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G.R. No. 184517 October 8, 2013 them to tender their resignations,11 with the promise that they would be rehired upon reapplication. His
directive was allegedly done at the behest of petitioner Olga Samson.12
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR, JR.,
Petitioners, Relying on this representation, Elicerio,13 Ricardo,14 Fidel,15 Simeon, Jr.,16 and Liberato17 tendered
vs. their resignations dated 27 August 2001. As for Eufemia, the records show that she first tendered a
PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR, , RICARDO GASPAR resignation letter dated27 August 2001,18 and then a retirement letter dated September 2001.19
JR., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA,
Respondents. Elicerio,20 Ricardo,21 Fidel,22 Simeon, Jr.,23 and Liberato24 submitted application letters on 11
September 2001. Both the resignation letters and copies of respondent employees application letters
Security of tenure is a constitutionally guaranteed right.1 Employees may not be terminated from their were transmitted by Espiritu to Samsons representative on 11 September 2001.25
regular employment except for just or authorized causes under the Labor Code2 and other pertinent
laws. A mere change in the equity composition of a corporation is neither a just nor an authorized cause On 11 September 2001, Agustin and De Guzman signified their conformity to the Letter Agreements and
that would legally permit the dismissal of the corporations employees en masse. sold 86.365% of the shares of stock of SME Bank to spouses Abelardo and Olga Samson. Spouses
Samson then became the principal shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed
Before this Court are consolidated Rule 45 Petitions for Review on Certiorari3 assailing the Decision4 bank president. As it turned out, respondent employees, except for Simeon, Jr.,26 were not rehired.
and Resolution5 of the Court of Appeals(CA) in CA-G.R. SP No. 97510 and its Decision6 and After a month in service, Simeon, Jr. again resigned on October 2001.27
Resolution7 in CA-G.R. SP No. 97942.
Respondent-employees demanded the payment of their respective separation pays, but their requests
The facts of the case are as follows: were denied.1wphi1

Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.(Ricardo), Eufemia Rosete Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the National Labor
(Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato) Relations Commission (NLRC) Regional Arbitration Branch No. III and sued SME Bank, spouses
were employees of Small and Medium Enterprise Bank, Incorporated (SME Bank).Originally, the Abelardo and Olga Samson and Aurelio Villaflor (the Samson Group) for unfair labor practice; illegal
principal shareholders and corporate directors of the bank were Eduardo M. Agustin, Jr. (Agustin) and dismissal; illegal deductions; underpayment; and nonpayment of allowances, separation pay and 13th
Peregrin de Guzman, Jr. (De Guzman). month pay.28 Subsequently, they amended their Complaint to include Agustin and De Guzman as
respondents to the case.29
In June 2001, SME Bank experienced financial difficulties. To remedy the situation, the bank officials
proposed its sale to Abelardo Samson(Samson).8 On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is not bound to absorb its
employees, unless there is an express stipulation to the contrary. However, he also found that
Accordingly, negotiations ensued, and a formal offer was made to Samson. Through his attorney-in-fact, respondent employees were illegally dismissed, because they had involuntarily executed their
Tomas S. Gomez IV, Samson then sent formal letters (Letter Agreements) to Agustin and De Guzman, resignation letters after relying on representations that they would be given their separation benefits and
demanding the following as preconditions for the sale of SME Banks shares of stock: rehired by the new management. Accordingly, the labor arbiter decided the case against Agustin and De
Guzman, but dismissed the Complaint against the Samson Group, as follows:
4. You shall guarantee the peaceful turn over of all assets as well as the peaceful transition of
management of the bank and shall terminate/retire the employees we mutually agree upon, upon WHEREFORE, premises considered, judgment is hereby rendered ordering respondents Eduardo
transfer of shares in favor of our groups nominees; Agustin, Jr. and Peregrin De Guzman to pay complainants separation pay in the total amount of
P339,403.00 detailed as follows:
xxxx
Elicerio B. Gaspar = P 5,837.00
7. All retirement benefits, if any of the above officers/stockholders/board of directors are hereby waived
upon consummation [sic] of the above sale. The retirement benefits of the rank and file employees Ricardo B. Gaspar, Jr. = P11,674.00
including the managers shall be honored by the new management in accordance with B.R. No. 10, S.
1997.9 Liberato B. Mangoba = P64,207.00

Agustin and De Guzman accepted the terms and conditions proposed by Samson and signed the Fidel E. Espiritu = P29,185.00
conforme portion of the Letter Agreements.10
Simeon B. Espiritu, Jr. = P26,000.00
Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all the
employees of the head office and of the Talaveraand Muoz branches of SME Bank and persuaded Eufemia E. Rosete = P202,510.00
2

WHEREFORE, premises considered, the instant Petition for Certiorari is denied, and the herein
All other claims including the complaint against Abelardo Samson, Olga Samson and Aurelio Villaflor assailed May 8, 2006 Decision and November 28, 2006 Resolution of the NLRC are hereby
are hereby DISMISSED for want of merit. AFFIRMED.

SO ORDERED.30 SO ORDERED.34

Dissatisfied with the Decision of the labor arbiter, respondent employees, Agustin and De Guzman The appellate court denied the Motions for Reconsideration filed by the parties in Resolutions dated 1
brought separate appeals to the NLRC. Respondent employees questioned the labor arbiters failure to September 200835 and 19 February 2009.36
award backwages, while Agustin and De Guzman contended that they should not be held liable for the
payment of the employees claims. The Samson Group then filed two separate Rule 45 Petitions questioning the CA Decisions and
Resolutions in CA-G.R. SP No. 97510 and CA-G.R. SP No. 97942. On 17 June 2009, this Court
The NLRC found that there was only a mere transfer of shares and therefore, a mere change of resolved to consolidate both Petitions.37
management from Agustin and De Guzman to the Samson Group. As the change of management
was not a valid ground to terminate respondent bank employees, the NLRC ruled that they had indeed THE ISSUES
been illegally dismissed. It further ruled that Agustin, De Guzman and the Samson Group should be
held jointly and severally liable for the employees separation pay and backwages, as follows: Succinctly, the parties are asking this Court to determine whether respondent employees were illegally
dismissed and, if so, which of the parties are liable for the claims of the employees and the extent of the
WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED. Respondents reliefs that may be awarded to these employees.
are hereby Ordered to jointly and severally pay the complainants backwages from 11 September 2001
until the finality of this Decision, separation pay at one month pay for every year of service, P10,000.00 THE COURTS RULING
and P5,000.00 moral and exemplary damages, and five (5%) percent attorneys fees.
The instant Petitions are partly meritorious.
Other dispositions are AFFIRMED
I
SO ORDERED.31
Respondent employees were illegally dismissed.
On 28 November 2006, the NLRC denied the Motions for Reconsideration filed by Agustin, De Guzman
and the Samson Group.32 As to Elicerio Gaspar, Ricardo Gaspar, Jr., Fidel Espiritu, Eufemia Rosete and Liberato Mangoba

Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA, docketed as CA-G.R. SP No. The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily resigned from their
97510. The Samson Group likewise filed a separate Rule 65 Petition for Certiorari with the CA, posts, while Eufemia retired from her position. As their resignations and retirements were voluntary, they
docketed as CA-G.R. SP No. 97942. Motions to consolidate both cases were not acted upon by the were not dismissed from their employment.38 In support of this argument, it presented copies of their
appellate court. resignation and retirement letters,39 which were couched in terms of gratitude.

On 13 March 2008, the CA rendered a Decision in CA-G.R. SP No.97510 affirming that of the NLRC. We disagree. While resignation letters containing words of gratitude may indicate that the employees
The fallo of the CA Decision reads: were not coerced into resignation,40 this fact alone is not conclusive proof that they intelligently, freely
and voluntarily resigned. To rule that resignation letters couched in terms of gratitude are, by
WHEREFORE, in view of the foregoing, the petition is DENIED. Accordingly, the Decision dated May 8, themselves, conclusive proof that the employees intended to relinquish their posts would open the
2006, and Resolution dated November 28, 2006 of the National Labor Relations Commission in NLRC floodgates to possible abuse. In order to withstand the test of validity, resignations must be made
NCR CA No. 043236-05 (NLRC RAB III-07-4542-02) are hereby AFFIRMED. voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment.41
Therefore, in order to determine whether the employees truly intended to resign from their respective
SO ORDERED.33 posts, we cannot merely rely on the tenor of the resignation letters, but must take into consideration the
totality of circumstances in each particular case.
Subsequently, CA-G.R. SP No. 97942 was disposed of by the appellate court in a Decision dated 15
January 2008, which likewise affirmed that of the NLRC. The dispositive portion of the CA Decision Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered resignation letters
states: because they were led to believe that, upon reapplication, they would be reemployed by the new
management.42 As it turned out, except for Simeon, Jr., they were not rehired by the new management.
Their reliance on the representation that they would be reemployed gives credence to their argument
that they merely submitted courtesy resignation letters because it was demanded of them, and that they
3

had no real intention of leaving their posts. We therefore conclude that Elicerio, Ricardo, Fidel, and Even assuming that the parties intended to close the bank, the records do not show that the employees
Liberato did not voluntarily resign from their work; rather, they were terminated from their employment. and the Department of Labor were given written notices at least one month before the dismissal took
place. Moreover, aside from their bare assertions, the parties failed to substantiate their claim that SME
As to Eufemia, both the CA and the NLRC discussed her case together with the cases of the rest of Bank was suffering from serious financial reverses.
respondent-employees. However, a review of the records shows that, unlike her co-employees, she did
not resign; rather, she submitted a letter indicating that she was retiring from her former position.43 In fine, the argument that the dismissal was due to an authorized cause holds no water.

The fact that Eufemia retired and did not resign, however, does not change our conclusion that illegal Petitioner bank also argues that, there being a transfer of the business establishment, the innocent
dismissal took place. transferees no longer have any obligation to continue employing respondent employees,56 and that the
most that they can do is to give preference to the qualified separated employees; hence, the employees
Retirement, like resignation, should be an act completely voluntary on the part of the employee. If the were validly dismissed.57
intent to retire is not clearly established or if the retirement is involuntary, it is to be treated as a
discharge.44 The argument is misleading and unmeritorious. Contrary to petitioner banks argument, there was no
transfer of the business establishment to speak of, but merely a change in the new majority
In this case, the facts show that Eufemias retirement was not of her own volition. The circumstances shareholders of the corporation.
could not be more telling. The facts show that Eufemia was likewise given the option to resign or retire
in order to fulfill the precondition in the Letter Agreements that the seller should "terminate/retire the There are two types of corporate acquisitions: asset sales and stock sales.58 In asset sales, the
employees [mutually agreed upon] upon transfer of shares" to the buyers.45 Thus, like her other co- corporate entity59 sells all or substantially all of its assets60 to another entity. In stock sales, the
employees, she first submitted a letter of resignation dated 27 August 2001.46 For one reason or individual or corporate shareholders61 sell a controlling block of stock62 to new or existing
another, instead of resigning, she chose to retire and submitted a retirement letter to that effect.47 It shareholders.
was this letter that was subsequently transmitted to the representative of the Samson Group on 11
September 2001.48 In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected employees,
but is liable for the payment of separation pay under the law.63 The buyer in good faith, on the other
In San Miguel Corporation v. NLRC,49 we have explained that involuntary retirement is tantamount to hand, is not obliged to absorb the employees affected by the sale, nor is it liable for the payment of their
dismissal, as employees can only choose the means and methods of terminating their employment, but claims.64 The most that it may do, for reasons of public policy and social justice, is to give preference to
are powerless as to the status of their employment and have no choice but to leave the company. This the qualified separated personnel of the selling firm.65
rule squarely applies to Eufemias case. Indeed, she could only choose between resignation and
retirement, but was made to understand that she had no choice but to leave SME Bank. Thus, we In contrast with asset sales, in which the assets of the selling corporation are transferred to another
conclude that, similar to her other co-employees, she was illegally dismissed from employment. entity, the transaction in stock sales takes place at the shareholder level. Because the corporation
possesses a personality separate and distinct from that of its shareholders, a shift in the composition of
The Samson Group further argues50 that, assuming the employees were dismissed, the dismissal is its shareholders will not affect its existence and continuity. Thus, notwithstanding the stock sale, the
legal because cessation of operations due to serious business losses is one of the authorized causes of corporation continues to be the employer of its people and continues to be liable for the payment of their
termination under Article 283 of the Labor Code.51 just claims. Furthermore, the corporation or its new majority share holders are not entitled to lawfully
dismiss corporate employees absent a just or authorized cause.
Again, we disagree.
In the case at bar, the Letter Agreements show that their main object is the acquisition by the Samson
The law permits an employer to dismiss its employees in the event of closure of the business Group of 86.365% of the shares of stock of SME Bank.66 Hence, this case involves a stock sale,
establishment.52 However, the employer is required to serve written notices on the worker and the whereby the transferee acquires the controlling shares of stock of the corporation. Thus, following the
Department of Labor at least one month before the intended date of closure.53 Moreover, the dismissed rule in stock sales, respondent employees may not be dismissed except for just or authorized causes
employees are entitled to separation pay, except if the closure was due to serious business losses or under the Labor Code.
financial reverses.54 However, to be exempt from making such payment, the employer must justify the
closure by presenting convincing evidence that it actually suffered serious financial reverses.55 Petitioner bank argues that, following our ruling in Manlimos v. NLRC,67 even in cases of stock sales,
the new owners are under no legal duty to absorb the sellers employees, and that the most that the
In this case, the records do not support the contention of SME Bank that it intended to close the new owners may do is to give preference to the qualified separated employees.68 Thus, petitioner bank
business establishment. On the contrary, the intention of the parties to keep it in operation is confirmed argues that the dismissal was lawful.
by the provisions of the Letter Agreements requiring Agustin and De Guzman to guarantee the
"peaceful transition of management of the bank" and to appoint "a manager of [the Samson Groups] We are not persuaded.
choice x x x to oversee bank operations."
4

Manlimos dealt with a stock sale in which a new owner or management group acquired complete all or substantially all of the assets of the corporation. The transactions in those cases were not made at
ownership of the corporation at the shareholder level.69 The employees of the corporation were later the shareholder level, but at the corporate level. Thus, applicable to those cases were the rules in asset
"considered terminated, with their conformity"70 by the new majority shareholders. The employees then sales: the employees may be separated from their employment, but the seller is liable for the payment
re-applied for their jobs and were rehired on a probationary basis. After about six months, the new of separation pay; on the other hand, the buyer in good faith is not required to retain the affected
management dismissed two of the employees for having abandoned their work, and it dismissed the employees in its service, nor is it liable for the payment of their claims.
rest for committing "acts prejudicial to the interest of the new management."71 Thereafter, the
employees sought reinstatement, arguing that their dismissal was illegal, since they "remained regular The rule should be different in Manlimos, as this case involves a stock sale. It is error to even discuss
employees of the corporation regardless of the change of management."72 transfer of ownership of the business, as the business did not actually change hands. The transfer only
involved a change in the equity composition of the corporation. To reiterate, the employees are not
In disposing of the merits of the case, we upheld the validity of the second termination, ruling that "the transferred to a new employer, but remain with the original corporate employer, notwithstanding an
parties are free to renew the contract or not [upon the expiration of the period provided for in their equity shift in its majority shareholders. This being so, the employment status of the employees should
probationary contract of employment]."73 Citing our pronouncements in Central Azucarera del Danao v. not have been affected by the stock sale. A change in the equity composition of the corporate
Court of Appeals,74 San Felipe Neri School of Mandaluyong, Inc. v. NLRC,75 and MDII Supervisors & shareholders should not result in the automatic termination of the employment of the corporations
Confidential Employees Association v. Presidential Assistant on Legal Affairs,76 we likewise upheld the employees. Neither should it give the new majority shareholders the right to legally dismiss the
validity of the employees first separation from employment, pronouncing as follows: corporations employees, absent a just or authorized cause.

A change of ownership in a business concern is not proscribed bylaw. In Central Azucarera del Danao The right to security of tenure guarantees the right of employees to continue in their employment absent
vs. Court of Appeals, this Court stated: a just or authorized cause for termination. This guarantee proscribes a situation in which the corporation
procures the severance of the employment of its employees who patently still desire to work for the
There can be no controversy for it is a principle well-recognized, that it is within the employers corporation only because new majority stockholders and a new management have come into the
legitimate sphere of management control of the business to adopt economic policies or make some picture. This situation is a clear circumvention of the employees constitutionally guaranteed right to
changes or adjustments in their organization or operations that would insure profit to itself or protect the security of tenure, an act that cannot be countenanced by this Court.
investment of its stockholders. As in the exercise of such management prerogative, the employer may
merge or consolidate its business with another, or sellor dispose all or substantially all of its assets and It is thus erroneous on the part of the corporation to consider the employees as terminated from their
properties which may bring about the dismissal or termination of its employees in the process. Such employment when the sole reason for so doing is a change of management by reason of the stock sale.
dismissal or termination should not however be interpreted in such a manner as to permit the employer The conformity of the employees to the corporations act of considering them as terminated and their
to escape payment of termination pay. For such a situation is not envisioned in the law. It strikes at the subsequent acceptance of separation pay does not remove the taint of illegal dismissal. Acceptance of
very concept of social justice. separation pay does not bar the employees from subsequently contesting the legality of their dismissal,
nor does it estop them from challenging the legality of their separation from the service.77
In a number of cases on this point, the rule has been laid down that the sale or disposition must be
motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of a We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that, in a stock
business establishment has no liability to the employees of the transfer or to continue employer them. sale, the buyer in good faith has no obligation to retain the employees of the selling corporation; and
Nor is the transferee liable for past unfair labor practices of the previous owner, except, when the that the dismissal of the affected employees is lawful, even absent a just or authorized cause.
liability therefor is assumed by the new employer under the contract of sale, or when liability arises
because of the new owners participation in thwarting or defeating the rights of the employees. As to Simeon Espiritu, Jr.

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the The CA and the NLRC discussed the case of Simeon, Jr. together with that of the rest of respondent-
transferors employees as there is no law compelling such absorption. The most that the transferee may employees. However, a review of the records shows that the conditions leading to his dismissal from
do, for reasons of public policy and social justice, is to give preference to the qualified separated employment are different. We thus discuss his circumstance separately.
employees in the filling of vacancies in the facilities of the purchaser.
The Samson Group contends that Simeon, Jr., likewise voluntarily resigned from his post.78 According
Since the petitioners were effectively separated from work due to a bona fide change of ownership and to them, he had resigned from SME Bank before the share transfer took place.79
they were accordingly paid their separation pay, which they freely and voluntarily accepted, the private
respondent corporation was under no obligation to employ them; it may, however, give them preference Upon the change of ownership of the shares and the management of the company, Simeon, Jr.
in the hiring. x x x. (Citations omitted) submitted a letter of application to and was rehired by the new management.80 However, the Samson
Group alleged that for purely personal reasons, he again resigned from his employment on 15 October
We take this opportunity to revisit our ruling in Manlimos insofar as it applied a doctrine on asset sales 2001.81
to a stock sale case. Central Azucarera del Danao, San Felipe Neri School of Mandaluyong and MDII
Supervisors &Confidential Employees Association all dealt with asset sales, as they involved a sale of
5

Simeon, Jr., on the other hand, contends that while he was reappointed by the new management after
his letter of application was transmitted, he was not given a clear position, his benefits were reduced, Therefore, we conclude that, as the employer of the illegally dismissed employees before and after the
and he suffered a demotion in rank.82 These allegations were not refuted by the Samson Group. equity transfer, petitioner SME Bank is liable for the satisfaction of their claims.

We hold that Simeon, Jr. was likewise illegally dismissed from his employment. Turning now to the liability of Agustin, De Guzman and the Samson Group for illegal dismissal, at the
outset we point out that there is no privity of employment contracts between Agustin, De Guzman and
Similar to our earlier discussion, we find that his first courtesy resignation letter was also executed the Samson Group, on the one hand, and respondent employees on the other. Rather, the employment
involuntarily. Thus, it cannot be the basis of a valid resignation; and thus, at that point, he was illegally contracts were between SME Bank and the employees. However, this fact does not mean that Agustin,
terminated from his employment. He was, however, rehired by SME Bank under new management, De Guzman and the Samson Group may not be held liable for illegal dismissal as corporate directors or
although based on his allegations, he was not reinstated to his former position or to a substantially officers. In Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC,90 we laid down the rule as
equivalent one.83 Rather, he even suffered a reduction in benefits and a demotion in rank.84 These led regards the liability of corporate directors and officers in illegal dismissal cases, as follows:
to his submission of another resignation letter effective 15 October 2001.85
Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable
We rule that these circumstances show that Simeon, Jr. was constructively dismissed. In for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from
its officers, stockholders and members. However, this fictional veil may be pierced whenever the
Peaflor v. Outdoor Clothing Manufacturing Corporation,86 we have defined constructive dismissal as corporate personality is used as a means of perpetuating a fraud or an illegal act, evading an existing
follows: obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors and officers
are solidarily liable with the corporation, where terminations of employment are done with malice or in
Constructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and bad faith.91 (Citations omitted)
unfavorable conditions set by the employer and which arises when a clear discrimination, insensibility,
or disdain by an employer exists and has become unbearable to the employee.87 Thus, in order to determine the respective liabilities of Agustin, De Guzman and the Samson Group
under the afore-quoted rule, we must determine, first, whether they may be considered as corporate
Constructive dismissal exists where there is cessation of work, because "continued employment is directors or officers; and, second, whether the terminations were done maliciously or in bad faith.
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution
in pay" and other benefits.88 There is no question that both Agustin and De Guzman were corporate directors of SME Bank. An
analysis of the facts likewise reveals that the dismissal of the employees was done in bad faith.
These circumstances are clearly availing in Simeon, Jr.s case. He was made to resign, then rehired Motivated by their desire to dispose of their shares of stock to Samson, they agreed to and later
under conditions that were substantially less than what he was enjoying before the illegal termination implemented the precondition in the Letter Agreements as to the termination or retirement of SME
occurred. Thus, for the second time, he involuntarily resigned from his employment. Clearly, this case is Banks employees. However, instead of going through the proper procedure, the bank manager induced
illustrative of constructive dismissal, an act prohibited under our labor laws. respondent employees to resign or retire from their respective employments, while promising that they
would be rehired by the new management. Fully relying on that promise, they tendered courtesy
II resignations or retirements and eventually found themselves jobless. Clearly, this sequence of events
constituted a gross circumvention of our labor laws and a violation of the employees constitutionally
SME Bank, Eduardo M. Agustin, Jr. and Peregrin de Guzman, Jr. are liable for illegal dismissal. guaranteed right to security of tenure. We therefore rule that, as Agustin and De Guzman are corporate
directors who have acted in bad faith, they may be held solidarily liable with SME Bank for the
Having ruled on the illegality of the dismissal, we now discuss the issue of liability and determine who satisfaction of the employees lawful claims.
among the parties are liable for the claims of the illegally dismissed employees.
As to spouses Samson, we find that nowhere in the records does it appear that they were either
The settled rule is that an employer who terminates the employment of its employees without lawful corporate directors or officers of SME Bank at the time the illegal termination occurred, except that the
cause or due process of law is liable for illegal dismissal.89 Samson Group had already taken over as new management when Simeon, Jr. was constructively
dismissed. Not being corporate directors or officers, spouses Samson were not in legal control of the
None of the parties dispute that SME Bank was the employer of respondent employees. The fact that bank and consequently had no power to dismiss its employees.
there was a change in the composition of its shareholders did not affect the employer-employee
relationship between the employees and the corporation, because an equity transfer affects neither the Respondent employees argue that the Samson Group had already taken over and conducted an
existence nor the liabilities of a corporation. Thus, SME Bank continued to be the employer of inventory before the execution of the share purchase agreement.92 Agustin and De Guzman likewise
respondent employees notwithstanding the equity change in the corporation. This outcome is in line argued that it was at Olga Samsons behest that the employees were required to resign from their
with the rule that a corporation has a personality separate and distinct from that of its individual posts.93 Even if this statement were true, it cannot amount to a finding that spouses Samson should be
shareholders or members, such that a change in the composition of its shareholders or members would treated as corporate directors or officers of SME Bank. The records show that it was Espiritu who asked
not affect its corporate liabilities. the employees to tender their resignation and or retirement letters, and that these letters were actually
6

tendered to him.94 He then transmitted these letters to the representative of the Samson Group.95 That The assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 97510 dated 13
the spouses Samson had to ask Espiritu to require the employees to resign shows that they were not in March 2008 and 1 September 2008,respectively, are hereby REVERSED and SET ASIDE insofar as it
control of the corporation, and that the former shareholders through Espiritu were still in charge held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr. solidarily liable for illegal dismissal.
thereof. As the spouses Samson were neither corporate officers nor directors at the time the illegal
dismissal took place, we find that there is no legal basis in the present case to hold them in their The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 97942 dated 15
personal capacities solidarily liable with SME Bank for illegally dismissing respondent employees, January 2008 and 19 February 2009,respectively, are likewise REVERSED and SETASIDE insofar as it
without prejudice to any liabilities that may have attached under other provisions of law. held Abelardo P. Samson, Olga Samson and Aurelio Villaflor, Jr. solidarily liable for illegal dismissal.

Furthermore, even if spouses Samson were already in control of the corporation at the time that We REVERSE our ruling in Manlimos v. NLRC insofar as it upheld that, in a stock sale, the buyer in
Simeon, Jr. was constructively dismissed, we refuse to pierce the corporate veil and find them liable in good faith has no obligation to retain the employees of the selling corporation, and that the dismissal of
their individual steads. There is no showing that his constructive dismissal amounted to more than a the affected employees is lawful even absent a just or authorized cause.
corporate act by SME Bank, or that spouses Samson acted maliciously or in bad faith in bringing about
his constructive dismissal. SO ORDERED.

Finally, as regards Aurelio Villaflor, while he may be considered as a corporate officer, being the MARIA LOURD
president of SME Bank, the records are bereft of any evidence that indicates his actual participation in
the termination of respondent employees. Not having participated at all in the illegal act, he may not be THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC. AND WALDEN CHU, Petitioners, v. ROLLY P.
held individually liable for the satisfaction of their claims. ARENAS, Respondent.

III DECISION

Respondent employees are entitled to separation pay, full backwages, moral damages, exemplary BRION, J.:
damages and attorneys fees.
We resolve in this petition for review on certiorari1 the challenge to the Court of Appeals (CA) decision2
The rule is that illegally dismissed employees are entitled to (1) either reinstatement, if viable, or dated March 26, 2013 and resolution3 dated August 30, 2013 in CA-G.R. SP No. 117822. These
separation pay if reinstatement is no longer viable; and (2) backwages.96 assailed CA rulings affirmed the National Labor Relations Commissions (NLRC) decision4 dated
August 13, 2010, which also affirmed the Labor Arbiters (LA) February 28, 2010 decision.
Courts may grant separation pay in lieu of reinstatement when the relations between the employer and
the employee have been so severely strained; when reinstatement is not in the best interest of the
parties; when it is no longer advisable or practical to order reinstatement; or when the employee The Antecedent Facts
decides not to be reinstated.97 In this case, respondent employees expressly pray for a grant of
separation pay in lieu of reinstatement. Thus, following a finding of illegal dismissal, we rule that they On April 1, 2008, the Coffee Bean and Tea Leaf Philippines, Inc. (CBTL) hired Rolly P. Arenas (Arenas)
are entitled to the payment of separation pay equivalent to their one-month salary for every year of to work as a barista at its Paseo Center Branch. His principal functions included taking orders from
service as an alternative to reinstatement. customers and preparing their ordered food and beverages.5 Upon signing the employment contract,6
Arenas was informed of CBTLs existing employment policies.
Respondent employees are likewise entitled to full backwages notwithstanding the grant of separation
pay. In Santos v. NLRC,98 we explained that an award of backwages restores the income that was lost To ensure the quality of its crews services, CBTL regularly employs a mystery guest shopper who
by reason of the unlawful dismissal, while separation pay "provides the employee with 'the wherewithal poses as a customer, for the purpose of covertly inspecting the baristas job performance.7
during the period that he is looking for another employment."99 Thus, separation pay is a proper
substitute only for reinstatement; it is not an adequate substitute for both reinstatement and In April 2009, a mystery guest shopper at the Paseo Center Branch submitted a report stating that on
backwages.100 Hence, respondent employees are entitled to the grant of full backwages in addition to March 30, 2009, Arenas was seen eating non-CBTL products at CBTLs al fresco dining area while on
separation pay. duty. As a result, the counter was left empty without anyone to take and prepare the customers
orders.8
As to moral damages, exemplary damages and attorney's fees, we uphold the appellate court's grant
thereof based on our finding that the forced resignations and retirement were fraudulently done and On another occasion, or on April 28, 2009, Katrina Basallo (Basallo), the duty manager of CBTL,
attended by bad faith. conducted a routine inspection of the Paseo Center Branch. While inspecting the stores products, she
noticed an iced tea bottle being chilled inside the bin where the ice for the customers drinks is stored;
WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY GRANTED. thus, she called the attention of the staff on duty. When asked, Arenas muttered, kaninong iced tea?
and immediately picked the bottle and disposed it outside the store.9
7

based their conclusion. The query in this proceeding is limited to the determination of whether or not the
After inspection, Basallo prepared a store managers report which listed Arenas recent infractions, as NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in rendering its
follows: decision. x x x16 [Italics supplied]
Leaving the counter unattended and eating chips in an unauthorized area while on duty (March 30,
2009); Our review of the records shows that the CA did not err in affirming the LA and the NLRCs rulings. No
Reporting late for work on several occasions (April 1, 3 and 22); and grave abuse of discretion tainted these rulings, thus, the CAs decision also warrants this Courts
Placing an iced tea bottle in the ice bin despite having knowledge of company policy prohibiting the affirmation. The infractions which Arenas committed do not justify the application of the severe penalty
same (April 28, 2009).10 of termination from service.

Based on the mystery guest shopper and duty managers reports, Arenas was required to explain his First, Arenas was found eating non-CBTL products inside the stores premises while on duty. Allegedly,
alleged violations. However, CBTL found Arenas written explanation unsatisfactory, hence CBTL he left the counter unattended without anyone to entertain the incoming customers. Second, he chilled
terminated his employment.11 his bottled iced tea inside the ice bin, in violation of CBTLs sanitation and hygiene policy. CBTL argues
that these violations constitute willful disobedience, thus meriting dismissal from employment.
Arenas filed a complaint for illegal dismissal. After due proceedings, the LA ruled in his favor, declaring
that he had been illegally dismissed. On appeal, the NLRC affirmed the LAs decision. We disagree with CBTL.

CBTL filed a petition for certiorari under Rule 65 before the CA. CBTL insisted that Arenas infractions For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the
amounted to serious misconduct or willful disobedience, gross and habitual neglect of duties, and employees assailed conduct must have been willful, that is, characterized by a wrongful and perverse
breach of trust and confidence. To support these allegations, CBTL presented Arenas letter12 where he attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee,
admitted his commission of the imputed violations. and must pertain to the duties which he had been engaged to discharge.17

On March 26, 2013, the CA issued its decision dismissing the petition. The CA ruled that Arenas Tested against these standards, it is clear that Arenas alleged infractions do not amount to such a
offenses fell short of the required legal standards to justify his dismissal; and that these do not wrongful and perverse attitude. Though Arenas may have admitted these wrongdoings, these do not
constitute serious misconduct or willful disobedience, and gross negligence, to merit his termination amount to a wanton disregard of CBTLs company policies. As Arenas mentioned in his written
from service. The CA denied CBTLs motion for reconsideration opening the way for this present appeal explanation, he was on a scheduled break when he was caught eating at CBTLs al fresco dining area.
via a petition for review on certiorari. During that time, the other service crews were the one in charge of manning the counter. Notably,
CBTLs employee handbook imposes only the penalty of written warning for the offense of eating non-
The main issue before us is whether CBTL illegally dismissed Arenas from employment. CBTL products inside the stores premises.

The Petition CBTL also imputes gross and habitual neglect of duty to Arenas for coming in late in three separate
instances.
CBTL argues that under the terms and conditions of the employment contract, Arenas agreed to abide
and comply with CBTLs policies, procedures, rules and regulations, as provided for under CBTLs Gross negligence implies a want or absence of, or failure to exercise even a slight care or diligence, or
table of offenses and penalties and/or employee handbook.13 CBTL cites serious misconduct as the the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
primary reason for terminating Arenas employment. CBTL also imputes dishonesty on the part of effort to avoid them.18 There is habitual neglect if based on the circumstances, there is a repeated
Arenas for not immediately admitting that he indeed left his bottled iced tea inside the ice bin. failure to perform ones duties for a period of time.19

Our Ruling In light of the foregoing criteria, we rule that Arenas three counts of tardiness cannot be considered as
gross and habitual neglect of duty. The infrequency of his tardiness already removes the character of
We DENY the petition. habitualness. These late attendances were also broadly spaced out, negating the complete absence of
care on Arenas part in the performance of his duties. Even CBTL admitted in its notice to explain that
As a rule, in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not assess and this violation does not merit yet a disciplinary action and is only an aggravating circumstance to Arenas
weigh each piece of evidence introduced in the case. The CA only examines the factual findings of the other violations.20
NLRC to determine whether its conclusions are supported by substantial evidence, whose absence
points to grave abuse of discretion amounting to lack or excess of jurisdiction.14 In the case of To further justify Arenas dismissal, CBTL argues that he committed serious misconduct when he lied
Mercado v. AMA Computer College,15 we emphasized that: about using the ice bin as cooler for his bottled iced tea. Under CBTLs employee handbook,
dishonesty, even at the first instance, warrants the penalty of termination from service.21
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court
does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC
8

For misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it must
relate to the performance of the employees duties; and (c) it must show that the employee has become Nature of the Case
unfit to continue working for the employer.22
The issue in this petition boils down to the legality of respondent Nowella Reyes' termination as
However, the facts on record reveal that there was no active dishonesty on the part of Arenas. When University Treasurer of petitioner Wesleyan University - Philippines (WUP) on the ground of loss of trust
questioned about who placed the bottled iced tea inside the ice bin, his immediate reaction was not to and confidence. Petitioner prays in this recourse that We reverse the February 28, 2013 Decision of the
deny his mistake, but to remove the bottle inside the bin and throw it outside. More importantly, when he Court of Appeals (CA) in CA-G.R. SP No. 122536 which declared respondent's termination illegal.
was asked to make a written explanation of his action, he admitted that the bottled iced tea was his.
The Facts
Thus, even if there was an initial reticence on Arenas part, his subsequent act of owing to his mistake
only shows the absence of a deliberate intent to lie or deceive his CBTL superiors. On this score, we On March 16, 2004, respondent Nowella Reyes was appointed as WUP's University Treasurer on
conclude that Arenas action did not amount to serious misconduct. probationary basis. A little over a year after, she was appointed as full time University Treasurer.

Moreover, the imputed violations of Arenas, whether taken singly or as a whole, do not necessitate the On April 27, 2009, a new WUP Board of Trustees was constituted. Among its first acts was to engage
imposition of the strict and harsh penalty of dismissal from service. The LA, NLRC and the CA all the services of Nepomuceno Suner & Associates Accounting Firm (External Auditor) to investigate
consistently ruled that these offenses are not grave enough to qualify as just causes for dismissal. circulating rumors on alleged anomalies in the contracts entered into by petitioner and in its finances.
Factual findings of the labor tribunals especially if affirmed by the CA must be given great weight, and
merit the Courts respect. Discovered following an audit were irregularities in the handling of petitioners finances, mainly, the
encashment by its Treasury Department of checks issued to WUP personnel, a practice purportedly in
As a final remark, we note that petitioner Walden Chu (Chu) should not be held jointly and severally violation of the imprest system of cash management, and the encashment of various crossed checks
liable with CBTL for Arenas adjudged monetary awards. The LA and the NLRC ruled for their solidary payable to the University Treasurer by Chinabank despite managements intention to merelyhave the
liability but the CA failed to dispose this issue in its decision. funds covered thereby transferred from one of petitioners bankaccounts to another. The External
Auditors report embodied the following findings and recommendations:1
A corporation is a juridical entity with a legal personality separate and distinct from those acting for and
in its behalf and, in general, from the people comprising it.23 Thus, as a general rule, an officer may not Treasury Department (Cash Management):
be held liable for the corporations labor obligations unless he acted with evident malice and/or bad faith
in dismissing an employee.24 Findings:

In the present case, there was no showing of any evident malice or bad faith on Chus part as CBTLs 1. It was noted that checks consisting of various checks payable to teachers, staffs and other third
president. His participation in Arenas termination was not even sufficiently alleged and argued. Hence, parties had been the subject of encashment directly with the Treasury Department under the
he cannot be held solidarily liable for CBTLs liabilities to Arenas. stewardship of Mrs. Nowella A. Reyes,the University Treasurer. This practice is a clear violation of
imprest system of cash management, hence, resulting to unsound accounting practice. This laxity in
WHEREFORE, in light of these considerations, we hereby DENY the petition for lack of merit. The Court cash management of those checks were paid as intended for them. Recommendations:
of Appeals committed no grave abuse of discretion in its decision of March 26, 2013 and its resolution of
August 30, 2013 in CA-G.R. SP No. 117822, except with respect to the liability of petitioner Walden For internal control reasons, the treasury should not accept any check encashment from its daily
Chu. We thus absolve petitioner Walden Chu from paying in his personal capacity the monetary awards collections. Checks are being issued for encashment with our depository bank for security reasons. The
of respondent Rolly P. Arenas. No costs. mere acceptance of checks from the collections is tantamount to cash disbursement out of collections.

SO ORDERED. Findings:

G.R. No. 208321 July 30, 2014 2. It was also noted that various checks payable to the Treasurer of WUP x x x had been negotiated for
encashment directly to China Bank Cabanatuan Branch, while the intention of the management for
WESLEYAN UNIVERSITY PHILIPPINES, Petitioner, these checks were merely for fund transfer with the other account maintained at China Bank. This
vs. practice is a violation not only in the practice of accounting/cash custodianship but had been mingled
NOWELLA REYES, Respondent. with spurious elements. Unfortunately, check vouchers relating to this exception are nowhere to be
found or not on file.
DECISION
Findings:
VELASCO, JR., J.:
9

3. A crossed check payable to the Treasurer [WUP] x x x had been negotiated for encashment to On December 15, 2010, Labor Arbiter Reynaldo V. Abdon rendered a Decision finding for respondent.
China Bank Cabanatuan Branch despite of the restriction indicated in the face of the check. The dispositive portion of the Labor Arbiter Decision reads:
Unfortunately, the used check was no longer found on file.
WHEREFORE, premises considered, judgment is hereby rendered, DECLARING that complainant
As a result of said audit, petitioner served respondent a Show Cause Order and placed her under Nowella Reyes x x x [was] illegally dismissed by respondent Wesleyan University Philippines.
preventive suspension.2 The said Show Cause Order required her to explain the following matters
found by the External Auditors: Accordingly, respondent Wesleyan University Philippines through its President is hereby DIRECTED to:

(a) your encashment of Php300,000.00 ofa crossed check you issued payable to yourself (Chinabank (1) Reinstate complainant Nowella Reyes to her former or equivalent position without loss of seniority
Check No. 000873613 dated 26 November 2008) x x x; right;

(b) the encashment of various checks without any supporting vouchers x x x; (1.1) Since reinstatement is immediately executory, to render a Report of Compliance to this Office
within ten (10) days from receipt of this Decision.
(c) unliquidated cash advances in the aggregate amount of Php9.7 million x x x.3
(2) Pay complainant Reyes her backwages, from the time of her dismissal until reinstatement, the
On June 18, 2009, respondent submitted her Explanation. Following which, WUPs Human Resources present sum of which is P429,000.00;
Development Office (HRDO) conducted an investigation. Finding respondents Explanation
unsatisfactory, the HRDO, on July 2, 2009, submitted an Investigation Report4 to the University (3) Pay complainant Reyes, her 13th month pay in the sum of P52,000; her shared (sic) in related
President containing its findings and recommending respondents dismissal as University Treasurer. learning experience fee, P12,000.00; clothing allowance, P6,000.00; Honorarium as member of
standing committees, P4,000.00; and her vacation leave credits in the sum of P17,862.59;
Upon receipt of her notice of termination on July 9, 2009, respondent post-haste filed a complaint for
illegal dismissal with the Arbitration Branch of the National Labor Relations Commission. She contended (4) Pay complainant Reyes, moral damages in the sum of P150,000.00, exemplary damages in the
that her dismissal was illegal, void and unjust, for the following reasons: amount of P100,000.00, and 10% attorneys fees in the sum of P77,086.25;

First,her 60-day preventive suspension violated the Labor Code provisions prohibiting such xxxx
suspensions tolast for more than thirty (30) days. Thus, the fact that she was not reinstated to her
former position before the lapse of thirty (30) days, amounted to constructive dismissal;5 Second,there SO ORDERED.10
was a violation of her right to substantive and procedural due process, as evidencedby petitioners
failure to apply the pertinent due process provisions under its Administrative and Personnel Policy The Labor Artbiter noted, as respondent has insisted, that the charges against the latter were based on
Manual;6 and mere rumors and speculations. As observed too by the Labor Arbiter, petitioner itself was in the wrong
because it had no proper policies on its accounting and financial procedures and that the encashment
Finally,the charges against her werebased on mere suspicion and speculations and unsupported by and accommodation of checks to personnel, especially after banking hours, had been the practice of its
evidence.7 previous and present administrations. Thus, it was unfair to put all the blame on respondent without any
evidence that her actionswere highly irregular, unfair or unjustified.11
Petitioner, for its part, predicated its defense on the contention that respondent was a highly confidential
employee who handled significant amounts of money as University Treasurer and that the irregularities As regards petitionersfindings on the alterations in the Check Disbursement Voucher (CDV),
attributed to her in the performance ofher duties justify her dismissal on the basis of loss of trust and unliquidated cash advances and duplicate checks, the Labor Arbiter found and wrote:
confidence.8
Anent the alleged finding of the university that there was material alteration on the documents as
Petitioner also averred that the 60-day preventive suspension thus imposed does not necessarily make regards the Check Disbursement Voucher (CDV), for allegedly there was an absence of Board
suchsuspension void, inasmuch as the law merely requires that after a 30-day preventive suspension, Resolution entry in the CDV filed in the Accounting while the copy submitted by the Treasurer has a
the affected employee shall automatically be reinstated. But in the case of respondent, there was no Board Resolution entry as well as the word ATM on the payee portion on the photocopy as crossed out
need for her automatic reinstatement inasmuch as she was duly terminated within the 30-day period of while in the original it was not crossed out, respondent cannot summarily state that complainant was at
her preventive suspension.9 Moreover, respondent was duly afforded her right to due process since fault. The Human Resource should have conducted an in-depth investigation on this matter.
WUP substantially complied with the twin-notice rule. Unfortunately, respondent just followed the twin-notice rule, and did not conduct a thorough
administrative investigation in accordance with their own internal rules and policies in the Manual.
Ruling of the Labor Arbiter Consequently, this Office has serious doubt that such matter was the fault of the complainant for the
blame may fall on the accounting personnel who is handling the CDV.
10

With respect to the unliquidated cash advances, it is not likewise the fault of the complainant. She As found by the External Auditor, complainant-appellee should have implemented an imprest system of
pointed out that follow ups of the liquidation is [sic] being handled by the auditor, while respondent cash management in order to secure the indicated payees in those checks and they were paid of the
claims that she was previously handling the same before it was transferred to Accounting Office in checks as intended for them. It appears that checks payable to teachers, staffs and other third parties
August 2008. We see no evidence to prove that the liquidation is being handled by the complainant had beenthe subject of encashment directly with the Treasury Department x x x and this is an unsound
prior to August 2008. Moreover, it is common practice thatthe Treasurer disburses the funds such as accounting practice.
cash advances but the liquidation must be done by the beneficiary of the fund, and the responsible
people who should follow up the liquidation is the accounting office. Moreover, the External Auditors found that various checks payable to the Treasurer of Wesleyan
University has been negotiated for encashment directly to China Bank-Cabanatuan Branch while the
With respect to the duplicate checks, the same were done by a syndicate or individuals not intention of the management for those checks weremerely for fund transfer with the other account
connectedwith the University. The bank has already admitted responsibility in the encashment of these maintained at China Bank. That this practice violated accounting or cash custodianship and check
checks and had returned the amounts to the respondent University, thus complainant has no fault about vouchers are nowhere to be found.
this incident.12
Further, the crossed check payable to the Treasurer (complainantappellee) in the amount of
Ruling of the NLRC P300,000.00 dated 26 November 2008 had been negotiated for encashment to China Bank
Cabanatuan Branch despite of restriction indicated in the face of the check and that the used check was
Petitioner filed an appeal withthe National Labor Relations Commission (NLRC) which was granted in no longer found on file. There is a need for a clear policy when to issue crossed-checks or otherwise
the tribunals Decision dated July 11, 2011, declaring that respondentwas legally dismissed. However, and the use of debit/credit memo to transfer one account to another with the same bank. That these
petitioner was ordered to pay respondent her proportionate 13th month pay, the monetary value of her acts of violation of cash and check custodianship by complainant-appellee resulted in the loss of
vacation leave, and attorneys fees. respondent-appellant thus affecting the economy of the respondent-appellant institution.

Adopting a stance entirely opposite to that of the Labor Arbiter, the NLRC held that respondent failed to In view of our finding that respondents-appellants (sic) has validly terminated complainant-appellee the
controvert and disprove the established charges of petitioner (as appellant-respondent) and latters claim for damages and attorneys fees lacks sufficient factual and legal basis. Accordingly, the
insteadconveniently put the blame on other departments for her inculpatory acts. The NLRC opined that Labor Arbiters decision directing the reinstatement of complainantappellee with full backwages
her termination was not motivated by the change of petitioners officers but by the Universitys goal to ishereby vacated and set aside.15
promote the economy and efficiency of its Treasury Department.13
The NLRC denied respondents motion for reconsideration in a Resolution dated September 29,
In net effect, the NLRC found petitioners contention of loss of trust and confidence in respondent with 2011.Therefrom, respondent went on Certiorari to the CA, inCA-G.R. SP No. 122536.
sufficient basis. While respondent, so the NLRC notes, may not have been guilty ofwillful breach of
trust, the fact that she held a highly confidential position, and considering that anomalous transactions Ruling of the Court of Appeals
transpired under her command responsibility, provided petitioner with ample ground todistrust and
dismiss her.14 The NLRC explained: On February 28, 2013, the CA, through its assailed Decision,16 found the NLRCs ruling tainted with
grave abuse of discretion and reinstated the Decision of the Labor Arbiter. The fallo of the CA Decision
In this case, complainant-appellee [herein respondent] may not have been guilty of willful breach of reads:
trust. But as Treasurer of [WUP] who handles and supervises all monetary transactions in the University
and being a highly confidential employee at that, holding trust and confidence and after considering the WHEREFORE, premises considered, the assailed Decision and Resolution of the National Labor
series of irregular and anomalous transactions that transpired under complainant-appellees command Relations Commission dated July 11, 2011 and September 29, 2011 are REVERSED and SET ASIDE.
responsibility, respondent has basis or ample reason to distrust complainant-appellee. Thus, we cannot The Decision of the Labor Arbiter dated December 15, 2010 is hereby REINSTATED, subject to the
justly deny [WUP] the authority to dismiss complainant-appellee. modification that if reinstatement is no longer feasible, petitioner shall be awarded separation pay
equivalent to one month salary for every year ofservice reckoned from the time of employment to the
The principle of respondent (sic) superior or command responsibility may be cited as basis for the finality of this decision.17
termination of employment of managerial employees based on loss of trust and confidence. In the
Etcuban case (Ibid) the Supreme Court in upholding the validity of petitioner-employees dismissal on Holding that respondents termination was unjust, the CA, in virtual restoration of the findings and
the ground of loss of trust and confidence, ruled that even if the employee x x x had no actual and direct conclusions of the Labor Arbiter, pointed out, among others, that: (1) respondent sufficiently countered
participation in the alleged anomalies, his failure to detect any anomaly that would normally fall all charges against her; (2) it had been the practice of the previous and present administrations of
withinthe scope of his work reflects his ineffectiveness and amounts to gross negligence and petitioner to encash and accommodate checks of WUP personnel; thus, it would be unjust to penalize
incompetence which are likewise justifiable grounds for his irregularity, for what is material is that his respondent for observing a practice already in place when she assumed office; (3) the duty to liquidate
actuations were more than sufficient to sow in his employer the seed of mistrust and loss of confidence. cash advances is assigned to the internal auditor; (4) it has been established that the encashments of
spurious duplicate checks were perpetrated by individuals not connected with WUP, and that the bank
admitted responsibility therefor and had returned the amount involved to petitioner; (5) there was no
11

imputation of any violation of the Universitys Administration and Personnel Policy Manual; (6) while the Article 282. Termination by employer.An employer may terminate an employment for any of the
acts complained of violated the imprest system of cash management, there was no showing that the following causes:
said system had been adopted and observed in the schools accounting and financial procedures; and
(7) there was no showing that respondent had the responsibility to implement changes in petitioners xxxx
accounting system even if it were not in accordance with the generally accepted principles of
accounting.18 c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
Hence, the instant petition.
We explained in M+W Zander Philippines, Inc. v. Enriquez21 the requisites of a valid dismissal based
The Issues on loss of trust and confidence. As the case elucidates:

For consideration herein are the following issues raised by petitioner: Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss
of trust and confidence. Certain guidelines must be observed for the employer to terminate an employee
1. Whether or not the CA over-reached its power of review under Rule 65 of the Rules of Court when it for loss of trust and confidence. We held in General Bank and Trust Company v. Court of Appeals, viz.:
reversed the judgment of the NLRC; and
[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which
2. Whether or not the CA erred in finding respondent illegally dismissed by petitioner on the ground of are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of
loss of trust and confidence. overwhelming evidence to the contrary. It must be genuine, not a mere afterthought tojustify earlier
action taken in bad faith.
The Courts Ruling
The first requisite for dismissal on the ground of loss of trust and confidence is that the employee
The petition is impressed with merit. The CA erred in reinstating the Labor Arbiters Decision and in concerned must be one holding a position of trust and confidence.
finding that respondent was illegally dismissed.
There are two classes of positions of trust: managerial employees and fiduciary rank-and-file
The CAs power of review employees.

We first resolve the procedural issue raised in this recourse. Petitioner contends that the CA over- Managerial employees are defined as those vested with the powers or prerogatives to lay down
reached its power of review under Rule 65 when it substituted its own judgment over errors of judgment management policies and to hire, transfer, suspend, lay-off, recall, discharge,assign or discipline
that it found in the NLRC Decision, stressing that the province of a writ of certiorari is to correct only employees or effectively recommend such managerialactions. They refer to those whose primary duty
errors of jurisdiction and not errors of judgment. consists of the management of the establishment in which they are employed or of a department or a
subdivision thereof, and to other officers or members of the managerialstaff. Officers and members of
This contention is misplaced. It is settled that under Section 9 of Batas Pambansa Blg.129,19 as the managerial staff perform work directlyrelated to management policies of their employer and
amended by Republic Act No. 7902,20 the CA, pursuant to the exercise of its original jurisdiction over customarily and regularly exercise discretion and independent judgment.
petitions for certiorari, is specifically given the power to pass upon the evidence, if and when necessary,
to resolve factual issues. Sec. 9 clearly states: The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property
custodians, etc., or those who, in the normal exercise of their functions, regularlyhandle significant
The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and amounts of money or property. These employees, though rank-and-file, are routinely charged with the
perform any and all acts necessary to resolve factual issues raised in cases falling within its original and care and custody of the employers money or property, and are thus classified as occupying positions of
appellate jurisdiction, including the power to grant and conduct new trials or further proceedings. x x x trust and confidence.22

Hence, the appellate court acted within its sound discretion when it re-evaluated the NLRCs factual xxxx
findings and substituted the latters own judgment.
The second requisite of terminating an employee for loss of trust and confidence is that there must be
Loss of trust and confidence as a ground for termination an act that would justify the loss of trust and confidence. To be a valid cause for dismissal, the loss of
confidence must be based on a willful breach of trust and founded on clearly established facts.23
We now proceed to the substantive issue on the propriety of respondents dismissal due to loss of trust
and confidence.As provided in Art. 282(c) of Presidential Decree No. 442, otherwise known as the To summarize, the first requisite is that the employee concerned must be one holding a position of trust
Labor Code of the Philippines: and confidence, thus, one who is either: (1) a managerial employee; or (2) a fiduciary rank-and-file
employee, who, in the normal exercise of his or her functions, regularly handles significant amounts of
12

money or property of the employer. The secondrequisite is that the loss of confidence must be based on day, the question of whether she was a managerial or rank-andfile employee does not matter in this
a willful breach of trust and founded on clearly established facts. case because not only is there basis for believing that she breached the trust of her employer, her
involvement in the irregularities attending to petitionersfinances has also been proved.
In Lima Land, Inc. v. Cuevas,24 We discussed the difference between the criteria for determining the
validity of invoking loss of trust and confidence as a ground for terminating a managerial employee on To recall, petitioner, per its account, allegedly lost trust and confidence in respondent owing to any or an
the one hand and a rank-and-file employee on the other. In the said case, We held that with respect to interplay of the following events: (1) she encashed a check payable to the University Treasurer in the
rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal,requires proof of amount of three hundred thousand pesos (PhP 300,000); (2) she encashed crossed checks payable to
involvement in the alleged events in question, and that mere uncorroborated assertions and the University Treasurer, when the intention of management in this regard was to merely transfer funds
accusations by the employer would not suffice. Withrespect to a managerial employee, the mere from one of petitioners accounts to another in the same bank; (3) she allowed the Treasury Department
existence of a basis for believing that such employee has breached the trust of his employer would to encash the checks issued to WUP personnel rather than requiring the latter to have said checks
suffice for his dismissal. The following excerpts from Lima Land are instructive: encashed by the bank, in violation of the imprest system of accounting; (4) she caused the
disbursement of checks without supporting check vouchers; (5) there were unliquidated cash advances;
As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for termination of and (6) spurious duplicate checks bearing her signature were encashed causing damage to petitioner.
employment, is premised on the fact that an employee concerned holds a position where greater trust is
placed by management and from whom greater fidelity to duty is correspondingly expected. This We disagree with the CAs finding that respondent has sufficiently countered all inculpatory allegations
includes managerial personnel entrusted with confidence on delicate matters, such as the custody, and accusations against her. On the contrary, We find that here, there was anadmitted, actual and real
handling, or care and protection of the employers property.The betrayal of this trust is the essence of breach of duty committed by respondent, which translates into a breach of trust and confidence in her.
the offense for which an employee is penalized. For perspective, respondents explanation as to the charges against her is as follows:

It must be noted, however, that ina plethora of cases, this Court has distinguished the treatment of 1. That the alleged crossed check issued by her payable to THE TREASURER WUP was done in the
managerial employees from that of rank-and-file personnel, insofar as the application of the doctrine of exercise of her duty and function as such, and not with her name and not to herself and personal favor,
loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust and that said check had been prepared passing through the usual system; 2. That the University heads
and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events in were the beneficiaries of said amount who strongly requested that their love giftbe given, hence, the
question, and that mere uncorroborated assertions and accusations by the employer will not be encashment;
sufficient. But as regards a managerial employee, the mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of 3. That the amount of the check was properly disposed of as evidenced by the document bearing the
managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is signatures of recipients;
some basis for such loss of confidence, such as when the employer has reasonableground to believe
that the employee concerned is responsible for the purported misconduct, and the nature of his 4. That the Office to pointto if vouchers and supporting documents will have to be checked concerning
participation therein renders him unworthy of the trust and confidence demanded of his position. payments made is the Accounting Office;

On the other hand, loss of trust and confidence as a ground of dismissal has never been intended to 5. That cash advances to various University personnel pass through her office in the exercise of her
afford an occasion for abuse because of its subjective nature. It should not be used as a subterfuge for duties assuch but the office who follow up the liquidation of payments received is the Office of the
causes which are illegal, improper, and unjustified. It must be genuine, not a mere afterthought intended University Auditor;
to justify an earlier action taken in bad faith. Let it not be forgotten that what is at stake is the means of
livelihood, the name, and the reputation of the employee. To countenance an arbitrary exercise of that 6. That respondent Reyes adopted her reply on the show-cause order in the investigation previously
prerogative is to negate the employees constitutional right to security of tenure.25 conducted by Dr. Jeremias Garcia about the duplicated checks alleging among others:

Respondents employment classification is irrelevant in light of her proven willful breach a) She and her staff confirmed that only the checks issued to General Capulong and Leodigario David
were encashed by the University Teller;
There is no doubt that respondent held a position of trust; thus, greater fidelity is expected of her. She
was not an ordinary rank-and-file employee but an employee occupying a very sensitive position. As b) The check issued to Norma de Jesus was encashed by the Pick-up Chinabank Teller on December
University Treasurer, she handled and supervised all monetary transactions and was the highest 5, 2008 while collecting deposits from the University with the assistance of the University teller;
custodian of funds belonging to WUP.26 To be sure, in the normal exercise of her functions, she
regularly handled significant amounts of money of her employer and managed a critical department. c) That the check issued to Mercedes was not encashed with the University teller but with WEMCOOP;

The presence of the first requisite iscertain. So is as regards the second requisite. Indeed, the Court d) As to the encashment and accommodation of checks to personnel, it has been the practice of
finds that petitioner adequately proved respondents dismissal was for a just cause, based on a willful previousand present administration moreso when employees cannot anymore go to Chinabank to
breach of trust and founded on clearly established facts as required by jurisprudence. At the end of the transact business as it is mostly beyond banking hours when checks are ready for disbursement;
13

e) That Respondents department has no control over fraudulent transactions done outside the b. Unliquidated cash advances
University, that it is the Banks duty to protect its clients as tothe proper procedures to secure our
account; On the matter of unliquidated cash advances in the aggregate amount of nine million seven hundred
thousand pesos (PhP 9,700,000), respondent explained that while it was true that cash advances to
f) That the computer system program of the Universitys depository bank has very limited capabilities to WUP personnel passed through her office in the exercise of her duties as University Treasurer, the
detect fraudulent entries; office that follows up the liquidation of advances received is the office of the University Auditor.31
However, granting that the responsibility of handling the liquidation of cash advances is no longer
g) That the signature verifier also had been remiss in carefully checking the authenticity ofprevious lodged in her office, there is proof showing that before the Treasury Department was relieved of said
signatories.27 responsibility, the total unliquidated cash advances was even bigger, amounting to eleven million five
hundred thirty-three thousand two hundred thirty pesos and thirty-seven centavos (PhP 11,533,230.37).
a. Respondents encashment of checks There is nothing in the records before us showing that respondent denied the following findings in the
Investigation Report of the WUPs Human Resource Development Office (HRDO)on this matter, to wit:
As it were, respondent did not deny, in fact admitted, the encashment of the three hundred thousand
peso (PhP 300,000) crossed check payable to the University Treasurer which covered the total amount In the matter of unliquidated cash advances in the aggregate amount of Php9.7million as found by the
of the "love gift" for administrative and academic officials of WUP. Neither did she deny the fact that the External Auditors, respondents contention was that cash advances tovarious University personnel pass
Treasury Department encashed checks issued to WUP personnel rather than requiring them to have the through her office in the exercise of her duties as such but the office who follows up the liquidation of
checks encashed by the bank. Instead, she explained that the beneficiaries of the amounts strongly payments received is the Office of the University Auditor.
requested that their love gifts be given in cash, hence the encashment of the PhP 300,000 crossed
check and, thereafter, the accommodation and encashment of their checks directly by the Treasury On the inquiry done x x x of the Internal Auditor, Treasury and Accounting officer on July 1, 2009, it was
Department. Moreover, she submitted a document bearing the signatures of the recipients of the "love found out that the responsibility of handling cash advances and liquidation report was transferred from
gift" as proof that the amount was disposed properly.28 She further insisted that this was the usual Treasury Office to Accounting Office on August 2008, when Ms. Luzviminda Torres, the personnel
practice of the University and that she merely accommodated the requests of WUP personnel especially handling the same detailed at the Treasury Office went on leave. It was transferred to Ms. Julieta
when Chinabank was already closed. Mateo. What was surprising was that as per certification and summary submitted by Ms. Mateo, the
amount of unliquidated cash advances previous to August 2008, when the same was under the
Jurisprudence has pronounced that the crossing of a check means that the check may not be encashed responsibility of the Treasury Office, was even bigger with the total amount of ELEVEN MILLION FIVE
but only deposited in the bank.29 As Treasurer, respondent knew or is at least expected to be aware of HUNDRED THIRTY THREE THOUSAND, TWO HUNDRED THIRTY PESOS AND THIRTY SEVEN
and abide by this basic banking practice and commercial custom. Clearly, the issuance of a crossed CENTAVOS (Attached as Annex "G")
check reflects managements intention to safeguard the funds covered thereby, its special instruction to
have the same deposited to another account and its restriction on its encashment. Even if there is truth in the contention of herein Respondent that she was no longer the one in charge of
the liquidation proceedings, the same would not absolve her from gross negligence of duties. The fact
Here, respondent, as aptly detailed inthe auditors report, disregarded managements intentions and that the said function was with her office until August 2008, with unliquidated cash advances even
ignored the measures in place to secure the handling of WUPs funds. By encashing the crossed bigger, still showed that she reneged in her duties which she had overlooked for so long. She now
checks, respondent put the funds covered thereby under the riskof being lost, stolen, co-mingled with mistakenly points the responsibility to the Office of the University Auditor. These informations are
other funds or spent for other purposes. Furthermore, the accommodation and encashment by the enough to be considered as Respondents acts constitutive of breach of trust and confidence.32
Treasury Department of checks issued to WUP personnel were highly irregular. First, WUP, not being a
bank, had no business encashing the checks of its personnel.30 More importantly, in encashing the said xxx
checks, the Treasury Department made disbursements contrary to the wishes ofmanagement because,
in issuing said checks, management has madeclear its intention that monies therefor would be sourced c. Other irregularities inrespondents performance
from petitioners deposit with Chinabank, under a specific account, and not from the cash available in
the Treasury Department. In all, We find the Investigation Report of the HRDO a credible, extensive and thorough account of
respondents involvementin incidents which are sufficient grounds for petitioners loss of trust and
That the encashment of crossed checks and payment of checks directly to WUP personnel had been confidence in her, to wit:
the practice of the previous and present administration of petitioner is of no moment. To Our mind, this
was simply respondents convenient excuse, a poorlydisguised afterthought, when her unbecoming Respondent Nowella C. Reyes has committed breach of trust and confidence in the conduct of her
carelessness in managing WUPs finances was exposed. Moreover, the prevalence of this practice office.
could have been contained if only respondent consistently observed the regular procedure for
encashing crossed checks and properly handled requests for accommodation of checks issued to the In her answer, Respondent admitted the encashment of the crossed check with the defense that the
WUP personnel. same was done in the performance of her duty, not for her personal use but because of the request of
14

University heads who wanted their love gifts begiven. She alsoadmitted habitual encashment of checks However noble the intention of herein Respondent in helping her fellow workers in the University by her
issued by the University to its personnel on the basis of practice of previous administration. acts of accommodation by encashing their checks directly withthe Treasury Office when Chinabank was
already closed, the same still reneged in her duty to protect the economic security of the University. An
The charge against Respondent of the act of improper encashment of a check, which aside from being act of misconduct which caused [sic]33
irregular is clearly violative of imprest system of cash management. Moreover, the same being a
crossed check, should not be negotiated for encashment to Chinabank Cabanatuan Branch because An employer cannot be compelled toretain an employee who is guilty of acts inimical to the interests of
of the restriction indicated on its face, which Mrs. Reyes, by reason of her office knew very well. the employer. A company has the right to dismiss its employees if only as a measure of self-protection.
This is all the more true in the case of supervisors or personnel occupying positions of responsibility.34
During the investigation conducted, it was revealed that the check disbursement voucher attached by In this case, let it be remembered that respondent was not an ordinary rank-and-file employee as she
Respondent on her answer to justify the regularity of its issuance and eventual encashment was not was no less the Treasurer who was in charge of the coffers of the University. It would be oppressive to
exactly the same as the one filed at the Accounting Office. It showed that the photocopy of the original require petitioner to retain in their management an officer who has admitted to knowingly and
CDV which was attached by Respondent (attached as Annex "E"of this report) bear some material intentionally committing acts which jeopardized its finances and who was untrustworthy in the handling
alterations, namely: and custody of University funds.

1. The absence of entry of the Board Resolution which was reflected as a sort of inquiry by the Internal WHEREFORE, premises considered, we GRANTthe petition. The assailed Decision of the Court of
Auditor, and which at present was left blank on the original, as compared to the photocopy submitted by Appeals in CA-G.R. SP No. 122536 is, thus, SET ASIDE. The Decision of the National Labor Relations
respondent bearing an entry of the Board Resolution number; Commission in NLRC RAB III Case No. 07-15131-09 is REINSTATED.

2. The word ATM on the payee portion of the CDV in the original as compared to the photocopy wherein SO ORDERED.
the entry ATM was crossed out.
NARCISO T. MATIS, Petitioner, v. MANILA ELECTRIC COMPANY, Respondent.
During a discussion with the external auditors, it was categorically stated by them that during the
courseof external audit, said document was inexistent in the records presented by the Accounting and DECISION
Treasurers Offices. The production of the photocopy by Respondent already altered only after the
suspension was effected cast doubt on the regularity of its issuance, negating her otherwise claim. PERALTA, J.:
Another significant observation was that the original copy of CDV (attached as Annex "F" of this report)
and corresponding signatures of administrative heads who received payments showed folded marks Before this Court is a petition for review on certiorari filed by petitioner Narciso T. Matis (Matis) assailing
halfways, with the fastener holes unmatched, showing that those two documents were not really filed the Decision1 and Resolution,2 dated June 11, 2012 and March 1, 2013, respectively, of the Court of
together, as regularly done, and the same were not filed in the regular course and must have been kept Appeals (CA), which affirmed with modification the Decision3 dated July 22, 2009 and Resolution4
previously on a different manner in possession of person other than the office which must file the same. dated December 28, 2009 of the National Labor Relations Commission (NLRC).

xxxx The antecedents follow.


Respondent Manila Electric Company (Meralco) hired petitioner Matis, and complainants Nemencio
On the last charge in the show cause order specifically the existence of duplicate checks in the account Hipolito, Jr. (Hipolito), Raymundo M. Zufiiga5 (Zuniga), Gerardo de Guia (De Guia), and Ricardo Ignacio
of the University amounting to Php 1.050 Million, included in Respondents defenses were that among (Ignacio) on various dates and in various capacities.6 At the time of their dismissal, Matis was a
the checks duplicated, only two of them were encashed with the University Teller, and the check foreman; Hipolito and Zuniga were acting foremen; De Guia was a stockman/driver; and Ignacio was a
originally named to Norma de Jesus as payee was paid by the pick-up teller only through the assistance leadman.
of the University teller.
On July 27, 2006, Matis and the others were dismissed on the grounds of serious misconduct, fraud or
Again, Respondents defense were void of truth and merit. The act of encashing checks issued by the willful breach of trust, commission of a crime or offense against the employer and other causes
Treasury Office, clearly violative of imprest system of cash management which Mrs. Reyes by reason of analogous to the foregoing.7 They were dismissed for their alleged cooperation in the pilferages of
her office knew very well, showed that Respondent directly reneged in her duty to observe economic Meralco's electrical supplies by one Norberto Llanes (Llanes), a non-Meralco employee, particularly, in
security measures. an incident which took place on May 25, 2006. On that same day, Matis and the rest of the crew of
Trucks 1837 and 1891 were replacing a rotten pole in Pacheco Subdivision, Dalandan, Valenzuela
As found on the documents attachedto the Investigation report of Dr. Garcia which had been expressly City.8chanrobleslaw
adopted by herein respondent in her answer is an Affidavit of Norma de Jesus stating that she actually
encashed the check with the personnel of the Treasury Office particularly Shirley Punay, who gave her At around 10:30 in the morning while the Meralco crew were working at a distance, Llanes was hanging
the amountequivalent days after the check was handed to the Treasury office. around the work site. He appeared familiar with the crew as he was handing tools and drinking water
with them. He nonchalantly boarded the truck in the presence of Zuniga and De Guia, and rummaged
15

through the cargo bed for tools and materials and stashed them in his backpack without being stopped SO ORDERED.11chanroblesvirtuallawlibrary
by any of the crew. Thereafter, Matis and the other crew manning Truck 1891 arrived. Llanes boarded On appeal, the NLRC ruled that Matis and the other complainants were validly dismissed. Their
Truck 1891 and filched materials while Matis was around. For more than two hours, Llanes was walking suspicious leniency and laxity in allowing Llanes to board the trucks, conversing with him intimately,
around, boarding the trucks, freely sorting and choosing materials and tools inside the trucks then permitting him to return to the trucks with empty sacks in tow, and the quantity of materials stolen, all
putting them in his backpack, talking casually with the crew, and even drinking water from the crew's video-taped and described in detail by the surveillance team, belie their denial of involvement.12 Even
jug.9chanrobleslaw assuming that they were not conspirators in the crime of theft, their dismissal is still justified for they
were guilty of gross negligence. Considering the circumstances surrounding the pilferage, the willful
Unknown to them, a Meralco surveillance team, composed of Joseph Aguilar (Aguilar), Ariel Dola (Bola) inaction of the complainants when there is a duty to stop the stealing amounted to gross negligence.13
and Frederick Riano (Riano), was monitoring their activities and recording the same with a Sony Video The complainants were also validly dismissed on the ground of loss of trust and confidence. Their gross
8 camera. Due to reports of alleged pilferages occurring in Trucks 1837 and 1891, Meralco was negligence amounted to a breach of trust and confidence reposed upon them as employees entrusted
prompted to create the said team or "task force" to tail and monitor Matis and the others. with properties of respondent. However, the NLRC held that Ignacio was illegally dismissed in the
absence of evidence showing his complicity or participation in the theft. The decretal portion of the
In a Memorandum dated June 16, 2006, Meralco required them to appear before Meralco's counsel for decision reads:ChanRoblesVirtualawlibrary
an investigation relative to the incident on May 25, 2006. Matis and the others denied any involvement WHEREFORE, the appeals are PARTIALLY GRANTED and the Decision appealed from is hereby
in the stealing of the company properties. Subsequently, they were dismissed. MODIFIED as follows:

Matis and the other complainants alleged that Meralco's dismissal of their employment violated their chanRoblesvirtualLawlibrary1) Complainants Narciso Matis, Nemencio Hipolito, Jr., Raymund Zuniga
constitutional right to property protection, social justice and security of tenure. They denied any and Gerardo De Guia were validly terminated from their employment, hence they are not entitled to the
complicity or participation in the pilferage. They claimed that the affidavits presented by Meralco have relief of "returning to work" and their complaint is DISMISSED for lack of merit.
weak probative value. They also alleged that Meralco did not observe due process in their termination.
2) Complainant Ricardo Ignacio was illegally terminated and, therefore, he is entitled to full
Meralco, on the other hand, maintained that petitioner and the complainants were validly dismissed on backwages from the time of his termination until his actual reinstatement.
the ground of serious misconduct. Meralco presented the affidavits of Aguilar, Dola and the probationary
employees who were members of the crew, and the video showing the incident on May 25, 2006 to The dropping of Mr. Manuel M. Lopez as party-respondent is AFFIRMED.
show that complainants had knowledge, direct participation and complicity in the stealing. Meralco SO ORDERED.14chanroblesvirtuallawlibrary
insisted that there is evidence to support that it was not the first instance that Llanes has been stealing Finding no cogent reason to disturb the findings of the NLRC, the CA denied the petition for certiorari
supplies and materials, and that such were done in the presence of, and with clear knowledge of the filed by Matis and the others, and affirmed the decision of the NLRC. The CA held that the ruling of the
dismissed crew. NLRC deserves respect since the same was based on factual findings supported by clear and
convincing evidence and accepted jurisprudence. The fallo of the decision
In a Decision10 dated April 11, 2007, the Labor Arbiter (LA) ruled that Matis and the others were not reads:ChanRoblesVirtualawlibrary
illegally dismissed. The LA considered their dismissal from service too harsh when suspension would WHEREFORE, PREMISES CONSIDERED, the herein petition for certiorari is DENIED. The assailed
have sufficed given that they were not entirely faultless. The charge of serious misconduct cannot Decision of the National Labor Relations Commission, First Division, in NLRC CA No 052667-07 dated
prosper as there is no substantial evidence of their alleged cooperation and participation in the theft. July 22, 2009 and the Resolution promulgated on 28 December 2009 STAND.
Likewise, the LA rejected respondent's claim that complainants are guilty of gross negligence since
there was no evidence of complainants' habitual neglect of duty. The dispositive portion of the decision SO ORDERED.15chanroblesvirtuallawlibrary
reads:ChanRoblesVirtualawlibrary Upon the denial of the motion for reconsideration, Matis filed before this Court the instant petition raising
WHEREFORE, all foregoing premises considered, judgment is hereby rendered finding complainants' the following issues:ChanRoblesVirtualawlibrary
dismissal too harsh a penalty being not commensurate with their simple neglect of duties as earlier WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THERE WAS NO
discussed above. Accordingly, complainants are hereby ordered to immediately report back to work DISMISSAL IN THE INSTANT CASE.
within ten (10) working days from receipt of this decision without loss of seniority rights and benefits but
without the payment of backwages. As clarified above, this return-to-work order is NOT a reinstatement WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE DECISION OF THE
order within the ambit of Article 279 of the Labor Code since there is NO finding of illegal dismissal NATIONAL LABOR RELATIONS COMMISSION.
herein. In essence, the issue to be resolved by this Court is whether petitioner Matis was illegally dismissed.
This Court resolves to deny the instant petition.
For being a nominal party, Mr. Manuel M. Lopez is hereby ordered dropped as party-respondent in
these consolidated cases. Matis prays that this Court relax the application of the Rules where strong considerations of substantial
justice are manifest in the petition. He avowed that his counsel informed him of the denial by the CA of
All other claims are dismissed for lack of merit. his Motion for Reconsideration only on April 12, 2013.
16

Section 2, Rule 45 of the Rules of Court provides:ChanRoblesVirtualawlibrary Llanes. Matis's tolerance of the activities of Llanes demonstrates his complicity in the theft, and not a
Section 2. Time for filing; extension. The petition shall be filed within fifteen (15) days from notice of mere want of care in the performance of his duty or gross negligence.
the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for
new trial or reconsideration filed in due time after notice of the judgment. On motion duly filed and Assuming Matis were negligent, his inaction can only be regarded as a single or isolated act of
served, with full payment of the docket and other lawful fees and the deposit for costs before the negligence which cannot be considered as gross and habitual, hence, cannot be considered as a just
expiration of the reglementary period, the Supreme Court may for justifiable reasons grant an extension cause for his dismissal. Nevertheless, such finding will not warrant the reversal of the instant case.
of thirty (30) days only within which to file the petition. (Emphasis supplied)
It is settled that the rules of procedure are meant to be tools to facilitate a fair and orderly conduct of Article 282 (c) of the Labor Code provides that an employer may terminate an employment for fraud or
proceedings.16 The relaxation or suspension of procedural rules, or the exemption of a case from willful breach by the employee of the trust reposed in him by his employer or duly-authorized
their operation, is warranted when the purpose of justice requires it.17 However We held in the case of representative. It is stressed that loss of confidence as a just cause for the termination of employment is
Sebastian v. Hon. Morales18 that: based on the premise that the employee holds a position where greater trust is placed by management
and from whom greater fidelity to duty is correspondingly expected.22 The essence of the offense for
chanRoblesvirtualLawlibraryLitigation is not a game of technicalities, but every case must be which an employee is penalized is the betrayal of such trust.
prosecuted in accordance with the prescribed procedure so that issues may be properly presented and
justly resolved. Hence, rules of procedure must be faithfully followed except only when for persuasive Loss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse
reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with his failure to by the employer of its prerogative, as it can easily be subject to abuse because of its subjective
comply with the prescribed procedure. Concomitant to a liberal application of the rules of procedure nature.23 A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse,
should be an effort on the part of the party invoking liberality to explain his failure to abide by the rules. as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.24chanrobleslaw
We note that in his statement of material dates, Matis alleged that his counsel received the denial of his
Motion for Reconsideration on April 11, 2013, while he asseverated in his statement of the matters and Matis alleges that he may not be removed on the ground of breach of trust and confidence as he was
in his verification and certification of non-forum shopping that his counsel received the same on March not a managerial employee or an employee primarily entrusted with the handling of company funds or
11, 2013. property.

This Court, in a Resolution19 dated July 22, 2013, granted a 30-day extension within which to file his We are not persuaded. Loss of confidence applies to: (1) employees occupying positions of trust and
petition for review on certiorari, counted from the expiration of the reglementary period, and granted his confidence, the managerial employees; and (2) employees who are routinely charged with the care and
second motion for extension of fifteen (15) days to file the petition filed by his new counsel. Thus, Matis custody of the employer's money or property which may include rank-and-file employees, e.g., cashiers,
filed his petition for review on certiorari on May 30, 2013. auditors, property custodians, or those who, in the normal routine exercise of their functions, regularly
handle significant amounts of money or property.25cralawredchanrobleslaw
We resolve to allow the instant petition and decide on the merits of the case as petitioner adequately
explained in his petition the reason for his belated filing, and given that he promptly sought for It is established that Matis was a foreman with a monthly salary of P57,000.00 at the time of his
extensions of time for cogent grounds before the expiration of the time sought to be extended. dismissal.26 The vehicles being utilized in the repair and maintenance of Meralco's distribution lines
ordinarily carried necessary equipment, tools, supplies and materials. Thus, Matis, as the foreman, is
As to the substantive issue, Matis maintains that Meralco failed to prove that he was legally dismissed routinely entrusted with the care and custody of Meralco's properties in the exercise of his function.
based on the ground that he was grossly negligent which constituted breach of trust as provided by the
Labor Code. To be a ground for dismissal, the neglect of duty must be both gross and habitual. The In the case of Apo Cement Corp. v. Baptisma,27 it was held that for an employer to validly dismiss an
case stemmed from a single incident which occurred on May 25, 2006, thus, he cannot be validly employee on the ground of loss of trust and confidence, the following guidelines must be observed: (1)
dismissed from employment. loss of confidence should not be simulated; (2) it should not be used as subterfuge for causes which are
improper, illegal or unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming evidence
Gross negligence connotes want of care in the performance of one's duties.20 It evinces a thoughtless to the contrary; and (4) it must be genuine, not a mere afterthought to justify earlier action taken in bad
disregard of consequences without exerting any effort to avoid them.21 Fraud and willful neglect of faith. More importantly, the loss must be founded on clearly established facts sufficient to warrant the
duties imply bad faith on the part of the employee in failing to perform his job to the detriment of the employee's separation from work.28chanrobleslaw
employer and the latter's business. On the other hand, habitual neglect implies repeated failure to
perform one's duties for a period of time, depending upon the circumstances. Contrary to his allegation that he failed to notice the thievery because he and the crew were
preoccupied with the replacement of the rotting post, Matis lingered, by his admission, to supposedly
Records reveal that it was not only on May 25, 2006 that Llanes, the pilferer, was seen during a Meralco look after the truck.29 As established, the crew exhibited familiarity with the culprit during the entire
operation as he was previously noticed by Meralco employees in past operations. Also, the evidence operations. Based on the testimonies of the witnesses, Llanes was seen picking up unused supplies
ascertained the presence of Matis in the worksite where the pilferage took place, and his familiarity with and materials that were not returned to the company in the past operations. He was casually boarding
the trucks despite the same being prohibited from non-Meralco employees. Matis was seen conversing
17

intimately with Llanes inside Truck 1891. Thereafter, Llanes was able to filch Meralco properties in the confidence in him. If considered, petitioner's length of service should be taken against him as his
presence of Matis. Thus, Matis was complicit in the pilferage by being familiar with Llanes, by his familiarity with Llanes, his disregard of the company rules, and passivity during the thievery echo his
inaction while the looting was being perpetrated, and by not reporting the same to the authorities and to disloyalty with his employer which he served for thirty-one years. As such, fairness dictates that Matis,
Meralco. The totality of the circumstances convinces this Court that Matis is guilty of breach of trust. who has breached the confidence reposed on him, should not be allowed to continue his employment
with Meralco.
We reiterate this Court's ruling about the very same incident on May 25, 2006 in the case of Meralco v.
Gala,30 that to Our mind, the Meralco crew (the foremen and the linemen) allowed or could have even WHEREFORE, the petition for review on certiorari filed by petitioner Narciso T. Matis is hereby
asked Llanes to be there during their operations for one and only purpose to serve as their conduit DENIED. The Decision and Resolution, dated June 11, 2012 and March 1, 2013, respectively, of the
for pilfered company supplies to be sold to ready buyers outside Meralco worksites. As held in the Gala Court of Appeals affirming with modification the Decision dated July 22, 2009 and Resolution dated
case:ChanRoblesVirtualawlibrary December 28, 2009 of the National Labor Relations Commission are hereby AFFIRMED.
The established fact that Llanes, a non-Meralco employee, was often seen during company operations,
conversing with the foremen, for reason or reasons connected with the ongoing company operations, SO ORDERED.chanRoblesvirtualLawlibrary
gives rise to the question: what was he doing there? Apparently, he had been visiting Meralco
worksites, at least in the Valenzuela Sector, not simply to socialize, but to do something else. As G.R. No. 213934, November 09, 2016
testified to by witnesses, he was picking up unused supplies and materials that were not returned to the
company. From these factual premises, it is not hard to conclude that this activity was for the mutual MARY ANN G. VENZON, EDDIE D. GUTIERREZ, JOSE M. GUTIERREZ, JR. AND MONA LIZA L.
pecuniary benefit of himself and the crew who tolerated the practice. For one working at the scene who CABAL, Petitioners, v. ZAMECO II ELECTRIC COOPERATIVE, INC. AND ENGR. FIDEL S. CORREA,
had seen or who had shown familiarity with Llanes (a non-Meralco employee), not to have known the GENERAL MANAGER, Respondents.
reason for his presence is to disregard the obvious, or at least the very
suspicious.31chanroblesvirtuallawlibrary DECISION
Proof beyond reasonable doubt is not needed to justify the loss of confidence as long as the employer
has reasonable ground to believe that the employee is responsible for the misconduct and his PERALTA,** J.:
participation therein renders him unworthy of the trust and confidence demanded of his position.32
Meralco was able to establish through substantial evidence that it has reasonable ground to believe that Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court which seeks the
Matis's involvement in the incident rendered him unworthy of the trust and confidence reposed upon reversal of the Resolution2 dated July 31, 2014 of the Court of Appeals (CA) in CA-G.R. SP No.
him as a foreman of Meralco. 125798. The CA affirmed the Decision3 of the National Labor Relations Commission (NLRC), Special
Third Division, in NLRC Case No. RAB-III-10-15467-09 reversing, on reconsideration, the Decision4 of
As settled in Vergara v. NLRC,33 the filing of the complaint by the public prosecutor is sufficient ground the NLRC Third Division which held that, while there was illegal dismissal of petitioners contrary to the
for a dismissal of an employee for loss of trust and confidence. The evidence supporting the criminal Decision5 of the Labor Arbiter (LA), the case has been mooted due to the reinstatement of petitioners.
charge, found sufficient to show prima facie guilt after preliminary investigation, constitutes just cause
for termination based on loss of trust and confidence.34 In this case, the Assistant City Prosecutor of Petitioners were regular employees of ZAMECO II Electric Cooperative, Inc. (ZAMECO II) occupying
Valenzuela City recommended the filing of information for qualified theft against Matis and the managerial and rank-and-file positions. They filed a case for illegal dismissal from employment claiming
others.35chanrobleslaw that they were mere victims of a power struggle between the two (2) factions fighting to control the
management of ZAMECO II.
Additionally, an employee's acquittal in a criminal case does not automatically preclude a determination
that he has been guilty of acts inimical to the employer's interest resulting in loss of trust and The Factual Antecedents relating to ZAMECO II:
confidence.36 An acquittal in criminal prosecution does not have the effect of extinguishing
liability for dismissal on the ground of breach of trust and confidence.37 The trial court acquitted On November 21, 2002, Castillejos Consumers Associations, Inc. (CASCONA), an organization of
Matis and the others due to insufficiency of evidence to warrant conviction beyond reasonable electric consumers from the Municipality of Castillejos, Zambales under the coverage area of ZAMECO
doubt.38 While the evidence presented failed to satisfy the quantum of proof required in criminal cases, II and represented by Engr. Dominador Gallardo, filed a letter-complaint with the National Electrification
the same substantially proved the dishonest act of Matis which warranted his dismissal from Administration (NEA). The complaint sought to remove the Board of Directors of ZAMECO II headed by
employment. the Board President, Jose S. Dominguez, for mismanagement of funds and expiration of their term of
office.6chanrobleslaw
To be sure, length of service is taken into consideration in imposing the penalty to be meted upon an
erring employee.39 However, in cases of breach of trust and loss of confidence, the length of time, if On November 24, 2004, the NEA issued a Resolution removing from office all the members of the
considered at all, shall be taken against the employee, as his involvement in dishonest acts reflects a Board of Directors of ZAMECO II with perpetual disqualification to run for the same position in any
regrettable lack of loyalty which should have been strengthened, instead of betrayed.40 Unlike other future district elections of the cooperative, and ordered the immediate conduct of district elections. On
just causes for dismissal, trust in an employee, once lost is difficult, if not impossible, to regain.41 In the December 21, 2004, the NEA issued an Office Order designating Engr. Paulino T. Lopez as Project
case at bar, Matis's involvement in the pilferage of Meralco's properties resulted in respondent's loss of
18

Supervisor of ZAMECO II who was tasked to perform his duty until such time that a new set of Board of
Directors shall have been constituted.7chanrobleslaw On April 28, 2009, NEA issued a Resolution reappointing the members of the Interim Board Directors for
180 days or until the regular Board of Directors of ZAMECO II have been elected and
The Board of Directors headed by Dominguez appealed to the CA on the ground that Republic Act qualified.17chanrobleslaw
(R.A.) No. 9136, or the Electric Power Industry Reform Act (EPIRA), abrogated the regulatory and
disciplinary power of the NEA over electric cooperatives.8chanrobleslaw On June 22, 2009, the CDA through a Board Resolution, issued a confirmation as to the registration of
ZAMECO II. A Task Force for ZAMECO II was created headed by Atty. Fulgencio A. Vigare, Jr., who was
On February 7, 2005, the CA issued a Temporary Restraining Order (TRO) valid for sixty (60) days the CDA Administrator for Luzon and the Oversight Administrator for Electric Cooperatives.18 The Task
enjoining the NEA and CASCONA from enforcing or implementing the aforementioned NEA Resolution Force was created primarily to reinstate the duly-recognized incumbent members of the board of
and Office Order. On April 5, 2005, a Writ of Preliminary Injunction was issued by the CA. On October 4, directors who should perform their functions until such time as elections were conducted, and their
2006, the CA upheld the authority of the NEA in the supervision of electric cooperatives such as successors should have been elected and qualified.19chanrobleslaw
ZAMECO II, and the power to undertake preventive and/or disciplinary directors, measures against the
board of directors, officers and employees of electric cooperatives.9chanrobleslaw On August 27, 2009, the NEA Administrator recalled the designation of Engr. Lopez as Project
Supervisor of ZAMECO II effective September 1, 2009.20chanrobleslaw
On March 22, 2007, the Board of Directors of ZAMECO II headed by Dominguez appealed the CA
Decision with this Court. They manifested that they had registered ZAMECO II as a cooperative under On September 1, 2009, Vigare issued a Memorandum stating that the CDA should assume jurisdiction
the Cooperative Development Authority (CDA), and, thus, it was the CDA which had regulatory powers over ZAMECO II. It also stated that in the August 26, 2009 hearing of the House of Representatives
over ZAMECO II.10chanrobleslaw Committee on Cooperative Development (August 26, 2009 House Committee Hearing), the NEA readily
acceded that the CDA should assume jurisdiction over ZAMECO II.21 It recognized the incumbent
Meanwhile, by virtue of the aforesaid NEA Resolution dated November 24, 2004, NEA installed an Board of Directors of ZAMECO II headed by Dominguez and the Management Staff headed by General
Interim Board of Directors led by Gallardo as Interim President to function within an un-extendible Manager Fidel S. Correa.22chanrobleslaw
period of 100 days beginning November 10, 2008 until February 18, 2009.11chanrobleslaw
On September 19, 2009, a Special Annual General Membership Assembly was called and conducted by
On March 13, 2009, this Court promulgated its Decision (G.R. No. 176935-36)12 which held that the the Interim Board of Directors headed by Gallardo.
passage of the EPIRA did not affect the power of the NEA particularly over administrative cases
involving the board of directors, officers and employees of electric cooperatives.13 This Court further In a letter dated October 12, 2009, NEA informed the Interim Board of Directors that their previous
ruled that there was substantial evidence to justify the penalty of removal from office imposed by NEA reappointment for 180 days had expired on the said date.23chanrobleslaw
against the incumbent Board of Directors of ZAMECO II.14chanrobleslaw
On October 19, 2009, pursuant to the said Memorandum issued by Vigare, the CDA issued a
With respect to the issue of ZAMECO II being under the regulatory powers of the CDA in view of its Resolution which created a team composed of the officers of the CDA. The team was mandated to
registration, this Court declared that the matter could not then be adjudicated yet. This Court stated that meet with the ZAMECO II management who was then headed by Gallardo to talk about some issues
the EPIRA provides that an electric cooperative must first convert into either a stock cooperative or and concerns; to pave the way for the conduct of the election of officers; and to seek the opinion of the
stock corporation before it could register under the CDA. This Court further stated that whether Department of Justice (DOJ) about the jurisdiction of the CDA over electric cooperatives. The said
ZAMECO II complied with the provisions particularly on the conduct of a referendum and obtainment of Resolution was implemented through a Special Order issued on October 20, 2009.24chanrobleslaw
a simple majority vote prior to its conversion into a stock cooperative, was a question of fact which this
Court could not then review. The evidence on record did not afford this Court sufficient basis to make a According to CASCONA, on October 22, 2009, Correa, who was installed by the CDA as General
ruling on the matter. Thus, this Court remanded the case to the CA. The dispositive portion of the Manager, and his companions entered the ZAMECO II premises and refused to leave. Come night fall,
Decision reads:ChanRoblesVirtualawlibrary members of the Philippine National Police (PNP) and security guards assembled outside the gates of
WHEREFORE, the instant case is hereby REMANDED to the Court of Appeals for further proceedings ZAMECO II but were not allowed inside the premises.25cralawredchanrobleslaw
in order to determine whether the procedure outlined in Republic Act No. 9136, otherwise known as the
Electric Power Industry Reform Act of 2001, and its Implementing Rules for the conversion of an electric The next day, on October 23, 2009, the PNP members asked Gallardo, the Interim President of the
cooperative into a stock cooperative under the Cooperative Development Authority had been complied Board of Directors of ZAMECO II, for a discussion. When the latter opened the gates, the PNP
with. The Court of Appeals is directed to raffle this case immediately upon receipt of this Decision and to members and security guards forcefully entered the grounds of ZAMECO II. The Interim Board of
proceed accordingly with all deliberate dispatch. Thereafter, it is directed to forthwith transmit its findings Directors did not surrender the management of ZAMECO II to the group of Correa.26chanrobleslaw
to this Court for final adjudication. No pronouncement as to costs.
On October 24, 2009, Dominguez, who was installed as President of the Board by the CDA, and two
SO ORDERED.15chanroblesvirtuallawlibrary other former board members arrived at the ZAMECO II premises. Tensions only de-escalated when the
On March 22, 2009, Republic Act No. 9520 otherwise known as the Philippine Cooperative Code of PNP members left the scene through the intervention of Governor Amor Deloso.27chanrobleslaw
2008 took effect.16chanrobleslaw
19

On October 30, 2009, petitioners Mary Ann Venzon, Eddie Gutierrez, Jose Gutierrez, Jr., Correa and outline[d] in the EPIRA and its Implementing Rules for the conversion of an electric cooperative into a
another employee filed a complaint for damages with the Regional Trial Court (RTC) of Olongapo City stock certificate under the CDA.31chanroblesvirtuallawlibrary
with an application for a TRO and a writ of preliminary injunction against the Interim Board of Directors On September 24, 2010, the RTC of Olongapo City denied the motion of ZAMECO II to declare the
and General Manager Engr. Alvin Farrales. On November 24, 2009, a Preliminary Injunction was Order of February 15, 2010 immediately executory in view of the motion for reconsideration filed by
granted by the RTC28 and ordered the Interim Board of Directors and General Manager Engr. Alvin petitioners and Correa.32chanrobleslaw
Farrales to vacate their positions, and prevented them from interfering in the performance of the
functions of General Manager Fidel S. Correa who was designated by the CDA. On October 20, 2014, this Court issued a Decision in G.R. Nos. 176935-3633 stating that the NEA's
power of supervision applies whether an electric cooperative remains as a non-stock cooperative or
On November 27, 2009, the CA annulled the aforesaid NEA Resolution dated April 28, 2009. opts to register with the CDA as a stock cooperative. This Court ruled:ChanRoblesVirtualawlibrary
x x x. This only means that even assuming arguendo that the petitioners validly registered ZAMECO II
On February 15, 2010, the RTC of Olongapo City, set aside the Writ of Injunction it had previously with the CDA in 2007, the NEA is not completely ousted of its supervisory jurisdiction over electric
issued. The RTC took into consideration the Resolutions that were passed on October 30, 2008 which cooperatives under the R.A. No. 10531. This law may be considered as curative statute that is intended
were affirmed in the Annual General Assembly held on September 19, 2009, to wit: (1) Resolution to address the impact of a restructured electric power industry under the EPIRA on electric
removing Engr. Fidel S. Correa as OIC General Manager of ZAMECO II and appointed Engr. Alvin cooperatives, which has not been fully addressed by the Philippine Cooperative Code of 2008.
Farrales as the Interim OIC General Manager; (2) Resolution withdrawing and cancelling ZAMECO II's The Facts of the Case:
registration with the CDA and recognizing the NEA as the regulatory agency; (3) Resolution recognizing
the present members of the Interim Board of Directors as legitimate and ratifying their continuance in Petitioner Jose M. Gutierrez, Jr. was the Manager of Administrative and Personnel Department of
office until the next regular election.29 The dispositive portion of the RTC Order ZAMECO II and was hired on June 1, 2003. Petitioner Mary Ann Venzon was the Manager of Member
states:ChanRoblesVirtualawlibrary Service Department and had been with ZAMECO II since January 21, 1996. Petitioner Eddie Gutierrez
WHEREFORE, in order to avoid the provocative effect in the catalytic change of the General Manager was a member of the Operation and Disconnection Team and was hired on April 29, 2002. Petitioner
and Members of the Board of Directors of Zameco II by the resolution of the Cooperative Development Monaliza L. Cabal was an accounting staff and started working at ZAMECO II on August 1,
Authority, the powers of which as alleged by the defendants' counsel are not clearly defined by law 2001.34chanrobleslaw
insofar as appointment and removal of the General Manager and Members of the Board of Directors are
concerned, the Court finds merit in the motion for reconsideration of the order dated November 19, In a Memorandum dated September 2, 2009, OIC-General Manager Engr. Alvin Farrales designated
2009 and the writ of injunction issued on November 24, 2009 pursuant to the said order is hereby set petitioner Gutierrez, Jr. as Officer-in-Charge of the cooperative during his official travel to Manila on
aside. September 3, 2009.35chanrobleslaw

Consequently, and there being no legal and factual basis for the issuance of the writ of injunction dated On September, 3, 2009, the CDA authorities arrived in ZAMECO II to assume management of the
November 24, 2009, defendant Engr. Alvin Farrales and the other defendants are hereby reinstated to cooperative. This was opposed by the existing management of ZAMECO II.36 The following day,
their positions as General Manager and Members of the Interim Board of Directors of Zameco II, September 4, 2009, Petitioner Gutierrez, Jr. issued a Memorandum for and in behalf of Farrales
respectively, x x x. directing the employees to proceed to the main office in compliance with the directive of the CDA
appointed officers. Thus, a meeting was held on the same date at ZAMECO II's office in San Antonio
x x x. Ineluctably, plaintiff Fidel S. Correa is hereby ordered to vacate his position as Manager of led by CDA representatives. Petitioners Gutierrez, Jr., Venzon and Gutierrez participated in the said
Zameco II and the other plaintiffs to desist from performing their duties and functions as designated by meeting.37 Also, several meetings were held which were attended by employees and officers of
the Cooperative Development Authority.30chanroblesvirtuallawlibrary ZAMECO II who allegedly defected to the side of CDA appointed officers.38chanrobleslaw
On June 16, 2010, this Court issued a Resolution in G.R. No. 176935-36,
thus:ChanRoblesVirtualawlibrary Likewise, on September 4, 2009, petitioners Venzon, Gutierrez and Gutierrez, Jr. were given separate
The Court NOTES the Report dated 25 March 2010 submitted by Associate Justice Romeo E. Barza of memoranda by Engr. Farrales directing them to explain why no disciplinary action should be taken
the Court of Appeals, Manila, in compliance with the Decision dated 13 March 2009 (which remanded against them for failure to report for work on the said date and for violating the Company Code of Ethics
these cases to the Court of Appeals for further proceedings to determine whether the proceedings and Discipline and the Employees Code of Conduct.39 The charges against them were: (a) attending
outlined in Republic Act No. 9136 (Electric Power Industry Reform Act of 2001 or EPIRA) and its unauthorized meetings, gatherings or assembly of employees; (b) abandonment of work or of assigned
Implementing Rules for the conversion of an electric cooperative under the Cooperative Development duties; (c) misrepresentation or usurpation of functions; (d) giving unlawful orders that create confusion
Authority had been complied with), stating that in the hearing conducted by the appellate court on and disorder; (e) rumor mongering or gossiping with intent to destroy the reputation of the company or
October 20, 2009, it was aptly observed by respondents CASCONA and NEA that counsel for its officers and employees; and/or (f) any act conduct or behavior not included in the above but which is
petitioners categorically admitted that none of the requirements such as conduct of a referendum and prejudicial or detrimental to the company or its employees and/or contrary to good order or
obtainment of a simple majority vote of its members to determine whether they agree to convert into a discipline.40chanrobleslaw
stock cooperative or stock corporation were complied with, and that given the said admissions, the
appellate court cannot but conclude that petitioners failed to prove compliance with the procedure
20

Incidentally, petitioner Gutierrez, Jr. had undergone medical treatment from September 8 to September Also, on September 22, 2009, a Memorandum was sent to petitioner Cabal to explain in writing why no
28, 2009. He submitted medical certificates but did not file any application for sick leave.41 He, together disciplinary action should be taken against her for violating the Company Code of Ethics and Discipline
with petitioner Gutierrez, did not submit any explanation with regard to the above charges. particularly on the unauthorized and unexcused absence from work which exceeded six (6) consecutive
days.45 On September 24, 2009, she was directed to appear before the IAC but she stated that she
On September 11, 2009, petitioner Venzon answered the above charges. She explained that effective was banned from entering the premises. She submitted a Memorandum claiming that she had not
September 3, 2009 when CDA had assumed jurisdiction over ZAMECO II, after a serious discernment, abandoned her work, and that she believed that she had not incurred any unauthorized and unexcused
she recognized only the officers appointed by the CDA, who were the ones dismissed by the NEA, and absences from work exceeding six consecutive days on the basis of what she believed was "right and
Fidel Correa as the General Manager. She further averred:ChanRoblesVirtualawlibrary legal".46 She was again required to appear, for the last time, on September 29, 2009 but she replied
2. Nevertheless, allow us to state our position on the issues you raised:ChanRoblesVirtualawlibrary through a letter that she couldn't do so because of the existing ban for her from entering the main office
a. Unauthorized meeting/gathering or assembly of employees at sub-offices. The meeting was called by of ZAMECO II.47 On October 1, 2009, she made a written manifestation to Engr. John Regadio that she
the CDA representatives who have the mandate to conduct information dissemination under the CDA did not recognize the authority of the IAC, and that the Interim Board of Directors was not cloth with any
Memorandum dated September 1, 2009 and we had no other choice but to follow a lawful order. authority, such that, their actions were illegal.48chanrobleslaw

b. Abandonment of work or assigned duties - Since the interim board (which has no legal authority or On October 27, 2009, upon the recommendation of the IAC in a meeting on October 22, 2009,
power whatsoever) has virtually driven out of ZAMECO II's office premises the legally-recognized petitioners were dismissed from employment. The order of dismissal was served to them on November
management of the cooperative, we decided to report for work and undertake our respective duties at 20, 2009 but they refused to receive the same.49chanrobleslaw
their designated [workplace]. x x x
On November 23, 2009, petitioners Venzon and Gutierrez jointly filed a complaint for illegal dismissal,
c. Misrepresentation or usurpation of functions xxx. It is the illegally-constituted interim board that is illegal suspension, non-payment of 13th month pay, damages payment of allowances. On January 5,
usurping the functions of the CDA-recognized Board of Directors. In addition, you are the one usurping 2010, petitioners Gutierrez, Jr. and Cabal jointly filed the same complaint.
the functions of General Manager Fidel S. Correa, while the other cooperative staff you designated in
our stead are the ones usurping our own functions as Department Managers. During the mandatory conference, a Manifestation and Motion was filed by Correa stating that
petitioners were already reinstated to their respective positions by him as the CDA-recognized and
d. Giving unlawful orders that create confusion and disorder - xxx; It is you and the interim board that recently reinstated General Manager of ZAMECO II commencing on October 20, 2009 with Board
are giving unlawful orders on account of your lack of legal basis to continue performing such functions, Resolution dated November 14, 2009, and that the Interim Board Members and the OIC General
regrettably. Manager were prohibited from meddling with the operations of ZAMECO II by virtue of the writ of
preliminary injunction issued by the RTC of Olongapo City. Various checks issued in the names of
e. Rumor mongering or gossiping with intent to destroy the reputation of the company or its officers and petitioners dated January 2010 and February 2010, signed by Dominguez as President and by Correa
employees - xxx. Openly discussing the more than P17M net losses of the cooperative incurred for only as General Manager of ZAMECO II, were presented.
the six-month period January to June 2009 that were registered under the watch of the interim board
and yourself, and talking about the true state of validity of the registration of Zameco II with CDA are On the other hand, Farrales submitted his Comment stating that the action of the CDA in assuming
legitimate issues. jurisdiction over ZAMECO II was a unilateral act on the part of Vigare; and that, Farrales' appointment
as General Manager was still subsisting and recognized by the Board of Directors of ZAMECO
f. Any act, conduct or behavior not included in the above but which is prejudicial or detrimental to the II.50chanrobleslaw
company or its employees and/or contrary to good order or discipline, etc. Your inclusion of this
"offense" among those that we need to explain merely exposes your lack of knowledge and On August 11, 2009, an Order was issued by LA Leandro M. Jose suspending the resolution of the
competence on general management. x x x42chanroblesvirtuallawlibrary incident.51chanrobleslaw
Petitioner Cabal stopped reporting for work starting September 13, 2009.
On January 21, 2011, the LA issued a Decision declaring petitioners to have been illegally dismissed
On September 18, 2009, Farrales issued a Memorandum to the security personnel to deny entry to from employment. The LA held that though the evidence may, at first glance, shows compliance with the
petitioners Gutierrez, Jr, Gutierrez and Venzon and four other persons including Engr. Correa, and to notice requirement of procedural due process, the same failed to show that petitioners were indeed
not allow them to report for work.43chanrobleslaw guilty of violations of the cooperative's Code of Ethics and Discipline. According to the LA, the
Investigation Reports and Recommendations were noticeably undated which gave rise to a suspicion
On September 22, 2009, Farrales issued several memoranda: a) for petitioner Venzon to return the that it was conveniently intercalated to give basis to the memorandum of dismissal, and that, the
laptop computer and other equipment entrusted to her; b) for petitioner Gutierrez to answer the charges supporting documents were not attached to the said reports.
against him; c) for petitioners Venzon, Jose Gutierrez, Jr., and Gutierrez placing them under preventive
suspension pending investigation by the Investigation and Appeals Committee (IAC).44chanrobleslaw Thereafter, respondents elevated the case before the NLRC Third Division. On September 30, 2011, the
NLRC ruled that the termination of petitioners from employment was valid, but in view of their
reinstatement, it dismissed the case for being moot and academic, thus:ChanRoblesVirtualawlibrary
21

We rule that the said Manifestation and Motion has rendered this case moot and academic. Notably, THE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS' PETITION FOR REVIEW ON
when complainants were suspended on September 23, 2009 and dismissed on October 27, 2009 by CERTIORARI ON THE GROUND THAT THEY FAILED TO SUBSTANTIATE THEIR CLAIM THAT THE
OIC-General Manager Farrales, he appears to have the authority to do so. This is because at that point NLRC ACTED ARBITRARILY IN CONCLUDING THAT THEIR TERMINATION FROM EMPLOYMENT
in time, the CDA has already assumed jurisdiction over ZAMECO II and has recognized the incumbent WAS IN ACCORDANCE WITH LAW CONTRARY TO LAW AND JURISPRUDENCE; [and]
Board of Directors headed by Jose S. Dominguez and the management staff under General Manager
Correa. The NEA has (sic) apparently gave way to CDA as shown by its recall order of Engr. Lopez as THE COURT OF APPEALS FAILED TO CONSIDER AS AN ACT OF ABUSE OF DISCRETION THE
Project Supervisor of ZAMECO II effective 1 September 2009 and its letter stating that the GRANTING OF PRIVATE RESPONDENTS' MOTION FOR RECONSIDERATION BY THE NLRC
reappointment/appointment of the interim board headed by Gallardo has expired on October 12, 2009. WHEN SUCH MOTION WAS BASED ON THE MISLEADING AND INCOMPLETE INFORMATION
Besides, on April 28, 2009, the NEA Board of Administrators' Resolution (reappointing as members of GIVEN BY THE PRIVATE RESPONDENTS.56
Interim Board of Directors for 180 days or sooner when the regular Board of Directors of ZAMECO II Petitioners argued in their petition that the NLRC acted with grave abuse of discretion when it treated
has been duly elected and qualified) was annulled and set aside by the Court of Appeals' Special the Order dated February 15, 2010 of RTC Olongapo City as final and executory. Petitioners cited the
Sixteenth Division in its Decision dated November 27, 2009 in CA-G.R. SP No. 108553. The records of fact that there is a pending appeal before this Court as to the execution of the said Order in GR No.
this case is bereft of any showing that said Decision was assailed before the Supreme Court. 199828. They alleged that without any finality on who has the control of ZAMECO II because of the
pending cases with this Court, they could not be faulted for following orders of the other faction.
x x x. Unless the issue as to which of the Board of Directors and/or management have authority to
control the affairs of ZAMECO II is legally settled with clarity and finality, we uphold the right of the In their Comment,57 respondents alleged that the petition should not be given due course because it
complainants to remain in their employment with ZAMECO II and accordingly, receive their salaries and raises questions of fact which is not allowed under Rule 45 of the Rules of Court. They also showed the
benefits. The grounds (serious misconduct, breach of trust, willful disobedience, etc.) relied upon by dismissal of the case before the RTC Olongapo City upon the initiative of both parties.58 And that, the
Engr. Farrales for suspending and dismissing the complainants are essentially anchored on his and the dismissal of the case settled the issue of injunction.
Interim Board's authority, which authority the complainants believe they do not possess. And, we have
no jurisdiction to rule on the same.52chanroblesvirtuallawlibrary Our Ruling
Respondent ZAMECO II filed a Motion for Reconsideration. On March 26, 2012, the NLRC Special
Third Division held that there was no valid reinstatement of petitioners hence the case has not been There are two issues that have to be resolved in this case, to wit: a) whether or not Engr. Farrales of the
mooted:ChanRoblesVirtualawlibrary Interim Board of Directors of ZAMECO II had the authority to suspend and dismiss petitioners from
It is thus clear that as of February 15, 2010, Engr. Alvin Farrales and no longer Fidel S. Correa was the employment; and, b) whether petitioners where validly terminated from employment.
General Manager of herein respondent-appellant Zameco II and therefore Fidel S. Correa's Manifestion
and Motion filed on February 18, 2010 which sought the dismissal of these consolidated cases since To resolve the first issue, We need to determine who between the two factions - the NEA appointed
herein complainants-appellees were allegedly reinstated earlier should not have made these cases General Manager Engr. Farrales or the CDA installed General Manager Engr. Correa - had the authority
moot and academic since as of February 15, 2010, he already lost his standing and authority to do to manage the affairs of ZAMECO II for the period from September 4, 2009, when the first
anything in connection with these cases. memorandum was issued to petitioners, until October 27, 2009, when petitioners were dismissed from
employment.
We therefore reconsider and set aside Our having, thus, dismissed these cases and proceed to resolve
the issue in this case.53chanroblesvirtuallawlibrary We have clarified this in our Decision in CASCONA v. Dominguez,59 thus:ChanRoblesVirtualawlibrary
The NLRC Special Third Division54 ruled, however, that there was valid dismissal of petitioners In the case at bench, the respondents committed several acts which constituted indirect contempt. The
because, instead of playing neutral, they embroiled themselves in the ongoing corporate dispute. CDA issued the September 1, 2009 Memorandum stating that it had jurisdiction over ZAMECO II and
Hence, it set aside its Decision dated September 30, 2011 and dismissed case the case for lack of could reinstate the former members of the Board of Directors. The CDA officials also issued Resolution
merit. The decretal portion of the Decision states:ChanRoblesVirtualawlibrary No. 262, S-2009 and Special Order 2009-304 to interfere with the management and control of ZAMECO
WHEREFORE, the Motion for Reconsideration of respondents-appellants is hereby GRANTED. Our II. Armed with these issuances, the other respondents even tried to physically takeover ZAMECO II on
Decision dated September 30, 2011 is hereby reconsidered and SET ASIDE and a new one entered October 22,2009. These acts were evidently against the March 13, 2009 decision of this Court and,
dismissing the case a quo for lack of merit. thus, constituted indirect contempt against the Court. These contemptuous acts are criminal in nature
because these obstruct the administration of justice and tend to bring the court into disrepute or
SO ORDERED.55chanroblesvirtuallawlibrary disrespect. x x x.
Aggrieved, petitioners filed a petition for certiorari before the CA. In a Decision dated July 31, 2014, the
CA affirmed the Decision of the NLRC. It held that the petitioners failed to substantiate their claim, or xxxx
point to a specific act on the part of the NLRC that can be construed as amounting to grave abuse of
discretion. x x x. [T]he March 13, 2009 decision should not be taken in isolation. A perusal of the said decision
shows that there were several pronouncements which must be respected and obeyed, to wit: first, the
Hence, the instant Petition, wherein petitioners make the following assignment of CA shall make a factual determination as to the propriety of ZAMECO II's registration with the CDA;
errors:ChanRoblesVirtualawlibrary
22

second, the continuing jurisdiction of the Court, as the case is not yet final and executory; and lastly, notice and hearing. Article 282 of the Labor Code provides the just causes for dismissing an employee,
that there is substantial evidence to justify the removal from office of respondents Dominguez, et al. to wit:ChanRoblesVirtualawlibrary
ART. 282. TERMINATION BY EMPLOYER
Precisely, the Court remanded the case to the CA to determine whether ZAMECO II was properly
registered as a stock cooperative under the CDA. Until the CA properly had ascertained such fact, the An employer may terminate an employment for any of the following causes:
Court could not determine conclusively that the CDA had supervisory powers over ZAMECO II. The
parties were then expected to maintain status quo and refrain from doing any act that would pre-empt chanRoblesvirtualLawlibrary(a) Serious misconduct or willful disobedience by the employee of the
the final decision of the Court. Hence, the Court continued to exercise its jurisdiction in G.R. Nos. lawful orders of his employer or representative in connection with his work;
176935-36 until a final decision was promulgated. The respondents, however, unreasonably interfered
with the proper procedure mandated by the Court when they decided for themselves that the CDA had (b) Gross and habitual neglect by the employee of his duties;
jurisdiction over ZAMECO II. This constituted a contemptuous act because it unlawfully interfered with
the processes or proceedings of a court. (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
Worse, the respondent-officials of the CDA, fully aware of the Court's pronouncement, attempted to
reinstate respondents Dominguez, et al. despite the existence of substantial evidence that warrant the (d) Commission of a crime or offense by the employee against the person of his employer or any
latter's removal from office. Glaringly, this grave allegation was never refuted by the respondents, immediate member of his family or his duly authorized representative;
Dominguez, et al. were found unfit to hold office yet the respondents relentlessly endeavored to return
them to the seat of power in ZAMECO II. This blatant disregard of the March 13, 2009 decision of the (e) Other causes analogous to the foregoing.
Court is an improper conduct that impedes, obstructs, or degrades the administration of justice. Serious misconduct by the employee justifies the employer in terminating his or her employment.
Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and
The respondents justify their acts by stating that in the August 26, 2009 House Committee Hearing, the definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
NBA acceded to the jurisdiction of the CDA over ZAMECO II. This contention, however, is completely intent and not mere error in judgment. To constitute a valid cause for the dismissal within the text and
unsubstantiated. Notably, respondents Esguerra and Apalisok admitted that the creation of a task force meaning of Article 282 of the Labor Code, the employee s misconduct must be serious i.e., of such
to take over ZAMECO II would place dire consequences against the CDA. Even CDA Regional Director grave and aggravated character and not merely trivial or unimportant.
Manuel A. Mar doubted that the NEA consented to the authority of the CDA over ZAMECO II.
Additionally, the misconduct must be related to the performance of the employees duties showing him to
Indeed, the October 20, 2014 decision of the Court in G.R. Nos. 176935-36 conclusively settled that it is be unfit to continue working for the employer. Further, and equally important and required, the act or
NEA, and not the CDA, that has jurisdiction and disciplinary authority over ZAMECO II. The substantial conduct must have been performed with wrongful intent.61chanroblesvirtuallawlibrary
issues of the case have now been laid to rest. The Court, however, cannot turn a blind eye to the In the case at bar, General Manager Farrales, himself, designated petitioner Gutierrez, Jr. as Officer-in-
contemptuous acts of the respondents during the pendency of the case. If the Court condones these Charge of the cooperative during his official travel to Manila on September 3, 2009. But when the CDA
acts of interference and improper conduct, it would set a dangerous precedent to future litigants in authorities arrived in ZAMECO II to assume management of the cooperative which was opposed by the
disregarding the interlocutory orders and processes of the Court.60chanroblesvirtuallawlibrary existing management of ZAMECO II, petitioner Gutierrez, Jr. issued a Memorandum, allegedly signed
Clearly, from the above pronouncement, during the period material to this case, the Interim Board of on behalf of Farrales, directing the employees to proceed to the main office in compliance with the
Directors of ZAMECO appointed by the NEA had the jurisdiction and disciplinary authority over directive of the CDA appointed officers. Hence, a meeting was held on the same date at the
ZAMECO II. Thus, Engr. Farrales, as General Manager, had the authority to suspend and dismiss cooperative's office in San Antonio led by CDA representatives. Petitioners Gutierrez, Jr., Venzon and
petitioners. Gutierrez participated in the said meeting.

We go now to the second issue as to whether the petitioners were validly dismissed from employment. Petitioners obviously aligned themselves with the former Board of Directors led by Dominguez in trying
The right to security of tenure states that no employee shall be dismissed unless there are just or to wrest control of the management of ZAMECO II. In deciding to get involved in the power play,
authorized causes and only after compliance with procedural and substantive due process. Article 279 petitioners relinquished their duties as employees. They defied the instructions and directives of the
of the Labor Code provides for this right, thus:ChanRoblesVirtualawlibrary Interim Board of Directors as well as that of the General Manager. Instead, they followed the
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the instructions of the Board of Directors and officers designated by the CDA. They even filed a civil action
services of an employee except for a just cause of when authorized by this Title. An employee who is against Farrales and the Interim Board of Directors.
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary Petitioners did not participate in the proceedings before the IAC because they did not recognize its
equivalent computed from the time his compensation was withheld from him up to the time of his actual authority. It was the officers designated by the CDA whom they recognize. Their acts definitely
reinstatement. undermined the existence of the cooperative.
Hence, a lawful dismissal must meet both substantive and procedural requirements; in fine, the
dismissal must be for a just or authorized cause and must comply with the rudimentary due process of
23

Under these factual premises, We cannot help but consider the petitioners' misconduct to be of grave task of overseeing the operations of their divisions. As managers, a high degree of honesty and
and aggravated character so that the cooperative was justified in imposing the highest penalty available responsibility, as compared with ordinary rank-and-file employees, were required and expected of them.
dismissal. In ruling as We do now, We considered the balancing between petitioners' tenurial rights
and ZAMECO II's interests. Unfortunately for the petitioners, in this balancing under the circumstances It need not be stressed that the nature or extent of the penalty imposed on an erring employee must be
of the case, we have to rule against their tenurial rights in favor of the employer's management commensurate to the gravity of the offense as weighed against the degree of responsibility and trust
rights.62chanrobleslaw expected of the employee's position. Petitioners Gutierrez, Jr. and Venson are not just charged with a
misdeed, but with loss of trust and confidence, a cause premised on the fact that petitioners Gutierrez,
As correctly held by the NLRC Special Third Division, thus:ChanRoblesVirtualawlibrary Jr. and Venzon hold positions whose functions may only be performed by someone who enjoys the trust
What is important, as shown by the records, is that complainants-appellees Venzon, Jose Gutierrez, Jr. and confidence of the management. Needless to say, such an employee bears a greater burden of
and Eddie Gutierrez burned their bridges when they not only sided with the group of Fidel S. Correa but trustworthiness than ordinary workers, and the betrayal of the trust reposed is the essence of the loss of
also fought with them as actual complainants-appellees in their effort at wrestling control over ZAMECO trust and confidence which is a ground for the employee's dismissal.69chanrobleslaw
II and its interim board headed by Engr. Alvin Farrales.
As to the standards of procedural due process, the same were likewise observed in effecting the
This is shown by the fact that instead of playing neutral, they, along with Correa, instituted Civil Case petitioner's dismissal. Petitioners were given written memorandum to inform them of the charges
No. 163-0-2009 with the Regional Trial Court of Olongapo City against Farrales to remove him as the against them as well as notices of termination in accordance with Section 2, Rule XIV, Book V of the
rightful General Manager of Zameco II. Complainants-appellees embroiled themselves in the ongoing Omnibus Rules Implementing the Labor Code.
corporate dispute instead of being neutral.63chanroblesvirtuallawlibrary
Furthermore, Article 296(c) states that loss of trust and confidence in the employee is a just cause for In protecting the rights of the workers, the law, however, does not authorize the oppression or self-
dismissal. But it will validate an employee's dismissal only upon compliance with certain requirements, destruction of the employer. The constitutional commitment to the policy of social justice cannot be
namely: (1) the employee concerned must be holding a position of trust and confidence; and (2) there understood to mean that every labor dispute shall automatically be decided in favor of labor. The
must be an act that would justify the loss of trust and confidence.64chanrobleslaw constitutional and legal protection equally recognizes the employer's right and prerogative to manage its
operation according to reasonable standards and norms of fair play.70chanrobleslaw
Loss of trust and confidence to be a valid cause for dismissal must be work related such as would show
the employee concerned to be unfit to continue working for the employer and it must be based on a Finally, in labor cases, a Rule 45 petition is limited to reviewing whether the CA correctly determined the
willful breach of trust and founded on clearly established facts. Such breach is willful if it is done presence or absence of grave abuse of discretion and deciding other jurisdictional errors of the NLRC.
intentionally, knowingly, and purposely, without justifiable excuse as distinguished from an act done In this case, the CA is correct in ruling that the NLRC cannot be faulted for grave abuse of discretion
carelessly, thoughtlessly, heedlessly or inadvertently. The loss of trust and confidence must spring from amounting to excess or lack of jurisdiction in concluding that, indeed, petitioners were validly dismissed
the voluntary or willful act of the employee, or by reason of some blameworthy act or omission on the from their employment. After all, grave abuse of discretion implies a capricious and whimsical exercise
part of the employee.65chanrobleslaw of judgment as is equivalent to lack of jurisdiction, or, when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility; and it must be so patent and gross as to
While loss of trust and confidence should be genuine, it does not require proof beyond reasonable amount to an evasion of positive duty enjoined or to act at all in contemplation of law.71 Such is not
doubt, it being sufficient that there is some basis to believe that the employee concerned is responsible present in this case.
for the misconduct and that the nature of the employees participation therein rendered him unworthy of
trust and confidence demanded by his position.66chanrobleslaw WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision of the
Court of Appeals in CA-G.R. SP No. 125798, dated July 31, 2014, is hereby AFFIRMED.
There are two classes o f positions of trust. First, are the managerial employees whose primary duty
consists of the management of the establishment in which they are employed or of a department or a SO ORDERED.chanRoblesvirtualLawlibrary
subdivision thereof, and to other officers or members of the managerial staff. The second class consists
of the fiduciary rank-and-file employees, such as cashiers, auditors, property custodians, or those who,
in the normal exercise of their functions, regularly handle significant amounts of money or property. G.R. No. 219430, November 07, 2016
These employees, though rank-and-file, are routinely charged with the care and custody of the
employer's money or property, and are thus classified as occupying positions of trust and JINKY S. STA. ISABEL, Petitioner, v. PERLA COMPAIA* DE SEGUROS, INC., Respondent.
confidence.67chanrobleslaw
DECISION
It is undisputed that at the time of their dismissal, the petitioners Gutierrez, Jr. and Venson were holding
managerial positions and greater fidelity and trust were expected of them.68 Farrales even designated PERLAS-BERNABE, J.:
petitioner Gutierrez, Jr. as Officer-in-Charge of ZAMECO II during his official travel to Manila. Their
positions were unmistakably imbued with trust and confidence as they were charged with the delicate Assailed in this petition for review on certiorari1 are the Decision2 dated March 25, 2015 and the
Resolution3 dated June 15, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 134676, which
24

nullified and set aside the Decision4 dated December 26, 2013 and the Resolution5 dated February 27, circumspect with her claims servicing. She likewise alleged that after receipt of the Final Directive to
2014 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 06-001823-13 and, Report to Head Office dated November 22, 2012, she met with Renato Carino (Carino), Perla's Vice-
accordingly, reinstated the Decision6 dated April 10, 2013 of the Labor Arbiter (LA) in NLRC NCR Case President for Operations,21 albeit not at the Head Office, but at a nearby restaurant where Carino
No. 12-17463-12 finding petitioner Jinky S. Sta. Isabel (Sta. Isabel) to have been validly dismissed from himself instructed her to proceed. At the restaurant, Carino asked Sta. Isabel if she would voluntarily
employment by respondent Perla Compaia de Seguros, Inc. (Perla).chanroblesvirtuallawlibrary resign over the Ricsons incident, to which the latter replied that the incident had already been dealt with.
Finally, Sta. Isabel concluded that Perla was bent on easing her out of work, pointing out that the Notice
to Explain and Notice of Termination regarding her alleged insubordination was dated on the same
The Facts day.22

On February 27, 2006, Perla, a corporation engaged in the insurance business hired Sta. Isabel as a In its defense, Perla maintained that it validly terminated Sta. Isabel's employment on the ground of
Claims Adjuster with the task of handling and settling claims of Perla's Quezon City Branch (QC insubordination. It averred that since Sta. Isabel did not submit any written explanation regarding the
Branch). Later on, Perla discovered that Sta. Isabel owned a separate insurance agency known as JRS Notice to Explain dated November 9, 2012 (pertaining to the Ricsons incident), it was constrained to
Insurance Agency (JRS). To avoid conflict of interests, Perla instructed its QC Branch manager to: (a) issue the Final Written Warning dated November 22, 2012, which Sta. Isabel refused to accept. Carino
allow the licensing of JRS as a licensed agent of the QC Branch at the soonest time possible; and (b) then called her via telephone to get an explanation and, thereafter, sent a Final Directive to Report to
forward all claims coded under JRS to Perla's Claims Department at the Head Office for processing, Head Office. Instead of reporting at the Head Office, Sta. Isabel requested for an informal meeting with
evaluation, and approval.7 Carino at a restaurant as she did not want to see the faces of the other officers. Thereat, Carino asked
Sta. Isabel if she was willing to voluntarily retire, and at the same time, reminded her to report to the
Pending the resolution of the JRS issue, Sta. Isabel received a Notice to Explain8 dated October 19, Head Office. In view of Sta. Isabel's recalcitrance in complying with the aforesaid directives, Perla
2012 why no disciplinary action should be taken against her for her poor services towards the clients of issued a Notice to Explain dated November 26, 2012 charging Sta. Isabel of insubordination. On
PAIS Insurance Agency (PAIS), to which she submitted her written explanation.9 On October 29, 2012, November 27, 2012, Perla received a letter23 from Sta. Isabel saying that she will only report to the
Sta. Isabel attended a meeting with Perla's officers concerning the JRS and PAIS incidents. On even Head Office if Perla's President, Operations Head, Assistant Vice President, Human Resources
date, Perla issued a Report on Status of the Hearing for Jinky Sta. Isabel10 wherein it resolved the Manager, and QC Branch Manager will all be present for a meeting/conference to clear all issues
foregoing incidents by agreeing that: (a) claims under JRS shall be approved by the Head Office; and surrounding her. Thus, on November
(b) claims under PAIS will be transferred to the Head Office for processing.11
28, 2012, Perla terminated Sta. Isabel's employment on the ground of insubordination. In this regard,
On November 9, 2012, Sta. Isabel received another Notice to Explain12 why no disciplinary action Perla explained that due to a typographical error, it "wrongly" indicated November 26, 2012 as the date
should be taken against her for her poor services towards the clients of Ricsons Consultants and of issuance of Sta. Isabel's Notice of Termination instead of November 28, 2012.24
Insurance Brokers, Inc. (Ricsons). In view of Sta. Isabel's failure to submit a written explanation and to
appear before the Head Office to explain herself, Perla issued a Final Written Warning13 dated The LA Ruling
November 22, 2012 to be more circumspect with her claims servicing, with a stem admonition that "any
repetition of the same offense or any acts analogous to the foregoing shall be dealt with more severely In a Decision25 dated April 10, 2013, the Labor Arbiter (LA) dismissed the complaint for lack of merit,
and shall warrant drastic disciplinary action including the penalty of Termination in order to protect the but nevertheless, ordered Perla to pay Sta. Isabel the amounts of P8,778.00 and P7,442.30
interest of the company."14 On even date, Perla likewise issued a Final Directive to Report to Head representing her unpaid salary and service incentive leave pay, respectively.26
Office15 instructing Sta. Isabel to report to the Head Office and explain her alleged refusal to receive
the afore-cited Final Written Warning. The LA found that since Perla's directives for Sta. Isabel to appear before the Head Office were in
connection with the administrative proceedings against the latter, her refusal to comply therewith was
On November 26, 2012, Perla issued the following to Sta. Isabel: (a) a Notice to Explain16 why no not tantamount to willful disobedience or insubordination. At the most, it only amounted to a waiver of
disciplinary action should be taken against her for failing to report to the Head Office despite due notice; her opportunity to be heard in said proceedings. Nevertheless, the LA found just cause in terminating
and (b) a Notice of Termination17 dismissing Sta. Isabel from employment on the ground of Sta Isabel's employment, opining that her disrespectful language in her letter dated November 27, 2012
insubordination. Consequently, Sta. Isabel filed the instant complaint18 for: (a) illegal dismissal; (b) not only constitutes serious misconduct, but also insubordination as it showed her manifest refusal to
underpayment of wages; (c) non-payment of overtime pay, service incentive leave pay, accrued leave cooperate with Perla.27
pay, and 13th to 16th month pay; (d) retirement pay benefits under the corporation's Provident Fund; (e)
actual, moral, and exemplary damages; and (f) attorney's fees against Perla before the NLRC.19 In Aggrieved, Sta. Isabel appealed28 to the NLRC.chanroblesvirtuallawlibrary
relation to her claim for illegal dismissal, Sta. Isabel prayed for the grant of separation pay and
backwages, maintaining that there is already strained relations between her and Perla which would The NLRC Ruling
render reinstatement impossible.20
In a Decision29 dated December 26, 2013, the NLRC granted Sta. Isabel's appeal and, accordingly,
In support of her complaint, Sta. Isabel claimed that Perla could no longer use the PAIS and Ricsons ordered Perla to pay her separation pay, backwages, benefits under the Provident Fund, 14th month
incidents against her, considering that she was already penalized with multiple warnings to be more pay, and attorney's fees equivalent to 10% of all the monetary awards.30
25

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings
The NLRC held that Sta. Isabel's refusal to report to the Head Office was not willful disobedience, and conclusions are not supported by substantial evidence, or that amount of relevant evidence which a
considering that the directives were in connection with the administrative proceedings against her and, reasonable mind might accept as adequate to justify a conclusion.44
as such, her failure to appear was only tantamount to a waiver of her opportunity to be heard. Hence,
she cannot be dismissed on such cause, which incidentally, was the sole ground for her termination as Guided by the foregoing considerations, the Court finds that the CA committed reversible error in
stated in the Notice of Termination. In this relation, the NLRC ruled that the LA could not use Sta. granting Perla's certiorari petition considering that the NLRC's finding that Sta. Isabel was illegally
Isabel's November 27, 2012 letter as a ground for her termination as Perla itself did not invoke the dismissed from employment is supported by substantial evidence.
same in the first place. Even assuming that the letter may be used as evidence against Sta. Isabel, the
NLRC held that a careful perusal thereof would show that it was not discourteous, accusatory, or As may be gleaned from the records, Sta. Isabel received a total of three (3) Notices to Explain dated
inflammatory. At the most, the language in the letter would show that Sta. Isabel had written it out of October 19, 2012,45 November 9, 2012,46 and November 26, 2012.47
confusion and frustration over the matter the administrative proceedings against her were being
handled, and not out of defiance and arrogance.31 In sum, the NLRC concluded that Sta. Isabel's In the Notice to Explain dated October 19, 2012, Sta. Isabel was charged with serious misconduct for
dismissal was without just cause, hence, unlawful.32 her poor services towards the clients of PAIS.48 After Sta. Isabel submitted her written explanation and
attended the corresponding meeting, Perla resolved the matter through a Report on Status of the
Upon Perla's motion for reconsideration,33 the NLRC issued a Resolution34 dated February 27, 2014 Hearing for Jinky Sta. Isabel49 dated October 29, 2012 wherein she was penalized with a "VERBAL
affirming its Decision with modification deleting the award of benefits under the Provident Fund. WARNING to improve on the claims servicing of clients in QC Branch."50 Thus, the proceedings with
Dissatisfied, Perla filed a petition for certiorari35 before the CA.chanroblesvirtuallawlibrary regard to the PAIS incident should be deemed terminated.

The CA Ruling In the Notice to Explain dated November 9, 2012, Sta. Isabel was charged with serious misconduct and
gross neglect of duty for her poor services towards the clients of Ricsons.51 Notwithstanding Sta.
In a Decision36 dated March 25, 2015, the CA nullified and set aside the NLRC ruling, and reinstated Isabel's failure to submit her written explanation despite due notice, Perla went ahead and resolved the
that of the LA.37 Essentially, it held that the NLRC gravely abused its discretion in failing to appreciate matter anyway in the Final Written Warning52 dated November 22, 2012 wherein it penalized her with a
the evidence showing Sta. Isabel's sheer defiant attitude on the orders of Perla and its officers.38 In this "FINAL WARNING to be more circumspect in [her] claims servicing with agents, brokers, and assureds"
regard, the CA held that Sta. Isabel's conduct towards Perla's officers by deliberately ignoring the with an admonition that "any repetition of the same offense or any acts analogous to the foregoing shall
latter's directives for her to appear before the Head Office, coupled with her letter dated November 27, be dealt with more severely and shall warrant drastic disciplinary action including the penalty of
2012, constitutes insubordination or willful disobedience.39 Thus, the CA concluded that Sta. Isabel's Termination in order to protect the interest of the company."53 Hence, Perla's issuance of the Final
dismissal was valid, it being a valid exercise of management prerogative in dealing with its affairs, Written Warning should have likewise terminated the administrative proceedings relative to the Ricsons
including the right to dismiss its erring employees.40 incident.

Undaunted, Sta. Isabel moved for reconsideration,41 which was, however, denied in a Resolution42 Finally, in the Notice to Explain dated November 26, 2012, Perla charged her of willful disobedience for
dated June 15, 2015; hence, this petition.chanroblesvirtuallawlibrary her failure to appear before the Head Office despite due notice.54 In the Notice of Termination55 of
even date - although Perla insists that the date indicated therein was a mere typographical error and
The Issue Before the Court that it was actually made on November 28, 201256 - Sta. Isabel was terminated from work on the
ground o insubordination.57
The essential issue for the Court's resolution is whether or not the CA correctly ascribed grave abuse of
discretion on the part of the NLRC in ruling that Sta. Isabel's dismissal was Since Sta. Isabel was actually dismissed on the ground of insubordination, there is a need to determine
illegal.chanroblesvirtuallawlibrary whether or not there is sufficient basis to hold her guilty on such ground.

The Court's Ruling Insubordination or willful disobedience, is a just cause for termination of employment listed under Article
297 (formerly Article 282) of the Labor Code,58 to wit:chanRoblesvirtualLawlibrary
The petition is meritorious. Article 297282. Termination by Employer. - An employer may terminate an employment for any of the
following causes:cralawlawlibrary
To justify the grant of the extraordinary remedy of certiorari, the petitioner must satisfactorily show that
the court or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
discretion connotes a capricious and whimsical exercise of judgment, done in a despotic manner by representative in connection with his work;ChanRoblesVirtualawlibrary
reason of passion or personal hostility, the character of which being so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in xxxx
contemplation of law.43 Willful disobedience or insubordination, as a just cause for the dismissal of an employee, necessitates
the concurrence of at least two (2) requisites, namely: (a) the employee's assailed conduct must have
26

been willful, that is, characterized by a wrongful and perverse attitude; and (b) the order violated must part of Sta. Isabel was not even mentioned in her Notice of Termination. Verily, Perla's excuse of
have been reasonable, lawful, made known to the employee, and must pertain to the duties which he typographical error in the date indicated on the Notice of Termination is simply unacceptable for being a
had been engaged to discharge.59 mere self-serving assertion that deserves no weight in law.66 Besides, as aptly put by the NLRC, a
careful perusal of such letter reveals that the wordings used therein were not discourteous, accusatory,
In this case, a plain reading of the Notice to Explain and Notice of Termination both dated November 26, or inflammatory, nor was the letter written out of defiance and arrogance. Rather, it only exhibits Sta.
2012 reveals that the charge of insubordination against Sta. Isabel was grounded on her refusal to Isabel's confusion and frustration over the way the administrative proceedings against her were being
report to the Head Office despite due notice. While Perla's directives for Sta. Isabel to report to the handled.
Head Office indeed appear to be reasonable, lawful, and made known to the latter, it cannot be said that
such directives pertain to her duties as a Claims Adjuster, i.e., handling and settling claims of Perla's In sum, the totality of the foregoing circumstances shows that Sta. Isabel was not guilty of acts
Quezon City Branch, regardless of whether her refusal to heed them was actually willful or not. The constituting insubordination, which would have given Perla a just cause to terminate her employment.
aforesaid directives, whether contained in the Notice to Explain dated November 9, 2012 or the Final As such, the CA erred in holding that the NLRC gravely abuse its discretion in ruling that Sta. Isabel's
Directive to Report to Head Office dated November 22, 2012, all pertain to Perla's investigation dismissal was illegal; hence, the NLRC ruling must be reinstated. However, since the NLRC erred in
regarding the Ricsons incident and, thus, were issued in compliance with the requisites of procedural reckoning the computation of Sta. Isabel's separation pay from February 27, 2007 instead of the actual
due process in administrative cases. Otherwise stated, such directives to appear before the Head Office date of the commencement of her employment with Perla, a modification of the NLRC ruling to reflect
were for the purpose of affording Sta. Isabel an opportunity to be heard regarding the Notice to Explain this correction is in order.
dated November 9, 2012.60 As correctly pointed out by the labor tribunals, Sta. Isabel's failure or
refusal to comply with the foregoing directives should only be deemed as a waiver of her right to WHEREFORE, the petition is GRANTED. The Decision dated March 25, 2015 and the Resolution dated
procedural due process in connection with the Ricsons incident, and is not tantamount to willful June 15, 2015 of the Court of Appeals in CA-G.R. SP No. 134676 are hereby REVERSED and SET
disobedience or insubordination. ASIDE. Accordingly, the Decision dated December 26, 2013 and the Resolution dated February 27,
2014 of the National Labor Relations Commission in NLRC LAC No. 06-001823-13 are REINSTATED
Besides, contrary to Perla's claim that it could not wrap up its investigation on the Ricsons incident due with MODIFICATION in that the computation of separation pay due to petitioner Jinky S. Sta. Isabel
to Sta. Isabel's continuous disregard of said directives,61 the Final Written Warning dated November should be counted from February 26, 2006, the actual date of the commencement of her employment
with respondent Perla Compaia de Seguros, Inc., instead of February 27, 2007.
22, 2012 indubitably shows that Perla had already taken care of the Ricsons complaint despite Perla's
non-cooperation. To recapitulate, the Final Written Warning stated that Perla: (a) took into consideration SO ORDERED.ChanRoblesVirtualawlibrary
Sta. Isabel's refusal to appear before the Head Office or to submit her written explanation; (b) deemed
such refusal as a waiver of her opportunity to be heard; and (c) resultantly resolved the matter by
penalizing Sta. Isabel with, among others, a "FINAL WARNING to be more circumspect in [her] claims G.R. Nos. 205685-86 June 22, 2015
servicing with agents, brokers[,] and assureds."62 Clearly, Perla cannot base the charge of
insubordination against Sta. Isabel in her refusal to report to the Head Office in connection with the EMMANUEL H. BERALDE, HAYDEE B. OCHE, EDGAR E. FERNANDEZ, RONALD M. DUMADAUG,
Ricsons complaint. WENCESLAO L. CAMPORENDONDO, OCTAVE BRENDAN N. MARTINEZ, AVELINA C. NAVA,
ALSADOM P. CIRILO, OSCAR H. GALARAGA, IGNACIO R. ALMARIO, JR., MISAMBO D. LLEJES,
As an additional basis for Sta. Isabel's alleged insubordination, Perla argues that Sta. Isabel's letter63 ERNESTO M. MOVILLA, SR., RONALD R. PANUGALING, NICHOLS M. SULTAN, SR., FRANCISCO
dated November 27, 2012 signifies her outright defiance of management authority, considering that as M. VELASCO, SAMUEL G. WENCESLAO, EDMONDO B. ELECCION, SANNY L. ABDUL, JOEL T.
an employee, she had no right to impose conditions on management on when and what circumstances AUTIDA, ANTONIO C. BAG-O, RODOLFO C. BARTIDO, NECTOR B. BASILISCO, GREGORIO Y.
she would explain her side.64 CANAMO, TOMAS M. CANSECO, REYSALVIO M. CARREON, ALEJANDRO A. CELIS, EMERISA S.
BLANCADA, FELIX E. BUGWAT, RENIE N. BURGOS, DESIDERIO C. CABONITA, RICARDO P. DAG-
The Court finds the argument untenable and simply an afterthought to put some semblance of legality to UMAN, RUBEN B. DAVIDE, FELIPE G. DEMETILA, EDUARDO B. DIAL, EFREN L. ENCALLADO,
Sta. Isabel's dismissal. GETULIO A. GOHIL, GUMERSINDO C. HAPE, DOMINGO M. LABTON, ARNOLD B. LIM, LEONARDO
G. LOPEZ, SR., ALBINO M. LECERNAS, JOEL B. LUMERAN, MARTIN C. MAGLINTE, FOL A.
A careful examination of the records reveals that Perla already issued Sta. Isabel's Notice of MALAYA, ALFREDO D. MARAVILLAS, MARTINO R. MENDEZ, MAURO B. NAVAREZ, JR., CARLITO
Termination on November 26, 2012 the same day the Notice to Explain charging her of insubordination R. NAVARRO, AGUSTIN C. NOTARTE, JR., GONZALO G. OCHE, CARLITO G. OTOM, WALTER S.
was issued - even before Sta. Isabel wrote them the letter dated November 27, 2012. Evidently, Perla PANOY, ALEJANDRO T. PADOJAN, SR., GLESERIA L. PELDEROS, WILSON C. RODRIGUEZ,
never took this letter into consideration in dismissing Sta. Isabel. In an attempt to cover up this mishap, ARMAN A. ROSALINDA, ISIDRO M. RUSGAL, ISMAEL M. SANDANG, SR., WEA MAE B. SALATAN,
Perla claimed that the date indicated on the Notice of Termination was only a typographical error, as it EDWIN L. SARDIDO, PAULINO T. SEDIMO, CESARIO A. TANGARO, PABLITO B. TAYURAN,
was actually issued on November 28, 2012, even presenting the private courier receipt65 showing that EDUARDO D. TUBURAN, ARMANDO I. VARGAS, JR., RENATO E. LUMANAS, WILFREDO C.
it was only sent to Sta. Isabel on the latter date. While such private courier receipt indeed shows the PAUSAL, ALFREDO R. RAMIS, JOSE V. TUGAP, MANUEL G. WENCESLAO, MARIO D. ALBARAN,
date when the Notice of Termination was sent, it does not prove that it was made on the same day. EDGAR P. ALSADO, SANTOS T. AMADO, JR., CHRISBEL A. ANG, BERNARDO C. AYUSTE, JR.,
More revealing is the fact that this November 27, 2012 letter allegedly showing insubordination on the RONALD B. BARTIDO, REYNALDO R. BAURA, SR., ANGELITO A. BIMBO, REYNALDO N. CAPUL,
27

SONNY M. DAVIDE, REYNALDO A. LANTICSE, SR., MARIO M. LIMPIO, ARGIE A. OTOM, DANILO V.
PABLIO, CARLITO H. PELLERIN, DANILO L. QUIMPAN, MARK ANTHONY M. SALATAN, DANTE S. On January 4, 2008, Lapanday issued a Notice of Termination to all its employees, including herein
SERAFICA, BUENVENTURA J. TAUB, JENRITO S. VIA, ROMULO A. LANIOHAN, JORGE L. petitioners. In the said notice of termination, it was stated that the company is instituting a retrenchment
QUIMPAN, ANTONIO C. SALATAN, ARLON C. AYUSTE, ERNESTO P. MARAVILLAS, DANIEL B. program pursuant to Section 5, Article 1 of the Collective Bargaining Agreement (CBA) to prevent losses
ADONA, and WILFREDO M. ALGONES, Petitioners, as a result of the dramatical increase in production costs and lower productivity. The termination date
vs. for all employees was effective February 4, 2008.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION (GUIHING PLANTATION
OPERATIONS), RICA REGINA L. DA VILA (Chairman), EDWIN T. FABREGAR, JR. (VP-Banana Several employees signed the notice, in the hopes of getting their separation pay and other benefits.
Production); GERARDO IGNACIO B. ONGKIKO, (Senior VP-HR), CELSO S. SANCHEZ (Production Petitioners, however, claimed that their separation pay was not given to them. They further alleged that
Manager); and JESSEPEHINE 0. ALEGRE (Area Administrative Manager), Respondents. those who refused to sign the notice were not allowed to enter the work premises unless they would
sign the notice. Lapanday, on the other hand, claimed that despite its financial predicament, separation
x-----------------------x pay was offered to its employees.

PRESCO A. FUENTES and BRIAN TAUB, Petitioners, Hence, without any recourse, petitioners filed a complaint for illegal dismissal. Emmanuel Beralde, et al.
vs. filed their Complaint on February 5, 2008,5 while Fuentes and Taub filed their Complaint on October 6,
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION, (GUIHING PLANTATION 2008.6
OPERATIONS) RICA REGINA L. DAVILA, Chairman; EDWIN T. FABREGAR, JR., VP-Banana
Production; GERARDO IGNACIO B. ONGKIKO, CELSO S. SANCHEZ, Production Manager, Lapanday claimed that in 2006, it was beset with financial reverses due to very low productivity, an
Respondents. onslaught of banana diseases, the adverse effects of the imposition of the aerial spraying ban, the
reduction of leased areas due to CARP, the refusal of the landowners to renew petitioner's lease
DECISION contracts, increase in production costs, and the extraordinary fluctuation in foreign exchange. They
averred to have implemented numerous saving measures; however, its financial condition continued to
PERALTA, J.: decline, thus, they opted to implement a retrenchment program. Lapanday further claimed that it
consulted with the employees union (Samahan Manggagawa ng Lapanday Guihing-SAMALAG), and
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of filed the required notice with the Department of Labor and Employment (DOLE) before the
the Consolidated Decision1 dated June 29, 2012 and Consolidated Resolution2 dated November 14, implementation of said program.
2012 of the Court of Appeals-Cagayan de Oro City in CA-G.R. SP No. 035883 and CA-G.R. SP No.
04646.4 CA-G.R. SP No. 035887

The facts, as culled from the records, are as follows: On August 15, 2008, in NLRC RAB XI-02-00135-08,8 the Labor Arbiter rendered a Decision9 which
reads, thus:
Lapanday Agricultural and Development Corporation (Lapanday) is engaged in the business of Banana
plantation and exporting of the same to its clientele abroad. Petitioners are employees in the said WHEREFORE, foregoing considered, judgment is hereby rendered as follows:
corporation.
1. Dismissing the complaint for illegal dismissal and unfair labor practice;
Between the years 1992-1994, Lapanday retrenched and paid separation pay to some of its employees
in a downsizing effort. Thereafter, Lapanday allegedly re-hired some of their former employees with a 2. Declaring that the retrenchment is valid; and
promise that the land they worked on will be eventually turned-over to them, since the land was covered
by the Comprehensive Agrarian Reform Program (CARP). The employees including several of the 3. Ordering respondent LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION to pay
petitioners agreed to be retrenched and re-hired. complainants the sum of EIGHT MILLION TWO HUNDRED EIGHTY-SIX THOUSAND ONE HUNDRED
SEVENTY-FOUR AND 53/100 PESOS (P8,286,174.53) representing their separation pays.
Sometime in 1999, Lapanday again retrenched all its employees and offered to pay separation pay for
their years of service. Meanwhile, the land was not turned-over to them as promised since the SO ORDERED.10
Department of Agrarian Reform (DAR) issued an Order Dated February8, 1999, exempting said land
from the coverage of the CARP. Undaunted, before the NLRC, petitioners insisted that they were illegally dismissed. On September 22,
2009, the NLRC reversed and set aside the appealed decision.11 The dispositive portion reads, thus:
On March 29, 1999, Lapanday and the employees, including petitioners, signed a new employment
contract. However, upon learning of the DAR's order of exemption, the employees filed a petition to WHEREFORE, foregoing premises considered, the appealed decision is Reversed and Set Aside. In
revoke said order. lieu thereof, a new judgment is rendered declaring the complainants, less Presco Fuente and Brian
28

Taub, to have been illegally dismissed from employment, and thus ordering respondent Lapanday
Agricultural Development Corporation to reinstate the said complainants to their former positions Thus, Lapanday filed petitions on certiorari against the appellate court.
without loss of seniority rights and other privileges and to pay them full backwages from the dates they
were dismissed until they are actually reinstated plus attorneys fees equivalent to ten (10%) percent of In CA-G.R. SP No. 03588,21 Lapanday assailed the NLRC's Resolutions claiming that it gravely abused
the aggregate monetary award due them, subject to computation by the Regional Arbitration Branch of its discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor
origin during execution proceedings. Arbiter.

SO ORDERED.12 In CA-G.R. SP No. 04646,Lapanday raised the same issue of whether the NLRC committed grave
abuse of discretion in concluding that the retrenchment program it had undertaken was a mere ploy to
Lapanday filed a motion for reconsideration, but the NLRC denied the same in a Resolution13 dated ease out petitioners from their employment.
February 12, 2010.
In a Resolution22 dated March 13, 2012, upon motion, the appellate court ordered that CA-G.R. SP No.
CA-G.R. SP No. 0464614 04646 be consolidated with CA-G.R. No. SP 03588.

Meanwhile, in NLRC RAB XI-10-00881-08,15 the Labor Arbiter rendered a Decision16 dated July 30, In the disputed Consolidated Decision23 dated June 29, 2012, the Court of Appeals-Cagayan de Oro
2009, which reads: City, 23rd Division, granted the petitions for certiorari, the dispositive portion of which reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered declaring the dismissal of WHEREFORE, the instant consolidated Petitions are GRANTED.
complainants Presco A. Fuentes and Brina Taub as illegal:
In CA-G.R. [SP] No. 03588: the National Labor Relations Commission, 8th Division's (NLRC)
Accordingly, Lapanday Agricultural Development Corporation (Guihing Plantation Operation), Resolution promulgated on September 22, 2009 and February 12, 2010 are SET ASIDE. The Decision
represented by its authorized officers, is hereby (ordered) to pay complainants' backwages, to wit: of Labor Arbiter Henry F. Te promulgated on August 15, 2008 is hereby REINSTATED. In CA-G.R. [SP]
No. 04646: the National Labor Relations Commission, 8th Division's (NLRC) Decision promulgated on
1. Presco A. Fuentes - P160,632.21 July 29, 2011 and the Resolution promulgated on October 26, 2011 are SET ASIDE and a new
2. Brian M. Taub - P160,632.21 judgment is entered DISMISSING the instant complaints for lack of merit. Let this case be remanded to
P321,264.42 the arbitration branch of origin for the computation of private respondents' separation pay to be based
Respondent is further ordered (to)reinstate complainants to their former positions, either physically or in on each private respondent's number of years of service.
the payroll, without loss of seniority rights and other privileges, and to submit a report of compliance
thereon within ten (10) days from receipt of Decision. This order of reinstatement is immediately SO ORDERED.24
executory.
Petitioners moved for reconsideration, but was denied in a Resolution25 dated November 14, 2012.
All other claims are denied for insufficiency of evidence.
Hence, petitioners filed the instant appeal questioning the appellate court's pronouncement of the
SO ORDERED.17 legality of their dismissal due to retrenchment.

Lapanday appealed to the NLRC, however, the NLRC dismissed the same for non-perfection due to The petition is without merit.
failure of petitioner to post a cash bond or surety bond within the reglementary period. Petitioner moved
for reconsideration but was denied. Considering the conflicting findings of the Labor Arbiter and the NLRC, it behooved upon the Court of
Appeals in the exercise of its certiorari jurisdiction to determine which findings are more in conformity
Fuentes and Taub filed a petition for certiorari under Rule 65 alleging that the NLRC gravely abuse its with the evidentiary facts.26
discretion when it denied its appeal. On April 20, 2011, the Court of Appeals granted the petition and
reinstated NLRC RAB XI-10-00881-08,18 and the proceedings continued before the NLRC. As a rule, a petition for certiorari under Rule 65 is valid only when the question involved is an error of
jurisdiction, or when there is grave abuse of discretion amounting to lack or excess of jurisdiction on the
On July 29, 2011, the NLRC dismissed19 the complaint for lack of merit, affirming the assailed Decision part of the court or tribunals exercising quasi-judicial functions. Hence, courts exercising certiorari
of the Labor Arbiter which ruled in favor of petitioners' reinstatement after finding their dismissal to be jurisdiction should refrain from reviewing factual assessments of the respondent court or agency.
illegal. It likewise echoed its Decision dated September 22, 2009 but included Fuentes and Taub as they However, the Court of Appeals cannot be faulted in reviewing the correctness of the factual findings,
were not parties in the earlier case since they filed the complaint several months thereafter. considering that the NLRC and the Labor Arbiter came up with conflicting findings. Thus, we shall now
proceed to review whether the appellate court's decision was in accord with law and evidentiary facts.27
The motion for reconsideration was filed, but was denied on October 26, 2011 for lack of merit.20
29

Retrenchment is the termination of employment initiated by the employer through no fault of the Petitioner-company's financial condition before and at the time of the retrenchment clearly paints a
employees and without prejudice to the latter, resorted to by management during periods of business picture of a losing business. An independent auditor confirmed its claim of financial losses, finding that
recession; industrial depression; or seasonal fluctuations, during lulls occasioned by lack of orders, is suffered a net loss of Php26,297,297. in 2006 as compared to its net income of Php14,128,589. in
shortage of materials, conversion of the plant for a new production program, or the introduction of new 2005. This net loss ballooned to Php72,363,879. in 2007. To be sure, these financial statements cannot
methods or more efficient machinery or automation. Retrenchment is a valid management prerogative. be whimsically assailed as self-serving, as these documents were prepared and signed by SGV & Co.,
It is, however, subject to faithful compliance with the substantive and procedural requirements laid down a firm of reputable independent external auditors.31 Lapanday instituted a retrenchment program as a
bylaw and jurisprudence. In the discharge of these requirements, it is the employer who bears the onus, result of the management's decision to limit its operation and streamline positions and personnel
being in the nature of affirmative defense.28 requirements and arrest its increasing financial losses by downsizing its workforce. Lapanday then was
justified in implementing a retrenchment program since it was undergoing financial reverses, not only for
The pertinent provision of the Labor Code on the subject of retrenchment is instructive: a single fiscal year, but for several years prior to and even after the program. We likewise quote the
Labor Arbiter's findings: Per audit report of Sycip, Gorres Velayo & Co (SGV), an independent
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the accounting firm and credible external auditor, dated April 17, 2007, for 2006 Financial Statement of
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment Lapanday Agriculture and Development Corporation, it shows that respondent's revenue for sales of
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the bananas in 2005 was PhP724,200,596.00. In 2006, it dropped to Php607,186,264.00. A difference or
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the loss of Php117,013,332.00 was incurred by the respondent company. Also, per audit report dated March
worker and the [Department] of Labor and Employment at least one (1) month before the intended date 28, 2008 of same accounting firm x x x for the year 2007, it shows that respondent's revenue for sales
thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker of bananas from Php607,186,264.00 further went down to PhP539,979,711.00 or a loss of
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at P67,207,753.00.
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not Recovering from other aspects of respondent's business, summary of respondent net loss was at
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) PhP26,297,297.00 for 2006 from PhP14,128,589.00 for 2005. The net loss ballooned to
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction Php72,363,879.00 in 2007.32
of at least six (6) months shall be considered as one (1) whole year. Therefore, for a valid retrenchment,
the following requisites must be complied with: (a) the retrenchment is necessary to prevent losses and We cannot ignore the audited financial reports of independent and reputable external auditors such as
such losses are proven; (b) written notice to the employees and to the DOLE at least one month prior to Sycip Gorres Velayo & Co., as no evidence can best attest to a company's economic status other than
the intended date of retrenchment; and (c) payment of separation pay equivalent to one-month pay or at its financial statement. We defined the evidentiary weight accorded to audited financial statements in
least one-half month pay for every year of service, whichever is higher. Asian Alcohol Corporation v. National Labor Relations Commission,33 thus:

Likewise, jurisprudence laid down the following standards to justify retrenchment in order to prevent the The condition of business losses is normally shown by audited financial documents like yearly balance
management from abusing this prerogative. In Ariola v. Philex Mining Corporation,29 the Court sheets and profit and loss statements as well as annual income tax returns. It is our ruling that financial
summarized the requirements for retrenchment, as follows: statements must be prepared and signed by independent auditors. Unless duly audited, they can be
assailed as self-serving documents. But it is not enough that only the financial statements for the year
Thus, the requirements for retrenchment are: (1) it is undertaken to prevent losses, which are not during which retrenchment was undertaken, are presented in evidence. For it may happen that while the
merely de minimis, but substantial, serious, actual, and real, or if only expected, are reasonably company has indeed been losing, its losses may be on a downward trend, indicating that business is
imminent as perceived objectively and in good faith by the employer; (2) the employer serves written picking up and retrenchment, being a drastic move, should no longer be resorted to. Thus, the failure of
notice both to the employees and the DOLE at least one month prior to the intended date of the employer to show its income or loss for the immediately preceding year or to prove that it expected
retrenchment; and (3) the employer pays the retrenched employees separation pay equivalent to one no abatement of such losses in the coming years, may bespeak the weakness of its cause. It is
month pay or at least 1/2 month pay for every year of service, whichever is higher. The Court later necessary that the employer also show that its losses increased through a period of time and that the
added the requirements that the employer must use fair and reasonable criteria in ascertaining who condition of the company is not likely to improve in the near future.34
would be dismissed and x x x retained among the employees and that the retrenchment must be
undertaken in good faith. Except for the written notice to the affected employees and the DOLE, non- Verily, the fact that the financial statements were audited by independent auditors settles any doubt on
compliance with any of these requirements renders the retrenchment illegal.30 the financial condition of Lapanday.1avvphi1 As reported by SGV & Co., the financial statements
presented fairly, in all material aspects, the financial position of the respondent as of December 31,
In the instant case, Lapanday's financial condition before and at the time of petitioners' retrenchment, 2006 and 2005.35 However, even assuming arguendo that Lapanday was not experiencing losses, it is
justified petitioners retrenchment. The audited financial report presented in evidence was found to still authorized by Article 28336 of the Labor Code to terminate the employment of any employee due to
conclusively show that Lapanday has indeed suffered serious financial losses for the last three years retrenchment to prevent losses or the closing provided that the projected losses are not merely de
prior to its retrenchment. We quote the findings of the appellate court, to wit: minimis, but substantial, serious, actual, and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer.
30

We also find that Lapanday complied with the requisite notices to the affected employees and the DOLE counter-productive and ultimately subversive of the nation's thrust towards a resurgence in our
to effect a valid retrenchment. As found by the Labor Arbiter and Court of Appeals:37 economy which would ultimately benefit the majority of our people. Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the
Records show that the one (1) written notice requirement was duly filed by the respondent with the work force to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious
Office of the Department of Labor and Employment on December 27, 2007 and the Notices of reduction in the volume of business which has rendered certain employees redundant.40
Termination were duly served to its workers on January 4, 2008 to take effect thirty (30) days from their
receipt or on February4, 2008. By reason of the hard "no retrenchment" stand of herein complainants, AWARD OF SEPARATION PAY
the latter refused to receive the notices of termination, thus, copies of the Letters of Retrenchment were
sent through registered mail on January 8, 2008 to the last known addresses of the complainants. It The payment of separation pay would be due when a dismissal is on account of an authorized cause as
appears also that respondent submitted to the Department of Labor and Employment its Reports on in this case, and the amount of separation pay depends on the ground for the termination of
Employee Termination. On the matter of separation pay, it is established that respondent company is employment. When the termination of employment is due to retrenchment to prevent losses, or to
willing to comply with the same. closure or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay is only an equivalent of "one (1) month pay or at least one-half
We likewise cannot sustain petitioners' argument that their dismissal was illegal on the basis that (1/2) month pay for every year of service, whichever is higher." In the above instances, a fraction of at
Lapanday did not actually cease its operation, or that they have re-hired some of the dismissed least six (6) months is considered as one (1) whole year.41
employees and even hired new set of employees to replace the retrenched employees.
Consequently, petitioners are not entitled to backwages as it is well settled that backwages may be
The law acknowledges the right of every business entity to reduce its work force if such measure is granted only when there is a finding of illegal dismissal.42 Nevertheless, petitioners are entitled to
made necessary or compelled by economic factors that would otherwise endanger its stability or separation pay as provided under the law, equivalent to one (1) month pay or at least one-half (1/2)
existence. In exercising its right to retrench employees, the firm may choose to close all, or a part of, its month pay for every year of service, whichever is higher,43 and those other benefits that petitioners
business to avoid further losses or mitigate expenses. In Caffco International Limited v. Office of the may been titled thereto under the retrenchment program. WHEREFORE, premises considered, the
Minister-Ministry of Labor and Employment,38 the Court has aptly observed that instant Petition is DENIED. The Court of Appeals Consolidated Decision dated June 29, 2012 and its
Resolution dated November 14, 2012 in CA-G.R. SP No. 03588 are hereby AFFIRMED.
Business enterprises today are faced with the pressures of economic recession, stiff competition, and
labor unrest. Thus, businessmen are always pressured to adopt certain changes and programs in order Let the records of the case be remanded to the Labor Arbiter for proper computation of the award in
to enhance their profits and protect their investments. Such changes may take various forms. accordance with this decision.
Management may even choose to close a branch, a department, a plant, or a shop.
SO ORDERED.
In the same manner, when Lapanday continued its business operation and eventually hired some of its
retrenched employees and new employees, it was merely exercising its right to continue its business. G.R. No. 213729, September 02, 2015
The fact that Lapanday chose to continue its business does not automatically make the retrenchment
illegal. We reiterate that inretrenchment, the goal is to prevent impending losses or further business PHILIPPINE AIRLINES, INC., Petitioner, v. ALEXANDER P. BICHARA, Respondent.
reversals- it therefore does not require that there is an actual closure of the business. Thus, when the
employer satisfactorily proved economic or business losses with sufficient supporting evidence and DECISION
have complied with the requirements mandated under the law to justify retrenchment, as in this case, it
cannot be said that the subsequent acts of the employer to re-hire the retrenched employees or to hire PERLAS-BERNABE, J.:
new employees constitute bad faith. It could have been different if from the beginning the retrenchment
was illegal and the employer subsequently hired new employees or rehired some of the previously Assailed in this petition for review on certiorari1 are the Decision2 dated January 24, 2014 and the
dismissed employees because that would have constituted bad faith. Consequently, when Lapanday Resolution3 dated July 30, 2014 rendered by the Court of Appeals (CA) in CA-G.R. SP. No. 118777,
continued its operation, it was merely exercising its prerogative to streamline its operations, and to re- which reversed and set aside the Decision4 dated November 23, 2010 and the Resolution5 dated
hire or hire only those who are qualified to replace the services rendered by the retrenched employees January 21, 2011 of the National Labor Relations Commission (NLRC) in NLRC NCR 00-04-03414-94
in order to effect more economic and efficient methods of production and to forestall business losses. (CA No. 013528-97) (AE-03-09), and thereby, ordered petitioner Philippine Airlines, Inc. (PAL) to pay
The rehiring or reemployment of retrenched employees does not necessarily negate the presence or respondent Alexander P. Bichara (Bichara) salary differentials, backwages, and retirement benefits.
imminence of losses which prompted Lapanday to retrench.39

In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of The Facts
labor, the fundamental law itself guarantees, even during the process of tilting the scales of social
justice towards workers and employees, "the right of enterprises to reasonable returns of investment
and to expansion and growth." To hold otherwise would not only be oppressive and inhuman, but also
31

On October 28, 1968, PAL hired Bichara as a flight attendant. Sometime in 1971, PAL implemented a illegal demotion and illegal retrenchment cases which were both immediately executory; and (c)
retrenchment program. By April of that year, Bichara voluntarily resigned. On May 15, 1975, he was retrenchment was made during the pendency of the illegal demotion case without the permission of the
rehired.6 court where the case was pending.24 For these reasons, Bichara was entitled to reinstatement to his
position as flight purser. However, since Bichara may no longer be reinstated in view of his compulsory
In August 1993, Bichara was included in PAL's Purser Upgrading Program in which he graduated on retirement in accordance with the CBA, LA Macam, instead, ordered PAL to pay Bichara separation pay
December 13, 1993. As flight purser, he was required to take five (5) check rides for his performance with the salary base of a flight purser.25cralawred
evaluation and earn at least an 85% rating for each ride. However, Bichara failed in the two (2) check
rides with ratings of 83.46% and 80.63%. Consequently, on March 21, 1994, Bichara was demoted to Aggrieved, PAL appealed to the NLRC.
the position of flight steward.7
The NLRC Ruling
On March 22, 1994, Bichara appealed his demotion to PAL, but no action was taken; hence, he filed a
complaint for illegal demotion against PAL8 before the NLRC-Regional Arbitration Branch, docketed as In a Decision26 dated November 23, 2010, the NLRC reversed and set aside LA Macam's February 4,
NLRC NCR 04-03414-94 (illegal demotion case). Eventually, or on June 16, 1997, Labor Arbiter Ricardo 2009 Order and denied the motion for execution for being moot and academic, considering Bichara's
C. Nora (LA Nora) issued a Decision9 (June 16, 1997 Decision) declaring Bichara's demotion as illegal, compulsory retirement in 2005,27 without prejudice to the latter's entitlement to backwages and
and accordingly, ordered PAL to reinstate Bichara to his position as flight purser.10 PAL filed an appeal retirement benefits of a flight steward pursuant to this Court's final decision in the FASAP case.28
before the NLRC and later before the CA, both of which, however, upheld LA Nora's finding. PAL no
longer appealed to the Court, thus, it rendered the June 16, 1997 Decision final and executory on At the outset, the NLRC ruled that Bichara's reinstatement could have taken effect, if at all, only on
February 5, 2004.11 January 31, 2008 when he sought the execution of the said relief.29 In this light, his reinstatement and
corresponding backwages prior to said date must therefore be based on the salary rate and other
During the pendency of the illegal demotion case12 before the CA, however, or on July 15, 1998, PAL benefits attached to the position of flight steward to which he was demoted/reverted.30 (However, it
implemented another retrenchment program that resulted in the termination of Bichara's employment.13 declared that reinstatement is no longer possible as the same was rendered moot and academic when
This prompted him, along with more than 1,400 other retrenched flight attendants, represented by the he compulsorily retired in 2005.31 On the other hand, the NLRC concluded that the matter of payment
Flight Attendants and Stewards Association of the Philippines (FASAP), to file on June 22, 1998, a of monetary benefits is not for it to order since it is a relief pertaining to the pending FASAP case; as
separate complaint for unfair labor practice, illegal retrenchment with claims for reinstatement and such, Bichara should pursue payment of backwages when the decision in the FASAP case is due for
payment of salaries, allowances, backwages, and damages14 against PAL, docketed as NLRC-NCR execution. In this relation, the NLRC remarked that LA Macam exceeded his authority in awarding
Case No. 06-05100-9815 (illegal retrenchment case)16 This case was appealed all the way to this separation pay in lieu of reinstatement, since such relief is not contemplated in the decision sought to
Court, docketed as G.R. No. 178083 entitled "Flight Attendants and Stewards Assn. of the Phils, v. PAL, be executed, i.e., the June 16, 1997 Decision.32
Patria T. Chiong, and CA" (FASAP case), which remains pending as of this time.17
Both parties moved for reconsideration, which were, however, denied in a Resolution33 dated January
On July 9, 2005, Bichara reached the 60 year-old compulsory retirement age under the PAL-FASAP 21, 2011. Dissatisfied, Bichara elevated the case to the CA through a petition for review on certiorari.
Collective Bargaining Agreement (CBA).18
The CA Ruling
On January 31, 2008, Bichara filed a motion for execution of LA Nora's June 16, 1997 Decision,19
which PAL opposed20 by arguing that the "complaint for illegal demotion x x x was overtaken by In a Decision34 dated January 24, 2014, the CA reversed and set aside the NLRC's ruling. It did not
supervening events, i.e., the retrenchment of [Bichara] in 1998 and his having reached [the] compulsory find LA Macam to have exceeded his authority in ordering the payment of separation pay in lieu of
retirement age in 2005."21 reinstatement since, in a long line of cases, this Court has consistently held that when reinstatement is
not possible due to over age, payment of separation pay is in place.35 The CA, however, observed that
The LA Ruling since Bichara was one of the retrenched employees involved in the FASAP case, this Court's Decision
dated October 2, 2009, wherein it ruled that the retrenchment was illegal and thereby stated that "[f]light
In an Order22 dated February 4, 2009 (February 4, 2009 Order), Labor Arbiter Antonio R. Macam (LA attendants who have reached their compulsory retirement age of retirement shall receive backwages up
Macam) granted Bichara's motion for execution, thus, directing the issuance of a writ of execution to the date of their retirement only,"36 should be made to apply. Thus, instead of separation pay,
against PAL and/or a certain Jose Garcia to jointly and severally pay Bichara: (a) separation pay in lieu Bichara is entitled to backwages from the time of his retrenchment up to the time he reached the
of reinstatement equivalent to one (1) month's pay for every year of service counting from October 28, compulsory retirement age of 60. In addition, since the June 16, 1997 Decision, rendered in the illegal
1968 up to the present, excluding the period from April 1, 1971 until May 15, 1975, or a period of 35 demotion case, had already become final and executory, he is entitled to salary differentials of a flight
years; and (b) attorney's fees in the amount of P20,000.00.23 purser from a flight attendant from March 21, 1994, i.e., the date of his demotion, up to the time of his
retrenchment in July 1998.37 He is also entitled to retirement benefits in accordance with the existing
LA Macam declared that, notwithstanding the pendency before this Court of the illegal retrenchment CBA at the time of his retirement.38
case, i.e., FASAP case, Bichara's termination was invalid, given that: (a) PAL did not use a fair and
reasonable criteria in effecting the retrenchment; (b) PAL disregarded the labor arbiters' rulings in the
32

PAL moved for reconsideration39 which was denied in a Resolution40 dated July 30, 2014; hence, this Unlike the cases47 cited by the CA, which all involved illegal dismissal cases, it would not be proper to
petition. accord such relief in this case since, in those cases, the awards of separation pay in lieu of
reinstatement were all hinged on the validity of the employee's dismissal. Here, the validity of Bichara's
The Issue Before the Court termination is the subject matter of a separate case, i.e., the FASAP case, which is still pending before
this Court, and is also beyond the ambit of the illegal demotion proceedings. Hence, LA Macam
The essential issue to be resolved is whether or not the CA erred in reversing the NLRC's Decision and exceeded his authority when he ruled on this issue and directed PAL to pay Bichara separation pay in
thereby awarding Bichara the aforementioned monetary awards. lieu of reinstatement.

The Court's Ruling PAL's supervening retrenchment of its employees, which included Bichara, in July 1998, and his
compulsory retirement in July 2005, however, prevent the enforcement of the reinstatement of Bichara
The petition is partly meritorious. to the position of flight purser under the June 16, 1997 Decision. Nonetheless, since this Decision had
already settled the illegality of Bichara's demotion with finality, this Court finds that Bichara should,
A judgment should be implemented according to the terms of its dispositive portion is a long and well- instead, be awarded the salary differential of a flight purser from a flight steward from the time of his
established rule.41 As such, where the writ of execution is not in harmony with and exceeds the illegal demotion on March 21, 1994 up until the time he was retrenched in July 1998. Notably, unlike LA
judgment which gives it life, the writ has pro tanto no validity.42 Macam's award of separation pay in lieu of reinstatement, the award of salary differential is not
dependent on the validity of his termination, as it is, in fact, intrinsically linked to the illegality of
A companion to this rule is the principle of immutability of final judgments, which states that a final Bichara's demotion. Hence, with this direct relation, there should be no obstacle in rendering this award.
judgment may no longer be altered, amended or modified, even if the alteration, amendment or
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law and Further, it should be pointed out that the principle of immutability of judgments, from which the above-
regardless of what court renders it. Any attempt to insert, change or add matters not clearly stated rule on writ of executions proceed, allow courts, as an exception, to recognize circumstances that
contemplated in the dispositive portion violates the rule on immutability of judgments.43 But like any transpire after the finality of the decision which would render its execution unjust and inequitable and act
other rule, this principle has exceptions, namely: (1) the correction of clerical errors; (2) the so-called accordingly. Thus, in view of the supervening events above-mentioned, this Court deems the award of
nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever salary differential to be the just and equitable award under the circumstances herein prevailing.
circumstances transpire after the finality of the decision rendering its execution unjust and Jurisprudence holds that courts may modify or alter the judgment to harmonize the same with justice
inequitable.44 and the facts when after judgment has been rendered and the latter has become final, facts and
circumstances transpire which render its execution impossible or unjust,48 as in this case.
In this case, the final judgment sought to be executed is LA Nora's June 16, 1997 Decision, which was
confined to the directive that PAL reinstate Bichara as a flight purser in view of his illegal demotion to As a last point, it deserves mentioning that since Bichara's illegal demotion has been finally decreed, he
the position of flight attendant: should be entitled to (a) backwages, at the salary rate of a flight purser, from the time of retrenchment in
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered declaring the illegality of July 1998 up until his compulsory retirement in July 2005; (b) retirement benefits of a flight purser in
complainant's [Bichara] demotion/reversion to Flight Steward and ordering the respondents [PAL] to accordance with the existing CBA at the time of Bichara's retirement; and (c) attorney's fees, moral, and
reinstate the complainant to his position as Flight Purser within ten (10) days from receipt of this exemplary damages, if any, but only if this Court, in the FASAP case, finally rules that the subject
Decision. retrenchment is invalid. Otherwise, he should only be entitled to the above-stated salary differential, as
well as the corresponding separation pay required under the relevant CBA, or Article 29749 (formerly
The claim for damages is dismissed for lack of merit. Article 283) of the Labor Code if no such CBA provision exists. The awards of backwages, and
retirement benefits, including attorney's fees, moral, and exemplary damages, if any, cannot, however,
SO ORDERED.45 be executed in these proceedings since they are incidents which pertain to the illegal retrenchment
Evidently, LA Macam went beyond the terms of the June 16, 1997 Decision when he, in his February 4, case, hence, executable only when the FASAP case is finally concluded.
2009 Order, directed the issuance of a writ of execution ordering the payment of separation pay in lieu
of reinstatement: WHEREFORE, the petition is PARTLY GRANTED. The Decision dated January 24, 2014 and the
WHEREFORE, finding merit in the complainant's [Bichara] Motion for Execution, the same is hereby Resolution dated July 30, 2014 of Court of Appeals in CA-G.R. SP. No. 118777 are hereby REVERSED
GRANTED. Let a Writ of Execution be issued ordering the respondents Philippine Airlines, Inc. and/or and SET ASIDE. A new one is entered ORDERING petitioner Philippine Airlines, Inc. to pay respondent
Jose Garcia, in lieu of reinstating the complainant to the position of Flight Purser, to jointly and severally Alexander P. Bichara the salary differential of a flight purser from a flight attendant from the time of his
PAY to the complainant his separation pay equivalent to one (1) month's pay for every year of service illegal demotion on March 21, 1994 up until the time he was retrenched on July 15, 1998.
counting from October 28, 1968 up to the present, excluding the period from April 1, 1971 until May 15,
1975, or a period of thirty-five (35) years and to pay the complainant the sum of Twenty Thousand SO ORDERED.chanroblesvirtuallawlibrary
Pesos (P20,000.00) for and as attorney's fees.
TRI-C GENERAL SERVICES, Petitioner, v. NOLASCO B. MATUTO, ROMEO E. MAGNO AND ELVIRA
SO ORDERED.46 B. LAVIA, Respondents.
33

careful assessment, the services of respondents.14 Petitioner further claimed that it had no other
DECISION recourse but to temporarily put the respondents on "floating status" upon termination of client's contract
since their work was entirely dependent on the need for janitorial services of its clients. It alleged that
PERALTA, J.: the complaint for illegal dismissal was premature since the six months legal period for placing an
employee on a "floating status" has not yet lapsed.15 It insisted that it was a legitimate exercise of its
Fair evidentiary rule dictates that before employers are burdened to prove that they did not commit management prerogative.
illegal dismissal, it is incumbent upon the employee to first establish by substantial evidence the fact of
his or her dismissal.1 In its reply to respondents' position paper, petitioner insisted that respondents abandoned their posts. It
averred that its Personnel Department sent a series of letters to the respondents from October 2004 to
For resolution of this Court is a petition for review on certiorari, dated December 23, 2010 of petitioner November 2004.16 On October 14, 2004, Matuto and Laviha received similar letters, reading as
Tri-C General Services, seeking the reversal of the Decision2 dated June 17, 2010 and Resolution3 follows:cralawlawlibrary
dated December 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 111644 reversing the
Decision4 and Resolution5 dated June 30, 2009 and September 22, 2009, respectively, of the National
Labor Relations Commission (NLRC) Second Division, Quezon City in LAC No. 12-003297-07 which From: PMI Personnel Department
affirmed the Decision6 dated July 26, 2007 of the Labor Arbiter (LA) in NLRC Case No. RAB-IV-12- Subject: Requested to Report at the Office
20177-04-C. The assailed Decision and Resolution of the CA declared that respondents Nolasco B.
Matuto, Romeo E. Magno and Elvira B. Lavia were illegally dismissed, and ordered their reinstatement You are hereby requested to report on Saturday, October 16, 2004, 8:00 AM at our office #45 Zorra St.,
and payment of full backwages. San Francisco Del Monte, Quezon City.

The facts are as follows:chanRoblesvirtualLawlibrary In regards to the on going re-shuffling or Notice of transfer.

Petitioner Tri-C General Services, Inc. is a manpower agency engaged in the business of supplying Thank you.17chanrobleslaw
services to all PLDT Business Offices in Laguna.7
Subsequent letters dated October 19, 25 and November 11, 2004 pertain to the same request for the
Respondents Nolasco Matuto (Matuto), Romeo Magno (Magno) and Elvira Lavia (Lavia) were hired respondents to report at petitioner's main office. Petitioner warned respondents Matuto and Lavia in a
by petitioner as janitors/janitress assigned at the PLDT Business Office in Calamba City. Magno was letter18 dated November 11, 2004 that failure to report at their office will mean that they were no longer
hired on August 1, 1993 while Matuto was hired on June 5, 1995 and Lavia on February 4, 1996.8 interested in their work. When such request went unheeded, petitioner sent the final letter, dated
November 16, 2004, reading as follows:cralawlawlibrary
On November 3, 2004, Matuto and Lavia were barred from their work place in PLDT-Calamba, while
Magno was denied entry on November 26, 2004.9 From: Personnel Department
Subject: Failure to Report at the Office
Thus, respondents filed an illegal dismissal case against petitioner on December 15, 2004.10 Carmela
Quiogue, the owner of Tri-C General Services, Inc., was impleaded in the complaint.11 You were given ample time to report at the office since October 16, 2004 at our office at #45 Zorra St.,
San Francisco Del Monte, Quezon City, but you did not appear at all. Therefore, we took action that you
For their part, respondents averred that sometime in January 1997, they spearheaded the first are hereby terminating your services with this company voluntarily.
complaint of several janitors against petitioner for underpayment of wages and violation of labor
standards before the Department of Labor and Employment. The LA decided on September 1, 2003 in Due to this, we were left with no recourse but to delete you from our active roster of employees effective
their favor and ordered the petitioner to pay their underpaid salaries. However, petitioner did not pay the today November 16, 2004.
respondents with the mandated minimum wage but merely increased their salaries by P5.00 every year.
They alleged that since then, they earned the ire of petitioner and experienced harassment and We wish you the best of luck.
intimidation.12
Thank you.19chanrobleslaw
Respondents further alleged that assuming that petitioner had valid ground to terminate them, their
termination was still deemed illegal since petitioner failed to furnish them with the two notices required Respondent Magno received similar letters on November 11 and 16, 2004 directing him to report to
by law. They only received a notice informing them that their services had already been terminated petitioner's main office. On November 22, 2004, he received a letter20 informing him that his failure to
effective on the same date of the notice.13 appear at the office left petitioner with no recourse but to delete him from its active roster of employees.

In its defense, petitioner denied dismissing respondents. Sometime in October 2004, PLDT-Laguna The LA ruled in favor of the petitioner, the dispositive portion of the decision reads:cralawlawlibrary
informed petitioner that it would implement cost-cutting measures and that it would discontinue, after
34

WHEREFORE, premises considered, the complaint for illegal dismissal is DISMISSED for lack of merit This case is thus REMANDED to the Labor Arbiter for the computation, within 30 days from receipt
except that TRI-C GENERAL SERVICES, INC. is ordered to pay complainants their separation pay as hereof, of the backwages, inclusive of allowances and other benefits due to petitioners, computed from
follows:chanRoblesvirtualLawlibrary the time their compensation was withheld up to the time of their actual reinstatement, as well as the
award of attorney's fees in their favor.
Nolasco Matuto - P 42,432.00
Romeo Magno - 45,968.00 SO ORDERED.25
Elvira Lavia - 38,896.00 chanrobleslaw
GRAND TOTAL - P127,296.00
The CA held that the paramount consideration is the dire exigency of the business of the employer
SO ORDERED.21 which compelled it to put some of its employees temporarily out of work. It found that there was nothing
chanrobleslaw to support petitioner's allegation aside from its bare assertion that its client PLDT-Laguna requested for
discontinuance of its services. There was also no showing that there was lack of available posts to
The LA considered the respondents on floating status and the legal period during which they could be which the respondents might be assigned after they were relieved from their last assignment.26
placed under floating status has not yet lapsed at the time of the filing of the complaint on December 15,
2004. Hence, they could not be considered constructively dismissed.22 The CA denied petitioner's Motion for Reconsideration. Hence, the petitioner raised before this Court
the following issues:cralawlawlibrary
Respondents elevated the matters to the NLRC, wliich sustained the decision of the LA that they were
not illegally dismissed. The separation pay, however, was deleted. The dispositive portion of the WHETHER THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ANNULLING AND
decision states:cralawlawlibrary SETTING ASIDE THE DECISION ISSUED BY THE NATIONAL LABOR RELATIONS COMMISSION-
SECOND DIVISION.
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with MODIFICATION
only insofar as Our order for the monetary award of separation pay to be DELETED from the subject WHETHER THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DENYING THE MOTION
Decision, for lack of basis. FOR RECONSIDERATION FILED BY TRI-C EVERLASTING FOR THE REVIEW OF ITS DECISION
ISSUED ON JUNE 17, 2010.
SO ORDERED.23
chanrobleslaw WHETHER THE HONORABLE COURT OF APPEALS ERRED IN DECLARING MATUTO, MAGNO
AND LAVIA AS ILLEGALLY DISMISSED BY TRI-C.
The NLRC ruled that the filing of the complaint was premature since petitioner had proof that it could
only be sued if no new post or assignment was given to respondents after the lapse of a period of six WHETHER THE HONORABLE,COURT OF APPEALS ERRED IN ORDERING THE: REINSTATEMENT
months. The awards of separation pay to respondents were deleted for being misplaced absent any OF MATUTO, MAGNO AND LAVIA AND TO PAY THE LATTER'S BACKWAGES INCLUSIVE OF
showing that respondents were illegally dismissed.24 ALLOWANCES AND OTHER BENEFITS DUE THEM AS WELL AS ATTORNEY'S FEES.27
chanrobleslaw
After their Motion for Reconsideration was denied,'respondents filed before the CA a petition for
certiorari under Rule 65. The CA reversed the findings of the LA and the NLRC and ruled for the We find the instant petition meritorious.
respondents, the fallo of the decision reads:cralawlawlibrary
In a petition for review on certiorari under Rule 45, we review the legal errors that the CA may have
committed in the assailed decision, in contrast with the review for jurisdictional error undertaken in an
WHEREFORE, the instant petition for certiorari is GRANTED. The assailed Decision and Resolution of original certiorari action. In reviewing the legal correctness of the CA decision in a labor case made
the public respondent National Labor Relations Commission are ANNULLED and SET ASIDE. under Rule 65 of the Rules of Court, this Court examines the decision in the context that the CA
Judgment is hereby rendered declaring the petitioners Nolasco B. Matuto, Romeo E. Magno and Elvira determined the presence or the absence of grave abuse of discretion in the NLRC decision before it
B. Lavifia were illegally dismissed from their employment by private respondent Tri-C General Services and not on the basis of whether the NLRC decision, on the merits of the case, was correct.28
and, accordingly, ordering said private respondent to reinstate the petitioners to their former positions
without loss of seniority rights and with payment of full backwages from the time of their illegal dismissal The conflicting factual findings of the LA, the NLRC and the CA are not binding on us, and we retain the
on 03 November 2004 (for petitioners Matuto and Lavifia) and on 26 November 2004 (for petitioner authority to pass on the evidence presented and draw conclusions therefrom. In the exercise of its
Magno). equity jurisdiction, this Court would re-evaluate and re-examine the relevant findings.29

Private respondent is further ordered to pay petitioners the amounts equivalent to ten percent (10%) of For the first two issues, petitioner alleged that the CA erred when it annulled and set aside the decision
the monetary awards as and for attorney's fees. of the NLRC and denied its motion for reconsideration. It posited that when the findings of fact of the LA
35

is affirmed by the NLRC, said finding is considered as final and is viewed with respect by the higher dismiss the case for lack of merit. Instead, we find that respondents are entitled to reinstatement without
tribunals. payment of backwages and other monetary benefits.

It has been settled that judicial review of labor cases does not go beyond the evaluation of the Anent the issue on the award of attorney's fees, Article 111 of the Labor Code provides that in cases of
sufficiency of the evidence upon which its labor officials' findings rest. Hence, the findings of facts and unlawful withholding of wages, the culpable party may be assessed attorney's fees, equivalent to ten
conclusion of the NLRC are generally accorded not only great weight and respect but even clothed with percent (10%) of the amount of wages recovered. Likewise, we have recognized that "in actions for
finality and deemed binding on this Court as long as they are supported by substantial evidence.30 recovery of wages or where an employee was forced to litigate and, thus, incur expenses to protect his
rights and interest, the award of attorney's fees is legally and morally justifiable."39 We have similarly so
It was held that in labor cases elevated to it via petition for certiorari, the CA is empowered to evaluate ruled in RTG Construction, Inc., et at. v. Facto40 in which we specifically stated:cralawlawlibrary
the materiality and significance of the evidence alleged to have been capriciously, whimsically, or
arbitrarily disregarded by the NLRC in relation to all other evidence on record.31 To make this finding, xxx Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate
the CA necessarily has to view the evidence if only to determine if the NLRC ruling had basis in and, thus, incur expenses to protect his rights and interests, a monetary award by way of attorney's fees
evidence.32 is justifiable under Article 111 of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules;
and paragraph 7, Article 2208 of the Civil Code. The award of attorney's fees is proper, and there need,
After a judicious study of the records of the case, this Court deems it proper to disregard the findings of not be any showing that the employer acted maliciously or in bad faith when it withheld the wages.
the CA. There need only be a showing that the lawful wages were not paid accordingly.41
chanrobleslaw
The Court is not unmindful of the rule in labor cases that the employer has the burden of proving that
the termination was for a valid or authorized cause. However, it is likewise incumbent upon the In the present case, however, it was settled that respondents were not illegally dismissed from
employees that they should first establish by competent evidence the fact of their dismissal from employment and their wages were not withheld without valid and legal basis. There/fore, they are not
employment.33 As an allegation is not evidence, it is elementary that a party alleging a critical fact must entitled to receive attorney's fees.
support his allegation with substantial evidence.34 It was also stressed that the evidence to prove the
fact of dismissal must be clear, positive and convincing.35 As all circumstances surrounding the alleged termination are taken into account, petitioner should
accept respondents back and reinstate them to their former positions. However, under the principle of
In the present case, the facts and the evidence do not establish a prima facie case that respondents "no work, no pay," there should be no payment of backwages.42 In a case where the employee's failure
were dismissed from employment. Aside from their mere assertion and joint affidavit, respondents failed to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss
to adduce corroborative and competent evidence to substantiate their conclusion that they were is not rightfully shifted to the employer; each party must bear his own loss.43
dismissed from employment. Respondents did not even present the alleged notice of termination of
their employment. Therefore, in the absence of any showing of an overt or positive act proving that Absent any showing that there is strained relationship between petitioner and respondents, the order of
petitioner had dismissed respondents, the latter's claim of illegal dismissal cannot be sustained as the reinstatement shall stand. The doctrine of strained relations is not applied indiscriminately as to bar
same would be self-serving, conjectural and of no probative value.36 reinstatement, especially when the employee has not indicated an aversion to returning to work or does
not occupy a position of trust and confidence in or has no say in the operation of the employer's
The records are devoid of any indication that they were barred from petitioner's premises or were business.44In this case, there was no evidence that respondents disliked returning to their former posts
otherwise deprived of any work assignment after the discontinuance of their work in PLDT-Calamba. It and that they occupy a position of trust and confidence.
was also not shown that respondents reported or even tried to report to petitioner's office and requested
for another work assignment after being dismissed from PLDT-Calamba. On the contrary, the evidence WHEREFORE, premises considered, the instant petition is hereby GRANTED. Accordingly, the
presented by petitioner showed that they were repeatedly summoned to report to its main office and did Decision dated June 17, 2010 and Resolution dated December 9, 2010 of the Court of Appeals in CA-
not even bother to show despite several notices. Moreover, the rule 'that the employer bears the burden G.R. SP No. 111644 are hereby REVERSED and SET ASIDE.
of proof in illegal dismissal cases finds no application in a case, like the present petition, where the
employer denied having dismissed the employees.37 Petitioner Tri-C General Services, however is hereby ORDERED to REINSTATE respondents to their
former positions but without payment of backwages within a period of thirty (30) days from finality of
Petitioner alleged that the CA erred in ruling that respondents were entitled to reinstatement, payment of judgment. Respondents Nolasco B. Matuto, Romeo E. Magno and Elvira B. Lavia are ORDERED to
backwages and other monetary benefits. Petitioner believed that respondents are not entitled to the report for work within ten (10) days from notice from petitioner, otherwise, they shall be deemed to have
awards since they were not illegally dismissed. abandoned their employment with petitioner.

Under Article 27938 of the Labor Code and as settled in jurisprudence, an employee who is dismissed SO ORDERED.chanroblesvirtuallawlibrary
without just cause and without due process is entitled to backwages and reinstatement or payment of
separation pay in lieu thereof. While we agree with the rulings of the LA and the NLRC that respondents G.R. No. 214961, September 16, 2015
were not illegally dismissed and not guilty of abandonment, we do not agree with their decisions to
36

BANCO DE ORO UNIBANK, INC., Petitioner, v. GUILLERMO C. SAGAYSAY, Respondent. On January 10, 2011, Sagaysay filed a complaint12 for illegal dismissal with prayer for reinstatement
and payment of backwages, moral damages, exemplary damages, and attorney's fee against BDO
DECISION before the Labor Arbiter (LA). He claimed that despite his appeal, BDO compulsory retired him on
September 1, 2010. As a result, he and his family suffered damages in the amount of P2,225,403.00
MENDOZA, J.: which he would have received if he was made to retire at the age of sixty-five (65).

This is a petition for review on certiorari seeking to reverse and set aside the March 31, 2014 Decision1 For its part, BDO countered that after the bank denied Sagaysay's request for extension of services, he
and the October 8, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 126586, which was paid the amount of P98,376.14 representing the full and final settlement of his compensation,
reversed and set aside the February 29, 2012 Decision3 and the June 25, 2012 Resolution4 of the allowances, benefits and other emoluments. BDO stressed that he was not dismissed but was retired
National Labor Relations Commission (NLRC) and reinstated the July 19, 2011 Decision5 of the Labor from the service.
Arbiter (LA) in NLRC Case No. RAB II 02-0067-11.
The LA Ruling
The Facts
In a decision, dated July 19, 2011, the LA ruled that Sagaysay was illegally dismissed because he was
On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by petitioner Banco De Oro forced to avail of an optional retirement at the age of sixty (60) which was contrary to the provisions of
Unibank, Inc., (BDO) as Senior Accounting Assistant 5 in its San Jose, Nueva Ecija, branch as a result Article 287 of the Labor Code.13 The LA opined that he was terminated on the basis of a provision in a
of a merger with United Overseas Bank (UOB), with BDO as the surviving bank. Sagaysay was retirement plan to which he did not freely assent. BDO took advantage of his predicament and made
previously employed in UOB from 2004 to 2006 or for two (2) years. Prior thereto, he worked for him sign a quitclaim in exchange for a small consideration. The decretal portion of the LA decision
Metropolitan Bank and Trust Co. (Metrobank) from 1976 to 2004 for a period of twenty-eight (28) years. reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring that complainant
In a letter,6 dated January 8, 2010, BDO informed Sagaysay that, pursuant to the retirement policy of GUILLERMO C. SAGAYSAY was illegally dismissed from work. Hence, respondent BDO UNIBANK,
the bank which mandated its retirement age to be sixty (60), he would be formally retired effective INC. is ordered to REINSTATE complainant to his former position as Senior Accounting Assistant 5
September 1, 2010, a few days after his 60th birthday. The normal or compulsory retirement age of the without loss of seniority rights and privileges and to pay him backwages in the sum of P280,480.00 as
bank was based on its retirement plan7 which was implemented on July 1, 1994, Section 1, Article V of of July 7, 2011, plus ten percent (10%) thereof as attorney's fees or a total of P308,528.00.
which reads:
The reinstatement aspect is immediately executory, even pending appeal. Respondent is hereby
Section 1. Normal Retirement ordered to show proof that it complied with the reinstatement of complainant within ten (10) calendar
days from receipt hereof.
The Normal Retirement Date of each member shall be the first day of the month coincident with or next
following his sixtieth (60th) birthday. The Member's Normal Retirement Benefit shall be a sum Respondents [are] also ordered to pay complainant P50,000.00 each as moral and exemplary
determined in accordance with the Retirement Benefit Schedule stated in Section 4 of this Article as of damages.
his retirement date.8
In an e-mail,9 dated July 27, 2010, Sagaysay wrote that, although the time had come that the BDO SO ORDERED.14
Retirement Program would be implemented to those reaching the age of sixty (60), he requested that Aggrieved, BDO appealed to the NLRC arguing chiefly that Sagaysay freely assented to its retirement
his services be extended because he had an outstanding loan and his children were still in college. He plan.
assured BDO that he was healthy and could still perform his duties in the branch. BDO denied
Sagaysay's request. The NLRC Ruling

In another e-mail,10 dated August 19, 2010, Sagaysay appealed to BDO to extend his service for 8.5 On February 29, 2012, the NLRC reversed and set aside the ruling of the LA. The NLRC explained that
months or up to May 16, 2011 so that he could render at least five (5) years of employment which would BDO's retirement plan, which mandated a normal or compulsory retirement date at the age of sixty (60),
entitle him to 50% of his basic pay for every year of service upon his retirement. BDO denied was effective as early as June 1, 1994. The plan was renamed Banco de Oro Multiemployer Retirement
Sagaysay's appeal and retired him on September 1, 2010. As of his last day of work, he was earning a Plan on July 1, 2004, but the compulsory retirement age of sixty (60) was preserved. When Sagaysay
monthly salary of P28,048.00. was employed on May 16, 2006, the retirement plan was already in full force and effect. Thus, the
NLRC concluded that when he accepted his employment with BDO, he assented to the provisions of
Sagaysay then signed Release, Waiver and Quitclaim11 (quitclaim), dated October 22, 2010, for and in the retirement plan.
consideration of P98,376.14. The quitclaim stated, among others, that in consideration of the foregoing
payment, Sagaysay released and discharged the bank, its affiliates and its subsidiaries from any action, The NLRC found it difficult to believe that Sagaysay started his employment with BDO without
suit, claim or demand in connection with his employment. familiarizing himself with the bank's retirement policy considering that he had previously retired from two
(2) other banks. Further, the NLRC stated that a more concrete proof of his acceptance of BDO's
37

retirement plan was his execution of a quitclaim where he declared that he had no cause of action WHETHER THE EXECUTION OF A RELEASE, WAIVER AND QUITCLAIM BY RESPONDENT IS
against the bank and its agents. The dispositive portion of the NLRC decision states: VALID.
WHEREFORE, the appeal is GRANTED. The Decision of Labor Arbiter Ma. Lourdes R. Baricaua dated BDO principally argues that the retirement plan has been valid and effective since June 1, 1994; that
July 19, 2011 is REVERSED and SET ASIDE and a new one entered DISMISSING the complaint. having been in place for such a long period, the retirement plan is deemed to have been written into
Sagaysay's employment contract, executed on May 16, 2006; that he even asked for an extension to
SO ORDERED.15 become eligible to avail of the benefits under the same retirement plan; and that the 2005-2010 CBA
Sagaysay filed a motion for reconsideration, but it was denied by the NLRC in its Resolution, dated stated, "[t]he Bank shall continue to grant retirement pay," showing that the CBA likewise recognized the
June 25, 2012. existing retirement plan.

Undaunted, Sagaysay filed a petition for certiorari16 before the CA contending that it was neither stated BDO also contends that the CA erred in citing Cercado because in that case, the retirement plan was
in his employment contract nor stipulated in the collective bargaining agreement (CBA) between BDO executed only after the employment of petitioner therein. Moreover, Sagaysay, as a veteran banker, fully
and its employees that the compulsory retirement age was sixty (60) years old. knew the effects of the release, waiver and quitclaim when he signed it.

The CA Ruling In his Comment,22 Sagaysay countered that he was retired by BDO against his will; that there was no
provision in any CBA that employees who reached sixty (60) years of age could be compulsorily retired;
On March 31, 2014, the CA rendered the assailed decision which reversed the NLRC ruling. The that there was no agreement either between Sagaysay and BDO that he would be retired upon reaching
appellate court explained that while the cases of Pantranco North Express, Inc., v. NLRC17 and sixty (60); and that the quitclaim was invalid because BDO took undue advantage of his situation and
Philippine Airlines v. Airline Pilots Association of the Philippines18 affirmed that the employer may dire financial problems to obtain his signature therein.
provide an earlier retirement age, the retirement plans therein were the result of negotiations and
agreement between employer and employee. The CA continued that, in this case, the retirement plan In its Reply,23 BDO reiterated that the retirement plan was not forced upon Sagaysay; and that at the
was not a result of a mutual agreement of employer and employee. This was affirmed by the BDO time he was employed by BDO in 2006, he had every opportunity to refuse employment if he disagreed
Memorandum,19 dated June 1, 2009, stating that the retirement plan was to be implemented in the with the retirement policy of the bank.
merged bank. Citing Cercado v. UNIPROM Inc.20 (Cercado), the CA ruled that a retirement plan with no
voluntary acquiescence on the part of the employee was ineffective. The Court's Ruling

The CA stated that Sagaysay was forced to participate in the retirement plan. Equally, the quitclaim he The Court finds the petition meritorious.
executed was not given credence because his subsequent filing of a complaint for illegal dismissal
manifested that he had no intention to relinquish his employment. Nonetheless, the CA deleted the The petition essentially centers on whether the June 1, 1994 retirement plan is valid and effective
awards of moral and exemplary damages for lack of basis. The appellate court disposed the case in this against Sagaysay. To resolve this issue, a review of the relevant laws and jurisprudence regarding the
wise: compulsory retirement age is warranted.
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and the Resolution
dated June 25, 2012 of the National Labor Relations Commission are REVERSED and SET ASIDE. Laws and jurisprudence on early age of retirement
The July 19, 2011 Decision of the Labor Arbiter is REINSTATED, with MODIFICATION that the awards
of moral and exemplary damages are DELETED for lack of basis. Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer
and the employee whereby the latter, after reaching a certain age, agrees to sever his or her
SO ORDERED.21 employment with the former.24 Article 287 of the Labor Code is the primary provision which governs the
BDO moved for reconsideration, but the motion was denied by the CA in the assailed resolution, dated age of retirement and states:
October 8, 2014. Art. 287. Retirement. xxx

Hence, this petition. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
The issues presented can be summarized as follows: (65) years which is hereby declared the compulsory retirement age, who has served at least five (5)
I years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being
WHETHER THE RETIREMENT PLAN IS VALID AND EFFECTIVE AND, CONSEQUENTLY, THE considered as one whole year.
MANDATORY RETIREMENT AGE OF 60 YEARS OLD IS ALSO BINDING.
[Emphasis Supplied]
II Doubtless, under this provision, the retirement age is primarily determined by the existing agreement or
employment contract. Only in the absence of such an agreement shall the retirement age be fixed by
38

law, which provides for a compulsory retirement age at 65 years, while the minimum age for optional length of service, or when he had rendered thirty (30) years of service, regardless of age, whichever of
retirement is set at 60 years.25cralawred the said conditions came first. Considering that on February 21, 2001, PNB had informed all of its
officers and employees about the said retirement plan, the said plan was then registered with the B1R
Retirement plans allowing employers to retire employees who have not yet reached the compulsory and was later recognized by the Philnabank Employees Association in its CBA. Despite the proper
retirement age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure. dissemination of information, no one questioned the retirement plan. Hence, the Court deemed it valid
By its express language, the Labor Code permits employers and employees to fix the applicable and effective as due notice of the employer's decision to retire an employee was adequately provided.
retirement age at 60 years or below, provided that the employees' retirement benefits under any CBA
and other agreements shall not be less than those provided therein.26 A scrutiny of the above-discussed cases reveals that the retirement plan was adopted after the
employees were hired by their employer. This is in stark contrast with the case at bench wherein the
Jurisprudence is replete with cases discussing the employer's prerogative to lower the compulsory adoption of the retirement plan came before the hiring of Sagaysay. Thus, the present petition portrays
retirement age subject to the consent of its employees. In Pantranco North Express, Inc. v. NLRC,27 a unique predicament on whether a retirement plan adopted before the employment of an employee is
the Court upheld the retirement of the private respondent therein pursuant to a CBA allowing the deemed binding on the latter.
employer to compulsorily retire employees upon completing 25 years of service to the company.
Interpreting Article 287, the Court held that the Labor Code permits employers and employees to fix the Sagaysay was sufficiently informed of the retirement plan
applicable retirement age lower than 60 years of age. The Court also stressed that "[p]roviding in a CBA
for compulsory retirement of employees after twenty-five (25) years of service is legal and enforceable After a judicious study of records, the Court is convinced that Sagaysay was undeniably informed and
so long as the parties agree to be governed by such CBA."28 had consented to the retirement plan of BDO before his compulsory retirement on September 1, 2010
based on the following:chanRoblesvirtualLawlibrary
In Progressive Development Corporation v. NLRC,29 the retirement plan, which allowed the employer
to retire employees who had rendered more than 20 years of service, was declared valid and First, the retirement plan was established as early as July 1, 1994. The purpose of the plan was to
enforceable even though it was not embodied in a CBA. In that case, the Court concluded that the create a BDO employee's retirement trust fund which would provide for retirement and other benefits for
employees, who were hired before the execution of the employer's retirement plan on April 1, 1980, all employees of the bank. It was also intended to support the funding of the benefits indicated in the
were bound by it because the retirement plan was expressly made known and accepted by them. CBA.33 The retirement plan provided several retirement options such as normal retirement, early
retirement, late retirement, and disability retirement. Normal or compulsory retirement was mandated at
In contrast, the case of Jaculbe v. Silliman University30 did not allow the application of a lower the first day of the month following the employee's sixtieth (60th) birthday, while early or optional
retirement age. The petitioner in the said case was employed sometime in 1958 while the retirement retirement age was pegged at the age of fifty (50) with at least 10 years of credited service. It also
plan, which automatically retired its members upon reaching the age of 65 or after 35 years of discussed the different benefits that an employee could be entitled to upon retirement, resignation or
uninterrupted service to the university, came into being in 1970. The said retirement plan was not separation.
applied to the petitioner because there was no agreement to which the latter assented.
It was renamed on June 1, 2004, but its provision on the normal retirement age was retained. Twelve
Similarly, the case of Cercado, which was heavily relied on by the CA, involved a non-contributory (12) years after the adoption of the retirement plan, Sagaysay was employed by the bank. From its
retirement plan which provided that any employee with twenty (20) years of service, regardless of age, inception until his hiring, no employee had earnestly questioned the retirement plan. By then, it was
may be retired at his option or at the option of the company. The said plan was adopted on April 1, 1980 unquestionably an established policy within the BDO, applied to each and every worker of the bank.
while the petitioner therein was employed earlier on December 15, 1978. When respondent UNIPROM
retired the petitioner pursuant to its retirement plan, the latter objected stating that she did not consent Second, by accepting the employment offer of BDO, Sagaysay was deemed to have assented to all
to it. The Court ruled in favor of the petitioner because there was no voluntary acquiescence to existing rules, regulations and policy of the bank, including the retirement plan. Likewise, he consented
UNIPROM's early retirement age option on her part. It elucidated that:chanRoblesvirtualLawlibrary to the CBA34 between BDO and the National Union of Bank Employees Banco De Oro Chapter.
Section 2 of Article XVII of the CBA provides that "[t]he Bank shall continue to grant retirement/gratuity
Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and pay xxx." Notably, both the retirement plan and the CBA recognize that the bank has a continued and
uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible existing practice of granting the retirement pay to its employees.
ages under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early
retirement plan. In other words, only the implementation and execution of the option may be unilateral, Third, on June 1, 2009, BDO issued a memorandum35 regarding the implementation of its retirement
but not the adoption and institution of the retirement plan containing such option. For the option to be program, reiterating that the normal retirement date was the first day of the month following the
valid, the retirement plan containing it must be voluntarily assented to by the employees or at least by a employee's sixtieth (60th) birthday. Similar to the case of Obusan, the memorandum was addressed to
majority of them through a bargaining representative.31 all employees and officers. By that time, Sagaysay was already an employee and he did not deny being
informed of such memorandum.
On the other hand, in Obusan v. Philippine National Bank32 (Obusan), the petitioner therein, who was
hired by PNB in 1979, was deemed covered by its retirement plan adopted on December 22, 2000. It For four years, from the time he was employed until his retirement, and having actual knowledge of the
mandated that the employee should retire when he attained the age of sixty (60), regardless of his BDO retirement plan, Sagaysay had every opportunity to question the same, if indeed he knew it would
39

not be beneficial to him. Yet, he did not express his dissent. As observed in Obusan, "[t]his deafening The opposite cam be observed in the present case. It has been uncontroverted that Sagaysay earlier
silence eloquently speaks of [his] lack of disagreement with its provisions."36 acknowledged the retirement program of BDO and even requested for an extension of service.
Moreover, he signed a quitclaim for and in consideration of P98,376.14 which discharged the bank, its
Lastly, perhaps the most telling detail indicative of Sagaysay's assent to the retirement plan was his e- affiliates and its subsidiaries from any action, suit, claim or demand in connection with his employment.
mails to the bank, dated July 27, 2010 and August 19, 2010. In these communications, albeit having
been informed of his upcoming retirement, Sagaysay never opposed the company's compulsory age of Generally, a quitclaim is frowned upon. As an exception, a quitclaim, with clear and unambiguous
retirement. In fact, he recognized that "the time has come that BDO Retirement Program will be contents and executed for a valid consideration received in full by the employee who signed the same,
implemented to those reaching the age of sixty (60)."37 cannot be later invalidated because its signatory claims that he was pressured into signing it on account
of his dire financial need. When it is shown that the person executing the waiver did so voluntarily, with
Glaringly, he even requested that his services be extended, at least until May 16, 2011, so that he could full understanding of what he was doing, and the consideration for the quitclaim was credible and
render five (5) years of service.38 Sagaysay's request reflects the late retirement option where an reasonable, the transaction must be recognized as a valid and binding undertaking.40
employee may be allowed by the bank to continue to work on a yearly extension basis beyond his
normal retirement date.39 The late retirement option is embodied in the same retirement plan, of which, Here, the Court is of the view that the quitclaim was validly executed. For the consideration of the
ironically, he claimed to be unaware. With such inconsistent stance, the Court can only conclude that quitclaim, Sagaysay received the amount of P98,376.14. As admitted by him, the amount was based on
Sagaysay was indeed notified and had accepted the provisions of the retirement plan. It was only when a liquidation data sheet which showed the computation of benefits and emoluments of a rank and file
his request for late retirement was denied that he suddenly became oblivious to the said plan. employee.41 Understandably, the amount given would not reflect the retirement benefits he demanded
because he did not qualify under the retirement plan of BDO for he had not completed five (5) years of
The case of Cercado is not applicable service upon his compulsory retirement. Thus, the consideration provided in the quitclaim was justified
and reasonable.
The case of Cercado is not applicable in the present case as it has a different factual milieu. First, in
Cercado, the petitioner was employed on December 15, 1978, which was almost two (2) years before Further, it has been duly proven that Sagaysay was a seasoned banker, spending thirty-four (34) years
the adoption of the employer's retirement plan on April 1, 1980. The Court explained that, logically, her of his career in different banking establishments. He was learned in his profession and even
employment contract did not include the retirement plan, much less the early retirement age option experienced separation from his previous employments. Consequently, it cannot be said that he was
contained therein. naive in dealing with his employer and that he failed to exercise his free and voluntary will when faced
with the documents relating to his retirement. Not an iota of evidence showed that BDO exerted undue
In the case at bench, Sagaysay was employed on May 16, 2006, which was almost twelve (12) years influence against him to acquire his consent. In fine, absent any doubt to the contrary, his quitclaim
after the adoption of retirement plan on July 1, 1994. Accordingly, from the moment that Sagaysay must stand.
accepted his employment, he was deemed to have consented to all existing company rules and
regulations, including the policy on the early age retirement. Extension of service

Second, in Cercado, the retirement plan was implemented when the petitioner therein was already Finally, on Sagaysay's request to extend his length of service despite the compulsory retirement age of
employed. The Court held that because of the automatic application of the retirement plan to the current sixty (60) which was denied by BDO and eventually sparked the present controversy, the Court holds
employees without their voluntary conformity, "[p]etitioner was forced to participate in the plan, and the that BDO had the management prerogative to deny the extension of service. It is important to state that
only way she could have rejected the same was to resign or lose her job." Necessarily, it undermined upon the compulsory retirement of an employee or official in the public or private service his
the petitioner's security of tenure. employment is deemed terminated. The matter of extension of service of such employee or official is
addressed to the sound discretion of the employer. It is a privilege only the employer can grant.42
The ruling in Cercado cannot be applied to this case as Sagaysay was not yet employed when the
retirement plan was adopted. When he was offered employment by the bank in 2006, the established Although the Court has, more often than not, been inclined towards the plight of the workers and has
retirement plan was not forced upon him. Sagaysay had the free will whether to undertake the upheld their cause in their conflicts with the employers, such inclination has not blinded it to the rule that
employment and accept the bank's corresponding policies or look for a job elsewhere. Corollarily, no justice is in every case for the deserving, to be dispensed in the light of the established facts and
security of tenure had yet attached at that specific moment. applicable law and doctrine.43chanroblesvirtuallawlibrary

In other words, the evil sought to be prevented in Cercardo does not exist in the present case as WHEREFORE, the petition is GRANTED. The March 31, 2014 Decision and the October 8, 2014
Sagaysay was given the opportunity to accept or reject the lower retirement age policy. Resolution of the Court of Appeals in CA-G.R. SP No. 126586 are REVERSED and SET ASIDE, and
the February 29, 2012 Decision and the June 25, 2012 Resolution of the National Labor Relations
Third, the petitioner in Cercado refused the early retirement package in the amount of P171,982.90 from Commission in NLRC LAC No. 08-002069-11 are REINSTATED.
her employer. From the very beginning, she was adamant that she did not consent to the retirement
plan of her employer. SO ORDERED.chanroblesvirtuallawlibrary

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