petitioner avers that
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE
SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE
EXISTENCE OF GENUINE ISSUES AS TO MATERIAL FACTS WHICH CALL FOR
THE PRESENTATION OF EVIDENCE IN A TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN
PETITIONER NULL AND VOID FOR BEING UNREASONABLE AND
OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE WHICH
VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND
LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS
DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE
AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST OF
12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE
PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY
SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID ON
THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue in their
pleadings, affidavits, and documents, that is, whether the employment ban incorporated
in the Undertaking which petitioner executed upon his retirement is unreasonable,
oppressive, hence, contrary to public policy; and (2) whether petitioner is liable to
respondent for the restitution of P963,619.28 representing his retirement benefits, and
interest thereon at 12% per annum as of May 23, 1995 until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the parties, and the
documents and affidavits appended thereto, genuine issues as to matters of fact were
raised therein. He insists that the resolution of the issue of whether the employment ban is
unreasonable requires the presentation of evidence on the circumstances which led to
respondent banks offer of the SRP and ORP, and petitioners eventual acceptance and
signing of the Undertaking on March 1, 1995. There is likewise a need to adduce
evidence on whether the employment ban is necessary to protect respondents interest,
and whether it is an undue restraint on petitioners constitutional right to earn a living to
support his family. He further insists that respondent is burdened to prove that it sustained
damage or injury by reason of his alleged breach of the employment ban since neither the
Release, Waiver and Quitclaim, and Undertaking he executed contain any provision that
respondent is automatically entitled to the restitution of the P963,619.28. Petitioner
points out that all the deeds provide is that, in case of breach thereof, respondent is
entitled to protection before the appropriate courts of law.
On the second issue, petitioner avers that the prohibition incorporated in the Release,
Waiver and Quitclaim barring him as retiree from engaging directly or indirectly in any
unlawful activity and disclosing any information concerning the business of respondent
bank, as well as the employment ban contained in the Undertaking he executed, are
oppressive, unreasonable, cruel and inhuman because of its overbreath. He reiterates that
it is against public policy, an unreasonable restraint of trade, because it prohibits him to
work for one year in the Philippines, ultimately preventing him from supporting his
family. He points out that a breadwinner in a family of four minor daughters who are all
studying, with a wife who does not work, one would have a very difficult time meeting
the financial obligations even with a steady, regular-paying job. He insists that the
Undertaking deprives him of the means to support his family, and ultimately, his
childrens chance for a good education and future. He reiterates that the returns in his
poultry business fell short of his expectations, and unfortunately, the business was totally
destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondents management prerogative does not give it a
license to entice its employees to retire at a very young age and prohibit them from
seeking employment in a so-called competitor bank or financial institution, thus prevent
them from working and supporting their families (considering that banking is the only
kind of work they know). Petitioner avers that "managements prerogative must be
without abuse of discretion. A line must be drawn between management prerogative
regarding business operations per se and those which affect the rights of the employees.
In treating its employees, management should see to it that its employees are at least
properly informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement
benefit which he earned after serving the bank for 18 years. It was not a mere gift or
gratuity given by respondent bank, without the latter giving up something of value in
return. On the contrary, respondent bank received "valuable consideration," that is,
petitioner quit his job at the relatively young age of 45, thus enabling respondent to effect
its reorganization plan and forego the salary, benefits, bonuses, and promotions he would
have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of
action against him before the appropriate courts of law if he had violated the employment
ban. He avers that respondent must prove its entitlement to the P963,619.28. The
Undertaking contains no provision that he would have to return the amount he received
under the SRP; much less does it provide that he would have to pay 12% interest per
annum on said amount. On the other hand, the Release, Waiver and Quitclaim does not
contain the provision prohibiting him from being employed with any competitor bank or
financial institution within one year from February 28, 1995. Petitioner insists that he
acted in good faith when he received his retirement benefits; hence, he cannot be
punished by being ordered to return the sum of P963,619.28 which was given to him for
and in consideration of his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per annum on
his retirement pay of P963,619.28 from May 23, 1995, as it is improper and oppressive to
him and his family. As of July 3, 2002, the interest alone would amount to P822,609.67,
thus doubling the amount to be returned to respondent bank under the decision of the
RTC and the CA. The imposition of interest has no basis because the Release, Waiver and
Quitclaim, and the Undertaking do not provide for payment of interest. The deeds only
state that breach thereof would entitle respondent to bring an action to seek damages, to
include the return of the amount that may have been paid to petitioner by virtue thereof.
On the other hand, any breach of the Undertaking or the Release, Waiver and Quitclaim
would only entitle respondent to a cause of action before the appropriate courts of law.
Besides, the amount received by petitioner was not a loan and, therefore, should not earn
interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment with another
bank within one year from February 28, 1995 because he needed to earn a living to
support his family and finance his childrens education. Hence, the imposition of interest,
which is a penalty, is unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is the law
between it and petitioner. As such, the latter could not assail the deed after receiving the
retirement benefit under the SRP. As gleaned from the averments in his petition,
petitioner admitted that he executed the Undertaking after having been informed of the
nature and consequences of his refusal to sign the same, i.e., he would not be able to
receive the retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of obligations
voluntarily entered into simply because their contracts turned out to be disastrous deeds.
Citing the ruling of this Court in Eastern Shipping Lines, Inc. v. Court of
Appeals,26 respondent avers that petitioner is obliged to pay 12% per annum interest of
the P963,619.28 from judicial or extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained damages,
including the amount thereof, and that neither the Release, Waiver and Quitclaim nor the
Undertaking obliged him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. The motion shall be served at least ten (10)
days before the time specified for the hearing. The adverse party may serve opposing
affidavits, depositions, or admissions at least three (3) days before the hearing. After the
hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting
affidavits, depositions, and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites: (a) there
must be no genuine issue as to any material fact, except for the amount of damages; and
(b) the party presenting the motion for summary judgment must be entitled to a judgment
as a matter of law.27 Where, on the basis of the pleadings of a moving party, including
documents appended thereto, no genuine issue as to a material fact exists, the burden to
produce a genuine issue shifts to the opposing party. If the opposing party fails, the
moving party is entitled to a summary judgment.28
A genuine issue is an issue of fact which requires the presentation of evidence as
distinguished from an issue which is a sham, fictitious, contrived or a false claim. The
trial court can determine a genuine issue on the basis of the pleadings, admissions,
documents, affidavits or counteraffidavits submitted by the parties. When the facts as
pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to any fact and summary judgment called for. On the other hand, where the
facts pleaded by the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial. 29 The evidence on record must be viewed in
light most favorable to the party opposing the motion who must be given the benefit of all
favorable inferences as can reasonably be drawn from the evidence. 30
Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto.31 Conclusory assertions are insufficient to raise
an issue of material fact.32 A party cannot create a genuine dispute of material fact
through mere speculations or compilation of differences. 33 He may not create an issue of
fact through bald assertions, unsupported contentions and conclusory statements. 34 He
must do more than rely upon allegations but must come forward with specific facts in
support of a claim. Where the factual context makes his claim implausible, he must come
forward with more persuasive evidence demonstrating a genuine issue for trial. 35
Where there are no disputed material facts, the determination of whether a party breached
a contract is a question of law and is appropriate for summary judgment. 36 When
interpreting an ambiguous contract with extrinsic evidence, summary judgment is proper
so long as the extrinsic evidence presented to the court supports only one of the
conflicting interpretations.37 Where reasonable men could differ as to the contentions
shown from the evidence, summary judgment might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals
resolved the issue of whether a summary judgment is proper in a breach of contract
action involving the interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the contracts
terms are clear, or (b) the evidence supports only one construction of the controverted
provision, notwithstanding some ambiguity. x x x If the court finds no ambiguity, it
should proceed to interpret the contract and it may do so at the summary judgment
stage. If, however, the court discerns an ambiguity, the next step involving an
examination of extrinsic evidence becomes essential. x x x Summary judgment may be
appropriate even if ambiguity lurks as long as the extrinsic evidence presented to the
court supports only one of the conflicting interpretations.39
In this case, there is no dispute between the parties that, in consideration for his availment
of the SRP, petitioner executed the Release, Waiver and Quitclaim, and the Undertaking
as supplement thereto, and that he received retirement pay amounting to P963,619.28
from respondent. On May 1, 1995, within the one-year ban and without prior knowledge
of respondent, petitioner was employed by Equitable as Manager of its Credit
Investigation and Appraisal Division, Consumers Banking Group. Despite demands,
petitioner failed to return the P963,619.28 to respondent on the latters allegation that he
had breached the one-year ban by accepting employment from Equitable, which
according to respondent was a competitor bank.
We agree with petitioners contention that the issue as to whether the post-retirement
competitive employment ban incorporated in the Undertaking is against public policy is a
genuine issue of fact, requiring the parties to present evidence to support their respective
claims.
As gleaned from the records, petitioner made two undertakings. The first is incorporated
in the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any
unlawful activity prejudicial to the interest of the BANK, its parent, affiliate or subsidiary
companies, their stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information concerning the business of
the BANK, its manner or operation, its plans, processes or data of any kind. 40
The second undertaking is incorporated in the Undertaking following petitioners
execution of the Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank
on FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek employment
with any competitor bank or financial institution within one (1) year from February 28,
1995.41
In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring "an
action for damages which may include, but not limited to the return of whatever sums he
may have received from respondent under said deed if he breaks his undertaking
therein."42 On the other hand, petitioner declared in the Undertaking that "any breach on
his part of said Undertaking or the terms and conditions of the Release, Waiver and
Quitclaim will entitle respondent to a cause of action against [petitioner] for protection
before the appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order or public policy. The
freedom of contract is both a constitutional and statutory right. 44 A contract is the law
between the parties and courts have no choice but to enforce such contract as long as it is
not contrary to law, morals, good customs and against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the effects of
an unwise, foolish or disastrous contract, entered into with full awareness of what he was
doing and entered into and carried out in good faith. Such a contract will not be discarded
even if there was a mistake of law or fact. Courts have no jurisdiction to look into the
wisdom of the contract entered into by and between the parties or to render a decision
different therefrom. They have no power to relieve parties from obligation voluntarily
assailed, simply because their contracts turned out to be disastrous deals. 45
On the other hand, retirement plans, in light of the constitutional mandate of affording
full protection to labor, must be liberally construed in favor of the employee, it being the
general rule that pension or retirement plans formulated by the employer are to be
construed against it.46 Retirement benefits, after all, are intended to help the employee
enjoy the remaining years of his life, releasing him from the burden of worrying for his
financial support, and are a form of reward for being loyal to the employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in the
United States and the Philippines:
By "public policy," as defined by the courts in the United States and England, is intended
that principle of the law which holds that no subject or citizen can lawfully do that which
has a tendency to be injurious to the public or against the public good, which may be
termed the "policy of the law," or "public policy in relation to the administration of the
law." (Words & Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public
policy is the principle under which freedom of contract or private dealing is restricted by
law for the good of the public. (Id., Id.) In determining whether a contract is contrary to
public policy the nature of the subject matter determines the source from which such
question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed.
904, 906.)
The foregoing is sufficient to show that there is no difference in principle between the
public policy (orden publico) in the two jurisdictions (the United States and the
Philippine Islands) as determined by the Constitution, laws, and judicial decisions. 49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for subsistence or
profit. Andersons Dictionary of Law gives the following definition: "Generally
equivalent to occupation, employment, or business, whether manual or mercantile; any
occupation, employment or business carried on for profit, gain, or livelihood, not in the
liberal arts or in the learned professions." In Abbotts Law Dictionary, the word is defined
as "an occupation, employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following: "The business which a
person has learnt, and which he carries on for subsistence or profit; occupation;
particularly employment, whether manual or mercantile, as distinguished from the liberal
arts or the learned professions and agriculture." Bouvier limits the meaning to commerce
and traffic, and the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined
to adopt and apply the broader meaning given by the lexicographers. 50
In the present case, the trial court ruled that the prohibition against petitioner accepting
employment with a competitor bank or financial institution within one year from
February 28, 1995 is not unreasonable. The appellate court held that petitioner was
estopped from assailing the post-retirement competitive employment ban because of his
admission that he signed the Undertaking and had already received benefits under the
SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial courts ruling, for the simple reason that it rendered
summary judgment and thereby foreclosed the presentation of evidence by the parties to
prove whether the restrictive covenant is reasonable or not. Moreover, on the face of the
Undertaking, the post-retirement competitive employment ban is unreasonable because it
has no geographical limits; respondent is barred from accepting any kind of employment
in any competitive bank within the proscribed period. Although the period of one year
may appear reasonable, the matter of whether the restriction is reasonable or
unreasonable cannot be ascertained with finality solely from the terms and conditions of
the Undertaking, or even in tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from respondent.
However, petitioner is not proscribed, by waiver or estoppel, from assailing the post-
retirement competitive employment ban since under Article 1409 of the New Civil Code,
those contracts whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy are inexistent or void from the beginning. Estoppel cannot
give validity to an act that is prohibited by law or one that is against public policy.51
Respondent, as employer, is burdened to establish that a restrictive covenant barring an
employee from accepting a competitive employment after retirement or resignation is not
an unreasonable or oppressive, or in undue or unreasonable restraint of trade, thus,
unenforceable for being repugnant to public policy. As the Court stated in Ferrazzini v.
Gsell,52 cases involving contracts in restraint of trade are to be judged according to their
circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a contract in
restraint of trade is void as against public policy. One is, the injury to the public by being
deprived of the restricted partys industry; and the other is, the injury to the party himself
by being precluded from pursuing his occupation, and thus being prevented from
supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint upon one
party is not greater than protection to the other party requires, the contract may be
sustained. The question is, whether, under the particular circumstances of the case and the
nature of the particular contract involved in it, the contract is, or is not, unreasonable. 53
In cases where an employee assails a contract containing a provision prohibiting him or
her from accepting competitive employment as against public policy, the employer has to
adduce evidence to prove that the restriction is reasonable and not greater than necessary
to protect the employers legitimate business interests. 54The restraint may not be unduly
harsh or oppressive in curtailing the employees legitimate efforts to earn a livelihood and
must be reasonable in light of sound public policy.55
Courts should carefully scrutinize all contracts limiting a mans natural right to follow
any trade or profession anywhere he pleases and in any lawful manner. But it is just as
important to protect the enjoyment of an establishment in trade or profession, which its
employer has built up by his own honest application to every day duty and the faithful
performance of the tasks which every day imposes upon the ordinary man. What one
creates by his own labor is his. Public policy does not intend that another than the
producer shall reap the fruits of labor; rather, it gives to him who labors the right by every
legitimate means to protect the fruits of his labor and secure the enjoyment of them to
himself.56 Freedom to contract must not be unreasonably abridged. Neither must the right
to protect by reasonable restrictions that which a man by industry, skill and good
judgment has built up, be denied.57
The Court reiterates that the determination of reasonableness is made on the particular
facts and circumstances of each case. 58 In Esmerson Electric Co. v. Rogers, 59 it was held
that the question of reasonableness of a restraint requires a thorough consideration of
surrounding circumstances, including the subject matter of the contract, the purpose to be
served, the determination of the parties, the extent of the restraint and the specialization
of the business of the employer. The court has to consider whether its enforcement will be
injurious to the public or cause undue hardships to the employee, and whether the
restraint imposed is greater than necessary to protect the employer. Thus, the court must
have before it evidence relating to the legitimate interests of the employer which might be
protected in terms of time, space and the types of activity proscribed. 60
Consideration must be given to the employees right to earn a living and to his ability to
determine with certainty the area within which his employment ban is restituted. A
provision on territorial limitation is necessary to guide an employee of what constitutes as
violation of a restrictive covenant and whether the geographic scope is co-extensive with
that in which the employer is doing business. In considering a territorial restriction, the
facts and circumstances surrounding the case must be considered. 61
Thus, in determining whether the contract is reasonable or not, the trial court should
consider the following factors: (a) whether the covenant protects a legitimate business
interest of the employer; (b) whether the covenant creates an undue burden on the
employee; (c) whether the covenant is injurious to the public welfare; (d) whether the
time and territorial limitations contained in the covenant are reasonable; and (e) whether
the restraint is reasonable from the standpoint of public policy.62
Not to be ignored is the fact that the banking business is so impressed with public interest
where the trust and interest of the public in general is of paramount importance such that
the appropriate standard of diligence must be very high, if not the highest degree of
diligence.63
We are not impervious of the distinction between restrictive covenants barring an
employee to accept a post-employment competitive employment or restraint on trade in
employment contracts and restraints on post-retirement competitive employment in
pension and retirement plans either incorporated in employment contracts or in collective
bargaining agreements between the employer and the union of employees, or separate
from said contracts or collective bargaining agreements which provide that an employee
who accepts post retirement competitive employment will forfeit retirement and other
benefits or will be obliged to restitute the same to the employer. The strong weight of
authority is that forfeitures for engaging in subsequent competitive employment included
in pension and retirement plans are valid even though unrestricted in time or geography.
The raison detre is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction between
restraints on competitive employment in employment contracts and in pension plans. The
strong weight of authority holds that forfeitures for engaging in subsequent competitive
employment, included in pension retirement plans, are valid, even though unrestricted in
time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the
restraint included in the employment contract, is not a prohibition on the employees
engaging in competitive work but is merely a denial of the right to participate in the
retirement plan if he does so engage. A leading case on this point is Van Pelt v. Berefco,
Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture provision similar to
that here, the Court said:
"A restriction in the contract which does not preclude the employee from engaging in
competitive activity, but simply provides for the loss of rights or privileges if he does so
is not in restraint of trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the employer
against competition by former employees who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment. 66
We have reviewed the Undertaking which respondent impelled petitioner to sign, and find
that in case of failure to comply with the promise not to accept competitive employment
within one year from February 28, 1995, respondent will have a cause of action against
petitioner for "protection in the courts of law." The words "cause of action for protection
in the courts of law" are so broad and comprehensive, that they may also include a cause
of action for prohibitory and mandatory injunction against petitioner, specific
performance plus damages, or a damage suit (for actual, moral and/or exemplary
damages), all inclusive of the restitution of the P963,619.28 which petitioner received
from respondent. The Undertaking and the Release, Waiver and Quitclaim do not provide
for the automatic forfeiture of the benefits petitioner received under the SRP upon his
breach of said deeds. Thus, the post-retirement competitive employment ban incorporated
in the Undertaking of respondent does not, on its face, appear to be of the same class or
genre as that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded for breach of
contracts. Actual damages are primarily intended to simply make good or replace the loss
covered by said breach.67 They cannot be presumed. Even if petitioner had admitted to
having breached the Undertaking, respondent must still prove that it suffered damages
and the amount thereof.68 In determining the amount of actual damages, the Court cannot
rely on mere assertions, speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the actual amount of
losses.69 The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent a matter of speculation of the injured
party.
On the assumption that the competitive employment ban in the Undertaking is valid,
petitioner is not automatically entitled to return the P963,619.28 he received from
respondent. To reiterate, the terms of the Undertaking clearly state that any breach by
petitioner of his promise would entitle respondent to a cause of action for protection in
the courts of law; as such, restitution of the P963,619.28 will not follow as a matter of
course. Respondent is still burdened to prove its entitlement to the aforesaid amount by
producing the best evidence of which its case is susceptible. 70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be
REMANDED to the Regional Trial Court of Manila for further proceedings conformably
with this decision of the Court.
SO ORDERED.
SECOND DIVISION
G.R. No. 196539 October 10, 2012
MARIETTA N. PORTILLO, Petitioner,
vs.
RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALS Respondents.
DECISION
PEREZ, J.:
Before us is a petition for certiorari assailing the Resolution 1 dated 14 October 2010 of
the Court of Appeals in CA-G.R. SP No. I 065g I which modified its Decision 2 dated 31
March 2009, thus allowing the legal compensation or petitioner Marietta N. Portillo's
(Portillo) monetary claims against respondent corporation Rudolf Lietz, Inc.'s (Lietz
Inc.)3 claim for liquidated damages arising from Portillos alleged violation of the
"Goodwill Clause" in the employment contract executed by the parties.
The facts are not in dispute.
In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz
(Rudolf) and conformed to by Portillo, the latter was hired by the former under the
following terms and conditions:
A copy of [Lietz Inc.s] work rules and policies on personnel is enclosed and an inherent
part of the terms and conditions of employment.
We acknowledge your proposal in your application specifically to the effect that you will
not engage in any other gainful employment by yourself or with any other company
either directly or indirectly without written consent of [Lietz Inc.], and we hereby accept
and henceforth consider your proposal an undertaking on your part, a breach of which
will render you liable to [Lietz Inc.] for liquidated damages.
If you are in agreement with these terms and conditions of employment, please signify
your conformity below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was
promoted to Sales Representative and received a corresponding increase in basic monthly
salary and sales quota. In this regard, Portillo signed another letter agreement containing
a "Goodwill Clause:"
It remains understood and you agreed that, on the termination of your employment by act
of either you or [Lietz Inc.], and for a period of three (3) years thereafter, you shall not
engage directly or indirectly as employee, manager, proprietor, or solicitor for yourself or
others in a similar or competitive business or the same character of work which you were
employed by [Lietz Inc.] to do and perform. Should you breach this good will clause of
this Contract, you shall pay [Lietz Inc.] as liquidated damages the amount of 100% of
your gross compensation over the last 12 months, it being agreed that this sum is
reasonable and just.5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she intended to engage in businessa rice
dealership, selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of the
"Goodwill Clause" in the last letter agreement she had signed. Upon receipt thereof,
Portillo jotted a note thereon that the latest contract she had signed in February 2004 did
not contain any "Goodwill Clause" referred to by Lietz Inc. In response thereto, Lietz Inc.
categorically wrote:
Please be informed that the standard prescription of prohibiting employees from engaging
in business or seeking employment with organizations that directly or indirectly compete
against [Lietz Inc.] for three (3) years after resignation remains in effect.
The documentation you pertain to is an internal memorandum of your salary increase, not
an employment contract. The absence of the three-year prohibition clause in this
document (or any document for that matter) does not cancel the prohibition itself. We did
not, have not, and will not issue any cancellation of such in the foreseeable future[.]
[T]hus[,] regretfully, it is erroneous of you to believe otherwise. 6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the
exchange of correspondence between them regarding the "Goodwill Clause" in the
employment contract was a moot exercise since Portillos articulated intention to go into
business, selling rice, will not compete with Lietz Inc.s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines,
Limited to head its Pharma Raw Material Department. Ed Keller Limited is purportedly a
direct competitor of Lietz Inc.
Meanwhile, Portillos demands from Lietz Inc. for the payment of her remaining salaries
and commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext
that her salaries and commissions were still being computed.
On 14 September 2005, Portillo filed a complaint with the National Labor Relations
Commission (NLRC) for non-payment of 1 months salary, two (2) months them.10
commission, 13th month pay, plus moral, exemplary and actual damages and attorneys
fees.
In its position paper, Lietz Inc. admitted liability for Portillos money claims in the total
amount of P110,662.16. However, Lietz Inc. raised the defense of legal compensation:
Portillos money claims should be offset against her liability to Lietz Inc. for liquidated
damages in the amount of 869,633.09 7 for Portillos alleged breach of the "Goodwill
Clause" in the employment contract when she became employed with Ed Keller
Philippines, Limited.
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillos complaint:
WHEREFORE, judgment is hereby rendered ordering respondents Rudolf Lietz, Inc. to
pay complainant Marietta N. Portillo the amount of Php110,662.16, representing her
salary and commissions, including 13th month pay.8
On appeal by respondents, the NLRC, through its Second Division, affirmed the ruling of
Labor Arbiter Daniel J. Cajilig. On motion for reconsideration, the NLRC stood pat on its
ruling.
Expectedly, respondents filed a petition for certiorari before the Court of Appeals,
alleging grave abuse of discretion in the labor tribunals rulings.
As earlier adverted to, the appellate court initially affirmed the labor tribunals:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered by
us DENYING the petition filed in this case. The Resolution of the National Labor
Relations Commission (NLRC), Second Division, in the labor case docketed as NLRC
NCR Case No. 00-09- 08113-2005 [NLRC LAC No. 07-001965-07(5)] is
hereby AFFIRMED.9
The disposition was disturbed. The Court of Appeals, on motion for reconsideration,
modified its previous decision, thus:
WHEREFORE, in view of the foregoing premises, we hereby MODIFY the decision
promulgated on March 31, 2009 in that, while we uphold the monetary award in favor of
the [petitioner] in the aggregate sum of 110,662.16 representing the unpaid salary,
commission and 13th month pay due to her, we hereby allow legal compensation or set-off
of such award of monetary claims by her liability to [respondents] for liquidated damages
arising from her violation of the "Goodwill Clause" in her employment contract with
Portillos motion for reconsideration was denied.
Hence, this petition for certiorari listing the following acts as grave abuse of discretion of
the Court of Appeals:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY
EVADING TO RECOGNIZE (sic) THAT THE RESPONDENTS EARLIER PETITION
IS FATALLY DEFECTIVE;
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY
OVERSTEPPING THE BOUNDS OF APPELLATE JURISDICTION[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY
MODIFYING ITS PREVIOUS DECISION BASED ON AN ISSUE THAT WAS
RAISED ONLY ON THE FIRST INSTANCE AS AN APPEAL BUT WAS NEVER AT
THE TRIAL COURT AMOUNTING TO DENIAL OF DUE PROCESS[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY
EVADING THE POSITIVE DUTY TO UPHOLD THE RELEVANT LAWS[.]11
Simply, the issue is whether Portillos money claims for unpaid salaries may be offset
against respondents claim for liquidated damages.
Before anything else, we address the procedural error committed by Portillo, i.e., filing a
petition for certiorari, a special civil action under Rule 65 of the Rules of Court, instead
of a petition for review on certiorari, a mode of appeal, under Rule 45 thereof. On this
score alone, the petition should have been dismissed outright.
Section 1, Rule 45 of the Rules of Court expressly provides that a party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals may
file a verified petition for review on certiorari. Considering that, in this case, appeal
by certiorari was available to Portillo, that available recourse foreclosed her right to
resort to a special civil action for certiorari, a limited form of review and a remedy of last
recourse, which lies only where there is no appeal or plain, speedy and adequate remedy
in the ordinary course of law.12
A petition for review on certiorari under Rule 45 and a petition for certiorari under Rule
65 are mutually exclusive remedies. Certiorari cannot co-exist with an appeal or any
other adequate remedy.13 If a petition for review is available, even prescribed, the nature
of the questions of law intended to be raised on appeal is of no consequence. It may well
be that those questions of law will treat exclusively of whether or not the judgment or
final order was rendered without or in excess of jurisdiction, or with grave abuse of
discretion. This is immaterial. The remedy is appeal, not certiorari as a special civil
action.14
Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules of
proceduresattaining substantial justice as expeditiously as possible 15we have
accepted procedurally incorrect petitions and decided them on the merits. We do the same
here.
The Court of Appeals anchors its modified ruling on the ostensible causal connection
between Portillos money claims and Lietz Inc.s claim for liquidated damages, both
claims apparently arising from the same employment relations. Thus, did it say:
x x x This Court will have to take cognizance of and consider the "Goodwill Clause"
contained [in] the employment contract signed by and between [respondents and
Portillo]. There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of
the employment contract extended to [Portillo], and such clause is not contrary to law,
morals and public policy. There is thus a causal connection between [Portillos] monetary
claims against [respondents] and the latters claim for liquidated damages against the
former. Consequently, we should allow legal compensation or set-off to take place.
[Respondents and Portillo] are both bound principally and, at the same time, are creditors
of each other. [Portillo] is a creditor of [respondents] in the sum of 110,662.16 in
connection with her monetary claims against the latter. At the same time, [respondents]
are creditors of [Portillo] insofar as their claims for liquidated damages in the sum of
980,295.2516 against the latter is concerned.17
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the
Court of Appeals on the "causal connection between [Portillos] monetary claims against
[respondents] and the latters claim from liquidated damages against the former."
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as
otherwise provided under this code, the Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of stenographic
notes, the following case involving all workers, whether agricultural or nonagricultural:
xxxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations; (Underscoring supplied)
Evidently, the Court of Appeals is convinced that the claim for liquidated damages
emanates from the "Goodwill Clause of the employment contract and, therefore, is a
claim for damages arising from the employeremployee relations."
As early as Singapore Airlines Limited v. Pao,18 we established that not all disputes
between an employer and his employee(s) fall within the jurisdiction of the labor
tribunals. We differentiated between abandonment per seand the manner and consequent
effects of such abandonment and ruled that the first, is a labor case, while the second, is a
civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be held
to belong to the civil Courts. While seemingly petitioner's claim for damages arises from
employer-employee relations, and the latest amendment to Article 217 of the Labor Code
under PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-
employee relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and refusal" without
just cause of private respondent Cruz to report for duty despite repeated notices served
upon him of the disapproval of his application for leave of absence without pay. This,
coupled with the further averment that Cruz "maliciously and with bad faith" violated the
terms and conditions of the conversion training course agreement to the damage of
petitioner removes the present controversy from the coverage of the Labor Code and
brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private
respondent Cruz of his jobas the latter was not required in the Complaint to report back
to workbut on the manner and consequent effects of such abandonment of work
translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale
Veneer & Plywood, Inc. [citation omitted], the pertinent portion of which reads:
"Although the acts complained of seemingly appear to constitute 'matter involving
employee-employer' relations as Quisaba's dismissal was the severance of a pre-existing
employee-employer relations, his complaint is grounded not on his dismissal per se, as in
fact he does not ask for reinstatement or backwages, but on the manner of his dismissal
and the consequent effects of such dismissal.
"Civil law consists of that 'mass of precepts that determine or regulate the relations . . .
that exist between members of a society for the protection of private interest (1 Sanchez
Roman 3).
"The 'right' of the respondents to dismiss Quisaba should not be confused with the
manner in which the right was exercised and the effects flowing therefrom. If the
dismissal was done anti-socially or oppressively as the complaint alleges, then the
respondents violated Article 1701 of the Civil Code which prohibits acts of oppression by
either capital or labor against the other, and Article 21, which makes a person liable for
damages if he wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy, the sanction for which, by way of moral damages,
is provided in article 2219, No. 10. [citation omitted]"
Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated damages
for breach of a contractual obligation. The other items demanded are not labor
benefits demanded by workers generally taken cognizance of in labor disputes, such
as payment of wages, overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an obligation, intrinsically a
civil dispute.19(Emphasis supplied)
Subsequent rulings amplified the teaching in Singapore Airlines. The reasonable causal
connection rule was discussed. Thus, in San Miguel Corporation v. National Labor
Relations Commission,20 we held:
While paragraph 3 above refers to "all money claims of workers," it is not necessary to
suppose that the entire universe of money claims that might be asserted by workers
against their employers has been absorbed into the original and exclusive jurisdiction of
Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but
rather within the context formed by paragraph 1 (relating to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of employer-
employee relations), and paragraph 5 (relating to certain activities prohibited to
employees or to employers). It is evident that there is a unifying element which runs
through paragraph 1 to 5 and that is, that they all refer to cases or disputes arising out of
or in connection with an employer-employee relationship. This is, in other words, a
situation where the rule of noscitur a sociis may be usefully invoked in clarifying the
scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as
amended. We reach the above conclusion from an examination of the terms themselves of
Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of Article
217 of the Labor Code expressly brought within the jurisdiction of the Labor Arbiters and
the NLRC "cases arising from employer-employee relations, [citation omitted]" which
clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For
it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall
within the general jurisdiction of regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with
Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that
the "money claims of workers" referred to in paragraph 3 of Article 217 embraces
money claims which arise out of or in connection with the employer-employee
relationship, or some aspect or incident of such relationship. Put a little differently,
that money claims of workers which now fall within the original and exclusive
jurisdiction of Labor Arbiters are those money claims which have some reasonable
causal connectionwith the employer-employee relationship.21 (Emphasis supplied)
We thereafter ruled that the "reasonable causal connection with the employer-employee
relationship" is a requirement not only in employees money claims against the employer
but is, likewise, a condition when the claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,22 which reiterated
the San Miguel ruling and allied jurisprudence, we pronounced that a non-compete
clause, as in the "Goodwill Clause" referred to in the present case, with a stipulation that
a violation thereof makes the employee liable to his former employer for liquidated
damages, refers to post-employment relations of the parties.
In Dai-Chi, the trial court dismissed the civil complaint filed by the employer to recover
damages from its employee for the latters breach of his contractual obligation. We
reversed the ruling of the trial court as we found that the employer did not ask for any
relief under the Labor Code but sought to recover damages agreed upon in the contract as
redress for its employees breach of contractual obligation to its "damage and prejudice."
We iterated that Article 217, paragraph 4 does not automatically cover all disputes
between an employer and its employee(s). We noted that the cause of action was within
the realm of Civil Law, thus, jurisdiction over the controversy belongs to the regular
courts. At bottom, we considered that the stipulation referred to post-employment
relations of the parties.
That the "Goodwill Clause" in this case is likewise a postemployment issue should brook
no argument. There is no dispute as to the cessation of Portillos employment with Lietz
Inc.23 She simply claims her unpaid salaries and commissions, which Lietz Inc. does not
contest. At that juncture, Portillo was no longer an employee of Lietz Inc. 24 The
"Goodwill Clause" or the "Non-Compete Clause" is a contractual undertaking effective
after the cessation of the employment relationship between the parties. In accordance
with jurisprudence, breach of the undertaking is a civil law dispute, not a labor law case.
It is clear, therefore, that while Portillos claim for unpaid salaries is a money claim that
arises out of or in connection with an employer-employee relationship, Lietz Inc.s claim
against Portillo for violation of the goodwill clause is a money claim based on an act
done after the cessation of the employment relationship. And, while the jurisdiction over
Portillos claim is vested in the labor arbiter, the jurisdiction over Lietz Inc.s claim rests
on the regular courts. Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties' contract of employment as redress for respondent's
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction
over the controversy belongs to the regular courts. More so must this be in the present
case, what with the reality that the stipulation refers to the postemployment relations of
the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular court's jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon the defenses made by a
defendant in his answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the defendant. 25 [citation omitted]
xxxx
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees [citation omitted], we hold that by
the designating clause "arising from the employer-employee relations" Article 217 should
apply with equal force to the claim of an employer for actual damages against its
dismissed employee, where the basis for the claim arises from or is necessarily connected
with the fact of termination, and should be entered as a counterclaim in the illegal
dismissal case.26
xxxx
This is, of course, to distinguish from cases of actions for damages where the
employer-employee relationship is merely incidental and the cause of action
proceeds from a different source of obligation. Thus, the jurisdiction of regular
courts was upheld where the damages, claimed for were based on tort [citation
omitted], malicious prosecution [citation omitted], or breach of contract, as when the
claimant seeks to recover a debt from a former employee [citation omitted] or seeks
liquidated damages in enforcement of a prior employment contract. [citation
omitted]
Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as
amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relationsin other words, the Labor
Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also
damages governed by the Civil Code.27 (Emphasis supplied)
In the case at bar, the difference in the nature of the credits that one has against the other,
conversely, the nature of the debt one owes another, which difference in turn results in the
difference of the forum where the different credits can be enforced, prevents the
application of compensation. Simply, the labor tribunal in an employees claim for unpaid
wages is without authority to allow the compensation of such claims against the post
employment claim of the former employer for breach of a post employment condition.
The labor tribunal does not have jurisdiction over the civil case of breach of contract.
We are aware that in Baez v. Hon. Valdevilla, we mentioned that:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees [citation omitted], we hold that by
the designating clause "arising from the employer-employee relations" Article 217 should
apply with equal force to the claim of an employer for actual damages against its
dismissed employee, where the basis for the claim arises from or is necessarily connected
with the fact of termination, and should be entered as a counterclaim in the illegal
dismissal case.28
While on the surface, Baez supports the decision of the Court of Appeals, the facts
beneath premise an opposite conclusion. There, the salesman-employee obtained from the
NLRC a final favorable judgment of illegal dismissal. Afterwards, the employer filed
with the trial court a complaint for damages for alleged nefarious activities causing
damage to the employer. Explaining further why the claims for damages should be
entered as a counterclaim in the illegal dismissal case, we said:
Even under Republic Act No. 875 (the Industrial Peace Act, now completely superseded
by the Labor Code), jurisprudence was settled that where the plaintiffs cause of action
for damages arose out of, or was necessarily intertwined with, an alleged unfair labor
practice committed by the union, the jurisdiction is exclusively with the (now defunct)
Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the
same is a nullity. To allow otherwise would be "to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." Thus, even after the enactment of the
Labor Code, where the damages separately claimed by the employer were allegedly
incurred as a consequence of strike or picketing of the union, such complaint for damages
is deeply rooted from the labor dispute between the parties, and should be dismissed by
ordinary courts for lack of jurisdiction. As held by this Court in National Federation of
Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy
grounds, and equally so in the interest of greater promptness in the disposition of labor
matters, a court is spared the often onerous task of determining what essentially is a
factual matter, namely, the damages that may be incurred by either labor or management
as a result of disputes or controversies arising from employer-employee relations. 29
Evidently, the ruling of the appellate court is modeled after the basis used in Baez which
is the "intertwined" facts of the claims of the employer and the employee or that the
"complaint for damages is deeply rooted from the labor dispute between the parties."
Thus, did the appellate court say that:
There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of the
employment contract extended to [Portillo], and such clause is not contrary to law, morals
and public policy. There is thus a causal connection between [Portillos] monetary claims
against [respondents] and the latters claim for liquidated damages against the former.
Consequently, we should allow legal compensation or set-off to take place. 30
The Court of Appeals was misguided. Its conclusion was incorrect.
There is no causal connection between the petitioner employees claim for unpaid wages
and the respondent employers claim for damages for the alleged "Goodwill Clause"
violation. Portillos claim for unpaid salaries did not have anything to do with her alleged
violation of the employment contract as, in fact, her separation from employment is not
"rooted" in the alleged contractual violation. She resigned from her employment. She was
not dismissed. Portillos entitlement to the unpaid salaries is not even contested. Indeed,
Lietz Inc.s argument about legal compensation necessarily admits that it owes the money
claimed by Portillo.
The alleged contractual violation did not arise during the existence of the employer-
employee relationship. It was a post-employment matter, a post-employment violation.
Reminders are apt. That is provided by the fairly recent case of Yusen Air and Sea
Services Phils., Inc. v. Villamor,31 which harked back to the previous rulings on the
necessity of "reasonable causal connection" between the tortious damage and the damage
arising from the employer-employee relationship. Yusen proceeded to pronounce that the
absence of the connection results in the absence of jurisdiction of the labor arbiter.
Importantly, such absence of jurisdiction cannot be remedied by raising before the labor
tribunal the tortious damage as a defense. Thus:
When, as here, the cause of action is based on a quasi-delict or tort, which has no
reasonable causal connection with any of the claims provided for in Article 217,
jurisdiction over the action is with the regular courts. [citation omitted]
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties contract of employment as redress for respondents
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction
over the controversy belongs to the regular courts. More so must this be in the present
case, what with the reality that the stipulation refers to the postemployment relations of
the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular courts jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved only after and as a result of a
trial. Neither can jurisdiction of a court be made to depend upon the defenses made by a
defendant in his answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the defendant. 32 (Underscoring supplied).
The error of the appellate court in its Resolution of 14 October 2010 is basic. The original
decision, the right ruling, should not have been reconsidered.1wphi1
Indeed, the application of compensation in this case is effectively barred by Article 113 of
the Labor Code which prohibits wage deductions except in three circumstances:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in
CA-G.R. SP No. I 06581 dated 14 October 20 I 0 is SET ASIDE. The Decision of the
Court of Appeals in CA-G.R. SP No. I 06581 dated 3 I March :2009
is REINSTATED. No costs.
SO ORDERED.
G.R. No. 192571 April 22, 2014
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN
D. FEIST, MARIA OLIVIA T. YABUT-MISA, TERESITA C. BERNARDO, AND
ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
For resolution is respondent Pearlie Ann Alcaraz's (Alcaraz) Motion for Reconsideration
dated August 23, 2013 of the Court's Decision dated July 23, 2013 (Decision). 1
At the outset, there appears to be no substantial argument in the said motion sufficient for
the Court to depart from the pronouncements made in the initial ruling. But if only to
address Akaraz's novel assertions, and to so placate any doubt or misconception in the
resolution of this case, the Court proceeds to shed light on the matters indicated below.
A. Manner of review.
Alcaraz contends that the Court should not have conducted a re-weighing of evidence
since a petition for review on certiorari under Rule 45 of the Rules of Court (Rules) is
limited to the review of questions of law. She submits that since what was under review
was a ruling of the Court of Appeals (CA) rendered via a petition for certiorari under
Rule 65 of the Rules, the Court should only determine whether or not the CA properly
determined that the National Labor Relations Commission (NLRC) committed a grave
abuse of discretion.
The assertion does not justify the reconsideration of the assailed Decision.
A careful perusal of the questioned Decision will reveal that the Court actually resolved
the controversy under the above-stated framework of analysis. Essentially, the Court
found the CA to have committed an error in holding that no grave abuse of discretion can
be ascribed to the NLRC since the latter arbitrarily disregarded the legal implication of
the attendant circumstances in this case which should have simply resulted in the finding
that Alcaraz was apprised of the performance standards for her regularization and hence,
was properly a probationary employee. As the Court observed, an employees failure to
perform the duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employees non-regularization. As
detailed in the Decision, Alcaraz was well-apprised of her duties and responsibilities as
well as the probationary status of her employment:
(a) On June 27, 2004, [Abbott Laboratories, Philippines (Abbott)] caused the
publication in a major broadsheet newspaper of its need for a Regulatory Affairs
Manager, indicating therein the job description for as well as the duties and
responsibilities attendant to the aforesaid position; this prompted Alcaraz to
submit her application to Abbott on October 4, 2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that Alcaraz was to
be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which
specifically stated, inter alia, that she was to be placed on probation for a period
of six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo sent her
copies of Abbotts organizational structure and her job description through e-
mail;
(e) Alcaraz was made to undergo a pre-employment orientation where [Allan G.
Almazar] informed her that she had to implement Abbotts Code of Conduct
and office policies on human resources and finance and that she would be
reporting directly to [Kelly Walsh];
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and Performance
Modules from [Maria Olivia T. Yabut-Misa] who explained to her the procedure
for evaluating the performance of probationary employees; she was further
notified that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical
company and had admitted to have an "extensive training and background" to
acquire the necessary skills for her job.2
Considering the foregoing incidents which were readily observable from the records, the
Court reached the conclusion that the NLRC committed grave abuse of discretion, viz.:
[I]n holding that Alcaraz was illegally dismissed due to her status as a regular and not a
probationary employee, the Court finds that the NLRC committed a grave abuse of
discretion.
To elucidate, records show that the NLRC based its decision on the premise that
Alcarazs receipt of her job description and Abbotts Code of Conduct and Performance
Modules was not equivalent to being actually informed of the performance standards
upon which she should have been evaluated on. It, however, overlooked the legal
implication of the other attendant circumstances as detailed herein which should have
warranted a contrary finding that Alcaraz was indeed a probationary and not a regular
employee more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would lead to her
non-regularization and eventually, her termination.3
Consequently, since the CA found that the NLRC did not commit grave abuse of
discretion and denied the certiorari petition before it, the reversal of its ruling was thus in
order.
At this juncture, it bears exposition that while NLRC decisions are, by their nature, final
and executory4 and, hence, not subject to appellate review,5 the Court is not precluded
from considering other questions of law aside from the CAs finding on the NLRCs
grave abuse of discretion. While the focal point of analysis revolves on this issue, the
Court may deal with ancillary issues such as, in this case, the question of how a
probationary employee is deemed to have been informed of the standards of his
regularization if only to determine if the concepts and principles of labor law were
correctly applied or misapplied by the NLRC in its decision. In other words, the Courts
analysis of the NLRCs interpretation of the environmental principles and concepts of
labor law is not completely prohibited in as it is complementary to a Rule 45 review
of labor cases.
Finally, if only to put to rest Alcarazs misgivings on the manner in which this case was
reviewed, it bears pointing out that no "factual appellate review" was conducted by the
Court in the Decision. Rather, the Court proceeded to interpret the relevant rules on
probationary employment as applied to settled factual findings. Besides, even on the
assumption that a scrutiny of facts was undertaken, the Court is not altogether barred
from conducting the same. This was explained in the case of Career Philippines
Shipmanagement, Inc. v. Serna6 wherein the Court held as follows:
Accordingly, we do not re-examine conflicting evidence, re-evaluate the credibility of
witnesses, or substitute the findings of fact of the NLRC, an administrative body that has
expertise in its specialized field. Nor do we substitute our "own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible."
The factual findings of the NLRC, when affirmed by the CA, are generally conclusive on
this Court.
Nevertheless, there are exceptional cases where we, in the exercise of our discretionary
appellate jurisdiction may be urged to look into factual issues raised in a Rule 45 petition.
For instance, when the petitioner persuasively alleges that there is insufficient or
insubstantial evidence on record to support the factual findings of the tribunal or court a
quo, as Section 5, Rule 133 of the Rules of Court states in express terms that in cases
filed before administrative or quasi-judicial bodies, a fact may be deemed established
only if supported by substantial evidence.7 (Emphasis supplied)
B. Standards for regularization;
conceptual underpinnings.
Alcaraz posits that, contrary to the Courts Decision, ones job description cannot by and
of itself be treated as a standard for regularization as a standard denotes a measure of
quantity or quality. By way of example, Alcaraz cites the case of a probationary
salesperson and asks how does such employee achieve regular status if he does not know
how much he needs to sell to reach the same.
The argument is untenable.
First off, the Court must correct Alcarazs mistaken notion: it is not the probationary
employees job description but the adequate performance of his duties and
responsibilities which constitutes the inherent and implied standard for regularization. To
echo the fundamental point of the Decision, if the probationary employee had been fully
apprised by his employer of these duties and responsibilities, then basic knowledge and
common sense dictate that he must adequately perform the same, else he fails to pass the
probationary trial and may therefore be subject to termination. 8
The determination of "adequate performance" is not, in all cases, measurable by
quantitative specification, such as that of a sales quota in Alcarazs example. It is also
hinged on the qualitative assessment of the employees work; by its nature, this largely
rests on the reasonable exercise of the employers management prerogative. While in
some instances the standards used in measuring the quality of work may be conveyed
such as workers who construct tangible products which follow particular metrics, not all
standards of quality measurement may be reducible to hard figures or are readily
articulable in specific pre-engagement descriptions. A good example would be the case of
probationary employees whose tasks involve the application of discretion and intellect,
such as to name a few lawyers, artists, and journalists. In these kinds of occupation,
the best that the employer can do at the time of engagement is to inform the probationary
employee of his duties and responsibilities and to orient him on how to properly proceed
with the same. The employer cannot bear out in exacting detail at the beginning of the
engagement what he deems as "quality work" especially since the probationary employee
has yet to submit the required output. In the ultimate analysis, the communication of
performance standards should be perceived within the context of the nature of the
probationary employees duties and responsibilities.
The same logic applies to a probationary managerial employee who is tasked to supervise
a particular department, as Alcaraz in this case.1wphi1 It is hardly possible for the
employer, at the time of the employees engagement, to map into technical indicators, or
convey in precise detail the quality standards by which the latter should effectively
manage the department. Factors which gauge the ability of the managerial employee to
either deal with his subordinates (e.g., how to spur their performance, or command
respect and obedience from them), or to organize office policies, are hardly conveyable at
the outset of the engagement since the employee has yet to be immersed into the work
itself. Given that a managerial role essentially connotes an exercise of discretion, the
quality of effective management can only be determined through subsequent assessment.
While at the time of engagement, reason dictates that the employer can only inform the
probationary managerial employee of his duties and responsibilities as such and provide
the allowable parameters for the same. Verily, as stated in the Decision, the adequate
performance of such duties and responsibilities is, by and of itself, an implied standard of
regularization.
In this relation, it bears mentioning that the performance standard contemplated by law
should not, in all cases, be contained in a specialized system of feedbacks or evaluation.
The Court takes judicial notice of the fact that not all employers, such as simple
businesses or small-scale enterprises, have a sophisticated form of human resource
management, so much so that the adoption of technical indicators as utilized through
"comment cards" or "appraisal" tools should not be treated as a prerequisite for every
case of probationary engagement. In fact, even if a system of such kind is employed and
the procedures for its implementation are not followed, once an employer determines that
the probationary employee fails to meet the standards required for his regularization, the
former is not precluded from dismissing the latter. The rule is that when a valid cause for
termination exists, the procedural infirmity attending the termination only warrants the
payment of nominal damages. This was the principle laid down in the landmark cases of
Agabon v. NLRC9 (Agabon) and Jaka Food Processing Corporation v. Pacot 10 (Jaka). In
the assailed Decision, the Court actually extended the application of the Agabon and Jaka
rulings to breaches of company procedure, notwithstanding the employers compliance
with the statutory requirements under the Labor Code. 11 Hence, although Abbott did not
comply with its own termination procedure, its non-compliance thereof would not detract
from the finding that there subsists a valid cause to terminate Alcarazs employment.
Abbott, however, was penalized for its contractual breach and thereby ordered to pay
nominal damages.
As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano 12 (Aliling) since the
same is not squarely applicable to the case at bar. The employee in Aliling, a sales
executive, was belatedly informed of his quota requirement. Thus, considering the nature
of his position, the fact that he was not informed of his sales quota at the time of his
engagement changed the complexion of his employment. Contrarily, the nature of
Alcaraz's duties and responsibilities as Regulatory Affairs Manager negates the
application of the foregoing. Records show that Alcaraz was terminated because she (a)
did not manage her time effectively; (b) failed to gain the trust of her staff and to build an
effective rapport with them; (c) failed to train her staff effectively; and (d) was not able to
obtain the knowledge and ability to make sound judgments on case processing and article
review which were necessary for the proper performance of her duties. 13 Due to the
nature and variety of these managerial functions, the best that Abbott could have done, at
the time of Alcaraz's engagement, was to inform her of her duties and responsibilities, the
adequate performance of which, to repeat, is an inherent and implied standard for
regularization; this is unlike the circumstance in Aliling where a quantitative
regularization standard, in the term of a sales quota, was readily articulable to the
employee at the outset. Hence, since the reasonableness of Alcaraz's assessment clearly
appears from the records, her termination was justified. Bear in mind that the quantum of
proof which the employer must discharge is only substantial evidence which, as defined
in case law, means that amount of relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise.14 To the Court's mind, this threshold of evidence Abbott
amply overcame in this case.
All told, the Court hereby denies the instant motion for reconsideration and thereby
upholds the Decision in the main case.
WHEREFORE, the motion for reconsideration dated August 23, 2013 of the Court's
Decision dated July 23, 2013 in this case is hereby DENIED.
SO ORDERED.
G.R. No. 181490 April 23, 2014
MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A.
BAUTISTA, Petitioners,
vs.
JOSELITO A. CARO, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision2 and Resolution3 of the Court of Appeals (CA) dated June 26, 2007
and January 11, 2008, respectively, which reversed and set aside the Decision 4 of the
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 046551-05
(NCR-00-03-02511-05). The NLRC decision vacated and set aside the Decision 5 of the
Labor Arbiter which found that respondent Joselito A. Caro (Caro) was illegally
dismissed by petitioner Mirant (Philippines) Corporation (Mirant).
Petitioner corporation is organized and operating under and by virtue of the laws of the
Republic of the Philippines. It is a holding company that owns shares in project
companies such as Mirant Sual Corporation and Mirant Pagbilao Corporation (Mirant
Pagbilao) which operate and maintain power stations located in Sual, Pangasinan and
Pagbilao, Quezon, respectively. Petitioner corporation and its related companies maintain
around 2,000 employees detailed in its main office and other sites. Petitioner corporation
had changed its name to CEPA Operations in 1996 and to Southern Company in 2001. In
2002, Southern Company was sold to petitioner Mirant whose corporate parent is an
Atlanta-based power producer in the United States of America. 6 Petitioner corporation is
now known as Team Energy Corporation.7
Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner corporation
when respondent was terminated from employment.8
Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics Officer. In
2002, when Southern Company was sold to Mirant, respondent was already a Supervisor
of the Logistics and Purchasing Department of petitioner. At the time of the severance of
his employment, respondent was the Procurement Supervisor of Mirant Pagbilao
assigned at petitioner corporations corporate office. As Procurement Supervisor, his main
task was to serve as the link between the Materials Management Department of petitioner
corporation and its staff, and the suppliers and service contractors in order to ensure that
procurement is carried out in conformity with set policies, procedures and practices. In
addition, respondent was put incharge of ensuring the timely, economical, safe and
expeditious delivery of materials at the right quality and quantity to petitioner
corporations plant. Respondent was also responsible for guiding and overseeing the
welfare and training needs of the staff of the Materials Management Department. Due to
the nature of respondents functions, petitioner corporation considers his position as
confidential.9
The antecedent facts follow:
Respondent filed a complaint10 for illegal dismissal and money claims for 13th and 14th
month pay, bonuses and other benefits, as well as the payment of moral and exemplary
damages and attorneys fees. Respondent posits the following allegations in his Position
Paper:11
On January 3, 1994, respondent was hired by petitioner corporation as its Logistics
Officer and was assigned at petitioner corporations corporate office in Pasay City. At the
time of the filing of the complaint, respondent was already a Supervisor at the Logistics
and Purchasing Department with a monthly salary of P39,815.00.
On November 3, 2004, petitioner corporation conducted a random drug test where
respondent was randomly chosen among its employees who would be tested for illegal
drug use. Through an Intracompany Correspondence, 12 these employees were informed
that they were selected for random drug testing to be conducted on the same day that they
received the correspondence. Respondent was duly notified that he was scheduled to be
tested after lunch on that day. His receipt of the notice was evidenced by his signature on
the correspondence.
Respondent avers that at around 11:30 a.m. of the same day, he received a phone call
from his wifes colleague who informed him that a bombing incident occurred near his
wifes work station in Tel Aviv, Israel where his wife was then working as a caregiver.
Respondent attached to his Position Paper a Press Release 13 of the Department of Foreign
Affairs (DFA) in Manila to prove the occurrence of the bombing incident and a
letter14 from the colleague of his wife who allegedly gave him a phone call from Tel Aviv.
Respondent claims that after the said phone call, he proceeded to the Israeli Embassy to
confirm the news on the alleged bombing incident. Respondent further claims that before
he left the office on the day of the random drug test, he first informed the secretary of his
Department, Irene Torres (Torres), at around 12:30 p.m. that he will give preferential
attention to the emergency phone call that he just received. He also told Torres that he
would be back at the office as soon as he has resolved his predicament. Respondent
recounts that he tried to contact his wife by phone but he could not reach her. He then had
to go to the Israeli Embassy to confirm the bombing incident. However, he was told by
Eveth Salvador (Salvador), a lobby attendant at the Israeli Embassy, that he could not be
allowed entry due to security reasons.
On that same day, at around 6:15 p.m., respondent returned to petitioner corporations
office. When he was finally able to charge his cellphone at the office, he received a text
message from Tina Cecilia (Cecilia), a member of the Drug Watch Committee that
conducted the drug test, informing him to participate in the said drug test. He
immediately called up Cecilia to explain the reasons for his failure to submit himself to
the random drug test that day. He also proposed that he would submit to a drug test the
following day at his own expense. Respondent never heard from Cecilia again.
On November 8, 2004, respondent received a Show Cause Notice 15 from petitioner
corporation through Jaime Dulot (Dulot), his immediate supervisor, requiring him to
explain in writing why he should not be charged with "unjustified refusal to submit to
random drug testing." Respondent submitted his written explanation 16 on November 11,
2004. Petitioner corporation further required respondent on December 14, 2004 to submit
additional pieces of supporting documents to prove that respondent was at the Israeli
Embassy in the afternoon of November 3, 2004 and that the said bombing incident
actually occurred. Respondent requested for a hearing to explain that he could not submit
proof that he was indeed present at the Israeli Embassy during the said day because he
was not allegedly allowed entry by the embassy due to security reasons. On January 3,
2005, respondent submitted the required additional supporting documents. 17
On January 13, 2005, petitioner corporations Investigating Panel issued an Investigating
Report18 finding respondent guilty of "unjustified refusal to submit to random drug
testing" and recommended a penalty of four working weeks suspension without pay,
instead of termination, due to the presence of mitigating circumstances. In the same
Report, the Investigating Panel also recommended that petitioner corporation should
review its policy on random drug testing, especially of the ambiguities cast by the term
"unjustified refusal."
On January 19, 2005, petitioner corporations Asst. Vice President for Material
Management Department, George K. Lamela, Jr. (Lamela), recommended 19 that
respondent be terminated from employment instead of merely being suspended. Lamela
argued that even if respondent did not outrightly refuse to take the random drug test, he
avoided the same. Lamela averred that "avoidance" was synonymous with "refusal."
On February 14, 2005, respondent received a letter 20 from petitioner corporations Vice
President for Operations, Tommy J. Sliman (Sliman), terminating him on the same date.
Respondent filed a Motion to Appeal 21 his termination on February 23, 2005. The motion
was denied by petitioner corporation on March 1, 2005.
It is the contention of respondent that he was illegally dismissed by petitioner corporation
due to the latters non-compliance with the twin requirements of notice and hearing. He
asserts that while there was a notice charging him of "unjustified refusal to submit to
random drug testing," there was no notice of hearing and petitioner corporations
investigation was not the equivalent of the "hearing" required under the law which should
have accorded respondent the opportunity to be heard.
Respondent further asserts that he was illegally dismissed due to the following
circumstances:
1. He signed the notice that he was randomly selected as a participant to the
company drug testing;
2. Even the Investigating Panel was at a loss in interpreting the charge because
it believed that the term "refusal" was ambiguous, and therefore such doubt
must be construed in his favor; and
3. He agreed to take the drug test the following day at his own expense, which
he says was clearly not an indication of evasion from the drug test.
Petitioner corporation counters with the following allegations:
On November 3, 2004, a random drug test was conducted on petitioner corporations
employees at its Corporate Office at the CTC Bldg. in Roxas Blvd., Pasay City. The
random drug test was conducted pursuant to Republic Act No. 9165, otherwise known as
the "Comprehensive Dangerous Drugs Act of 2002." Respondent was randomly selected
among petitioners employees to undergo the said drug test which was to be carried out
by Drug Check Philippines, Inc.22
When respondent failed to appear at the scheduled drug test, Cecilia prepared an incident
report addressed to Dulot, the Logistics Manager of the Materials Management
Department.23 Since it was stated under petitioner corporations Mirant Drugs Policy
Employee Handbook to terminate an employee for "unjustified refusal to submit to a
random drug test" for the first offense, Dulot sent respondent a Show Cause
Notice24 dated November 8, 2004, requiring him to explain why no disciplinary action
should be imposed for his failure to take the random drug test. Respondent, in a letter
dated November 11, 2004, explained that he attended to an emergency call from his
wifes colleague and apologized for the inconvenience he had caused. He offered to
submit to a drug test the next day even at his expense. 25 Finding respondents explanation
unsatisfactory, petitioner corporation formed a panel to investigate and recommend the
penalty to be imposed on respondent.26 The Investigating Panel found respondents
explanations as to his whereabouts on that day to be inconsistent, and recommended that
he be suspended for four weeks without pay. The Investigating Panel took into account
that respondent did not directly refuse to be subjected to the drug test and that he had
been serving the company for ten years without any record of violation of its policies.
The Investigating Panel further recommended that the Mirant Drug Policy be reviewed to
clearly define the phrase "unjustified refusal to submit to random drug
testing."27 Petitioner corporations Vice-President for Operations, Sliman, however
disagreed with the Investigating Panels recommendations and terminated the services of
respondent in accordance with the subject drug policy. Sliman likewise stated that
respondents violation of the policy amounted to willful breach of trust and loss of
confidence.28
A cursory examination of the pleadings of petitioner corporation would show that it
concurs with the narration of facts of respondent on material events from the time that
Cecilia sent an electronic mail at about 9:23 a.m. on November 3, 2004 to all employees
of petitioner corporation assigned at its Corporate Office advising them of the details of
the drug test up to the time of respondents missing his schedule to take the drug test.
Petitioner corporation and respondents point of disagreement, however, is whether
respondents proffered reasons for not being able to take the drug test on the scheduled
day constituted valid defenses that would have taken his failure to undergo the drug test
out of the category of "unjustified refusal." Petitioner corporation argues that
respondents omission amounted to "unjustified refusal" to submit to the random drug test
as he could not proffer a satisfactory explanation why he failed to submit to the drug test:
1. Petitioner corporation is not convinced that there was indeed such a phone
call at noon of November 3, 2004 as respondent could not even tell who called
him up.
2. Respondent could not even tell if he received the call via the landline
telephone service at petitioner corporations office or at his mobile phone.
3. Petitioner corporation was also of the opinion that granting there was such a
phone call, there was no compelling reason for respondent to act on it at the
expense of his scheduled drug testing. Petitioner corporation principally pointed
out that the call merely stated that a bomb exploded near his wifes work station
without stating that his wife was affected. Hence, it found no point in
confirming it with extraordinary haste and forego the drug test which would
have taken only a few minutes to accomplish. If at all, respondent should have
undergone the drug testing first before proceeding to confirm the news so as to
leave his mind free from this obligation.
4. Petitioner corporation maintained that respondent could have easily asked
permission from the Drug Watch Committee that he was leaving the office since
the place where the activity was conducted was very close to his work station. 29
To the mind of petitioners, they are not liable for illegal dismissal because all of these
circumstances prove that respondent really eluded the random drug test and was therefore
validly terminated for cause after being properly accorded with due process. Petitioners
further argue that they have already fully settled the claim of respondent as evidenced by
a Quitclaim which he duly executed. Lastly, petitioners maintain that they are not guilty
of unfair labor practice as respondents dismissal was not intended to curtail his right to
self-organization; that respondent is not entitled to the payment of his 13th and 14th
month bonuses and other incentives as he failed to show that he is entitled to these
amounts according to company policy; that respondent is not entitled to reinstatement,
payment of full back wages, moral and exemplary damages and attorneys fees due to his
termination for cause.
In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog found
respondent to have been illegally dismissed. The Labor Arbiter also found that the
quitclaim purportedly executed by respondent was not a bona fide quitclaim which
effectively discharged petitioners of all the claims of respondent in the case at bar. If at
all, the Labor Arbiter considered the execution of the quitclaim as a clear attempt on the
part of petitioners to mislead its office into thinking that respondent no longer had any
cause of action against petitioner corporation. The decision stated, viz.:
WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal
dismissal, and hereby ordered to jointly and severally reinstate complainant back to his
former position without loss on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was illegally dismissed up to the time he is
actually reinstated, partially computed as of this date in the amount of P258,797.50
(P39,815.00 x 6.5 mos.) plus his 13th and 14th month pay in the amount of P43,132.91 or
in the total amount of P301,930.41.
Respondents are also ordered to pay complainant the amount of P3,000,000.00 as and by
way of moral and exemplary damages, and to pay complainant the amount equivalent to
ten percent (10%) of the total awards as and by way of attorneys fees.
SO ORDERED.30
The Labor Arbiter stated that while petitioner corporation observed the proper procedure
in the termination of an employee for a purported authorized cause, such just cause did
not exist in the case at bar. The decision did not agree with the conclusions reached by
petitioner corporations own Investigating Panel that while respondent did not refuse to
submit to the questioned drug test and merely "avoided" it on the designated day,
"avoidance" and "refusal" are one and the same. It also held that the terms "avoidance"
and "refusal" are separate and distinct and that "the two words are not even synonymous
with each other."31 The Labor Arbiter considered as more tenable the stance of respondent
that his omission merely resulted to a "failure" to submit to the said drug test and not an
"unjustified refusal." Even if respondents omission is to be considered as refusal, the
Labor Arbiter opined that it was not tantamount to "unjustified refusal" which constitutes
as just cause for his termination. Finally, the Labor Arbiter found that respondent was
entitled to moral and exemplary damages and attorneys fees.
On appeal to the NLRC, petitioners alleged that the decision of the Labor Arbiter was
rendered with grave abuse of discretion for being contrary to law, rules and established
jurisprudence, and contained serious errors in the findings of facts which, if not corrected,
would cause grave and irreparable damage or injury to petitioners. The NLRC, giving
weight and emphasis to the inconsistencies in respondents explanations, considered his
omission as "unjustified refusal" in violation of petitioner corporations drug policy.
Thus, in a decision dated May 31, 2006, the NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by copy of the notice x x x which he
signed to acknowledge receipt thereof on the said date. [Respondent] did not refute
[petitioner corporations] allegation that he was also personally reminded of said drug test
on the same day by Ms. Cecilia of [petitioner corporations] drug watch committee.
However, [respondent] was nowhere to be found at [petitioner corporations] premises at
the time when he was supposed to be tested. Due to his failure to take part in the random
drug test, an incident report x x x was prepared by the Drug Cause Notice x x x to explain
in writing why no disciplinary action should be taken against him for his unjustified
refusal to submit to random drug test, a type D offense punishable with termination.
Pursuant to said directive, [respondent] submitted an explanation x x x on 11 November
2004, pertinent portions of which read:
"I was scheduled for drug test after lunch that day of November 3, 2004 as confirmed
with Tina Cecilia. I was having my lunch when a colleague of my wife abroad called up
informing me that there was something wrong [that] happened in their neighborhood,
where a bomb exploded near her workstation. Immediately, I [left] the office to confirm
said information but at around 12:30 P.M. that day, I informed MS. IRENE TORRES, our
Department Secretary[,] that I would be attending to this emergency call. Did even
[inform] her that Ill try to be back as soon as possible but unfortunately, I was able to
return at 6:15 P.M. I didnt know that Tina was the one calling me on my cell that day.
Did only receive her message after I charged my cell at the office that night. I was able to
call back Tina Cecilia later [that] night if its possible to have it (drug test) the next day.
My apology [for] any inconvenience to the Drug Watch Committee, that I forgot
everything that day including my scheduled drug test due to confusion of what had
happened. It [was] not my intention not to undergo nor refuse to have a drug test knowing
well that its a company policy and its mandated by law."
In the course of the investigation, [respondent] was requested to present proof pertaining
to the alleged call he received on 3 November 2004 from a colleague of his wife
regarding the bomb explosion in Tel Aviv, his presence at the Israel Embassy also on 3
November 2004. [Respondent], thereafter, submitted a facsimile which he allegedly
received from his wife's colleague confirming that she called and informed him of the
bombing incident. However, a perusal of said facsimile x x x reveals that the same cannot
be given any probative value because, as correctly observed by [petitioners], it can barely
be read and upon inquiry with PLDT, the international area code of Israel which is 00972
should appear on the face of the facsimile if indeed said facsimile originated from Israel.
[Respondent] also could not present proof of his presence at the Israel Embassy on said
time and date. He instead provided the name of a certain Ms. Eveth Salvador of said
embassy who could certify that he was present thereat. Accordingly, Mr. Bailon, a
member of the investigation panel, verified with Ms. Salvador who told him that she is
only the telephone operator of the Israel Embassy and that she was not in a position to
validate [respondents] presence at the Embassy. Mr. Bailon was then referred to a certain
Ms. Aimee Zandueta, also of said embassy, who confirmed that based on their records,
[respondent] did not visit the embassy nor was he attended to by any member of said
embassy on 3 November 2004. Ms. Zandueta further informed Mr. Bailon that no
bombing occurred in Tel Aviv on 3 November 2004 and that the only reported incident of
such nature occurred on 1 November 2004. A letter x x x to this effect was written by
Consul Ziva Samech of the Embassy of Israel. A press release x x x of the Department of
Foreign Affairs confirm[ed] that the bombing occurred on 1 November 2004.
In his explanation, the [respondent] stated that the reason why he had to leave the office
on 3 November 2004 was to verify an information at the Israel Embassy of the alleged
bombing incident on the same day. However, [petitioners] in their position paper alleged
that Ms. Torres of [petitioner] company received a text message from him at around
12:47 p.m. informing her that he will try to be back since he had a lot of things to do and
asking her if there was a signatory on that day. [Respondent] did not deny sending said
text messages to Ms. Torres in his reply and rejoinder x x x. He actually confirmed that
he was involved in the CIIS registration with all companies that was involved with
[petitioner] company and worked on the registration of [petitioner] companys vehicles
with TRO.
It is also herein noted that [respondent] had initially reported to Ms. Torres that it was his
mother in law who informed him about the problem concerning his wife. However, in his
written explanation x x x, the [respondent] stated that it was a friend of his wife, whom
he could not even identify, who informed him of the alleged bombing incident in Tel
Aviv, Israel. [Respondent] also did not deny receiving a cellphone call from Ms. Cecilia
that day. He merely stated that he did not know that it was Ms. Cecilia calling him up in a
cellphone and it was only after he charged his cellphone at the office that night that he
received her message. In effect, [respondent] asserted that his cellphone battery was
running low or drained. [Petitioners] were able to refute [these] averments of
[respondent] when they presented [respondents] Smart Billing Statement
x x x showing that he was able to make a cellphone call at 5:29 p.m. to [petitioner
corporations] supplier, Mutico for a duration of two (2) minutes.32
Given the foregoing facts, the NLRC stated that the offer of respondent to submit to
another drug test the following day, even at his expense, cannot operate to free him from
liability. The NLRC opined that taking the drug test on the day following the scheduled
random drug test would affect both the integrity and the accuracy of the specimen which
was supposed to be taken from a randomly selected employee who was notified of his/her
selection on the same day that the drug test was to be administered. The NLRC further
asserted that a drug test, conducted many hours or a day after the employee was notified,
would compromise its results because the employee may have possibly taken remedial
measures to metabolize or eradicate whatever drugs s/he may have ingested prior to the
drug test.
The NLRC further stated that these circumstances have clearly established the falsity of
respondents claims and found no justifiable reason for respondent to refuse to submit to
the petitioner corporations random drug test. While the NLRC acknowledged that it was
petitioner corporations own Investigating Panel that considered respondents failure to
take the required drug test as mere "avoidance" and not "unjustified refusal," it concluded
that such finding was merely recommendatory to guide top management on what action
to take.
The NLRC also found that petitioner corporations denial of respondents motion to
reconsider his termination was in order. Petitioner corporations reasons for such denial
are quoted in the NLRC decision, viz.:
"Your appeal is anchored on your claim that you responded to an emergency call from
someone abroad informing you that a bomb exploded near the work station of your wife
making you unable to undergo the scheduled drug testing. This claim is groundless taking
into account the following:
We are not convinced that there was indeed that call which you claim to have received
noon of November 3, 2004. On the contrary, our belief is based on the fact that you could
not tell who called you up or how the call got to you. If you forgot to ask the name of the
person who called you up, surely you would have known how the call came to you. You
said you were having lunch at the third floor of the CTC building when you received the
call. There were only two means of communication available to you then: the land line
telephone service in your office and your mobile phone. If your claim were (sic) not
fabricated, you would be able to tell which of these two was used.
Granting that you indeed received that alleged call, from your own account, there was no
compelling reason for you to act on it at the expense of your scheduled drug testing. The
call, as it were, merely stated that something wrong happened (sic) in their
neighborhood, where a bomb exploded near her workstation. Nothing was said if your
wife was affected. There is no point in confirming it with extraordinary haste and forego
the drug test which would have taken only a few minutes to accomplish. If at all, you
should have undergone the drug testing first before proceeding to confirm the news so as
to leave your mind free from this obligation.
Additionally, if it was indeed necessary that you skip the scheduled drug testing to verify
that call, why did you not ask permission from the Drug Watch [C]ommittee that you
were leaving? The place where the activity was being conducted was very close to your
workstation. It was absolutely within your reach to inform any of its members that you
were attending to an emergency call. Why did you not do so?
All this undisputedly proves that you merely eluded the drug testing. Your claim that you
did not refuse to be screened carries no value. Your act was a negation of your words." 33
The NLRC found that respondent was not only validly dismissed for cause he was also
properly accorded his constitutional right to due process as shown by the following
succession of events:
1. On November 8, 2004, respondent was given a show-cause notice requiring
him to explain in writing within three days why no disciplinary action should be
taken against him for violation of company policy on unjustified refusal to
submit to random drug testing a type D offense which results in termination.
2. Respondent submitted his explanation on November 11, 2004.
3. On December 9, 2004, respondent was given a notice of
investigation34 informing him of a meeting on December 13, 2004 at 9:00 a.m.
In this meeting, respondent was allowed to explain his side, present his
evidences and witnesses, and confront the witnesses presented against him.
4. On February 14, 2005, respondent was served a letter of termination which
clearly stated the reasons therefor.35
The NLRC, notwithstanding its finding that respondent was dismissed for cause and with
due process, granted financial assistance to respondent on equitable grounds. It invoked
the past decisions of this Court which allowed the award of financial assistance due to
factors such as long years of service or the Courts concern and compassion towards labor
where the infraction was not so serious. Thus, considering respondents 10 years of
service with petitioner corporation without any record of violation of company policies,
the NLRC ordered petitioner corporation to pay respondent financial assistance
equivalent to one-half (1/2) month pay for every year of service in the amount of One
Hundred Ninety-Nine Thousand Seventy-Five Pesos (P199,075.00). The NLRC decision
states thus:
WHEREFORE, the decision dated 31 August 2005 is VACATED and SET ASIDE. The
instant complaint is dismissed for lack of merit. However, respondent Mirant
[Philippines] Corp. is ordered to pay complainant financial assistance in the amount of
one hundred ninety-nine thousand seventy five pesos (P199,075.00).
SO ORDERED.36
37
Respondent filed a motion for reconsideration, while petitioners filed a motion for
partial reconsideration38 of the NLRC decision. In a Resolution39 dated June 30, 2006, the
NLRC denied both motions.
In a petition for certiorari before the CA, respondent raised the following issues: whether
the NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of its jurisdiction when it construed that the terms "failure,"
"avoidance," "refusal" and "unjustified refusal" have similar meanings; reversed the
factual findings of the Labor Arbiter; and held that respondent deliberately breached
petitioners Anti-Drugs Policy.40 Respondent further argued before the appellate court that
his failure to submit himself to the random drug test was justified because he merely
responded to an emergency call regarding his wifes safety in Tel Aviv, and that such
failure cannot be considered synonymous with "avoidance" or "refusal" so as to mean
"unjustified refusal" in order to be meted the penalty of termination. 41
The CA disagreed with the NLRC and ruled that it was immaterial whether respondent
failed, refused, or avoided being tested. To the appellate court, the singular fact material
to this case was that respondent did not get himself tested in clear disobedience of
company instructions and policy. Despite such disobedience, however, the appellate court
considered the penalty of dismissal to be too harsh to be imposed on respondent, viz.:
x x x While it is a management prerogative to terminate its erring employee for willful
disobedience, the Supreme Court has recognized that such penalty is too harsh depending
on the circumstances of each case. "There must be reasonable proportionality between,
on the one hand, the willful disobedience by the employee and, on the other hand, the
penalty imposed therefor" x x x.
In this case, [petitioner corporations] own investigating panel has revealed that the
penalty of dismissal is too harsh to impose on [respondent], considering that this was the
first time in his 10-year employment that the latter violated its company policies. The
investigating panel even suggested that a review be had of the company policy on the
term "unjustified refusal" to clearly define what constitutes a violation thereof. The
recommendation of the investigating panel is partially reproduced as follows:
"VII. Recommendation
However, despite having violated the company policy, the panel recommends 4 working
weeks suspension without pay (twice the company policys maximum of 2 working
weeks suspension) instead of termination due to the following mitigating circumstances.
1. Mr. Joselito A. Caro did not directly refuse to be subjected to the random
drug test scheduled on November 3, 2004.
 2. In the case of Mr. Joselito A. Caro, the two conditions for termination
(Unjustified and Refusal) were not fully met as he expressly agreed to undergo
drug test.
3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug test the
following day at his own expense.
Doubling the maximum of 2 weeks suspension to 4 weeks is indicative of the gravity of
the offense committed. The panel believes that although mitigating factors partially offset
reasons for termination, the 2 weeks maximum suspension is too lenient penalty for such
an offense.
The Panel also took into consideration that Mr. Joselito A. Caro has served the company
for ten (10) years without any record of violation of the company policies.
xxxx
The Panel also recommends that Management review the Mirant Drug Policy specifically
Unjustified [R]efusal to submit to random drug testing. The Panel believes that the term
refusal casts certain ambiguities and should be clearly defined." 42
The CA however found that award of moral and exemplary damages is without basis due
to lack of bad faith on the part of the petitioner corporation which merely acted within its
management prerogative. In its assailed Decision dated June 26, 2007, the CA ruled, viz.:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The assailed
Decision dated May 31, 2006 and Resolution dated June 30, 2006 rendered by the
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 046551-05
(NCR-00-03-02511-05) are REVERSED and SET ASIDE. The Labor Arbiters Decision
dated August 31, 2005 is hereby REINSTATED with MODIFICATION by omitting the
award of moral and exemplary damages as well as attorneys fees, and that the
petitioners salary equivalent to four (4) working weeks at the time he was terminated be
deducted from his backwages. No cost.
SO ORDERED.43
Petitioner moved for reconsideration. In its assailed Resolution dated January 11, 2008,
the CA denied petitioners motion for reconsideration for lack of merit. It ruled that the
arguments in the motion for reconsideration were already raised in their past pleadings.
In this instant Petition, petitioners raise the following grounds:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
FAILED TO CONSIDER THAT:
A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO
SHOULD HAVE BEEN SUMMARILY DISMISSED CONSIDERING THAT
IT LACKED THE REQUISITE VERIFICATION AND CERTIFICATION
AGAINST FORUM SHOPPING REQUIRED BY THE RULES OF COURT;
OR
B. AT THE VERY LEAST, THE SAID PETITION FOR CERTIORARI FILED
BY RESPONDENT CARO SHOULD HAVE BEEN CONSIDERED MOOT
SINCE RESPONDENT CARO HAD ALREADY PREVIOUSLY EXECUTED
A QUITCLAIM DISCHARGING THE PETITIONERS FROM ALL HIS
MONETARY CLAIMS.
II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED
QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT, CONSIDERING THAT:
A. THE COURT OF APPEALS REVERSED THE DECISION DATED 31
MAY 2006 OF THE NLRC ON THE GROUND THAT THERE WAS GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION NOTWITHSTANDING THE FACT THAT IT AFFIRMED
THE NLRCS FINDINGS THAT RESPONDENT CARO DELIBERATELY
DISOBEYED PETITIONER MIRANTS ANTI-DRUGS POLICY.
B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN SUSTAINED
BY THE COURT OF APPEALS GIVEN ITS POSITIVE FINDING THAT
RESPONDENT CARO DELIBERATELY AND WILLFULLY DISOBEYED
PETITIONER MIRANTS ANTI-DRUGS POLICY.
C. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT
OF APPEALS SUBSTITUTED WITH ITS OWN DISCRETION A CLEAR
MANAGEMENT PREROGATIVE BELONGING ONLY TO PETITIONER
MIRANT IN THE INSTANT CASE.
D. THE WILLFUL AND DELIBERATE VIOLATION OF PETITIONER
MIRANTS ANTI-DRUGS POLICY AGGRAVATED RESPONDENT
 CAROS WRONGFUL CONDUCT WHICH JUSTIFIED HIS
TERMINATION.
E. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT
OF APPEALS, IN EFFECT, BELITTLED THE IMPORTANCE AND
SERIOUSNESS OF PETITIONER MIRANTS ANTI-DRUGS POLICY AND
CONSEQUENTLY HAMPERED THE EFFECTIVE IMPLEMENTATION OF
THE SAME.
F. THE EXISTENCE OF OTHER GROUNDS FOR CAROS DISMISSAL,
SUCH AS WILLFUL DISOBEDIENCE AND [LOSS] OF TRUST AND
CONFIDENCE, JUSTIFIED HIS TERMINATION FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL ASSISTANCE IN FAVOR OF
RESPONDENT CARO IS NOT WARRANTED CONSIDERING THAT RESPONDENT
CAROS WILLFUL AND DELIBERATE REFUSAL TO SUBJECT HIMSELF TO
PETITIONER MIRANTS DRUG TEST AND HIS SUBSEQUENT EFFORTS TO
CONCEAL THE SAME SHOWS HIS DEPRAVED MORAL CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT HELD
PETITIONER BAUTISTA PERSONALLY LIABLE FOR [RESPONDENT] CAROS
UNFOUNDED CLAIMS CONSIDERING THAT, ASIDE FROM RESPONDENT
CAROS DISMISSAL BEING LAWFUL, PETITIONER BAUTISTA MERELY ACTED
WITHIN THE SCOPE OF HIS FUNCTIONS IN GOOD FAITH. 44
We shall first rule on the issue raised by petitioners that the petition for certiorari filed by
respondent with the CA should have been summarily dismissed as it lacked the requisite
verification and certification against forum shopping under Sections 4 and 5, Rule 7 of
the Rules, viz.:
SEC. 4. Verification. Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verified which contains a verification based on "information
and belief," or upon "knowledge, information and belief," or lacks a proper verification,
shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for relief,
or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or noncompliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions.
It is the contention of petitioners that due to respondents failure to subscribe the
Verification and Certification of Non-Forum Shopping before a Notary Public, the said
verification and certification cannot be considered to have been made under oath.
Accordingly, such omission is fatal to the entire petition for not being properly verified
and certified. The CA therefore erred when it did not dismiss the petition.
This jurisdiction has adopted in the field of labor protection a liberal stance towards the
construction of the rules of procedure in order to serve the ends of substantial justice.
This liberal construction in labor law emanates from the mandate that the workingmans
welfare should be the primordial and paramount consideration. 45 Thus, if the rules of
procedure will stunt courts from fulfilling this mandate, the rules of procedure shall be
relaxed if the circumstances of a case warrant the exercise of such liberality. If we sustain
the argument of petitioners in the case at bar that the petition for certiorari should have
been dismissed outright by the CA, the NLRC decision would have reached finality and
respondent would have lost his remedy and denied his right to be protected against illegal
dismissal under the Labor Code, as amended.
It is beyond debate that petitioner corporations enforcement of its Anti-Drugs Policy is
an exercise of its management prerogative. It is also a conceded fact that respondent
"failed" to take the random drug test as scheduled, and under the said company policy,
such failure metes the penalty of termination for the first offense. A plain, simple and
literal application of the said policy to the omission of respondent would have warranted
his outright dismissal from employment if the facts were that simple in the case at bar.
Beyond debate the facts of this case are not and this disables the Court from
permitting a straight application of an otherwise prima facie straightforward rule if the
ends of substantial justice have to be served.
It is the crux of petitioners argument that respondents omission amounted to "unjust
refusal" because he could not sufficiently support with convincing proof and evidence his
defenses for failing to take the random drug test. For petitioners, the inconsistencies in
respondents explanations likewise operated to cast doubt on his real reasons and motives
for not submitting to the random drug test on schedule. In recognition of these
inconsistencies and the lack of convincing proof from the point of view of petitioners, the
NLRC reversed the decision of the Labor Arbiter. The CA found the ruling of the Labor
Arbiter to be more in accord with the facts, law and existing jurisprudence.
We agree with the disposition of the appellate court that there was illegal dismissal in the
case at bar.
While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is
recognized as a valid exercise of its management prerogative as an employer, such
exercise is not absolute and unbridled. Managerial prerogatives are subject to limitations
provided by law, collective bargaining agreements, and the general principles of fair play
and justice.46 In the exercise of its management prerogative, an employer must therefore
ensure that the policies, rules and regulations on work-related activities of the employees
must always be fair and reasonable and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction. 47 The Anti-
Drugs Policy of Mirant fell short of these requirements.
Petitioner corporations subject Anti-Drugs Policy fell short of being fair and reasonable.
First. The policy was not clear on what constitutes "unjustified refusal" when the subject
drug policy prescribed that an employees "unjustified refusal" to submit to a random
drug test shall be punishable by the penalty of termination for the first offense. To be
sure, the term "unjustified refusal" could not possibly cover all forms of "refusal" as the
employees resistance, to be punishable by termination, must be "unjustified." To the
mind of the Court, it is on this area where petitioner corporation had fallen short of
making it clear to its employees as well as to management as to what types of acts
would fall under the purview of "unjustified refusal." Even petitioner corporations own
Investigating Panel recognized this ambiguity, viz.:
The Panel also recommends that Management review the Mirant Drug Policy specifically
"Unjustified [R]efusal to submit to random drug testing." The Panel believes that the term
"refusal" casts certain ambiguities and should be clearly defined.48
The fact that petitioner corporations own Investigating Panel and its Vice President for
Operations, Sliman, differed in their recommendations regarding respondents case are
first-hand proof that there, indeed, is ambiguity in the interpretation and application of
the subject drug policy. The fact that petitioner corporations own personnel had to
dissect the intended meaning of "unjustified refusal" is further proof that it is not clear on
what context the term "unjustified refusal" applies to. It is therefore not a surprise that the
Labor Arbiter, the NLRC and the CA have perceived the term "unjustified refusal" on
different prisms due to the lack of parameters as to what comes under its purview. To be
sure, the fact that the courts and entities involved in this case had to engage in semantics
and come up with different constructions is yet another glaring proof that the subject
policy is not clear creating doubt that respondents dismissal was a result of petitioner
corporations valid exercise of its management prerogative.
It is not a mere jurisprudential principle, but an enshrined provision of law, that all doubts
shall be resolved in favor of labor. Thus, in Article 4 of the Labor Code, as amended,
"[a]ll doubts in the implementation and interpretation of the provisions of [the Labor]
Code, including its implementing rules and regulations, shall be resolved in favor of
labor." In Article 1702 of the New Civil Code, a similar provision states that "[i]n case of
doubt, all labor legislation and all labor contracts shall be construed in favor of the safety
and decent living for the laborer." Applying these provisions of law to the circumstances
in the case at bar, it is not fair for this Court to allow an ambiguous policy to prejudice
the rights of an employee against illegal dismissal. To hold otherwise and sustain the
stance of petitioner corporation would be to adopt an interpretation that goes against the
very grain of labor protection in this jurisdiction. As correctly stated by the Labor Arbiter,
"when a conflicting interest of labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be counter-balanced by the sympathy and
compassion the law must accord the underprivileged worker." 49
Second. The penalty of termination imposed by petitioner corporation upon respondent
fell short of being reasonable. Company policies and regulations are generally valid and
binding between the employer and the employee unless shown to be grossly oppressive
or contrary to law50 as in the case at bar. Recognizing the ambiguity in the subject
policy, the CA was more inclined to adopt the recommendation of petitioner corporations
own Investigating Panel over that of Sliman and the NLRC. The appellate court
succinctly but incisively pointed out, viz.:
x x x We find, as correctly pointed out by the investigating panel, that the [petitioner
corporations] Anti-Drug Policy is excessive in terminating an employee for his
"unjustified refusal" to subject himself to the random drug test on first offense, without
clearly defining what amounts to an "unjustified refusal."
Thus, We find that the recommended four (4) working weeks suspension without pay as
the reasonable penalty to be imposed on [respondent] for his disobedience. x x
x51 (Additional emphasis supplied.)
To be sure, the unreasonableness of the penalty of termination as imposed in this case is
further highlighted by a fact admitted by petitioner corporation itself: that for the ten-year
period that respondent had been employed by petitioner corporation, he did not have any
record of a violation of its company policies.
As to the other issue relentlessly being raised by petitioner corporation that respondents
petition for certiorari before the CA should have been considered moot as respondent had
already previously executed a quitclaim discharging petitioner corporation from all his
monetary claims, we cannot agree. Quitclaims executed by laborers are ineffective to bar
claims for the full measure of their legal rights, 52 especially in this case where the
evidence on record shows that the amount stated in the quitclaim exactly corresponds to
the amount claimed as unpaid wages by respondent under Annex A 53 of his Reply54 filed
with the Labor Arbiter. Prima facie, this creates a false impression that respondents
claims have already been settled by petitioner corporation discharging the latter from
all of respondents monetary claims. In truth and in fact, however, the amount paid under
the subject quitclaim represented the salaries of respondent that remained unpaid at the
time of his termination not the amounts being claimed in the case at bar.
We believe that this issue was extensively discussed by both the Labor Arbiter and the
CA and we find no reversible error on the disposition of this issue, viz.:
A review of the records show that the alluded quitclaim, which was undated and not even
notarized although signed by the petitioner, was for the amount of P59,630.05. The said
quitclaim was attached as Annex 26 in the [petitioners] Position Paper filed before the
Labor Arbiter. As fully explained by [respondent] in his Reply filed with the Labor
Arbiter, the amount stated therein was his last pay due to him when he was terminated,
not the amount representing his legitimate claims in this labor suit x x x. To bolster his
defense, [respondent] submitted the pay form issued to him by the [petitioner
corporation], showing his net pay at P59,630.05 exactly the amount stated in the
quitclaim x x x. Then, too, as stated on the quitclaim itself, the intention of the waiver
executed by the [respondent] was to release [petitioner corporation] from any liability
only on the said amount representing [respondents] "full and final payment of [his] last
salary/separation pay" x x x. It did not in any way waive [respondents] right to pursue
his legitimate claims regarding his dismissal in a labor suit. Thus, We gave no credence to
[petitioners] private defense that alleged quitclaim rendered the instant petition moot. 55
Finally, the petition avers that petitioner Bautista should not be held personally liable for
respondents dismissal as he acted in good faith and within the scope of his official
functions as then president of petitioner corporation. We agree with
petitioners.1wphi1 Both decisions of the Labor Arbiter and the CA did not discuss the
basis of the personal liability of petitioner Bautista, and yet the dispositive portion of the
decision of the Labor Arbiter - which was affirmed by the appellate court - held him
jointly and severally liable with petitioner corporation, viz.:
WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal
dismissal, and hereby ordered to jointly and severally reinstate complainant back to his
former position without loss on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was illegally dismissed up to the time he is
actually reinstated, partially computed as of this date in the amount of P258,797.50
(P39,815.00 x 6.5 mos.) plus his 13th and 14th month pay in the amount of P43,132.91 or
in the total amount of P301,930.41. Respondents are also ordered to pay complainant the
amount of P3,000,000.00 as and by way of moral and exemplary damages, and to pay
complainant the amount equivalent to ten percent (10%) of the total awards as and by
way of attorney's fees.
SO ORDERED.56 (Emphasis supplied.)
A corporation has a personality separate and distinct from its officers and board of
directors who may only be held personally liable for damages if it is proven that they
acted with malice or bad faith in the dismissal of an employee. 57 Absent any evidence on
record that petitioner Bautista acted maliciously or in bad faith in effecting the
termination of respondent, plus the apparent lack of allegation in the pleadings of
respondent that petitioner Bautista acted in such manner, the doctrine of corporate fiction
dictates that only petitioner corporation should be held liable for the illegal dismissal of
respondent.
WHEREFORE, the petition for review on certiorari is DENIED. The assailed Decision
dated June 26, 2007 and the Resolution dated January 11, 2008 in CA-G.R. SP No. 96153
are AFFIRMED with the MODIFICATION that only petitioner corporation is found
GUILTY of the illegal dismissal of respondent Joselito A. Caro. Petitioner Edgardo A.
Bautista is not held personally liable as then President of petitioner corporation at the
time of the illegal dismissal.
No pronouncement as to costs.
SO ORDERED.
DECISION
MENDOZA, J.:
Petitioners, by way of this petition for review on certiorari under Rule 45, seek to annul
and set aside the December 23, 2008 Decision 1 of the Court of Appeals (CA) in CA-G.R.
SP No. 100015, which reversed and set aside the December 29, 2006 Resolution 2 of the
National Labor Relations Commission (NLRC). The NLRC Resolution, in turn, reversed
and set aside the June 15, 2006 Decision3 of the Labor Arbiter (LA).4

THE FACTS

Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and
existing under the laws of the Republic of the Philippines and registered with the
Philippine Economic Zone Authority. Petitioner Winfried
Hartmannshenn (Hartmannshenn), a German national, is its president, in which capacity
he determines the administration and direction of the day-to-day business affairs of SHS.
Petitioner Hinrich Johann Schumacher (Schumacher), also a German national, is the
treasurer and one of the board directors. As such, he is authorized to pay all bills,
payrolls, and other just debts of SHS of whatever nature upon maturity. Schumacher is
also the Executive Vice-President of the European Chamber of Commerce of the
Philippines (ECCP) which is a separate entity from SHS. Both entities have an
arrangement where ECCP handles the payroll requirements of SHS to simplify business
operations and minimize operational expenses. Thus, the wages of SHS employees are
paid out by ECCP, through its Accounting Services Department headed by Juliet
Taguiang (Taguiang).

Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business
Development on probationary status from July 18, 2005 to January 18, 2006, with a
monthly salary of P100,000.00. Respondents duties, responsibilities, and work hours
were described in the Contract of Probationary Employment,5 as reproduced below:

NAME : Jose Manuel F. Diaz

G.R. No. 185814 October 13, 2010 TITLE/STATUS : Manager for Business Development
LOCATION : Lot C3-2A, Phase I, Camelray
SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, and Industrial Park II, Calamba, Laguna
HINRICH JOHANN SCHUMACHER, Petitioners,
REPORTS TO : Direct to Mr. Winfried
vs.
Hartmannshenn
MANUEL F. DIAZ, Respondent.
Normal Working Hours : 8:00 a.m. to 5:00
subject to requirements of the job
OVERTIME : ________________________
JOB DESCRIPTION AND RESPONSIBILITIES:
DAILY/GENERAL DUTIES:
(a) Represent the company in any event organized by PEZA;
(b) Perform sales/marketing functions;
(c) Monitor/follow-up customers inquiry on EMPLOYERs services;
(d) Monitor on-going job orders/projects;
(e) Submit requirements as needed in application/renewal of necessary
permits;
(f) Liaise closely with the other commercial and technical staff of the
company;
(g) Accomplish PEZA documents/requirements for every sales made;
with legal assistance where necessary at EMPLOYERs expense; and
(h) Perform other related duties and responsibilities.
OTHER RESPONSIBILITIES:
(a) abide by and perform to the best of his abilities all functions, duties
and responsibilities to be assigned by the EMPLOYER in due course;
(b) comply with the orders and instructions given from time to time by
the EMPLOYER, INC. through its authorized representatives;
(c) will not disclose any confidential information in respect of the
affairs of the EMPLOYER to any unauthorized person;
p.m. (d) perform any other administrative or non-administrative duties, as
assigned by any of the EMPLOYERs representative from time to time
either through direct written order or by verbal assignment. The
EMPLOYER may take into account EMPLOYEEs training and
expertise when assigning additional tasks.
AGREED:
(sgd. Manuel Diaz).
In addition to the above-mentioned responsibilities, respondent was also instructed by
Hartmannshenn to report to the SHS office and plant at least two (2) days every work
week to observe technical processes involved in the manufacturing of perforated
materials, and to learn about the products of the company, which respondent was hired to
market and sell.
During respondents employment, Hartmannshenn was often abroad and, because of
business exigencies, his instructions to respondent were either sent by electronic mail or
relayed through telephone or mobile phone. When he would be in the Philippines, he and
the respondent held meetings. As to respondents work, there was no close supervision by
him.
During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over
respondents poor performance. Respondent allegedly failed to make any concrete
business proposal or implement any specific measure to improve the productivity of the
SHS office and plant or deliver sales except for a meagre P2,500.00 for a sample product.
In numerous electronic mail messages, respondent acknowledged his poor performance
and offered to resign from the company.
Respondent, however, denied sending such messages but admitted that he had reported to
the SHS office and plant only eight (8) times from July 18, 2005 to November 30, 2005.
On November 16, 2005, in preparation for his trip to the Philippines, Hartmannshenn
tried to call respondent on his mobile phone, but the latter failed to answer. On November
18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on November 22
and 24, 2005, notified respondent of his arrival through electronic mail messages and
advised him to get in touch with him. Respondent claimed that he never received the
messages.
On November 29, 2005, Hartmannshenn instructed Taguiang not to release respondents
salary. Later that afternoon, respondent called and inquired about his salary. Taguiang
informed him that it was being withheld and that he had to immediately communicate
with Hartmannshenn. Again, respondent denied having received such directive.
The next day, on November 30, 2005, respondent served on SHS a demand letter and a
resignation letter. The resignation letter reads:
This is to tender my irrevocable resignation from SHS Perforated Materials, Inc,
Philippines, effective immediately upon receipt of my due and demandable salary for the
period covering November 16 to 30, 2005, which has yet been unpaid and is still
currently being withheld albeit illegally. This covers and amounts to the sum of
Php50,000.00 pesos net of all taxes. As my employment contract clearly shows I receive
a monthly salary of Php100,000.00 net of all taxes.
It is precisely because of illegal and unfair labor practices such as these that I offer my
resignation with neither regret nor remorse.6
In the evening of the same day, November 30, 2005, respondent met with Hartmannshenn
in Alabang. The latter told him that he was extremely disappointed for the following
reasons: his poor work performance; his unauthorized leave and malingering from
November 16 to November 30, 2005; and failure to immediately meet Hartmannshenn
upon his arrival from Germany.
Petitioners averred that respondent was unable to give a proper explanation for his
behavior. Hartmannshenn then accepted respondents resignation and informed him that
his salary would be released upon explanation of his failure to report to work, and proof
that he did, in fact, work for the period in question. He demanded that respondent
surrender all company property and information in his possession. Respondent agreed to
these "exit" conditions through electronic mail. Instead of complying with the said
conditions, however, respondent sent another electronic mail message to Hartmannshenn
and Schumacher on December 1, 2005, appealing for the release of his salary.
Respondent, on the other hand, claimed that the meeting with Hartmannshenn took place
in the evening of December 1, 2005, at which meeting the latter insulted him and rudely
demanded that he accept P25,000.00 instead of his accrued wage and stop working for
SHS, which demands he refused. Later that same night, he sent Hartmannshenn and
Schumacher an electronic mail message appealing for the release of his salary. Another
demand letter for respondents accrued salary for November 16 to November 30, 2005,
13th month pay, moral and exemplary damages, and attorneys fees was sent on
December 2, 2005.
To settle the issue amicably, petitioners counsel advised respondents counsel by
telephone that a check had been prepared in the amount of P50,000.00, and was ready for
pick-up on December 5, 2005. On the same date, a copy of the formal reply letter relating
to the prepared payment was sent to the respondents counsel by facsimile transmission.
Despite being informed of this, respondent never picked up the check.
Respondent countered that his counsel received petitioners formal reply letter only on
December 20, 2005, stating that his salary would be released subsequent to the turn-over
of all materials owned by the company in his possession. Respondent claimed that the
only thing in his possession was a sample panels folder which he had already returned
and which was duly received by Taguiang on November 30, 2005.
On December 9, 2005, respondent filed a Complaint 7 against the petitioners for illegal
dismissal; non-payment of salaries/wages and 13th month pay with prayer for
reinstatement and full backwages; exemplary damages, and attorneys fees, costs of suit,
and legal interest.
THE RULING OF THE LABOR ARBITER
On June 15, 2006, the LA rendered his decision, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainant
as having been illegally dismissed and further ordering his immediate reinstatement
without loss of seniority rights and benefits. It is also ordered that complainant be
deemed as a regular employee. Accordingly, respondents are hereby ordered to jointly
and severally pay complainant the following
1. P704,166.67 (P100,000.00 x 6.5 + (P100,000.00 x 6.5/12) as backwages;
2. P50,000.00 as unpaid wages;
 3. P37,083.33 as unpaid 13th month pay
4. P200,000.00 as moral and exemplary damages;
5. P99,125.00 as attorneys fees.
SO ORDERED.8
The LA found that respondent was constructively dismissed because the withholding of
his salary was contrary to Article 116 of the Labor Code as it was not one of the
exceptions for allowable wage deduction by the employer under Article 113 of the Labor
Code. He had no other alternative but to resign because he could not be expected to
continue working for an employer who withheld wages without valid cause. The LA also
held that respondents probationary employment was deemed regularized because
petitioners failed to conduct a prior evaluation of his performance and to give notice two
days prior to his termination as required by the Probationary Contract of Employment
and Article 281 of the Labor Code. Petitioners contention that they lost trust and
confidence in respondent as a managerial employee was not given credence for lack of
notice to explain the supposed loss of trust and confidence and absence of an evaluation
of respondents performance.
The LA believed that the respondent complied with the obligations in his contract as
evidenced by his electronic mail messages to petitioners. He ruled that petitioners are
jointly and severally liable to respondent for backwages including 13th month pay as
there was no showing in the salary vouchers presented that such was integrated in the
salary; for moral and exemplary damages for having in bad faith harassed respondent into
resigning; and for attorneys fees.
THE RULING OF THE NLRC
On appeal, the NLRC reversed the decision of the LA in its December 29, 2006
Resolution, the dispositive portion of which reads:
WHEREFORE, premises considered, the appeal is hereby GRANTED.
The Decision dated June 15, 2006 is hereby REVERSED and SET ASIDE and a new one
is hereby entered:
(1) dismissing the complaint for illegal dismissal for want of merit;
(2) dismissing the claims for 13th month pay, moral and exemplary damages
and attorneys fees for lack of factual and legal basis; and
(3) ordering respondents to pay the complainants unpaid salary for the period
covering November 16-30, 2005 in the amount of FIFTY THOUSAND PESOS
(Php 50,000.00).
SO ORDERED.9
The NLRC explained that the withholding of respondents salary was a valid exercise of
management prerogative. The act was deemed justified as it was reasonable to demand an
explanation for failure to report to work and to account for his work accomplishments.
The NLRC held that the respondent voluntarily resigned as evidenced by the language
used in his resignation letter and demand letters. Given his professional and educational
background, the letters showed respondents resolve to sever the employer-employee
relationship, and his understanding of the import of his words and their consequences.
Consequently, respondent could not have been regularized having voluntarily resigned
prior to the completion of the probationary period. The NLRC further noted that
respondents 13th month pay was already integrated in his salary in accordance with his
Probationary Contract of Employment and, therefore, no additional amount should be due
him.
On January 25, 2007, respondent filed a motion for reconsideration but the NLRC
subsequently denied it for lack of merit in its May 23, 2007 Resolution.
THE RULING OF THE COURT OF APPEALS
The CA reversed the NLRC resolutions in its December 23, 2008 Decision, the
dispositive portion of said decision reads:
WHEREFORE, premises considered, the herein petition is GRANTED and the 29
December 2006 Resolution of the NLRC in NLRC CN RAB-IV-12-21758-05-L, and the
23 May 2007 Resolution denying petitioners Motion for Reconsideration, are
REVERSED and SET ASIDE. Accordingly, a new judgment is hereby entered in that
petitioner is hereby awarded separation pay equivalent to at least one month pay, and his
full backwages, other privileges and benefits, or their monetary equivalent during the
period of his dismissal up to his supposed actual reinstatement by the Labor Arbiter on 15
June 2006.
SO ORDERED.10
Contrary to the NLRC ruling, the CA held that withholding respondents salary was not a
valid exercise of management prerogative as there is no such thing as a management
prerogative to withhold wages temporarily. Petitioners averments of respondents failure
to report to work were found to be unsubstantiated allegations not corroborated by any
other evidence, insufficient to justify said withholding and lacking in probative value.
The malicious withholding of respondents salary made it impossible or unacceptable for
respondent to continue working, thus, compelling him to resign. The respondents
immediate filing of a complaint for illegal dismissal could only mean that his resignation
was not voluntary. As a probationary employee entitled to security of tenure, respondent
was illegally dismissed. The CA ruled out actual reinstatement, however, reasoning out
that antagonism had caused a severe strain in their relationship. It was of the view that
separation pay equivalent to at least one month pay would be a more equitable
disposition.
THE ISSUES
Aggrieved, the petitioners come to this Court praying for the reversal and setting aside of
the subject CA decision presenting the following
ISSUES
I The resolution of these issues is dependent on whether or not respondent was
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
NOT AFFIRMING THE DECISION OF THE NLRC, WHICH WAS BASED ON
SUBSTANTIAL EVIDENCE.
II
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
NOT AFFIRMING THE NLRCS HOLDING THAT PETITIONERS WITHHOLDING
OF RESPONDENTS SALARY FOR THE PAYROLL PERIOD NOVEMBER 16-30,
2005 IN VIEW OF RESPONDENTS FAILURE TO RENDER ACTUAL WORK FOR
SAID PAYROLL PERIOD WAS A VALID EXERCISE OF MANAGEMENT
PREROGATIVE.
III
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
AFFIRMING THE LABOR ARBITERS FINDING THAT RESPONDENT HAD BEEN
CONSTRUCTIVELY DISMISSED.
IV
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
AWARDING RESPONDENT SEPARATION PAY EQUIVALENT TO AT LEAST ONE
MONTH PAY IN LIEU OF REINSTATEMENT, FULL BACKWAGES, AND OTHER
PRIVILEGES AND BENEFITS, OR THEIR MONETARY EQUIVALENT IN VIEW OF
THE FACT THAT RESPONDENT VOLUNTARILY RESIGNED FROM PETITIONER
SHS AND WAS NOT ILLEGALLY DISMISSED.
V
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
NOT HOLDING THAT INDIVIDUAL PETITIONERS HARTMANNSHENN AND
SCHUMACHER MAY NOT BE HELD SOLIDARILY AND PERSONALLY LIABLE
WITH PETITIONER SHS FOR THE PAYMENT OF THE MONETARY AWARD TO
RESPONDENT.
constructively dismissed by petitioners, which determination is, in turn, hinged on
finding out (i) whether or not the temporary withholding of respondents salary/wages by
petitioners was a valid exercise of management prerogative; and (ii) whether or not
respondent voluntarily resigned.
THE COURTS RULING
As a rule, the factual findings of the courts below are conclusive in a petition for review
on certiorari where only errors of law should be reviewed. The case, however, is an
exception because the factual findings of the CA and the LA are contradictory to that of
the NLRC. Thus, a review of the records is necessary to resolve the factual issues
involved and render substantial justice to the parties. 11
Petitioners contend that withholding respondents salary from November 16 to November
30, 2005, was justified because respondent was absent and did not show up for work
during that period. He also failed to account for his whereabouts and work
accomplishments during said period. When there is an issue as to whether an employee
has, in fact, worked and is entitled to his salary, it is within management prerogative to
temporarily withhold an employees salary/wages pending determination of whether or
not such employee did indeed work.
We disagree with petitioners.
Management prerogative refers "to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall of work." 12 Although management
prerogative refers to "the right to regulate all aspects of employment," it cannot be
understood to include the right to temporarily withhold salary/wages without the consent
of the employee. To sanction such an interpretation would be contrary to Article 116 of
the Labor Code, which provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or
induce him to give up any part of his wages by force, stealth, intimidation, threat or by
any other means whatsoever without the workers consent.
Any withholding of an employees wages by an employer may only be allowed in the
form of wage deductions under the circumstances provided in Article 113 of the Labor
Code, as set forth below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-
off has been recognized by the employer or authorized in writing by the
individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by
the Secretary of Labor.
As correctly pointed out by the LA, "absent a showing that the withholding of
complainants wages falls under the exceptions provided in Article 113, the withholding
thereof is thus unlawful."13
Petitioners argue that Article 116 of the Labor Code only applies if it is established that
an employee is entitled to his salary/wages and, hence, does not apply in cases where
there is an issue or uncertainty as to whether an employee has worked and is entitled to
his salary/wages, in consonance with the principle of "a fair days wage for a fair days
work." Petitioners contend that in this case there was precisely an issue as to whether
respondent was entitled to his salary because he failed to report to work and to account
for his whereabouts and work accomplishments during the period in question.
To substantiate their claim, petitioners presented hard copies of the electronic mail
messages14 sent to respondent on November 22 and 24, 2005, directing the latter to
contact Hartmannshenn; the Affidavit15 of Taguiang stating that she advised respondent
on or about November 29, 2005 to immediately communicate with Mr. Hartmannshenn at
the SHS office; Hartmannshenns Counter-Affidavit 16 stating that he exerted earnest
efforts to contact respondent through mobile phone; Schumachers Counter-
Affidavit17 stating that respondent had not filed any request for official leave; and
respondents admission in his Position Paper 18 that he found it absurd to report to the SHS
plant when only security guards and machinists were present.
Respondent, on the other hand, presented reports 19 prepared by him and submitted to
Hartmannshenn on November 18 and 25, 2005; a receipt 20 issued to him by Taguiang for
a clients payment during the subject period; and eight notarized letters 21 of prospective
clients vouching for meetings they had with the respondent during the subject period.
The Court finds petitioners evidence insufficient to prove that respondent did not work
from November 16 to November 30, 2005. As can be gleaned from respondents Contract
of Probationary Employment and the exchanges of electronic mail messages 22 between
Hartmannshenn and respondent, the latters duties as manager for business development
entailed cultivating business ties, connections, and clients in order to make sales. Such
duties called for meetings with prospective clients outside the office rather than reporting
for work on a regular schedule. In other words, the nature of respondents job did not
allow close supervision and monitoring by petitioners. Neither was there any prescribed
daily monitoring procedure established by petitioners to ensure that respondent was doing
his job. Therefore, granting that respondent failed to answer Hartmannshenns mobile
calls and to reply to two electronic mail messages and given the fact that he admittedly
failed to report to work at the SHS plant twice each week during the subject period, such
cannot be taken to signify that he did not work from November 16 to November 30,
2005.
Furthermore, the electronic mail reports sent to Hartmannshenn and the receipt presented
by respondent as evidence of his having worked during the subject period were not
controverted by petitioners. The eight notarized letters of prospective clients vouching for
meetings they had with respondent during the subject period may also be given credence.
Although respondent only presented such letters in support of his Motion for
Reconsideration filed with the NLRC, they may be considered by this Court in light of
Section 10, Rule VII, of the 2005 New Rules of Procedure of the NLRC, which provides
in part that "the rules of procedure and evidence prevailing in courts of law and equity
shall not be controlling and the Commission shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively, without regard to technicalities
of law or procedure, all in the interest of due process." While administrative tribunals
exercising quasi-judicial functions are free from the rigidity of certain procedural
requirements, they are bound by law and practice to observe the fundamental and
essential requirements of due process in justiciable cases presented before them. 23 In this
case, due process was afforded petitioners as respondent filed with the NLRC a Motion to
Set Case for Reception of Additional Evidence as regards the said letters, which
petitioners had the opportunity to, and did, oppose.
Although it cannot be determined with certainty whether respondent worked for the entire
period from November 16 to November 30, 2005, the consistent rule is that if doubt
exists between the evidence presented by the employer and that by the employee, the
scales of justice must be tilted in favor of the latter 24 in line with the policy mandated by
Articles 2 and 3 of the Labor Code to afford protection to labor and construe doubts in
favor of labor. For petitioners failure to satisfy their burden of proof, respondent is
presumed to have worked during the period in question and is, accordingly, entitled to his
salary. Therefore, the withholding of respondents salary by petitioners is contrary to
Article 116 of the Labor Code and, thus, unlawful.
Petitioners contend that respondent could not have been constructively dismissed because
he voluntarily resigned as evidenced by his resignation letter. They assert that respondent
was not forced to draft the letter and his intention to resign is clear from the contents and
terms used, and that given respondents professional and educational background, he was
fully aware of the import and consequences of the said letter. They maintain that
respondent resigned to save face and avoid disciplinary measures due to his allegedly
dismal work performance and failure to report to work.
The Court, however, agrees with the LA and the CA that respondent was forced to resign
and was, thus, constructively dismissed. In Duldulao v. Court of Appeals, it was written:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain
by an employer becomes so unbearable on the part of the employee that it would
foreclose any choice by him except to forego his continued employment. It exists where
there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in
pay. 25
What made it impossible, unreasonable or unlikely for respondent to continue working
for SHS was the unlawful withholding of his salary. For said reason, he was forced to
resign. It is of no moment that he served his resignation letter on November 30, 2005, the
last day of the payroll period and a non-working holiday, since his salary was already due
him on November 29, 2005, being the last working day of said period. In fact, he was
then informed that the wages of all the other SHS employees were already released, and
only his was being withheld. What is significant is that the respondent prepared and
served his resignation letter right after he was informed that his salary was being
withheld. It would be absurd to require respondent to tolerate the unlawful withholding of
his salary for a longer period before his employment can be considered as so impossible,
unreasonable or unlikely as to constitute constructive dismissal. Even granting that the
withholding of respondents salary on November 30, 2005, would not constitute an
unlawful act, the continued refusal to release his salary after the payroll period was
clearly unlawful. The petitioners claim that they prepared the check ready for pick-up
cannot undo the unlawful withholding.
It is worthy to note that in his resignation letter, respondent cited petitioners "illegal and
unfair labor practice"26as his cause for resignation. As correctly noted by the CA,
respondent lost no time in submitting his resignation letter and eventually filing a
complaint for illegal dismissal just a few days after his salary was withheld. These
circumstances are inconsistent with voluntary resignation and bolster the finding of
constructive dismissal.
Petitioners cite the case of Solas v. Power & Telephone Supply Phils., Inc.27 to support
their contention that the mere withholding of an employees salary does not by itself
constitute constructive dismissal. Petitioners are mistaken in anchoring their argument on
said case, where the withholding of the salary was deemed lawful. In the above-cited
case, the employees salary was withheld for a valid reason - it was applied as partial
payment of a debt due to the employer, for withholding taxes on his income and for his
absence without leave. The partial payment of a debt due to the employer and the
withholding of taxes on income were valid deductions under Article 113 paragraph (c) of
the Labor Code. The deduction from an employees salary for a due and demandable debt
to an employer was likewise sanctioned under Article 1706 of the Civil Code. As to the
withholding for income tax purposes, it was prescribed by the National Internal Revenue
Code. Moreover, the employee therein was indeed absent without leave.
In this case, the withholding of respondents salary does not fall under any of the
circumstances provided under Article 113. Neither was it established with certainty that
respondent did not work from November 16 to November 30, 2005. Hence, the Court
agrees with the LA and the CA that the unlawful withholding of respondents salary
amounts to constructive dismissal.
Respondent was constructively dismissed and, therefore, illegally
dismissed.1avvphi1 Although respondent was a probationary employee, he was still
entitled to security of tenure. Section 3 (2) Article 13 of the Constitution guarantees the
right of all workers to security of tenure. In using the expression "all workers," the
Constitution puts no distinction between a probationary and a permanent or regular
employee. This means that probationary employees cannot be dismissed except for cause
or for failure to qualify as regular employees.28
This Court has held that probationary employees who are unjustly dismissed during the
probationary period are entitled to reinstatement and payment of full backwages and
other benefits and privileges from the time they were dismissed up to their actual
reinstatement.29 Respondent is, thus, entitled to reinstatement without loss of seniority
rights and other privileges as well as to full backwages, inclusive of allowances, and
other benefits or their monetary equivalent computed from the time his compensation was
withheld up to the time of actual reinstatement. Respondent, however, is not entitled to
the additional amount for 13th month pay, as it is clearly provided in respondents
Probationary Contract of Employment that such is deemed included in his salary. Thus:
EMPLOYEE will be paid a net salary of One Hundred Thousand (Php100,000.00) Pesos
per month payable every 15th day and end of the month.
The compensation package defined in this paragraph shall represent all that is due and
demandable under this Contract and includes all benefits required by law such as the
13th month pay. No other benefits, bonus or allowance shall be due the employee. 30
(emphasis supplied)
Respondents reinstatement, however, is no longer feasible as antagonism has caused a
severe strain in their working relationship. Under the doctrine of strained relations, the
payment of separation pay is considered an acceptable alternative to reinstatement when
the latter option is no longer desirable or viable. Payment liberates the employee from
what could be a highly oppressive work environment, and at the same time releases the
employer from the obligation of keeping in its employ a worker it no longer trusts.
Therefore, a more equitable disposition would be an award of separation pay equivalent
to at least one month pay, in addition to his full backwages, allowances and other
benefits.31
With respect to the personal liability of Hartmannshenn and Schumacher, this Court has
held that corporate directors and officers are only solidarily liable with the corporation
for termination of employment of corporate employees if effected with malice or in bad
faith.32 Bad faith does not connote bad judgment or negligence; it imports dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of
unknown duty through some motive or interest or ill will; it partakes of the nature of
fraud.33 To sustain such a finding, there should be evidence on record that an officer or
director acted maliciously or in bad faith in terminating the employee. 34
Petitioners withheld respondents salary in the sincere belief that respondent did not work
for the period in question and was, therefore, not entitled to it. There was no dishonest
purpose or ill will involved as they believed there was a justifiable reason to withhold his
salary. Thus, although they unlawfully withheld respondents salary, it cannot be
concluded that such was made in bad faith. Accordingly, corporate officers,
Hartmannshenn and Schumacher, cannot be held personally liable for the corporate
obligations of SHS.
WHEREFORE, the assailed December 23, 2008 Decision of the Court of Appeals in
CA-G.R. SP No. 100015 is hereby AFFIRMED with MODIFICATION. The additional
amount for 13th month pay is deleted. Petitioners Winfried Hartmannshenn and Hinrich
Johann Schumacher are not solidarily liable with petitioner SHS Perforated Materials,
Inc.
SO ORDERED
G.R. No. 203005, March 14, 2016 cooperative's ability to grant regular loans to other members of the
cooperative.7 However, despite said board action, SILs were granted to Falgui and
TABUK MULTI-PURPOSE COOPERATIVE, INC. (TAMPCO), JOSEPHINE Kotoken over and above the ceiling set. This prompted the BOD to issue, on October 26,
DOCTOR, AND WILLIAM BAO-ANGAN, Petitioners, v. MAGDALENA 2003, BA No. 55 completely halting the grant of SILs pending collection of outstanding
DUCLAN, Respondent. loans.

DECISION Despite issuance of BA No. 55, however, additional SILs were granted to Falgui
amounting to P6,697,000.00 and to Kotoken amounting to P3.5 million. 8 Eventually,
DEL CASTILLO, J.: Falgui filed for insolvency while Kotoken failed to pay back her loans.

On February 23, 2004, TAMPCO indefinitely suspended respondent and other

An employee's willful and repeated disregard of a resolution issued by a cooperative's
cooperative officials pursuant to BA No. 73-03, and required them to replace the amount
board of directors (BOD) declaring a moratorium on the approval and release of loans,
of P6 million representing unpaid loans as of February 21, 2004. On March 6, 2004,
thus placing the resources of the cooperative and ultimately the hard-earned savings of its
respondent's suspension was fixed at 15 days, and she was ordered to return to work on
members in a precarious state, constitutes willful disobedience which justifies the penalty
March 15, 2004.
of dismissal under Article 282 of the Labor Code.

The TAMPCO BOD then created a fact-finding committee (committee) to investigate the
Assailed in this Petition for Review on Certiorari1 are: 1) the September 15, 2011
SIL fiasco.9Respondent and other TAMPCO employees were summoned to the
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 114753, which reversed and
proceedings and required to submit their respective answers to the committee. 10
set aside the November 25, 2009 Decision3 and April 8, 2010 Resolution4 of the National
Labor Relations Commission (NLRC) in NLRC CA-No. 050848-06 (RA-06-09); and 2)
Respondent submitted to the committee an October 21, 2004 letter,11 admitting that
the CA's July 11, 2012 Resolution5 denying reconsideration of its assailed Decision.
despite the issuance of BA No. 55, she and her co-respondents approved and released
SILs, and that she acknowledged responsibility therefor.
Factual Antecedents

After conducting hearings, the committee issued its Report on the Special Investment
Petitioner Tabuk Multi-Purpose Cooperative, Inc. (TAMPCO) is a duly registered
Loans,12 which states as follows:
cooperative based in Tabuk City, Kalinga. It is engaged in the business of obtaining
investments from its members which are lent out to qualified member-borrowers.
xxxx
Petitioner Josephine Doctor is TAMPCO Chairperson and member of the cooperative's
a. There are loan notes which do not contain the signature of the spouse of the borrower
BOD, while petitioner William, Bao-Angan is TAMPCO Chief Executive Officer.
as mandated under Chapter 10 of the Policy Manual. This is true in the loan notes of
Monica Oras, and Juliet Kotoken for her loan application sometime on [sic] January 12,
Respondent Magdalena Duclan was employed as TAMPCO Cashier on August 15, 1989,
2004;
In 2002, TAMPCO introduced Special Investment Loans (SILs) to its members and
prospective borrowers. Among those who availed themselves of the SILs were Brenda
b. Special loans were still granted even after the setting of the allowable ceiling on June
Falgui (Falgui) and Juliet Kotoken (Kotoken).6
28, 2003 (BA No. 28) and even after the Board of Directors stopped the granting of the
Special Investment Loan on October 26, 2003 (BA No. 55);
In June 2003, the TAMPCO BOD issued Board Action (BA) No. 28 which limited the
grant of SILs to P5 million and instructed management to collect outstanding loans and
c. Loans were released even there [sic] were lacking documents. The case of the SIL
thus reduce the amount of loans granted to allowable levels. This was prompted by a
granted for example to Mrs. Juliet Kotoken and Mrs. Brenda Falgui on January 12, 2004
cooperative report stating that too many SILs were being granted, the highest single
were released even without the required loan note. It was revealed that Mr. Peter Socalo
individual borrowing reached a staggering P14 million, which thus adversely affected the
prepared the voucher and Mrs. Aligo did the releasing of the amount upon the conformity
of Mrs. Magdalena Duclan. The loan notes were made and executed later after the loans of P1,500,000.00 [by] Dec. 31, 2004.
were also released;
[For failure] to collect or account/pay [by then she] shall be [dismissed] from service
d. Checks used to secure or postdated checks intended to pay the Special Investment with forfeiture of all benefits.
loans were not presented for payment at the time that they fall [sic] due;
She violated policies and Board actions, specially 28 and 55 in relation to the manual. 13.
e. Extension of the term of the loan were done through the substitution of the checks
On November 6, 2004. the BOD adopted the report of the committee and ordered that
without prior approval of the Board of Directors.
respondent be suspended from November 8 until December 31, 2004; respondent was
likewise directed to collect, within the said period, the unauthorized SIL releases she
All the above findings were not denied and in fact respondents CEO Rev. Ismael
made, otherwise she would be terminated from employment. 14
Sarmiento admitted the charge against him. "Mea Culpa" x x x he said[,] but at the same
time prayed for the Committee's and Board's understanding and compassion, Magdalena
Unable to collect or account for the P1.5 million as required, respondent was dismissed
Duclan and Fruto Singwey admitted [their fault under] command responsibility for the
from employment. Thus, in a February 1, 2005 communication, 15 TAMPCO wrote:
action of their subordinates.
.
Anent your letter dated January 26, 2005, reiterating your plea for a reconsideration of
All the other respondents invoked that they just [performed] their duties [or be charged
your suspension for the reason that you were suspended twice on different days for the
with] insubordination x x x.
commission of the same offense, the following quoted paragraph was lifted from lines
339 through 350 of the minutes of the regular meeting of the TAMPCO BOD held on
To the issue of the missing check which was raised by Mr. Dulawon in the previous
November 27, 2004, treating the matter of your concern for your information, to wit:
Board meetings, the committee heard again the side of the cashier [who] denied that tine
.
same is missing. Accordingly, the same was changed by Mrs. Brenda Falgui, or that a
"x x x CEO Sarmiento and Cashier Duclan [requested] reconsideration of their
substitute check was issued by Mrs. Falgui. She [had a] conflicting statement before the
suspension pointing out that they are being suspended twice for the same offense, The
Board when she stated that the amount belongs to Juliet's account.
Board denied the request, clarifying that the basis for the second suspension is the
discovery of the release of cash to the SIL recipient without first accomplishing the
CONCLUSION:
corresponding loan note and which action is. contrary to the established processes. It
was mentioned that such violation is punishable by outright dismissal but the policy was
There was indeed an error, mistake, negligence or abuse of discretion that transpired in
humanized with the imposition only of suspension to the violators to give them ample
the grant of the special investment loans, x x x [T]here are violations of the policies or
time to collect the unauthorized disbursement. x x x [The first] suspension was lifted
Board actions which should be dealt with[.] x x x.
because their services were urgently needed in the distribution of dividends and
patronage refunds. The Board decided to stand by its decision based on the
RECOMMENDATIONS:
recommendation of the fact-finding committee."
[For] failure to comply with the tasks required x x x within the effectivity period of your
AS TO THE ACCOUNTABILITY
suspension as set under Office Orders numbered 001-04 and 002-04, both dated
November 6, 2004, the Board, during its January 29, 2005 regular meeting, decided to
xxxx
terminate your services xxx effective as of the closing of office hours on February 1,
2005.
Mrs. Magdalena Duclan
Ruling of the Labor Arbiter

The committee recommended that she will be immediately suspended without pay and
for her to collect the SIL she [had] released even without the loan note and for her to
On July 12, 2005, respondent filed a complaint for illegal dismissal, with recovery of
account [for] or pay the missing value of the check bearing no. 00115533 in the amount
backwages; unpaid holiday pay; premium and 13th month pay; moral, exemplary and
actual damages; and attorney's fees, against respondents which was docketed in the
NLRC RAB, Cordillera Administrative Region, Bagiuo City as NLRC Case No. RAB-
CAR-07-Q344-05 (R-11-08).
On April 24, 2009, Labor Arbiter Monroe C, Tabingan issued a Decision 16 in the case,
decreeing as follows:
. 30 days; g) respondent was suspended twice for the same infraction; h) the February 1,
WHEREFORE, all premises duly considered, the respondent is hereby found to have
illegally suspended, then illegally dismissed the herein complainant. In view of the fact
that this decision was a collective act of the Board of Directors and Officers of the
respondent, they, as well as the respondent Cooperative, are hereby jointly and severally
held liable to pay to the complainant the following:
1. Her full backwages from the time of her illegal suspension beginning 24
February 2004 to 15 March 2004, and her illegal dismissal from 08 November
2004 to the finality of this Decision, with legal rate of interest thereon until fully
paid, currently computed at PhP1,188,283.30, subject to re-computation at the
time of the payment of said monetary claim;
xxxx
2. Her separation pay in lieu of reinstatement of one (1) month pay for every year
of service beginning at the time of her initial date of hiring, to the finality of this
decision, with legal rate of interest thereon until fully paid, currently computed
at PhP405,002.40, said interest subject to re-computation at the time of the
payment;
xxxx
3. Moral damages in the amount of PhP100,000.00 and exemplary damages in the
amount of PhP100,000.00;
4. Her attorney's fees of not less than ten (10%) per centum of the total monetary
award hereto awarded, currently computed at P159,329.07, subject to re-
computation at the time of payment.
SO ORDERED.17.
In ruling that respondent was illegally dismissed, the Labor Arbiter made the following
findings: a) respondent's first suspension was for an indefinite period, hence illegal; b)
respondent was not accorded the opportunity to explain her side before she was meted the
penalty of suspension; c) placing respondent on suspension and requiring her to
personally pay the loan is not the proper way to collect irregularly released loans; d)
although respondent's indefinite suspension was eventually reduced to 15 days, by that
time respondent was suspended for 20 days already; e) respondent was deprived of the
opportunity to explain her side when she was suspended the second time on November 8,
2004 to December 31, 2004; f) the second suspension was illegal because it was beyond
2005 letter informing respondent of her termination is redundant since respondent has
been deemed constructively dismissed as early as February 23, 2004 when she was
indefinitely suspended; i) as cashier, respondent's signing of the check before its release
is merely ministerial; she has no hand in the processing or approval of the loans; j)
TAMPCO had previously tolerated the practice of releasing loans ahead of the processing
of vouchers and board approval and during the prohibited period; and k) petitioners did
not terminate respondent's co-workers who were charged with committing the same
infraction.18
Ruling of the National Labor Relations Commission
Petitioners filed an appeal before the NLRC, which was docketed as NLRC CA-No.
050848-06 (RA-06-09). On November 25, 2009, the NLRC issued its
Decision19 containing the following pronouncement:
Anent respondent's first suspension, the NLRC noted that petitioners already modified
the period from being indefinite to only 15 days and that respondent was properly paid
her wages corresponding to said period of suspension. Thus, there was no need to discuss
the validity of said suspension. Regarding the second suspension from November 8 to
December 31, 2004, the NLRC found the same as illegal considering that it was imposed
as a penalty and not as a preventive suspension pending investigation of her
administrative liability. In fact, during her suspension, she was ordered to collect the loan
illegally released. However, as regards her dismissal from service, the NLRC found the
same as valid and for cause. The NLRC opined that respondent was notified of the
investigation to be conducted by the Fact-Finding Committee; the notice apprised her that
she was being charged with: (1) violation of BA No. 55 stopping the giving of SILs; (2)
violation of BA No. 28 limiting the individual grant of SIL to P5 million; and (3)
violation of lending policies requiring the consent of spouse in the granting of loans.
Respondent was given the opportunity to answer the charges against her. In fact, she
admitted having released SILs despite the board resolution discontinuing the same.
Despite this admission, petitioners continued with the investigation and found the
following infractions to have been committed by respondent:
.
1. There were loan notes which did not contain the signature of the borrower's spouse as
mandated by the Policy Manual of the Cooperative;
2. SILs were still granted even after the BOD passed BR Nos. 28 and 55 which limited
the ceiling of SILs to be granted and even subsequently stopping the grant of the said
loan;
3. Loans were released even [when] there [were] documents [missing]. The cases of Ms.
Kotoken and Falgui were cited where their loans were released despite the absence of
loan notes;
4. [Post-dated] checks used to secure the SlLs were not presented at the time they fell
due; and
5. Extension of the term of the loans [was] done through substitution of checks without
prior approval of the BOD.20.
According to the NLRC, the Fact-Finding Committee discovered that respondent
unilaterally altered the terms of the loan by extending the dates of maturity of checks
which secured the loans and that she reported a partial payment, by way of two (2)
checks, of the loan of Kotoken in the amount of P3 million although the subject checks
were not yet encashed. Worse, the checks were later dishonored when presented for
payment.
As observed by the NLRC, respondent failed to refute the above findings. In fact, she
admitted having released SILs despite knowledge of board resolutions discontinuing the
grant of SILs and despite the fact that the borrower concerned had exceeded the
allowable ceiling.
The NLRC did not give credence to respondent's assertion that as a mere cashier, she has
no discretion at all on the approval of the loans. The NLRC opined that respondent was
the custodian of the entire funds of TAMPCO and also an honorary member of the BOD,
advising the latter on financial matters. The NLRC also held that the release of funds is
not purely ministerial as respondent was expected to check all the supporting documents
and whether pertinent policies regarding the loan had been met by the applicant.
For the NLRC, respondent's transgressions were deliberate infractions of clear and
mandatory policies of TAMPCO amounting to gross misconduct.
The dispositive portion of the NLRC Decision reads:
. Cooperative's fund"; that respondent is responsible and accountable for all disbursements
WHEREFORE, premises considered, the appeal of respondents is GRANTED. The
Decision of the Labor Arbiter dated April 24, 2009 is hereby REVERSED AND SET
ASIDE, and a new one is hereby rendered DISMISSING the above-entitled complaint for
lack of merit. Respondent Tabuk Multi-Purpose Cooperative, Inc., is, however, ordered to
pay complainant's wages for the period of November 8 to December 31, 2004.
SO ORDERED.21.
Respondent moved to reconsider. However, in a Resolution dated April 8, 2010, the
NLRC held its ground.22
Ruling of the Court of Appeals
In a Petition for Certiorari23 filed with the CA and docketed therein as CA-G.R. SP No.
114753, respondent sought to set aside the NLRC dispositions and reinstate the Labor
Arbiter's judgment, arguing that she had no discretion in the release of the SILs; that she
was not an ex-officio member of the cooperative's BOD; that while she committed a
violation of the cooperative's policies, she should be accorded clemency just as her co-
respondents were pardoned and allowed to collect their benefits; that she did not commit
gross misconduct, as she was not solely responsible for the prohibited release of the SILs
to Kotoken and Falgui, since they were previously approved by the loan investigator, the
Credit Committee, and the General Manager prior to their release; that petitioners did not
properly observe the twin-notice rule prior to her dismissal, as she was not given any
notice to present her side - instead, she was dismissed outright when she failed to collect
and return the amount she disbursed via the SILs; that there is no just cause for her
dismissal; that her length of service (15 years) and her unblemished record with the
cooperative should merit the setting aside of her dismissal, and instead, her previous
suspensions should suifice as a penalty for her infraction; that the exoneration of her co-
respondents - notably the General Manager - who was allowed to retire, given a "graceful
exit" from the cooperative, honorably discharged, allowed to collect his benefits in full,
and given a certification to the effect that he did not commit any violation of the
cooperative's policies, rules, and regulations - constitutes discrimination, favoritism,
evident bad faith, and a violation of her constitutional right to equal protection; and that
the Labor Arbiter's decision is entirely correct and should be given full credence and
respect.
In their Comment24 seeking dismissal of the Petition, petitioners contended that the
Petition was filed to cover up for a lost appeal; that no reversible error is evident; that
contrary to respondent's claim, her position as cashier is the "lifeblood and very existence
of the Cooperative" since she was the "key to the vault and the dispenser of the
because before the release of the loan proceeds, she must ensure that all the processes and
necessary documents are duly complied with and tibere are no violations of any of the
cooperative's policies and rules; that she is likewise responsible for the collection
activities of the cooperative and the coordination thereof, as required under her job
description; that respondent was customarily appointed by the BOD as its adviser and
treasurer - being so, she very well knew of its policies; that as cashier, her signature to the
checks were required prior to the release thereof to the SIL borrowers - thus, she is liable
for signing these checks and releasing them to the borrowers in disregard of BA No. 55
prohibiting the further release of loans pending collection of those outstanding; that there
is no favoritism or discrimination when the former General Manager was allowed a
graceful exit while respondent was dismissed, as the decision to allow the former to retire
and collect his benefits is a management prerogative that respondent cannot interfere
with; and that ultimately, respondent was dismissed not for her failure to collect the
outstanding loans, but for her violation of the cooperative's policies (BA Nos. 28 and 55);
that in dismissing her, due process was observed.
On September 15, 2011, the CA issued the herein assailed Decision, decreeing as follows:
. TO REVERSE THE DECISION OF THE HONORABLE NATIONAL LABOR
WHEREFORE, premises considered, the Decision of the NLRC dated 25 November
2009 is hereby REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated 24
April 2009 in NLRC Case No. RAB-CAR-07-0344-05 (R-11-18) is hereby
REINSTATED.
SO ORDERED.25.
The CA held that respondent's dismissal was illegal; that she was not guilty of violating
her duties and responsibilities as Cashier; that she was under the supervision of the
cooperative's Finance and Credit Managers, who are primarily responsible for the
approval of loan applications; that as Cashier, she was a mere co-signatory of check
releases and simply acts as a "check and balance on the power and authority of the
General Manager;" that she does not exercise discretion on the matter of SILs -
specifically the assessment, recommendation, approval and granting thereof; that only the
Loan Officers, as well as the Credit, Finance, and General Managers, have a direct hand
in the evaluation, assessment and approval of SEL applications, including their required
attachments/documents; that while the questioned SILs were released without the
approval of the BOD, such practice was sanctioned and had been adopted and tolerated
within TAMPCO ever since; that it is unjust to require respondent to pay the amounts
released to SEL borrowers but which could no longer be collected; that it was unfair to
condemn and punish respondent for the anomalies, while her corespondents, particularly
the former General Manager, was given a graceful exit, honorably discharged, and was
even allowed to collect his retirement benefits in full; that respondent's suspension from
November 8 to December 31, 2004 was illegal; and that petitioners failed to comply with
the twin-notice rule prior to her dismissal.
Petitioners filed a Motion for Reconsideration,26 but the CA denied the same in its July
11, 2012 Resolution. Hence, the present Petition.
In a November 11, 2013 Resolution,27 this Court resolved to give due course to the
Petition.
On March 19, 2014, petitioners filed an Urgent Motion28 seeking injunctive relief to
enjoin the execution of judgment. In a March 24, 2014 Resolution, 29 the motion was
denied.
Issues
Petitioners submit the following issues for resolution:
.
1. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD
RELATIONS COMMISSION THEREBY AFFIRMING THE DECISION OF THE
HONORABLE LABOR ARBITER.
2. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
ERROR WHEN IT DID NOT CONSIDER THE EVIDENCE OF THE PETITIONERS
AS IT RULED THAT THE RESPONDENT WAS REMOVED IN VIOLATION OF THE
TWO-NOTICE RULE AND THAT THERE IS NO JUST CAUSE FOR HER
REMOVAL.
3. WHETHER THE HONORABLE COURT OF APPEALS PATENTLY COMMUTED
A GRAVE ERROR WHEN IT RULED THAT THE JOB OF THE RESPONDENT
MAGDALENA DUCLAN INCLUDES CHECK AND BALANCE AND YET IT
CONCLUDED THAT HER FUNCTION IS MERELY MINISTERIAL. THUS, SHE
CANNOT BE HELD ACCOUNTABLE FOR HER [CONDUCT].
4. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT ACTED
ON THE PETITION FOR CERTIORARI (RULE 65) FILED BY THE RESPONDENT
DESPITE THE FACT THAT THE PROPER REMEDY SHOULD [HAVE] BEEN X X X
A PETITION FOR REVIEW ON CERTIORARI.30.
Petitioners' Arguments
Praying that the assailed CA pronouncements be set aside and that the NLRC judgment
be reinstated instead, petitioners essentially argue in their Petition and Reply 31 that due
process was observed in the dismissal of respondent; that there was just and valid cause
to dismiss her, as she violated the cooperative's policies and board resolutions limiting
and subsequently prohibiting the grant and release of SILs - which actions jeopardized
TAMPCO's financial position; that respondent's actions constituted serious misconduct
and willful disobedience, justifying dismissal under Article 282 of the Labor Code; 32 that
while the Credit and General Managers possessed discretion in the evaluation and
approval of SIL applications, respondent as Cashier was still accountable as she was
duty-bound to check that the release of the loan amounts was proper and done in
accordance with the cooperative's rules and policies; and that there is no basis to suppose
that respondent was unfairly treated, since all those found responsible for the SIL fiasco
were dismissed from service after their respective cases were individually considered and
accordingly treated based on the infractions committed.
Respondent's Arguments
In her Comment,33 respondent counters that the Petition fails to present any cogent
argument that warrants reversal of the assailed CA dispositions; that on the contrary, the
CA correctly upheld her rights to security of tenure and due process; that there was no
valid cause to dismiss her; that as Cashier, she had no power to approve SIL applications,
but only release the loan amounts after the applications are evaluated and approved by the
Credit Manager, and under the supervision of the Finance Manager; and that the
respective decisions of the CA and the Labor Arbiter are correct on all points and must be
upheld.
Our Ruling
The Court grants the Petition.
Under Article 282 of the Labor Code, the employer may terminate the services of its
employee for the latter's serious misconduct or willful disobedience of its or its
representative's lawful orders. And for willful disobedience to constitute a ground, it is
required that: "(a) the conduct of the employee must be willful or intentional; and (b) the
order the employee violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties that he had been engaged to discharge.
Willfulness must be attended by a wrongful and perverse mental attitude rendering the
employee's act inconsistent with proper subordination, hi any case, the conduct of the
employee that is a valid ground for dismissal under the Labor Code constitutes harmful
behavior against the business interest or person of his employer. It is implied that in every
act of willful disobedience, the erring employee obtains undue advantage detrimental to
the business interest of the employer."34
The persistent refusal of the employee to obey the employer's lawful order amounts to
willful disobedience.35 Indeed, "[o]ne of the fundamental duties of an employee is to obey
all reasonable rules, orders and instructions of the employer. Disobedience, to be a just
cause for termination, must be willful or intentional, willfulness being characterized by a
wrongful and perverse mental attitude rendering the employee's act inconsistent with
proper subordination. A willful or intentional disobedience of such rule, order or
instruction justifies dismissal only where such rule, order or instruction is (1) reasonable
and lawful, (2) sufficiently known to the employee, and (3) connected with the duties
which the employee has been engaged to discharge."36
As TAMPCO Cashier, respondent was, among her other designated functions and duties,
responsible and accountable for all disbursements of cooperative funds and the
coordination of delinquency control and collection activities.37 She was likewise expected
to understand the cooperative's operational procedures,38 and of course, follow its rules,
regulations, and policies.
A year after introducing the SIL program, TAMPCO realized that a considerable amount
of the cooperative's loanable funds was being allocated to SILs, which thus adversely
affected its ability to lend under the regular loan program. It further discovered that single
individual borrowings under the SIL program reached precarious levels, thus placing the
resources of the cooperative at risk. Thus, in June 2003, the TAMPCO BOD issued BA
No. 28, putting a cap on SIL borrowings at P5 million. In October of the same year, BA
No. 55 was issued, completely prohibiting the grant of SILs. However, despite issuance
of BA Nos. 28 and 55, respondent and the other officers of the cooperative including its
former General Manager, continued to approve and release SILs to borrowers, among
them Falgui and Kotoken, who received millions of pesos in loans in January and
December of 2004, and in January 2005. Eventually, Falgui claimed insolvency, and
Kotoken failed to pay back her loans.
The CA failed to consider that in releasing loan proceeds to SIL borrowers like Falgui
and Kotoken even after the BOD issued BA Nos. 28 and 55, respondent, and the other
cooperative officers, willfully and repeatedly defied a necessary, reasonable and lawful
directive of the cooperative's BOD, which directive was made known to them and which
they were expected to know and follow as a necessary consequence of their respective
positions in the cooperative. They placed the resources of the cooperative - the hard-
earned savings of its members - in a precarious state as a result of the inability to collect
the loans owing to the borrowers' insolvency or refusal to honor their obligations,
Respondent committed gross insubordination which resulted in massive financial losses
to the cooperative. Applying Article 282, her dismissal is only proper.
Respondent cannot pretend to ignore the clear mandate of BA Nos. 28 and 55 and justify
her actions in releasing the loan proceeds to borrowers by claiming that she had no choice
but to release the loan proceeds after the SIL loan applications were evaluated and
approved by the loan investigator, the Credit Committee, and the General Manager. These
officers were themselves bound to abide by BA Nos. 28 and 55 - they, just as respondent,
are subordinate to the TAMPCO BOD. Pursuant to the Philippine Cooperative Code of
2008, or Republic Act No. 9520, TAMPCO's BOD is entrusted with the management of
the affairs of the cooperative (Article 5 [3]); the direction and management of the
cooperative's affairs shall be vested in the said board (Article 37); and it shall be
responsible for the strategic planning, direction-setting and policy-formulation activities
of the cooperative (Article 38).
Just the same, respondent could have simply refused to release the loan proceeds even if
the loan applications were duly approved. Had she done so, she would have been
excluded from the indictments. She would have continued with her employment. In this
regard, the CA erred completely in declaring that only the Loan Officers, as well as the
Credit, Finance, and General Managers are primarily responsible since only they
exercised discretion over SIL applications, and respondent had no choice but to
perfunctorily release the loan proceeds upon approval of the applications.
The Court likewise finds that in dismissing respondent, petitioners observed the
requirements of due process. An investigation was conducted by a fact-finding
committee; respondent and her colleagues were summoned and required to explain - and
they did; respondent submitted an October 21, 2004 letter acknowledging and confessing
her wrongdoing - that despite BA No. 55, she and her colleagues continued to approve
and release SILs. After the investigation proceedings, the committee prepared a detailed
Report of its findings and containing a recommendation to suspend the respondent,
require her to restore the amounts she wrongly disbursed - by collecting the credits
herself, and in the event of failure to restore the said amounts, she would be dismissed
from the service. The Report was approved and adopted by the cooperative's BOD, which
resolved to suspend respondent from November 8 until December 31, 2004 and ordered
her to collect, within the said period, the unauthorized SIL releases she made; otherwise,
she would be terminated from employment. When respondent failed to restore the
amounts in question, the BOD ordered her dismissal from employment. Respondent was
informed of her dismissal in a February 1, 2005 communication addressed to her; this is
the second of the twin notices required by law. Thus, as to respondent, the cooperative
observed the proper procedure prior to her dismissal.
In termination proceedings of employees, procedural due process consists of the twin
requirements of notice and hearing. The employer must furnish the employee with two
written notices before the termination of employment can be effected: (1) the first
apprises the employee of the particular acts or omissions for which his dismissal is
sought; and (2) the second informs the employee of the employer's decision to dismiss
him. x x x39.
During the proceedings below, respondent questioned the cooperative's decision requiring
her to collect the credits from Falgui and/or Kotoken, claiming this was illegal and
improper. But there is nothing wrong in requiring her to do so; this is simply ordering her
to restore the amounts she unlawfully released. She may do so in any way she deemed
best: either by paying the amounts from her own funds, or by collecting the same from
the borrowers themselves. The cooperative could have rephrased its directive to her by
simply ordering her to restore the lost amounts. This is pretty much standard procedure in
cases of this nature: the accused in malversation cases is required to restore the amount
lost, and bank tellers or cashiers are told to pay back what the banks lose through their
willful or negligent acts.
There is also nothing irregular in the cooperative's decision to require from respondent
and her colleagues the collection or restoration of the amounts that were illegally
released, with a threat that in case of failure to do so, they would be dismissed from
employment. Respondent and her colleagues were simply given the opportunity to clear
themselves from the serious infractions they committed; their failure to restore the
amounts lost in any manner could not prevent the imposition of the ultimate penalty,
since their commission of the serious offense has been adequately shown. In fact,
respondent voluntarily confessed her crime. To the mind of the Court, respondent and her
colleagues were afforded ample opportunity to clear themselves and thus restore the
confidence that was lost, and TAMPCO was not precluded from testing their resolve.
Finally, while the CA finds that it is unfair for TAMPCO to treat respondent differently
from the former General Manager, who was permitted to retire and collect his benefits in
full, the appellate court must nonetheless be reminded that "[t]he law protects both the
welfare of employees and the prerogatives of management. Courts will not interfere with
prerogatives of management on the discipline of employees, as long as they do not
violate labor laws, collective bargaining agreements if any, and general principles of
fairness and justice."40 Moreover, management is not precluded from condoning the
infractions of its employees; as with any other legal right, the management prerogative to
discipline employees and impose punishment may be waived. 41 As far as respondent is
concerned, the cooperative chose not to waive its right to discipline and punish her; this is
its privilege as the holder of such right. Finally, it cannot be said that respondent was
discriminated against or singled out, for among all those indicted, only the former
General Manager was accorded leniency; the rest, including respondent, were treated on
equal footing. As to why the former General Manager was allowed to retire, this precisely Labor Relations Commission in NLRC CA-No. 050848-06 (RA-06-09)
falls within the realm of management prerogative; what matters, as far as the Court is is REINSTATED and AFFIRMED.
concerned, is that respondent was not singled out and treated unfairly.
SO ORDERED..
WHEREFORE, the Petition is GRANTED. The assailed September 15, 2011 Decision
and July 11, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 114753
are REVERSED and SET ASIDE. The November 25, 2009 Decision of the National