41. Tiangco v. Leogardo, G.R. No.

L-57636, May 16, 1983

G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor and
Employment, AURELIO ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO CARABIO,
JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA, CLEMENTE
VILLARUEL, RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO DURANA,
AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO,
ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA, ROBERTO BAYON-
ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS CAPALAR,
JUAN GIHAPON, JOSE OFQUERIA, FRUTO GIHAPON, PEPITO BATOY, and SERAFIO
YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction and/or restraining order, to
annul and set aside the order of the respondent Deputy Minister of Labor which modified and
affirmed the order of Director of the National Capitol Region of the Ministry of Labor directing
the petitioners to pay the private respondents their legal holiday pay, service incentive pay, and
differentials in their emergency cost of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo Tiangco Fishing
Company and a fleet of fishing vessels engaged in deep-sea fishing which operates from
Navotas, Rizal. His business is capitalized at P2,000,000.00, 1 while the petitioner, Victoria
Tiangco, is a fish broker whose business is capitalized at P100,000.00.2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham
Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel,
Dominador Lacerna, and Graciano Durana, are batillos engaged by the petitioner Reynaldo
Tiangco to unload the fish catch from the vessels and take them to the Fish Stall of the petitioner
Victoria Tiangco. The private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio
Laylay, Fruto Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan
Castro, Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio Yadawon,
Juan Gihapon, Elias Escaran and Roberto Bayon-on, were batillos engaged by Victoria Tiangco.
3 The work of these batillos were limited to days of arrival of the fishing vessels and their
working days in a month are comparatively few. Their working hours average four (4) hours a
day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with the
Ministry of Labor and Employment for non-payment of their legal holiday pay and service
incentive leave pay, as well as underpayment of their emergency cost of living allowances which
used to be paid in full irrespective of their working days, but which were reduced effective
February, 1980, in contravention of Article 100 of the new Labor Code which prohibits the
elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all given, in
addition to their regular daily wage, a daily extra pay in amounts ranging from 30 centavos to 10
pesos which are sufficient to offset the laborers' claim for service incentive leave and legal
holiday pay. As regards the claim for emergency allowance differentials, the petitioners admitted
that they discontinued their practice of paying their employees a fixed monthly allowance, and
effective February, 1980, they no longer paid allowances for non-working days. They argued,
however, that no law was violated as their refusal to pay allowances for non-working days is in
consonance with the principle of "no work, no allowance"; and that they could not pay private
respondents a fixed monthly allowance without risking the viability of their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of Labor and
Employment ruled that the daily extra pay given to private respondents was a ,'production
incentive benefit", separate and distinct from the service incentive leave pay and legal holiday
pay, payment of which cannot be used to offset a benefit provided by law, and ordered the
petitioners to pay the private respondents their service incentive leave pay and legal holiday pay.
However, he denied the laborers' claim for differentials in the emergency cost of living
allowance for the reason that the emergency cost of living allowance accrues only when the
laborers actually work following the principle of "no work, no pay," and private respondents are
not entitled to a fixed monthly allowance since they work on a part time basis which average
only four (4) days a week. The private respondents should not be paid their allowances during
non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified the order
and directed the petitioners to restore and pay the individual respondents their fixed monthly
allowance from March, 1980 and to pay them the amount of P58,860.00, as underpayment of
their living allowance from May, 1977 to February 21, 1980. 7
When their motion for the reconsideration of the above order was denied, the petitioners
interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment acted in
excess of jurisdiction, or with grave abuse of discretion in ordering them to pay the private
respondents a fixed monthly allowance from March, 1980, despite the "no work, no pay," law;
the private respondents' consent to receive an allowance for days worked for, as stated in their
appeal; and the findings of the Director of the National Capitol Region that private respondents
work for other employers and are part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a part-time
basis and their work average only four (4) days a week. It is not also disputed that the private
respondents work for more than one employer so that the private respondents should be paid
their living allowance only for the days they actually worked in a week or month and all the
employers of the employee shall share proportionately in the payment of the allowance of the
employee. Section 12 of the Rules and Regulations implementing P.D. 525 which made
mandatory the payment of emergency cost of living allowances to workers in the private section,
provides, as follows:
Section 12. Allowance on Daily Paid & Part Time employees. Employees who are paid on
a daily basis shall be paid their allowances for the number of days they actually worked in a
week or month, on the basis of the scales provided in Section 7 hereof.

In case of part-time employment, the allowances shall be paid in the amount proportionate to the
time worked by the employee, or higher. If employed by more than one employer, all employers
of such employee shall share proportionately in the payment of the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency allowance under P.D.
525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. Employees shall be paid in full
the monthly allowances on the basis of the scales provided in Section 3 hereof, regardless of the
number of their regular working days, if they incur no absence during the month. If they incur
absences, the amounts corresponding to their absences may be deducted from the monthly
allowance.
In case of part-time employment, the allowance to be paid shall be proportionate to the time
worked by the employee. This requirement shall apply to any employee with more than one
employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled that since
the petitioners had been paying the private respondents a fixed monthly emergency allowance
since November, 1976 up to February, 1980, as a matter of practice and/or verbal agreement
between the petitioners and the private respondents, the discontinuance of the practice and/or
agreement unilaterally by the petitioners contravened the provisions of the Labor Code,
particularly Article 100 thereof which prohibits the elimination or diminution of existing
benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also prohibits the
diminution of any benefit granted to the employees under existing laws, agreements, and
voluntary employer practice. Section 15 of the Rules on P.D. 525 provides, as follows:
Section 15. Relation to Agreement. Nothing herein shall prevent the employer and his
employees from entering into any agreement with terms more favorable to the employees than
those provided therein, or be construed to sanction the diminution of any benefit granted to the
employees under existing laws, agreements, and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It provides, as
follows:
Section 16. Relation to other agreements. Nothing herein shall prevent employers from
granting allowances to their employees in excess of those provided under the Decree and the
Rules nor shall it be construed to countenance any reduction of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and Employment
erred in ordering them to pay the amount of P58,860.00 to the private respondents as
underpayment of respondents' allowances from May, 1977 to February 20, 1980. The petitioners
contend that the emergency cost of living allowances of the private respondents had been paid in
full.
We find no merit in the contention. However, a revision of the amount due the private
respondents is in order for the reason that the respondent Deputy Minister of Labor and
Employment failed to take into consideration, in computing the amount due each worker, the fact
that the private respondents are employed by two different individuals whose businesses are
divergent and capitalized at various amounts, contrary to the provisions of P.D. 525 and
subsequent amendatory decrees, wherein the amount of the emergency cost of living allowance
to be paid to a worker is made to depend upon the capitalization of the business of his employer
or its total assets, whichever is higher. Thus, Section 7 of the Rules and Regulations
implementing P.D. 525 reads, as follows:
Section 7. Amount of Allowances. Every covered employer shall give to each of his
employees who is receiving less than P600.00 a month not less than the following allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is applicable and higher,
is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is applicable and higher
is at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is applicable and higher,
is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their employees who will
receive more than P600.00 a month, including the allowances. An employer, however, may grant
his employees an allowance which if added to their monthly salary, will not yield to them more
than P600.00 a month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio
Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto
Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and Graciano Durana, were
employees of the petitioner Reynaldo Tiangco, while the remaining seventeen (17) were
employed by the petitioner Victoria Tiangco. 8 Accordingly, the workers of the petitioner
Victoria Tiangco, whose business as fish broker is capitalized at P100,000.00, 9 should receive a
lesser amount of allowance (P30.00) than those workers employed by the petitioner Reynaldo
Tiangco whose business, as a fishing operator with a fleet of fishing vessels, is capitalized at
more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of P50.00 a
month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional
allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month effective May 1,
1977;
2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month effective
September 1, 1979, and another P30.00 a month beginning January 1, 1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria Tiangco
should pay her workers a fixed monthly allowance of P 30.00, while the workers of the petitioner
Reynaldo Tiangco were entitled to a fixed monthly allowance of P50.00, each. The record shows
that during this period, the petitioner Victoria Tiangco was paying her workers a monthly
allowance of P30.00 each. 10 Accordingly, there was no underpayment for this period insofar as
her batillos are concerned. The petitioner Reynaldo Tiangco, however, paid his employees
P30.00, instead of P50.00, as mandated by law. 11 Therefore, there was an underpayment of
P20.00 a month for each batillounder his employ. For the 6-month period, he should pay his
workers differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria Tiangco
were entitled to a fixed monthly allowance of P90.00 in view of the promulgation of P.D. 1123
which granted an across-the-board increase of P60.00 a month in their allowances. For this
period, however, the said petitioner paid her workers only P60.00 a month, or a difference of
P30.00 a month. 12 There was, therefore, an underpayment of P690.00 for every batillounder her
employ for the 23-month period.
With the addition of P60.00 across-the-board increase in their allowances, the workers of the
petitioner Reynaldo Tiangco were entitled to receive a fixed monthly allowance of P110.00.
However, the record shows that his workers were only paid P60.00 a month, 13 or a difference of
P50.00 a month. Consequently, each batillo hired by him should be paid a differential of
P1,150.00 for the 23-month period.
For the period from April, 1979 to August, 1979, the employees of the petitioner Victoria
Tiangco were entitled to a fixed monthly allowance of P150.00 while the workers employed by
the petitioner Reynaldo Tiangco were entitled to an allowance of P170.00, pursuant to P.D.
1614. The record shows, however, that both petitioners paid their workers only P120.00 a month.
14 There was a difference of P30.00 a month in the case of the petitioner Victoria Tiangco, and
P50.00, a month, in the case of the petitioner Reynaldo Tiangco. Hence, for this period, the
petitioner Victoria Tiangco should pay the amount of P150.00 to each batillo in her employ,
while the petitioner Reynaldo Tiangco should pay the amount of P250.00, as differentials in the
cost of living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a month
effective September, 1979 and another P30.00 effective January 1, 1980, the workers of the
petitioner Victoria Tiangco were entitled to receive a fixed monthly allowance of P210.00 a
month from September, 1979, and P340.00, a month beginning January, 1980. The workers of
the petitioner Reynaldo Tiangco, upon the other hand, were entitled to a monthly allowance of
P230.00, effective September, 1979, and P260.00, a month beginning January, 1980. The record
shows, however, that both petitioners paid their workers the amounts of P180.00 a month for the
months of September to December, 1979, 15 and P210.00 a month for the months of January and
February, 1980. 16 There was underpayment, therefore, in the allowances of the workers of the
petitioner Victoria Tiangco in the amount of P30.00, a month, for the months of September, 1979
to February, 1980, or P180.00 for each batillo in her employ. The private respondents hired by
the petitioner Reynaldo Tiangco, upon the other hand, are entitled to differentials in the amount
of P50.00 a month for the same period, or P300.00 each.
Then, beginning February, 21, 1980, the workers should be paid an additional P2.00, a day,
pursuant to P.D. 1678. The record shows that the petitioners had complied with this requirement.
17 The petitioners, however, failed to pay the fixed monthly allowance of their workers which
was P240.00, in the case of the workers employed by the petitioner Victoria Tiangco, and
P260.00, in the case of the workers of the petitioner Reynaldo Tiangco. Thus, for the month of
March, 1980, the petitioner Victoria Tiangco paid her workers varying amounts, the lowest of
which was P30.00, paid to Eddie Batobalanos and Fruto Gihapon, and the highest of which was
P210.00, paid to Juan Gihapon and Roberto Bayonon. 18 Hence, there was underpayment in
their emergency cost of living allowances. But, since, the respondents employed by Victoria
Tiangco are wining to accept P50.00 a month as differentials for the months of March, 1980 to
May, 1980, 19 the workers employed by her should be paid P50.00, each, for the month of
March, 1980, except Juan Gihapon and Roberto Bayon-on who should be paid P30.00, each, for
the said month, having received the amount of P210.00, each as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid varying
amounts ranging from P120.00 to P210.00. 20 Hence, there was also underpayment in their
allowances. Accordingly, they should be paid the amount of P50.00, each, except for Juan
Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo Marabe, who should be paid P40.00, each,
and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be paid P30.00 each.
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying amounts
less that what was provided for by law. 21 Hence, they should be paid the amount of P50.00,
each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging from
P210.00 to P250.00, as emergency cost of living allowance, for the month of March, 22, 1980.
22 Since they were entitled to a fixed monthly allowance of P260.00, each, there was
underpayment in their cost of living allowances. Accordingly, the petitioner should pay the
respondent Pepito Gilbuena the amount of P50.00; the respondents Dominador Lacerna and
Graciano Durano, the amount of P40.00, each; the respondent Ernesto Diong, the amount of
P30.00; the respondents Rustom Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each;
and the respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio, and Emerenciano
Villaruel, the amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not also paid
their emergency cost of living allowance in full. 23 Hence, the said petitioner should pay his
workers the amount of P30.00 each, except for Pepito Gilbuena, who should be paid the amount
of P50.00, and Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who are entitled to only
P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living allowance
for the month of May, 1980. The workers were paid varying amounts of P130.00 to P150.00,
instead of P260.00, as required by law. 24Hence, they should be paid the amunt of P50.00 each
for the month of May, 1980.
WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as they are
hereby, ordered to PAY the private respondents the following amounts as differentials in their
emergency cost of living allowance:
Petitioner Victoria Tiangco:
1.
Eddie Batobalanos............. Pl,170.00
2. Aguedo Morabe................. 1,160.00
3. Gregorio Laylay.................. 1,150.00
4. Fruto Gihapon..................... 1,170.00
5. Solomon Clarin ................... 1,150.00
6. Pepito Batoy........................ 1,170.00
7. Jose Ofqueria....................... 1,170.00
8. Daniel Cabrera..................... 1,150.00
9. Juan Castro.......................... 1,160.00
10. Alcafone Esgana................. 1,170.00
11. Tomas Capalar .................... 1,170.00
12. Antonio Gilbuena................ 1,160.00
13. Ernesto Batoy...................... 1,170.00
14. Serapio Yadawon................ 1,150.00
15. Juan Gihapon....................... 1,140.00
16. Elias Escaran ...................... 1,150.00
17. Roberto Bayon-on.............. 1,130.00
Petitioner Reynaldo Tiangco:
1.
Aurelio Ilustrisimo............ P l,920.00
2. Pepito Gilbuena................. 1,970.00
3. Rogelio Carabio................. 1,910.00
4. Abraham Gilbuena............. 1,910.00
5. Rustom Ofqueria................ 1,930.00
6. Ernesto Diong.................... 1,930.00
7. Jesus Gilbuena................... 1,920.00
8. Emerenciano Villaruel........ 1,910.00
9. Dominador Lacerna............ 1,940.00
10. Graciano Durano................. 1,950.00
With this modification, the judgment appealed from is AFFIRMED in all other respects. With
costs against the petitioners.
SO ORDERED.
42. Standard Chartered Bank v. Standard Chartered Bank Employees Union, G.R. No. 165550,
October 8, 2008
G.R. No. 165550 October 8, 2008
STANDARD CHARTERED BANK, petitioners,
vs.
STANDARD CHARTERED BANK EMPLOYEES UNION (SCBEU), respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court of
Standard Chartered Bank assailing the Decision1 dated July 1, 2004 as well as
the Resolution2 dated September 23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
71448. The questioned Decision and Resolution of the appellate court affirmed the Orders3 dated
March 11, 2002 and April 29, 2002 of the Department of Labor and Employment (DOLE) which
sustained the outpatient medicine reimbursements of the employees of petitioner as well as the
maternity benefits of the spouses of its male employees. Respondent Standard Chartered Bank
Employees Union (SCBEU) filed its Comment (to the petition)4 on March 28, 2005 and
petitioner filed its Reply5 thereto on June 21, 2005.
The facts are culled from the records of the case.
On August 25, 1998, petitioner Standard Chartered Bank entered into a Collective Bargaining
Agreement6 (CBA) with respondent Standard Chartered Bank Employees Union (SCBEU),
which provided, among others, for medical benefits. Under Article XI, Section 1 of the CBA,
petitioner committed to "continue to cover all its employees with a group hospitalization and
major surgical insurance plan including maternity benefits."77"> At the time of the signing of the
said CBA, the group hospitalization insurance plan in force was Group Policy No. P-1620 issued
by the Philippine American Life (Philamlife) Insurance Company with * Additional Member as
per Special Order No. 520.
an effective date of March 3, 1977.8
After the signing of the CBA, petitioner changed its insurance provider from Philamlife to
Maxicare, a Health Maintenance Organization, to allegedly provide its employees with improved
medical benefits under the CBA.
Subsequently, respondent charged petitioner with unfair labor practice before the DOLE for
alleged gross violation of the economic provisions of the CBA and diminution or removal of
benefits. Respondent contested, among others, the exclusion of the outpatient medicine
reimbursements of the employees and the maternity benefits granted to the spouses of the male
employees of petitioner in the new insurance policy provided by Maxicare.
In support of its allegations, respondent presented a letter addressed to petitioners Personnel
Manager from the Group Marketing Officer of Philamlife and documents indicating
reimbursements for outpatient services to prove that the petitioners employees had been
enjoying outpatient medicine reimbursements. Respondent also cited Schedule L of the CBA and
affidavits of employees to prove that the spouses of the male employees of petitioner were
entitled to maternity benefits.
Petitioner, in turn, argued that there was no diminution of benefits as the insurance policy issued
by Maxicare contained similar benefits to those contained in the previous Philamlife policy.
Petitioner alleged that outpatient medicine reimbursement was not expressly provided for in the
Philamlife insurance policy and that this was precisely the reason petitioners employees were
provided with a medicine allowance under the CBA. Petitioner also contended that the maternity
benefits as provided in the CBA were exclusive to its female employees and that the past
practices cited by the respondent were "malpractices" which it seeks to curtail and correct.
In a Decision dated May 31, 2001, the DOLE gave credit to the claims of respondent. It ruled
that the "outpatient benefit [had] been a regular feature of the [petitioners] medical coverage and
as a regular feature, cannot be withdrawn unilaterally."9 The insurance policy issued by
Philamlife allowed outpatient benefits as claims against maximum disablement, notwithstanding
the lack of an express provision regarding outpatient benefits. Moreover, the DOLE found that
petitioner acknowledged, without disapproval or objection, employees requests for
reimbursement of outpatient medical expenses under the old insurance plan. The DOLE also held
that the spouses of the male employees of petitioner were entitled to maternity benefits as a
matter of practice. This finding was supported by the claims for reimbursement of maternity
expenses of the spouses of bank employees covering the period from 1984 to 1998. The 1984
claims indicated that the same were approved by petitioner and that there was no showing that it
disapproved or challenged the other claims. The DOLE said that these circumstances negated
petitioners contention that there was a mistake in the processing of claims for the said maternity
benefits.
In an Order10 dated October 5, 2001, the DOLE acted on the separate motions for
reconsideration of the parties and sustained its earlier findings but reversed its ruling that the
maternity benefits granted by petitioner extend to the spouses of its male employees. Respondent
allegedly failed to dispute the assertion of petitioner that there were only three out of four claims
covering the period of twenty years that were processed by Philamlife. The DOLE was
convinced that there was no voluntary practice of giving said maternity benefits to spouses of
male employees.
Respondent filed a second motion for reconsideration11 and contended that it submitted
documentary evidence showing that there were nine claims of the subject maternity benefits that
were processed and approved. These were in addition to the four affidavits of bank employees
attesting to the fact that the medical hospitalization plan of Philamlife included such maternity
benefits. Respondent further pointed out that these benefits were even integrated in the CBA.
In the assailed Order dated March 11, 2002, the DOLE reverted to its original ruling that the
spouses of male employees of petitioner were entitled to maternity benefits. Petitioner disagreed
and filed a second motion for reconsideration to this ruling and a motion for clarification
regarding the grant of "outpatient benefits" to the employees. In a subsequent Order dated April
29, 2002, the DOLE denied the said motion and clarified that the grant of outpatient benefits
includes medicine reimbursements.
Petitioner elevated this case before the appellate court through a special civil action for certiorari
under Rule 65 of the Rules of Court. The said court dismissed the petition and affirmed the
assailed Orders dated March 11, 2002 and April 29, 2002 of the DOLE and held that the basis
for the grant of the subject maternity benefits was Schedule L of the CBA of the parties. The
appellate court likewise denied petitioners motion for reconsideration thereto for lack of merit.
Hence, the instant petition for review on certiorari.
Petitioner assails the rulings of the appellate court on the ground that the same are not in accord
with evidence, law, and the applicable decisions of this Court and raises the following issues:
ISSUES
A. Whether or not, on the basis of evidence on record, the appellate court is correct in ruling
that spouses of male employees are entitled to maternity benefits despite its own finding that
there was no established company practice of granting maternity benefits to male employees
spouses; and
B. Whether or not, on the basis of the evidence on record, the appellate court is correct in
ruling that there is an established company practice of granting outpatient medicine
reimbursements to petitioners employees.
Anent the first issue, petitioner claims that the spouses of its male employees are not entitled to
maternity benefits as these are exclusively intended for its female employees. It is petitioners
view that the CA erred in finding that Schedule L of the CBA obligates it to pay maternity
benefits to spouses of its male employees, despite ruling that there is no company practice
granting maternity benefits to such persons.
According to petitioner, the literal interpretation of Schedule L of the CBA is not the real
intention of the parties to the contract. Such an interpretation is purportedly iniquitous to the
bank as the same will also mean (a) that the children of married employees and the mothers of
single employees will enjoy the same benefits and (b) that the spouses of the male employees
who also happen to be employed in the bank or any other company will benefit twice. Schedule
L of the CBA should instead be read compatibly with the provisions of the contract itself to
determine the real intention of the parties thereto.
Petitioner points out Section 1 of Article XI of the CBA and claims that this provision shows that
the maternity benefits provided in Schedule L extend only to its employees, thus, the spouses of
its male employees are not entitled to these benefits. Petitioner asserts that the CBA would have
stated expressly that spouses of male employees are entitled to the said benefit had this been the
intention of the parties, similar to the provision granting of advances and medicine allowances to
the employees and their dependents. Moreover, the CA allegedly erred in applying Article 4 of
the Labor Code in interpreting Schedule L of the CBA instead of Articles 1370-1379 of the Civil
Code.
Petitioner adds that its previous medical insurance policy which was provided by Philamlife
granted insurance benefits only to its "regular, full-time employees" and that there is nothing in
the said policy granting maternity benefits to the spouses of its male employees. Hence,
petitioner asserts that the CA, having correctly ruled that petitioner had no company practice of
extending such benefits to the spouses of its male employees, should not have granted such
benefits on the basis of Schedule L of the CBA.
Anent the second issue, petitioner claims that the appellate court erred in ruling that its
employees are entitled to "outpatient medicine reimbursements" distinct and separate from the
"medicine allowances" granted in the CBA. This would allegedly result in the unjust enrichment
of the employees at the expense of petitioner.
In its Comment, respondent contends that the instant petition must fail as it raises questions of
fact when it should be limited to questions of law. Respondent adds that there is no real and
material conflict between the findings of fact of the DOLE and the appellate court so as to claim
that this case is an exception to the rule that only questions of law are elevated to this Court
under Rule 45 of the Rules of Court. The appellate court allegedly shares the conclusion of the
DOLE that the maternity benefits granted to the employees extend to the spouses of the male
employees of petitioner although the basis for the ruling is not anchored on an established
company practice but rather on the basis of Schedule L of the CBA.
In its Reply, petitioner claims that "when the facts are undisputed, then the question of whether
or not the conclusion drawn therefrom by the Court of Appeals is correct is a question of
law." 12 The issues before this Court are thus questions of law because petitioner seeks the
review of the "evidence on record and the conclusion drawn by the appellate court."
In the alternative, petitioner further asserts that assuming the issues raised are questions of fact,
this Court is still not precluded from taking cognizance of the case as the same falls within the
exceptions laid in the case of Fuentes v. Court of Appeals.13 The factual findings of the CA may
be reviewed by this Court (i) when the appellate court fails to notice certain relevant facts which
will justify a different conclusion; and (ii) when the findings of fact are conflicting. Petitioner
points out that the appellate court erroneously concluded that the spouses of its male employees
are entitled to maternity benefits on the basis of Schedule L of the CBA despite finding that there
is no company practice of granting the said benefit. Petitioner adds that this finding is consistent
with the finding of the DOLE that the said company practice does not exist.
The petition is bereft of merit.
With respect to the procedural issue, we agree with respondent that the issues raised by the bank
are essentially questions of fact that cannot be the subject of this petition for review
on certiorari. Section 1 of Rule 45 of the Rules of Court provides that only questions of law may
be raised on appeal by certiorari. Well-settled in our jurisprudence is the principle that this Court
is not a trier of facts and that it is neither the function of this Court to analyze or weigh the
evidence of the parties all over again.14 The ruling in Microsoft Corporation v. Maxicorp,
Inc.15 elucidates the distinction of a question of law and a question of fact as follows:
A question of law exists when the doubt or difference centers on what the law is on a certain
state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged
facts.
xxx xxx xxx
There is a question of law if the issue raised is capable of being resolved without need of
reviewing the probative value of the evidence. The resolution of the issue must rest solely on
what the law provides on the given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one of fact. If the query
requires a re-evaluation of the credibility of witnesses, or the existence or relevance of
surrounding circumstances and their relation to each other, the issue in that query is factual. Our
ruling in Paterno v. Paterno is illustrative on this point:
Such questions as whether certain items of evidence should be accorded probative value or
weight, or rejected as feeble or spurious, or whether or not the proofs on one side or the
other are clear and convincing and adequate to establish a proposition in issue, are without
doubt questions of fact. Whether or not the body of proofs presented by a party, weighed and
analyzed in relation to contrary evidence submitted by adverse party, may be said to be strong,
clear and convincing; whether or not certain documents presented by one side should be
accorded full faith and credit in the face of protests as to their spurious character by the other
side; whether or not inconsistencies in the body of proofs of a party are of such gravity as to
justify refusing to give said proofs weight all these are issues of fact. [Emphasis supplied]
Petitioner wants this Court to determine if (i) the maternity benefits provided to its female
employees extend to the spouses of its male employees and if (ii) its employees are entitled to
"outpatient medicine reimbursements" as a matter of company practice. Indeed, petitioner, in
phrasing the issues in this Petition, urges this Court to scrutinize the "evidence based on record."
Such language militates against petitioners contention that the Petition involves purely questions
of law.
We disagree with petitioner that the conclusion drawn by the appellate court from the "evidence
based on record" is a question of law. This is the opposite definition of a question of law.
Petitioners reliance on the ruling in Commissioner of Immigration v. Garcia16 that "when the
facts are undisputed, then the question of whether or not the conclusion drawn therefrom by the
Court of Appeals is correct is a question of law" is misplaced. In the present case, the facts are
disputed. Respondent claims that there is an existing company practice entitling petitioners
employees to "outpatient medicine reimbursements" and entitling the spouses of its male
employees to maternity benefits. Petitioner persistently argues the contrary. Both parties point to
their CBA and various documents inclined to prove or disprove their respective factual
contentions.
This case likewise does not fall within any of exceptions to the rule that only questions of law are
proper in a petition for review on certiorari under Rule 45 of the Rules of Court. The findings
and conclusions of the appellate court show that the evidence and the arguments of the parties
had all been carefully considered and passed upon. There are no "relevant facts" that will justify
a different conclusion which the said court failed to consider. There are likewise no factual
conclusions of the CA and the DOLE which are in conflict.
In any event, even if this Court evaluates petitioners arguments on the merits, we still find no
reason to disturb the findings of the CA on the basis of the records of this case, particularly the
attachments to the Petition.
With respect to the first issue, the CA ruled in this wise:
xxx
Indeed, it has been held that for benefits to be considered as voluntary employer practice which
cannot later on be unilaterally withdrawn by the employer under Article 100, Labor Code, it
must be shown that the practice has been, for a long period of time, consistently and deliberately
made by the employer.
The Court finds that the element of consistency in the alleged practice of giving maternity
benefits to spouses of petitioners male employees is lacking in this case.
In its motion for reconsideration of public respondents Order dated March 11, 2002, petitioner
enumerated names of twenty (20) male employees whose spouses gave birth during the alleged
period of entitlement (1984-1998) but who did not avail of maternity benefits. In its comment on
the motion for reconsideration, while private respondent disputed the names of ten (10)
employees, it did not contest the rest of the names mentioned in the list. This only shows that the
granting of maternity benefits to spouses of male employees was not consistently practiced by
petitioner.
Nonetheless, the Court still sustains the grant of maternity benefits to spouses of male
employees on the basis of Schedule L of the 1998-2000 CBA, explicitly providing the
coverage of the "Group Hospitalization Benefits" (which include maternity benefits), to
include married staff and spouses and eligible children.
Schedule L, referred to in Article XI of the CBA, provides:
Basic Medical Php

Room & Board (31) 750

Hospital Service 7,500

Doctors Call (31) 600

 Maternity Benefits

Normal Delivery 10,000

Miscarriage 22,837.50

Caesarian 20,000
xxx xxx xxx
Coverage
Married staff and spouse and eligible children as defined in the plan. Single staff and one
parent who has not reached 65 year of age.
Petitioner, however, gives a different interpretation of the foregoing provision and claims
that "the persons enumerated in Schedule L refer only to those who are covered by the
insurance in case of hospitalization due to ill health considering that in such a
circumstance, immediate dependents are likewise covered." The claim cannot prevail over
the specific provision of said coverage of benefits. If ever the provision is capable of two
interpretations, the same must be resolved in favor of labor. Nonetheless, since the grant of
maternity benefits to spouses of male employees of petitioner is premised on the CBA, the same
may be the subject of future renegotiation. As held in "Globe Mackay Cable and Radio Corp. vs.
NLRC", 163 SCRA 71 (1988), "the CBA is the law between the parties and, if not acceptable,
can be the subject of future renegotiation."17 (emphasis and underscoring supplied)
xxx
Petitioner exhorts this Court to interpret Schedule L of the CBA in relation to Section 1, Article
XI of the CBA which provides:
Section 1. Group Hospitalization Insurance
The BANK shall continue to cover all its employees with a group hospitalization and major
surgical insurance plan including maternity benefits with a disablement maximum amount of
PHP100,000.00 per illness per year. All employees will be furnished with a copy of the booklet
explaining the coverage of the Plan (See Schedule L).
The BANK shall continue extending advances to staff members (or their dependents as defined
in the insurance plan), who have been hospitalized due to ill health. The amount advanced will
be the amount fully reimbursable under the Group Hospitalization Plan less Medicare but
including the twenty percent (20%) deductible under the plan which absorbed by the BANK.
Any shortfall is to be met by the employee.18
Petitioner argues that the above-quoted provision expressly limits the grant of benefits,
specifically maternity benefits, under the group hospitalization insurance plan to its own
employees and that dependents of employees are only entitled to benefits for hospitalization due
to ill-health. In addition, petitioner stresses that there is nothing in the group hospitalization
insurance plan which expressly provides for maternity benefits for spouses of its male
employees. Thus, petitioner asserts that maternity benefits under the CBA should be deemed
granted only to petitioners female employees.
We are unconvinced by petitioners reasoning. A reading of Section 1, Article XI of the CBA
shows that at the time the CBA was signed there was already an existing group hospitalization
insurance plan and petitioner was committing under the CBA to "continue" the same. It is
undisputed that the plan referred to in said provision is Philamlifes Group Policy No. P-1620, a
copy of which was attached to the Petition as Annex "O." In determining the coverage of the
benefits under the said plan, it is the provisions of the plan itself that govern. In the said plan, the
term "dependent" includes "a members spouse who is not more than 65 years of age."19 The
plan further provides that "[u]nless dependents are excluded in any particular Insurance Schedule
the term insured person shall be deemed to include any dependent insured under the
Policy."20 In other words, dependents enjoy the same benefits as the insured person unless they
are expressly excluded in the Insurance Schedules of benefits. This Court notes that there is
nothing in the Insurance Schedules or the plan itself which excludes dependents from
availing of the maternity benefits granted under the plan. Thus, Schedule L appears to
accurately summarize the provisions of the existing group hospitalization insurance plan with
respect to the types of benefits under the plan and the persons who may avail them. The CA did
not err in relying on Schedule L in finding that the spouses of petitioners male employees may
avail of maternity benefits.
Neither can petitioner believably claim that it had no intention to extend maternity benefits to the
spouses of its male employees under the CBA. Under the same Section 1, Article XI of the CBA,
petitioner also committed to furnish all employees with a booklet explaining the coverage of the
group hospitalization insurance plan. A copy of that booklet called the "Standard Chartered Bank
Employee Medical Insurance Plan" was attached to the Petition as Annex "P."21 Petitioner points
to the following passage in Appendix B of the booklet to bolster its position that only female
employees can avail of maternity benefits:
Do I qualify for Maternity Benefits even if I am pregnant at the time I become eligible?
If you are a female employee and your pregnancy commences prior to your eligibility date for
this insurance, you can claim for the benefits stated in the Schedule of Medical Insurance
Benefits provided you apply for this insurance within 31 days from the date you become eligible
for this insurance. However, the dependent of an insured employee can only claim under this
benefit after the insured dependent has been continuously insured for a period of 9
months. (emphasis supplied)
In its pleadings, petitioner conveniently omits the second sentence of the foregoing quote but this
Court is not misled by such dissembling tactic. It is undeniable from the full text of petitioners
explanation of maternity benefits that the dependent of an insured employee can claim
maternity benefits subject only to the condition that she has been continuously insured for a
period of nine months. This booklet appears to be a publication solely of petitioner and it is clear
evidence that petitioner itself interprets Philamlife Group Policy No. P-1620 as authorizing the
grant of maternity benefits to dependents of its employees. Having knowingly and voluntarily
incorporated by reference the provisions of its Philamlife group hospitalization insurance plan in
the CBA (as can be seen in Article XI, Section 1 thereof in relation to Schedule L), petitioner
cannot now assert that it never intended to extend maternity benefits to the spouses of its male
employees under the CBA.
Anent the second issue, the Court likewise finds no reason to deviate from the factual finding of
both the DOLE and the CA that there is an established company practice of reimbursement of
outpatient services, including medicine reimbursement, despite the absence of a provision in the
group hospitalization insurance plan regarding outpatient benefits.
Petitioner admits that outpatient benefits, as a matter of practice, were paid by Philamlife as
claims against the "disablement maximum." However, petitioner is not assailing the payment of
outpatient benefits in the present case but only assailing the inclusion of "outpatient medicine
reimbursements" in the term "outpatient benefits."
In this regard, we find well-taken the following excerpt from the DOLEs Order22 dated April 29,
2002, attached as Annex "N" of the Petition:
xxx
Insofar as the outpatient benefit is concerned, it must be stressed that this Office directed the
Bank to continue with the outpatient benefit under the old insurance plan and to carry it over to
the new health care plan. This means that the components of the old health insurance scheme on
this particular benefit should be the same component under the new health plan. In the Decision
dated 31 May 2001, this Office made particular mention of the claims for reimbursement
appearing as Annex "O" of the Unions Position Paper as basis for its directive to the Bank to
continue with the outpatient benefits. These claims refer not only to x-ray services but also to
reimbursement of prescription drugs. The existence of these benefits were further buttressed
in the Unions "Reply to SCBs Motion for Reconsideration" (dated 11 July 2001) where the
Union submitted copies of claims for doctors fees, prescription drugs and laboratory fees
processed, approved and paid. These should provide ample guidance to the parties in the grant
of outpatient benefits, which includes medicine reimbursements as earlier practised [sic].
In making this clarification, we are not unaware of the Banks position that medicine
reimbursement is not part of the HMO package but was unilaterally granted by the service
provider. Even if this were so, however, we do not believe that the grant by the service provider
was without the conformity of the Bank in light of the exhibits submitted by the Union in its
"Reply to the SCBs Motion for Reconsideration" (dated 11 July 2001, Annexes "B-86-1" to "B-
99-1," covering the period 1986 to 1999). Thus, viewed from another angle, a conclusion similar
to the spousal maternity benefit obtains, i.e., that a practice on medicine reimbursement has
similarly developed which the Bank cannot now unilaterally withdraw. (emphasis supplied)
xxx
We see no reversible error in the CAs adoption of said findings of the DOLE. It is elementary
that factual findings of labor officials, who are deemed to have acquired expertise in matters
within their jurisdiction, are accorded not only respect but finality.23 In a recent case, it was
similarly held that where the factual findings of the labor tribunals or agencies conform to, and
are affirmed by, the CA, the same are accorded respect and finality, and are binding upon this
Court.24
WHEREFORE, in view of the foregoing, the instant petition is hereby DENIED for lack of
merit and the Decision dated July 1, 2004 of the Court of Appeals in CA-G.R. SP No. 71448 is
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
43. Globe Mackay Cable and Radio Corporation v. NLRC, G.R. No. 74156, Jan 29, 1988
G.R. No. 74156 June 29, 1988

GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and

JESUS SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES
UNION and EDA CONCEPCION, respondents.

Castillo, Laman, Tan & Pantaleon for petitioners.

Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:

A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin
respondents from enforcing the Decision of 10 March 1986 of the National Labor Relations
Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees
Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive portion of
which reads:

WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and
another one issued:

1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-

of-living allowance;

2. Ordering respondents-appellees to pay complainants-appellants their back allowances

reckoned from the time of illegal deduction; and

3. Ordering respondents-appellees from further illegally deducting the allowances of

complainants-appellants.

SO ORDERED.

Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while
Commissioner Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's
Decision.

On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from
enforcing the assailed Decision. On 2 September 1987, we gave due course to the petition and
required the submittal of memoranda, by the parties, which has been complied with.

The facts follow:

Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance
of non-agricultural workers in the private sector. Petitioner corporation complied with the said
Wage Order by paying its monthly-paid employees the mandated P3.00 per day COLA.
However, in computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by
22 days, which is the number of working days in the company.

Respondent Union disagreed with the computation of the monthly COLA claiming that the daily
COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The
union alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner
Corporation had been computing and paying the monthly COLA on the basis of thirty (30) days
per month and that this constituted an employer practice, which should not be unilaterally
withdrawn.

After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and
Santiago were sought to be held personally liable for the money claims thus demanded.

Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding
that since the individual petitioners acted in their corporate capacity they should not have been
impleaded; and that the monthly COLA should be computed on the basis of twenty two (22)
days, since the evidence showed that there are only 22 paid days in a month for monthly-paid
employees in the company. His reasoning, inter alia, was as follows:

To compel the respondent company to use 30 days in a month to compute the allowance and
retain 22 days for vacation and sick leave, overtime pay and other benefits is inconsistent and
palpably unjust. If 30 days is used as divisor, then it must be used for the computation of all
benefits, not just the allowance. But this is not fair to complainants, not to mention that it will
contravene the provision of the parties' CBA.

On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the
P3.00 daily COLA under Wage Order No. 6 should be paid and computed on the basis of thirty
(30) days instead of twenty-two (22) days since workers paid on a monthly basis are entitled to
COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance
enjoyed by Petitioner Corporation's monthly-paid employees before the CBA executed between
the parties in 1982 constituted voluntary employer practice, which cannot be unilaterally
withdrawn; and (3) that petitioners White and Santiago were properly impleaded as respondents
in the case below.

Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.

We are constrained to reverse the reversal.

Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.

All covered employees shall be entitled to their daily living allowance during the days that they
are paid their basic wage, even if unworked. (Emphasis supplied)

The primordial consideration, therefore, for entitlement to COLA is that basic wage is being
paid. In other words, the payment of COLA is mandated only for the days that the employees are
paid their basic wage, even if said days are unworked. So that, on the days that employees are
not paid their basic wage, the payment of COLA is not mandated. As held in University of
Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA
691):

... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages.
Hence, we have the principle of 'No Pay, No ECOLA.

Applied to monthly-paid employees if their monthly salary covers all the days in a month, they
are deemed paid their basic wages for all those days and they should be entitled to their COLA
on those days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the
circumstance that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner
Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5)
days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement
read:

Art. XV(a)Eight net working hours shall constitute the regular work day for five days.

Art. XV(b)Forty net hours of work, 5 working days, shall constitute the regular work week.

Art. XVI, Sec. 1(b)All overtime worked in excess of eight net hours daily or in excess of 5
days weekly shall be computed on hourly basis at the rate of time and one half.

The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for
purposes of computing overtime pay, the monthly wage is divided by the number of actual work
days in a month and then, by eight (8) working hours. If a monthly-paid employee renders
overtime work, he is paid his basic salary rate plus one-half thereof. For example, after
examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found:

the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50%
premium. This is over and above his monthly basic pay as supported by the fact that base pay
was paid. If the 6th and 7th days of the week are deemed paid even if unworked and included in
the monthly salary, Santos should not have been paid his base pay for Saturday and Sunday but
should have received only the 50% overtime premium.

Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed
that in computing the vacation and sick leaves of the employees, Petitioner Corporation
consistently used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day
work week, it will have to be held that the COLA should be computed on the basis of twenty two
(22) days, which is the period during which the monthly-paid employees of Petitioner
Corporation receive their basic wage. The CBA is the law between the parties and, if not
acceptable, can be the subject of future re-negotiation.

2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA
in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984),
should not be construed as constitutive of voluntary employer practice, which cannot now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced
over a long period of time, and must be shown to have been consistent and deliberate. Adequate
proof is wanting in this respect. The test of long practice has been enunciated thus:

... Respondent Company agreed to continue giving holiday pay knowing fully well that said
employees are not covered by the law requiring payment of holiday pay.' (Oceanic Pharmacal
Employees Union [FFW] vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270). (Emphasis
ours)

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No.
4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to its
monthly equivalent was laid down, thus:

Section 3. Application of Section 2--

xxx xxx xxx

(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:

xxx xxx xxx

(3) For workers who do not work and are not considered paid on Saturdays and Sundays:

P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)

As the Labor Arbiter had analyzed said formula:

Under the aforecited formula/guideline, issued for the first time, when applied to a company like
respondent which observes a 5-day work week (or where 2 days in a week, not necessarily
Saturday and Sunday, are not considered paid), the monthly equivalent of a daily allowance is
arrived at by multiplying the daily allowance by 262 divided by 12. This formula results in the
equivalent of 21.8 days in a month.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in
relation to Article 2154 2 of the Civil Code). Since it is a past error that is being corrected, no
vested right may be said to have arisen nor any diminution of benefit under Article 100 of the
Labor Code3 may be said to have resulted by virtue of the correction.

With the conclusions thus reached, there is no further need to discuss the liability of the officers
of Petitioner Corporation.

WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission,
dated 10 March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985,
is hereby REINSTATED. The Temporary Restraining Order heretofore issued is hereby made
permanent.

SO ORDERED.
44. Prubankers Association v. Prudential Bank & Trust Company, G.R. No. 131247, Jan 25,
1999
G.R. No. 131247 January 25, 1999

PRUBANKERS ASSOCIATION, petitioner,

vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.

PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office
hierarchy wirhout a corresponding raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of the distinction between the two
groups. Such distortion does not arise when a wage order gives employees in one branch of a
bank higher compensation than that given to their counterparts in other regions occupying the
same pay scale, who are not covered by said wage order. In short, the implementation of wage
orders in one region but not in others does not in itself necessarily result in wage distortion.

The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of
the Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged
Decision reads:

WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration
Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued
with grave abuse of discretion tantamount to lack of or excess of jurisdiction, and a new
judgment is rendered finding that no wage distortion resulted from the petitioner's separate and
regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.

The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of
Appeals reversed and set aside, disposed as follows:

WHEREFORE, it is hereby ruled that the Bank's separate and regional implementation of Wage
Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in
the Bank nationwide which should be resolved in accordance with Art. 124 of the Labor Code. 3

The Facts

The facts of the case are summarized by the Court of Appeals thus:

On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V
issued Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who ha[d] rendered service for at least three (3) months before its
effectivity, and for the same period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS
AND FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of
Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.

Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of
Region VII issued Wage Order No. RB VII-03, which directed the integration of the COLA
mandated pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers. It also
established an increase in the minimum wage rates for all workers and and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu;
Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran.

The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only
branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into
the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches, the
branches covered by Wage Order No. RB VII-03.

On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to discuss and resolve the alleged
wage distortion created in the salary structure upon the implementation of the said wage orders.
Respondent Association then demanded in the Labor Management Committee meetings that the
petitioner extend the application of the wage orders to its employees outside Regions V and VII,
claiming that the regional implementation of the said orders created a wage distortion in the
wage rates of petitioner's employees nationwide. As the grievance could not be settled in the said
meetings, the parties agreed to submit the matter to voluntary arbitration. The Arbitration
Committee formed for that purpose was composed of the following: public respondent Froilan
M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as
members. The issue presented before the Committee was whether or not the bank's separate and
regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage Order No. VII-
03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank
nationwide.

The Arbitration Committee on June 18, 1996 rendered questioned decision. 4

Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the
salary rates of employees in different regions of the country was justified by RA 6727. It noted
that "the underlying considerations in issuing the wage orders are diverse, based on the
distinctive situations and needs existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII."
Furthermore, the Court of Appeals ruled that "the distinctions between each employee group in
the region are maintained, as all employees were granted an increase in minimum wage rate. 5

The Issues
In its Memorandum, petitioner raises the following issues: 6

Whether or not the Court of Appeals departed from the usual course of judicial procedure when
it disregarded the factual findings of the Voluntary Arbitration Committee as to the existence of
wage distortion.

II

Whether or not the Court of Appeals committed grave error in law when it ruled that wage
distortion exists only within a region and not nationwide.

III

Whether or not the Court of Appeals erred in implying that the term "establishment" as used in
Article 125 of the Labor Code refers to the regional branches of the bank and not to the bank as a
whole.

The main issue is whether or not a wage distortion resulted from respondent's implementation of
the aforecited Wage Orders. As a preliminary matter, we shall also take up the question of
forum-shopping.

The Court's Ruling

The petition is devoid of merit. 7

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-
shopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the Rules of
Court, which requires that parties must certify under oath that they have not commenced any
other action involving the same issues in the Supreme Court, the Court of Appeals, or different
divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, they
must state the status of the same; and if they should thereafter learn that a similar action or
proceeding has been filed or is pending before the said courts, they should promptly inform the
aforesaid courts or any other tribunal or agency within five days therefrom. Specifically,
petitioner accuses respondent of failing to inform this Court of the pendency of NCMB-NCR-
RVA-O4-012-97 entitled "In Re: Voluntary Arbitration between Prudential Bank and Prubankers
Association" (hereafter referred to as "voluntary arbitration case"), an action involving issues
allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending
when it filed the present petition. However, it claims no violation of the rule against forum-
shopping, because there is no identity of causes of action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the
Interim Rules and Guidelines issued by this Court on January 11, 1983, which imposed a
sanction in this wise: "A violation of the rule shall constitute contempt of court and shall be a
cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate
action against the counsel or party concerned." Thereafter, the Court restated the rule in Revised
Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in
the 1997 amendments to the Rules of Court.

As explained by this Court in First Philippine International Bank v. Court of Appeals, 8 forum-
shopping exists where the elements of litis pendentia are present, and where a final judgment in
one case will amount to res judicata in the other. Thus, there is forum-shopping when, between
an action pending before this Court and another one, there exist: "a) identity of parties, or at least
such parties as represent the same interests in both actions, b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and c) the identity of the two
preceding particulars is such that any judgement rendered in the other action, will, regardless of
which party is successful amount to res judicata in the action under consideration; said requisites
also constitutive of the requisites for auter action pendant or lis pendens." 9 Another case
elucidates the consequence of forum-shopping: "[W]here a litigant sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of
the same relief is/are still pending, the defense of litis pendentia in one case is a bar to the others;
and, a final judgment in one would constitute res judicata and thus would cause the dismissal of
the rest." 10

The voluntary arbitration case involved the issue of whether the adoption by the Bank of
regionalized hiring rates was valid and binding. On the other hand, the issue now on hand
revolves around the existence of a wage distortion arising from the Bank's separate and regional
implementation of the two Wage Orders in the affected branches. A closer look would show that,
indeed, the requisites of forum-shopping are present.

First, there is identity of parties. Both cases are between the Bank and the Association acting on
behalf of all its members. Second, although the respective issues and reliefs prayed for in the two
cases are stated differently, both actions boil down to one single issue: the validity of the Bank's
regionalization of its wage structure based on RA 6727. Even if the voluntary arbitration case
calls for striking, down the Bank's regionalized hiring scheme while the instant petition calls for
the correction of the alleged wage distortion caused by the regional implementation of Wage
Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of the Bank's
national wage structure. Hence, the final disposition of one would constitute res judicata in the
other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both
actions is indeed warranted.

Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its
importance.

Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as
amended by Republic Act No. 6727, which reads:

Art. 124. Standards/Criteria for Minimum Wage Fixing . . .

As used herein, a wage distortion shall mean a situation where an increase in prescribed wage
results in the elimination of severe contraction of intentional quantitative differences in wage or
salary rates between and among employee groups in an establishment as to effectively obliterate
the distinctions embodied in such wage structure based on skills, length of service, or other
logical bases of differentiation.

Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a
classification of positions and ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in terms of wages and other
emoluments. Where a significant change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the hierarchy of positions, negating as
a result thereof the distinction between one level of position from the next higher level, and
resulting in a parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion. . . . . The concept of a wage distortion
assumes an existing grouping or classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of employees" 11

Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

2. A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one

3. The elimination of the distinction between the two levels

4. The existence of the distortion in the same region of the country

In the present case, it is clear that no wage distortion resulted when respondent implemented the
subject Wage Orders in the covered branches. In the said branches, there was an increase in the
salary rates of all pay classes. Furthermore, the hierarchy of positions based on skills, lengh of
service and other logical bases of differentiation was preserved. In other words, the quantitative
difference in compensation between different pay classes remained the same in all branches in
the affected region. Put differently, the distinction between Pay Class 1 and Pay Class 2, for
example, was not eliminated as a result of the implementation of the two Wage Orders in the said
region. Hence, it cannot be said that there was a wage distortion.

Petitioner argues that a wage distortion exists, because the implementation of the two Wage
Orders has resulted in the discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation than their counterparts
of the same level in other regions. Several tables are presented by petitioner to illustrate that the
employees in the regions covered by the Wage Orders are receiving more than their counterparts
in the same pay scale in other regions.

The Court is not persuaded. A wage parity between employees in different rungs, is not at issue
here, but a wage disparity between employees in the same rung but located in different regions of
the country.

Contrary to petitioner's postulation, a disparity in wages between employees holding similar

positions but in different regions does not constitute wage distortion as contemplated by law. As
previously enunciated, it is the hierarchy of positions and the disparity of their corresponding
wages and other emoluments that are sought to be preserved by the concept of wage distortion.
Put differently, a wage distortion arises when a wage order engenders wage parity between
employees in different rungs of the organizational ladder of the same establishment. It bears
emphasis that wage distortion involves a parity in the salary rates of different pay classes which,
as a result, eliminates the distinction between the different ranks in the same region.

Different Regional Wages

Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference in
wages between employees in the same pay scale in different regions is not the mischief sought to
be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:

Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages
and to promote productivity-improvement and gain-sharing measures to ensure a decent standard
of living for the workers and their families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the countryside through industry
dispersal; and to allow business and industry reasonable returns on investment, expansion and
growth.

The State shall promote collective bargaining as the primary mode of settling wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall be
adjusted in a fair and equitable manner, considering existing regional disparities in the cost of
living and other socio-economic factors and the national economic and social development plans.

RA 6727 also amended Article 124 of the Labor Code, thus:

Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages
to be established by the Regional Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-
being of the employees within the frame work of the national economic and social development
program. In the determination of such regional minimum wages, the Regional Board shall,
among other relevant factors, consider the following:

The demand for living wages;

Wage adjustment vis-a-vis the consumer price index;
The cost of living and changes or increases therein;
The needs of workers and their families;
The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the imperatives of social and economic
development.
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in
wages between employees with similar positions in different regions is necessarily expected. In
insisting that the employees of the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning of wage distortion and
the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country are controlling factors such as
the cost of living; supply and demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore the necessity of the law. Wages
in some areas may be increased in order to prevent migration to the National Capital Region and,
hence, to decongest the metropolis. Therefore, what the petitioner herein bewails is precisely
what the law provides in order to achieve its purpose.

Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA
6727 do not have the authority to issue wage orders based on the distinctive situations and needs
existing in each region. So also, . . . it does not insist that the [B]ank should not implement
regional wage orders. Neither does it seek to penalize the Bank for following Wage Order VII-
03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon a national
wage structure and replace the same with a regionalized structure in violation of the principle of
equal pay for equal work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law."

As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not
objecting, on the one hand, to the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.

The objective of the law also explains the wage disparity in the example cited by petitioner:
Armae Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. 12 RA 6727
recognizes that there are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not necessarily mean that he
or she is better off than a person receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national economic goals, and standard of
living. In any event, this Court, in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.

Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only one region violates the
equal-pay-for-equal-work principle. This is not correct. At the risk of being repetitive, we stress
that RA 6727 mandates that wages in every region must be set by the particular wage board of
that region, based on the prevailing situation therein. Necessarily, the wages in different regions
will not be uniform. Thus, under RA 6727, the minimum wage in Region 1 may be different
from that in Region 13, because the socioeconomic conditions in the two regions are different.

Meaning of "Establishment"

Petitioner further contends that the Court of Appeals erred in interpreting the meaning of
"establishment" in relation to wage distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers working in branches or agencies of
establishments in or outside the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but are simply branches of, the
establishment which is the whole bank. In effect, petitioner argues that wage distortion covers
the pay scales even of employees in different regions, and not only those of employees in the
same region or branch. We disagree.

Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of
establishments in or outside the National Capital Region shall be those applicable in the place
where they are sanctioned" The last part of the sentence was omitted by petitioner in its
argument. Given the entire phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and offices in different regions.

Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised
Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite Wages and Productivity Board," which
states that "establishment" "refers to an economic unit which engages in one or predominantly
one kind of economic activity with a single fixed location."

Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the
status of an established management practice; thus, it is estopped from implementing a wage
order for a specific region only. We are not persuaded. Said nationwide uniform wage policy of
the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the
Bank was mandated to regionalize its wage structure. Although the Bank implemented Wage
Order Nos. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity of
RA 6727, the Bank at the time was still uncertain about how to follow the new law. In any event,
that single instance cannot be constitutive of "management practice."

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against
petitioner.1wphi1.nt

SO ORDERED.
 45. Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda, G.R. No. 145561,
June 15, 2005

G.R. No. 145561 June 15, 2005

HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals
decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP
No. 59052. The appellate court affirmed the decision dated May 2, 2000 rendered by the
Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.s (Honda) pro-rated
payment of the 13th and 14th month pay and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement
(CBA) forged between petitioner Honda and respondent union Samahan ng Malayang
Manggagawa sa Honda (respondent union) which contained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month
pay.

Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of
13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-
negotiations for the fourth and fifth years of their CBA. When the talks between the parties
bogged down, respondent union filed a Notice of Strike on the ground of bargaining deadlock.
Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then Department of Labor and
Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and
ordered the parties to cease and desist from committing acts that would aggravate the situation.
Both parties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of
unfair labor practice alleging that Honda illegally contracted out work to the detriment of the
workers. Respondent union went on strike and picketed the premises of Honda on May 19, 1999.
On June 16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the
case and certified the same to the National Labor Relations Commission (NLRC) for compulsory
arbitration. The striking employees were ordered to return to work and the management accepted
them back under the same terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum4 announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the
thirty-one (31)-day long strike shall be considered unworked days for purposes of computing
said benefits. As per the companys new formula, the amount equivalent to 1/12 of the
employees basic salary shall be deducted from these bonuses, with a commitment however that
in the event that the strike is declared legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November
25, 1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue.
In a letter dated January 4, 2000,5 the BWC agreed with the pro-rata payment of the 13th month
pay as proposed by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties existing
CBA but when the issue remained unresolved, it was submitted for voluntary arbitration. In his
decision6 dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Hondas
computation, to wit:

WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is
hereby ruled that the Companys implementation of pro-rated 13th Month pay, 14th Month pay
and Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in
full month basic pay and pay the amounts in question within ten (10) days after this Decision
shall have become final and executory.

The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.

SO ORDERED.7

Hondas Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000.
Thus, a petition was filed with the Court of Appeals, however, the petition was dismissed for
lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of
the 13th month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit.8As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy.9 Thus, where
the CBA is clear and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.10

In some instances, however, the provisions of a CBA may become contentious, as in this case.
Honda wanted to implement a pro-rated computation of the benefits based on the "no work, no
pay" rule. According to the company, the phrase "present practice" as mentioned in the CBA
refers to the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be
given in May and the other 50% in December of each year. Respondent union, however, insists
that the CBA provisions relating to the implementation of the 13th month pay necessarily relate
to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance
would be based on one full months basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of
labor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the
arbitrators finding and added that the computation of the 13th month pay should be based on the
length of service and not on the actual wage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor
officials, who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence. It is not our function to assess and evaluate the evidence all
over again, particularly where the findings of both the arbiter and the Court of Appeals
coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all
employers to pay their employees a 13th month pay, was issued to protect the level of real wages
from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted
that there had been no increase in the minimum wage since 1970 and the Christmas season was
an opportune time for society to show its concern for the plight of the working masses so that
they may properly celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November
16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided
that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of
the total basic salary earned by an employee within a calendar year. The guidelines pertinently
provides:

The "basic salary" of an employee for the purpose of computing the 13th month pay shall include
all remunerations or earnings paid by his employer for services rendered but does not include
allowances and monetary benefits which are not considered or integrated as part of the regular or
basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime
premium, night differential and holiday pay, and cost-of-living allowances.14 (Emphasis
supplied)

For employees receiving regular wage, we have interpreted "basic salary" to mean, not the
amount actually receivedby an employee, but 1/12 of their standard monthly wage multiplied by
their length of service within a given calendar year. Thus, we exclude from the computation of
"basic salary" payments for sick, vacation and maternity leaves, night differentials, regular
holiday pay and premiums for work done on rest days and special holidays.15 In Hagonoy Rural
Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food Corporation v.
NLRC,18 and similar cases, the 13th month pay due an employee was computed based on the
employees basic monthly wage multiplied by the number of months worked in a calendar year
prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation
or separation from work. As the rules state, under these circumstances, an employee is entitled to
a pay in proportion to the length of time he worked during the year, reckoned from the time he
started working during the calendar year.19 The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should be based on the length
of service and not on the actual wage earned by the worker. In the present case, there being no
gap in the service of the workers during the calendar year in question, the computation of the
13th month pay should not be pro-rated but should be given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the
13th month pay before the instant case. Honda did not adduce evidence to show that the
13th month, 14th month and financial assistance benefits were previously subject to deductions or
pro-rating or that these were dependent upon the companys financial standing. As held by the
Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to
adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M
substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is
an implicit acceptance that prior to the strike, a full month basic pay computation was the
"present practice" intended to be maintained in the CBA.21

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time
a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for
the company that the work stoppage held by the employees lasted for thirty-one (31) days or
exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary
as base amount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that
when they were absent from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from Honda, they still
received the full amount of their 13th month, 14th month and financial assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example
of a voluntary act of the employer that has ripened into a company practice. In that case, the
employer, from 1975 to 1981, freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law. We have held that this act,
which was favorable to the employees though not conforming to law, has ripened into a practice
and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated.
Furthermore, in Sevilla Trading Company v. Semana,24 we stated:

With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold
that jurisprudence has not laid down any rule requiring a specific minimum number of years. In
the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company
practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to
cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers.
While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three (3) years and
four (4) months. In all these cases, this Court held that the grant of these benefits has ripened
into company practice or policy which cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves
for unused sick leave and vacation leave in the computation of their 13th-month pay for at least
two (2) years. This, we rule likewise constitutes voluntary employer practice which cannot be
unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code.25 (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the
underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of
workers and to help them cope with the exorbitant increases in the cost of living. To allow the
pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the
mandate that the workingmans welfare should be the primordial and paramount
consideration.26 What is more, the factual milieu of this case is such that to rule otherwise
inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their
constitutional rights to self-organization and to strike in accordance with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No.
59052, affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby
AFFIRMED in toto.

SO ORDERED.
 46. Lexal Laboratories, Inc. v. CIR, G.R. No. L-24632, Oct. 26, 1968

G.R. No. L-24632 October 26, 1968

LEXAL LABORATORIES and/or JOSE ANGELES, Manager, petitioners,

vs.
NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal
Laboratories Chapter) and THE COURT OF INDUSTRIAL RELATIONS, respondents.

Matias, Liboro & Benitez for petitioners.

F. M. de los Reyes for respondents.

SANCHEZ, J.:

Condensed, the question before us is this: Are per diems included in backpay? This problem
came about because of the implementation of the decision of the Court of Industrial Relations
(CIR) of June 29, 19631 directing petitioner Lexal Laboratories (Lexal) to reinstate Guillermo
Ponseca, a dismissed employee, to his former position "with full back wages from the day of his
dismissal up to the time he is actually reinstated without loss of his seniority rights and of such
other rights and privileges enjoyed by him prior to his lay-off."

CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of February
16, 1965 that Ponseca was entitled to back wages from November 5, 1958 when he ceased
reporting for work, to November 24, 1963 a day prior to his reinstatement on November 25,
1963; and that for the number of days that he was supposed to be in Manila, he was to earn P4.50
a day, and during the periods when he should have been in the provinces, P4.50 a day plus a per
diem of P4.00 or a total of P8.50 daily. This order was subsequently modified by CIR's
resolution of May 22, 1965 which directed the deduction of P5,000.00 previously paid Ponseca
under the judgment and P610.00 which Ponseca earned from other sources during his lay-off.

Petitioners vigorously objected to the inclusion of the P4.00 per diem in the computation of
Ponseca's back wages because the latter "did not actually spend for his meals and lodgings for he
was all the time in Manila, his station." CIR brushed this contention aside. Whereupon,
petitioners appealed to this Court from the order of February 16, 1965 and the resolution of May
22, 1965.2

1. Our attention has not been drawn to a rule of law or jurisprudence which holds that per
diems are integral parts of regular wages or salaries. Neither is it suggested in the record that per
diems formed part of the terms of employment between petitioners and respondent union (of
which Ponseca is a member), or with Ponseca himself for that matter. Nor was pronouncement
made either in the original decision or in the questioned order and resolution of CIR that per
diems are part of back wages. CIR simply hit upon the idea that per diems should be paid as part
of the back wages because they were "paid to him regularly."

Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day he (an
officer or employee) was away from his home base".3 It would seem to us that per diem is
intended to cover the cost of lodging and subsistence of officers and employees when the latter
are on duty outside of their permanent station.4 Lexal concedes that whenever its employee,
Guillermo Ponseca, was out of Manila, he was allowed a per diem of P4.00 broken down as
follows: P1.00 for breakfast; P1.00 for lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca
during the period involved did not leave Manila. Therefore, he spent nothing for meals and
lodging outside of Manila. Because he spent nothing, there is nothing to be reimbursed.
Since per diems are in the nature of reimbursement, Ponseca should not be entitled to per diems.

Besides, back wages are what an employee has lost "in the way of wages" due to his dismissal.
So that, because Ponseca earned P4.50 a day, "then that is the amount which he lost daily by
reason of his dismissal, nothing more nothing less:"5

We, accordingly, rule that CIR erred in including per diems in the back wages due and payable
to Guillermo Ponseca.

2. The rest is a matter of mathematical computation but first to the facts. The union's evidence is
that since the last part of October, 1958 Ponseca had been reporting everyday to the bodega of
respondents.6 Anyway, prior to Ponseca's dismissal, he worked daily either in Manila or in the
provinces.7

But the order of February 15, 1965 credits Ponseca with 1,856 days for the period from
November 5, 1958 to November 24, 1963. We checked the accuracy of this figure. We found
that there should only be 1,846 days from November 5, 1958 to November 24, 1963, viz:

November 5, 1958 to December 31, 1958 57 days

January 1, 1959 to December 31, 1959 365 days

January 1, 1960 to December 31, 1960 366 days

January 1, 1961 to December 31, 1961 365 days

January 1, 1962 to December 31, 1962 365 days

January 1, 1963 to November 24, 1963 328 days

TOTAL 1,846 days

This brings us to the total amount due from Lexa1 to Guillermo Ponseca, as follows: .

1,846 days x P4.50 P8,307.00

Less: Advance payment P5,000.00

 Earnings from other sources P610.00 P5,610.008

NET BACKPAY P2,697.00 .

For the foregoing reasons, the order of February 16, 1965, and the resolution of May 22, 1965,
both of the Court of Industrial Relations, in its Case No. 2002-ULP, entitled "National Chemical
Industries Workers Union-PAFLU (Lexal Laboratories Chapter), Complainant, versus Lexal
Laboratories and Jose Angeles, its Manager, Respondents", are hereby modified; and

Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo Ponseca,
by way of net backpay, the sum of P2,697.00.

No costs. So ordered.
 47. Asis v. Minister of labor, G.R. Nos. 58094-95, March 15, 1989

G.R. No. 58094-95 March 15, 1989

MAMERTO B. ASIS, petitioner,

vs.
MINISTER OF LABOR AND EMPLOYMENT, CENTRAL AZUCARERA DE PILAR,
and EMMANUEL JAVELLANA, respondents.

Belo, Ermitano Abiera & Associates for petitioner.

Yolanda, Quisumbing-Javellana & Associates for respondent Emmanuel Q. Javellana.

V. Veloso & Associates for respondent Central Azucarera

NARVASA, J.:

The facts of this case depict a picture that is hardly edifying: avidity trying to wear the mantle of
right. The facts raise a twofold issue: whether a company which has been haled to court by its
own in-house counsel is obliged to continue his employment and entrust its legal affairs to him,
specially when his cause of action has been shown to be devoid of merit; and whether a firm is
bound to retain in its service a personnel manager who has incited the very employees under his
supervision and control to file complaints against it. Asserting a right to sue his employer for a
legitimate grievance without meriting retaliatory action, the petitioner claims that his dismissal
for such conduct or on the ground, essentially, of loss of confidence, was illegal; and he asks this
Court to annul the judgment of the respondent Commission, which upheld the termination of his
services in respondent company. Said claim finds no support in either the law or the established
facts and must, therefore, be rejected.

The petitioner was appointed Legal Counsel of the Central Azucarera de Pilar 1 Later,
concurrently with his position as Legal Counsel, he was named Head of its Manpower and
Services Department.

In addition to his basic salaries and other fringe benefits, his employer granted him, and a few
other officials of the company, a monthly ration of 200 liters of gasoline and a small tank of
liquefied petroleum gas (LPG). 2 This monthly ration was temporarily revoked some five (5)
years later as a cost reduction measure of the Central .3 The petitioner and the other officials
adversely affected moved for reconsideration. Their plea was denied.

The petitioner then commenced an action against the Central with the Regional Office of the
Ministry of Labor and Employment, seeking restoration of his monthly ration of gasoline and
LPG which, as aforesaid, had been temporarily suspended. The case was docketed as LRD Case
No. 1632.
Shortly afterwards, he filed another action against his employer, docketed as LRD Case No.
1685, this time complaining against the Central's memorandum ordaining his relief (by being
placed on leave of absence) as the Central's Legal Counsel and Head of the Manpower Services
Department, impleaded by the petitioner as co-respondent was Emmanuel Q. Javellana, the
Finance Manager and Comptroller of the Central, who had signed the memorandum for his
relief. 4 The petitioner theorized that he had in effect been dismissed, illegally. 5

The two cases were jointly heard and decided by the Regional Director. The latter's
judgments 6 was for the petitioner's reinstatement to his former positions without loss of
seniority, benefits and other privileges, the payment to him of back wages from date of his relief
up to time of reinstatement, and the delivery to him of the monthly benefits from the time of their
temporary revocation up to actual restoration or, at his option, the money equivalent thereof. 7

The Deputy Minister of Labor however reversed this decision of the Regional Director, on
appeal taken by the Central; the Deputy Minister ordered the dismissal of the petitioner's
complaint. 8 The Deputy Minister found that the evidence satisfactorily established that the
Central's suspension of the petitioner's and others' monthly ration of gasoline and LPG, had been
caused by unavoidable financial constraints; that such a suspension, in line with its conservation
and cost-saving policy, did not in truth effect any significant diminution of said benefits, since
the petitioner was nevertheless entitled to reimbursement of the actual amount of gas consumed;
that petitioner had encouraged his co-employees to file complaints against the Central over the
rations issue, and this, as well as his institution of his own actions, had created an atmosphere of
enmity in the Central, and caused the loss by the Central of that trust and confidence in him so
essential in a lawyer-client relationship as that theretofore existing between them; and that under
the circumstances, petitioner's discharge as the Central's Legal Counsel and Head of the
Manpower & Services Department was justified. The Deputy Minister's order of dismissal was
however subsequently modified, at the petitioner's instance, by decreeing the payment to the
latter of separation pay equivalent to one month's salary for every year of service rendered. 9

The petitioner theorizes that apart from the fact that the Deputy Minister lacked jurisdiction to
entertain the Central's appeal from the decision of the Regional Director, he had gravely abused
his discretion in reaching his factual conclusions, pejoratively described as guesswork and
speculation.

The petitioner's theory of the Deputy Minister's lack of jurisdiction, founded on the tardy
payment by the Central of the appeal fee of P 25.00, is quickly disposed of by simply adverting
to our holding in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 10 to wit:

It may be that, as held in Acda vs. MOLE, 119 SCRA 306 [1982], payment of the appeal fee is by
no means a mere technicality but is an essential requirement in the perfection of an appeal.
However, where as in this case, the fee had been paid, unlike in the Acda case, although payment
was delayed, the broader interest of justice and the desired objective of resolving controversies
on the merits demanded that the appeal be given course as, in fact, it was so given by the NLRC.
Besides, it was within the inherent power of the NLRC to have allowed the late payment of the
appeal fee.
As regards the temporary revocation of the petitioner's monthly ration of fuel, suffice it to point
out that, as the Solicitor General stresses, this bad been occasioned by force of circumstances
affecting the Central's business. The monthly ration was not a part of his basic salary, and is not
indeed found in any of the management payroll vouchers pertinent to the
petitioner. 11 Moreover, the adverse consequences of the suspension of the monthly rations had
been largely if not entirely negated by the Central's undertaking to reimburse the petitioner for
his actual consumption of fuel during the period of suspension. These facts are entirely distinct
from those obtaining in the case of States Marine Corporation and Royal Line, Inc. v. Cebu
Seamen's Association, Inc., 12 invoked by petitioner and thus preclude application of the ruling
therein laid down to the case at bar.

A review of the record demonstrates that there is substantial evidence supporting the factual
findings of the respondent Deputy Minister. Said findings, as well as the legal conclusions
derived therefrom, cannot be said to have been rendered with grave abuse of discretion, and will
thus be affirmed. In fine, and as petitioner could not but have realized from the outset, neither he
nor any other employee similarly situated had any legitimate grievance against the Central.

WHEREFORE, the petition is DISMISSED for lack of merit, with costs against petitioner.
 48. Bank of Commerce v. manalo, G.R. No. 158149, Feb 9, 2006

G. R. No. 158149 February 9, 2006

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), Petitioner,

vs.
PERLA P. MANALO and CARLOS MANALO, JR., Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 47458 affirming, on appeal, the Decision2 of the Regional Trial Court (RTC)
of Quezon City, Branch 98, in Civil Case No. Q-89-3905.

The Antecedents

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the
Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the
property into residential lots, which was then offered for sale to individual lot buyers.3

On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The
Overseas Bank of Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate" over
some residential lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square
meters, and Lot 2, Block 2, with an area of 832.80 square meters. The transaction was subject to
the approval of the Board of Directors of OBM, and was covered by real estate mortgages in
favor of the Philippine National Bank as security for its account amounting to 5,187,000.00,
and the Central Bank of the Philippines as security for advances amounting to
22,185,193.74.4 Nevertheless, XEI continued selling the residential lots in the subdivision as
agent of OBM.5

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr.
Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps under
the business name Hurricane Commercial, Inc. For 34,887.66, Manalo, Jr. installed a water
pump at Ramos residence at the corner of Aurora Boulevard and Katipunan Avenue, Quezon
City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville
subdivision, and offered as part of the downpayment the 34,887.66 Ramos owed him. XEI,
through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to
choose which lots he wanted to buy so that the price of the lots and the terms of payment could
be fixed and incorporated in the conditional sale.6Manalo, Jr. met with Ramos and informed him
that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square
meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots.
He also pegged the price of the lots at 200.00 per square meter, or a total of 348,060.00, with a
20% down payment of the purchase price amounting to 69,612.00 less the 34,887.66 owing
from Ramos, payable on or before December 31, 1972; the corresponding Contract of
Conditional Sale would then be signed on or before the same date, but if the selling operations of
XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and
the spouses would sign the aforesaid contract within five (5) days from receipt of the notice of
resumption of such selling operations. It was also stated in the letter that, in the meantime, the
spouses may introduce improvements thereon subject to the rules and regulations imposed by
XEI in the subdivision. Perla Manalo conformed to the letter agreement.7

The spouses Manalo took possession of the property on September 2, 1972, constructed a house
thereon, and installed a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly installments until they were
assured that they would be issued Torrens titles over the lots they had purchased.8 The spouses
Manalo were notified of the resumption of the selling operations of XEI.9 However, they did not
pay the balance of the downpayment on the lots because Ramos failed to prepare a contract of
conditional sale and transmit the same to Manalo for their signature. On August 14, 1973, Perla
Manalo went to the XEI office and requested that the payment of the amount representing the
balance of the downpayment be deferred, which, however, XEI rejected. On August 10, 1973,
XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a
balance of 34,724.34 on the downpayment of the two lots after deducting the account of
Ramos, plus 3,819.6810 interest thereon from September 1, 1972 to July 31, 1973, and that the
interests on the unpaid balance of the purchase price of 278,448.00 from September 1, 1972 to
July 31, 1973 amounted to 30,629.28.11 The spouses were informed that they were being billed
for said unpaid interests.12

On January 25, 1974, the spouses Manalo received another statement of account from XEI,
inclusive of interests on the purchase price of the lots.13 In a letter dated April 6, 1974 to XEI,
Manalo, Jr. stated they had not yet received the notice of resumption of Leis selling operations,
and that there had been no arrangement on the payment of interests; hence, they should not be
charged with interest on the balance of the downpayment on the property.14Further, they
demanded that a deed of conditional sale over the two lots be transmitted to them for their
signatures. However, XEI ignored the demands. Consequently, the spouses refused to pay the
balance of the downpayment of the purchase price.15

Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house.
In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed
along the sidewalk. It demanded that he remove the same, on the ground, among others, that the
sidewalk was not part of the land which he had purchased on installment basis from
XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on September 15, 1977.17

Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots
already contracted and those yet to be sold.18 On December 8, 1977, OBM warned Manalo, Jr.,
that "putting up of a business sign is specifically prohibited by their contract of conditional sale"
and that his failure to comply with its demand would impel it to avail of the remedies as provided
in their contract of conditional sale.19
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title
(TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor
of the OBM.20 The lien in favor of the Central Bank of the Philippines was annotated at the
dorsal portion of said title, which was later cancelled on August 4, 1980.21

Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from
OBM. CBM wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as
of January 31, 1983, Manalo, Jr. was one of the lot buyers in the subdivision.22 CBM reiterated
in its letter to Ng that, as of January 24, 1984, Manalo was a homeowner in the subdivision.23

In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was the owner of the lot and she had no permission
for such construction.24 She agreed to have a conference meeting with CBM officers where she
informed them that her husband had a contract with OBM, through XEI, to purchase the
property. When asked to prove her claim, she promised to send the documents to CBM.
However, she failed to do so.25 On September 5, 1986, CBM reiterated its demand that it be
furnished with the documents promised,26 but Perla Manalo did not respond.

On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the spouses with the
Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No. 51618. CBM
claimed that the spouses had been unlawfully occupying the property without its consent and that
despite its demands, they refused to vacate the property. The latter alleged that they, as vendors,
and XEI, as vendee, had a contract of sale over the lots which had not yet been rescinded.28

While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement,
promising to abide by the purchase price of the property (313,172.34), per agreement with XEI,
through Ramos. However, on July 28, 1988, CBM wrote the spouses, through counsel, proposing
that the price of 1,500.00 per square meter of the property was a reasonable starting point for
negotiation of the settlement.29 The spouses rejected the counter proposal,30 emphasizing that
they would abide by their original agreement with XEI. CBM moved to withdraw its
complaint31 because of the issues raised.32

In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its
complaint against the spouses Manalo, the latter filed a complaint for specific performance and
damages against the bank before the Regional Trial Court (RTC) of Quezon City on October 31,
1989.

The plaintiffs alleged therein that they had always been ready, able and willing to pay the
installments on the lots sold to them by the defendants remote predecessor-in-interest, as might
be or stipulated in the contract of sale, but no contract was forthcoming; they constructed their
house worth 2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant,
through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his
original agreement with the defendants predecessor-in-interest; during the hearing of the
ejectment case on October 16, 1988, they offered to pay 313,172.34 representing the balance on
the purchase price of said lots; such tender of payment was rejected, so that the subject lots could
be sold at considerably higher prices to third parties.
Plaintiffs further alleged that upon payment of the 313,172.34, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form
and substance to transfer title thereto free and clear of any and all liens and encumbrances of
whatever kind and nature.33 The plaintiffs prayed that, after due hearing, judgment be rendered in
their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:

(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over
subject lots in favor of the plaintiffs after payment of the sum of 313,172.34, sufficient
in form and substance to transfer to them titles thereto free and clear of any and all liens
and encumbrances of whatever kind or nature;

(b) The defendant should be held liable for moral and exemplary damages in the amounts
of 300,000.00 and 30,000.00, respectively, for not promptly executing and delivering
to plaintiff the necessary Contract of Sale, notwithstanding repeated demands therefor
and for having been constrained to engage the services of undersigned counsel for which
they agreed to pay attorneys fees in the sum of 50,000.00 to enforce their rights in the
premises and appearance fee of 500.00;

(c) And for such other and further relief as may be just and equitable in the premises.34

In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a)
plaintiffs had no cause of action against it because the August 22, 1972 letter agreement between
XEI and the plaintiffs was not binding on it; and (b) "it had no record of any contract to sell
executed by it or its predecessor, or of any statement of accounts from its predecessors, or
records of payments of the plaintiffs or of any documents which entitled them to the possession
of the lots."35 The defendant, likewise, interposed counterclaims for damages and attorneys fees
and prayed for the eviction of the plaintiffs from the property.36

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable
settlement of the case by paying 942,648.70, representing the balance of the purchase price of
the two lots based on the current market value.37 However, the defendant rejected the same and
insisted that for the smaller lot, they pay 4,500,000.00, the current market value of the
property.38 The defendant insisted that it owned the property since there was no contract or
agreement between it and the plaintiffs relative thereto.

During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale
executed between XEI and Alberto Soller;39 Alfredo Aguila,40 and Dra. Elena Santos-Roque41 to
prove that XEI continued selling residential lots in the subdivision as agent of OBM after the
latter had acquired the said lots.

For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI
proposed to sell the two lots subject to two suspensive conditions: the payment of the balance of
the downpayment of the property, and the execution of the corresponding contract of conditional
sale. Since plaintiffs failed to pay, OBM consequently refused to execute the corresponding
contract of conditional sale and forfeited the 34,877.66 downpayment for the two lots, but did
not notify them of said forfeiture.42 It alleged that OBM considered the lots unsold because the
titles thereto bore no annotation that they had been sold under a contract of conditional sale, and
the plaintiffs were not notified of XEIs resumption of its selling operations.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the defendant.
The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant

(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2,
Block 2 of the Xavierville Estate Subdivision after payment of the sum of 942,978.70
sufficient in form and substance to transfer to them titles thereto free from any and all
liens and encumbrances of whatever kind and nature.

(b) Ordering the defendant to pay moral and exemplary damages in the amount of
150,000.00; and

(c) To pay attorneys fees in the sum of 50,000.00 and to pay the costs.

SO ORDERED.43

The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs,
the parties had a "complete contract to sell" over the lots, and that they had already partially
consummated the same. It declared that the failure of the defendant to notify the plaintiffs of the
resumption of its selling operations and to execute a deed of conditional sale did not prevent the
defendants obligation to convey titles to the lots from acquiring binding effect. Consequently,
the plaintiffs had a cause of action to compel the defendant to execute a deed of sale over the lots
in their favor.

Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not
concluding that the letter of XEI to the spouses Manalo, was at most a mere contract to sell
subject to suspensive conditions, i.e., the payment of the balance of the downpayment on the
property and the execution of a deed of conditional sale (which were not complied with); and (b)
in awarding moral and exemplary damages to the spouses Manalo despite the absence of
testimony providing facts to justify such awards.44

On September 30, 2002, the CA rendered a decision affirming that of the RTC with
modification. The fallo reads:

WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the figure
"942,978.70" appearing [in] par. (a) of the dispositive portion thereof is changed to
"313,172.34 plus interest thereon at the rate of 12% per annum from September 1, 1972 until
fully paid" and (b) the award of moral and exemplary damages and attorneys fees in favor of
plaintiffs-appellees is DELETED.
SO ORDERED.45

The appellate court sustained the ruling of the RTC that the appellant and the appellees had
executed a Contract to Sell over the two lots but declared that the balance of the purchase price
of the property amounting to 278,448.00 was payable in fixed amounts, inclusive of pre-
computed interests, from delivery of the possession of the property to the appellees on a monthly
basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other
lot buyers.46 The CA also declared that, while XEI must have resumed its selling operations
before the end of 1972 and the downpayment on the property remained unpaid as of December
31, 1972, absent a written notice of cancellation of the contract to sell from the bank or notarial
demand therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60-
day grace period from January 1, 1973 within which to pay the same.

Boston Bank filed a motion for the reconsideration of the decision alleging that there was no
perfected contract to sell the two lots, as there was no agreement between XEI and the
respondents on the manner of payment as well as the other terms and conditions of the sale. It
further averred that its claim for recovery of possession of the aforesaid lots in its Memorandum
dated February 28, 1994 filed before the trial court constituted a judicial demand for rescission
that satisfied the requirements of the New Civil Code. However, the appellate court denied the
motion.

Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA
rulings. It maintains that, as held by the CA, the records do not reflect any schedule of payment
of the 80% balance of the purchase price, or 278,448.00. Petitioner insists that unless the parties
had agreed on the manner of payment of the principal amount, including the other terms and
conditions of the contract, there would be no existing contract of sale or contract to
sell.47 Petitioner avers that the letter agreement to respondent spouses dated August 22, 1972
merely confirmed their reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3
square meters, more or less, at the price of 200.00 per square meter (or 348,060.00), the
amount of the downpayment thereon and the application of the 34,887.00 due from Ramos as
part of such downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions
relating to the payment of the balance of the purchase price of the property (as agreed upon by
XEI and other lot buyers in the same subdivision) were also applicable to the contract entered
into between the petitioner and the Respondents. It insists that such a ruling is contrary to law, as
it is tantamount to compelling the parties to agree to something that was not even discussed, thus,
violating their freedom to contract. Besides, the situation of the respondents cannot be equated
with those of the other lot buyers, as, for one thing, the respondents made a partial payment on
the downpayment for the two lots even before the execution of any contract of conditional sale.

Petitioner posits that, even on the assumption that there was a perfected contract to sell between
the parties, nevertheless, it cannot be compelled to convey the property to the respondents
because the latter failed to pay the balance of the downpayment of the property, as well as the
balance of 80% of the purchase price, thus resulting in the extinction of its obligation to convey
title to the lots to the Respondents.
Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552.
It insists that such law applies only to a perfected agreement or perfected contract to sell, not in
this case where the downpayment on the purchase price of the property was not completely paid,
and no installment payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the
respondents of cancellation or rescission of the contract to sell, or notarial demand therefor.
Petitioner insists that its August 5, 1986 letter requiring respondents to vacate the property and
its complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan Trial Court
amounted to the requisite demand for a rescission of the contract to sell. Moreover, the action of
the respondents below was barred by laches because despite demands, they failed to pay the
balance of the purchase price of the lots (let alone the downpayment) for a considerable number
of years.

For their part, respondents assert that as long as there is a meeting of the minds of the parties to a
contract of sale as to the price, the contract is valid despite the parties failure to agree on the
manner of payment. In such a situation, the balance of the purchase price would be payable on
demand, conformably to Article 1169 of the New Civil Code. They insist that the law does not
require a party to agree on the manner of payment of the purchase price as a prerequisite to a
valid contract to sell. The respondents cite the ruling of this Court in Buenaventura v. Court of
Appeals48 to support their submission.

They argue that even if the manner and timeline for the payment of the balance of the purchase
price of the property is an essential requisite of a contract to sell, nevertheless, as shown by their
letter agreement of August 22, 1972 with the OBM, through XEI and the other letters to them, an
agreement was reached as to the manner of payment of the balance of the purchase price. They
point out that such letters referred to the terms of the terms of the deeds of conditional sale
executed by XEI in favor of the other lot buyers in the subdivision, which contained uniform
terms of 120 equal monthly installments (excluding the downpayment, but inclusive of pre-
computed interests). The respondents assert that XEI was a real estate broker and knew that the
contracts involving residential lots in the subdivision contained uniform terms as to the manner
and timeline of the payment of the purchase price of said lots.

Respondents further posit that the terms and conditions to be incorporated in the "corresponding
contract of conditional sale" to be executed by the parties would be the same as those contained
in the contracts of conditional sale executed by lot buyers in the subdivision. After all, they
maintain, the contents of the corresponding contract of conditional sale referred to in the August
22, 1972 letter agreement envisaged those contained in the contracts of conditional sale that XEI
and other lot buyers executed. Respondents cite the ruling of this Court in Mitsui Bussan Kaisha
v. Manila E.R.R. & L. Co.49

The respondents aver that the issues raised by the petitioner are factual, inappropriate in a
petition for review on certiorari under Rule 45 of the Rules of Court. They assert that petitioner
adopted a theory in litigating the case in the trial court, but changed the same on appeal before
the CA, and again in this Court. They argue that the petitioner is estopped from adopting a new
theory contrary to those it had adopted in the trial and appellate courts. Moreover, the existence
of a contract of conditional sale was admitted in the letters of XEI and OBM. They aver that they
became owners of the lots upon delivery to them by XEI.

The issues for resolution are the following: (1) whether the factual issues raised by the petitioner
are proper; (2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller,
and the respondents, as buyers, forged a perfect contract to sell over the property; (3) whether
petitioner is estopped from contending that no such contract was forged by the parties; and (4)
whether respondents has a cause of action against the petitioner for specific performance.

The rule is that before this Court, only legal issues may be raised in a petition for review on
certiorari. The reason is that this Court is not a trier of facts, and is not to review and calibrate the
evidence on record. Moreover, the findings of facts of the trial court, as affirmed on appeal by
the Court of Appeals, are conclusive on this Court unless the case falls under any of the
following exceptions:

(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings
went beyond the issues of the case and the same is contrary to the admissions of both appellant
and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings
of fact are conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondents; and (10) when the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record.50

We have reviewed the records and we find that, indeed, the ruling of the appellate court
dismissing petitioners appeal is contrary to law and is not supported by evidence. A careful
examination of the factual backdrop of the case, as well as the antecedental proceedings
constrains us to hold that petitioner is not barred from asserting that XEI or OBM, on one hand,
and the respondents, on the other, failed to forge a perfected contract to sell the subject lots.

It must be stressed that the Court may consider an issue not raised during the trial when there is
plain error.51Although a factual issue was not raised in the trial court, such issue may still be
considered and resolved by the Court in the interest of substantial justice, if it finds that to do so
is necessary to arrive at a just decision,52 or when an issue is closely related to an issue raised in
the trial court and the Court of Appeals and is necessary for a just and complete resolution of the
case.53 When the trial court decides a case in favor of a party on certain grounds, the Court may
base its decision upon some other points, which the trial court or appellate court ignored or
erroneously decided in favor of a party.54

In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase
price of the property was raised by the parties. The trial court ruled that the parties had perfected
a contract to sell, as against petitioners claim that no such contract existed. However, in
resolving the issue of whether the petitioner was obliged to sell the property to the respondents,
while the CA declared that XEI or OBM and the respondents failed to agree on the schedule of
payment of the balance of the purchase price of the property, it ruled that XEI and the
respondents had forged a contract to sell; hence, petitioner is entitled to ventilate the issue before
this Court.

We agree with petitioners contention that, for a perfected contract of sale or contract to sell to
exist in law, there must be an agreement of the parties, not only on the price of the property sold,
but also on the manner the price is to be paid by the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional,
one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale is perfected at the moment there is a meeting of the minds upon the thing which
is the object of the contract and the price. From the averment of perfection, the parties are bound,
not only to the fulfillment of what has been expressly stipulated, but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.55 On the
other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties.56

A definite agreement as to the price is an essential element of a binding agreement to sell

personal or real property because it seriously affects the rights and obligations of the parties.
Price is an essential element in the formation of a binding and enforceable contract of sale. The
fixing of the price can never be left to the decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.57

It is not enough for the parties to agree on the price of the property. The parties must also agree
on the manner of payment of the price of the property to give rise to a binding and enforceable
contract of sale or contract to sell. This is so because the agreement as to the manner of payment
goes into the price, such that a disagreement on the manner of payment is tantamount to a failure
to agree on the price.58

In a contract to sell property by installments, it is not enough that the parties agree on the price as
well as the amount of downpayment. The parties must, likewise, agree on the manner of payment
of the balance of the purchase price and on the other terms and conditions relative to the sale.
Even if the buyer makes a downpayment or portion thereof, such payment cannot be considered
as sufficient proof of the perfection of any purchase and sale between the parties. Indeed, this
Court ruled in Velasco v. Court of Appeals59 that:

It is not difficult to glean from the aforequoted averments that the petitioners themselves admit
that they and the respondent still had to meet and agree on how and when the down-payment and
the installment payments were to be paid. Such being the situation, it cannot, therefore, be said
that a definite and firm sales agreement between the parties had been perfected over the lot in
question. Indeed, this Court has already ruled before that a definite agreement on the manner of
payment of the purchase price is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent
the sum of 10,000.00 as part of the downpayment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale agreement between the parties herein
under article 1482 of the New Civil Code, as the petitioners themselves admit that some essential
matter the terms of payment still had to be mutually covenanted.60

We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the
records, of the schedule of payment of the balance of the purchase price on the property
amounting to 278,448.00. We have meticulously reviewed the records, including Ramos
February 8, 1972 and August 22, 1972 letters to respondents,61 and find that said parties confined
themselves to agreeing on the price of the property (348,060.00), the 20% downpayment of the
purchase price (69,612.00), and credited respondents for the 34,887.00 owing from Ramos as
part of the 20% downpayment. The timeline for the payment of the balance of the downpayment
(34,724.34) was also agreed upon, that is, on or before XEI resumed its selling operations, on
or before December 31, 1972, or within five (5) days from written notice of such resumption of
selling operations. The parties had also agreed to incorporate all the terms and conditions relating
to the sale, inclusive of the terms of payment of the balance of the purchase price and the other
substantial terms and conditions in the "corresponding contract of conditional sale," to be later
signed by the parties, simultaneously with respondents settlement of the balance of the
downpayment.

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.

Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:

We agree with your verbal offer to exchange the proceeds of your contract with us to form as a
down payment for a lot in our Xavierville Estate Subdivision.

Please let us know your choice lot so that we can fix the price and terms of payment in
our conditional sale.

Sincerely yours,

XAVIERVILLE ESTATE, INC.

(Signed)
EMERITO B. RAMOS, JR.
President

CONFORME:

(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling62
The August 22, 1972 letter agreement of XEI and the respondents reads:

Mrs. Perla P. Manalo

1548 Rizal Avenue Extensionbr>Caloocan City

Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision
plan as amended, consisting of 1,740.3 square meters more or less, at the price of 200.00 per
square meter or a total price of 348,060.00.

It is agreed that as soon as we resume selling operations, you must pay a down payment of 20%
of the purchase price of the said lots and sign the corresponding Contract of Conditional Sale, on
or before December 31, 1972, provided, however, that if we resume selling after December 31,
1972, then you must pay the aforementioned down payment and sign the aforesaid
contract within five (5) days from your receipt of our notice of resumption of selling operations.

In the meanwhile, you may introduce such improvements on the said lots as you may desire,
subject to the rules and regulations of the subdivision.

If the above terms and conditions are acceptable to you, please signify your conformity by
signing on the space herein below provided.

Thank you.

Very truly yours,

XAVIERVILLE ESTATE, INC. CONFORME:

By:

(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO

President Buyer63

Based on these two letters, the determination of the terms of payment of the 278,448.00 had yet
to be agreed upon on or before December 31, 1972, or even afterwards, when the parties sign the
corresponding contract of conditional sale.

Jurisprudence is that if a material element of a contemplated contract is left for future

negotiations, the same is too indefinite to be enforceable.64 And when an essential element of a
contract is reserved for future agreement of the parties, no legal obligation arises until such
future agreement is concluded.65
So long as an essential element entering into the proposed obligation of either of the parties
remains to be determined by an agreement which they are to make, the contract is incomplete
and unenforceable.66 The reason is that such a contract is lacking in the necessary qualities of
definiteness, certainty and mutuality.67

There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after
December 31, 1972, on the terms of payment of the balance of the purchase price of the property
and the other substantial terms and conditions relative to the sale. Indeed, the parties are in
agreement that there had been no contract of conditional sale ever executed by XEI, OBM or
petitioner, as vendor, and the respondents, as vendees.68

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because
the issue of the manner of payment of the purchase price of the property was not raised therein.

We reject the submission of respondents that they and Ramos had intended to incorporate the
terms of payment contained in the three contracts of conditional sale executed by XEI and other
lot buyers in the "corresponding contract of conditional sale," which would later be signed by
them.69 We have meticulously reviewed the respondents complaint and find no such allegation
therein.70 Indeed, respondents merely alleged in their complaint that they were bound to pay the
balance of the purchase price of the property "in installments." When respondent Manalo, Jr.
testified, he was never asked, on direct examination or even on cross-examination, whether the
terms of payment of the balance of the purchase price of the lots under the contracts of
conditional sale executed by XEI and other lot buyers would form part of the "corresponding
contract of conditional sale" to be signed by them simultaneously with the payment of the
balance of the downpayment on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the
execution by the parties of their August 22, 1972 letter agreement, XEI stated, in part, that
respondents had purchased the property "on installment basis."71 However, in the said letter, XEI
failed to state a specific amount for each installment, and whether such payments were to be
made monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed to
adduce a shred of evidence to prove that they were obliged to pay the 278,448.00 monthly,
semi-annually or annually. The allegation that the payment of the 278,448.00 was to be paid in
installments is, thus, vague and indefinite. Case law is that, for a contract to be enforceable, its
terms must be certain and explicit, not vague or indefinite.72

There is no factual and legal basis for the CA ruling that, based on the terms of payment of the
balance of the purchase price of the lots under the contracts of conditional sale executed by XEI
and the other lot buyers, respondents were obliged to pay the 278,448.00 with pre-computed
interest of 12% per annum in 120-month installments. As gleaned from the ruling of the
appellate court, it failed to justify its use of the terms of payment under the three "contracts of
conditional sale" as basis for such ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of the purchase price, net
of the downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. "N," "O"
and "P") entered into by XEI with other lot buyers, it would appear that the subdivision lots sold
by XEI, under contracts to sell, were payable in 120 equal monthly installments (exclusive of the
downpayment but including pre-computed interests) commencing on delivery of the lot to the
buyer.73

By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI
and the Respondents. Courts should not undertake to make a contract for the parties, nor can it
enforce one, the terms of which are in doubt.74 Indeed, the Court emphasized in Chua v. Court of
Appeals75 that it is not the province of a court to alter a contract by construction or to make a
new contract for the parties; its duty is confined to the interpretation of the one which they have
made for themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of
the 278,448.00 to be incorporated in the "corresponding contract of conditional sale" were those
contained in the contracts of conditional sale executed by XEI and Soller, Aguila and
Roque.76 They likewise failed to prove such allegation in this Court.

The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots
purchased by them in 120 or 180 monthly installments does not constitute evidence that XEI also
agreed to give the respondents the same mode and timeline of payment of the 278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing
at one time is not admissible to prove that he did the same or similar thing at another time,
although such evidence may be received to prove habit, usage, pattern of conduct or the intent of
the parties.

Similar acts as evidence. Evidence that one did or did not do a certain thing at one time is not
admissible to prove that he did or did not do the same or a similar thing at another time; but it
may be received to prove a specific intent or knowledge, identity, plan, system, scheme, habit,
custom or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a matter of business
usage, habit or pattern of conduct, XEI granted all lot buyers the right to pay the balance of the
purchase price in installments of 120 months of fixed amounts with pre-computed interests, and
that XEI and the respondents had intended to adopt such terms of payment relative to the sale of
the two lots in question. Indeed, respondents adduced in evidence the three contracts of
conditional sale executed by XEI and other lot buyers merely to prove that XEI continued to sell
lots in the subdivision as sales agent of OBM after it acquired said lots, not to prove usage, habit
or pattern of conduct on the part of XEI to require all lot buyers in the subdivision to pay the
balance of the purchase price of said lots in 120 months. It further failed to prive that the trial
court admitted the said deeds77 as part of the testimony of respondent Manalo, Jr.78

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct,
the offering party must establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather, conduct that is semi-
automatic in nature. The offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity
of contracts does not present the kind of sufficiently similar circumstances to outweigh the
danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances.79 It is only when examples
offered to establish pattern of conduct or habit are numerous enough to lose an inference of
systematic conduct that examples are admissible. The key criteria are adequacy of sampling and
uniformity of response or ratio of reaction to situations.80

There are cases where the course of dealings to be followed is defined by the usage of a
particular trade or market or profession. As expostulated by Justice Benjamin Cardozo of the
United States Supreme Court: "Life casts the moulds of conduct, which will someday become
fixed as law. Law preserves the moulds which have taken form and shape from life."81 Usage
furnishes a standard for the measurement of many of the rights and acts of men.82 It is also well-
settled that parties who contract on a subject matter concerning which known usage prevail,
incorporate such usage by implication into their agreement, if nothing is said to be contrary.83

However, the respondents inexplicably failed to adduce sufficient competent evidence to prove
usage, habit or pattern of conduct of XEI to justify the use of the terms of payment in the
contracts of the other lot buyers, and thus grant respondents the right to pay the 278,448.00 in
120 months, presumably because of respondents belief that the manner of payment of the said
amount is not an essential element of a contract to sell. There is no evidence that XEI or OBM
and all the lot buyers in the subdivision, including lot buyers who pay part of the downpayment
of the property purchased by them in the form of service, had executed contracts of conditional
sale containing uniform terms and conditions. Moreover, under the terms of the contracts of
conditional sale executed by XEI and three lot buyers in the subdivision, XEI agreed to grant 120
months within which to pay the balance of the purchase price to two of them, but granted one
180 months to do so.84 There is no evidence on record that XEI granted the same right to buyers
of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be
considered certain if it be so with reference to another thing certain. It is sufficient if it can be
determined by the stipulations of the contract made by the parties thereto85 or by reference to an
agreement incorporated in the contract of sale or contract to sell or if it is capable of being
ascertained with certainty in said contract;86 or if the contract contains express or implied
provisions by which it may be rendered certain;87 or if it provides some method or criterion by
which it can be definitely ascertained.88 As this Court held in Villaraza v. Court of Appeals,89 the
price is considered certain if, by its terms, the contract furnishes a basis or measure for
ascertaining the amount agreed upon.

We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no
direct or implied reference to the manner and schedule of payment of the balance of the purchase
price of the lots covered by the deeds of conditional sale executed by XEI and that of the other
lot buyers90 as basis for or mode of determination of the schedule of the payment by the
respondents of the 278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light
Company91 is not applicable in this case because the basic price fixed in the contract was 9.45
per long ton, but it was stipulated that the price was subject to modification "in proportion to
variations in calories and ash content, and not otherwise." In this case, the parties did not fix in
their letters-agreement, any method or mode of determining the terms of payment of the balance
of the purchase price of the property amounting to 278,448.00.

It bears stressing that the respondents failed and refused to pay the balance of the downpayment
and of the purchase price of the property amounting to 278,448.00 despite notice to them of the
resumption by XEI of its selling operations. The respondents enjoyed possession of the property
without paying a centavo. On the other hand, XEI and OBM failed and refused to transmit a
contract of conditional sale to the Respondents. The respondents could have at least consigned
the balance of the downpayment after notice of the resumption of the selling operations of XEI
and filed an action to compel XEI or OBM to transmit to them the said contract; however, they
failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents have no cause of action for specific performance
against petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a
contract with no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court
of Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial
Court of Quezon City, Branch 98 is ordered to dismiss the complaint. Costs against the
Respondents.

SO ORDERED.
 49. Pag-Asa Steel Works, Inc. v. CA, G.R. No. 166647, March 31, 2006

G.R. No. 166647 March 31, 2006

PAG-ASA STEEL WORKS, INC., Petitioner,

vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS
UNION (PSWU), Respondent.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-
G.R. SP No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel
Workers Union (Union) the wage increase prescribed under Wage Order No. NCR-08. Also
assailed in this petition is the CA Resolution denying the corporations motion for
reconsideration.

Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under
Philippine laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel
Workers Union is the duly authorized bargaining agent of the rank-and-file employees of
petitioner.

On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the
National Capital Region (NCR) issued Wage Order No. NCR-06.2 It provided for an increase
of P13.00 per day in the salaries of employees receiving the minimum wage, and a consequent
increase in the minimum wage rate to P198.00 per day. Petitioner and the Union negotiated on
how to go about the wage adjustments. Petitioner forwarded a letter3 dated March 10, 1998 to the
Union with the list of the salary adjustments of the rank-and-file employees after the
implementation of Wage Order No. NCR-06, and the notation that said "adjustments [were] in
accordance with the formula [they] have discussed and [were] designed so as no distortion shall
result from the implementation of Wage Order No. NCR-06."

NAME DATE PRESENT ADJUST EFF

REGULAR RATE 2/6/98
1. PEPINO EMMANUEL 08.01.97 191.00 13.0
2. SEVANDRA RODOLFO 01.17.98 192.00 13.0
3. BERNABE ALFREDO 10.24.97 200.00 13.0
4. UMBAL ADOLFO 08.18.97 215.00 12.0
5. AQUINO JONAS 08.25.97 215.00 12.0
6. AGCAOILI JAIME 01.08.98 220.00 11.0
7. BERMEJO JIMMY JR. 04.01.97 221.00 11.0
8. EDRADAN ELDEMAR P. 04.17.97 221.00 11.0
9. REBOTON RONILO 05.14.97 221.00 11.0
10. TABAOG ALBERT 04.10.97 221.00 11.0
11. SALEN EDILBERTO 02.10.97 221.00 11.0
13. PAEZ REYNALDO 02.27.97. 235.00 11.0
14. HERNANDEZ ALFREDO 03.23.96 246.00 10.0
15. BANIA LUIS JR. 12.08.95 246.00 10.0
16. MAGBOO VICTOR 05.25.96 246.00 10.0
17. NINORA BONIFACIO 03.22.96 246.00 10.0
18. ALANCADO RODERICK 11.10.95 246.00 10.0
19. PUTONG PASCUAL 06.23.96 246.00 10.0
20. PAR EULOGIO JR. 08.16.95 246.00 10.0
21. SALON FONDADOR 11.16.95 246.00 10.0
22. RODA GEORGE 10.11.95 246.00 10.0
23. RIOJA JOSEPH 12.28.95 246.00 10.0
24. RAYMUNDO ANTONIO 06.05.96 246.00 10.0
25. BUGTAI ROBERTO 04.10.96 246.00 10.0
26. RELATO RAMON 07.07.96 265.00 10.0
27. REGACHUELO DENNIS 11.30.95 265.00 10.0
28. ORNOPIA REYNALDO 08.09.94 268.00 10.0
29. PULPULAAN JAIME 01.18.96 275.00 10.0
30. PANLAAN FERDINAND 01.18.96 275.00 10.0
31.BAGASBAS EULOGIO JR. 01.18.96 275.00 10.0
32. ALEJANDRO OLIVER 12.03.95 275.00 10.0
33. PRIELA DANILO 11.30.95 280.00 10.0
34. NOBELJAS EDGAR 07.10.95 283.00 10.0
35. SAJOT RONNIE 10.02.93 288.00 10.0
36. WHITING JOEL 09.30.93 288.00 10.0
37. SURINGA FRANKLIN 12.19.93 288.00 10.0
38. SIBOL MICHAEL 12.11.93 288.00 10.0
39. SOLO JOSE 02.20.94 288.00 10.0
40. TIZON JOEL 12.23.93 288.00 10.0
41. SABATIN GILBERT 04.19.94 288.00 10.0
42. REYES RONALDO 04.14.94 288.00 10.0
43. AMANIA WILFREDO 01.06.94 288.00 10.0
44. QUIDATO ARISTON 12.12.93 288.00 10.0
45. LAROGA CLAUDIO JR. 10.13.93 288.00 10.0
46. MORALES LUIS 09.30.93 288.00 10.0
47. ANTOLO DANILO 12.26.93 288.00 10.0
48. EXMUNDO HERCULES 05.13.94 288.00 10.0
49. AMPER VALENTINO 08.02.93 288.00 10.0
50. BAYO-ANG ALDEN JR. 07.14.93 288.00 10.0
51. BASCONES NELSON 02.26.94 288.00 10.0
52. DECENA LAURO 09.18.93 288.00 10.0
53. CHUA MARLONITO 10.20.93 288.00 10.0
54. CATACUTAN JUNE 03.02.94 288.00 10.0
55.DE LOS SANTOS REYNALDO 12.23.93 288.00 10.0
56. REYES EFREN 10.23.93 288.00 10.0
57. CAGOMOC DANILO 01.13.94 288.00 10.0
58. DOROL ERWIN 09.16.93 288.00 10.0
59. CURAMBAO TIRSO 09.23.93 288.00 10.0
60. VENTURA FERDINAND 09.20.94 292.00 10.0
61. ALBANO JESUS 01.06.94 297.00 10.0
62. CALLEJA JOSEPH 05.10.93 303.00 10.0
63. PEREZ DANILO 03.01.93 303.00 10.0
64. BATOY ERNIE 06.15.93 305.00 10.0
65. SAMPAGA EDGARDO 06.07.93 307.00 10.0
66. SOLON ROBINSON 05.10.94 315.00 10.0
67. ELEDA FULGENIO 06.07.93 322.00 10.0
68. CASCARA RODRIGO 06.07.93 322.00 10.0
69. ROMANOS ARNULFO 06.07.93 322.00 10.0
70. LUMANSOC MARIANO 06.07.93 322.00 10.0
71. RAMOS GRACIANO 06.07.93 322.00 10.0
72. MAZON NESTOR 07.24.90 330.00 10.0
73. BRIN LUCENIO 07.26.90 330.00 10.0
74. SE FREDIE 03.25.90 340.00 10.0
75. RONCALES DIOSDADO 04.30.90 340.00 10.0
76. DISCAYA EDILBERTO 09.06.89 340.00 10.0
77. SUAREZ LUISTO 06.10.92 347.00 10.0
78. CASTRO PEDRO 10.30.92 348.00 10.0
79. CLAVECILLA AMBROSIO 09.09.88 351.00 10.0
80. YSON ROMEO 09.11.88 351.00 10.0
81. JUMAWAN URBANO JR. 12.20.87 354.00 10.0
82. MARASIGAN GRACIANO 05.20.88 354.00 10.0
83. MAGLENTE ROLANDO 09.03.87 354.00 10.0
84. NEBRIA CALIX 02.25.88 354.00 10.0
85. BARBIN DANIEL 09.03.87 354.00 10.0
86. CAMAING CARLITO 12.22.87 354.00 10.0
87. BUBAN JONATHAN 10.22.87 354.00 10.0
88. GUEVARRA ARNOLD 10.04.87 354.00 10.0
89. MALAPO MARCOS JR. 08.04.87 354.00 10.0
90. ZUNIEGA CARLOS 02.19.88 354.00 10.0
91. SABORNIDO JULITO 12.20.87 354.00 10.0
92. DALUYO LOTERIO 04.02.88 354.00 10.0
93. AGUILLON GRACIANO 05.27.87 359.00 10.0
94. CRISTY EMETERIO 04.06.87 359.50 10.0
95. FULGUERAS DOMINGO 01.25.87 362.00 10.0
96. ZIPAGAN NELSON 02.07.84 370.00 10.0
97. LAURIO JESUS 06.01.82 371.00 10.0
98. ACASIO PEDRO 11.21.79 372.00 10.0
99. MACALISANG EPIFANIO 02.01.88 372.00 10.0
100. OFILAN ANTONIO 03.12.79 374.50 10.0
101. SEVANDRA ALFREDO 05.02.69 374.50 10.0
102. VILLAMER JOEY 11.04.81 374.50 10.0
103. GRIPON GIL 01.17.76 374.75 10.0
104. CARLON HERMINIGILDO, JR. 04.17.87 375.00 10.0
 105. MANLABAO HEROHITO 04.14.81 375.00 10.0
106. VILLANUEVA DOMINGO 12.01.77 375.50 10.0
107. APITAN NAZARIO 09.04.79 376.00 10.0
108. SALAMEDA EDUARDO 02.13.79 377.00 10.0
109. ARNALDO LOPE 05.02.69 378.50 10.0
110. SURIGAO HERNANDO 12.29.79 379.00 10.0
111. DE LA CRUZ CHARLIE 07.14.76 379.00 10.0
112. ROSAURO JUAN 07.15.76 379.50 10.0
113 HILOTIN ARLEN 10.10.77 383.00 10.0

On September 23, 1999, petitioner and the Union entered into a Collective Bargaining
Agreement (CBA), effective July 1, 1999 until July 1, 2004. Section 1, Article VI (Salaries and
Wage) of said CBA provides:

Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers, who are
already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT, a
general wage increase as follows:

July 1, 1999 . . . . . . . . . . . P15.00 per day per employee

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing to give
the following increases, to wit:

July 1, 1999 . . . . . . . . . . . P20.00 per day per employee

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be
subject for a re-opening or renegotiation as provided for by Republic Act No. 6715.5
 For the first year of the CBAs effectivity, the salaries of Union members were increased as
follows:

NAME WAGE NAME WAGE

1. Pedro Acasio P427.00 53. Nestor Mazon P385.00
2. Roderick Alancado 301.00 54. Luis Morales 343.00
3. Jesus Albano 352.00 55. Calix Nebria 409.00
4. Oliver Alejandro 330.00 56. Bonifacio Ninora Jr. 301.00
5. Welfredo Amania 343.00 57. Edgar Noblejas 338.00
6. Valentino Amper 343.00 58. Antonio Ofilan 429.50
7. Danilo Antolo 343.00 59. Reynaldo Ornopia 323.00
8. Nazario Apitan 431.00 60. Reynaldo Paez 291.00
9. Jonas Aquino 272.00 61. Ferdinand Panlaan 330.00
10. Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00
11. Luis Bania, Jr. 301.00 63. Marvin Peco 223.00
12. Daniel Barbin 409.00 64. Emmanuel Pepino 249.00
13. Nelson Bascones 343.00 65. Danilo Perez 358.00
14. Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00
15. Jimmy Bermejo 277.00 67. Ariston Quidato 343.00
16. Alfredo Bernabe 258.00 68. Graciano Ramos Jr. 377.00
17. Lucenio Brin 385.00 69. Antonio Raymundo 301.00
18. Jonathan Buban 409.00 70. Ronilo Reboton 277.00
19. Roberto Bugtai 301.00 71. Ramon Relato 320.00
20. Danilo Cagomoc 343.00 72. Efren Reyes 343.00
21. Joseph Calleja 358.00 73. Ronaldo Reyes 343.00
22. Carlito Camaing 409.00 74. Joseph Rioja 301.00
23. Hermenigildo Carlon, Jr. 430.00 75. George Roda 301.00
24. June Catacutan 343.00 76. Diosdado Roncales 395.00
25. Marlonito Chua 343.00 77. Gilbert Sabatin 343.00
26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409.00
27. Emeterio Cristy 414.50 79. Ronnie Sajot 343.00
28. Tirso Curambao 343.00 80. Eduardo Salameda 432.00
29. Loterio Daluyo 409.00 81. Edilberto Salen 277.00
30. Lauro Decena 343.00 82. Fundador Salon 301.00
31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362.00
32. Raynaldo delos Santos 343.00 84. Fredie Se 395.00
33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250.00
34. Erwin Dorol 343.00 86. Jose Solo 343.00
35. Eldemar Edradan 277.00 87. Robinson Solon 370.00
36. Fulgencio Eleda 377.00 88. Luisito Suarez 402.00
37. Hercules Exmundo 343.00 89. Jeriel Suico 223.00
38. Domingo Fulgueras 417.00 90. Hernando Surigao 434.00
39. Federico Garcia 277.00 91. Franklin Suringa 343.00
40. Gil Gripon 429.75 92. Albert Tabaog 277.00
41. Arnold Guevarra 409.00 93. Joel Tizon 343.00
42. Arlen Hilotin 438.00 94. Alfredo Umbal 272.00
43. Urbano Jumawan, Jr. 409.00 95. Ferdinand Ventura 347.00
44. Ronilo Lacandoze 265.00 96. Joey Villamer 429.50
45. Claudio Laroga, Jr. 343.00 97.Domingo Villanueva 430.50
46. Jesus Laurio 426.00 98. Joel Whiting 343.00
47. Mariano Lumansoc 377.00 99. Romeo Yson 406.00
48. Victor Magboo 301.00 100. Carlos Zuniega 409.00
49. Rolando Maglente 409.00 101. Nelson Zipagan 425.00
50. Marcos Malapo Jr. 409.00 102. Michael Sibol 343.00
51. Herohito Manlabao 430.00 103. Renante Tangian 223.00
52. Graciano Marasigan 409.00 104. Rodrigo Cascara 377.006

On October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, 1999, its
Implementing Rules and Regulations. It provided for a P25.50 per day increase in the salary of
employees receiving the minimum wage and increased the minimum wage to P223.50 per day.
Petitioner paid the P25.50 per day increase to all of its rank-and-file employees.

On July 1, 2000, the rank-and-file employees were granted the second year increase provided in
the CBA in the amount of P25.00 per day.8

On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides:

Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the
National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall
receive an increase of TWENTY SIX PESOS and FIFTY CENTAVOS (P26.50) per day,
thereby setting the new minimum wage rate in the National Capital Region at TWO HUNDRED
FIFTY PESOS (P250.00) per day.10

Then Union president Lucenio Brin requested petitioner to implement the increase under Wage
Order No. NCR-08 in favor of the companys rank-and-file employees. Petitioner rejected the
request, claiming that since none of the employees were receiving a daily salary rate lower
than P250.00 and there was no wage distortion, it was not obliged to grant the wage increase.

The Union elevated the matter to the National Conciliation and Mediation Board. When the
parties failed to settle, they agreed to refer the case to voluntary arbitration. In the Submission
Agreement, the parties agreed that the sole issue is "[w]hether or not the management is obliged
to grant wage increase under Wage Order No. NCR #8 as a matter of practice,"11 and that the
award of the Voluntary Arbitrator (VA) shall be final and binding.12

In its Position Paper, the Union alleged that it has been the companys practice to grant a wage
increase under a government-issued wage order, aside from the yearly wage increases in the
CBA. It averred that petitioner paid the salary increases provided under the previous wage orders
in full (aside from the yearly CBA increases), regardless of whether there was a resulting wage
distortion, or whether Union members salaries were above the minimum wage rate. Wage Order
No. NCR-06, where rank-and-file employees were given different wage increases ranging
from P10.00 to P13.00, was an exception since the adjustments were the result of the formula
agreed upon by the Union and the employer after negotiations. The Union averred that all of
their CBAs with petitioner had a "collateral agreement" where petitioner was mandated to pay
the equivalent of the wage orders across-the-board, or at least to negotiate how much will be
paid. It pointed out that an established practice cannot be discontinued without running afoul of
Article 100 of the Labor Code on non-diminution of benefits.13

For its part, petitioner alleged that there is no such company practice and that it complied with
the previous wage orders (Wage Order Nos. NCR-01-05) because some of its employees were
receiving wages below the minimum prescribed under said orders. As for Wage Order No. NCR-
07, petitioner alleged that its compliance was in accordance with its verbal commitment to the
Union during the CBA negotiations that it would implement any wage order issued in 1999.
Petitioner further averred that it applied the wage distortion formula prescribed under Wage
Order Nos. NCR-06 and NCR-07 because an actual distortion occurred as a result of their
implementation. It asserted that at present, all its employees enjoy regular status and that none
receives a daily wage lower than the P250.00 minimum wage rate prescribed under Wage Order
No. NCR-08.14

In reply to the Unions position paper, petitioner contended that the full implementation of the
previous wage orders did not give rise to a company practice as it was not given to the workers
within the bargaining unit on a silver platter, but only per request of the Union and after a series
of negotiations. In fact, during CBA negotiations, it steadfastly rejected the following proposal of
the Unions counsel, Atty. Florente Yambot, to include an across-the-board implementation of
the wage orders:15

x x x To supplement the above wage increases, the parties agree that additional wage increases
equal to the wage orders shall be paid across-the-board whenever the Regional Tripartite Wage
and Productivity Board issues wage orders. It is understood that these additional wage increases
will be paid not as wage orders but as agreed additional salary increases using the wage orders
merely as a device to fix or determine how much the additional wage increases shall be paid.16

The Union, however, insisted that there was such a company practice. It pointed out that despite
the fact that all the employees were already receiving salaries above the minimum wage, the
CBA still provided for the payment of a wage increase using wage orders as the yardstick. It
claimed that the parties intended that petitioner-employer would pay the additional increases
apart from those in the CBA.17 The Union further asserted that the CBA did not include all the
agreements of the parties; hence, to determine the true intention of the parties, parol evidence
should be resorted to. Thus, Atty. Yambots version of the wage adjustment provision should be
considered.18

On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case
dismissed.19 It held that there was no company practice of granting a wage order increase to
employees across-the-board, and that there is no provision in the CBA that would oblige
petitioner to grant the wage increase under Wage Order No. NCR08 across-the-board.20

The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined
the issue for resolution as follows:

The principal issue in the present petition is whether or not the wage increase of P26.50 under
Wage Order No. NCR-08 must be paid to the union members as a matter of practice and whether
or not parol evidence can be resorted to in proving or explaining or elucidating the existence of a
collateral agreement/company practice for the payment of the wage increase under the wage
order despite that the employees were already receiving wages way above the minimum wage
of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage
distortion exists.21

On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the
VA. The fallo of the decision reads:

WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary
Arbitrator is REVERSED and SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is
ordered to pay the members of the petitioner union the P26.50 daily wage by applying the wage
increase prescribed under Wage Order No. NCR-08. Costs against private respondent.

SO ORDERED.22

The CA stressed that the CBA constitutes the law between the employer and the Union. It held
that the CBA is plain and clear, and leaves no doubt as to the intention of the parties, that is, to
grant a wage increase that may be ordered by the Wage Board in addition to the CBA-mandated
salary increases regardless of whether the employees are already receiving wages way above the
minimum wage. The appellate court further held that the employer has no valid reason not to
implement the wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had
been paying the wage increase provided for in the CBA even though the employees concerned
were already receiving wages way above the applicable minimum wage.23 Petitioner filed a
motion for reconsideration which the CA denied for lack of merit on January 11, 2005.24

Petitioner then filed the instant petition in which it raises the following issues:

I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE

REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED AS A MATTER OF RIGHT BY
THE RESPONDENT UNDER THE 1999 CBA, in that:

a) Issue not averred in the complaint nor raised during the trial cannot be raised for the
first time on appeal; and

b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the New
Civil Code, as well as Section 11 of the Rules of Court, requires that contract must be
 read in its entirety and the various stipulations in a contract must be read together to give
effect to all.

II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE

REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED BY THE RESPONDENT UNION
AS A MATTER OF PRACTICE.25

Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings
was whether or not the company was obliged to grant the wage increase under Wage Order No.
NCR-08 as a matter of practice. It posits that the respondent did not anchor its claim for such
wage increase on the CBA but on an alleged company practice of granting the increase pursuant
to a wage order. According to petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous.26 Petitioner contends that respondent Union
was precluded from raising this issue as it was not raised during the voluntary arbitration. It
insists that an issue cannot be raised for the first time on appeal.27

Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI
of the CBA should be read in its entirety.28 From the said provision, it is clear that the CBA
contemplated only the implementation of a wage order issued within six months from the
execution of the CBA, and not every wage order issued during its effectivity. Hence, petitioner
complied with Wage Order No. NCR-07 which was issued 28 days from the execution of the
CBA. Petitioner emphasizes that this was implemented not because it was a matter of practice
but because it was agreed upon in the CBA.29 It alleges that respondent Union in fact realized
that it could not invoke the provisions of the CBA to enforce Wage Order No. NCR-08, which is
why it agreed to limit the issue for voluntary arbitration to whether respondent Union is entitled
to the wage increase as a matter of practice. The fact that the "Yambot proposals" were left out in
the final document simply means that the parties never agreed to them.30

In any case, petitioner avers that respondent Union is not entitled to the wage increase provided
under Wage Order No. NCR-08 as a matter of practice. There is no company practice of granting
a wage-order-mandated increase in addition to the CBA-mandated wage increase. It points out
that, as admitted by respondent Union, the previous wage orders were not automatically
implemented and were made applicable only after negotiations. Petitioner argues that the
previous wage orders were implemented because at that time, some employees were receiving
salaries below the minimum wage and the resulting wage distortion had to be remedied.31

For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by
the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase
adverted to above" referred to a company practice of paying a wage increase whenever the
government issues a wage order even if the employees salaries were above the minimum wage
and there is no resulting wage distortion. According to respondent, the CBA contemplated all the
salary increases that may be mandated by wage orders to be issued in the future. Since the wage
order was only a device to determine exactly how much and when the increase would be given,
these increases are, in effect, CBA-mandated and not wage order increases. 32 Respondent further
avers that the ambiguity in the wage adjustment provision of the CBA can be clarified by
resorting to parol evidence, that is, Atty. Yambots version of said provision.33

The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase
under Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of company practice.

On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not
raised below cannot be raised for the first time on appeal.34 Points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will not be,
considered by the reviewing court, as they cannot be raised for the first time at that late stage.
Basic considerations of due process impel this rule.35

We agree with petitioners contention that the issue on the ambiguity of the CBA and its failure
to express the true intention of the parties has not been expressly raised before the voluntary
arbitration proceedings. The parties specifically confined the issue for resolution by the VA to
whether or not the petitioner is obliged to grant an increase to its employees as a matter of
practice. Respondent did not anchor its claim for an across-the-board wage increase under Wage
Order No. NCR-08 on the CBA. However, we note that it raised before the CA two issues,
namely:

x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid
to the union members as a matter of practice and whether or not parol evidence can be resorted to
in proving or explaining or elucidating the existence of a collateral agreement/company practice
for the payment of the wage increase under the wage order despite that the employees were
already receiving wages way above the minimum wage of P250.00/day as prescribed by Wage
Order No. NCR-08 and irrespective of whether wage distortion exists.36

Petitioner, in its Comment on the petition, delved into these issues and elaborated on its
contentions. By so doing, it thereby agreed for the CA to take cognizance of such issues as
defined by respondent (petitioner therein). Moreover, a perusal of the records shows that the
issue of whether or not the CBA is ambiguous and does not reflect the true agreement of the
parties was, in fact, raised before the voluntary arbitration proceedings. Despite the submission
agreement confining the issue to whether petitioner was obliged to grant an increase pursuant to
Wage Order No. NCR-08 as a matter of practice, respondent Union nevertheless raised the same
issues in its pleadings. In its Position Paper, it asserted that the CBA consistently contained a
collateral agreement to pay the equivalent of the wage orders across-the-board; in its Reply, it
claimed that such provision clearly provided that petitioner would pay the additional increases
apart from the CBA and that the wage order serves only as a measure of said increase. These
assertions indicate that respondent Union also relied on the CBA to support its claim for the
wage increase.

Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated
September 23, 1999, viz:

SALARIES AND WAGE

Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant to all workers who are
already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT a
general wage increase as follows:

July 1, 1999 . P15.00 per day per employee

July 1, 2000 . P25.00 per day per employee

July 1, 2001 . P 30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing to give
the following increases, to wit:

July 1, 1999 . P 20.00 per day per employee

July 1, 2000 . P 25.00 per day per employee

July 1, 2001 P 30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be
subject for a reopening or renegotiation as provided for by Republic Act No. 6715.37

On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private
sector in the NCR receiving the prescribed daily minimum wage rate of P223.00 per day would
receive an increase of P26.50 a day, thereby setting the new minimum wage rate in said region
to P250.00 per day. There is no dispute that, when the order was issued, the lowest paid
employee of petitioner was receiving a wage higher than P250.00 a day. As such, its employees
had no right to demand for an increase under said order. As correctly ruled by the VA:

We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase
to its workers under W.O. No. NCR-08 as a matter of practice? It is submitted that employers
(unless exempt) in Metro Manila (including the [petitioner]) are mandated to implement the said
wage order but limited to those entitled thereto. There is no legal basis to implement the same
across-the-board. A perusal of the record shows that the lowest paid employee before the
implementation of Wage Order #8 is P250.00/day and none was receiving below P223.50
minimum. This could only mean that the union can no longer demand for any wage distortion
adjustment. Neither could they insist for an adjustment of P26.50 increase under Wage Order #8.
The provision of wage order #8 and its implementing rules are very clear as to who are entitled
to the P26.50/day increase, i.e., "private sector workers and employees in the National Capital
Region receiving the prescribed daily minimum wage rate of P223.50 shall receive an increase of
Twenty-Six Pesos and Fifty Centavos (P26.50) per day," and since the lowest paid
is P250.00/day the company is not obliged to adjust the wages of the workers.

With the above narration of facts and with the union not having effectively controverted the
same, we find no merit to the complainants assertion of such a company practice in the grant of
wage order increase applied across-the-board. The fact that it was shown the increases granted
under the Wage Orders were obtained thru request and negotiations because of the existence of
wage distortion and not as company practice as what the union would want.

Neither do we find merit in the argument that under the CBA, such increase should be
implemented across-the-board. The provision in the CBA that "Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted above" cannot be interpreted in support of an across-the-board increase.
If such were the intentions of this provision, then the company could have simply accepted the
original demand of the union for such across-the-board implementation, as set forth in their
original proposal (Annex "2" union[]s counsel proposal). The fact that the company rejected this
proposal can only mean that it was never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with the increase of P30.00 under the
CBA which is due on July 31, 2001 barely a month from now.38

The error of the CA lies in its considering only the CBA in interpreting the wage adjustment
provision, without taking into account Wage Order No. NCR-08, and the fact that the members
of respondent Union were already receiving salaries higher than P250.00 a day when it was
issued. The CBA cannot be considered independently of the wage order which respondent Union
relied on for its claim.

Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the
prescribed minimum wage are entitled to the wage increase provided therein, and not all
employees across-the-board as respondent Union would want petitioner to do. Considering
therefore that none of the members of respondent Union are receiving salaries below the P250.00
minimum wage, petitioner is not obliged to grant the wage increase to them.

The ruling of the Court in Capitol Wireless, Inc. v. Bate39 is instructive on how to construe a
CBA vis--vis a wage order. In that case, the company and the Union signed a CBA with a
similar provision: "[s]hould there be any government mandated wage increases and/or
allowances, the same shall be over and above the benefits herein granted."40 Thereafter, the
Wage Board of the NCR issued several wage orders providing for an across-the-board increase
in the minimum wage of all employees in the private sector. The company implemented the
wage increases only to those employees covered by the wage orders - those receiving not more
than the minimum wage. The Union protested, contending that, pursuant to said provision, any
and all government-mandated increases in salaries and allowance should be granted to all
employees across-the-board. The Court held as follows:

x x x The wage orders did not grant across-the-board increases to all employees in the National
Capital Region but limited such increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day
under Wage Order No. NCR-02. Since the wage orders specified who among the employees are
entitled to the statutory wage increases, then the increases applied only to those mentioned
therein. The provisions of the CBA should be read in harmony with the wage orders, whose
benefits should be given only to those employees covered thereby. (Emphasis added)41

In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral
agreement between it and petitioner, an agreement extrinsic of the CBA based on an alleged
established practice of the latter as employer. The VA rejected this claim:

Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist
a collateral agreement to pay the equivalent of wage orders across the board or at least to
negotiate how much will be paid" and that "parol evidence is now applicable to show or explain
what the unclean provisions of the CBA means regarding wage adjustment." The respondent
cites Article XXVII of the CBA in effect, as follows:

"The parties acknowledged that during the negotiation which resulted in this AGREEMENT,
each had the unlimited right & opportunity to make demands, claims and proposals of every kind
and nature with respect to any subject or matter not removed by law from the Collective
Bargaining and the understanding and agreements arrived at by the parties after the exercise of
that right & opportunity are set forth in this AGREEMENT. Therefore, the COMPANY and the
UNION, for the life of this AGREEMENT, agrees that neither party shall not be obligated to
bargain collectively with respect to any subject matter not specifically referred to or covered in
this AGREEMENT, and furthermore, that each party voluntarily & unqualifiedly waives such
right even though such subject may not have been within the knowledge or contemplation of
either or both of the parties at the time they signed this AGREEMENT."

From the said CBA provision and upon an appreciation of the entire CBA, we find it to have
more than amply covered all aspects of the collective bargaining. To allow alleged collateral
agreements or parol/oral agreements would be violative of the CBA provision afore-quoted.42

We agree with petitioners contention that the rule excluding parol evidence to vary or contradict
a written agreement, does not extend so far as to preclude the admission of extrinsic evidence, to
show prior or contemporaneous collateral parol agreements between the parties. Such evidence
may be received regardless of whether or not the written agreement contains reference to such
collateral agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.:44

A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the
draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes
the rights and duties of the parties. It is a system of industrial self-government with the grievance
machinery at the very heart of the system. The parties solve their problems by molding a system
of private law for all the problems which may arise and to provide for their solution in a way
which will generally accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that
the hirees must be presumed of employment qualification standards but fail to state such
qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA to
determine the full agreement intended by the parties. When a CBA may be expected to speak on
a matter, but does not, its sentence imports ambiguity on that subject. The VA is not merely to
rely on the cold and cryptic words on the face of the CBA but is mandated to discover the
intention of the parties. Recognizing the inability of the parties to anticipate or address all future
problems, gaps may be left to be filled in by reference to the practices of the industry, and the
step which is equally a part of the CBA although not expressed in it. In order to ascertain the
intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered. The VA may also consider and rely upon negotiating and contractual
history of the parties, evidence of past practices interpreting ambiguous provisions. The VA has
to examine such practices to determine the scope of their agreement, as where the provision of
the CBA has been loosely formulated. Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical and realistic construction
upon it.45

However, just like any other fact, habits, customs, usage or patterns of conduct must be proved.
Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.:46

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct,
the offering party must establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather, conduct that is semi-
automatic in nature. The offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity
of contracts does not present the kind of sufficiently similar circumstances to outweigh the
danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances. It is only when examples
offered to establish pattern of conduct or habit are numerous enough to lose an inference of
systematic conduct that examples are admissible. The key criteria are adequacy of sampling and
uniformity of response or ratio of reaction to situations.

We have reviewed the records meticulously and find no evidence to prove that the grant of a
wage-order-mandated increase to all the employees regardless of their salary rates on an
agreement collateral to the CBA had ripened into company practice before the effectivity of
Wage Order No. NCR-08. Respondent Union failed to adduce proof on the salaries of the
employees prior to the issuance of each wage order to establish its allegation that, even if the
employees were receiving salaries above the minimum wage and there was no wage distortion,
they were still granted salary increase. Only the following lists of salaries of respondent Unions
members were presented in evidence: (1) before Wage Order No. NCR-06 was issued; (2) after
Wage Order No. NCR-06 was implemented; (3) after the grant of the first year increase under
the CBA; (4) after Wage Order No. NCR-07 was implemented; and (5) after the second year
increase in the CBA was implemented.

The list of the employees salaries before Wage Order No. NCR-06 was implemented belie
respondent Unions claim that the wage-order-mandated increases were given to employees
despite the fact that they were receiving salaries above the minimum wage. This list proves that
some employees were in fact receiving salaries below the P198.00 minimum wage rate
prescribed by the wage order two rank-and-file employees in particular. As petitioner
explains, a wage distortion occurred as a result of granting the increase to those employees who
were receiving salaries below the prescribed minimum wage. The wage distortion necessitated
the upward adjustment of the salaries of the other employees and not because it was a matter of
company practice or usage. The situation of the employees before Wage Order No. NCR-08,
however, was different. Not one of the members of respondent Union was then receiving less
than P250.00 per day, the minimum wage requirement in said wage order.

The only instance when petitioner admittedly implemented a wage order despite the fact that the
employees were not receiving salaries below the minimum wage was under Wage Order No.
NCR-07. Petitioner, however, explains that it did so because it was agreed upon in the CBA that
should a wage increase be ordered within six months from its signing, petitioner would give the
increase to the employees in addition to the CBA-mandated increases. Respondents isolated act
could hardly be classified as a "company practice" or company usage that may be considered an
enforceable obligation.

Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of
the increase should not be by reason of a strict legal or contractual obligation, but by reason of an
act of liberality on the part of the employer. Hence, even if the company continuously grants a
wage increase as mandated by a wage order or pursuant to a CBA, the same would not
automatically ripen into a company practice. In this case, petitioner granted the increase under
Wage Order No. NCR-07 on its belief that it was obliged to do so under the CBA.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005 are REVERSED and
SET ASIDE. The Decision of the Voluntary Arbitrator is REINSTATED. No costs.

SO ORDERED.
 50. Traders Royal Bank v. NLRC, G.R. No. 88168, Aug 30, 1990

G.R. No. 88168 August 30, 1990

TRADERS ROYAL BANK, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK
EMPLOYEES UNION, respondents.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.

GRIO-AQUINO, J.:

This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of
the National Labor Relations Commission, which found the petitioner, Traders Royal Bank (or
TRB), guilty of diminution of benefits due the private respondents and ordered it to pay the said
employees' claims for differentials in their holiday, mid-year, and year-end bonuses.

On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB
with the Conciliation Division of the Bureau of Labor Relations claiming that:

First, the management of TRB per memo dated October 10, 1986 paid the
employees their HOLIDAY PAY, but has withheld from the Union the basis of
their computation.

Second, the computation in question, has allegedly decreased the daily salary rate
of the employees. This diminution of existing benefits has decreased our overtime
rate and has affected the employees' take home pay.

Third, the diminution of benefits being enjoyed by the employees since time
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2)
months basic and year-end bonus from three (3) months gross to only two (2)
months.

Fourth, the refusal by management to recall active union members from the
branches which were being transferred without prior notice, solely at the instance
of the branch manager. (p. 26, Rollo.)

In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor
Relations, had jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of
the following issues raised by the complainants:

l) The Management of TRB per memo dated October 10, 1986 paid the
employees their holiday pay but has withheld from the union the basis of their
computation.

2) The computation in question has allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits has decreased our overtime rate
and has affected the employees' take home pay.

3) The diminution of benefits being enjoyed by the employees since the (sic)
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2)
months basic and year-end bonus from three (3) months gross to only two (2)
months.

4) The refusal by management to recall active union members from the branches
which were being transferred without prior notice, solely at the instance of the
branch, manager. (p. 28, Rollo.)

In the meantime, the parties who had been negotiating for a collective bargaining agreement,
agreed on the terms of the CBA, to wit:

1. The whole of the bonuses given in previous years is not demandable, i.e., there
is no diminution, as to be liable for a differential, if the bonus given is less than
that in previous years.

2. Since only two months bonus is guaranteed, only to that extent are bonuses
deemed part of regular compensation.

3. As regards the third and fourth bonuses, they are entirely dependent on the
income of the bank, and not demandable as part of compensation. (pp. 67-
68, Rollo.)

Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the
CBA would apply prospectively only to claims arising after its effectivity.

Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of
giving them bonuses at year's end, would depend on how profitable the operation of the bank had
been. Generally, the bonus given was two (2) months basic mid-year and two (2) months gross
end-year.

On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive
portion of which reads:
 WHEREFORE, judgment is hereby rendered in favor of the petitioner and
ordering respondent bank to pay petitioner members-employees the following:

1. Holiday differential for the period covering l983-1986 as embodied in

Resolution No. 4984-1986 of respondent's Board of Directors but to start from
November 11, 1983 and using the Divisor 251 days in determining the daily rate
of the employees;

2. Mid-year bonus differential representing the difference between two (2) months
gross pay and two (2) months basic pay and end-year bonus differential of one (1)
month gross pay for 1986.

The claim for holiday differential for the period earlier than November 11, 1983 is
hereby dismissed, the same having prescribed.

Likewise, the charge of unfair labor practice against the respondent company is
hereby dismissed for lack of merit. (pp. 72-73, Rollo.)

A motion for reconsideration was filed by TRB but it was denied. Hence, this petition
for certiorari.

There is merit in the petitioner's contention that the NLRC gravely abused its discretion in
ordering it to pay mid-year/year-end bonus differential for 1986 to its employees.

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand
as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something
given in addition to what is ordinarily received by or strictly due the recipient." The granting of a
bonus is basically a management prerogative which cannot be forced upon the employer "who
may not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employee's basic salaries or wages" . . . (Kamaya Point Hotel vs. National Labor
Relations Commission, Federation of Free Workers and Nemia Quiambao, G.R. No. 75289,
August 31, 1989).

It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its
employees. The matter of giving them bonuses over and above their lawful salaries and
allowances is entirely dependent on the profits, if any, realized by the Bank from its operations
during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986,
the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2)
months basic mid-year and two months gross year-end bonuses. The petitioner pointed out,
however, that the Bank weakened considerably after 1986 on account of political developments
in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under
sequestration by the present administration and is now managed by the Presidential Commission
on Good Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of
bonuses to the employees had ripened into a company practice that may not be adjusted to the
prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition
having declined, the Bank may not be forced to distribute bonuses which it can no longer afford
to pay and, in effect, be penalized for its past generosity to its employees.

Private respondent's contention, that the decrease in the midyear and year-end bonuses
constituted a diminution of the employees' salaries, is not correct, for bonuses are not part of
labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave
benefits, which are provided by the Labor Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor
Relations Commission is modified by deleting the award of bonus differentials to the employees
for 1986. In other respects, the decision is affirmed. Costs against the respondent union.

SO ORDERED.
 51. International School of Speech v. NLRC, G.R. No. 112658, March 18, 1995

G.R. No. 112658 March 16, 1995

INTERNATIONAL SCHOOL OF SPEECH and/or WILMA CRUZ

TAPALLA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MA. CORAZON D.
MAMUYAC, respondents.

REGALADO, J.:

The instant case was precipitated by a complaint, dated April 18, 1990, filed by private
respondent Ma. Corazon D. Mamuyac against petitioners International School of Speech and/or
Wilma Cruz Tapalla, charging the latter with unfair labor practice; illegal deduction; non-
payment of wages, overtime pay, legal holiday pay, premium pay for holiday and rest day; and
violation of Presidential Decrees Nos. 525, 851 and 928.1

On June 20, 1990, petitioners filed a counter-complaint charging private respondent with
abandonment and violation of contract, with a prayer for P150,000.00 as actual damages,
P50,000.00 as moral damages and P50,000.00 for exemplary damages.2

It appears that sometime in June, 1989, private respondent was hired as an English teacher paid
on an hourly basis, and she served as such up to March 15, 1990. She avers that petitioners
committed acts constitutive of unfair labor practice, that is, by preventing employees of the
school from socializing with each other for fear that a labor organization might be formed, not
furnishing her a copy of her contract, imposing stiff penalties for tardiness, imposing inhuman
and unbearable working conditions such as lunch-break of only 15 minutes, violating labor
standard laws, prohibiting stay-in employees from eating in adjoining restaurants, and hitting a
teacher for allegedly refusing to sign a contract.3

She likewise cited several unauthorized deductions made from her salary, namely, P1,000.00 for
cash bond, P460.00 for books, and P1,500.00 for alleged tardiness.4

On unpaid wages, she claimed that she was not compensated from March 15 up to September 15
(the year was not specified but, based on the records, it was in 1990) at the agreed sum of
P3,000.00 per month, or a total sum of P21,000.00. She further asseverates that she was
constructively dismissed from the service when she was divested of her assigned load of
subjects. Finally, she was allegedly not paid for services she rendered on weekends and legal
holidays.5

On their part, petitioners contended that private respondent abandoned her job when she failed to
report for work in the summer of 1990 contrary to their agreement, hence they prayed for an
award of damages in their favor.6
After a careful evaluation of the position papers of the contending parties, labor arbiter found
that only the claims for illegal deduction, 13th month pay, unpaid wages, and legal holiday pay
were meritorious. Accordingly, petitioners were ordered to pay private respondent the aggregate
sum of P11,335.96 and attorney's fees in the amount of P1,133.60 while petitioners' counter-
complaint was dismissed.7

For the ratio decidendi of said ruling, we reproduce with approval the following discussion in the
decision of the labor arbiter:

. . . This Branch cannot give due course to the alleged illegal dismissal. In the first
place, illegal dismissal was not among the causes of action cited in the complaint.
The complainant is not permitted by the rules to implead additional causes of
action in her position paper without first amending her complaint. To allow her
such stance would unduly prejudice the respondents who are entitled to due
process inasmuch as under the ordinary course of procedure summons must first
be issued before additional causes of action could be cited against the
respondents. Besides, how could there be illegal dismissal when it was the
complainant who ceased reporting for work on April 12, 1990? The reason
advanced by the complainant in support of her alleged illegal dismissal is that her
subject loads were withdrawn from her. Granting that her subject loads as an
English Teacher were withdrawn, it appears that when that was done, complainant
yielded without any remonstrance as in fact she agreed to work as Course Adviser
instead during the summer time.

Regarding the claim of unfair labor practice, the acts complained of and being
attributed to the respondents as hereinbefore discussed cannot be categorized as
unfair labor practice acts as understood and contemplated by the Labor Code, as
amended, particularly Art. 248, paragraph (a) to (i), inclusive. The alleged
attempts of the respondents not to let (sic) the employees to socialize for fear of
the organization of a labor union is just a mere conclusion of fact not supported
by the evidence.

Anent the alleged violations of PD 525 and PD 928, these charges do not have
merit. PD 525 refers to emergency living allowance already integrated into the
basic wage sometime in 1980. PD 928 refers to wage increase granted sometime
in 1982 not applicable to the case the complainant.

With respect to the claim for overtime pay, it appears from the evidence (Exh. "3-
b" to "3-j") that the complainant being paid on per hour basis did not render any
overtime work or services beyond eight (8) hours everyday. Most of the time, her
teaching loads did not keep her at work to no (sic) more than four (4) hours
everyday.

On legal holiday pays, it appears from the evidence that complainant reported for
work on November 30 and December 30, 1989, at four (4) hours each. Being
legal holidays, complainant is entitled to an additional 100% of her daily rate
which was P30.00 per hour. Thus, complainant for the total eight (8) hours for the
two (2) legal holidays, she must be paid P240.00.

On unpaid wages, it appears that complainant was paid P500.00 only for the
period from March 15, 1990 up to April 12, 1990 instead of the P3,500.00 per
month as agreed upon between her and the respondents. Thus, the respondents
must pay the balance in the sum of P3,000.00. The complainant's claim for unpaid
salaries from April 15, 1990 up to September 15, 1990 cannot be granted where it
appears that she was already out of work starting April 12, 1990.

Regarding the complainant's claim for illegal deduction, the alleged deduction of
P460.00 for books was admitted by the respondents. Said deduction without any
written authorization from the complainant cannot be made. Besides, there was no
agreement before complainant was hired that she had to buy books from the
respondents. Hence, respondent must reimburse the complainant the said sum of
P460.00. This Branch also awards the claim of P1,000.00 to complainant by way
of reimbursement of what was also deducted as cash bond. As between the
affirmative declaration of the complainant and the negative denial of the
respondents, the former deserves more evidentiary weight. Besides, in case of
doubt in case of two (2) unsubstantiated but opposing assertions, such doubt must
be resolved in favor of workingmen.

On the claim for 13th month pay (violation of PD 851), it appears from the
evidence submitted by the respondents that no such payment by way of
proportionate 13th month pay for 1990 and 1989 was paid to the complainant.
From July, 1989 up to December 31, 1989, the complainant received a total
compensation amounting to P7,319.00, then, from January 1, 1990 up to April,
1990, she received a total of P10,205.00. Thus, her proportionate 13th month pay
is computed, follows:

1989

6 mos. x P7,319.00 = P3,659.50

12

1990

3.5 x P10,205.00 = P2,976.46

12
 TOTAL 13TH MONTH PAY = P6,635.96

With respect to the counter-complaint that respondents filed against the

complainant for damages, for want of basis the same, is dismissed. The
complainant has been forced to be absent on account of the failure of the
respondents to pay her salaries. In fact, for that reason and her other money claims
against the respondents, complainant without further delay instituted her suit
against the respondents in less than a week after she absented herself. The
complainant cannot be faulted. Part of the blame is imputable to the respondents.
It has been said that one who comes to court must do so with clean hands. The
respondents do not belong to this category. Apart from their non-observance of
certain labor standard laws as hereinabove discussed, it even appears that they do
not keep the required payrolls, daily time records, and pay slips as required by
Book III, Rule X, Section 6,
to 12, the Implementing Rules and Regulations of the Labor Code, as amended. 8

Dissatisfied with the aforequoted ruling, both petitioners and private respondent lodged separate
appeals before the National Labor Relations Commission (NLRC). The latter affirmed the
appealed decisions,9 hence the instant petition.

In this action for certiorari, petitioners assail the public respondent's judgment on two
points, viz.: (1) in awarding 13th month pay in the amount of P6,635.96 in favor of private
respondent, and (2) in dismissing its counter-complaint. 10

The appeal with regard to the first issue is meritorious. The NLRC, as earlier illustrated, adopted
the labor arbiter's computation of private respondent's 13th month pay as follows:

1989

6 mos. x P7,319.00 = P3,659.50

12

1990

3.5 mos. x P10,205.00 = P2,976.46

12

TOTAL 13TH MONTH PAY = P6,635.9611

According to No. 4(a) of the Revised Guidelines on the implementation of the 13th Month Pay
Law (Presidential Decree No. 851) dated November 16, 1987, the 13th month pay of an
individual is (not less than) one-twelfth (1/12) of the total basic salary earned by an employee
within a calendar year. Moreover, in No. 6 thereof, it is provided that an employee who has
resigned or whose services were terminated at any time before the time for payment of the 13th
month pay is entitled to this monetary benefit in proportion to the length of time he worked
during the year, reckoned from the time he started working during the calendar year up to the
time of his resignation or termination from the service. Thus, if he worked only from January up
to September, his proportionate 13th month pay should be equivalent to the total basic salary he
earned during that period.

Since no evidence was adduced by private respondent that petitioners observe a different formula
in the computation of the 13th month pay for their employees, the aforementioned mode of
computation should be applied.

Thus, considering that in 1989 private respondent rendered service for only 6 months, her 13th
month pay should be one-twelfth (1/12) of the total compensation she received for that year, that
is, P7,319.00. Consequently her 13th month pay for the year 1989 should be P610.00.

Following the same formula, private respondent should receive a 13th month pay of P850,00 for
the year 1990 for services rendered for three months wherein she received a total compensation
of P10,205.00, that is, P10,205.00 divided by 12 equals P850.00.

On this particular aspect, therefore, the Court takes exception to the rule that the findings on
technical matters by administrative bodies like respondent NLRC are accorded respect and
finality on appeal,12 since it is clear that a palpable and demonstrable mistake has been
committed and should be rectified. Petitioners should, therefore, pay private respondent the total
amount of P1,460,00, instead or P6,635.96, as her 13th month pay for 1989 and 1990.

With regard to the second issue, on whether or not petitioners are entitled to damages in view of
private respondent's abandonment of her job, the Court upholds and approvingly quotes
respondent NLRC's ruling on this matter which affirmed that of the labor arbiter, to wit:

As regards respondents' counterclaim on the allegation that complainant is guilty

of having abandoned her job, we likewise vote for a dismissal thereof. It is a well-
settled rule that to constitute abandonment, there must be a deliberate unjustified
refusal of the employee to resume his employment. This circumstance does not
however exist in complainant's case, the assertions in her testimony given during
the hearing standing unrebutted, and which is hereunder quoted as:

THE LABOR ARBITER

(to witness)

What did you do as Course Adviser?

THE WITNESS
(answering)

A As Course Adviser whenever there are enrollees, we advise

them on the course that they have to take.

THE LABOR ARBITER

(to witness)

Q So, after you agreed with Mrs. Tapalla, did you report for the
two month period, April and May, 1990 as Course Adviser?

THE WITNESS
(answering)

A As Course Adviser, yes, Your Honor.

THE LABOR ARBITER

(to witness)

Q For the two month period April and May?

THE WITNESS
(answering)

A Not for the two month period. I was not able to finish since
when I waited for the salary, there were two fifteen that were not
given.

THE LABOR ARBITER

(to witness)

Q In other words, there were two (2) pay periods that you were not
paid?

THE WITNESS
(answering)

A Yes, Your Honor.

THE LABOR ARBITER

(to witness)

Q What in particular were the periods involved?

THE WITNESS
(answering)

A The first month.

THE LABOR ARBITER

(to witness)

Q You mean April?

THE WITNESS
(answering)

A Yes, Your Honor, March 15 to April 15.

xxx xxx xxx

THE LABOR ARBITER

(to witness)

Q In other words, your agreement involving rendition of your

services as Course Adviser started March 15, 1990?

THE WITNESS
(answering)

A Yes, Your Honor.

THE LABOR ARBITER

(to witness)

Q And according to you, you were not paid your salary for March
15 up to March 31?

THE WITNESS
(answering)

A Yes, Your Honor.

THE LABOR ARBITER

(to witness)

Q And also from April 1 to April 15 because according to you two

pay periods?
THE WITNESS
(answering)

A Yes, Your Honor.

xxx xxx xxx

THE LABOR ARBITER

(to witness)

Q All right, after that conference with Mrs. Tapalla, did you still
report for work as Course Adviser?

THE WITNESS
(answering)

A I wasn't able to report anymore because I don't have any money.

In fact I borrowed money from people without my husband's
knowledge.

THE LABOR ARBITER

(to witness)

Q Did you inform Mrs. Tapalla About the fact that you will no
longer report anymore to your work?

THE WITNESS
(answering)

A I was not able to inform her since they sent me a letter at once.
So, they did not give me any chance to call them up because I
received a letter the following day, and I think that is a Sunday.

xxx xxx xxx

Had respondents been free from any participation in the adverted cause for
complainant's failure to report for work, this Commission could have taken a
different course from that of the Labor Arbiter. It appears, however, that
respondents are not free from any wrong as it is also clear from the records of the
case that they have been remiss in fully observing the letter of the law concerning
labor standards provisions. As such, we concur with the Labor Arbiter in invoking
the principle in equity that he who comes to court must do so with "clean hands."
Accordingly, respondents do not deserve the remedial relief asked.13
WHEREFORE, as MODIFIED by awarding private respondent her 13th month pay for 1989 and
1990 in the reduced total amount of P1,460.00, the assailed decision of respondent National
Labor Relations Commission is hereby AFFIRMED in all other respects.

SO ORDERED.
 52. Villarama v. NLRC, G.R. No. 106341, Sept 2, 1994

G.R. No. 106341 September 2, 1994

DELFIN G. VILLARAMA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND GOLDEN DONUTS,
INC., respondents.

Rogelio R. Udarbe for petitioner.

Armando V. Ampil for private respondent.

PUNO, J.:

Sexual harassment abounds in all sick societies. It is reprehensible enough but more so when
inflicted by those with moral ascendancy over their victims. We rule that it is a valid cause for
separation from service.

First, the facts. On November 16, 1987, petitioner DELFIN VILLARAMA was employed by
private respondent GOLDEN DONUTS, INC., as its Materials Manager. His starting salary was
P6,500.00 per month, later increased to P8,500.00.

On July 15, 1989, petitioner Villarama was charged with sexual harassment by Divina Gonzaga,
a clerk-typist assigned in his department. The humiliating experience compelled her to resign
from work. Her letter-resignation, dated July 15, 1989, reads:

MR. LEOPOLDO H. PRIETO

President
Golden Donuts, Inc.

Dear Sir:

I would like to tender my resignation from my post as Clerk Typist of Materials

Department effective immediately.

It is really my regret to leave this company which has given me all the
opportunity I long desired. My five (5) months stay in the company have been
very gratifying professionally and financially and I would not entertain the idea of
resigning except for the most shocking experience I have had in my whole life.

Last Friday, July 7, 1989, Mr. Delfin Villarama and Mr. Jess de Jesus invited all
the girls of Materials Department for a dinner when in (sic) the last minute the
other three (3) girls decided not to join the groupp anymore. I do (sic) not have
second thought(s) in accepting their invitation for they are my colle(a)gues and I
had nothing in mind that would in any manner prompt me to refuse to what
appeared to me as a simple and cordial invitation. We went to a restaurant along
Makati Avenue where we ate our dinner. Mr. Villarama, Mr. Olaybar and Mr.
Jess de Jesus were drinking while we were eating and (they) even offered me a
few drinks and when we were finished, they decided to bring me home. While on
my way, I found out that Mr. Villarama was not driving the way to my house. I
was wondering why we were taking the wrong way until I found out that we were
entering a motel. I was really shock(ed). I did not expect that a somewhat
reputable person like Mr. Villarama could do such a thing to any of his
subordinates. I should have left the company without any word but I feel that I
would be unfair to those who might be similarly situated. I hope that you would
find time to investigate the veracity of my allegations and make each (sic)
responsible for is own deed. (emphasis ours)

Thank you very much and more power.

V
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The letter prompted Mr. Leopoldo Prieto, President of Golden Donuts, Inc., to call petitioner to a
meeting on August 4, 1989. Petitioner was then required to explain the letter against him. It
appears that petitioner agreed to tender his resignation. Private respondent moved swiftly to
separate petitioner. Thus, private respondent approved petitioner's application for leave of
absence with pay from August 5-28, 1989. It also issued an inter-office memorandum, dated
August 4, 1989, advising "all concerned" that petitioner was no longer connected with the
company effective August 5, 1989. 1 Two (2) days later, or on August 7, 1989, Mr. Prieto sent a
letter to petitioner confirming their agreement that petitioner would be officially separated from
the private respondent. The letter reads:

Dear Mr. Villarama:

This is to officially confirm our discussion last Friday, August 4, 1989, regarding
your employment with us. As per our agreement, you will be officially separated
from the company effective August 23, 1989.

May I, therefore, request you to please submit or send us your resignation letter
on or before the close of business hours of August 22, 1989.

Please see the Personnel & Industrial Relations Office for your clearance.

Very truly yours,

(SGD). LEOPOLDO
H. PRIETO, JR.
President

In the interim, petitioner had a change of mind. In a letter dated August 16, 1989, petitioner
sought reconsideration of the management's decision to terminate him, viz.:

DEAR SIR:

MAY I REQUEST FOR A RECONSIDERATION ON THE DECISION

HANDED DURING OUR MEETING OF AUGUST 4, 1989, TERMINATING
MY SERVICES WITH THE COMPANY EFFECTIVE AUGUST 5, 1989.

THE SIGNIFICANT CONTRIBUTION OF THE MATERIALS

DEPARTMENT, WHICH I HAD BEEN HEADING FOR THE PAST 21
 MONTHS, TO THE PERFORMANCE OF THE COMPANY FAR
OUTWEIGHS THE ERROR THAT I HAD COMMITTED. AN ERROR THAT
MUST NOT BE A BASIS FOR SUCH A DRASTIC DECISION.

AS I AM STILL OFFICIALLY ON LEAVE UNTIL THE 29th, OF THIS

MONTH, MAY I EXPECT THAT I WILL RESUME MY REGULAR DUTY
ON THE 29th?

ANTICIPATING YOUR FAVORABLE REPLY.

VERY TRULY
YOURS,

(SGD.) DELFIN G.
VILLARAMA

For his failure to tender his resignation, petitioner was dismissed by private respondent on
August 23, 1989. Feeling aggrieved, petitioner filed an illegal dismissal case 2 against private
respondent.

In a decision dated January 23, 1991, Labor Arbiter Salimar V. Nambi held that due process was
not observed in the dismissal of petitioner and there was no valid cause for dismissal. Private
respondent GOLDEN DONUTS, INC. was ordered to: (1) reinstate petitiner DELFIN G.
VILLARAMA to his former position, without loss of seniority rights, and pay his backwages at
the rate of P8,500.00 per month from August 1989, until actual reinstatement; (2) pay petitioner
the amount of P24,866.66, representing his unused vacation leave and proportionate 13th month
pay; (3) pay petitioner P100,000.00, as moral damages, and P20,000.00, as exemplary damages;
and (3) pay the attorney's fees equivalent to ten percent of the entire monetary award.

Private respondent appealed to the National Labor Relations Commission. On July 16, 1992,
public respondent reversed the decision of the labor arbiter. The dispositive portion of its
Resolution reads:

WHEREFORE, premises considered, the decision appealed from is hereby set

aside and a new one entered declaring the cause of dismissal of complainant as
valid; however, for the procedural lapses, respondent (Golden Donuts, Inc.) is
hereby ordered to indemnify complainant (petitioner) in the form of separation
pay equivalent to two month's (sic) pay (for his two years of service, as appears
(sic) in the records), or the amount of P17,000.00.

SO ORDERED.

Hence, this petition where the following arguments are raised:

THE ALLEGED IMMORALITY CHARGED AGAINST PETITIONER IS NOT

SUPPORTED BY SUBSTANTIAL EVIDENCE ON RECORD.
 THE MERE ADMISSION OF THE VIOLATION OF DUE PROCESS
ENTITLES PETITIONER TO REINSTATEMENT.

IN ANY EVENT, PETITIONER IS ENTITLED TO HIS SALARIES FROM

RECEIPT BY PRIVATE RESPONDENT OF THE DECISION OF THE LABOR
ARBITER ON 4 FEBRUARY 1991 TO (sic) AT LEAST THE
PROMULGATION OF THE ASSAILED RESOLUTION ON (sic) 16 JULY
1992.

IN ANY EVENT, PETITIONER IS ALSO ENTITLED TO HIS UNUSED

VACATION LEAVE AND PROPORTIONATE 13TH MONTH PAY IN THE
TOTAL AMOUNT OF P24,866.66, ADJUDGED BY THE LABOR ARBITER.

THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND

ATTORNEY'S FEES BY THE LABOR ARBITER IS JUSTIFIED.

We affirm with modification the impugned Resolution.

At the outset, we note that the Petition was not accompanied by a certified true copy of the
assailed July 16, 1992 NLRC Resolution, 3 in violation of Revised Circular No. 1-88. Neither
was there any certification under oath that "petitioner has not commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals or different
Divisions thereof, or any other tribunal or agency, and that to the best of his knowledge, no such
action or proceeding is pending in the Supreme Court, the Court of Appeals, or different
Divisions thereof or any other tribunal or agency," as required under Circular No. 28-91. It is
settled that non-compliance with the provisions of Revised Circular No. 1-88 and Circular No.
28-91, would result in the outright dismissal of the petition. 4

In addition, under Rule 65 of the Revised Rules of Court, the special civil action for certiorari is
available in cases where the concerned "tribunal, board or officer exercising judicial functions
had acted without or in excess of its jurisdiction, or with grave abuse of discretion and there is no
appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law." In Antonio
v. National Labor Relations Commission, 5 we held that the plain and adequate remedy expressly
provided by law is a motion for reconsideration of the assailed decision, and the resolution
thereof, which is not only expected to be but would actually have provided adequate and more
speedy remedy than a petition for certiorari. The rationale for this requirement is to enable the
court or agency concerned to pass upon and correct its mistakes without the intervention of a
higher court. 6 In this case, the assailed July 16, 1992 Resolution of the National Labor Relations
Commission was received by petitioner's counsel on July 23, 1992. 7 Petitioner did not file a
motion for reconsideration, instead, he commenced this special civil action for certiorari. Be that
as it may, we allowed the petition to enable us to rule on the significant issues raised before
us, viz.: (1) whether or not petitioner's right to procedural due process was violated, and (2)
whether or not he was dismissed for a valid or just cause.

The procedure for terminating an employee is found in Article 277 (b) of the Labor Code, viz.:
 xxx xxx xxx

(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause and
without prejudice to the requirement of notice under Article 283 of this Code the
employer shall furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to defend himself with the
assistance of his counsel if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor
and Employment. Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his dismissal by
filing a complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or
authorized cause shall rest on the employer. . . . (emphasis supplied)

This procedure protects not only rank-and-file employees but also managerial employees. Both
have the right to security of tenure as provided for in Section 3, Article XIII of the 1987
Constitution. In the case at bench, petitioner decided to seek reconsideration of the termination of
his service thru his August 16, 1989 letter. While admitting his error, he felt that its gravity did
not justify his dismissal. Considering this stance, and in conformity with the aforequoted Article
277 (b) of the Labor Code, petitioner should have been formally charged and given an
opportunity to refute the charges. Under the facts in field, we hold that petitioner was denied
procedural due process.

We now come to the more important issue of whether there was valid cause to terminate
petitioner.

Petitioner claims that his alleged immoral act was unsubstantiated, hence, he could not be
dismissed. We hold otherwise. The records show that petitioner was confronted with the charge
against him. Initially, he voluntarily agreed to be separated from the company. He took a leave of
absence preparatory to this separation. This agreement was confirmed by the letter to him by Mr.
Prieto dated August 7, 1989. A few days after, petitioner reneged on the agreement. He refused
to be terminated on the ground that the seriousness of his offense would not warrant his
separation from service. So he alleged in his letter to Mr. Prieto dated August 16, 1989. But even
in this letter, petitioner admitted his "error" vis-a-vis Miss Gonzaga. As a manager, petitioner
should know the evidentiary value of his admissions. Needless to stress, he cannot complain
there was no valid cause for his separation.

Moreover, loss of trust and confidence is a good ground for dismissing a managerial employee. It
can be proved by substantial evidence which is present in the case at bench. As further observed
by the Solicitor General:

. . . assuming arguendo that De Jesus and Gonzaga were sweethearts and that
petitioner merely acceded to the request of the former to drop them in the motel,
petitioner acted in collusion with the immoral designs of De Jesus and did not
 give due regard to Gonzaga's feeling on the matter and acted in chauvinistic
disdain of her honor, thereby justifying public respondent's finding of sexual
harassment. Thus, petitioner not only failed to act accordingly as a good father of
the family because he was not able to maintain his moral ascendancy and
authority over the group in the matter of morality and discipline of his
subordinates, but he actively facilitated the commission of immoral conduct of his
subordinates by driving his car into the motel.

(Comment, April 29, 1993, p. 9)

As a managerial employee, petitioner is bound by a more exacting work ethics. He failed

to live up to this higher standard of responsibility when he succumbed to his moral
perversity. And when such moral perversity is perpetrated against his subordinate, he
provides justifiable ground for his dismissal for lack of trust and confidence. It is the
right, nay, the duty of every employer to protect its employees from over sexed superiors.

To be sure, employers are given wider latitude of discretion in terminating the employment of
managerial employees on the ground of lack of trust and confidence. 8

We next rule on the monetary awards due to petitioner. The public respondent erred in awarding
separation pay of P17,000.00 as indemnity for his dismissal without due process of law. The
award of separation pay is proper in the cases enumerated under Articles 283 and 284 of the
Labor Code, 9 and in cases where there is illegal dismissal (for lack of valid cause) and
reinstatement is no longer feasible. But this is not to state that an employer cannot be penalized
for failure to give formal notice and conduct the necessary investigation before dismissing an
employee. 10Thus, in Wenphil vs. NLRC 11 and Pacific Mills, Inc. vs. Alonzo, 12 this Court
awarded P1,000.00 as penalty for non-observance of due process.

Petitioner is not also entitled to moral and exemplary damages. There was no bad faith or malice
on the part of private respondent in terminating the services of petitioner. 13

Petitioner is entitled, however, to his unused vacation/sick leave and proportionate 13th month
pay, as held by the labor arbiter. These are monies already earned by petitioner and should be
unaffected by his separation from the service.

WHEREFORE, premises considered, the assailed resolution of public respondent is hereby

AFFIRMED WITH MODIFICATION that the award of separation pay is DELETED. Private
respondent is ordered to pay petitioner the amount of P1,000.00 for non-observance of due
process, and the equivalent amount of his unused vacation/sick leave and proportionate 13th
month pay. No pronouncement as to costs.

SO ORDERED.
 53. Clarion Printing House, Inc. v. NLRC, G.R. No.148372, June 27, 2005

G.R. No. 148372 June 27, 2005

CLARION PRINTING HOUSE, INC., and EULOGIO YUTINGCO, petitioners,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (Third Division)
and MICHELLE MICLAT,respondents.

DECISION

CARPIO-MORALES, J.:

Respondent Michelle Miclat (Miclat) was employed on April 21, 1997 on a probationary basis as
marketing assistant with a monthly salary of 6,500.00 by petitioner Clarion Printing House
(CLARION) owned by its co-petitioner Eulogio Yutingco. At the time of her employment, she
was not informed of the standards that would qualify her as a regular employee.

On September 16, 1997, the EYCO Group of Companies of which CLARION formed part filed
with the Securities and Exchange Commission (SEC) a "Petition for the Declaration of
Suspension of Payment, Formation and Appointment of Rehabilitation Receiver/ Committee,
Approval of Rehabilitation Plan with Alternative Prayer for Liquidation and Dissolution of
Corporation"1 the pertinent allegations of which read:

xxx

5. The situation was that since all these companies were sister companies and were
operating under a unified and centralized management team, the financial requirements of
one company would normally be backed up or supported by one of the available fundings
from the other companies.

6. The expansion exhausted the cash availability of Nikon, NKI, and 2000 because those
fundings were absorbed by the requirements of NPI and EYCO Properties, Inc. which
were placed on real estate investments. However, at the time that those investments and
expansions were made, there was no cause for alarm because the market situation was
very bright and very promising, hence, the decision of the management to implement the
expansion.

7. The situation resulted in the cash position being spread thin. However, despite the thin
cash positioning, the management still was very positive and saw a very viable
proposition since the expansion and the additional investments would result in a bigger
real estate base which would be very credible collateral for further expansions. It was
envisioned that in the end, there would be bigger cash procurement which would result in
greater volume of production, profitability and other good results based on the
expectations and projections of the team itself.
 8. Unfortunately, factors beyond the control and anticipation of the management came
into play which caught the petitioners flat-footed, such as:

a) The glut in the real estate market which has resulted in the bubble economy
for the real estate demand which right now has resulted in a severe slow down in
the sales of properties;

b) The economic interplay consisting of the inflation and the erratic changes i
n the peso-dollarexchange rate which precipitated a soaring banking interest.

c) Labor problems that has precipitated adverse company effect on the media
and in the financial circuit.

d) Liberalization of the industry (GATT) which has resulted in flooding the

market with imported goods;

e) Other related adverse matters.

9. The inability of the EYCO Group of Companies to meet the obligations as they fall
due on the schedule agreed with the bank has now become a stark reality. The situation
therefore is that since the obligations would not be met within the scheduled due
date, complications and problems would definitely arise that would impair
and affect the operations of the entire conglomerate comprising the EYCO Group of
Companies.

xxx

12. By virtue of this development, there is a need for suspension of all accounts o[r]
obligations incurred by the petitioners in their separate and combined capacities in the
meantime that they are working for the rehabilitation of the companies that would
eventually redound to the benefit of these creditors.

13. The foregoing notwithstanding, however, the present combined financial condition of
the petitioners clearly indicates that their assets are more than enough to pay off the
credits.

x x x (Emphasis and underscoring supplied)2

On September 19, 1997, the SEC issued an Order3 the pertinent portions of which read:

xxx

It appearing that the petition is sufficient in form and

substance, the corporate petitioners prayer for the creation ofmanagement or receivership comm
ittee and creditors approval of the proposed Rehabilitation Plan is hereby set forhearing on Octo
ber 22, 1997 at 2:00 oclock in the afternoon at the SICD, SEC Bldg., EDSA, Greenhills,
Mandaluyong City.

xxx

Finally, the petitioners are hereby enjoined from disposing any and all of their properties in any
manner, whatsoever, except in the ordinary course of business and from making any payment
outside of the legitimate business expenses during the pendency of the proceedings and as a
consequence of the filing of the Petition, all actions, claims and proceedings against herein
petitioners pending before any court, tribunal, office board and/or commission are deemed
SUSPENDED until further orders from this Hearing Panel pursuant to the rulings of the Supreme
Court in the cases of RCBC v. IAC et al., 213 SCRA 830 and BPI v. CA, 229 SCRA 223.
(Underscoring supplied)

And on September 30, 1997, the SEC issued an Order4 approving the creation of an interim
receiver for the EYCO Group of Companies.

On October 10, 1997, the EYCO Group of Companies issued to its employees the following
Memorandum:5

This is to formally announce the entry of the Interim Receiver Group represented by SGV from
today until October 22, 1997 or until further formal notice from the SEC.

This interim receiver groups function is to make sure that all assets of the company are secured
and accounted for both for the protection of us and our creditors.

Their function will involve familiarization with the different processes and controls in our
organization & keeping physical track of our assets like inventories and machineries.

Anything that would be required from you would need to be in writing and duly approved by the
top management in order for us to maintain a clear line.

We trust that this temporary inconvenience will benefit all of us in the spirit of goodwill. Lets
extend our full cooperation to them.

Thank you. (Underscoring supplied)

On October 22, 1997, the Assistant Personnel Manager of CLARION informed Miclat by
telephone that her employment contract had been terminated effective October 23, 1997. No
reason was given for the termination.

The following day or on October 23, 1997, on reporting for work, Miclat was informed by the
General Sales Manager that her termination was part of CLARIONs cost-cutting measures.

On November 17, 1997, Miclat filed a complaint6 for illegal dismissal against CLARION and
Yutingco (petitioners) before the National Labor Relations Commission (NLRC).
In the meantime, or on January 7, 1998, the EYCO Group of Companies issued a
Memorandum7 addressed to company managers advising them of "a temporary partial shutdown
of some operations of the Company" commencing on January 12, 1998 up to February 28, 1998:

In view of the numerous external factors such as slowdown in business and consumer
demand and consistent with Art. 286 of the Revised Labor Code of the Philippines, we are
constrained to go on a temporary partial shutdown of some operations of the Company.

To implement this measure, please submit to my office through your local HRAD the list of
those whom you will require to report for work and their specific schedules. Upon revalidation
and approval of this list, all those not in the list will not receive any pay nor will it be credited
against their VL.

Please submit the listing no later than the morning of Friday, January 09, 1998.

Shutdown shall commence on January 12, 1998 up to February 28, 1998, unless otherwise
recalled at an earlier date.

Implementation of th[ese] directives will be done through your HRAD departments.

(Underscoring supplied)

In her Position Paper8 dated March 3, 1998 filed before the labor arbiter, Miclat claimed that she
was never informed of the standards which would qualify her as a regular employee. She
asserted, however, that she qualified as a regular employee since her immediate supervisor even
submitted a written recommendation in her favor before she was terminated without just or
authorized cause.

Respecting the alleged financial losses cited by petitioners as basis for her termination, Miclat
disputed the same, she contending that as marketing assistant tasked to receive sales calls,
produce sales reports and conduct market surveys, a credible assessment on production and sales
showed otherwise.

In any event, Miclat claimed that assuming that her termination was necessary, the manner in
which it was carried out was illegal, no written notice thereof having been served on her, and she
merely learned of it only a day before it became effective.

Additionally, Miclat claimed that she did not receive separation pay, 13th month pay and salaries
for October 21, 22 and 23, 1997.

On the other hand, petitioners claimed that they could not be faulted for retrenching some of its
employees including Miclat, they drawing attention to the EYCO Group of Companies being
placed under receivership, notice of which was sent to its supervisors and rank and file
employees via a Memorandum of July 21, 1997; that in the same memorandum, the EYCO
Group of Companies advised them of a scheme for voluntary separation from employment with
payment of severance pay; and that CLARION was only adopting the "LAST IN, FIRST OUT
PRINCIPLE" when it terminated Miclat who was relatively new in the company.
Contending that Miclats termination was made with due process, petitioners referred to the
EYCO Group of Companies abovesaid July 21, 1997 Memorandum which, so they claimed,
substantially complied with the notice requirement, it having been issued more than one month
before Miclat was terminated on October 23, 1997.

By Decision9 of November 23, 1998, the labor arbiter found that Miclat was illegally
dismissed and directed her reinstatement. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered ordering the
respondent to reinstatecomplainant to her former or equivalent position without loss of seniority
rights and benefits and to pay her backwages, from the time of dismissal to actual reinstatement,
proportionate 13th month pay and two (2) days salary computed as follows:

a.1) Backwages 10/23/97 to 11/30/98

6,500.00 x 13.25 months = 86,125.00

a.2) Proportionate 13th month pay

1/12 of 86,125 = 7,177.08

b) 13th month pay - 1997

=6,500 x 9.75 months/12 = 5,281.25

c) Two days salary

=6,500/26 x 2 days = 500.00

TOTAL 99,083.33

(Emphasis and underscoring supplied).

Before the National Labor Relations Commission (NLRC) to which petitioners appealed, they
argued that:10

1. [CLARION] was placed under receivership thereby evidencing the fact that it
sustained business losses to warrant the termination of [Miclat] from her employment.

2. The dismissal of [Miclat] from her employment having been effected in accordance
with the law and in good faith, [Miclat] does not deserve to be reinstated and paid
backwages, 13th month pay and two (2) days salary.

And petitioners pointed out that CLARION had expressed its decision to shutdown its operations
by Memorandum11of January 7, 1998 to its company managers.
Appended to petitioners appeal before the NLRC were photocopies of their balance sheets from
1997 to November 1998 which they claimed to "unanimously show that x x x [petitioner]
company experienced business reverses which were made the basis x x x in retrenching x x x."12

By Resolution13 of June 17, 1999, the NLRC affirmed the labor arbiters decision. The pertinent
portion of the NLRC Resolution reads:

There are three (3) valid requisites for valid retrenchment: (1) the retrenchment is necessary to
prevent losses and such losses are proven; (2) written notices to the employees and to the
Department of Labor and Employment at least one (1) month prior to the intended date of
retrenchment; and (3) payment of separation pay equivalent to one (1) month pay or at least
month pay for every year of service, whichever is higher. The two notices are mandatory. If the
notice to the workers is later than the notices sent to DOLE, the date of termination should be at
least one month from the date of notice to the workers.

In Lopez Sugar Corporation v. Federation of Free Workers Philippine Labor Union Association
(PLUA-NACUSIP) and National Labor Relations Commission, the Supreme Court had the
occasion to set forth four standards which would justify retrenchment, being, firstly, - the losses
expected should be substantial and not merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential
in character, the bona fide nature of the retrenchment would appear to be seriously in question;
secondly, - the substantial loss apprehended must be reasonably imminent, as such imminence
can be perceived objectively and in good faith by the employer. There should, in other words, be
a certain degree of urgency for the retrenchment, which is after all a drastic course with serious
consequences for the livelihood of the employees retired or otherwise laid-off; thirdly, - because
of the consequential nature of retrenchment, it must be reasonably necessary and likely to
effectively prevent the expected losses. The employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut other cost than labor costs; and lastly, - the
alleged losses if already realized and the expected imminent losses sought to be forestalled, must
be proven by sufficient and convincing evidence.

The records show that these requirements were not substantially complied with. And proofs
presented by respondents-appellants were short of being sufficient and convincing to justify valid
retrenchment. Their position must therefore fail. The reason is simple. Evidences on record
presented fall short of the requirement of substantial, sufficient and convincing evidence to
persuade this Commission to declare the validity of retrenchment espoused by respondents-
appellants. The petition before the Securit[ies] and Exchange Commission for suspension of
payment does not prove anything to come within the bounds of justifying retrenchment. In fact,
the petition itself lends credence to the fact that retrenchment was not actually reinstated under
the circumstances prevailing when it stated, "The foregoing notwithstanding, however, the
present combined financial condition of the petitioners clearly indicates that their assets are
more than enough to pay off the credits." Verily, reading further into the petition, We are not
ready to disregard the fact that the petition merely seeks to suspend payments of their obligation
from creditor banks and other financing institutions, and not because of imminent substantial
financial loss. On this account, We take note of paragraph 7 of the petition which stated: "The
situation resulted in cash position being spread thin. However, despite the thin cash positioning,
the management was very positive and saw a very viable proposition since the expansion and the
additional investments would result in a bigger real estate base which would be a very credible
collateral for further expansions. It was envisioned that in the end, there would a bigger cash
procurement which would result in greater volume of production, profitability and other good
results based on the expectations and projections of the team itself." Admittedly, this does not
create a picture of retrenchable business atmosphere pursuant to Article 283 of the Labor Code.

We cannot disregard the fact that respondent-appellants failed in almost all of the criteria set by
law and jurisprudence in justifying valid retrenchment. The two (2) mandatory notices were
violated. The supposed notice to the DOLE (Annex "4," List of Employees on Shutdown) is of
no moment, the same having no bearing in this case. Herein complainant-appellee was not even
listed therein and the date of receipt by DOLE, that is, January 18, 1999, was way out of time in
relation to this case. And no proof was adduced to evidence cost cutting measures, to say the
least. Nor was there proof shown that separation pay had been awarded to complainant-appellee.

WHEREFORE, premises considered, and finding no grave abuse of discretion on the findings of
Labor Arbiter Nieves V. De Castro, the appeal is DENIED for lack of merit.

The decision appealed from is AFFIRMED in toto. (Italics in the original; underscoring supplied;
citations omitted)

Petitioners Motion for Reconsideration of the NLRC resolution having been denied by
Resolution14 of July 29, 1999, petitioners filed a petition for certiorari15 before the Court of
Appeals (CA) raising the following arguments:

1. PETITIONER CLARION WAS PLACED UNDER RECEIVERSHIP THEREBY

EVIDENCING THE FACT THAT IT SUSTAINED BUSINESS LOSSES TO
WARRANT THE TERMINATION OF PRIVATE RESPONDENT MICLAT FROM
HER EMPLOYMENT.

2. THE DISMISSAL OF PRIVATE RESPONDENT MICLAT FROM HER

EMPLOYMENT HAVING BEEN EFFECTED IN ACCORDANCE WITH THE LAW
AND IN GOOD FAITH, PRIVATE RESPONDENT DOES NOT DESERVE TO BE
REINSTATED AND PAID BACKWAGES, 13th MONTH PAY AND TWO (2) DAYS
SALARY. (Underscoring supplied)

By Decision16 of November 24, 2000, the CA sustained the resolutions of the NLRC in this wise:

In the instant case, Clarion failed to prove its ground for retrenchment as well as compliance
with the mandated procedure of furnishing the employee and the Department of Labor and
Employment (hereafter, DOLE) with one (1) month written notice and payment of separation
pay to the employee. Clarions failure to discharge its burden of proof is evident from the
following instances:

First, Clarion presented no evidence whatsoever before the Labor Arbiter. To prove
serious business losses, Clarion presented its 1997 and 1998 financial statements and the
 SEC Order for the Creation of an Interim Receiver, for
the first time on appeal before the NLRC. The Supreme Court has consistently
disallowed such practice unless the party making the belated submission of evidence had
satisfactorily explained the delay. In the instant case, said financial statements are not
admissible in evidence due to Clarions failure to explain the delay.

Second, even if such financial statements were admitted in evidence, they would not alter
the outcome of the case as statements have weak probative value. The required method of
proof in such case is the presentation of financial statements prepared by independent
auditors and not merely by company accountants. Again, petitioner failed in this regard.

Third, even audited financial statements are not enough. The employer must present the
statement for the year immediately preceding the year the employee was
retrenched, which Clarion failed to do in the instant case, to prove not only the fact of
business losses but more importantly, the fact that such losses were substantial,
continuing and without immediate prospect of abatement. Hence, neither the NLRC nor
the courts must blindly accept such audited financial statements. They must examine and
make inferences from the data presented to establish business losses. Furthermore, they
must be cautioned by the fact that "sliding incomes" or decreasing gross revenues alone
are not necessarily business losses within the meaning of Art. 283 since in the nature of
things, the possibility of incurring losses is constantly present in business operations.

Last, even if business losses were indeed sufficiently proven, the employer must
still prove that retrenchment was resorted to only after less drastic measures such as the
reduction of both management and rank-and-file bonuses and salaries, going on reduced
time, improving manufacturing efficiency, reduction of marketing and advertising costs,
faster collection of customer accounts, reduction of raw materials investment and others,
have been tried and found wanting. Again, petitioner failed to prove the exhaustion of
less drastic measures short of retrenchment as it had failed with the other requisites.

It is interesting to note that Miclat started as a probationary employee on 21 April 1997. There
being no stipulation to the contrary, her probation period had a duration of six (6) months from
her date of employment. Thus, after the end of the probation period on 22 October 1997, she
became a regular employee as of 23 October 1997 since she was allowed to work after the end of
said period. It is also clear that her probationary employment was not terminated at the end of the
probation period on the ground that the employee failed to qualify in accordance with reasonable
standards made known to her at the time of engagement.

However, 23 October 1997 was also the day of Miclats termination from employment on the
ground of retrenchment. Thus, we have a bizarre situation when the first day of an employees
regular employment was also the day of her termination. However, this is entirely possible, as
had in fact happened in the instant case, where the employers basis for termination is Art. 288,
instead of Art. 281 of the Labor Code. If petitioner terminated Miclat with Art. 281 in mind, it
would have been too late to present such theory at this stage and it would have been equally
devastating for petitioner had it done so because no evidence exists to show that Miclat failed to
qualify with petitioners standards for regularization. Failure to discharge its burden of proof
would still be petitioners undoing.

Whichever way We examine the case, the conclusion is the same

Miclat was illegally dismissed. Consequently, reinstatement without loss of seniority rights and
full backwages from date of dismissal on 23 October 1997 until actual reinstatement is in order.

WHEREFORE, the instant petition is hereby DISMISSED and the 29 July 1999 and 7 June 1999
resolutions of the NLRC are SUSTAINED. (Emphasis and underscoring supplied)

By Resolution17 of May 23, 2001, the CA denied petitioners motion for reconsideration of the
decision.

Hence, the present petition for review on certiorari, petitioners contending that:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN SUSTAINING THE ASSAILED DECISIONS OF HONORABLE PUBLIC RESPONDENT
COMMISSION:

A. HOLDING THAT PRIVATE RESPONDENT MICLAT WAS ILLEGALLY

DISMISSED; and

B. ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENT MICLAT TO

HER FORMER OR EQUIVALENT POSITION WITHOUT LOSS OF SENIORITY
RIGHTS AND BENEFITS AND PAYMENT OF BACKWAGES, 1[3]th MONTH PAY
AND TWO (2) DAYS SALARY.18

Petitioners argue that the conclusion of the CA that no sufficient proof of financial losses on the
part of CLARION was adduced is patently erroneous, given the serious business reverses it had
gravely suffered as reflected in its financial statements/balance sheets, thereby leaving as its only
option the retrenchment of its employees including Miclat.19

Petitioners further argue that when a company is under receivership and a receiver is appointed
to take control of its management and corporate affairs, one of the evident reasons is to prevent
further losses of said company and protect its remaining assets from being dissipated; and that
the submission of financial reports/statements prepared by independent auditors had been
rendered moot and academic, the company having shutdown its operations and having been
placed under receivership by the SEC due to its inability to pay or comply with its obligations.20

Respecting the CAs holding that the financial statements CLARION submitted for the first time
on appeal before the NLRC are inadmissible in evidence due to its failure to explain the delay in
the submission thereof, petitioners lament the CAs failure to consider that technical rules on
evidence prevailing in the courts are not controlling in proceedings before the NLRC which may
consider evidence such as documents and affidavits submitted by the parties for the first time on
appeal.21
As to the CAs holding that CLARION failed to prove the exhaustion of less drastic measures
short of retrenching, petitioners advance that prior to the termination of Miclat, CLARION,
together with the other companies under the EYCO Group of Companies, was placed under
receivership during which drastic measures to continue business operations of the company and
eventually rehabilitate itself were implemented.22

Denying Miclats entitlement to backwages, petitioners proffer that her dismissal rested upon a
valid and authorized cause. And petitioners assail as grossly erroneous the award of 13th month
pay to Miclat, she not having sought it and, therefore, there was no jurisdiction to award the
same.23

The petition is partly meritorious.

Contrary to the CAs ruling, petitioners could present evidence for the first time on appeal to the
NLRC. It is well-settled that the NLRC is not precluded from receiving evidence, even for the
first time on appeal, because technical rules of procedure are not binding in labor cases.

The settled rule is that the NLRC is not precluded from receiving evidence on appeal as technical
rules of evidence are not binding in labor cases. In fact, labor officials are mandated by the Labor
Code to use every and all reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure, all in the interest of due process.
Thus, in Lawin Security Services v. NLRC, and Bristol Laboratories Employees Association-
DFA v. NLRC, we held that even if the evidence was not submitted to the labor arbiter, the fact
that it was duly introduced on appeal to the NLRC is enough basis for the latter to be more
judicious in admitting the same, instead of falling back on the mere technicality that said
evidence can no longer be considered on appeal. Certainly, the first course of action would be
more consistent with equity and the basic notions of fairness. (Italics in the original; citations
omitted)24

It is likewise well-settled that for retrenchment to be justified, any claim of actual or potential
business losses must satisfy the following standards: (1) the losses are substantial and not de
minimis; (2) the losses are actual or reasonably imminent; (3) the retrenchment is reasonably
necessary and is likely to be effective in preventing expected losses; and (4) the alleged losses, if
already incurred, or the expected imminent losses sought to be forestalled, are proven by
sufficient and convincing evidence.25 And it is the employer who has the onus of proving the
presence of these standards.

Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("reorganization of the
securities and exchange commission with additional powers and placing said agency under the
administrative supervision of the office of the president"),26 as amended, read:

SEC. 5 In addition to the regulatory and adjudicative functions of THE SECURITIES AND
EXCHANGE COMMISSION over corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have original and
exclusive jurisdiction to hear and decide cases involving:
xxx

(d) Petitions of corporations, partnerships or associations declared in the state of

suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all debts but foresees the impossibility of meeting
them when they respectively fall due or in cases where the corporation, partnership,
association has no sufficient assets to cover its liabilities, but is under the management of a
Rehabilitation Receiver or Management Committee created pursuant to this Decree.

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:

xxx

(c) To appoint one or more receivers of the property, real and personal, which is the subject of
the action pending before the Commission in accordance with the provisions of the Rules of
Court in such other cases whenever necessary in order to preserve the rights of the parties-
litigants and/or protect the interest of the investing public and creditors: Provided, however,
That the Commission may in appropriate cases, appoint a rehabilitation receiver of
corporations, partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to powers of the regular receiver under
the provisions of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof: x x x

(d) To create and appoint a management committee, board or body upon petition or motu propio
to undertake the management of corporations, partnership or other associations not supervised or
regulated by other government agencies in appropriate cases when there is imminent danger of
dissipation, loss, wastage or destruction of assets or other properties or paralization of
business operations of such corporations or entities which may be prejudicial to the interest
of minority stockholders, parties-litigants of the general public: x x x (Emphasis and
underscoring supplied).

From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a receiver
or management committee by the SEC presupposes a finding that, inter alia, a company
possesses sufficient property to cover all its debts but "foresees the impossibility of meeting
them when they respectively fall due" and "there is imminent danger of dissipation, loss, wastage
or destruction of assets of other properties or paralization of business operations."

That the SEC, mandated by law to have regulatory functions over corporations, partnerships or
associations,27appointed an interim receiver for the EYCO Group of Companies on its petition in
light of, as quoted above, the therein enumerated "factors beyond the control and anticipation of
the management" rendering it unable to meet its obligation as they fall due, and thus resulting to
"complications and problems . . . to arise that would impair and affect [its] operations . . ." shows
that CLARION, together with the other member-companies of the EYCO Group of Companies,
was suffering business reverses justifying, among other things, the retrenchment of its
employees.
This Court in fact takes judicial notice of the Decision28 of the Court of Appeals dated June 11,
2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial Corp., et
al. [including CLARION], otherwise known as the EYCO Group of Companies v. Philippine
National Bank, Solidbank Corporation, et al., collectively known and referred as the
Consortium of Creditor Banks," which was elevated to this Court via Petition
for Certiorari and docketed as G.R. No. 145977, but which petition this Court dismissed by
Resolution dated May 3, 2005:

Considering the joint manifestation and motion to dismiss of petitioners and respondents dated
February 24, 2003, stating that the parties have reached a final and comprehensive settlement of
all the claims and counterclaims subject matter of the case and accordingly, agreed to the
dismissal of the petition for certiorari, the Court Resolved to DISMISS the petition
for certiorari (Underscoring supplied).

The parties in G.R. No. 145977 having sought, and this Court having granted, the dismissal of
the appeal of the therein petitioners including CLARION, the CA decision which affirmed
in toto the September 14, 1999 Order of the SEC, the dispositive portion of which SEC Order
reads:

WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18
December 1998 is set aside. The Petition to be Declared in State of Suspension of payments is
hereby disapproved and the SAC Plan terminated. Consequently, all committee, conservator/
receivers created pursuant to said Order are dissolved and discharged and all acts and orders
issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of the appellee
corporations. The case is hereby remanded to the hearing panel below for that purpose.

x x x (Emphasis and underscoring supplied),

has now become final and executory. Ergo, the SECs disapproval of the EYCO Group of
Companies "Petition for the Declaration of Suspension of Payment . . ." and the order for the
liquidation and dissolution of these companies including CLARION, must be deemed to have
been unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v. PNB et
al., there should be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. A court shall take judicial notice, without the
introduction of evidence, of the existence and territorial extent of states, their political history,
forms of government and symbols of nationality, the law of nations, the admiralty and maritime
courts of the world and their seals, the political constitution and history of the Philippines,
the official acts of the legislative, executive and judicial departments of the Philippines, the
laws of nature, the measure of time, and the geographical divisions. (Emphasis and underscoring
supplied)

which Mr. Justice Edgardo L. Paras interpreted as follows:

A court will take judicial notice of its own acts and records in the same case, of facts
established in prior proceedings in the same case, of the authenticity of its own records of
another case between the same parties, of the files of related cases in the same court, and of
public records on file in the same court. In addition judicial notice will be taken of the record,
pleadings or judgment of a case in another court between the same parties or involving one of the
same parties, as well as of the record of another case between different parties in the same court.
Judicial notice will also be taken of court personnel. (Emphasis and underscoring supplied)29

In fine, CLARIONs claim that at the time it terminated Miclat it was experiencing business
reverses gains more light from the SECs disapproval of the EYCO Group of Companies
petition to be declared in state of suspension of payment, filed before Miclats termination, and
of the SECs consequent order for the group of companies dissolution and liquidation.

This Courts finding that Miclats termination was justified notwithstanding, since at the time she
was hired on probationary basis she was not informed of the standards that would qualify her as
a regular employee, under Section 6, Rule I of the Implementing Rules of Book VI of the Labor
Code which reads:

SEC. 6. Probationary employment. There is probationary employment where the employee, upon
his engagement, is made to undergo a trial period during which the employer determines his
fitness to qualify for regular employment, based on reasonable standards made known to him at
the time of engagement.

"Probationary employment shall be governed by the following rules:

xxx

(d) In all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time of his
engagement. Where no standards are made known to the employee at that time, he shall be
deemed a regular employee" (Emphasis and underscoring supplied),

she was deemed to have been hired from day one as a regular employee.30

CLARION, however, failed to comply with the notice requirement provided for in Article 283 of
the Labor Code, to wit:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The

employer may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before the intended date
thereof. x x x (Emphasis and underscoring supplied)

This Court thus deems it proper to award the amount equivalent to Miclats one (1) month salary
of 6,500.00 as nominal damages to deter employers from future violations of the statutory due
process rights of employees.31

Since Article 283 of the Labor Code also provides that "[i]n case of retrenchment to prevent
losses, . . . the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. . . , [a] fraction of at least six (6)
months [being] considered one (1) whole year," this Court holds that Miclat is entitled to
separation pay equivalent to one (1) month salary.

As to Miclats entitlement to 13th month pay, paragraph 6 of the Revised Guidelines on the 13th
Month Pay Law provides:

6. 13th Month Pay of Resigned or Separated Employee

An employee x x x whose services were terminated any time before the time for payment of the
13th month pay is entitled to this monetary benefit in proportion to the length of time he worked
during the calendar year up to the time of his resignation or termination from the service. Thus if
he worked only from January up to September his proportionate 13th month pay shall be
equivalent to 1/12 of his total basic salary he earned during that period.

xxx

Having worked at CLARION for six months, Miclats 13th month pay should be
computed as follows:

(Monthly Salary x 6 ) / 12 = Proportionate 13th month pay

(6,500.00 x 6) / 12 = 3,250.00

With the appointment of a management receiver in September 1997, however, all claims and
proceedings against CLARION, including labor claims,32 were deemed suspended during the
existence of the receivership.33 The labor arbiter, the NLRC, as well as the CA should not have
proceeded to resolve respondents complaint for illegal dismissal and should instead have
directed respondent to lodge her claim before the then duly-appointed receiver of CLARION. To
still require respondent, however, at this time to refile her labor claim against CLARION under
the peculiar circumstances of the case that 8 years have lapsed since her termination and that
all the arguments and defenses of both parties were already ventilated before the labor arbiter,
NLRC and the CA; and that CLARION is already in the course of liquidation this Court
deems it most expedient and advantageous for both parties that CLARIONs liability be
determined with finality, instead of still requiring respondent to lodge her claim at this time
before the liquidators of CLARION which would just entail a mere reiteration of what has been
already argued and pleaded. Furthermore, it would be in the best interest of the other creditors of
CLARION that claims against the company be finally settled and determined so as to further
expedite the liquidation proceedings. For the lesser number of claims to be proved, the sooner
the claims of all creditors of CLARION are processed and settled.

WHEREFORE, the Court of Appeals November 24, 2000 Decision, together with its May 23,
2001 Resolution, is SET ASIDE and another rendered declaring the legality of the dismissal of
respondent, Michelle Miclat. Petitioners are ORDERED, however, to PAY her the following in
accordance with the foregoing discussions:

1) 6,500.00 as nominal damages for non-compliance with statutory due process;

2) 6,500.00 as separation pay; and

3) 3,250.00 as 13th month pay.

Let a copy of this Decision be furnished the SEC Hearing Panel charged with the liquidation and
dissolution of petitioner corporation for inclusion, in the list of claims of its creditors, respondent
Michelle Miclats claims, to be satisfied in accordance with Article 110 of the Labor Code in
relation to the Civil Code provisions on Concurrence and Preference of Credits.

Costs against petitioners.

SO ORDERED.
 54. Marcopper Mining Corp. v. Ople, G.R. No. G.R. No. L-51254

G.R. No. L-51254 June 11, 1981

MARCOPPER MINING CORPORATION, petitioner,

vs.
THE HONORABLE BLAS OPLE and AMADO INCIONG, Minister and Deputy Minister
of Labor, respectively, and MARCOPPER EMPLOYEES LABOR UNION
(NAMAWU) respondents.

FERNANDO, C.J.:

It is in pursuance of the constitutional principle of the enjoyment by the people of a decent

standard of living 1 that a Presidential Decree 2 was issued by way of response to the ravages of
world wide inflation, causing extreme difficulty to laborers and wage-earners. It reads thus:
"Section 1. All employers are hereby required to pay all their employees receiving a basic salary
of not more than P 1,000 a month, regardless of the nature of their employment, a 13th-month
pay not later than December 24 of every year. Sec- 2. Employers already paying their employees
a 13th-month pay or its equivalent are not concerned by this Decree. SEC. 3. This Decree shall
take effect immediately.3 Relying on the above Decree, private respondent Marcopper
Employees Labor Union filed a complaint before the National Labor Relations Commission for
the payment of the 13th-month salary. Petitioner Marcopper Mining Corporation opposed on the
ground that in view of its then existing collective bargaining agreement adopted on October 8,
1977 which granted the employees belonging to private respondent midyear and year end
bonuses, it was exempt from the operation of such Decree. Its opposition prevailed with a
regional director, who, on March 29, 1979, dismissed the complaint. On appeal, then Deputy
Minister of Labor, respondent Amado G. Inciong, on July 25, 1979, reversed such order. He
explicitly stated that the bonuses under the collective bargaining agreement are "by their very
nature of a different character from the 13th month pay ordained by the Decree." He went on to
say: "Foremost to consider and in point is, Section 10 of the Rules and Regulations
Implementing PD No. 851 which deals on prohibition against reduction or elimination of the
benefits provided by the Decree. Said section provides as follows: 'Nothing herein shall be
construed to authorize any employer to eliminate, or diminish in any way, supplements, or other
employee benefits or favorable practice being enjoyed by the employee at the time of the
promulgation of this issuance.' Both the mid-year and year-end bonuses are benefits being
enjoyed by complainants at the time of the promulgation of PD 851, hence, covered by the
foregoing prohibition. In fact, said benefits were negotiated and re-incorporated in subsequent
collective bargaining agreement which gives them a character separate and distinct from the 13th
month pay. By reason of the collective bargaining agreement, complainants acquired a vested
right over such benefits on a mutual and contractual understanding. Any subsequent grant of
benefit, extended by law, will not operate to disturb the existing agreement and to construe
otherwise will result to the prejudice of the workers. If we must consider deeper the grant of the
bonuses, we will find that it is a voluntary gesture on the part of the respondent irrespective of
the amount of salary of the employees and does not form part of their pay. It is likewise
conditional in that the same could be availed of only when profit in business has been realized.
Once profit is declared, then bonuses must be automatically granted in the amount to be
determined by the company. On the other hand, the grant of 13th month pay to employees is
mandatory, irrespective of loss or profit by the company." 4

Hence, this petition. It was alleged that there was a grave abuse of discretion as under the term of
the Decree, in relation to a section cited, 5 petitioner is excluded from its coverage and that there
was lack of jurisdiction of respondent Inciong. In the answer of public respondents submitted by
Solicitor General Estelito Mendoza, 6 the above contentions were characterized as devoid of
merit. Reference was made to the inability of petitioner to demonstrate that it clearly falls under
the exempting clause of the above Decree, citing not only the section of the implementing rules
and regulations relied upon by petitioner, but a later section which reads thus: "Nothing herein
shall be construed to authorize any employer to eliminate or diminish in any way, supplements,
or other employee benefits or favorable practice being enjoyed by the employee at the time of
promulgation of this issuance." 7 The answer discussed the matter further thus: "In the case at
bar, the payment of the mid-year and Christmas bonuses in those years when petitioner's
operation is profitable is a matter of contractual obligation on the part of the petitioner. It should
be noted that the CBA clearly states that petitioner 'shall grant mid-year and end-year bonuses to
employees following years in which it had profitable operations.' The only tiling that is left to the
discretion of petitioner is the amount of such mid-year and end-year bonuses; but there is no
question that petitioner has to grant such bonuses. Since said bonuses granted in fulfillment of
petitioner's contractual obligations under the CBA are employee benefits enjoyed by petitioner's
employees at the time PD 851 took effect and since the payment of such bonuses is obligatory on
the part of petitioner, the petitioner does not come under the exempting clause of PD 851 and it
has to pay its employees the 13th month pay required under said Decree. In other words, all
employee monetary benefits provided in the CBA are in addition to, and may not be taken as
substitute for, the employee benefits granted by law, otherwise there would be no reason for the
execution of the CBA." 8

The petition must be dismissed. Such a conclusion is unavoidable in the fight of the mandatory
language of the Presidential Decree, the conditional character of the contractual obligation under
the collective bargaining agreement, and on the construction that should be fastened on statutes
or decrees intended to promote social and economic rights.

1. The Decree is specific and mandatory. Employers, without exception, are required to pay their
employees receiving a basic salary of not more than P1,000 a month irrespective of the nature of
employment, a 13th-month pay not later than December 24 of every year. That is the plain and
specific command. That is an obligation imposed by law and must be obeyed. Where the
employers, however, actually grant such for the 13th-month pay they could be exempted from
the operation of the Decree. To fall within the exempting clause, it must be shown that there is
such actual payment. There is no such showing here. Instead, reliance of petitioner corporation is
on a clause in the existing bargaining contract which in its opinion amounts to the fulfillment of
its duty under the Decree. The memorandum of Solicitor General Mendoza makes clear why
such a submission is unwarranted. Thus: "In the case at bar, the payment of mid-year and
Christmas bonuses in the years when petitioner's operation is profitable is a matter of contractual
obligation on the part of the petitioner. The only thing that is left to the discretion of petitioner is
the amount of such mid-year and end-year bonuses; but there is no question that petitioner has to
grant such bonuses. Since said bonuses granted in fulfillment of petitioner's contractual
obligations under the CBA are employee benefits enjoyed by petitioner's employees at the time
PD No. 851 took effect and since the payment of such bonuses is obligatory on the part of the
petitioner, then the petitioner does not come under the exempting clause of PD No. 851 and it
has to pay its employees the 13th month pay required under said Decree. On the other hand, if
the company earns no profit in a particular year, then it is not obligated, under the CBA, to grant
bonuses to its employees. If it grants bonuses notwithstanding the fact that it is not in profitable
operation, the grant thereof is a purely voluntary gesture on the part of the company, and the
company is then entitled to credit the same as the 13th month salary under the Decree. In other
words, all employee monetary benefits provided in the CBA are in addition to, and may not be
taken as substitute for, the employee benefits granted by law, otherwise there would be no reason
for the execution of the CBA." 9 The Solicitor General then went on to state that a bonus under
the collective bargaining agreement and the 13th-month pay are of different category. For while
the former is an obligation created by contract, the other is created by law; while the former is
contractual in character, only if there are profits, the latter is absolute and mandatory on the part
of the employer; while the former applies to all rank and file workers, the latter benefits only
those earning P1,000 or less a month. It is clear, therefore, that a 13th-month pay is in the nature
of wages while the bonuses provided for are mere supplements or fringe benefits. Further the
memorandum continues: "The 13th month pay is, by its nature and purpose, part of wages,
considering the express recitals in PD No. 851 that it is necessary to protect the level of real
wages from the ravage of world-wide inflation and there has been no increase in the legal
minimum wage rates since 1970' ... CBA bonuses and benefits are not part of wages but merely
supplements or fringe benefits." 10 On the authority of Atok-Big Wedge Association v. Atok-Big
Wedge Co. 11it is contended, and correctly, by the Solicitor General that clearly "the bonuses and
other benefits granted to the employees by the petitioner under the current CBA are
'supplements' and do not form part of wages." 12

2. There is no vagueness in the Decree. At the most, there could be ambiguity by the use of the
word "equivalent" in Section 2 thereof. If it were a 13th-month pay, then obviously petitioner is
entitled to be exempted. Thus it is understandable why it made much of Section 3 of the
implementing rules and regulations, referring, as already noted, to a Christmas bonus as well as a
mid-year bonus. That would be, though, as was pointed out by the Solicitor General, to ignore an
even clearer provision in the implementing rules, namely Section 10 thereof. Thus: "Nothing
herein shall be construed to authorize any employer to eliminate or diminish in any way,
supplements, or other employee benefits or favorable practice being enjoyed by the employee at
the time of promulgation of this issuance." 13 The purpose that animated the Decree is thus
rendered even clearer. It was issued in the expectation that whatever employee benefits or
favorable practice being enjoyed by the employee" when it was promulgated should not be
eliminated or diminished. If it were otherwise, it would lose its character as a measure intended
to cope with the problems that the low salaried employees face in view of the inflationary state
of the economy. The situation, instead of improving, has grown worse the past six years, the
Decree being issued in 1975. It would be, therefore, to defeat the purpose of the Decree if the
contention urged by petitioner would be sustained.
3. The conclusion reached by the Court receives an even more compelling justification from the
Constitution. The 1935 Constitution enshrined the concepts of social justice 14 and prosection to
labor. 15 Even then, there was a realization of their importance in vitalizing a regime of liberty
not just as immunity from governmental restraint but as the assumption by the State of an
obligation to assure a life of dignity for all, especially the poor and the needy. The expanded
social justice 16 and protection to labor provisions 17of the present Constitution lend added
emphasis to the concern ' for social and economic rights. The memorandum of the Solicitor
General quoted this excerpt from La Mallorca v. Workmen's Compensation Commission:" 18 A
decisive consideration, much more compelling in character, precludes acceptance of the view
now pressed by petitioner. Time and time again, we have stressed that statutes intended to
benefit labor should be accorded the most hospitable scope to attain their dominant purpose.
Thereby fidelity is manifested to the constitutional policy embodied in the principle of social
justice and the mandate of protection to labor. They cannot be made to yield a meaning that
would emasculate their terms or allow evasion. To do so could even give rise to serious
constitutional questions, for the legislative body would then be deemed to have enacted measures
which, rather than translate into reality such worthy constitutional objective, would frustrate it.
Such an approach certainly cannot find any favor with courts, if the oft-repeated doctrine that no
interpretation is allowable that would bring doubts as to the validity of any statutory provision
for repugnancy to the fundamental law were to be, as it should be, respected." 19 That was so
under the 1935 Constitution. Such an approach is even more valid now. As a matter of fact, in
the first case after the applicability of the 1973 Constitution where social and economic rights
were involved, this Court in Alfanta v. Noe, 20 through Justice Antonio, stated: "In the
environment of a new social order We can do no less. Thus, under the new Constitution, property
ownership has been impressed with a social function. This implies that the owner has the
obligation to use his property not only to benefit himself but society as well. Hence, it provides
under Section 6 of Article II thereof, that in the promotion of social justice, the State 'shall
regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and
equitably diffuse property ownership and profits.' The Constitution also ensures that the worker
shall have a just and living wage which should assure for himself and his family an existence
worthy of human dignity and give him opportunities for a better life." 21 Such a sentiment finds
expression in subsequent opinions. 22

4. The second point raised in the petition is the allegation that respondent Deputy Minister was
without jurisdiction. This contention on its face clearly lacks support in law. As far back
as Philippine American Management & Financing Co., Inc. v. Management & Supervisors
Association of the Philippine-American Management & Financing Co., Inc., 23 decided in 1972,
this Court left no doubt as to the labor tribunal, then the Court of Industrial Relations, being
vested with competence to pass upon a declaratory relief petition for the interpretation of a
collective bargaining agreement, not a Court of First Instance. There is no justification for a
departure from the principle which was announced in the light of a careful study of previous
decisions and precisely enunciated to 24 The allegation that is a settle all doubts on the matter. hi
money claim falsifies reality. What is involved here and what persuaded this Court to give due
course to this petition is that a serious question of the applicability of Presidential Decree No.
851 was raised in the light of the stipulation in the collective bargaining contract between
petitioner and respondent union as to the mid-year and Christmas bonus.
WHEREFORE, the petition is dismissed for lack of merit. No costs.
 55. NFSW v. Ovejera, G.R. No L-59743 May 31 1982

G.R. No. L-59743 May 31 1982

NATIONAL FEDERATION OF SUGAR WORKERS (NFSW), petitioner,

vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE LA CARLOTA (CAC),
COL. ROGELIO DEINLA, as Provincial Commander, 3311st P.C. Command, Negros
Occidental, respondents.

PLANA, J:

This is a petition for prohibition seeking to annul the decision dated February 20, 1982 of Labor
Arbiter Ethelwoldo R. Ovejera of the National Labor Relations Commission (NLRC) with
station at the Regional Arbitration Branch No. VI-A, Bacolod City, which, among others,
declared illegal the ongoing strike of the National Federation of Sugar Workers (NFSW) at the
Central Azucarera de la Carlota (CAC), and to restrain the implementation thereof.

I. FACTS

1. NFSW has been the bargaining agent of CAC rank and file employees (about 1200 of more
than 2000 personnel) and has concluded with CAC a collective bargaining agreement effective
February 16, 1981 February 15, 1984. Under Art. VII, Sec. 5 of the said CBA

Bonuses The parties also agree to maintain the present practice on the grant of
Christmas bonus, milling bonus, and amelioration bonus to the extent as the latter
is required by law.

The Christmas and milling bonuses amount to 1- months' salary.

2. On November 28, 1981, NFSW struck allegedly to compel the payment of the 13th month pay
under PD 851, in addition to the Christmas, milling and amelioration bonuses being enjoyed by
CAC workers.

3. To settle the strike, a compromise agreement was concluded between CAC and NFSW on
November 30,1981. Under paragraph 4 thereof

The parties agree to abide by the final decision of the Supreme Court in any case
involving the 13th Month Pay Law if it is clearly held that the employer is liable
to pay a 13th month pay separate and distinct from the bonuses already given.

4. As of November 30, 1981, G.R. No. 51254 (Marcopper Mining Corp. vs. Blas Ople and
Amado Inciong, Minister and Deputy Minister of Labor, respectively, and Marcopper Employees
Labor Union, Petition for certiorari and Prohibition) was still pending in the Supreme Court. The
Petition had been dismissed on June 11, 1981 on the vote of seven Justices. 1 A motion for
reconsideration thereafter filed was denied in a resolution dated December 15, 1981, with only
five Justices voting for denial. (3 dissented; 2 reserved their votes: 4 did not take part.)

On December 18, 1981 the decision of June 11, 1981 having become final and executory
entry of judgment was made.

5. After the Marcopper decision had become final, NFSW renewed its demand that CAC give
the 13th month pay. CAC refused.

6. On January 22, 1982, NFSW filed with the Ministry of Labor and Employment (MOLE)
Regional Office in Bacolod City a notice to strike based on non-payment of the 13th month pay.
Six days after, NFSW struck.

7. One day after the commencement of the strike, or on January 29, 1982, a report of the strike-
vote was filed by NFSW with MOLE.

8. On February 8, 1982, CAC filed a petition (R.A.B. Case No. 0110-82) with the Regional
Arbitration Branch VI-A, MOLE, at Bacolod City to declare the strike illegal, principally for
being violative of Batas Pambansa Blg. 130, that is, the strike was declared before the expiration
of the 15-day cooling-off period for unfair labor practice (ULP) strikes, and the strike was staged
before the lapse of seven days from the submission to MOLE of the result of the strike-vote.

9. After the submission of position papers and hearing, Labor Arbiter Ovejera declared the
NFSW strike illegal. The dispositive part of his decision dated February 20, 1982 reads:

Wherefore, premises considered, judgment is hereby rendered:

1. Declaring the strike commenced by NFSW on January 28, 1982, illegal,

2. Directing the Central to resume operations immediately upon receipt hereof;

3. Directing the Central to accept back to work all employees appearing in its
payroll as of January 28, 1982 except those covered by the February 1, 1982
memorandum on preventive suspension but without prejudice to the said
employees' instituting appropriate actions before this Ministry relative to
whatever causes of action they may have obtained proceeding from said
memorandum;

4. Directing the Central to pay effective from the date of resumption of operations
the salaries of those to be placed on preventive suspension as per February 1,
1982 memorandum during their period of preventive suspension; and

5. Directing, in view of the finding that the subject strike is illegal, NFSW, its
officers, members, as well as sympathizers to immediately desist from committing
acts that may impair or impede the milling operations of the Central
 The law enforcement authorities are hereby requested to assist in the peaceful
enforcement and implementation of this Decision.

SO ORDERED.

10. On February 26, 1982, the NFSW by passing the NLRC filed the instant Petition for
prohibition alleging that Labor Arbiter Ovejera, CAC and the PC Provincial Commander of
Negros Occidental were threatening to immediately enforce the February 20, 1982 decision
which would violate fundamental rights of the petitioner, and praying that

WHEREFORE, on the foregoing considerations, it is prayed of the Honorable

Court that on the Petition for Preliminary Injunction, an order, after hearing,
issue:

1. Restraining implementation or enforcement of the Decision of February 20,

1982;

2. Enjoining respondents to refrain from the threatened acts violative of the rights
of strikers and peaceful picketers;

3. Requiring maintenance of the status quo as of February 20, 1982, until further
orders of the Court;

and on the Main Petition, judgment be rendered after hearing.

1. Declaring the Decision of February 2O, l982 null and void;

2. Making the preliminary injunction permanent;

3. Awarding such other relief as may be just in the premises.

11. Hearing was held, after which the parties submitted their memoranda. No restraining order
was issued.

II ISSUES

The parties have raised a number of issues, including some procedural points. However,
considering their relative importance and the impact of their resolution on ongoing labor disputes
in a number of industry sectors, we have decided in the interest of expediency and dispatch
to brush aside non-substantial items and reduce the remaining issues to but two fundamental
ones:

1. Whether the strike declared by NFSW is illegal, the resolution of which mainly depends on the
mandatory or directory character of the cooling-off period and the 7-day strike ban after report to
MOLE of the result of a strike-vote, as prescribed in the Labor Code.
2. Whether under Presidential Decree 851 (13th Month Pay Law), CAC is obliged to give its
workers a 13th month salary in addition to Christmas, milling and amelioration bonuses, the
aggregate of which admittedly exceeds by far the disputed 13th month pay. (See petitioner's
memorandum of April 12, 1982, p. 2; CAC memorandum of April 2, 1982, pp. 3-4.) Resolution
of this issue requires an examination of the thrusts and application of PD 851.

III. DISCUSSION

1. Articles 264 and 265 of the Labor Code, insofar as pertinent, read:

Art. 264, Strikes, picketing and lockouts. ...

(c) In cases of bargaining deadlocks, the certified or duly recognized bargaining

representative may file a notice of strike with the Ministry (of Labor and
Employment) at least thirty (30) days before the intended date thereof. In cases of
unfair labor practices, the period of notice shall be shortened to fifteen (15) days;
...

(d) During the cooling-off period, it shall be the duty of the voluntary
sttlement. Should the dispute remain unsettled until the lapse of the requisite
number of days from the mandatory filing of the notice, the labor union may
strike or the employer may declare a lockout.

(f) A decision to declae a strike must be approved by at least two-thirds (2/3) of

the total union membership in the bargaining unit concerened by secret ballots in
meetings or referenda. A decision to declae a lockout must be approved by at least
two-thirds (2/3) of the board of direcotrs of the employer corporation or
association or of the partners in a partnership obtained by secret ballot in a
meeting called for the purpose. the decision shall be valid for the duration of the
dispute based on substantially the same grounds considered when the strike or
lockout vote was taken . The Ministry, may at its own intitiative or upon the
request of any affected party, supervise the conduct of the secret balloting. In
every case, the union of the employer shall furnish the Ministry the results of the
voting at least seven (7) days before the intended strike or lockout, subject to the
cooling-off period herein provided. (Emphasis supplied).

ART. 265. Prohibited activities. It shall be unlawful for any labor organization
or employer to declare a strike or lockout without first having bargained
collectively in accordance with Title VII of this Book or without first having filed
the notice required in the preceding Article or without the necessary strike or
lockout vote first having been obtained and reported to the Ministry.

It shall likewise be unlawful to declare a strike or lockout after assumption of

jurisdiction by the President or the Minister or after certification or submission of
the dispute to compulsory or voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or lockout. (Emphasis supplied.)
(a) Language of the law. The foregoing provisions hardly leave any room for doubt that the
cooling-off period in Art. 264(c) and the 7-day strike ban after the strike-vote report prescribed
in Art. 264(f) were meant to be, and should be deemed, mandatory.

When the law says "the labor union may strike" should the dispute "remain unsettled until the
lapse of the requisite number of days (cooling-off period) from the filing of the notice," the
unmistakable implication is that the union may not strike before the lapse of the cooling-off
period. Similarly, the mandatory character of the 7-day strike ban after the report on the strike-
vote is manifest in the provision that "in every case," the union shall furnish the MOLE with the
results of the voting "at least seven (7) days before the intended strike, subject to the (prescribed)
cooling-off period." It must be stressed that the requirements of cooling-off period and 7-day
strike ban must both be complied with, although the labor union may take a strike vote and report
the same within the statutory cooling-off period.

If only the filing of the strike notice and the strike-vote report would be deemed mandatory, but
not the waiting periods so specifically and emphatically prescribed by law,
the purposes (hereafter discussed) for which the filing of the strike notice and strike-vote report
is required would not be achieved, as when a strike is declared immediately after a strike notice
is served, or when as in the instant case the strike-vote report is filed with MOLE after the
strike had actually commenced Such interpretation of the law ought not and cannot be
countenanced. It would indeed be self-defeating for the law to imperatively require the filing on
a strike notice and strike-vote report without at the same time making the prescribed waiting
periods mandatory.

(b) Purposes of strike notice and strike-vote report. In requiring a strike notice and a cooling-
off period, the avowed intent of the law is to provide an opportunity for mediation and
conciliation. It thus directs the MOLE "to exert all efforts at mediation and conciliation to effect
a voluntary settlement" during the cooling-off period . As applied to the CAC-NFSW dispute
regarding the 13th month pay, MOLE intervention could have possibly induced CAC
to provisionally give the 13th month pay in order to avert great business loss arising from the
project strike, without prejudice to the subsequent resolution of the legal dispute by competent
authorities; or mediation/conciliation could have convinced NFSW to at least postpone the
intended strike so as to avoid great waste and loss to the sugar central, the sugar planters and the
sugar workers themselves, if the strike would coincide with the mining season.

So, too, the 7-day strike-vote report is not without a purpose. As pointed out by the Solicitor
General

Many disastrous strikes have been staged in the past based merely on the
insistence of minority groups within the union. The submission of the report gives
assurance that a strike vote has been taken and that, if the report concerning it is
false, the majority of the members can take appropriate remedy before it is too
late. (Answer of public respondents, pp. 17-18.)

If the purpose of the required strike notice and strike-vote report are to be achieved, the periods
prescribed for their attainment must, as aforesaid, be deemed mandatory.,
 ... when a fair interpretation of the statute, which directs acts or proceedings to be
done in a certain way, shows the legislature intended a compliance with such
provision to be essential to the validity of the act or proceeding, or when some
antecedent and prerequisite conditions must exist prior to the exercise of power or
must be performed before certain other powers can be exercised, the statute must
be regarded as mandatory. So it has been held that, when a statute is founded on
public policy [such as the policy to encourage voluntary settlement of disputes
without resorting to strikes], those to whom it applies should not be permitted to
waive its provisions. (82 C.J.S. 873-874. Emphasis supplied.)

(c) Waiting period after strike notice and strike-vote report, valid regulation of right to strike.
To quote Justice Jackson in International Union vs. Wisconsin Employment Relations Board,
336 U.S. 245, at 259

The right to strike, because of its more serious impact upon the public interest, is
more vulnerable to regulation than the right to organize and select representatives
for lawful purposes of collective bargaining ...

The cooling-off period and the 7-day strike ban after the filing of a strike- vote report, as
prescribed in Art. 264 of the Labor Code, are reasonable restrictions and their imposition is
essential to attain the legitimate policy objectives embodied in the law. We hold that they
constitute a valid exercise of the police power of the state.

(d) State policy on amicable settlement of criminal liability. Petitioner contends that since the
non-compliance (with PD 851) imputed to CAC is an unfair labor practice which is an offense
against the state, the cooling-off period provided in the Labor Code would not apply, as it does
not apply to ULP strikes. It is argued that mediation or conciliation in order to settle a criminal
offense is not allowed.

In the first place, it is at best unclear whether the refusal of CAC to give a 13th month pay to
NFSW constitutes a criminal act. Under Sec. 9 of the Rules and regulations Implementing
Presidential Decree No. 851

Non-payment of the thirteenth-month pay provided by the Decree and these rules
shall be treated as money claims cases and shall be processed in accordance with
the Rules Implementing the Labor Code of the Philippines and the Rules of the
National Labor Relations Commission.

Secondly, the possible dispute settlement, either permanent or temporary, could

very well be along legally permissible lines, as indicated in (b) above or assume
the form of measures designed to abort the intended strike, rather than
compromise criminal liability, if any. Finally, amicable settlement of criminal
liability is not inexorably forbidden by law. Such settlement is valid when the law
itself clearly authorizes it. In the case of a dispute on the payment of the 13th
month pay, we are not prepared to say that its voluntary settlement is not
authorized by the terms of Art. 264(e) of the Labor Code, which makes it the duty
 of the MOLE to exert all efforts at mediation and conciliation to effect a voluntary
settlement of labor disputes.

(e) NFSW strike is illegal. The NFSW declared the strike six (6) days after
filing a strike notice, i.e., before the lapse of the mandatory cooling-off period. It
also failed to file with the MOLE beforelaunching the strike a report on the strike-
vote, when it should have filed such report "at least seven (7) days before the
intended strike." Under the circumstances, we are perforce constrained to
conclude that the strike staged by petitioner is not in conformity with law. This
conclusion makes it unnecessary for us to determine whether the pendency of an
arbitration case against CAC on the same issue of payment of 13th month pay
[R.A.B No. 512-81, Regional Arbitration Branch No. VI-A, NLRC, Bacolod City,
in which the National Congress of Unions in the Sugar Industry of the Philippines
(NACUSIP) and a number of CAC workers are the complainants, with NFSW as
Intervenor seeking the dismissal of the arbitration case as regards unnamed CAC
rank and file employees] has rendered illegal the above strike under Art. 265 of
the Labor Code which provides:

It shall likewise be unlawful to declare a strike or lockout after assumption of

jurisdiction by the President or the Minister, or after certification or submission of
the dispute to compulsory or voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or lockout. (Emphasis supplied.)

(2) The Second Issue. At bottom, the NFSW strike arose from a dispute on the meaning and
application of PD 851, with NFSW claiming entitlement to a 13th month pay on top of bonuses
given by CAC to its workers, as against the diametrically opposite stance of CAC. Since the
strike was just an offshoot of the said dispute, a simple decision on the legality or illegality of the
strike would not spell the end of the NFSW-CAC labor dispute. And considering further that
there are other disputes and strikes actual and impending involving the interpretation and
application of PD 851, it is important for this Court to definitively resolve the problem: whether
under PD 851, CAC is obliged to give its workers a 13th month salary in addition to Christmas,
milling and amelioration bonuses stipulated in a collective bargaining agreement amounting to
more than a month's pay.

Keenly sensitive to the needs of the workingmen, yet mindful of the mounting production cost
that are the woe of capital which provides employment to labor, President Ferdinand E. Marcos
issued Presidential Decree No. 851 on 16 December 1975. Thereunder, "all employers are
hereby required to pay salary of not more than all their employees receiving a basic P1,000 a
month, regardless of the nature of their employment, a 13th month pay not later than December
24 of every year." Exempted from the obligation however are:

Employers already paying their employees a 13th month pay or its equivalent ...
(Section 2.)

The evident intention of the law, as revealed by the law itself, was to grant an additional income
in the form of a 13th month pay to employees not already receiving the same. Otherwise put, the
intention was to grant some relief not to all workers but only to the unfortunate ones not
actually paid a 13th month salary or what amounts to it, by whatever name called; but it was not
envisioned that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out of pure generosity or on the basis
of a binding agreement and, in the latter ease, regardless of the conditional character of the grant
(such as making the payment dependent on profit), so long as there is actual payment. Otherwise,
what was conceived to be a 13th month salary would in effect become a 14th or possibly 15th
month pay.

This view is justified by the law itself which makes no distinction in the grant of exemption:
"Employers already paying their employees a 13th month pay or its equivalent are not covered
by this Decree." (P.D. 851.)

The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of said law
reinforce this stand. Under Section 3(e) thereof

The term "its equivalent" ... shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash bonuses amounting to not less than
1/12th of the basic salary but shall not include cash and stock dividends, cost of
living allowances and all other allowances regularly enjoyed by the employee, as
well as non-monetary benefits. Where an employer pays less than 1/12th of the
employee's basic salary, the employer shall pay the difference." (Italics supplied.)

Having been issued by the agency charged with the implementation of PD 851 as its
contemporaneous interpretation of the law, the quoted rule should be accorded great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual
bonuses for the purpose of determining liability for the 13th month pay. To require employers
(already giving their employees a 13th month salary or its equivalent) to give a second 13th
month pay would be unfair and productive of undesirable results. To the employer who had
acceded and is already bound to give bonuses to his employees, the additional burden of a 13th
month pay would amount to a penalty for his munificence or liberality. The probable reaction of
one so circumstance would be to withdraw the bonuses or resist further voluntary grants for fear
that if and when a law is passed giving the same benefits, his prior concessions might not be
given due credit; and this negative attitude would have an adverse impact on the employees.

In the case at bar, the NFSW-CAC collective bargaining agreement provides for the grant to
CAC workers of Christmas bonus, milling bonus and amelioration bonus, the aggregate of which
is very much more than a worker's monthly pay. When a dispute arose last year as to whether
CAC workers receiving the stipulated bonuses would additionally be entitled to a 13th month
pay, NFSW and CAC concluded a compromise agreement by which they

agree(d) to abide by the final decision of the Supreme Court in any case involving
the 13th Month Pay Law if it is clearly held that the employer is liable to pay a
13th month pay separate and distinct from the bonuses already given.
When this agreement was forged on November 30,1981, the original decision dismissing the
petition in the aforecited Marcopper case had already been promulgated by this Court. On the
votes of only 7 Justices, including the distinguished Chief Justice, the petition of Marcopper
Mining Corp. seeking to annul the decision of Labor Deputy Minister Amado Inciong granting a
13th month pay to Marcopper employees (in addition to mid- year and Christmas bonuses under
a CBA) had been dismissed. But a motion for reconsideration filed by Marcopper was pending as
of November 30, 1981. In December 1981, the original decision was affirmed when this Court
finally denied the motion for reconsideration. But the resolution of denial was supported by the
votes of only 5 Justices. The Marcopper decision is therefore a Court decision but without the
necessary eight votes to be doctrinal. This being so, it cannot be said that the Marcopper decision
"clearly held" that "the employer is liable to pay a 13th month pay separate and distinct from the
bonuses already given," within the meaning of the NFSW-CAC compromise agreement. At any
rate, in view of the rulings made herein, NFSW cannot insist on its claim that its members are
entitled to a 13th month pay in addition to the bonuses already paid by CAC. WHEREFORE, the
petition is dismissed for lack of merit. No costs.

SO ORDERED.
 56. Kamaya Point Hotel v. NLRc, G.R. No. 75289 August 31, 1989

G.R. No. 75289 August 31, 1989

KAMAYA POINT HOTEL, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, FEDERATION OF FREE
WORKERS and MEMIA QUIAMBAO, respondents.

FERNAN, C.J.:

This petition for review on certiorari filed by herein petitioner Kamaya Point Hotel seeks to set
aside the decision 1 of the National Labor Relations Commission dated June 25, 1986 in NLRC
Case No. RAB III-4-1191-83 which affirmed with modification the decision of the Labor Arbiter
dated May 31, 1984.

Respondent Memia Quiambao with thirty others who are members of private respondent
Federation of Free Workers (FFW) were employed by petitioner as hotel crew. On the basis of
the profitability of the company's business operations, management granted a 14th month pay to
its employees starting in 1979. In January 1982, operations ceased to give way to the hotel's
conversion into a training center for Libyan scholars. However, due to technical and financing
problems, the Libyans pre-terminated the program on July 7, 1982, leaving petitioner without
any business, aside from the fact that it was not paid for the use of the hotel premises and in
addition had to undertake repairs of the premises damaged by the Libyan students. All in all
petitioner allegedly suffered losses amounting to P2 million.

Although petitioner reopened the hotel premises to the public, it was not able to pick-up its lost
patronage. In a couple of months it effected a retrenchment program until finally on January 7,
1984, it totally closed its business. 2

On April 18, 1983, private respondent Federation of Free Workers (FFW); a legitimate labor
organization, filed with the Ministry of Labor and Employment, Bataan Provincial Office,
Bataan Export Processing Zone, Mariveles, Bataan, a complaint against petitioner for illegal
suspension, violation of the CBA and non-payment of the 14th month pay. 3 Records however
show that the case was submitted for decision on the sole issue of alleged non-payment of the
14th month pay for the year 1982 .4

After the hearing, Executive Labor Arbiter Francisco M. Jose, Jr. rendered a decision dated May
31, 1984, the dispositive portion of which reads:

WHEREFORE, IN VIEW OF ALL THE FOREGOING, judgment is hereby

rendered:
 1. Ordering the respondent Kamaya Point Hotel to pay the 14th month pay for
1982 of all its rank and file employees;

2. Ordering the same respondent to pay the monetary equivalent of the benefits
mentioned in Section 6 of Article XII and Sections I and 2 of Article XII of the
then existing Collective Bargaining Agreement which will expire on 1 July
1984. 5

On appeal, the National Labor Relations Commission (NLRC) in its decision dated June 25,
1986 set aside the award of monetary benefits under the CBA but affirmed the grant of the 14th
month pay adopting the Labor Arbiter's reasoning, thus:

xxx xxx xxx

We agree with respondent that there is no law granting a 14th month pay. We
likewise agree with respondent that there is no provision in the Collective
Bargaining Agreement granting a 14th month pay. Despite all these, however, we
believe that individual complainants herein are still entitled to the 14th month pay
for 1982 because to our mind, the granting of this 14th month pay has already
ripened into a company practice which respondent company cannot withdraw
unilaterally. This 14th month pay is now an existing benefit which cannot be
withdrawn without violating article 100 of the Labor Code. To allow its
withdrawal now would certainly amount to a diminution of existing benefits
which complainants are presently enjoying. Premised on the above, the individual
complainants are entitled to the 14th month pay for 1982 and respondent should
pay the same. (Emphasis supplied) 6

Before this Court, petitioner now seeks to reverse the decision of the NLRC arguing that the
latter tribunal committed grave abuse of discretion when it adopted the Labor Arbiter's decision
saying that the 14th month pay cannot be withdrawn without violating Article 100 of the Labor
Code which states:

Prohibition against elimination or diminution of benefits.- Nothing in this Book

shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.

We find it difficult to comprehend why the NLRC and the Labor Arbiter, despite their admission
that the 14th month pay has no contractual or legal basis, still chose to rule in favor of private
respondents. It is patently obvious that Article 100 is clearly without applicability. The date of
effectivity of the Labor Code is May 1, 1974. In the case at bar, petitioner extended its 14th
month pay beginning 1979 until 1981. What is demanded is payment of the 14th month pay for
1982. Indubitably from these facts alone, Article 100 of the Labor Code cannot apply.

Moreover, there is no law that mandates the payment of the 14th month pay. This is emphasized
in the grant of exemption under Presidential Decree 851 (13th Month Pay Law) which states:
"Employers already paying their employees a 13th month pay or its equivalent are not covered
by this Decree." Necessarily then, only the 13th month pay is mandated. Having enjoyed the
additional income in the form of the 13th month pay, private respondents' insistence on the 14th
month pay for 1982 is already an unwarranted expansion of the liberality of the law.

Also contractually, as gleaned from the collective bargaining agreement between management
and the union, there is no stipulation as to such extra remuneration. Evidently, this omission is an
acknowledgment that such benefit is entirely contilagent or dependent on the profitability of the
company's operations.

Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous
in nature. The granting of the 14th month pay is a management prerogative which cannot be
forced upon the employer. It is something given in addition to what is ordinarily received by or
strictly due the recipient. It is a gratuity to which the recipient has no right to make a demand. 7

This Court is not prepared to compel petitioner to grant the 14th month pay solely because it has
allegedly ripened into a company practice" as the labor arbiter has put it. Having lost its catering
business derived from Libyan students, Kamaya Hotel should not be penalized for its previous
liberality.

An employer may not be obliged to assume a "double burden" of paying the 13th month pay in
addition to bonuses or other benefits aside from the employee's basic salaries or wages. 8
Restated differently, we rule that an employer may not be obliged to assume the onerous burden
of granting bonuses or other benefits aside from the employee's basic salaries or wages 8 in
addition to the required 13th month pay.

WHEREFORE, the petition is hereby GRANTED. The portion of the decision of the National
Labor Relations Commission dated June 25, 1986 ordering the payment of 14th month pay to
private respondents is set aside.

SO ORDERED.
 57. UST Faculty Union v. NLRC, G.R. No. 90445 October 2, 1990

G.R. No. 90445 October 2, 1990

UST FACULTY UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND UNIVERSITY OF SANTO
TOMAS, INC., respondents.

Eduardo J. Mario, Jr. for petitioner.

Abad, Leao & Associates for private respondent.

CORTS, J.:

The controversy, from which the case arose, has to do with the payment of the 13th month pay.

An understanding of the incidents that led to the filing of the instant petition is necessary to
resolve the basic issue raised.

To settle a labor dispute regarding the share of the faculty members in the increase in tuition fees
under Presidential Decree No. 451, the University of Santo Tomas and the UST Faculty Union,
represented by Dean (now Justice) Andres Narvasa and Professor (later, Court of Appeals
Justice) Cecilio Pe, respectively, entered into an agreement on March 25, 1985, which
provided inter alia:

1.0. Under this Agreement and the Collective Bargaining Agreement that the
parties shall eventually execute, UST shall grant to all its faculty members the
additional benefits specified in the succeeding paragraphs hereof, over and above
the benefits currently enjoyed by the said faculty members, which additional
benefits shall amount in the aggregate to P35,000,000.00, divided and receivable
over a period of three (3) years, within School Years 1985-1986, 1986-1987, and
1987-1988, it being explicitly understood and stipulated by both parties hereto
that UST's total commitments under and by virtue of this Agreement and the
Collective Bargaining Agreement to be hereafter executed, cannot and shall not
exceed nor be less than the amount of P35,000,000.00.

2.0. For School Year 1985-1986, UST shall grant the following:

xxx xxx xxx

2.3. Christmas gift of P2,000.00 each to all full-time faculty members i.e.,
those with an average assignment of at least 15 units in the current school year
provided that they have been employed for at least 12 months as of December 1,
 1985; and of P1,000.00 each to all part-time faculty members i.e., those with
an average teaching assignment of less than 15 units in the current school year
or faculty members employed for less than 12 months as of December 1, 1985;

xxx xxx xxx

3.0. For School Year 1986-1987 and 1987-1988, UST shall grant a salary increase
of not less than 10% in each year under the conditions set forth in paragraph 2.1
(see Annex A) and the same amount of benefits set out in paragraphs 2.2 to 2.5,
inclusive.

xxx xxx xxx

6.0. If at the end of School Year 1987-1988 there should be any unspent balance
of the aggregate of P35,000,000.00, such unspent balance shall be distributed
proportionately to all faculty members.

xxx xxx xxx

[Rollo, pp. 64-65.]

UST had not been previously paying its faculty members 13th month pay. Presidential Decree
No. 851, which took effect on December 16, 1975 provides:

Sec. 1. All employers are hereby required to pay all their employees receiving a
basic salary of not more than P1,000 a month, regardless of the nature of the
employment, a 13th month pay not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree.

Thus, since the faculty members of UST were receiving salaries greater than P1,000.00 a
month, UST was not required to pay them any 13th month pay.

On August 13, 1986, President Aquino issued Memorandum Order No. 28 which provided:
"Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all emloyers are
hereby required to pay all their rank-and-file employees a 13th month pay not later than
December 24 of every year."

Thus starting with the year 1986 the UST was required by law to pay its faculty members the
13th month pay. At the same time the faculty expected compliance with the Agreement of March
25, 1985 to pay Christmas gifts of P2,000.00 for full-time faculty members and P1,000.00 for
part-time faculty members. It was because of this that the controversy arose.
On December 3, 1986, Prof. Pe wrote a letter to the rector of the university expressing the faculty
members' apprehensions regarding reports "that the 13th month pay is being reduced by
deducting therefrom the amount of the said Christmas gift."

The rector replied the next day, December 4, 1986, by attaching a memorandum of its legal
counsel which concluded that "the Christmas bonus already paid to the employees shall be
credited as compliance with the 13th month pay."

On December 9, 1986, Prof. Pe wrote the rector another letter expressing the union's
disagreement with the university legal counsel's opinion and reiterating its position that the
Christmas gift is not a bonus and should be paid in addition to the 13th month pay. The letter
further stated:

It will be recalled that when you and Fr. Fermin and I in the presence of Alex
Tagaro met at the Quezon City Sports Club in March, 1985 and discussed
possible settlement of our then existing labor dispute in the University, it was
readily agreed that the University would pay the faculty members the aggregate
amount of P35 million demanded by the Union. It was only thereafter that we
proceeded, in a subsequent meeting held in the same place, to take up the matter
of allocation, that is, how the sum of P35 million would be paid and what form.
As finally agreed, the payment in cash would be made over a period of three (3)
years in the form of salary increases, increase of contribution to the Retirement
Fund, Christmas gift, hospitalization benefits, and educational benefits. All this
embodied in our Agreement dated March 25, 1985 which is part and parcel
(Annex "A") of our CBA dated May 17, 1986. So clear was our agreement that
the University's obligation was to pay the faculty members the total amount of
P35 million no more, no less (see par. 1.0 of the March 25 Agreement) that
it is expressly and explicitly stipulated therein that at the end of School Year
1987-88 there should be any unspent balance of the aggregate P35,000,000.00,
such unspent balance shall be distributed proportionately to all faculty members.
(See par. 6.0) The allocation was not intended to affect in any way the obligation
of the University to pay P35 million, no part of which should therefore be
considered as a bonus. [Rollo, p. 92.]

When UST did not heed the union's demand, the latter filed a complaint with the arbitration
branch of the NLRC on December 10, 1986 seeking to compel UST to pay the faculty members
the full amount of their 13th month pay and not to deduct therefrom the P2,000.00 or P1,000.00
given as Christmas gift.

On January 4, 1989, the Labor Arbiter rendered a decision dismissing the union's complaint. The
arbiter ruled that the Christmas gift may be considered an equivalent of the 13th month pay
pursuant to the rules implementing P.D. No. 851.

The union appealed to the NLRC. In a decision dated August 23, 1989, the NLRC dismissed the
appeal and affirmed the arbiter's decision. The union moved for reconsideration but this was
denied on September 29, 1989.
But the issue was ventilated not only before the NLRC. Individual faculty members filed
complaints before the Grievance Adjudication Committee created pursuant to the CBA. In a
unanimous decision dated March 27, 1987, the Committee ruled "that the P2,000/1,000 provided
for in Sec. 2.3 of Annex "A" of the CBA is not a Christmas Bonus creditable to the 13th month
pay but part of the P35 million which in the Compromise Agreement (Annex "A" of CBA) was
agreed upon by the Faculty Union and the respondent University as a settlement of all existing
claims of the Union." [Rollo, p. 86.] The decision was signed by Justice Eduardo P. Caguioa and
Dean Minerva A. Gonzales, representing the university, and Atty. Eduardo J. Marino, Jr. and
Prof. Ma. Melvyn P. Alamis, representing the union. Although its representatives signed the
committee decision, UST refused to accept the judgment.

These are the incidents that led to the filing of the instant petition. After comments were filed by
private and public respondents, and petitioner filed a reply, the petition was given due course on
February 27, 1990 and the parties were required to file their memoranda. After the parties
complied, the case was deemed submitted.

The leading case on the 13th month pay is National Federation of Sugar
Workers (NFSW) v. Ovejera, G.R. No. 59743, May 31, 1982, 114 SCRA 354, an en
banc decision. In concluding that "Christmas bonus," "milling bonus" and "amelioration bonus,"
the yearly total of which exceeds one month salary, may be considered as an "equivalent" of the
13th month pay under the rules implementing P.D. No. 851, the Court said:

The evident intention of the law, as revealed by the law itself, was to grant an
additional income in the form of a 13th month pay to employees not already
receiving the same. Otherwise put, the intention was to grant some relief not to
all workers but only to the unfortunate ones not actually paid a 13th month
salary or what amounts to it, by whatever name called; but it was not envisioned
that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out of pure generosity
or on the basis of a binding agreement and, in the latter case, regardless of the
conditional character of the grant (such as making the payment dependent on
profit), so long as there is actual payment. Otherwise, what was conceived to be a
13th month salary would in effect become a 14th or possibly 15th month pay.

This view is justified by the law itself which makes no distinction in the grant of
exemption: "Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree." (P.D. 851.)

The Rules Implementing P.D. 851 issued by MOLE immediately after the
adoption of said law reinforce this stand. Under Section 3(e) thereof

The term "its equivalent" . . . shall include Christmas bonus, mid-

year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic salary but
shall not include cash and stock dividends, cost of living
allowances and all other allowances regularly enjoyed by the
 employee, as well as non-monetary benefits. Where an employer
pays less than 1/12th of the employee's basic salary, the employer
shall pay the difference. (Emphasis supplied.)

Having been issued by the agency charged with the implementation of PD 851 as
its contemporaneous interpretation of the law, the quoted rule should be accorded
great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary

and contractual bonuses for the purpose of determining liability for the 13th
month pay. To require employers (already giving their employees a 13th month
salary or its equivalent) to give a second 13th month pay would be unfair and
productive of undesirable results. To the employer who had acceded and is
already bound to give bonuses to his employees, the additional burden of a 13th
month pay would amount to a penalty for his munificence of liberality. The
probable reaction of one so circumstanced would be to withdraw the bonuses or
resist further voluntary grants for fear that if and when a law is passed giving the
same benefits, his prior concessions might not be given due credit; and this
negative attitude would have an adverse impact on the employees. [At pp. 369-
370.]

Then, in Dole Philippines, Inc. v. Leogardo, Jr., G.R. No. 60018, October 23, 1982, 117 SCRA
938, the Court, using the holding in National Federation of Sugar Workers (NFSW) as yardstick,
said:

Tested against this norm, it becomes clear that the year-end productivity bonus
granted by petitioner to private respondents pursuant to their CBA is, in legal
contemplation, an integral part of their 13th month pay, notwithstanding its
conditional nature. When, therefore, petitioner, in order to comply with the
mandate of PD No. 851, credited the year-end productivity bonus as part of the
13th month pay and adopted the procedure of paying only the difference between
said bonus and the 1/12th of the worker's yearly basic salary, it acted well within
the letter and spirit of the law and its implementing rules. For in the event that "an
employer pays less than one-twelfth of the employees' basic salary, all that said
employer is required to do under the law is to pay the difference.

To hold otherwise would be to impose an unreasonable and undue burden upon

those employers who had demonstrated their sensitivity and concern for the
welfare of their employees. A contrary stance would indeed create an absurd
situation whereby an employer who started giving his employees the 13th month
pay only because of the unmistakable force of the law would be in a far better
position than another who, by his own magnanimity or by mutual agreement, had
long been extending to his employees the benefits contemplated under PD No.
851, by whatever nomenclature these benefits have come to be known. Indeed,
PD No. 851, a legislation benevolent in its purpose, never intended to bring about
such oppressive situation. [At pp. 943-944.]
In Brokenshire Memorial Hospital, Inc. v. NLRC, G.R. No. 69741, August 19, 1986, 143 SCRA
564, the Court, applying the rulings in National Federation of Sugar Workers (NFSW) and Dole,
held that an employer can not be made to bear the double burden of giving both 13th month pay
and Christmas bonus.

In providing for a 13th month pay, P.D. No. 851 intended to uniformly provide low-paid
employees with additional income. This is clear from the preamble to the decree which states:

WHEREAS, it is necessary to further protect the level of real wages from the
ravage of world-wide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since
1970;

WHEREAS, the Christmas season is an opportune time for society to show its
concern for the plight of the working masses so they may properly celebrate
Christmas and New Year.

The law wanted to uniformly provide low-paid employees with additional income
because on the average their salaries for twelve (12) months were grossly inadequate to
meet the expenses for day-to-day subsistence. This additional income took the form of an
extra month's salary to be given in December.

Thus, where such additional income, whether granted by the employer voluntarily or agreed
upon by the employer and the employees in a CBA, or its equivalent is already given by the
employer, whether in December or in some other date, the 13th month pay need not be given. If,
on the other hand, an amount less than that required by law is given, the employer has only to
pay his employees the deficiency. In both instances, the purpose of the law is met. The
modification introduced by Memorandum Order No. 28 did not substantially alter the purpose of
the law but expands the coverage of the 13th month pay, now to uniformly provide all rank-and-
file employees additional income.

Clearly, from the discussions in National Federation of Sugar

Workers (NFSW), Dole and Brokenshire, what the law wants to prevent is the imposition of a
"double burden" upon the employer who is already paying the equivalent of a 13th month pay.
The law exempts from the payment of the 13th month pay employers who are already giving its
equivalent. Otherwise the goal of uniformly providing employees with additional income will
not be met. Another inequity will result; while most employees will be paid thirteen (13) months
salary, some, by virtue of P.D. No. 851, will be receiving salary for fourteen (14) months.

The imposition of a "double burden" does not obtain in the present case even if UST pays both
the 13th month pay and the Christmas gift of P2,000.00 or P1,000.00. The Christmas gift is part
of the lump sum of P35M which the school has obliged itself to pay the faculty members in full
settlement of their share in the increase of tuition fees pursuant to P.D. No. 451. It is not a bonus,
incentive or additional income. Neither is the giving of the Christmas gift an act of liberality on
the part of the university. The Christmas gift was partial payment, according to a schedule
agreed upon by UST and the faculty union, of the university's outstanding obligation to the
faculty members for their share in the increase in tuition fees under P.D. No. 451. Once the
university has fully paid the P35M to the faculty members within the time frame and in the forms
specified in the agreement, its obligation to pay a Christmas gift of P2,000.00 or P1,000.00, as
part of the P35M compromise package, ceases. UST would then have to comply only with P.D.
No. 851 as amended by Memorandum Order No. 28 by paying the 13th month pay.

The Christmas gift is clearly not an "equivalent" of the 13th month pay under the rules
implementing P.D. No. 851. It is not akin to a "Christmas bonus," "mid-year bonus," "profit-
sharing payments" or "other cash bonuses." [Sec 3.]

[A] bonus is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of employer's business and made possible
the realization of profits. It is an act of generosity of the employer . . . It is also
granted by an enlightened employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. [Philippine Education
Co., Inc. v. Court of Industrial Relations, 92 Phil. 381, 385 (1952)].

The Christmas gift cannot therefore be compared to the "Christmas bonus," "milling bonus," and
"amelioration bonus" in National Federation of Sugar Workers (NFSW), the "year-end
productivity bonus" in Dole, and the "Christmas bonus" in Brokenshire which were actually
forms of incentives and additional income for the employees. Neither is it in the same category
as the fixed "transportation allowance" ruled as a form of bonus equivalent to the 13th month pay
in FEU Employees Labor Union v. FEU, G.R. Nos. 69224-5, December 18, 1987, 156 SCRA
629 (consolidated with Cebu Institute of Technology v. Ople, G.R. No. 58870, December 18,
1987, 156 SCRA 629, the lead case under which FEU is indexed.)

We are not saying that these cases are no longer good law. What we are saying is that the facts
and circumstances in the case now before us are at variance with those in the aforecited cases
and, hence, do not call for a disposition similar to that in said cases.

This is not the first time that the Court has ruled in this fashion. In United CMC Textile Workers
Union v. Valenzuela, G.R. No. 70763, April 30, 1987, 149 SCRA 424, we ruled that an employer
still has to give the 13th month pay under P.D. No. 851 on top of the Christmas bonus in
graduated amounts, based on length of service, provided in the CBA. In said case, the Court
distilled from the facts and circumstances the conclusion that the purpose of the bonus was to
reward employees for their length of service, a purpose different from that in P.D. No. 851 which
seeks to uniformly provide low-paid employees additional income.

To recapitulate, under P.D. No. 851, as amended by Memorandum Order No. 28, and the March
25, 1985 agreement, UST has to pay its faculty members both the 13th month pay and the
Christmas gift of P2,000.00 or P1,000.00 for the years 1986 and 1987. Payment of the Christmas
gift provided in the March 25, 1985 agreement cannot be credited as partial compliance with
P.D. No. 851, as amended. Consequently, we find that the NLRC gravely abused its discretion
when it affirmed the dismissal of the union's complaint.
WHEREFORE, the petition is GRANTED and the decision of the NLRC dated August 23, 1989
and its resolution dated September 29, 1989 are SET ASIDE. UST is DIRECTED to pay its
faculty members 13th month pay in accordance with P.D. No. 851, as amended by Memorandum
Order No. 28, and the Christmas gift under the Agreement dated March 25, 1985 for the years
1986 and 1987.

SO ORDERED.
 A. Title II Wages (Articles 97-129, LCP; IRR, Rule VII, VII-A, VIII, IX, X, XI)
Cases:
1. Metropolitan Bank and Trust Company employees Union-ALU-TUCP v. NLRC,
G.R. No. 102636, Sept 10, 1993

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP

and ANTONIO V. BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and
METROPOLITAN BANK and TRUST COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-
TUCP (MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the
implementation by the Metropolitan Bank and Trust Company of Republic Act No. 6727,
mandating an increase in pay of P25 per day for certain employees in the private sector, created a
distortion that would require an adjustment under said law in the wages of the latter's other
various groups of employees.

On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01
January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of employees who would
benefit from the first P900 increase but the bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01 January 1989 were given the increase to the
exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage
policy determination be establishing the mechanism and proper standards thereof, . . . fixing new
wage rates, providing wage incentives for industrial dispersal to the countryside, and for other
purposes," took effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of
all workers and employees in the private sector, whether agricultural or non-
agricultural, shall be increased by twenty-five pesos (P25) per day, . . .: Provided,
That those already receiving above the minimum wage rates up to one hundred
 pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00) per
day, . . .

xxx xxx xxx

(d) If expressly provided for and agreed upon in the collective bargaining
agreements, all increase in the daily basic wage rates granted by the employers
three (3) months before the effectivity of this Act shall be credited as compliance
with the increases in the wage rates prescribed herein, provided that, where such
increases are less than the prescribed increases in the wage rates under this Act,
the employer shall pay the difference. Such increase shall not include anniversary
wage increases, merit wage increase and those resulting from the regularization or
promotion of employees.

Where the application of the increases in the wage rates under this Section results
in distortions as defined under existing laws in the wage structure within an
establishment and gives rise to a dispute therein, such dispute shall first be settled
voluntarily between the parties and in the event of a deadlock, the same shall be
finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the
workplace.

It shall be mandatory for the NLRC to conduct continous hearings and decide any
dispute arising under this Section within twenty (20) calendar days from the time
said dispute is formally submitted to it for arbitration. The pendency of a dispute
arising from a wage distortion shall not in any way delay the applicability of the
increase in the wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status
before 01 July 1989 but whose daily rate was P100 and below. The bank refused to give the
same increase to its regular employees who were receiving more than P100 per day and
recipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of
the employees into (a) the probationary employees as of 30 June 1989 and regular employees
receiving P100 or less a day who had been promoted to permanent or regular status before 01
July 1989, and (b) the regular employees as of 01 July 1989, whose pay was over P100 a day,
and that, between the two groups, there emerged a substantially reduced salary gap, the
MBTCEU sought from the bank the correction of the alleged distortion in pay. In order to avert
an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction over the
case or to certify the same to the National Labor Relations Commission (NLRC) under Article
263 (g) of the Labor Code.1 The parties ultimately agreed to refer the issue for compulsory
arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991,
the labor arbiter disregard with the bank's contention that the increase in its implementation of
Republic Act 6727 did not constitute a distortion because "only 143 employees or 6.8% of the
bank's population of a total of 2,108 regular employees" benefited. He stressed that "it is not
necessary that a big number of wage earners within a company be benefited by the mandatory
increase before a wage distortion may be considered to have taken place," it being enough, he
said, that such increase "result(s) in the severe contraction of an intentional quantitative
difference in wage between employee groups."

The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary
rates between and among groups of employees is not based purely on skills or length of service
but also on "other logical bases of differentiation, a P900.00 wage gap intentionally provided in a
collective bargaining agreement as a quantitative difference in wage between those who WERE
regular employees as of January 1, 1989 and those who WERE NOT as of that date, is definitely
a logical basis of differentiation (that) deserves protection from any distorting statutory wage
increase." Otherwise, he added, "a minimum wage statute that seek to uplift the economic
condition of labor would itself destroy the mechanism of collective bargaining which, with
perceived stability, has been labor's constitutional and regular source of wage increase for so
long a time now." Thus, since the "subjective quantitative difference" between wage rates had
been reduced from P900.00 to barely P150.00, correction of the wage distortion pursuant to
Section 4(c) of the Rules Implementing Republic Act 6727 should be made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to restore

to complainants and their members the Nine Hundred (P900.00) Pesos CBA wage
gap they used to enjoy over non-regular employees as of January 1, 1989 by
granting them a Seven Hundred Fifty (P750.00) Pesos monthly increase effective
July 1, 1989.

SO ORDERED.2

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to
1, reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L.
Diokno and Domingo H. Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation where the salary structure is
characterized by intentional quantitative differences among employee groups
determined or fixed on the basis of skills, length of service, or other logical basis
of differentiation and such differences or distinction are obliterated (In Re: Labor
Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary
of Labor and Employment, February 18, 1991).

As applied in this case, We noted that in the new wage salary structure, the wage
gaps between Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic) were
maintained. While there is a noticeable decrease in the wage gap between levels 2
 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps between
said levels is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in salary rates between the employees groups.
For this reason, the basis requirement for a wage in this case. Moreover, there is
nothing in the law which would justify an across-the-board adjustment of P750.00
as ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside

and a new judgment is hereby entered, dismissing the complaint for lack of merit.

SO ORDERED.3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative

distinction/difference aforecited but clearly there is a contraction. Would such
contraction be severe as to warrant the necessary correction sanctioned by the law
in point, RA 6727? It is may considered view that the quantitative intended
distinction in pay between the two groups of workers in respondent company was
contracted by more than fifty (50%) per cent or in particular by more or less
eighty-three (83%) per cent hence, there is no doubt that there is an evident severe
contraction resulting in the complained of wage distortion.

Nonetheless, the award of P750.00 per month to all of herein individual

complainants as ordered by the Labor Arbiter below, to my mind is not the most
equitable remedy at bar, for the same would be an across the board increase which
is not the intention of RA 6727. For that matter, herein complainants cannot by
right claim for the whole amount of P750.00 a month or P25.00 per day granted to
the workers covered by the said law in the sense that they are not covered by the
said increase mandated by RA 6727. They are only entitled to the relief granted
by said law by way of correction of the pay scale in case of distortion in wages by
reason thereof.

Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on
21 May 1991 by the Regional Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage distortion as in the case at bar
which is:

Minimum Wage = % x Prescribed = Distortion

Increased Adjustment
Actual Salary

would be the most equitable and fair under the circumstances obtaining in this
case.
 For this very reason, I register my dissent from the majority opinion and opt for
the modification of the Labor Arbiter's decision as afore-discussed.4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been
denied, the MBTCEU and its president filed the instant petition for certiorari, charging the
NLRC with gave abuse of discretion by its refusal (a) "to acknowledge the existence of a wage
distortion in the wage or salary rates between and among the employee groups of the respondent
bank as a result of the bank's partial implementation" of Republic Act 6727 and (b) to give due
course to its claim for an across-the-board P25 increase under Republic Act No. 6727.5

We agree with the Solicitor General that the petition is impressed with merit.6

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates
results in the elimination or severe contradiction of intentional quantitative
differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination of
which is the statutory function of the NLRC.7 Judicial review of labor cases, we may add, does
not go beyond the evaluation of the sufficiency of the evidence upon which the labor official's
findings rest.8 As such, factual findings of the NLRC are generally accorded not only respect but
also finality provided that its decision are supported by substantial evidence and devoid of any
taint of unfairness of arbitrariness.9 When, however, the members of the same labor tribunal are
not in accord on those aspects of a case, as in this case, this Court is well cautioned not to be as
so conscious in passing upon the sufficiency of the evidence, let alone the conclusions derived
therefrom.

In this case, the majority of the members of the NLRC, as well as its dissenting member, agree
that there is a wage distortion arising from the bank's implementation of the P25 wage increase;
they do differ, however, on the extent of the distortion that can warrant the adoption of corrective
measures required by law.

The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when,
as a result of an increase in the prescribed wage rate, an "elimination or severe contraction of
intentional quantitative differences in wage or salary rates" would occur "between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of differentiation."
In mandating an adjustment, the law did not require that there be an elimination or total
abrogation of quantitative wage or salary differences; a severe contraction thereof is enough. As
has been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting opinion,
the contraction between personnel groupings comes close to eighty-three (83%), which cannot,
by any stretch of imagination, be considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by
the CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at
through the collective bargaining process to which the parties are thereby concluded. 11 The
Solicitor General, in recommending the grant of due course to the petition, has correctly
emphasized that the intention of the parties, whether the benefits under a collective bargaining
agreement should be equated with those granted by law or not, unless there are compelling
reasons otherwise, must prevail and be given effect. 12

In keeping then with the intendment of the law and the agreement of the parties themselves,
along with the often repeated rule that all doubts in the interpretation and implementation of
labor laws should be resolved in favor of labor, 13 we must approximate an acceptable
quantitative difference between and among the CBA agreed work levels. We, however, do not
subscribe to the labor arbiter's exacting prescription in correcting the wage distortion. Like the
majority of the members of the NLRC, we are also of the view that giving the employees an
across-the-board increase of P750 may not be conducive to the policy of encouraging "employers
to grant wage and allowance increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation," particularly in this case where both
Republic Act 6727 and the CBA allow a credit for voluntary compliance. As the Court, through
Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company,
Inc. v. NLRC: 14

. . . . (T)o compel employers simply to add on legislated increases in salaries or

allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutorily prescribed minimum
rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the
standard considered by the regional Tripartite Wages and Productivity Commission for the
correction of pay scale structures in cases of wage distortion, 15 to well be the appropriate
measure to balance the respective contentions of the parties in this instance. We also view it as
being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE
PROCESS, the questioned NLRC decision is hereby SET ASIDE and the decision of the labor
arbiter is REINSTATED subject to the MODIFICATION that the wage distortion in question be
corrected in accordance with the formula expressed in the dissenting opinion of Presiding
Commissioner Edna Bonto-Perez. This decision is immediately executory.

SO ORDERED.
 59 Kar Asia, Inc. v. Corona, G.R. No. 154985, Aug 24, 2004

G.R. No. 154985 August 24, 2004

KAR ASIA, INC. and/or CELESTINO S. BARETTO, petitioners,

vs.
MARIO CORONA, RICKY HEPGANO, JOHNNY COLLADOS, CONSTANTINO
LAGARAS, RANEL BALANSAG, ARNOLD AVILA, PETER ARCENAL, ARNOLD
CABAHUG, BERNARD BETE, RUPERTO RESTAURO, WILLY CRUZ, RANDY
BASNILLO, ARMAN BASTE, ERNESTO ESPINA, PATRICIO AGUDELA, IRENEO
BANGOY, PALERMO AUTENTICO, GEORGE TAGAYTAY, BENITO MATUGAS,
and WILFREDO ESPINA, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
February 28, 2002 Decision1 of the Court of Appeals2 in CA-G.R. SP No. 57972, and its August
9, 2002 Resolution denying petitioners motion for reconsideration.

The undisputed facts are as follows:

Respondents, regular employees of petitioner KAR ASIA, Inc., an automotive dealer in Davao
City, filed on September 24, 1997 a complaint3 for underpayment of wages and attorneys fees
before Branch XI, Regional Arbitration Branch of Davao City. They claimed that they were not
paid their cost of living allowance (COLA), as mandated by the Regional Tripartite and Wages
Productivity Board (RTWPB) XI Wage Order No. 3, for the months of December 1993 and
December 1994, and prayed that petitioner be ordered to pay the same with 1% interest per
month, as well as attorneys fees equivalent to 10% of the total monetary award.

Petitioner company and its president Celestino Barretto countered that the complaint was false
and malicious; that respondents had already been paid their COLA for the said periods; and that
respondents scared off potential customers and caused a substantial reduction in the income of
the petitioner company estimated at, more or less, P1,000,000.00 when they picketed and put up
streamers with insulting and derogatory slogans. Petitioners presented in evidence the payrolls
for December 1993 and December 1994 showing that the respondents acknowledged in writing
the receipt of their COLA, and the affidavits of Ermina Daray and Cristina Arana, cashiers of
KAR ASIA, refuting respondents claim that they were made to sign blank pieces of paper.
On August 31, 1998, the Labor Arbiter rendered a decision in favor of petitioners, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Ordering the complainants jointly and severally to pay respondents the sum of
P50,000.00 representing attorneys fee of respondents;

2. Ordering complainants jointly and severally to pay respondent Celestino S. Barretto

the sum of P150,000.00 in concept of moral damages;

3. Ordering the complainants jointly and severally to pay respondents the sum of
P5,000.00 as litigation expenses.

SO ORDERED.4

Respondents appealed to the NLRC, which affirmed the decision of the Labor Arbiter but
deleted the award of moral damages, attorneys fees, and litigation expenses for lack of sufficient
basis in a Resolution5 dated August 23, 1999.

Respondents filed a petition for certiorari with the Court of Appeals, which reversed the
decision of the NLRC and ordered petitioner company to pay the respondents the P25.00 per day
COLA for the period December 1 to 31, 1994, plus interest thereon at the rate of 1% per month
computed from the time the same was withheld from respondents up to the time they were
actually paid the respective sums due them.

In support of its decision, the appellate court stated:6

As aforesaid, the claim for the December 01 to 31, 1993 COLA had already prescribed at the
time the complaint for underpayment was filed with the labor arbiter. However, there appears to
be insufficient evidence in the records to justify a finding that COLA for the period December 01
to 31, 1994 had already been paid. The December 01 to 15 and 16 to 31, 1994 payroll adduced as
evidence of payment does not meet the "substantial evidence" test. The same does not bear the
signatures of the respondent companys employees acknowledging receipt of the same amount.
Moreover, the same was signed by Ermina I. Daray, the paymaster and private respondent
Celestino S. Barretto, the president cum C.E.O. of respondent company and the same was not
covered by any affidavit of either signatory that the required COLA had already been actually
paid, the payroll presented being merely the copy approved for payment, and not the copy
disclosing actual payment.

Hence this petition for review based on the following grounds:

1. IN ITS ASSAILED DECISION, THE HONORABLE COURT OF APPEALS MADE

A MISAPPREHENSION OF FACTS AND IT PREMISED ITS FINDING OF FACT
ON A SUPPOSED ABSENCE OF EVIDENCE BUT THIS IS CONTRADICTED BY
THE EVIDENCE ON RECORD CONSIDERING THAT:
 a. THE PRESIDENT AND CEO EXECUTED THE POSITION PAPER UNDER
OATH WHERE THE PAYROLL EVIDENCING PAYMENT OF THE
DECEMBER 1994 COLA, WHICH HE ALSO SIGNED, WAS ANNEXED
AND ATTACHED, HENCE THERE WAS NO NEED FOR HIM TO MAKE A
SEPARATE AFFIDAVIT;

b. THE PAYMASTER CERTIFIED IN EACH PAGE OF THE PAYROLL

THAT SHE HAD ACTUALLYPAID THE AMOUNTS TO THE PERSONS
LISTED IN THE DECEMBER 1994 PAYROLL THAT INCLUDED HEREIN
RESPONDENTS. HENCE, THE PAYROLL IS NOT MERELY
AN APPROVALFOR PAYMENT BUT IS AN EVIDENCE
THAT ACTUAL PAYMENT WAS MADE.

c. THE LABOR ARBITER CONDUCTED A CLARIFICATORY HEARING

WHEREIN THE CASHIERS OF PETITIONER, ONE OF WHOM WAS THE
PAYMASTER REFERRED TO ABOVE, CONFIRMED THAT THEY HAVE
ACTUALLY PAID THE RESPONDENTS THEIR ALLEGED UNPAID COLA.

2. THE HONORABLE COURT OF APPEALS EXCEEDED THE LIMITS OF ITS

POWER TO REVIEW THE ACTS OF THE LABOR ARBITER AND THE NLRC BY
NOT CONFINING ITSELF IN DETERMINING WHETHER THE SAID QUASI-
JUDICIAL BODIES LACKED OR ACTED IN EXCESS OF JURISDICTION OR
COMMITTED GRAVE ABUSE OF DISCRETION BUT PROCEEDED TO INQUIRE
ON THE CORRECTNESS OF THE EVALUATION OF EVIDENCE BY THE SAID
AGENCIES WHICH IS BEYOND THE OFFICE OF AN EXTRAORDINARY WRIT
OF CERTIORARI.7

In support of the first assigned error, petitioners argue that the factual findings of the Court of
Appeals are in conflict with the evidence on record and those of the Labor Arbiter and the
NLRC. They contend that the proceedings and pleadings before the Labor Arbiter and the NLRC
showed that the respondents have abandoned their claim for non-payment of the December 1994
COLA. They insist that in their position paper and Memorandum on Appeal, the respondents
only demanded the payment of the December 1993 COLA but not the December 1994 COLA.
They further insist that there is sufficient evidence that the respondents had already been paid
their COLA.

Anent the second assigned error, petitioners argue that the respondents having filed a petition
for certiorari under Rule 65 of the Rules of Court, the Court of Appeals should have limited the
exercise of its judicial review to issues of want of jurisdiction and/or grave abuse of discretion on
the part of the Labor Arbiter and the NLRC, instead of evaluating the correctness and sufficiency
of the evidence upon which the labor tribunals based their decisions.

The issue is simple: whether or not the petitioner company paid the respondents the COLA for
December 1993 and December 1994 as mandated by RTWPB XI Wage Order No. 3.

We find merit in the petition.

A close scrutiny of the payroll for the December 1993 COLA8 readily disclose the signatures of
the respondents opposite their printed names and the numeric value of P654.00. Respondents
averment that the petitioner company harassed them into signing the said payroll without giving
them its cash equivalent cannot be given credence. Their self-serving and unsubstantiated
declarations cannot overturn the evidentiary weight of the signatures. The allegations of
harassment are inadmissible as self-serving statements and therefore cannot be repositories of
truth. He who asserts not he who denies must prove; unfortunately, the respondents miserably
failed to discharge this burden. We also agree with the observation of the Labor Arbiter that in
1993 there was no labor dispute since the labor unrest took place only in the later part of 1997.
Hence, there was no reason for management to harass its employees.

More importantly, the unreasonable length of time in pursuing respondents claim for the
December 1993 COLA militates against its grant. Article 291 of the Labor Code requires that all
money claims arising from employer-employee relations shall be filed within 3 years from the
time that the cause of action accrued; otherwise they shall be barred forever. In the present case,
the respondents filed the complaint for underpayment of wage on September 24, 1997. Thus, the
action for the payment of the December 1993 COLA has already prescribed.

With respect to the December 1994 COLA, we find that the respondents alleged its non-payment
only in the complaint. Subsequent pleadings reveal that they opted to pursue their demand only
for December 1993 COLA and forego that of the December 1994. Even assuming that the
neglect by the respondents in asserting their claim for the December 1994 COLA does not
amount to an abandonment on the ground that they should not be deprived of their rightful
monetary claims if they were so entitled, still the paucity of evidence to substantiate their bare
assertions negates such an award.

The payrolls9 for December 1 to 15, 1994 and December 16 to 31, 1994 indicate an allowance of
P327.00 for each period, or a total of P654.00 for the entire month. However, a casual
observation of the payroll for the December 1993 COLA will also show that the respondents
signed for the amount of P654.00. Also, the allowances appearing in the two separate
payslips10 for December 1 to 15, 1994 and December 16 to 31, 1994 sum up to a total of
P654.00. Although the numeric figures in the December 1994 payroll and the payslips for the
same period were denominated merely as allowances while those in the December 1993 payroll
were specifically identified as COLA, the fact that they add up to the same figure, i.e., P654.00,
is not a coincidence. Whether designated merely as an allowance or COLA, it is unmistakable
that they all represent the cost of living allowance for the given periods under RTWPB XI Wage
Order No. 3.

Moreover, the affidavits of Ermina Daray and Cristita Arana, whose verity we find no reason to
suspect, confirmed the truthfulness of the entries in the payrolls and affirmed the receipt by the
respondents of their full compensation. Entries in the payroll, being entries in the course of
business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court.
It is therefore incumbent upon the respondents to adduce clear and convincing evidence in
support of their claim. Unfortunately, respondents naked assertions without proof in
corroboration will not suffice to overcome the disputable presumption.
In disputing the probative value of the payrolls for December 1994, the appellate court observed
that the same contain only the signatures of Ermina Daray and Celestino Barreto, the paymaster
and the president, respectively. It further opined that the payrolls presented were only copies of
the approved payment, and not copies disclosing actual payment.

The December 1994 payrolls11 contain a computation of the amounts payable to the employees
for the given period, including a breakdown of the allowances and deductions on the amount
due, but the signatures of the respondents are conspicuously missing. Ideally, the signatures of
the respondents should appear in the payroll as evidence of actual payment. However, the
absence of such signatures does not necessarily lead to the conclusion that the December 1994
COLA was not received. It appears that the payslips12 for the same period bear the signatures of
the respondents plus a certification that they received the full compensation for the services
rendered. While ordinarily a payslip is only a statement of the gross monthly income of the
employee, his signature therein coupled by an acknowledgement of full compensation alter the
legal complexion of the document. The payslip becomes a substantial proof of actual payment.
Moreover, there is no hard-and-fast rule requiring that the employees signature in the payroll is
the only acceptable proof of payment. By implication, the respondents, in signing the payslips
with their acknowledgement of full compensation, unqualifiedly admitted the receipt thereof,
including the COLA for December 1994. The Court of Appeals erred when it placed undue
reliance on the unsigned payrolls and disregarded the signed payslips.

Factual findings by quasi-judicial agencies, such as the National Labor Relations Commission,
which have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect but even finality.13

WHEREFORE, based on the foregoing, the petition is GRANTED. The February 28, 2002
decision of the Court of Appeals in CA-G.R. SP No. 57972 is REVERSED and SET ASIDE.
The Decision of the NLRC dated August 23, 1999 dismissing respondents claims of unpaid
COLA for December 1993 and December 1994, and deleting the awards for moral damages,
attorneys fees and litigation expenses for lack of sufficient basis, is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
60. G&M Phils., Inc. v. Cruz, G.R. No. 140495, April 15, 2005

G.R. No. 140495. April 15, 2005

G & M (Phils.), Inc., Petitioners,

vs.
EPIFANIO CRUZ, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial
bodies, like the National Labor Relations Commission (NLRC), are accorded with respect, even
finality, if supported by substantial evidence. Particularly when passed upon and upheld by the
Court of Appeals, they are binding and conclusive upon the Supreme Court and will not
normally be disturbed.1

The Court finds no reason in this case to depart from such doctrine.

Petitioner G & M (Phils.), Inc. recruited respondent Cruz as trailer driver for its foreign
principal, Salim Al Yami Est., for a period of two years, and with a stipulated monthly salary of
US$625, starting June 6, 1990. Respondent alleged that when he arrived in the Kingdom of
Saudi Arabia, he was made to sign an employment contract in blank and his salary was reduced
to SR604.00. Seven months into employment, his employer deported him on December 28,
1990. According to respondent, the cause for his dismissal was his complaint for sub-human
working conditions, non-payment of wages and overtime pay, salary deduction and change of
employer. Hence, he filed with the Labor Arbiter an Affidavit/Complaint against petitioner for
illegal dismissal, underpayment and non-payment of wages, and refund of transportation
expenses. Respondent claims that he was only paid in an amount equivalent to five months salary
and he did not receive his salary for the last two months. Respondent submitted a copy of his pay
slip showing the amount of SR604.00 as his basic salary.2

Petitioner contends that respondent abandoned his job when he joined an illegal strike and
refused to report for work, constituting a breach of his employment contract and a valid cause for
termination of employment. Petitioner also claims that the pay slip submitted by respondent is
inadmissible because the original copy was not presented and that its existence, due execution,
genuineness and authenticity were not established.3

The Labor Arbiter found merit in petitioners claim that respondent abandoned his job, but
nevertheless granted respondents claim for underpayment of wages and two months unpaid
salary. The dispositive portion of the Labor Arbiters decision reads:

WHEREFORE, premises considered, the charge of illegal dismissal is hereby denied for lack of
merit. However, respondent G & M (Phils.), Inc., is hereby ordered to pay within ten (10) days
from receipt hereof, herein complainant Epifanio Cruz, the sums of 77,455.00 to be adjusted as
earlier stated, and US$1,250.00 or its peso equivalent at the time of payment.

SO ORDERED.4

On partial appeal to the NLRC, the same was dismissed per Resolution dated June 10, 1998, with
the following dispositive portion:

WHEREFORE, the appeal is Dismissed for lack of merit. Respondent G & M (Phils.) Inc., and
Salim Al Yami Est., are hereby ordered jointly and severally liable to pay complainant Epifanio
Cruz the Philippine Peso equivalent at the time of actual payment of the following sums:

a) THREE THOUSAND ONE HUNDRED TWENTY FIVE US DOLLARS (US$3,125.00) less

THREE THOUSAND TWENTY SAUDI RIYALS (SR3,020.000) representing salary
differentials for five months; and

b) ONE THOUSAND TWO HUNDRED FIFTY US DOLLARS (US$1,250.00) representing

unpaid salaries for two (2) months.

Other dispositions of the appealed Decision stand AFFIRMED.

SO ORDERED.5

Petitioner filed a special civil action for certiorari in the Court of Appeals, docketed as CA-G.R.
SP No. 49729, but it was dismissed for lack of merit.6

Hence, this petition for review on certiorari under Rule 45 of the Rules of Court, based on the
following grounds:

THE COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT WITH THE
RESPONDENTS ADMISSION OF RECEIPT OF THE PAYMENTS OF HIS SALARIES
ALTHOUGH ALLEGEDLY SHORT OF WHAT WAS STIPULATED IN HIS CONTRACT -
THE "BURDEN OF EVIDENCE" IS NOW SHIFTED UPON HIM TO SHOW CONCRETE
PROOF THAT INDEED HE WAS SHORT-CHANGED OF HIS SALARIES.

CONTRARY TO THE COURT OF APPEALS [sic] CONCLUSION, THE "PAYROLL

ISSUE" IS OF GREAT IMPORTANCE IN THE DETERMINATION OF THE ISSUES IN
THE CASE AT BAR INASMUCH AS IT IS THE RESPONDENT WHO HAS THE BURDEN
OF PRESENTING EVIDENCE OF SHORT PAYMENT AFTER HAVING ADMITTED TO
HAVE RECEIVED CERTAIN AMOUNTS FOR HIS SALARIES.7

This petition mainly involves factual issues, i.e., whether or not there is evidence on record to
support the findings of the Labor Arbiter, the NLRC and the Court of Appeals that respondent is
entitled to the payment of salary differential and unpaid wages. This calls for a re-examination of
the evidence, which the Court cannot entertain. As stated earlier, factual findings of labor
officials, who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind the Court when
supported by substantial evidence. It is not the Courts function to assess and evaluate the
evidence all over again, particularly where the findings of both the Arbiter and the Court of
Appeals concur.8

Nevertheless, even if the Court delves into the issues posed by petitioner, there is still no reason
to grant the petition.

It was the finding of the Court of Appeals that it is the burden of petitioner to prove that the
salaries paid by its foreign principal complied with the contractual stipulations of their agency-
worker agreement. Since petitioner failed to discharge such burden, then it was correct for the
NLRC to rely on respondents claim of underpayment.9

The Court of Appeals also ruled that since the positive testimony of respondent, as creditor, is
sufficient to prove non-payment even without the indefinite testimony of petitioner, as debtor,
then the payroll (pay slip), presented by respondent to prove that he only received the amount of
SR604.00 as basic monthly salary, is immaterial.10

Petitioner, however, insists that since respondent already admitted that his employer paid him,
albeit short of what was stipulated upon, then petitioner has no more obligation to show that
respondent was paid, and it now rests upon respondent to prove underpayment, and the pay slip
submitted by respondent, which is of "questionable authenticity," is not enough to prove the
same.11

The rule is that the burden of proving payment of monetary claims rests on the employer,12 in
this case, herein petitioner, it being the employment agency or recruitment entity, and agent of
the foreign principal, Salim Al Yami Est.,13 which recruited respondent. In Jimenez vs.
NLRC,14 which involves a claim for unpaid wages/commissions, separation pay and damages
against an employer, the Court ruled that where a person is sued for a debt admits that the debt
was originally owed, and pleads payment in whole or in part, it is incumbent upon him to prove
such payment. This is based on the principle of evidence that each party must prove his
affirmative allegations. Since petitioner asserts that respondent has already been fully paid of his
stipulated salary, the burden is upon petitioner to prove such fact of full payment.

In this case, while respondent may have admitted that he has actually been paid the amount of
SR604.00 as monthly salary, it does not discharge petitioner from proving full payment of the
stipulated monthly salary of US$625.00 based on the Agency-Worker Agreement. Respondents
admission that some payments have been made does not change the burden of proof. Petitioner
still has the burden of establishing payments beyond those admitted by respondent.15

Thus, it was stated in the Jimenez case that:

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff
must allege non-payment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of
showing with legal certainty that the obligation has been discharged by payment.
When the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers
such a defense to the claim of the creditor. Where the debtor introduces some evidence of
payment, the burden of going forward with the evidence - as distinct from the general burden of
proof - shifts to the creditor, who is then under a duty of producing some evidence to show non-
payment.

Petitioner merely denied respondents claim of underpayment. It did not present any
controverting evidence to prove full payment. Hence, the findings of the Labor Arbiter, the
NLRC and the Court of Appeals that respondent was not fully paid of his wages stand.

The positive testimony of a creditor may be sufficient of itself to show non-payment, even when
met by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be
sufficient to show payment, but, where his testimony is contradicted by the other party or by a
disinterested witness, the issue may be determined against the debtor since he has the burden of
proof. The testimony of the debtor creating merely an inference of payment will not be regarded
as conclusive on that issue.

Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense
and in effect admitted the allegations of private respondents.16

With regard to the admissibility of the pay slips, both the Labor Arbiter and the NLRC found that
it was admissible as evidence. As a general rule, the Court is not duty-bound to delve into the
accuracy of the NLRCs factual findings in the absence of a clear showing that these were
arbitrary and bereft of any rational basis.17 In the present case, petitioner failed to demonstrate
any arbitrariness or lack of rational basis on the part of the NLRC.18

Article 221 of the Labor Code provides that proceedings before the NLRC are not covered by the
technical rules of evidence and procedure. The probative value of the copy of the pay slips is
aptly justified by the NLRC, as follows:

the payslips are original duplicates of computerized payslips issued by the employer, Salim
Al Yami Est., to its workers which contain entries such as pay date, employees I.D. number,
employee name, category, basic rate, overtime hours and other relevant information, including an
itemization of earnings (basic pay, overtime pay, meal allowance for the period covered) and
deductions. The fact that the payslips are not authenticated will not militate against
complainants claim, considering that in presenting the payslips, complainant has established the
fact of underpayment, and the burden has shifted to the respondent to prove that complainant was
totally compensated for actual services rendered.19 (Emphasis supplied)

WHEREFORE, the petition is DENIED for lack merit.

SO ORDERED.
60. Chavez v. NLRC, G.R. No. 146530, Jan 17, 2005

G.R. No. 146530 January 17, 2005

PEDRO CHAVEZ, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and
ALVIN LEE, Plant Manager, respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari of the Resolution1 dated December 15,
2000 of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP
No. 52485. The assailed resolution reinstated the Decision dated July 10, 1998 of the National
Labor Relations Commission (NLRC), dismissing the complaint for illegal dismissal filed by
herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision
dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had
been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.

The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons
and other packaging materials for export and distribution. It engaged the services of the
petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked
to deliver the respondent companys products from its factory in Mariveles, Bataan, to its various
customers, mostly in Metro Manila. The respondent company furnished the petitioner with a
truck. Most of the petitioners delivery trips were made at nighttime, commencing at 6:00 p.m.
from Mariveles, and returning thereto in the afternoon two or three days after. The deliveries
were made in accordance with the routing slips issued by respondent company indicating the
order, time and urgency of delivery. Initially, the petitioner was paid the sum of 350.00 per trip.
This was later adjusted to 480.00 per trip and, at the time of his alleged dismissal, the petitioner
was receiving 900.00 per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys
plant manager, his (the petitioners) desire to avail himself of the benefits that the regular
employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay,
among others. Although he promised to extend these benefits to the petitioner, respondent Lee
failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional
Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be
heard, respondent company terminated the services of the petitioner. Consequently, on May 25,
1995, the petitioner filed an amended complaint against the respondents for illegal dismissal,
unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month
pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship
between the respondent company and the petitioner. They averred that the petitioner was an
independent contractor as evidenced by the contract of service which he and the respondent
company entered into. The said contract provided as follows:

That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and
the Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs,
accepts the services to be rendered to the Principal, under the following terms and covenants
heretofore mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the
principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change
to this travel route shall be subject to further agreement by the parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery transport services
fully rendered by the Contractor shall be on a per trip basis depending on the size or
classification of the truck being used in the transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip
basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (300.00) and
EFFECTIVE December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip
basis, following the same route mentioned, shall be THREE HUNDRED FIFTY (350.00) Pesos
and Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2)
helpers;

4. The Contractor shall exercise direct control and shall be responsible to the Principal for the
cost of any damage to, loss of any goods, cargoes, finished products or the like, while the same
are in transit, or due to reckless [sic] of its men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its men working
for him subject to this agreement, and that the Contractor shall hold the Principal free and
harmless from any liability or claim that may arise by virtue of the Contractors non-compliance
to the existing provisions of the Minimum Wage Law, the Employees Compensation Act, the
Social Security System Act, or any other such law or decree that may hereafter be enacted, it
being clearly understood that any truck drivers, helpers or men working with and for the
Contractor, are not employees who will be indemnified by the Principal for any such claim,
including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to renewal
on a year-to-year basis.2

This contract of service was dated December 12, 1984. It was subsequently renewed twice, on
July 10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms
of the contracts were substantially the same. The relationship of the respondent company and the
petitioner was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by
which his work was accomplished. He paid the wages of his helpers and exercised control over
them. As such, the petitioner was not entitled to regularization because he was not an employee
of the respondent company. The respondents, likewise, maintained that they did not dismiss the
petitioner. Rather, the severance of his contractual relation with the respondent company was due
to his violation of the terms and conditions of their contract. The petitioner allegedly failed to
observe the minimum degree of diligence in the proper maintenance of the truck he was using,
thereby exposing respondent company to unnecessary significant expenses of overhauling the
said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision
dated February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter
declared that the petitioner was a regular employee of the respondent company as he was
performing a service that was necessary and desirable to the latters business. Moreover, it was
noted that the petitioner had discharged his duties as truck driver for the respondent company for
a continuous and uninterrupted period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision affording full protection to labor and security of
tenure. The Labor Arbiter found that the petitioners dismissal was anchored on his insistent
demand to be regularized. Hence, for lack of a valid and just cause therefor and for their failure
to observe the due process requirements, the respondents were found guilty of illegal dismissal.
The dispositive portion of the Labor Arbiters decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business
address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay
complainant his separation pay equivalent to one (1) month pay per year of service based on the
average monthly pay of 10,800.00 in lieu of reinstatement as his reinstatement back to work
will not do any good between the parties as the employment relationship has already become
strained and full backwages from the time his compensation was withheld on February 23, 1995
up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue
to run. Also to pay complainant his 13th month pay, night shift differential pay and service
incentive leave pay hereunder computed as follows:

a) Backwages .. 248,400.00

b) Separation Pay .... 140,400.00

c) 13th month pay . 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

TOTAL 401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys
fees.

SO ORDERED.3

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was
dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the
decision of the Labor Arbiter. In the said decision, the NLRC characterized the contract of
service between the respondent company and the petitioner as a "scheme" that was resorted to by
the respondents who, taking advantage of the petitioners unfamiliarity with the English
language and/or legal niceties, wanted to evade the effects and implications of his becoming a
regularized employee.5

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting
thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision
and, this time, holding that no employer-employee relationship existed between the respondent
company and the petitioner. In reconsidering its earlier decision, the NLRC stated that the
respondents did not exercise control over the means and methods by which the petitioner
accomplished his delivery services. It upheld the validity of the contract of service as it pointed
out that said contract was silent as to the time by which the petitioner was to make the deliveries
and that the petitioner could hire his own helpers whose wages would be paid from his own
account. These factors indicated that the petitioner was an independent contractor, not an
employee of the respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the
Labor Code on the regularization of employees. Said contract, including the fixed period of
employment contained therein, having been knowingly and voluntarily entered into by the
parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus,
dismissed the petitioners complaint for illegal dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the
NLRC in its Resolution dated September 7, 1998. He then filed with this Court a petition for
certiorari, which was referred to the CA following the ruling in St. Martin Funeral Home v.
NLRC .8

The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998
Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the
CA ruled that the petitioner was a regular employee of the respondent company because as its
truck driver, he performed a service that was indispensable to the latters business. Further, he
had been the respondent companys truck driver for ten continuous years. The CA also reasoned
that the petitioner could not be considered an independent contractor since he had no substantial
capital in the form of tools and machinery. In fact, the truck that he drove belonged to the
respondent company. The CA also observed that the routing slips that the respondent company
issued to the petitioner showed that it exercised control over the latter. The routing slips
indicated the chronological order and priority of delivery, the urgency of certain deliveries and
the time when the goods were to be delivered to the customers.

The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job
noting that he just filed a complaint for regularization. This actuation of the petitioner negated
the respondents allegation that he abandoned his job. The CA held that the respondents failed to
discharge their burden to show that the petitioners dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the
Labor Arbiter was reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent
company and the petitioner in this wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with
extreme caution their legality and justness. Where from the circumstances it is apparent that a
contract has been entered into to preclude acquisition of tenurial security by the employee, they
should be struck down and disregarded as contrary to public policy and morals. In this case, the
"contract of service" is just another attempt to exploit the unwitting employee and deprive him of
the protection of the Labor Code by making it appear that the stipulations of the parties were
governed by the Civil Code as in ordinary transactions.9

However, on motion for reconsideration by the respondents, the CA made a complete turn
around as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of
service between the petitioner and the respondent company. In reconsidering its decision, the CA
explained that the extent of control exercised by the respondents over the petitioner was only
with respect to the result but not to the means and methods used by him. The CA cited the
following circumstances: (1) the respondents had no say on how the goods were to be delivered
to the customers; (2) the petitioner had the right to employ workers who would be under his
direct control; and (3) the petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of
service but by the contract of service. This contract, not being contrary to morals, good customs,
public order or public policy, should be given the force and effect of law as between the
respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998
Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.

Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution
of the appellate court alleging that:
(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO
THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES
WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;

(B)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10

The threshold issue that needs to be resolved is whether there existed an employer-employee
relationship between the respondent company and the petitioner. We rule in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct.11 The most important element is the
employers control of the employees conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it.12 All the four elements are present in this
case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.

Second. Wages are defined as "remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission
basis, or other method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered."13 That the petitioner was paid on a per trip basis is not significant.
This is merely a method of computing compensation and not a basis for determining the
existence or absence of employer-employee relationship. One may be paid on the basis of results
or time expended on the work, and may or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are present or not.14 In this case, it
cannot be gainsaid that the petitioner received compensation from the respondent company for
the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.15 The payroll should show, among other things, the employees
rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the
respondents did not present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation would be
adverse to their case.16

Third. The respondents power to dismiss the petitioner was inherent in the fact that they
engaged the services of the petitioner as truck driver. They exercised this power by terminating
the petitioners services albeit in the guise of "severance of contractual relation" due allegedly to
the latters breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the
"control test" is the most important. Compared to an employee, an independent contractor is one
who carries on a distinct and independent business and undertakes to perform the job, work, or
service on its own account and under its own responsibility according to its own manner and
method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.17 Hence, while an independent
contractor enjoys independence and freedom from the control and supervision of his principal, an
employee is subject to the employers power to control the means and methods by which the
employees work is to be performed and accomplished.18

Although the respondents denied that they exercised control over the manner and methods by
which the petitioner accomplished his work, a careful review of the records shows that the latter
performed his work as truck driver under the respondents supervision and control. Their right of
control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively
to deliver respondent companys goods; 19

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in
either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street,
Makati City or at BEPZ, Mariveles, Bataan;20 and

4. Respondents determined how, where and when the petitioner would perform his task by
issuing to him gate passes and routing slips. 21

a. The routing slips indicated on the column REMARKS, the chronological order and priority of
delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver
the same according to the order of priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by
the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the
customers as, for example, the words "tomorrow morning" was written on slip no. 2776.

These circumstances, to the Courts mind, prove that the respondents exercised control over the
means and methods by which the petitioner accomplished his work as truck driver of the
respondent company. On the other hand, the Court is hard put to believe the respondents
allegation that the petitioner was an independent contractor engaged in providing delivery or
hauling services when he did not even own the truck used for such services. Evidently, he did not
possess substantial capitalization or investment in the form of tools, machinery and work
premises. Moreover, the petitioner performed the delivery services exclusively for the
respondent company for a continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that the existence of an employer-
employee relationship cannot be negated by expressly repudiating it in a contract and providing
therein that the employee is an independent contractor when, as in this case, the facts clearly
show otherwise. Indeed, the employment status of a person is defined and prescribed by law and
not by what the parties say it should be.22

Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly
dismissed the petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid and just
cause.23 In this case, the respondents failed to prove any such cause for the petitioners
dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment,
these two factors must concur: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship.24
Obviously, the petitioner did not intend to sever his relationship with the respondent company
for at the time that he allegedly abandoned his job, the petitioner just filed a complaint for
regularization, which was forthwith amended to one for illegal dismissal. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal,
more so when it includes a prayer for reinstatement.25

Neither can the respondents claim that the petitioner was guilty of gross negligence in the
proper maintenance of the truck constitute a valid and just cause for his dismissal. Gross
negligence implies a want or absence of or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them.26 The negligence, to warrant removal from service, should not merely be
gross but also habitual.27 The single and isolated act of the petitioners negligence in the proper
maintenance of the truck alleged by the respondents does not amount to "gross and habitual
neglect" warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:
 As against the gratuitous allegation of the respondent that complainant was not dismissed
from the service but due to complainants breach of their contractual relation, i.e., his violation
of the terms and conditions of the contract, we are very much inclined to believe complainants
story that his dismissal from the service was anchored on his insistent demand that he be
considered a regular employee. Because complainant in his right senses will not just abandon for
that reason alone his work especially so that it is only his job where he depends chiefly his
existence and support for his family if he was not aggrieved by the respondent when he was told
that his services as driver will be terminated on February 23, 1995.28

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his
dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is
entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment
of full backwages, inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.29 However, as found by the Labor Arbiter, the circumstances obtaining in this
case do not warrant the petitioners reinstatement. A more equitable disposition, as held by the
Labor Arbiter, would be an award of separation pay equivalent to one month for every year of
service from the time of his illegal dismissal up to the finality of this judgment in addition to his
full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of
the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is
REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in
NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally terminating the
employment of petitioner Pedro Chavez, is REINSTATED.

SO ORDERED.
 62. Philippine Airlilnes, Inc. v. Ligan, G.R. No. 146408, February 29, 2008

G.R. No. 146408 February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner,

vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS,
RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE
SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN,
RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO,
NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO
AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN
BENTUZAL, respondents.

DECISION

CARPIO MORALES, J.:

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as

Contractor, entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide
loading, unloading, delivery of baggage and cargo and other related services to and from
[petitioner]'s aircraft at the Mactan Station."2

The Agreement specified the following "Scope of Services" of Contractor Synergy:

1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading
and delivery materials, facilities, supplies, equipment and tools for the satisfactory
performance and execution of the following services (the Work):

a. Loading and unloading of baggage and cargo to and from the aircraft;

b. Delivering of baggage from the ramp to the baggage claim area;

c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;

d. Delivering of cargo unloaded from the flight to cargo terminal;

e. Other related jobs (but not janitorial functions) as may be required and necessary;

CONTRACTOR shall perform and execute the aforementioned Work at the

following areas located at Mactan Station, to wit:

a. Ramp Area

b. Baggage Claim Area

 c. Cargo Terminal Area, and

d. Baggage Sorting Area3 (Underscoring supplied)

And it expressly provided that Synergy was "an independent contractor and . . . that there
w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees
on the one hand, and OWNER, on the other."4

On the duration of the Agreement, Section 10 thereof provided:

10. 1 Should at any time OWNER find the services herein undertaken by
CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR who shall have
fifteen (15) days from such notice within which to improve the services. If
CONTRACTOR fails to improve the services under this Agreement according to
OWNER'S specifications and standards, OWNER shall have the right to terminate this
Agreement immediately and without advance notice.

10.2 Should CONTRACTOR fail to improve the services within the period stated above
or should CONTRACTOR breach the terms of this Agreement and fail or refuse to
perform the Work in such a manner as will be consistent with the achievement of the
result therein contracted for or in any other way fail to comply strictly with any terms of
this Agreement, OWNER at its option, shall have the right to terminate this
Agreement and to make other arrangements for having said Work performed and
pursuant thereto shall retain so much of the money held on the Agreement as is necessary
to cover the OWNER's costs and damages, without prejudice to the right of OWNER to
seek resort to the bond furnished by CONTRACTOR should the money in OWNER's
possession be insufficient.

x x x x (Underscoring supplied)

Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to
have been assigned by Synergy to petitioner following the execution of the July 15, 1991
Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu
City against petitioner, Synergy and their respective officials for underpayment, non-payment of
premium pay for holidays, premium pay for rest days, service incentive leave pay, 13th month
pay and allowances, and for regularization of employment status with petitioner, they claiming to
be "performing duties for the benefit of [petitioner] since their job is directly connected with [its]
business x x x."5

Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their
respective officials for regularization of his employment status. Later alleging that he was,
without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and
their respective officials for illegal dismissal and reinstatement with full backwages.6

The complaints of respondents were consolidated.

By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an
independent contractor and dismissed respondents' complaint for regularization against
petitioner, but granted their money claims. The fallo of the decision reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:

(1) Ordering respondents PAL and Synergy jointly and severally to pay all the
complainants herein their 13thmonth pay and service incentive leave benefits;

xxxx

(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial

assistance in the amount of P5,000.00.

The awards hereinabove enumerated in the aggregate total amount of THREE

HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY NINE PESOS
AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal
Examiner which computation is hereto attached to form part of this decision.

The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring
supplied)

On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the
decision of the Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads:

WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated

August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby
rendered:

1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;

2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the
complainants, . . . and to give each of them the salaries, allowances and other
employment benefits and privileges of a regular employee under the Collective
Bargaining Agreement subsisting during the period of their employment;

xxxx

4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering

his reinstatement as helper or utility man with respondent Philippine Airlines, with full
backwages, allowances and other benefits and privileges from the time of his dismissal
up to his actual reinstatement; and

5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of

merit.10 (Emphasis and underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.

By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for
appropriate action and disposition, conformably with St. Martin Funeral Homes v. National
Labor Relations Commission which was promulgated on September 16, 1998.

The appellate court, by Decision of September 29, 2000, affirmed the Decision of the
NLRC.12 Petitioner's motion for reconsideration having been denied by Resolution of December
21, 2000,13 the present petition was filed, faulting the appellate court

I.

. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION

DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-
EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.

II.

. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS

COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO
DESPITE THE ABSENCE [OF] ANY FACTUAL FINDINGIN THE DECISION THAT
PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.

III.

. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN

UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE
RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR
SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL
REQUIREMENTS.14 (Underscoring supplied)

Petitioner argues that the law does not prohibit an employer from engaging an independent
contractor, like Synergy, which has substantial capital in carrying on an independent business of
contracting, to perform specific jobs.

Petitioner further argues that its contracting out to Synergy various services like janitorial,
aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make
respondents its employees.

Petitioner furthermore argues that none of the four (4) elements of an employer-employee
relationship between petitioner and respondents, viz: selection and engagement of an employee,
payment of wages, power of dismissal, and the power to control employee's conduct, is present
in the case.15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because
it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement
with Synergy effective June 30, 199816 as a cost-saving measure.

The decision of the case hinges on a determination of whether Synergy is a mere job-only
contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor,
respondents could be considered as regular employees of petitioner as Synergy would then be a
mere agent of petitioner in which case respondents would be entitled to all the benefits granted to
petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor,
respondents' claims against petitioner must fail as they would then be considered employees of
Synergy.

The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the
Labor Code which reads:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into

a contract with another person for the performance of the former's work, the employees
of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with
the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the

contracting out of labor to protect the rights of workers established under the Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, AND the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him. (Emphasis, capitalization and underscoring supplied)

Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No.
18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended)
as follows:
 Section 3. Trilateral relationship in contracting arrangements. In legitimate
contracting, there exists a trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the contractor or subcontractor,
and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides
to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the
job, work or service, and the contractual workersengaged by the contractor or
subcontractor to accomplish the job, work or service. (Emphasis and underscoring
supplied)

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby

declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are [sic]
present:

(i) The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal; OR

(ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee. (Emphasis, underscoring and capitalization supplied)

"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of
the Department Order as follows:

"Substantial capital or investment" refers to capital stocks and subscribed capitalization

in the case of corporations, tools, equipment, implements, machineries and work
premises, actually and directly used by the contractor or subcontractor in the performance
or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end. (Emphasis and
underscoring supplied)

From the records of the case, it is gathered that the work performed by almost all of the
respondents - loading and unloading of baggage and cargo of passengers - is directly related to
the main business of petitioner. And the equipment used by respondents as station loaders, such
as trailers and conveyors, are owned by petitioner.17

Petitioner asserts, however, that mere compliance with substantial capital requirement suffices
for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations
Commission.18 Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a
capital stock of P1 million fully subscribed and paid for.19 The corporation's status as
independent contractor had in fact been previously confirmed in an earlier case20 by this Court
which found it to be serving, among others, a university, an international bank, a big local bank,
a hospital center, government agencies, etc."

In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter
and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed
to present evidence thereon. As the NLRC held:

The decision of the Labor Arbiter merely mentioned on page 5 of his decision that
respondent SYNERGY has substantial capital, but there is no showing in the records as
to how much is that capital. Neither had respondents shown that SYNERGY has such
substantial capital. x x x21 (Underscoring supplied)

It was only after the appellate court rendered its challenged Decision of September 29, 2002
when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first
time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial
statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes
'A' - 'A-4.'"22

More significantly, however, is that respondents worked alongside petitioner's regular employees
who were performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole
Philippines, Inc. v. Esteva, et al.25teach, such is an indicium of labor-only contracting.

For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two
elements to be present is, for convenience, re-quoted:

(i) The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal, OR

(ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee. (Emphasis and CAPITALIZATION supplied)

Even if only one of the two elements is present then, there is labor-only contracting.

The control test element under the immediately-quoted paragraph (ii), which was not present in
the old Implementing Rules (Department Order No. 10, Series of 1997),26 echoes the prevailing
jurisprudential trend27elevating such element as a primary determinant of employer-employee
relationship in job contracting agreements.

One who claims to be an independent contractor has to prove that he contracted to do the work
according to his own methods and without being subject to the employer's control except only as
to the results.28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents,
it failed to present evidence thereon. It did not even identify who were the Synergy supervisors
assigned at the workplace.

Even the parties' Agreement does not lend support to petitioner's claim, thus:

Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.

CONTRACTOR shall employ capable and experienced workers and foremen to carry out
the loading, unloading and delivery Work as well as provide all equipment, loading,
unloading and delivery equipment, materials, supplies and tools necessary for the
performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the
latter with information regarding the qualifications of the former's workers, to prove their
capability and experience. Contractor shall require all its workers, employees,
suppliers and visitors to comply with OWNER'S rules, regulations, procedures and
directives relative to the safety and security of OWNER'S premises, properties and
operations. For this purpose, CONTRACTOR shall furnish its employees and
workers identification cards to be countersigned by OWNER and uniforms to be
approved by OWNER. OWNER may require CONTRACTOR to dismiss
immediately and prohibit entry into OWNER'S premises of any person employed
therein by CONTRACTOR who in OWNER'S opinion is incompetent or
misconducts himself or does not comply with OWNER'S reasonable instructions and
requests regarding security, safety and other matters and such person shall not again be
employed to perform the services hereunder without OWNER'S
permission.29 (Underscoring partly in the original and partly supplied; emphasis supplied)

Petitioner in fact admitted that it fixes the work schedule of respondents as their work was
dependent on the frequency of plane arrivals.30 And as the NLRC found, petitioner's managers
and supervisors approved respondents' weekly work assignments and respondents and other
regular PAL employees were all referred to as "station attendants" of the cargo operation and
airfreight services of petitioner.31

Respondents having performed tasks which are usually necessary and desirable in the air
transportation business of petitioner, they should be deemed its regular employees and Synergy
as a labor-only contractor.32

The express provision in the Agreement that Synergy was an independent contractor and there
would be "no employer-employee relationship between [Synergy] and/or its employees on one
hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual
provisions are not valid determinants of the existence of such relationship. For it is the totality of
the facts and surrounding circumstances of the case33 which is determinative of the parties'
relationship.

Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner
who had been working as utility man/helper since November 1988, it is not legally justified for
want of just or authorized cause therefor and for non-compliance with procedural due process.
Petitioner's claim that he abandoned his work does not persuade.35 The elements of abandonment
being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a
clear intention to sever the employer-employee relationship manifested by some overt
acts,36 the onus probandi lies with petitioner which, however, failed to discharge the same.

Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally
dismissed from employment, should be entitled to salary differential37 from the time he rendered
one year of service until his dismissal, reinstatement plus backwages until the finality of this
decision.38 In view, however, of the long period of time39 that had elapsed since his dismissal on
November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for
each year of service, in lieu of reinstatement.40

As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the
appellate court, ordering petitioner to accept them as its regular employees and to give each of
them the salaries, allowances and other employment benefits and privileges of a regular
employee under the pertinent Collective Bargaining Agreement.

Petitioner claims, however, that it has become impossible for it to comply with the orders of the
NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its
personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5,
1998.41 Hence, there are no available positions where respondents could be placed.

And petitioner informs that "the employment contracts of all if not most of the respondents . . .
were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with
Synergy."42

Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of
compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed
on June 14, 1999 before the Court of Appeals.43 Further, the notice of termination in 1998 was in
disregard of a subsisting temporary restraining order44to preserve the status quo, issued by this
Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart
the attempt to subvert the implementation of the assailed decision, respondents are deemed to be
continuously employed by petitioner, for purposes of computing the wages and benefits due
respondents.

Finally, it must be stressed that respondents, having been declared to be regular employees of
petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such,
they could only be dismissed by petitioner, the real employer, on the basis of just or authorized
cause, and with observance of procedural due process.

WHEREFORE, the Court of Appeals Decision of September 29, 2000

is AFFIRMED with MODIFICATION.

Petitioner PHILIPPINE AIRLINES, INC. is ordered to:

(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO
OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE
SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL
BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE
PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS,
ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON
M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially
equivalent positions, and pay the wages and benefits due them as regular employees plus salary
differential corresponding to the difference between the wages and benefits given them and
those granted to petitioner's other regular employees of the same rank; and

(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of
his dismissal until the finality of this decision; and separation pay, in lieu of reinstatement,
equivalent to one (1) month pay for every year of service until the finality of this decision.

There being no data from which this Court may determine the monetary liabilities of petitioner,
the case is REMANDED to the Labor Arbiter solely for that purpose.

SO ORDERED.
 63. Dumpit Murillo v. CA, G.R. No. 164652, June 8, 2007

G.R. No. 164652 June 8, 2007

THELMA DUMPIT-MURILLO, petitioner,

vs.
COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER
AND EDWARD TAN,respondents.

DECISION

QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision1 dated January 30, 2004 of the
Court of Appeals in CA-G.R. SP No. 63125 and its Resolution2 dated June 23, 2004 denying the
motion for reconsideration. The Court of Appeals had overturned the Resolution3 dated August
30, 2000 of the National Labor Relations Commission (NLRC) ruling that petitioner was
illegally dismissed.

The facts of the case are as follows:

On October 2, 1995, under Talent Contract No. NT95-1805,4 private respondent Associated
Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-
anchor for Balitang-Balita, an early evening news program. The contract was for a period of
three months. It was renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984
and NT99-5649.5 In addition, petitioners services were engaged for the program "Live on
Five." On September 30, 1999, after four years of repeated renewals, petitioners talent contract
expired. Two weeks after the expiration of the last contract, petitioner sent a letter to Mr. Jose
Javier, Vice President for News and Public Affairs of ABC, informing the latter that she was still
interested in renewing her contract subject to a salary increase. Thereafter, petitioner stopped
reporting for work. On November 5, 1999, she wrote Mr. Javier another letter,6 which we quote
verbatim:

xxxx

Dear Mr. Javier:

On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note
"what terms and conditions" in response to my first letter dated October 13, 1999. To date, or for
more than fifteen (15) days since then, I have not received any formal written reply. xxx

In view hereof, should I not receive any formal response from you until Monday, November 8,
1999, I will deem it as a constructive dismissal of my services.

xxxx
A month later, petitioner sent a demand letter7 to ABC, demanding: (a) reinstatement to her
former position; (b) payment of unpaid wages for services rendered from September 1 to October
20, 1999 and full backwages; (c) payment of 13th month pay, vacation/sick/service incentive
leaves and other monetary benefits due to a regular employee starting March 31, 1996. ABC
replied that a check covering petitioners talent fees for September 16 to October 20, 1999 had
been processed and prepared, but that the other claims of petitioner had no basis in fact or in law.

On December 20, 1999, petitioner filed a complaint8 against ABC, Mr. Javier and Mr. Edward
Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay, premium pay,
separation pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13th month
pay in NLRC-NCR Case No. 30-12-00985-99. She likewise demanded payment for moral,
exemplary and actual damages, as well as for attorneys fees.

The parties agreed to submit the case for resolution after settlement failed during the mandatory
conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.9

On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The
NLRC held that an employer-employee relationship existed between petitioner and ABC; that
the subject talent contract was void; that the petitioner was a regular employee illegally
dismissed; and that she was entitled to reinstatement and backwages or separation pay, aside
from 13th month pay and service incentive leave pay, moral and exemplary damages and
attorneys fees. It held as follows:

WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET
ASIDE and a NEW ONE promulgated:

1) declaring respondents to have illegally dismissed complainant from her regular work therein
and thus, ordering them to reinstate her in her former position without loss of seniority right[s]
and other privileges and to pay her full backwages, inclusive of allowances and other benefits,
including 13th month pay based on her said latest rate of 28,000.00/mo. from the date of her
illegal dismissal on 21 October 1999 up to finality hereof, or at complainants option, to pay her
separation pay of one (1) month pay per year of service based on said latest monthly rate,
reckoned from date of hire on 30 September 1995 until finality hereof;

2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and
13th month pay for the years 1999, 1998 and 1997 of 19,236.00 and 84,000.00, respectively
and her accrued salary from 16 September 1999 to 20 October 1999 of 32,760.00 plus legal
interest at 12% from date of judicial demand on 20 December 1999 until finality hereof;

3) to pay complainant moral damages of 500,000.00, exemplary damages of 350,000.00 and

10% of the total of the adjudged monetary awards as attorneys fees.

Other monetary claims of complainant are dismissed for lack of merit.

SO ORDERED.10
After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals
in a petition for certiorari under Rule 65. The petition was first dismissed for failure to attach
particular documents,11 but was reinstated on grounds of the higher interest of justice.12

Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and
reversed the decision of the NLRC.13 The appellate court reasoned that petitioner should not be
allowed to renege from the stipulations she had voluntarily and knowingly executed by invoking
the security of tenure under the Labor Code. According to the appellate court, petitioner was a
fixed-term employee and not a regular employee within the ambit of Article 28014 of the Labor
Code because her job, as anticipated and agreed upon, was only for a specified time.15

Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows:

I.

THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE

COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR
WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT[;]

II.

THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC

FIRST DIVISION, ARE "ANTI-REGULARIZATION DEVICES" WHICH MUST BE STRUCK
DOWN FOR REASONS OF PUBLIC POLICY[;]

III.

BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-

MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS
CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]

IV.

BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR

EMPLOYEE, THERE WAS A DENIAL OF PETITIONERS RIGHT TO DUE PROCESS
THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.]16

The issues for our disposition are: (1) whether or not this Court can review the findings of the
Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court of
Appeals committed a reversible error in its Decision.

On the first issue, private respondents contend that the issues raised in the instant petition are
mainly factual and that there is no showing that the said issues have been resolved arbitrarily and
without basis. They add that the findings of the Court of Appeals are supported by overwhelming
wealth of evidence on record as well as prevailing jurisprudence on the matter.17
Petitioner however contends that this Court can review the findings of the Court of Appeals,
since the appellate court erred in deciding a question of substance in a way which is not in accord
with law or with applicable decisions of this Court.18

We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any
case regardless of the nature of the action or proceeding involved may be appealed to this
Court through a petition for review. This remedy is a continuation of the appellate process over
the original case,19 and considering there is no congruence in the findings of the NLRC and the
Court of Appeals regarding the status of employment of petitioner, an exception to the general
rule that this Court is bound by the findings of facts of the appellate court,20 we can review such
findings.

On the second issue, private respondents contend that the Court of Appeals did not err when it
upheld the validity of the talent contracts voluntarily entered into by petitioner. It further stated
that prevailing jurisprudence has recognized and sustained the absence of employer-employee
relationship between a talent and the media entity which engaged the talents services on a per
talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.21

Petitioner avers however that an employer-employee relationship was created when the private
respondents started to merely renew the contracts repeatedly fifteen times or for four consecutive
years.22

Again, we agree with petitioner. The Court of Appeals committed reversible error when it held
that petitioner was a fixed-term employee. Petitioner was a regular employee under
contemplation of law. The practice of having fixed-term contracts in the industry does not
automatically make all talent contracts valid and compliant with labor law. The assertion that a
talent contract exists does not necessarily prevent a regular employment status.23

Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza
how to perform his job. How Sonza delivered his lines, appeared on television, and sounded on
radio were outside the television stations control. Sonza had a free hand on what to say or
discuss in his shows provided he did not attack the television station or its interests. Clearly, the
television station did not exercise control over the means and methods of the performance of
Sonzas work.24 In the case at bar, ABC had control over the performance of petitioners work.
Noteworthy too, is the comparatively low 28,000 monthly pay of petitioner25 vis the 300,000 a
month salary of Sonza,26 that all the more bolsters the conclusion that petitioner was not in the
same situation as Sonza.

The contract of employment of petitioner with ABC had the following stipulations:

xxxx

1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention and best
efforts in the performance of his/her duties and responsibilities as Anchor/Program
Host/Newscaster of the Program, in accordance with the direction of ABC and/or its authorized
representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:

a. Render his/her services as a newscaster on the Program;

b. Be involved in news-gathering operations by conducting interviews on- and off-the-air;

c. Participate in live remote coverages when called upon;

d. Be available for any other news assignment, such as writing, research or camera work;

e. Attend production meetings;

f. On assigned days, be at the studios at least one (1) hour before the live telecasts;

g. Be present promptly at the studios and/or other place of assignment at the time designated by
ABC;

h. Keep abreast of the news;

i. Give his/her full cooperation to ABC and its duly authorized representatives in the production
and promotion of the Program; and

j. Perform such other functions as may be assigned to him/her from time to time.

xxxx

1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND

REGULATIONS TALENT agrees that he/she will promptly and faithfully comply with the
requests and instructions, as well as the program standards, policies, rules and regulations of
ABC, the KBP and the government or any of its agencies and instrumentalities.27

xxxx

In Manila Water Company, Inc. v. Pena,28 we said that the elements to determine the existence
of an employment relationship are: (a) the selection and engagement of the employee, (b) the
payment of wages, (c) the power of dismissal, and (d) the employers power to control. The most
important element is the employers control of the employees conduct, not only as to the result
of the work to be done, but also as to the means and methods to accomplish it.29

The duties of petitioner as enumerated in her employment contract indicate that ABC had control
over the work of petitioner. Aside from control, ABC also dictated the work assignments and
payment of petitioners wages. ABC also had power to dismiss her. All these being present,
clearly, there existed an employment relationship between petitioner and ABC.

Concerning regular employment, the law provides for two kinds of employees, namely: (1) those
who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed.30 In other
words, regular status arises from either the nature of work of the employee or the duration of his
employment.31 In Benares v. Pancho,32 we very succinctly said:

[T]he primary standard for determining regular employment is the reasonable connection
between the particular activity performed by the employee vis--vis the usual trade or business of
the employer. This connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its entirety. If the
employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but only with respect to such activity and
while such activity exists.33

In our view, the requisites for regularity of employment have been met in the instant case.
Gleaned from the description of the scope of services aforementioned, petitioners work was
necessary or desirable in the usual business or trade of the employer which includes, as a pre-
condition for its enfranchisement, its participation in the governments news and public
information dissemination. In addition, her work was continuous for a period of four years. This
repeated engagement under contract of hire is indicative of the necessity and desirability of the
petitioners work in private respondent ABCs business.34

The contention of the appellate court that the contract was characterized by a valid fixed-period
employment is untenable. For such contract to be valid, it should be shown that the fixed period
was knowingly and voluntarily agreed upon by the parties. There should have been no force,
duress or improper pressure brought to bear upon the employee; neither should there be any
other circumstance that vitiates the employees consent.35 It should satisfactorily appear that the
employer and the employee dealt with each other on more or less equal terms with no moral
dominance being exercised by the employer over the employee.36 Moreover, fixed-term
employment will not be considered valid where, from the circumstances, it is apparent that
periods have been imposed to preclude acquisition of tenurial security by the employee.37

In the case at bar, it does not appear that the employer and employee dealt with each other on
equal terms. Understandably, the petitioner could not object to the terms of her employment
contract because she did not want to lose the job that she loved and the workplace that she had
grown accustomed to,38 which is exactly what happened when she finally manifested her
intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring
to keep her job as a broadcasting practitioner, petitioner was left with no choice but to affix her
signature of conformity on each renewal of her contract as already prepared by private
respondents; otherwise, private respondents would have simply refused to renew her contract.
Patently, the petitioner occupied a position of weakness vis--vis the employer. Moreover,
private respondents practice of repeatedly extending petitioners 3-month contract for four years
is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term
employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment contracts in a number of
cases, it has consistently emphasized that when the circumstances of a case show that the periods
were imposed to block the acquisition of security of tenure, they should be struck down for being
contrary to law, morals, good customs, public order or public policy.39

As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for
just cause and after due compliance with procedural due process. Since private respondents did
not observe due process in constructively dismissing the petitioner, we hold that there was an
illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23,
2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a
fixed-term employee, are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.
 64. Escasinas v. Shangrilas Mactan Island Resort, G.R. No. 178827, March 4, 2009

G.R. No. 178827 March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,

vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R.
PEPITO, Respondents.

DECISION

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in
1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her
clinic at respondent Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which she was a
retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional
Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint1 for regularization, underpayment
of wages, non-payment of holiday pay, night shift differential and 13th month pay differential
against respondents, claiming that they are regular employees of Shangri-la. The case was
docketed as RAB Case No. 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor
whom it retained via Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor
Code, as amended.

Respondent doctor for her part claimed that petitioners were already working for the previous
retained physicians of Shangri-la before she was retained by Shangri-la; and that she maintained
petitioners services upon their request.

By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular
employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages and
benefits due them as regular employees from the time their services were engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually
perform work which is necessary and desirable to Shangri-las business; that they observe clinic
hours and render services only to Shangri-las guests and employees; that payment for their
salaries were recommended to Shangri-las Human Resource Department (HRD); that
respondent doctor was Shangri-las "in-house" physician, hence, also an employee; and that the
MOA between Shangri-la and respondent doctor was an "insidious mechanism in order to
circumvent [the doctors] tenurial security and that of the employees under her."

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with
respect to the non-award to them of some of the benefits they were claiming.
By Decision4 dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors
appeal and dismissed petitioners complaint for lack of merit, it finding that no employer-
employee relationship exists between petitioner and Shangri-la. In so deciding, the NLRC held
that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as
what is required under Article 157 is that the employer should provide the services of medical
personnel to its employees, but nowhere in said article is a provision that nurses are required to
be employed; that contrary to the finding of the Arbiter, even if Article 280 states that if a worker
performs work usually necessary or desirable in the business of the employer, he cannot be
automatically deemed a regular employee; and that the MOA amply shows that respondent
doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her own
nurses and other clinic personnel.

Brushing aside petitioners contention that since their application for employment was addressed
to Shangri-la, it was really Shangri-la which hired them and not respondent doctor, the NLRC
noted that the applications for employment were made by persons who are not parties to the case
and were not shown to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment
of petitioners wages were recommended by Shangri-las HRD did not prove that it was Shangri-
la which pays their wages. It thus credited respondent doctors explanation that the
recommendations for payment were based on the billings she prepared for salaries
of additional nurses during Shangri-las peak months of operation, in accordance with the
retainership agreement, the guests payments for medical services having been paid directly to
Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals which, by Decision5 of May 22,
2007, affirmed the NLRC Decision that no employer-employee relationship exists between
Shangri-la and petitioners. The appellate court concluded that all aspects of the employment of
petitioners being under the supervision and control of respondent doctor and since Shangri-la is
not principally engaged in the business of providing medical or healthcare services, petitioners
could not be regarded as regular employees of Shangri-la.

Petitioners motion for reconsideration having been denied by Resolution6 of July 10, 2007, they
interposed the present recourse.

Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-
time registered nurse, apart from a physician, hence, their engagement should be deemed as
regular employment, the provisions of the MOA notwithstanding; and that the MOA is contrary
to public policy as it circumvents tenurial security and, therefore, should be struck down as being
void ab initio. At most, they argue, the MOA is a mere job contract.

And petitioners maintain that respondent doctor is a labor-only contractor for she has no license
or business permit and no business name registration, which is contrary to the requirements
under Sec. 19 and 20 of the Implementing Rules and Regulations of the Labor Code on sub-
contracting.
Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as
she does in substantial capital, the clinic having been set-up and already operational when she
took over as retained physician; that respondent doctor has no control over how the clinic is
being run, as shown by the different orders issued by officers of Shangri-la forbidding her from
receiving cash payments and several purchase orders for medicines and supplies which were
coursed thru Shangri-las Purchasing Manager, circumstances indubitably showing that she is not
an independent contractor but a mere agent of Shangri-la.

In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the
petition for being inadequate. On the merits, it prays for the disallowance of the petition,
contending that it raises factual issues, such as the validity of the MOA, which were never raised
during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article
157 of the Labor Code does not make it mandatory for a covered establishment to employ health
personnel; that the services of nurses is not germane nor indispensable to its operations; and that
respondent doctor is a legitimate individual independent contractor who has the power to hire,
fire and supervise the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis
Art. 280 and the provisions on permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners postulation, Art. 157 does not require the
engagement of full-time nurses as regular employees of a company employing not less than
50 workers. Thus, the Article provides:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to
furnish his employees in any locality with free medical and dental attendance and facilities
consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds
fifty (50) but not more than two hundred (200) except when the employer does not
maintain hazardous workplaces, in which case the services of a graduate first-aider shall
be provided for the protection of the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations the services that shall be
required where the number of employees does not exceed fifty (50) and shall determine
by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not
more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as
a dental clinic, and an infirmary or emergency hospital with one bed capacity for every
one hundred (100) employees when the number of employees exceeds three hundred
(300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist
who cannot stay in the premises of the establishment for at least two (2) hours, in the case of
those engaged on part-time basis, and not less than eight (8) hours in the case of those employed
on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist
may be engaged on retained basis, subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental treatment and attendance in case
of emergency. (Emphasis and underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated
to "furnish" its employees with the services of a full-time registered nurse, a part-time physician
and dentist, and an emergency clinic which means that it should provide or make available such
medical and allied services to its employees, not necessarily to hire or employ a service provider.
As held in Philippine Global Communications vs. De Vera:8

x x x while it is true that the provision requires employers to engage the services of medical
practitioners in certain establishments depending on the number of their employees, nothing is
there in the law which says that medical practitioners so engaged be actually hired as employees,
adding that the law, as written, only requires the employer "to retain", not employ, a part-time
physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours.
(Emphasis and underscoring supplied)1avvphi1

The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of
the person engaged to provide the services, for Article 157 must not be read alongside Art.
2809 in order to vest employer-employee relationship on the employer and the person so
engaged. So De Vera teaches:

x x x For, we take it that any agreement may provide that one party shall render services for and
in behalf of another, no matter how necessary for the latters business, even without being hired
as an employee. This set-up is precisely true in the case of an independent contractorship as well
as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate
court, is not the yardstick for determining the existence of an employment relationship. As it is,
the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual.
x x x10 (Emphasis and underscoring supplied)

The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of
services that the nurse will render in the companys premises and to its employees, not the
manner of his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the

pertinent sections of DOLE Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:

(1) The contractor carries on an independent business and undertakes the contract work
on his own account under his own responsibility according to his own manner and
 method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of
his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of
the circumstances of each case and after considering the operating needs of the employer
and the rights of the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established

by considering the following determinants: whether the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the premises,
tools, appliances, materials and labor; and the mode, manner and terms of payment.11

On the other hand, existence of an employer- employee relationship is established by the

presence of the following determinants: (1) the selection and engagement of the workers; (2)
power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control
the worker's conduct, with the latter assuming primacy in the overall consideration.12

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate
independent contractor. That Shangri-la provides the clinic premises and medical supplies for
use of its employees and guests does not necessarily prove that respondent doctor lacks
substantial capital and investment. Besides, the maintenance of a clinic and provision of medical
services to its employees is required under Art. 157, which are not directly related to Shangri-las
principal business operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries,
SSS contributions and other benefits of the staff13; group life, group personal accident insurance
and life/death insurance14 for the staff with minimum benefit payable at 12 times the employees
last drawn salary, as well as value added taxes and withholding taxes, sourced from her
60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-las guests
who avail of the clinic services. It is unlikely that respondent doctor would report petitioners as
workers, pay their SSS premium as well as their wages if they were not indeed her employees.15

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a
document, "Clinic Policies and Employee Manual"16 claimed to have been prepared by
respondent doctor exists, to which petitioners gave their conformity17 and in which they
acknowledged their co-terminus employment status. It is thus presumed that said document, and
not the employee manual being followed by Shangri-las regular workers, governs how they
perform their respective tasks and responsibilities.

Contrary to petitioners contention, the various office directives issued by Shangri-las officers
do not imply that it is Shangri-las management and not respondent doctor who exercises control
over them or that Shangri-la has control over how the doctor and the nurses perform their work.
The letter18 addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes
giving instructions regarding the replenishment of emergency kits is, at most, administrative in
nature, related as it is to safety matters; while the letter19 dated May 17, 2004 from Shangri-las
Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments
from the resorts guests is a matter of financial policy in order to ensure proper sharing of the
proceeds, considering that Shangri-la and respondent doctor share in the guests payments for
medical services rendered. In fine, as Shangri-la does not control how the work should be
performed by petitioners, it is not petitioners employer.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated
May 22, 2007 and the Resolution dated July 10, 2007 are AFFIRMED.

SO ORDERED.
 65. Commissioner of Internal Revenue v. NLRC, G.R. No.74965, Nov 9, 1994

G.R. No. 74965 November 9, 1994

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, DEPUTY CITY SHERIFF
CARMELO V. CACHERO, MARITIME COMPANY OF THE PHILIPPINES,
DOMINGO C. NIANGAR, DANIEL C. SABINO, FERNANDO S. TULIAO and
TULMAR TRADING CORPORATION, respondents.

Reynaldo L. Libanan for respondent deputy sheriff.

Joaquin G. Chung, Jr. Law Office for respondent Tulmar Trading Corp.

Eliodoro C. Cruz & Arsenio P. Dizon for Maritime Co. of the Philippines.

MENDOZA, J.:

This is a petition for certiorari to set aside the resolution dated April 4, 19861 of the National
Labor Relations Commission in NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar v.
Maritime Company of the Philippines), affirming the denial by the Labor Arbiter2 of petitioner's
motion to annul the sheriff's sale of four barges or, in the alternative, to order him to remit the
proceeds of his sale to the Bureau of the Internal Revenue for the satisfaction of the tax liabilities
of private respondent Maritime Company of the Philippines.

The facts are as follows:

On January 12, 1984 the Commissioner of the Internal Revenue sent two letters3 of demand to
the respondent Maritime Company of the Philippines for deficiency common carrier's tax, fixed
tax, 6% Commercial Broker's tax, documentary stamp tax, income tax and withholding taxes in
the total amount of P17,284,882.45.

The assessment became final and executory as private respondent did not contest it. But as
private respondent did not pay its tax liability either, the Commissioner of Internal Revenue
issued warrants of distraint of personal property and levy of real property of private respondent.
Copies of the warrants, both dated January 23, 1985, were served on January 28, 1985 on Yoly
T. Petrache, private respondent's accountant.4

On April 16, 1985 a "Receipt for Goods, Articles, and Things Seized5 under Authority of the
National Internal Revenue Code" was executed, covering, among other things, six barges
identified as MCP-1,2,3,4,5 and 6. This receipt is required by 303 (now 206) of the NIRC as
proof of the constructive distraint of property. It is an undertaking by the taxpayer or person in
possession of the property covered that he will preserve the property and deliver it upon order of
the court or the Internal Revenue Commissioner.

The receipt was prepared by the BIR for the signature of a representative of respondent Maritime
Company of the Philippines, but it was not in fact signed. Petitioner later explained that the
individuals who had possession of the barges had refused to sign the receipt.

This circumstance has given rise to the question in this case as it appears that four of the barges
placed under constructive distraint were levied upon execution by respondent deputy sheriff of
Manila on July 20, 1985 to satisfy a judgment for unpaid wages and other benefits of employees
of respondent Maritime Company of the Philippines. More specifically, the question in this case
is the validity of the warrant of distraint served by the Revenue Seizure Officer against the writ
of execution subsequently levied upon the same property by the deputy sheriff of Manila to
satisfy the claims of employees in NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar, et
al. v. Maritime Company of the Philippines) for P490,749.21.

The four barges were sold by respondent deputy sheriff at a public auction on August 12, 1985.
The highest bidder, Daniel C. Sabino, subsequently sold them to private respondents Fernando S.
Tuliao and Tulmar Trading Corporation.

On September 4, 1985, petitioner asked the Labor Arbiter to annul the sale and to enjoin the
sheriff from disposing of the proceeds of the sale or, in the alternative, to remit them to the
Bureau of Internal Revenue so that the amount could be applied to the payment of private
respondent Maritime Company's tax liabilities.

In an order dated September 30, 1985, Labor Arbiter Ceferina Diosana denied the motion on the
ground that petitioner Commissioner of Internal Revenue failed to show that the barges which
were levied upon in execution and sold at public auction had been validly placed under
constructive distraint.6 The Labor Arbiter likewise rejected petitioner's contention that the
government's claim for taxes was preferred under Art. 2247, in relation to Art. 2241(1) of the
Civil Code, on the ground that under this provisions only taxes and fees which are due on
specific movables enjoy preference, whereas the taxes claimed by petitioner were not due on the
four barges in question.

The order was appealed to the NLRC, which in resolution dated April 4, 1986, affirmed the
denial of the Internal Revenue Commissioner's motion. Hence this petition for certiorari.

For reasons to be presently stated, the petition is granted.

The National Internal Revenue Code provides for the collection of delinquent taxes by any of the
following remedies: (a) distraint of personal property or levy of real property of the delinquent
taxpayer and (b) civil or criminal action.

With respect to the four barges in question, petitioner resorted to constructive distraint pursuant
to 303 (now 206) of the NLRC. This provisions states:
 Constructive distraint of the property of a taxpayer. To safeguard the interest
of the Government, the Commissioner of Internal Revenue may place under
constructive distraint the property of a delinquent taxpayer or any taxpayer who,
in his opinion, is retiring from any business subject to tax, or intends to leave the
Philippines, or remove his property therefrom, or hide or conceal his property, or
perform any act tending to obstruct the proceedings, for collecting the tax due or
which may be due from him.

The constructive distraint of personal property shall be effected by requiring the

taxpayer or any person having possession or control of such property to sign a
receipt covering the property distrained and obligate himself to preserve the same
intact and unaltered and not to dispose of the same in any manner whatever
without the express authority of the Commissioner of Internal Revenue.

In case the taxpayer or the person having the possession and control of the
property sought to be placed under constructive distraint refuses or fails to sign
the receipt herein referred to, the revenue officer effecting the constructive
distraint shall proceed to prepare a list of such property and in the presence of two
witnesses leave a copy thereof in the premises where the property distrained is
located, after which the said property shall be deemed to have been placed under
constructive distraint..

Although the warrant of distraint in this case had been issued earlier (January 23,1985) than the
levy on execution in the labor case on July 20, 1985, the Labor Arbiter nevertheless held that
there was no valid distraint of personal property on the ground that the receipt of property
distrained had not been signed by the taxpayer as required above. In her order, which the NLRC
affirmed in toto, the Labor Arbiter said:

It is claimed by the Commissioner of the Internal Revenue that on January 23,

1984, he issued a warrant of distraint of personal property on respondent to satisfy
the collection of the deficiency taxes in the aggregate sum of P17,284,882.45 and
a copy of said warrant was served upon Maritime Company on January 28, 1985
and pursuant to the warrant, the Commissioner, through Revenue Seizure Agent
Roland L. Bombay, issued on April 16, 1985, to Maritime Company a receipt for
goods, articles and things seized pursuant to authority granted to him under the
National Internal Revenue Code. Such personal properties seized includes, among
others, "Six (6) units of barges MCI-6 . . . " However, his own receipts for goods
attached to his motions does not show that it was received by Maritime; neither
does it show any signature of any of Maritime's Officers.

Apart from the foregoing, in his affidavit of 11 September 1985, Sheriff Cachero
stated that before he sold the subject four barges at public auction, he conducted
an investigation on the ownership of the said four barges. In brief, he found out
that the said four barges were purchased by respondent through Makati Leasing
and that the whole purchase price has been paid by respondent. In fact, the
corresponding deed of sale has already been signed. He did not find any lien or
 encumbrance on any of the said four barges. Thus it cannot be true that the
Commissioner effected a valid warrant of distraint of personal property on the
four barges in question.7

However, this case arose out of the same facts involved in Republic v. Enriquez,8 in which we
sustained the validity of the distraint of the six barges, which included the four involved in this
case, against the levy on execution made by another deputy sheriff of Manila in another case
filed against Maritime Company. Two barges (MCP-1 and MCP-4) were the subject of a levy in
the case. There we found that the "Receipt for Goods, Articles and Things Seized under
Authority of the National Internal Revenue Code" covering the six barges had been duly
executed, with the Headquarters, First Coast Guard District, Farola Compound Binondo, Manila
acknowledging receipt of several barges, vehicles and two (2) bodegas of spare parts belonging
to Maritime Company of the Philippines.

Apparently, what had been attached to the petitioner's motion filed by the government with the
Labor Arbiter in this case was a copy, not the original one showing the rubber stamp of the Coast
Guard and duly signed by its representative. A xerox copy of this signed receipt was submitted in
the prior case.9 This could be due to the fact that, except for Solicitor Erlinda B. Masakayan, the
government lawyers who prepared the petition in the prior case were different from those who
filed the present petition. They admitted that the receipt of property distrained had not been
signed by the taxpayer or person in possession of the taxpayer's property allegedly because they
had refused to do so. What apparently they did not know is that the receipt had been
acknowledged by the Coast Guard which obviously had the barges in its possession.

In addition to the receipt duly acknowledged by the Coast Guard, the record of the prior case also
shows that on October 4, 1985, the Commissioner of the Internal Revenue issued a "Notice of
Seizure of Personal Property" stating that the goods and chattels listed on its reverse side, among
which were the four barges (MCP-2, MCP-3, MCP-5, and MCP-6), had been distrained by the
Commissioner of Internal Revenue.10

The "Notice of Seizure of Personal Property," a copy of which was received by Atty. Redentor
R. Melo in behalf of Maritime Company of the Philippines, together with the receipt of the Coast
Guard, belies the claim of respondent deputy sheriff that when he levied upon the four barges
there was no indication that the barges had previously been placed under distraint by the
Commissioner of Internal Revenue.

Accordingly, what we said in the prior case 11 in upholding the validity of distraint of two of the
six barges (MCP Nos. 1 and 4), fully applies in this case:

It is settled that the claim of the government predicated on a tax lien is superior to
the claim of a private litigant predicated on a judgment. The tax lien attaches not
only from the service of the warrant of distraint of personal property but from the
time the tax became due and payable. Besides, the distraint on the subject
properties of the Maritime Company of the Philippines as well as the notice of
their seizure were made by petitioner, through the Commissioner of the Internal
Revenue, long before the writ of the execution was issued by the Regional Trial
 Court of Manila, Branch 31. There is no question then that at the time the writ of
execution was issued, the two (2) barges, MPC-1 and MCP-4, were no longer
properties of the Maritime Company of the Philippines. The power of the court in
execution of judgments extends only to properties unquestionably belonging to
the judgment debtor. Execution sales affect the rights of the judgment debtor only,
and the purchaser in an auction sale acquires only such right as the judgment
debtor had at the time of sale. It is also well-settled that the sheriff is not
authorized to attach or levy on property not belonging to the judgment debtor.

Nor is there any merit in the contention of the NLRC that taxes are absolutely preferred claims
only with respect to movable or immovable properties on which they are due and that since the
taxes sought to be collected in this case are not due on the barges in question the government's
claim cannot prevail over the claims of employees of the Maritime Company of the Philippines
which, pursuant to Art. 110 of the Labor Code, "enjoy first preference."

In Republic v. Peralta 12 this Court rejected a similar contention. Through Mr. Justice Feliciano
we held:

. . . [T]he claim of the Bureau of Internal Revenue for unpaid tobacco inspection
fees constitutes a claim for unpaid internal revenue taxes which gives rise to a tax
lien upon all the properties and assets, movable or immovable, of the insolvent as
taxpayer. Clearly, under Articles 2241 No. 1, 2242 No. 1, and 2246-2249 of the
Civil Code, this tax claim must be given preference over any other claim of any
other creditor, in respect of any and all properties of the insolvent.

xxx xxx xxx

Article 110 of the Labor Code does not purport to create a lien in favor of workers
or employees for unpaid wages either upon all of the properties or upon any
particular property owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially preferred claims established
under Articles 2241 and 2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article 2241, number 6: "claims
for laborer's wages, on the goods manufactured or the work done," or by Article
2242, number 3: "claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other works, upon
said buildings, canals or other works." To the extent that claims for unpaid wages
fall outside the scope of Article 2241, number 6 and 2242, number 3, they would
come with the ambit of the category of ordinary preferred credits under Article
2244.

Applying Article 2241, number 6 to the instant case, the claims of the Unions for
separation pay of their members constitute liens attaching to the processed leaf
tobacco, cigars and cigarettes and other products produced or manufactured by the
Insolvent, but not to other assets owned by the Insolvent. And even in respect of
such tobacco and tobacco products produced by the Insolvent, the claims of the
 Unions may be given effect only after the Bureau of Internal Revenue's claim for
unpaid tobacco inspection fees shall have been satisfied out of the products so
manufactured by the Insolvent.

Article 2242, number 3, also creates a lien or encumbrance upon a building or

other real property of the Insolvent in favor of workmen who constructed or
repaired such building or other real property. Article 2242, number 3, does not
however appear relevant in the instant case, since the members of the Unions to
whom separation pay is due rendered services to the Insolvent not (so far as the
record of this case would show) in the construction or repair of buildings or other
real property, but rather, in the regular course of the manufacturing operations of
the Insolvent. The Unions' claims do not therefore constitute a lien or
encumbrance upon any immovable property owned by the insolvent, but rather, as
already indicated, upon the Insolvent's existing inventory (if any) of processed
tobacco and tobacco products.

In addition, we have held 13 that Art. 110 of the Labor Code applies only in case of bankruptcy or
judicial liquidation of the employer. This is clear from the text of the law.

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy

or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claims
to a share in the assets of the employer.

This case does not involve the liquidation of the employer's business.

WHEREFORE, the petition for certiorari is GRANTED and the resolution dated April 4, 1986
of respondent NLRC in NLRC Case No. NCR-12-4233-84 is SET ASIDE insofar as it denies the
government's claim for taxes, and respondent deputy sheriff Carmelo V. Cachero or his
successor is ORDERED to remit the proceeds of the auction sale to the Bureau of Internal
Revenue to be applied as part payment of respondent Maritime Company's tax liabilities.

SO ORDERED.
 66. Hautea v. NLRC, G.R. No.96149, Feb 6, 1994

G.R. No. 96149 February 16, 1994

CONCHITA S. HAUTEA, in Substitution of JOSE H. HAUTEA (Deceased), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ASSET PRIVATIZATION TRUST
AND PHILIPPINE NATIONAL BANK, respondents.

Eugenio S. Hautea and Salvador A. Altura, Jr. for petitioners.

Jose M. Suratos, Jr. for Asset Privatization Trust.

NOCON, J.:

Petitioner entreats this Court to nullify the decision dated August 13, 1990 of respondent
National Labor Relations Commission (NLRC) in Injunction cases Nos. 1457 and 1469, entitled
"Asset Privatization Trust/Philippine National Bank v. Jose Hautea and Rodolfo G. Layoc,
Executive Labor Arbiter, Arbitration Branch, Region IV, NLRC, Iloilo City."

The questioned decision annulled the decision dated March 12, 1987 of the Labor Arbiter in
RAB Case No. VI-0007-87 which ordered Calinog-Lambunao Sugar Mill, Inc. (CLSM) to pay
Jose H. Hautea separation pay/retirement benefits, moral damages and attorney's fees amounting
to P276,000.00, insofar as said Labor Arbiter's decision affected Philippine National Bank
(PNB). The questioned decision of the NLRC also ordered the writ of execution issued on April
23, 1987 and the order of the Labor Arbiter dated May 22, 1987 vacated and set aside and the
levy on the properties of PNB lifted.

Petitioner imputes grave abuse of discretion on the part of public respondent in annulling the
decision of the labor arbiter insofar as it affected PNB on the grounds that PNB, though
impleaded as party-respondent was never properly served with summons and that no execution
can be maintained against the properties foreclosed by PNB pursuant to the case of Development
Bank of the Philippines v. NLRC.1

The facts show that on January, 1967, Jose Hautea was hired by the Calinog-Lambunao
Sugarmill, Inc. (CLSMI). In December, 1984, he retired from his employment with CLSMI. On
December 2, 1986, the PNB extrajudicially foreclosed the real and personal mortgaged to it by
CLSMI and at the auction sale it was the sole bidder.

On January 12, 1987, Jose Hautea filed with the public respondent a complaint for separation
pay/retirement benefits against CLSMI and/or PNB. On January 29, 1987, the complaint was
amended to include damages and attorney's fees. The respondents CLSMI and/or PNB were
furnished with copies of the complaint and amended complaint through CLSMI at its offices at
Calinog, Iloilo. All notices of hearing were likewise sent to CLSMI at its offices. For failure to
appear during the scheduled hearings, CLSMI and PNB were declared in default.

On February 27, 1987, the properties of CLSMI foreclosed by PNB were transferred and
assigned in favor of the Government of the Republic of the Philippines thru the Asset
Privatization Trust (APT), by virtue of Proclamation No. 50, as amended, and the Deed of
Transfer.

On March 12, 1987, the Labor Arbiter rendered a decision in favor of Jose Hautea and against
CLSMI and PNB. On April 1, 1987, copy of the decision was sent to CLSMI and PNB at the
offices of CLSMI in Calinog, Iloilo.

On April 20, 1987, Jose Hautea filed a motion for execution. Acting on the motion, the Labor
Arbiter issued on April 23, 1987 the necessary writ of execution. Sheriff Adorico Dadivas levied
on the property of CLSMI worth more or less P1,500,000.00 which APT/PNB acquired through
foreclosure of mortgage.

On May 5, 1987, the APT filed a third party claim with the Labor Arbiter, and later joined PNB
in a petition for relief with application for preliminary injunction originally filed with the Labor
Arbiter and later elevated to the NLRC (4th Division) at Cebu City.

On July 31, 1987, Jose Hautea died and he was substituted by his wife, Conchita S. Hautea,
petitioner herein.

In a Decision2 dated August 13, 1990, respondent NLRC found for APT and PNB. The
dispositive portion of decision reads:

WHEREFORE, in view of all the foregoing, the petition to annul the decision in
RAB CASE No. VI-0007-87 insofar as it affects petitioner Philippine National
Bank is GRANTED and the decision in said case is MODIFIED accordingly. The
Writ of Execution issued on April 23, 1987 and the Order of the Labor Arbiter
dated May 22, 1987 are VACATED and SET ASIDE. The levy on the properties
of petitioner pursuant to the Writ of Execution is lifted.

SO ORDERED.3

On September 21, 1990, Conchita S. Hautea filed a motion for reconsideration which was denied
on October 29, 1990.

Aggrieved, petitioner comes to us and raises the following issues:

I. WHETHER OR NOT THE RESPONDENT NATIONAL LABOR

RELATIONS COMMISSION ERRED IN APPLYING
STRICTLY THE PROVISION OF THE RULES OF COURT ON THE
SERVICE OF SUMMONS TO THE DETRIMENT OF THE INTEREST OF
 EXPEDITIOUS LABOR JUSTICE, PRACTICABILITY AND
CONVENIENCE.

II. WHETHER OR NOT THE RESPONDENT NATIONAL LABOR

RELATIONS COMMISSION ERRED IN HOLDING THAT
JOSE H. HAUTEA CANNOT LIKEWISE CLAIM COVERAGE UNDER
SECTION 27 OF PROCLAMATION NO. 50 BECAUSE AS SPECIFICALLY
PROVIDED UNDER SECTION 27 OF SAID PROCLAMATION WORK
RELATED BENEFITS WILL ONLY BE EXTENDED TO EMPLOYEES OF
COMPANIES WHO ARE OR WILL BE TERMINATED FROM
EMPLOYMENT BY REASON OF SALE OR DISPOSITION OF THE
COMPANIES' ASSETS.4

In setting aside the decision of the Labor Arbiter, public respondent held that PNB was not
properly served with summons, hence, it cannot be held liable for the claim of Jose H. Hautea.
The question of validity of the service of summons of PNB is, however, immaterial. An
examination of the dispositive portion of the Labor Arbiter's decision shows that PNB has not
been adjudged to pay the judgment debt, to wit:

WHEREFORE, premises considered, respondent Calinog-Lambunao Sugarmill,

Inc. is hereby ordered to pay herein complainant the amount of P126,000.00 as
separation pay, P125,000.00 as moral damages and P25,000.00 as attorney's fees.

SO ORDERED.5

Although PNB was impleaded as party respondent, it was not held liable for the claim of Jose H.
Hautea. Correctly so, because it was not the employer of Hautea. It was dragged into the case
because it has in its possession, property of the employer CLSMI which it had acquired through
foreclosure of mortgage. Thus, as pointed out by the Solicitor General, its liability attached
through the levy on the property which it had foreclosed. In this regard, the validity of the
decision of the public respondent nullifying the decision of the Labor Arbiter based on the
jurisdictional defect of lack of summons need not be discussed.

The second issue raises the question of whether the public respondent erred in not holding that
Jose H. Hautea can claim coverage under Section 27 of Proclamation No. 50, which provides:

Sec. 27. Automatic Termination of Employer-Employee Relations. Upon the sale

or other disposition of the ownership and/or controlling interest of the government
in a corporation held by the Trust, or all or substantially all of the assets of such
corporation, the employer-employee relations between the government and other
offices and the personnel of such corporations shall terminate by operation of law.
None of such officers or employees shall retain any vested right to future
employment in the privatized or disposed corporation, and the new owners or
controlling interest holders thereof shall have full and absolute discretion to retain
or dismiss said officers and employees and to hire the replacement or
 replacements of any one or all of them as the pleasure and confidence of such
owners or controlling interest holders may dictate.

Nothing in this section shall, however, be construed to deprive said officers and
employees of their vested entitlements in accrued or due compensation and other
benefits incident to their employment or attaching to termination under applicable
employment contracts, collective bargaining agreements, and applicable
legislation.

Clearly evident is that the foregoing provision speaks of entitlement to employment benefits of
officers and employees of government corporations whose employment is terminated when the
corporations are transferred to the Asset Privatization Trust. It does not support petitioner's
submission that the award of employment benefits in her husband's favor can be satisfied from
the properties of the corporation subject to a lien superior to that of the workers' preference of
credit. Nevertheless, the question whether Jose H. Hautea is entitled to the benefits he had
claimed is now beyond question. The judgment ordering CLSMI to pay him separation pay had
become final and the only problem at hand is the enforcement of said judgment.

Thus, the relevant issue in this case is whether said judgment can be enforced against APT/PNB
as mortgagee of the foreclosed properties of CLSMI.

Article 110 of the Labor Code, prior to its amendment by Republic Act No. 6715 reads:

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy

or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.

As amended by Republic Act 6715, Article 110 now reads:

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy

or liquidation of an employer's business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims, any provision of law to
the contrary notwithstanding. Such unpaid wages and monetary claims shall be
paid in full before the claims of the Government and other creditors may be paid.

In the 1990 Development Bank of the Philippines v. NLRC case (supra) involving the former
employees of Lirag Textile Mills, Inc., this Court, En Banc, noted that the amendment expands
worker preference to cover not only unpaid wages but also other monetary claims to which even
claims of the Government must be deemed subordinate. Despite the elimination of the terms
"declaration" of bankruptcy or "judicial" liquidation, this Court opined that liquidation
proceedings have not been done away with. In the event of insolvency, there must be some
proceedings where notice to all of the insolvent's creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated.
This Court emphasized therein that DBP's lien on Lirag's properties, being a mortgage credit, is a
special preferred credit under Article 2241 of the Civil Code while the workers' preference is an
ordinary preferred credit, to wit:

. . . A mortgage directly and immediately subjects the property upon which it is

imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted (Article 2176, Civil Code). It creates a real right
which is enforceable against the whole world. It is a lien on an identified
immovable property, which a preference is not.
A recorded mortgage credit is a special preferred credit under Article 2242(5) of
the Civil Code on classification of credits. The preference given by Article 110,
when not falling within Article 2241(6) and Article 2242(3) of the Civil Code and
not attached to any specific property, is an ordinary preferred credit although its
impact is to move it from second priority to first in the order of preference
established by Article 2244 of the Civil Code (Republic vs. Peralta, supra).6

In the 1993 Development Bank of the Philippines v. NLRC case7 involving claims for separation
pay of employees of Republic Hardwood, Inc., the Third Division of this Court also emphasized
that DBP's lien on
Republic Hardwood, Inc.'s mortgage credit is a special preferred credit under Article 2242 of the
Civil Code while the workers' preference is an ordinary preferred credit under Article 2242.
While the decision had expressed that under the new Article 110 of the Labor Code, even
mortgage credits are subordinate to worker's claims, the statement, however, was merely
an obiter. Furthermore,
RA 6715 amending Article 110 took effect only on March 21, 1989. The amendment cannot,
therefore, be retroactively applied to, nor can it affect, the mortgage credit which was secured by
the petitioner several years prior to its effectivity. In the 1990 Development Bank of the
Philippines v. NLRC case, this Court enunciated the prospective application of the law, to wit:

Even if Article 110 and its Implementing Rule, as amended, should be interpreted
to mean "absolute preference", the same should be given only prospective effect
in line with the cardinal rule that laws shall have no retroactive effect, unless the
contrary is provided (Article 4, Civil Code). Thereby, any infringement on the
constitutional guarantee on
non-impairment of the obligation of contracts (Section 10, Article III, 1987
Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715. To give Article 110 retroactive
effect would be to wipe out the mortgage in DBP's favor and expose it to risk
which it sought to protect itself against by requiring a collateral in the form of real
property.8

Considering that in the case at bar, PNB had extrajudicially foreclosed the properties of
CLSMI on December 2, 1986, it is evident that the
mortgage credit of PNB also antedated by several years the amendatory law, RA No.
6715 which became effective on March 21, 1989.
WHEREFORE, in view of the foregoing reasons, the questioned decision of public respondent
National Labor Relations Commission is hereby AFFIRMED.

SO ORDERED.
 67. Barayoga v. Asset Privatization Trust, G.R. No. 160073, Oct 24, 2005

G.R. No. 160073 October 24, 2005

ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR CORFARM WORKERS UNION

(PACIWU CHAP-TPC),Petitioners,
vs.
ASSET PRIVATIZATION TRUST,* Respondent.

DECISION

PANGANIBAN, J.:

esponsibility for the liabilities of a mortgagor towards its employees cannot be transferred via an
auction sale to a purchaser who is also the mortgagee-creditor of the foreclosed assets and
chattels. Clearly, the mortgagee-creditor has no employer- __________________

* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p. 480.

employee relations with the mortgagors workers. The mortgage constitutes a lien on the
determinate properties of the employer-debtor, because it is a specially preferred credit to which
the workers monetary claims is deemed subordinate.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 30,
2003 Decision2and the August 27, 2003 Resolution3 of the Court of Appeals (CA), in CA-GR SP
No. 58813. The disposition or fallo of the questioned Decision reads as follows:

"IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the assailed
NLRC Decision dated February 18, 2000 is hereby RECALLED and SET ASIDE insofar as
herein petitioner APT is concerned. No cost."4

The reversed Decision5 of the National Labor Relations Commission (NLRC) disposed as
follows:

"WHEREFORE, premises considered, the decision appealed from is AFFIRMED with

modifications as follows:

1. Complainants are awarded their monetary claims for underpayment of salaries and payment
of allowances per their computation on pp. 97-99 and 142-144 of the records;

2. Complainants are declared to have been illegally dismissed and should be paid their
backwages from 01 May 1991 to 30 October 1992."6

The challenged August 27, 2003 Resolution denied petitioners Motion for Reconsideration.
 The Facts

The CA summarized the antecedents in this portion of its Decision, which we quote:

"Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar

Development Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili,
Camarines Sur.

"On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created
under Proclamation No. 50, as amended, mandated to take title to and possession of, conserve,
provisionally manage and dispose of non-performing assets of the Philippine government
identified for privatization or disposition.

"Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued
Administrative Order No. 14 identifying certain assets of government institutions that were to be
transferred to the National Government. Among the assets transferred was the financial claim of
the Philippine National Bank against BISUDECO in the form of a secured loan. Consequently,
by virtue of a Trust Agreement executed between the National Government and APT on
February 27, 1987, APT was constituted as trustee over BISUDECOs account with the PNB.

"Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar
Corporation (Philsucor) to take over the management of the sugar plantation and milling
operations until August 31, 1992.

"Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with
PNB, its mortgaged properties were foreclosed and subsequently sold in a public auction to APT,
as the sole bidder. On April 2, 1991, APT was issued a Sheriffs Certificate of Sale.

"On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal
deduction and underpayment of wages and other labor standard benefits plus damages.

"In the meantime, on July 15, 1992, APTs Board of Trustees issued a resolution accepting the
offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again,
on September 23, 1992, the board passed another resolution authorizing the payment of
separation benefits to BISUDECOs employees in the event of the companys privatization.
Then, on October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT
and took over its sugar milling operations under the trade name Peafrancia Sugar Mill
(Pensumil).

"On December 17, 1992, the union filed a similar complaint, later to be consolidated with its
earlier complaint and docketed as RAB V Case No. 07-00184-91.

"On March 2, 1993, it filed an amended complaint, impleading as additional party respondents
APT and Pensumil.
"In their Position Paper, the union alleged that when Philsucor initially took over the operations
of the company, it retained BISUDECOs existing personnel under the same terms and
conditions of employment. Nonetheless, at the start of the season sometime in May 1991,
Philsucor started recalling workers back to work, to the exception of the union members.
Management told them that they will be re-hired only if they resign from the union. Just the
same, thereafter, the company started to employ the services of outsiders under the pakyaw
system.

"BISUDECO, Pensumil and APT all interposed the defense of lack of employer-employee
relationship.

xxxxxxxxx

"After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed as
follows:

WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein

complainants of the mandated employment benefits provided for under Section 27 of
Proclamation No. 50 which benefits had been earlier extended to other employees similarly
situated.

SO ORDERED.

"Both the union and APT elevated the labor arbiters decision before NLRC."7

The NLRC affirmed APTs liability for petitioners money claims. While no employer-employee
relationship existed between members of the petitioner union and APT, at the time of the
employees illegal dismissal, the assets of BISUDECO had been transferred to the national
government through APT. Moreover, the NLRC held that APT should have treated petitioners
claim as a lien on the assets of BISUDECO. The Commission opined that APT should have done
so, considering its awareness of the pending complaint of petitioners at the time BISUDECO
sold its assets to BAPCI, and APT started paying separation pay to the workers.

Finding their computation to be in order, the NLRC awarded to petitioners their money claims
for underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages,
computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal
dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other
hand, the NLRC ruled that petitioners were not entitled to separation pay because of the huge
business losses incurred by BISUDECO, which had resulted in its bankruptcy.

Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of
Court.

Ruling of the Court of Appeals

The CA ruled that APT should not be held liable for petitioners claims for unfair labor practice,
illegal dismissal, illegal deduction and underpayment of wages, as well as other labor-standard
benefits plus damages. As found by the NLRC, APT was not the employer of petitioners, but
was impleaded only for possessing BISUDECOs mortgaged properties as trustee and, later, as
the highest bidder in the foreclosure sale of those assets.

Citing Batong Buhay Gold Mines v. Dela Serna,8 the CA concluded that petitioners claims
could not be enforced against APT as mortgagee of the foreclosed properties of BISUDECO.

Hence, this Petition.9

Issues

In their Memorandum, petitioners raise the following issues for our consideration:

"I. Whether or not the Court of Appeals erred in ruling that Respondent Asset Privatization Trust
(APT) should not be held liable for the petitioner unions claim for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard benefits plus
damages.

"II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB as
mortgagee of the foreclosed properties of BISUDECO.

"III. Whether or not the entitlement of petitioners upon their claims against Respondent APT is
recognized under the law."10

In brief, the main issue raised is whether Respondent APT is liable for petitioners monetary
claims.

The Courts Ruling

The Petition has no merit.

Main Issue:

Whether APT Is Liable for the Claims of

Petitioners Against Their Former Employer

It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series of
1987,11 PNBs assets, loans and receivables from its borrowers were transferred to APT as
trustee of the national government. Among the liabilities transferred to APT was PNBs financial
claim against BISUDECO, not the latters assets and chattel. Contrary to petitioners assertions,
BISUDECO remained the owner of the mortgaged properties in August 1988, when the
Philippine Sugar Corporation (Philsucor) undertook the operation and management of the sugar
plantation until August 31, 1992, under a so-called Contract of Lease between the two
corporations. At the time, APT was merely a secured creditor of BISUDECO.12

It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of
the latters continued failure to pay outstanding loan obligations to PNB/APT. The properties
were sold at public auction to APT, the highest bidder, as indicated in the Sheriffs Certificate of
Sale issued on April 2, 1991. It was only in September 1992 (after the expiration of the
lease/management Contract with Philsucor in August 1992), however, when APT took over
BISUDECO assets, preparatory to the latters privatization.

In the present case, petitioner-unions members who were not recalled to work by Philsucor in
May 1991 seek to hold APT liable for their monetary claims and allegedly illegal dismissal.
Significantly, prior to the actual sale of BISUDECO assets to BAPCI on October 30, 1992, the
APT board of trustees had approved a Resolution on September 23, 1992. The Resolution
authorized the payment of separation benefits to the employees of the corporation in the event of
its privatization. Not included in the Resolution, though, were petitioner-unions members who
had not been recalled to work in May 1991.

The question now before the Court is whether APT is liable to pay petitioners monetary claims,
including back wages from May 1, 1991, to October 30, 1992 (the date of the sale of
BISUDECO assets to BAPCI).

We rule in the negative. The duties and liabilities of BISUDECO, including its monetary
liabilities to its employees, were not all automatically assumed by APT as purchaser of the
foreclosed properties at the auction sale. Any assumption of liability must be specifically and
categorically agreed upon. In Sundowner Development Corp. v. Drilon,13 the Court ruled that,
unless expressly assumed, labor contracts like collective bargaining agreements are not
enforceable against the transferee of an enterprise. Labor contracts are in personam and thus
binding only between the parties.

No succession of employment rights and obligations can be said to have taken place between the
two. Between the employees of BISUDECO and APT, there is no privity of contract that would
make the latter a substitute employer that should be burdened with the obligations of the
corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted
assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of Transfer
between the national government and PNB.

Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the latters
employees.14 The most that the purchasing company may do, for reasons of public policy and
social justice, is to give preference of reemployment to the selling companys qualified separated
employees, who in its judgment are necessary to the continued operation of the business
establishment.15

In any event, the national government (in whose trust APT previously held the mortgage credits
of BISUDECO) is not the employer of petitioner-unions members, who had been dismissed
sometime in May 1991, even before APT took over the assets of the corporation. Hence, under
existing law and jurisprudence, there is no reason to expect any kind of bailout by the national
government.16 Even the NLRC found that no employer-employee relationship existed between
APT and petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding
that APT, as the transferee of the assets of BISUDECO, was liable to petitioners.

Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals,17 this Court
supposedly ruled that the "sale of a business of a going concern does not ipso facto terminate the
employer-employee relations insofar as the successor-employer is concerned, and that change of
ownership or management of an establishment or company is not one of the just causes provided
by law for termination of employment[.]"18

A careful reading of the Courts Decision in that case plainly shows that it does not contain the
words quoted by counsel for petitioners. At this juncture, we admonish their counsel19 of his
bounden duty as an officer of the Court to refrain from misquoting or misrepresenting the text of
its decisions.20 Ever present is the danger that, if not faithfully and exactly quoted, they may lose
their proper and correct meaning, to the detriment of other courts, lawyers and the public who
may thereby be misled.21

In that case, contrary to the assertions of petitioners, the Court held as follows:

"There can be no controversy for it is a principle well-recognized, that it is within the employers
legitimate sphere of management control of the business to adopt economic policies or make
some changes or adjustments in their organization or operations that would insure profit to itself
or protect the investment of its stockholders. As in the exercise of such management prerogative,
the employer may merge or consolidate its business with another, or sell or dispose all or
substantially all of its assets and properties which may bring about the dismissal or termination
of its employees in the process. Such dismissal or termination should not however be interpreted
in such a manner as to permit the employer to escape payment of termination pay. x x x.

"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 business establishment has no liability to the employees of the transferor to
continue employing them. Nor is the transferee liable for past unfair labor practices of the
previous owner, except, when the 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."22 (Citations omitted.)

In other words, the liabilities of the previous owner to its employees are not enforceable against
the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or
transfer was made in bad faith. Thus, APT cannot be held responsible for the monetary claims of
petitioners who had been dismissed even before it actually took over BISUDECOs assets.

Moreover, it should be remembered that APT merely became a transferee of BISUDECOs

assets for purposes of conservation because of its lien on those assets -- a lien it assumed as
assignee of the loan secured by the corporation from PNB. Subsequently, APT, as the highest
bidder in the auction sale, acquired ownership of the foreclosed properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act
No. 6715, which reads:

"Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy or

liquidation of the employers business, his workers shall enjoy first preference as regards their
unpaid wages and other monetary claims shall be paid in full before the claims of the
Government and other creditors may be paid."23

This Court has ruled in a long line of cases24 that under Articles 2241 and 2242 of the Civil
Code, a mortgage credit is a special preferred credit that enjoys preference with respect to a
specific/determinate property of the debtor. On the other hand, the workers preference under
Article 110 of the Labor Code is an ordinary preferred credit. While this provision raises the
workers money claim to first priority in the order of preference established under Article 2244
of the Civil Code, the claim has no preference over special preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their employer
cannot have any preference over the latters mortgage credit. In other words, being a mortgage
credit, APTs lien on BISUDECOs mortgaged assets is a special preferred lien that must be
satisfied first before the claims of the workers.

Development Bank of the Philippines v. NLRC25 explained the rationale of this ruling as follows:

"x x x. A preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards unpaid wages
recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in
favor of workers. It is but a preference of credit in their favor, a preference in application. It is a
method adopted to determine and specify the order in which credits should be paid in the final
distribution of the proceeds of the insolvents assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor. x x x"

Furthermore, workers claims for unpaid wages and monetary benefits cannot be paid outside of
a bankruptcy or judicial liquidation proceedings against the employer.26 It is settled that the
application of Article 110 of the Labor Code is contingent upon the institution of those
proceedings, during which all creditors are convened, their claims ascertained and inventoried,
and their preferences determined.27 Assured thereby is an orderly determination of the preference
given to creditors claims; and preserved in harmony is the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor
Code.

The Court hastens to add that the present Petition was brought against APT alone. In holding that
the latter, which has never really been an employer of petitioners, is not liable for their claims,
this Court is not reversing or ruling upon their entitlement to back wages and other unpaid
benefits from their previous employer.
On the basis of the foregoing clarification, the Court finds no reversible error in the questioned
CA Decision, which set aside the February 8, 2000 Decision of the NLRC. As a mere transferee
of the mortgage credit and later as the purchaser in a public auction of BISUDECOs foreclosed
properties, APT cannot be held liable for petitioners claims against BISUDECO: illegal
dismissal, unpaid back wages and other monetary benefits.

WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.

SO ORDERED.
 D. TITLE III Special Groups of Employees (Articles 130-161; IRR, Rules XII, XIII, XIV),
RA 6725, RA 7322, RA 10151, RA 10361, RA 7610, RA 7658, RA 9231)
Cases:
68. Apex Mining Co., Inc. v. NLRC (supra) G.R. No. 94951 April 22, 1991

G.R. No. 94951 April 22, 1991

APEX MINING COMPANY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA
CANDIDO, respondents.

Bernabe B. Alabastro for petitioner.

Angel Fernandez for private respondent.

GANCAYCO, J.:

Is the househelper in the staff houses of an industrial company a domestic helper or a regular
employee of the said firm? This is the novel issue raised in this petition.

Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on
May 18, 1973 to perform laundry services at its staff house located at Masara, Maco, Davao del
Norte. In the beginning, she was paid on a piece rate basis. However, on January 17, 1982, she
was paid on a monthly basis at P250.00 a month which was ultimately increased to P575.00 a
month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her
laundry, she accidentally slipped and hit her back on a stone. She reported the accident to her
immediate supervisor Mila de la Rosa and to the personnel officer, Florendo D. Asirit. As a
result of the accident she was not able to continue with her work. She was permitted to go on
leave for medication. De la Rosa offered her the amount of P 2,000.00 which was eventually
increased to P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to
return to work. Petitioner did not allow her to return to work and dismissed her on February 4,
1988.

On March 11, 1988, private respondent filed a request for assistance with the Department of
Labor and Employment. After the parties submitted their position papers as required by the labor
arbiter assigned to the case on August 24, 1988 the latter rendered a decision, the dispositive part
of which reads as follows:

WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering

the respondent, Apex Mining Company, Inc., Masara, Davao del Norte, to pay the
complainant, to wit:
 1 Salary

Differential P16,289.20

2. Emergency Living

Allowance 12,430.00

3. 13th Month Pay

Differential 1,322.32

4. Separation Pay

(One-month for

every year of

service [1973-19881) 25,119.30

or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS
AND 42/100 (P55,161.42).

SO ORDERED.1

Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations
Commission (NLRC), wherein in due course a decision was rendered by the Fifth Division
thereof on July 20, 1989 dismissing the appeal for lack of merit and affirming the appealed
decision. A motion for reconsideration thereof was denied in a resolution of the NLRC dated
June 29, 1990.

Hence, the herein petition for review by certiorari, which appopriately should be a special civil
action for certiorari, and which in the interest of justice, is hereby treated as such.2 The main
thrust of the petition is that private respondent should be treated as a mere househelper or
domestic servant and not as a regular employee of petitioner.

The petition is devoid of merit.

Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper"
or "domestic servant" are defined as follows:

The term "househelper" as used herein is synonymous to the term "domestic servant" and
shall refer to any person, whether male or female, who renders services in and about the
employer's home and which services are usually necessary or desirable for the
maintenance and enjoyment thereof, and ministers exclusively to the personal comfort
and enjoyment of the employer's family.3
The foregoing definition clearly contemplates such househelper or domestic servant who is
employed in the employer's home to minister exclusively to the personal comfort and enjoyment
of the employer's family. Such definition covers family drivers, domestic servants, laundry
women, yayas, gardeners, houseboys and other similar househelps.

The definition cannot be interpreted to include househelp or laundrywomen working in

staffhouses of a company, like petitioner who attends to the needs of the company's guest and
other persons availing of said facilities. By the same token, it cannot be considered to extend to
then driver, houseboy, or gardener exclusively working in the company, the staffhouses and its
premises. They may not be considered as within the meaning of a "househelper" or "domestic
servant" as above-defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of
said employer. While it may be true that the nature of the work of a househelper, domestic
servant or laundrywoman in a home or in a company staffhouse may be similar in nature, the
difference in their circumstances is that in the former instance they are actually serving the
family while in the latter case, whether it is a corporation or a single proprietorship engaged in
business or industry or any other agricultural or similar pursuit, service is being rendered in the
staffhouses or within the premises of the business of the employer. In such instance, they are
employees of the company or employer in the business concerned entitled to the privileges of a
regular employee.

Petitioner contends that it is only when the househelper or domestic servant is assigned to certain
aspects of the business of the employer that such househelper or domestic servant may be
considered as such as employee. The Court finds no merit in making any such distinction. The
mere fact that the househelper or domestic servant is working within the premises of the business
of the employer and in relation to or in connection with its business, as in its staffhouses for its
guest or even for its officers and employees, warrants the conclusion that such househelper or
domestic servant is and should be considered as a regular employee of the employer and not as a
mere family househelper or domestic servant as contemplated in Rule XIII, Section l(b), Book 3
of the Labor Code, as amended.

Petitioner denies having illegally dismissed private respondent and maintains that respondent
abandoned her work.1wphi1This argument notwithstanding, there is enough evidence to show
that because of an accident which took place while private respondent was performing her
laundry services, she was not able to work and was ultimately separated from the service. She is,
therefore, entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private
respondent appears not to be interested in returning to her work for valid reasons, the payment of
separation pay to her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public
respondent NLRC are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.
 69. Remington Industrial Sales Corp. v. Castaneda, G.R. No. 162295-96, Nov 20, 2006

G.R. Nos. 169295-96 November 20, 2006

REMINGTON INDUSTRIAL SALES CORPORATION, Petitioner,

vs.
ERLINDA CASTANEDA, Respondent.

DECISION

PUNO, J.:

Before this Court is the Petition for Review on Certiorari1 filed by Remington Industrial Sales
Corporation to reverse and set aside the Decision2 of the Fourth Division of the Court of Appeals
in CA-G.R. SP Nos. 64577 and 68477, dated January 31, 2005, which dismissed petitioners
consolidated petitions for certiorari, and its subsequent Resolution,3 dated August 11, 2005,
which denied petitioners motion for reconsideration.

The antecedent facts of the case, as narrated by the Court of Appeals, are as follows:

The present controversy began when private respondent, Erlinda Castaneda ("Erlinda") instituted
on March 2, 1998 a complaint for illegal dismissal, underpayment of wages, non-payment of
overtime services, non-payment of service incentive leave pay and non-payment of 13th month
pay against Remington before the NLRC, National Capital Region, Quezon City. The complaint
impleaded Mr. Antonio Tan in his capacity as the Managing Director of Remington.

Erlinda alleged that she started working in August 1983 as company cook with a salary of Php
4,000.00 for Remington, a corporation engaged in the trading business; that she worked for six
(6) days a week, starting as early as 6:00 a.m. because she had to do the marketing and would
end at around 5:30 p.m., or even later, after most of the employees, if not all, had left the
company premises; that she continuously worked with Remington until she was
unceremoniously prevented from reporting for work when Remington transferred to a new site in
Edsa, Caloocan City. She averred that she reported for work at the new site in Caloocan City on
January 15, 1998, only to be informed that Remington no longer needed her services. Erlinda
believed that her dismissal was illegal because she was not given the notices required by law;
hence, she filed her complaint for reinstatement without loss of seniority rights, salary
differentials, service incentive leave pay, 13th month pay and 10% attorneys fees.

Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic
helper, not a regular employee; Erlinda worked as a cook and this job had nothing to do with
Remingtons business of trading in construction or hardware materials, steel plates and wire rope
products. It also contended that contrary to Erlindas allegations that the (sic) she worked for
eight (8) hours a day, Erlindas duty was merely to cook lunch and "merienda", after which her
time was hers to spend as she pleased. Remington also maintained that it did not exercise any
degree of control and/or supervision over Erlindas work as her only concern was to ensure that
the employees lunch and "merienda" were available and served at the designated time.
Remington likewise belied Erlindas assertion that her work extended beyond 5:00 p.m. as she
could only leave after all the employees had gone. The truth, according to Remington, is that
Erlinda did not have to punch any time card in the way that other employees of Remington did;
she was free to roam around the company premises, read magazines, and to even nap when not
doing her assigned chores. Remington averred that the illegal dismissal complaint lacked factual
and legal bases. Allegedly, it was Erlinda who refused to report for work when Remington
moved to a new location in Caloocan City.

In a Decision4 dated January 19, 1999, the labor arbiter dismissed the complaint and ruled that
the respondent was a domestic helper under the personal service of Antonio Tan, finding that her
work as a cook was not usually necessary and desirable in the ordinary course of trade and
business of the petitioner corporation, which operated as a trading company, and that the latter
did not exercise control over her functions. On the issue of illegal dismissal, the labor arbiter
found that it was the respondent who refused to go with the family of Antonio Tan when the
corporation transferred office and that, therefore, respondent could not have been illegally
dismissed.

Upon appeal, the National Labor Relations Commission (NLRC) rendered a Decision,5 dated
November 23, 2000, reversing the labor arbiter, ruling, viz:

We are not inclined to uphold the declaration below that complainant is a domestic helper of the
family of Antonio Tan. There was no allegation by respondent that complainant had ever worked
in the residence of Mr. Tan. What is clear from the facts narrated by the parties is that
complainant continuously did her job as a cook in the office of respondent serving the needed
food for lunch and merienda of the employees. Thus, her work as cook inured not for the benefit
of the family members of Mr. Tan but solely for the individual employees of respondent.

Complainant as an employee of respondent company is even bolstered by no less than the

certification dated May 23, 1997 issued by the corporate secretary of the company certifying that
complainant is their bonafide employee. This is a solid evidence which the Labor Arbiter simply
brushed aside. But, such error would not be committed here as it would be at the height of
injustice if we are to declare that complainant is a domestic helper.

Complainants work schedule and being paid a monthly salary of 4,000.00 are clear indication
that she is a company employee who had been employed to cater to the food needed by the
employees which were being provided by respondent to form part of the benefit granted them.

With regard to the issue of illegal dismissal, we believe that there is more reason to believe that
complainant was not dismissed because allegedly she was the one who refused to work in the
new office of respondent. However, complainants refusal to join the workforce due to poor
eyesight could not be considered abandonment of work or voluntary resignation from
employment.

Under the Labor Code as amended, an employee who reaches the age of sixty years old (60
years) has the option to retire or to separate from the service with payment of separation
pay/retirement benefit.
In this case, we notice that complainant was already 60 years old at the time she filed the
complaint praying for separation pay or retirement benefit and some money claims.

Based on Article 287 of the Labor Code as amended, complainant is entitled to be paid her
separation pay/retirement benefit equivalent to one-half (1/2) month for every year of service.
The amount of separation pay would be based on the prescribed minimum wage at the time of
dismissal since she was then underpaid. In as much as complainant is underpaid of her wages, it
behooves that she should be paid her salary differential for the last three years prior to
separation/retirement.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is hereby, SET ASIDE, and a new
one is hereby entered ordering respondents to pay complainant the following:

1. Salary differential - 12,021.12 2. Service Incentive Leave Pay - 2,650.00 3. 13th Month Pay
differential - 1,001.76 4. Separation Pay/retirement benefit - 36,075.00

Total - 51,747.88

SO ORDERED.

Petitioner moved to reconsider this decision but the NLRC denied the motion. This denial of its
motion prompted petitioner to file a Petition for Certiorari6 with the Court of Appeals, docketed
as CA-G.R. SP No. 64577, on May 4, 2001, imputing grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the NLRC in (1) reversing in toto the decision of the
labor arbiter, and (2) awarding in favor of respondent salary differential, service incentive leave
pay, 13th month pay differential and separation benefits in the total sum of 51,747.88.

While the petition was pending with the Court of Appeals, the NLRC rendered another
Decision7 in the same case on August 29, 2001. How and why another decision was rendered is
explained in that decision as follows:

On May 17, 2001, complainant filed a Manifestation praying for a resolution of her Motion for
Reconsideration and, in support thereof, alleges that, sometime December 18, 2000, she mailed
her Manifestation and Motion for Reconsideration registered as Registered Certificate No.
188844; and that the said mail was received by the NLRC, through a certain Roland Hernandez,
on December 26, 2000. Certifications to this effect was issued by the Postmaster of the Sta. Mesa
Post Office bearing the date May 11, 2001 (Annexes A and B, Complainants Manifestation).

Evidence in support of complainants having actually filed a Motion for Reconsideration within
the reglementary period having been sufficiently established, a determination of its merits is
thus, in order.

On the merits, the NLRC found respondents motion for reconsideration meritorious leading to
the issuance of its second decision with the following dispositive portion:
WHEREFORE, premises considered, the decision dated November 23, 2000, is MODIFIED by
increasing the award of retirement pay due the complainant in the total amount of SIXTY TWO
THOUSAND FOUR HUNDRED THIRTY-SEVEN and 50/100 (62,437.50). All other
monetary relief so adjudged therein are maintained and likewise made payable to the
complainant.

SO ORDERED.

Petitioner challenged the second decision of the NLRC, including the resolution denying its
motion for reconsideration, through a second Petition for Certiorari8 filed with the Court of
Appeals, docketed as CA-G.R. SP No. 68477 and dated January 8, 2002, this time imputing
grave abuse of discretion amounting to lack of or excess of jurisdiction on the part of the NLRC
in (1) issuing the second decision despite losing its jurisdiction due to the pendency of the first
petition for certiorari with the Court of Appeals, and (2) assuming it still had jurisdiction to issue
the second decision notwithstanding the pendency of the first petition for certiorari with the
Court of Appeals, that its second decision has no basis in law since respondents motion for
reconsideration, which was made the basis of the second decision, was not filed under oath in
violation of Section 14, Rule VII9 of the New Rules of Procedure of the NLRC and that it
contained no certification as to why respondents motion for reconsideration was not decided on
time as also required by Section 10, Rule VI10 and Section 15, Rule VII11 of the aforementioned
rules.

Upon petitioners motion, the Court of Appeals ordered the consolidation of the two (2)
petitions, on January 24, 2002, pursuant to Section 7, par. b(3), Rule 3 of the Revised Rules of
the Court of Appeals. It summarized the principal issues raised in the consolidated petitions as
follows:

1. Whether respondent is petitioners regular employee or a domestic helper;

2. Whether respondent was illegally dismissed; and

3. Whether the second NLRC decision promulgated during the pendency of the first
petition for certiorari has basis in law.

On January 31, 2005, the Court of Appeals dismissed the consolidated petitions for lack of merit,
finding no grave abuse of discretion on the part of the NLRC in issuing the assailed decisions.

On the first issue, it upheld the ruling of the NLRC that respondent was a regular employee of
the petitioner since the former worked at the company premises and catered not only to the
personal comfort and enjoyment of Mr. Tan and his family, but also to that of the employees of
the latter. It agreed that petitioner enjoys the prerogative to control respondents conduct in
undertaking her assigned work, particularly the nature and situs of her work in relation to the
petitioners workforce, thereby establishing the existence of an employer-employee relationship
between them.
On the issue of illegal dismissal, it ruled that respondent has attained the status of a regular
employee in her service with the company. It noted that the NLRC found that no less than the
companys corporate secretary certified that respondent is a bonafide company employee and
that she had a fixed schedule and routine of work and was paid a monthly salary of 4,000.00;
that she served with petitioner for 15 years starting in 1983, buying and cooking food served to
company employees at lunch and merienda; and that this work was usually necessary and
desirable in the regular business of the petitioner. It held that as a regular employee, she enjoys
the constitutionally guaranteed right to security of tenure and that petitioner failed to discharge
the burden of proving that her dismissal on January 15, 1998 was for a just or authorized cause
and that the manner of dismissal complied with the requirements under the law.

Finally, on petitioners other arguments relating to the alleged irregularity of the second NLRC
decision, i.e., the fact that respondents motion for reconsideration was not under oath and had
no certification explaining why it was not resolved within the prescribed period, it held that such
violations relate to procedural and non-jurisdictional matters that cannot assume primacy over
the substantive merits of the case and that they do not constitute grave abuse of discretion
amounting to lack or excess of jurisdiction that would nullify the second NLRC decision.

The Court of Appeals denied petitioners contention that the NLRC lost its jurisdiction to issue
the second decision when it received the order indicating the Court of Appeals initial action on
the first petition for certiorari that it filed. It ruled that the NLRCs action of issuing a decision in
installments was not prohibited by its own rules and that the need for a second decision was
justified by the fact that respondents own motion for reconsideration remained unresolved in the
first decision. Furthermore, it held that under Section 7, Rule 65 of the Revised Rules of
Court,12the filing of a petition for certiorari does not interrupt the course of the principal case
unless a temporary restraining order or a writ of preliminary injunction has been issued against
the public respondent from further proceeding with the case.

From this decision, petitioner filed a motion for reconsideration on February 22, 2005, which the
Court of Appeals denied through a resolution dated August 11, 2005.

Hence, the present petition for review.

The petitioner raises the following errors of law: (1) the Court of Appeals erred in affirming the
NLRCs ruling that the respondent was petitioners regular employee and not a domestic helper;
(2) the Court of Appeals erred in holding that petitioner was guilty of illegal dismissal; and (3)
the Court of Appeals erred when it held that the issuance of the second NLRC decision is proper.

The petition must fail. We affirm that respondent was a regular employee of the petitioner and
that the latter was guilty of illegal dismissal.

Before going into the substantive merits of the present controversy, we shall first resolve the
propriety of the issuance of the second NLRC decision.

The petitioner contends that the respondents motion for reconsideration, upon which the second
NLRC decision was based, was not under oath and did not contain a certification as to why it
was not decided on time as required under the New Rules of Procedure of the
NLRC.13 Furthermore, the former also raises for the first time the contention that respondents
motion was filed beyond the ten (10)-calendar day period required under the same Rules,14 since
the latter received a copy of the first NLRC decision on December 6, 2000, and respondent filed
her motion only on December 18, 2000. Thus, according to petitioner, the respondents motion
for reconsideration was a mere scrap of paper and the second NLRC decision has no basis in law.

We do not agree.

It is well-settled that the application of technical rules of procedure may be relaxed to serve the
demands of substantial justice, particularly in labor cases.15 Labor cases must be decided
according to justice and equity and the substantial merits of the controversy.16 Rules of
procedure are but mere tools designed to facilitate the attainment of justice.17 Their strict and
rigid application, which would result in technicalities that tend to frustrate rather than promote
substantial justice, must always be avoided.18

This Court has consistently held that the requirement of verification is formal, and not
jurisdictional. Such requirement is merely a condition affecting the form of the pleading, non-
compliance with which does not necessarily render it fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the pleading is filed in good
faith.19 The court may order the correction of the pleading if verification is lacking or act on the
pleading although it is not verified, if the attending circumstances are such that strict compliance
with the rules may be dispensed with in order that the ends of justice may thereby be served.20

Anent the argument that respondents motion for reconsideration, on which the NLRCs second
decision was based, was filed out of time, such issue was only brought up for the first time in the
instant petition where no new issues may be raised by a party in his pleadings without offending
the right to due process of the opposing party.

Nonetheless, the petitioner asserts that the respondent received a copy of the NLRCs first
decision on December 6, 2000, and the motion for reconsideration was filed only on December
18, 2000, or two (2) days beyond the ten (10)-calendar day period requirement under the New
Rules of Procedure of the NLRC and should not be allowed.21

This contention must fail.

Under Article 22322 of the Labor Code, the decision of the NLRC shall be final and executory
after ten (10) calendar days from the receipt thereof by the parties.

While it is an established rule that the perfection of an appeal in the manner and within the
period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal
has the effect of rendering the judgment final and executory, it is equally settled that the NLRC
may disregard the procedural lapse where there is an acceptable reason to excuse tardiness in the
taking of the appeal.23 Among the acceptable reasons recognized by this Court are (a) counsel's
reliance on the footnote of the notice of the decision of the Labor Arbiter that "the aggrieved
party may appeal. . . within ten (10) working days";24 (b) fundamental consideration of
substantial justice;25 (c) prevention of miscarriage of justice or of unjust enrichment, as where
the tardy appeal is from a decision granting separation pay which was already granted in an
earlier final decision;26 and (d) special circumstances of the case combined with its legal
merits27 or the amount and the issue involved.28

We hold that the particular circumstances in the case at bar, in accordance with substantial
justice, call for a liberalization of the application of this rule. Notably, respondents last day for
filing her motion for reconsideration fell on December 16, 2000, which was a Saturday. In a
number of cases,29 we have ruled that if the tenth day for perfecting an appeal fell on a Saturday,
the appeal shall be made on the next working day. The reason for this ruling is that on Saturdays,
the office of the NLRC and certain post offices are closed. With all the more reason should this
doctrine apply to respondents filing of the motion for reconsideration of her cause, which the
NLRC itself found to be impressed with merit. Indeed, technicality should not be permitted to
stand in the way of equitably and completely resolving the rights and obligations of the parties
for the ends of justice are reached not only through the speedy disposal of cases but, more
importantly, through a meticulous and comprehensive evaluation of the merits of a case.

Finally, as to petitioners argument that the NLRC had already lost its jurisdiction to decide the
case when it filed its petition for certiorari with the Court of Appeals upon the denial of its
motion for reconsideration, suffice it to state that under Section 7 of Rule 6530 of the Revised
Rules of Court, the petition shall not interrupt the course of the principal case unless a temporary
restraining order or a writ of preliminary injunction has been issued against the public respondent
from further proceeding with the case. Thus, the mere pendency of a special civil action for
certiorari, in connection with a pending case in a lower court, does not interrupt the course of the
latter if there is no writ of injunction.31 Clearly, there was no grave abuse of discretion on the
part of the NLRC in issuing its second decision which modified the first, especially since it failed
to consider the respondents motion for reconsideration when it issued its first decision.

Having resolved the procedural matters, we shall now delve into the merits of the petition to
determine whether respondent is a domestic helper or a regular employee of the petitioner, and
whether the latter is guilty of illegal dismissal.

Petit
 BOOK IV Health, Safety and Social Welfare Benefits
Articles 162-216, LCP; IRR, Rules I-II; RA 8282, RA 8972, RA 8187, RA 9262, RA 9679,
RA 9710

70. Gualberto v. Marinduque Mining & Industrial Corp., C.A.-G.R. No.52753-R, June 28,
1978
71. PT & T v. NLRC, 118978, May 23, 1997

[G.R. No. 118978. May 23, 1997]

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY,* petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

DECISION
REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph
and Telephone Company (hereafter, PT&T) invokes the alleged concealment of civil status and
defalcation of company funds as grounds to terminate the services of an employee. That employee,
herein private respondent Grace de Guzman, contrarily argues that what really motivated PT&T
to terminate her services was her having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus claims that she was discriminated against
in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the
Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a
Supernumerary Project Worker, for a fixed period from November 21, 1990 until April 20, 1991
vice one C.F. Tenorio who went on maternity leave.[1] Under the Reliever Agreement which she
signed with petitioner company, her employment was to be immediately terminated upon
expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19,
1991 to August 8, 1991, private respondents services as reliever were again engaged by petitioner,
this time in replacement of one Erlinda F. Dizon who went on leave during both periods.[2] After
August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company
as a probationary employee, the probationary period to cover 150 days. In the job application form
that was furnished her to be filled up for the purpose, she indicated in the portion for civil status
therein that she was single although she had contracted marriage a few months earlier, that is, on
May 26, 1991.[3]
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner
supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial,
sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the
discrepancy. In that memorandum, she was reminded about the companys policy of not accepting
married women for employment.[4]
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&Ts policy regarding married women at the time, and that all along she had not deliberately
hidden her true civil status.[5] Petitioner nonetheless remained unconvinced by her
explanations. Private respondent was dismissed from the company effective January 29,
1992,[6] which she readily contested by initiating a complaint for illegal dismissal, coupled with a
claim for non-payment of cost of living allowances (COLA), before the Regional Arbitration
Branch of the National Labor Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent
volunteered the information, and this was incorporated in the stipulation of facts between the
parties, that she had failed to remit the amount of P2,380.75 of her collections. She then executed
a promissory note for that amount in favor of petitioner.[7]All of these took place in a formal
proceeding and with the agreement of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring
that private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and
COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the
ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that
it was apparent that she had been discriminated against on account of her having contracted
marriage in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent
upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent
had indeed been the subject of an unjust and unlawful discrimination by her employer,
PT&T. However, the decision of the labor arbiter was modified with the qualification that Grace
de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts
which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor
arbiter, including the order for the reinstatement of private respondent in her employment with
PT&T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent
NLRC in its resolution of November 9, 1994, hence this special civil action assailing the
aforestated decisions of the labor arbiter and respondent NLRC, as well as the denial resolution of
the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love
and respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal employment
opportunities and standards. In the Philippine setting, women have traditionally been considered
as falling within the vulnerable groups or types of workers who must be safeguarded with
preventive and remedial social legislation against discriminatory and exploitative practices in
hiring, training, benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all
phases of social and political life, provides a gamut of protective provisions.To cite a few of the
primordial ones, Section 14, Article II[8] on the Declaration of Principles and State Policies,
expressly recognizes the role of women in nation-building and commands the State to ensure, at
all times, the fundamental equality before the law of women and men. Corollary thereto, Section
3 of Article XIII[9] (the progenitor whereof dates back to both the 1935 and 1973 Constitution)
pointedly requires the State to afford full protection to labor and to promote full employment and
equality of employment opportunities for all, including an assurance of entitlement to tenurial
security of all workers. Similarly, Section 14 of Article XIII[10] mandates that the State shall protect
working women through provisions for opportunities that would enable them to reach their full
potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency
in the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442,
largely due to our countrys commitment as a signatory to the United Nations Convention on the
Elimination of All Forms of Discrimination Against Women (CEDAW).[11]
Principal among these laws are Republic Act No. 6727[12] which explicitly prohibits
discrimination against women with respect to terms and conditions of employment, promotion,
and training opportunities; Republic Act No. 6955[13] which bans the mail-order-bride practice for
a fee and the export of female labor to countries that cannot guarantee protection to the rights of
women workers; Republic Act No. 7192,[14] also known as the Women in Development and Nation
Building Act, which affords women equal opportunities with men to act and to enter into contracts,
and for appointment, admission, training, graduation, and commissioning in all military or similar
schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act
No. 7322[15] increasing the maternity benefits granted to women in the private sector; Republic
Act No. 7877[16] which outlaws and punishes sexual harassment in the workplace and in the
education and training environment; and Republic Act No. 8042,[17] or the Migrant Workers and
Overseas Filipinos Act of 1995, which prescribes as a matter of policy, inter alia, the deployment
of migrant workers, with emphasis on women, only in countries where their rights are
secure. Likewise, it would not be amiss to point out that in the Family Code,[18] womens rights in
the field of civil law have been greatly enhanced and expanded.
In the Labor Code, provisions governing the rights of women workers are found in Articles
130 to 138 thereof. Article 130 involves the right against particular kinds of night work while
Article 132 ensures the right of women to be provided with facilities and standards which the
Secretary of Labor may establish to ensure their health and safety.For purposes of labor and social
legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar
establishments shall be considered as an employee under Article 138. Article 135, on the other
hand, recognizes a womans right against discrimination with respect to terms and conditions of
employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136
explicitly prohibits discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with
the services of such employee, ones labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within
the so-called management prerogatives, which prescriptions encompass the matter of hiring,
supervision of workers, work assignments, working methods and assignments, as well as
regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and
recall of employees.[19] As put in a case, an employer is free to regulate, according to his discretion
and best business judgment, all aspects of employment, from hiring to firing, except in cases of
unlawful discrimination or those which may be provided by law.[20]
In the case at bar, petitioners policy of not accepting or considering as disqualified from work
any woman worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and by no less than the
Constitution. Contrary to petitioners assertion that it dismissed private respondent from
employment on account of her dishonesty, the record discloses clearly that her ties with the
company were dissolved principally because of the companys policy that married women are not
qualified for employment in PT&T, and not merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia
M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter,
that youre fully aware that the company is not accepting married women employee (sic), as it was
verbally instructed to you.[21] Again, in the termination notice sent to her by the same branch
supervisor, private respondent was made to understand that her severance from the service was not
only by reason of her concealment of her married status but, over and on top of that, was her
violation of the companys policy against marriage (and even told you that married women
employees are not applicable [sic] or accepted in our company.)[22] Parenthetically, this seems to
be the curious reason why it was made to appear in the initiatory pleadings that petitioner was
represented in this case only by its said supervisor and not by its highest ranking officers who
would otherwise be solidarily liable with the corporation.[23]
Verily, private respondents act of concealing the true nature of her status from PT&T could
not be properly characterized as willful or in bad faith as she was moved to act the way she did
mainly because she wanted to retain a permanent job in a stable company. In other words, she was
practically forced by that very same illegal company policy into misrepresenting her civil status
for fear of being disqualified from work. While loss of confidence is a just cause for termination
of employment, it should not be simulated.[24] It must rest on an actual breach of duty committed
by the employee and not on the employers caprices.[25] Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified.[26]
In the present controversy, petitioners expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal. Petitioner would asseverate, therefore, that while it has nothing
against marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable
reasoning, with interstitial distinctions, perturbs the Court since private respondent may well be
minded to claim that the imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy
against its female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the
same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In
other words, PT&T says it gives its blessings to its female employees contracting marriage, despite
the maternity leaves and other benefits it would consequently respond for and which obviously it
would have wanted to avoid. If that employee confesses such fact of marriage, there will be no
sanction; but if such employee conceals the same instead of proceeding to the confessional, she
will be dismissed. This line of reasoning does not impress us as reflecting its true management
policy or that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions
which confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it
was its unlawful policy against married women, both on the aspects of qualification and retention,
which compelled private respondent to conceal her supervenient marriage. It was, however, that
very policy alone which was the cause of private respondents secretive conduct now complained
of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause
of the evil caused.
Finally, petitioners collateral insistence on the admission of private respondent that she
supposedly misappropriated company funds, as an additional ground to dismiss her from
employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in
the course of the proceedings that she failed to remit some of her collections, but that is an
altogether different story. The fact is that she was dismissed solely because of her concealment of
her marital status, and not on the basis of that supposed defalcation of company funds. That the
labor arbiter would thus consider petitioners submissions on this supposed dishonesty as a mere
afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in
labor cases. For, there was no showing that private respondent deliberately misappropriated the
amount or whether her failure to remit the same was through negligence and, if so, whether the
negligence was in nature simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the matter was deemed settled
as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her
dismissal. When she was served her walking papers on January 29, 1992, she was about to
complete the probationary period of 150 days as she was contracted as a probationary employee
on September 2, 1991. That her dismissal would be effected just when her probationary period was
winding down clearly raises the plausible conclusion that it was done in order to prevent her from
earning security of tenure.[27]On the other hand, her earlier stints with the company as reliever were
undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed
activities which were essential or necessary in the usual trade and business of PT&T.[28]The
primary standard of determining regular employment is the reasonable connection between the
activity performed by the employee in relation to the business or trade of the employer.[29]
As an employee who had therefore gained regular status, and as she had been dismissed
without just cause, she is entitled to reinstatement without loss of seniority rights and other
privileges and to full back wages, inclusive of allowances and other benefits or their monetary
equivalent.[30] However, as she had undeniably committed an act of dishonesty in concealing her
status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month
suspension imposed by respondent NLRC must be upheld to obviate the impression or inference
that such act should be condoned. It would be unfair to the employer if she were to return to its
fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was withheld
up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount
corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:

ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a
condition of employment or continuation of employment that a woman shall not get married, or
to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of marriage.

This provision had a studied history for its origin can be traced to Section 8 of Presidential
Decree No. 148,[31] better known as the Women and Child Labor Law, which amended paragraph
(c), Section 12 of Republic Act No. 679,[32] entitled An Act to Regulate the Employment of
Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes. The
forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on
March 16, 1923 and which regulated the employment of women and children in shops, factories,
industrial, agricultural, and mercantile establishments and other places of labor in the then
Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs.
Philippine Air Lines,[33] a decision that emanated from the Office of the President. There, a policy
of Philippine Air Lines requiring that prospective flight attendants must be single and that they
will be automatically separated from the service once they marry was declared void, it being
violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination
against married women. Thus:

Of first impression is the incompatibility of the respondents policy or regulation with the codal
provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code
applies only to women employed in ordinary occupations and that the prohibition against
marriage of women engaged in extraordinary occupations, like flight attendants, is fair and
reasonable, considering the pecularities of their chosen profession.

We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the
controverted policy has already met its doom as early as March 13, 1973 when Presidential
Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated. But
for the timidity of those affected or their labor unions in challenging the validity of the policy,
the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree,
which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly
the same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.

It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all
policies and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins
the Secretary of Labor to establish standards that will ensure the safety and health of women
employees and in appropriate cases shall by regulation require employers to determine
appropriate minimum standards for termination in special occupations, such as those of flight
attendants, but that is precisely the factor that militates against the policy of respondent. The
standards have not yet been established as set forth in the first paragraph, nor has the Secretary of
Labor issued any regulation affecting flight attendants.

It is logical to presume that, in the absence of said standards or regulations which are as yet to be
established, the policy of respondent against marriage is patently illegal. This finds support in
Section 9 of the New Constitution, which provides:

Sec. 9. The State shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employees. The State shall assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work x
x x.

Moreover, we cannot agree to the respondents proposition that termination from employment of
flight attendants on account of marriage is a fair and reasonable standard designed for their own
health, safety, protection and welfare, as no basis has been laid therefor. Actually, respondent
claims that its concern is not so much against the continued employment of the flight attendant
merely by reason of marriage as observed by the Secretary of Labor, but rather on the
consequence of marriage-pregnancy. Respondent discussed at length in the instant appeal the
supposed ill effects of pregnancy on flight attendants in the course of their employment. We feel
that this needs no further discussion as it had been adequately explained by the Secretary of
Labor in his decision of May 2, 1976.

In a vain attempt to give meaning to its position, respondent went as far as invoking the
provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an
inviolable social institution and the family as a basic social institution, respectively, as bases for
its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant
from her home for long periods of time as contributory to an unhappy married life. This is pure
conjecture not based on actual conditions, considering that, in this modern world, sophisticated
technology has narrowed the distance from one place to another. Moreover, respondent
overlooked the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.

Article 136 is not intended to apply only to women employed in ordinary occupations, or it
should have categorically expressed so. The sweeping intendment of the law, be it on special or
ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of
non-discrimination on the employment of women.

The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation[34] considered as void a policy of the same nature. In said case, respondent, in
dismissing from the service the complainant, invoked a policy of the firm to consider female
employees in the project it was undertaking as separated the moment they get married due to lack
of facilities for married women. Respondent further claimed that complainant was employed in
the project with an oral understanding that her services would be terminated when she gets
married. Branding the policy of the employer as an example of discriminatory chauvinism
tantamount to denying equal employment opportunities to women simply on account of their sex,
the appellate court struck down said employer policy as unlawful in view of its repugnance to the
Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or
conditions relating to the marital status of an employee are categorized as a sex-plus discrimination
where it is imposed on one sex and not on the other. Further, the same should be evenly applied
and must not inflict adverse effects on a racial or sexual group which is protected by federal job
discrimination laws. Employment rules that forbid or restrict the employment of married women,
but do not apply to married men, have been held to violate Title VII of the United States Civil
Rights Act of 1964, the main federal statute prohibiting job discrimination against employees and
applicants on the basis of, among other things, sex.[35]
Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married
men, the variable is sex and the discrimination is unlawful.[36] Upon the other hand, a requirement
that a woman employee must remain unmarried could be justified as a bona fide occupational
qualification, or BFOQ, where the particular requirements of the job would justify the same, but
not on the ground of a general principle, such as the desirability of spreading work in the
workplace. A requirement of that nature would be valid provided it reflects an inherent quality
reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule
applicable to both male and female flight attendants, was regarded as unlawful since the restriction
was not related to the job performance of the flight attendants.[37]
5. Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor
Code on the right of a woman to be free from any kind of stipulation against marriage in connection
with her employment, but it likewise assaults good morals and public policy, tending as it does to
deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in
the individual as an intangible and inalienable right.[38] Hence, while it is true that the parties to a
contract may establish any agreements, terms, and conditions that they may deem convenient, the
same should not be contrary to law, morals, good customs, public order, or public policy.[39]Carried
to its logical consequences, it may even be said that petitioners policy against legitimate marital
bonds would encourage illicit or common-law relations and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations
between the parties, that is, of capital and labor, are not merely contractual, impressed as they are
with so much public interest that the same should yield to the common good.[40] It goes on to intone
that neither capital nor labor should visit acts of oppression against the other, nor impair the interest
or convenience of the public.[41] In the final reckoning, the danger of just such a policy against
marriage followed by petitioner PT&T is that it strikes at the very essence, ideals and purpose of
marriage as an inviolable social institution and, ultimately, of the family as the foundation of the
nation.[42] That it must be effectively interdicted here in all its indirect, disguised or dissembled
forms as discriminatory conduct derogatory of the laws of the land is not only in order but
imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone
Company is hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.
 72. Duncan Association of Detailman-PTGWO v. Laxo Welcome Philippines, Inc., G.R. No.
162994, Sept. 17, 2004

G.R. No. 162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.

TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

RESOLUTION

TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones,
involving the validity of the policy of a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company.

This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2

Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and
orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he
agrees to study and abide by existing company rules; to disclose to management any existing or
future relationship by consanguinity or affinity with co-employees or employees of competing
drug companies and should management find that such relationship poses a possible conflict of
interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
inform management of any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies. If management perceives a conflict of
interest or a potential conflict between such relationship and the employees employment with
the company, the management and the employee will explore the possibility of a "transfer to
another department in a non-counterchecking position" or preparation for employment outside
the company after six months.

Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte
sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in
Albay. She supervised the district managers and medical representatives of her company and
prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.

In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a
conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one
of them would resign from their jobs, although they told him that they wanted to retain him as
much as possible because he was performing his job well.

Tecson requested for time to comply with the company policy against entering into a relationship
with an employee of a competitor company. He explained that Astra, Bettsys employer, was
planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the
redundancy package to be offered by Astra. With Bettsys separation from her company, the
potential conflict of interest would be eliminated. At the same time, they would be able to avail
of the attractive redundancy package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In September 1999,
Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a
milk division, the potential conflict of interest would be eliminated. His application was denied
in view of Glaxos "least-movement-possible" policy.

In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur
sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.

Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until
February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and
continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not
issued samples of products which were competing with similar products manufactured by Astra.
He was also not included in product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted
the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half ()
month pay for every year of service, or a total of 50,000.00 but he declined the offer. On
November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered
its Decision declaring as valid Glaxos policy on relationships between its employees and
persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to
another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Review on the ground that the NCMB did not err in rendering its Decision. The appellate court
held that Glaxos policy prohibiting its employees from having personal relationships with
employees of competitor companies is a valid exercise of its management prerogatives.4

Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was
denied by the appellate court in its Resolution dated March 26, 2004.5

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in
affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying
an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not
finding that Tecson was constructively dismissed when he was transferred to a new sales
territory, and deprived of the opportunity to attend products seminars and training sessions.6

Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy restricts
the employees right to marry.7

They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the
Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from
attending seminars and training sessions for medical representatives, and (4) he was prohibited
from promoting respondents products which were competing with Astras products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees
from having a relationship with and/or marrying an employee of a competitor company is a valid
exercise of its management prerogatives and does not violate the equal protection clause; and
that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan
City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9

Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it
has a genuine interest in ensuring that its employees avoid any activity, relationship or interest
that may conflict with their responsibilities to the company. Thus, it expects its employees to
avoid having personal or family interests in any competitor company which may influence their
actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also
aimed at preventing a competitor company from gaining access to its secrets, procedures and
policies.10

It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or
future relationships with employees of competitor companies, and is therefore not violative of
the equal protection clause. It maintains that considering the nature of its business, the
prohibition is based on valid grounds.11

According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and
potential conflict of interest. Astras products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case
was a valid exercise of its management prerogatives.12 In any case, Tecson was given several
months to remedy the situation, and was even encouraged not to resign but to ask his wife to
resign form Astra instead.13

Glaxo also points out that Tecson can no longer question the assailed company policy because
when he signed his contract of employment, he was aware that such policy was stipulated
therein. In said contract, he also agreed to resign from respondent if the management finds that
his relationship with an employee of a competitor company would be detrimental to the interests
of Glaxo.14

Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from
seminars regarding respondents new products did not amount to constructive dismissal.

It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-
Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area.
Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons
family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan
City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would
be favorable to him and his family as he would be relocating to a familiar territory and
minimizing his travel expenses.15

In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-
asthma drug was due to the fact that said product was in direct competition with a drug which
was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him.
Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by
his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new
sales area instead of Naga City because the supplier thought he already transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in
ruling that Glaxos policy against its employees marrying employees from competitor companies
is valid, and in not holding that said policy violates the equal protection clause of the
Constitution; (2) Whether Tecson was constructively dismissed.

The Court finds no merit in the petition.

The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners
provides:

10. You agree to disclose to management any existing or future relationship you may
have, either by consanguinity or affinity with co-employees or employees of competing
drug companies. Should it pose a possible conflict of interest in management discretion,
you agree to resign voluntarily from the Company as a matter of Company policy.

17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of
Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.

Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in any

competitor supplier or other businesses which may consciously or unconsciously
influence their actions or decisions and thus deprive Glaxo Wellcome of
legitimate profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of

Company plans to advance their outside personal interests, that of their relatives,
friends and other businesses.

c. To avoid outside employment or other interests for income which would impair
their effective job performance.

d. To consult with Management on such activities or relationships that may lead

to conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with

co-employees of competing drug companies are expected to disclose such relationship to
the Management. If management perceives a conflict or potential conflict of interest,
every effort shall be made, together by management and the employee, to arrive at a
solution within six (6) months, either by transfer to another department in a non-counter
checking position, or by career preparation toward outside employment after Glaxo
Wellcome. Employees must be prepared for possible resignation within six (6) months, if
no other solution is feasible.19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy
prohibiting an employee from having a relationship with an employee of a competitor company
is a valid exercise of management prerogative.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors, especially so that it and Astra are
rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxos employees is reasonable under the circumstances because relationships
of that nature might compromise the interests of the company. In laying down the assailed
company policy, Glaxo only aims to protect its interests against the possibility that a competitor
company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than
the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect
its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our
laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law
also recognizes that management has rights which are also entitled to respect and enforcement in
the interest of fair play.21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business

confidentiality and protect a competitive position by even-handedly disqualifying from jobs male
and female applicants or employees who are married to a competitor. Consequently, the court
ruled than an employer that discharged an employee who was married to an employee of an
active competitor did not violate Title VII of the Civil Rights Act of 1964.23 The Court pointed
out that the policy was applied to men and women equally, and noted that the employers
business was highly competitive and that gaining inside information would constitute a
competitive advantage.

The challenged company policy does not violate the equal protection clause of the Constitution
as petitioners erroneously suggest. It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting under color of its
authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the
equal protection clause erects no shield against merely private conduct, however, discriminatory
or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions
has been found to have become entwined or involved in the wrongful private
conduct.27 Obviously, however, the exception is not present in this case. Significantly, the
company actually enforced the policy after repeated requests to the employee to comply with the
policy. Indeed, the application of the policy was made in an impartial and even-handed manner,
with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee
handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships
between its employees and those of competitor companies. Its employees are free to cultivate
relationships with and marry persons of their own choosing. What the company merely seeks to
avoid is a conflict of interest between the employee and the company that may arise out of such
relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not aimed at
restricting a personal prerogative that belongs only to the individual. However, an
 employees personal decision does not detract the employer from exercising management
prerogatives to ensure maximum profit and business success. . .28

The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondents Employee Code of Conduct and of its contracts with its employees, such as that
signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was
aware of that restriction when he signed his employment contract and when he entered into a
relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of
employment with Glaxo, the stipulations therein have the force of law between them and, thus,
should be complied with in good faith."29 He is therefore estopped from questioning said policy.

The Court finds no merit in petitioners contention that Tescon was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-
Surigao City-Agusan del Sur sales area, and when he was excluded from attending the
companys seminar on new products which were directly competing with similar products
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary
resignation resorted to when continued employment becomes impossible, unreasonable, or
unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.30 None of these
conditions are present in the instant case. The record does not show that Tescon was demoted or
unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo
properly exercised its management prerogative in reassigning Tecson to the Butuan City sales
area:

. . . In this case, petitioners transfer to another place of assignment was merely in

keeping with the policy of the company in avoidance of conflict of interest, and thus
validNote that [Tecsons] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work in close coordination
with District Managers and Medical Representatives. Her duties include monitoring sales
of Astra products, conducting sales drives, establishing and furthering relationship with
customers, collection, monitoring and managing Astras inventoryshe therefore takes
an active participation in the market war characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant, petitioners sales territory
covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of responsibility, all in the same Bicol
Region, renders the conflict of interest not only possible, but actual, as learning by one
spouse of the others market strategies in the region would be inevitable. [Managements]
appreciation of a conflict of interest is therefore not merely illusory and wanting in
factual basis31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved
a complaint filed by a medical representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he refused to accept his reassignment
to a new area, the Court upheld the right of the drug company to transfer or reassign its employee
in accordance with its operational demands and requirements. The ruling of the Court therein,
quoted hereunder, also finds application in the instant case:
 By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to areas
where the need for pushing its products is great. More so if such reassignments are part of
the employment contract.33

As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
Tecson several chances to eliminate the conflict of interest brought about by his relationship with
Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and on the
companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by
either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed
its desire to retain Tecson in its employ because of his satisfactory performance and suggested
that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated
requests for more time to resolve the conflict of interest. When the problem could not be
resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area
different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson
from employment but only reassigned him to another area where his home province, Agusan del
Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons
family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of
Glaxo.34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.
 73. Star Paper Corp v. Simbol, et. al. , G.R. No. 164774, April 12, 2006

G.R. No. 164774 April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN

CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.

DECISION

PUNO, J.:

We are called to decide an issue of first impression: whether the policy of the employer banning
spouses from working in the same company violates the rights of the employee under the
Constitution and the Labor Code or is a valid exercise of management prerogative.

At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations
Commission (NLRC) which affirmed the ruling of the Labor Arbiter.

Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally
of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration
Department while Sebastian Chua is its Managing Director.

The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N.
Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco
advised the couple that should they decide to get married, one of them should resign pursuant to
a company policy promulgated in 1995,2 viz.:

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to
[the] 3rd degree of relationship, already employed by the company.

2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then decided
to get married, one of them should resign to preserve the policy stated above.3

Simbol resigned on June 20, 1998 pursuant to the company policy.4

Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee,
whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December 21,
1999.6

The respondents each signed a Release and Confirmation Agreement. They stated therein that
they have no money and property accountabilities in the company and that they release the latter
of any claim or demand of whatever nature.7

Respondents offer a different version of their dismissal. Simbol and Comia allege that they did
not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to
respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who
misrepresented himself as a married but separated man. After he got her pregnant, she discovered
that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to
the company policy. On November 30, 1999, she met an accident and was advised by the doctor
at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on
December 21, 1999 but she found out that her name was on-hold at the gate. She was denied
entry. She was directed to proceed to the personnel office where one of the staff handed her a
memorandum. The memorandum stated that she was being dismissed for immoral conduct. She
refused to sign the memorandum because she was on leave for twenty-one (21) days and has not
been given a chance to explain. The management asked her to write an explanation. However,
after submission of the explanation, she was nonetheless dismissed by the company. Due to her
urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth
month pay.8

Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation
pay and attorneys fees. They averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to
their union membership.

On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of
merit, viz.:

[T]his company policy was decreed pursuant to what the respondent corporation perceived as
management prerogative. This management prerogative is quite broad and encompassing for it
covers hiring, work assignment, working method, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall of
workers. Except as provided for or limited by special law, an employer is free to regulate,
according to his own discretion and judgment all the aspects of employment.9 (Citations
omitted.)

On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January
11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:

WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:

(1) Declaring illegal, the petitioners dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority
rights with full backwages from the time of their dismissal until actual reinstatement; and

(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of
the award and the cost of this suit.13

On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:

1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards

marriage and the family of employees and of Article 136 of the Labor Code; and

2. x x x respondents resignations were far from voluntary.14

We affirm.

The 1987 Constitution15 states our policy towards the protection of labor under the following
provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.

xxx

Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the right of
enterprises to reasonable returns on investments, and to expansion and growth.

The Civil Code likewise protects labor with the following provisions:

Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer.

The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar
involves Article 136 of the Labor Code which provides:

Art. 136. It shall be unlawful for an employer to require as a condition of employment or

continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.

Respondents submit that their dismissal violates the above provision. Petitioners allege that its
policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new
meaning if read together with the first paragraph of the rule. The rule does not require the woman
employee to resign. The employee spouses have the right to choose who between them should
resign. Further, they are free to marry persons other than co-employees. Hence, it is not the
marital status of the employee, per se, that is being discriminated. It is only intended to carry out
its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the
prerogatives of management.16

It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative, rather than
upon their ability.17 These policies focus upon the potential employment problems arising from
the perception of favoritism exhibited towards relatives.

With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types of
employment policies involve spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all immediate family members,
including spouses, from working in the same company (anti-nepotism employment policies).18

Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there
are twenty state statutes20 in the United States prohibiting marital discrimination. Some state
courts21 have been confronted with the issue of whether no-spouse policies violate their laws
prohibiting both marital status and sex discrimination.

In challenging the anti-nepotism employment policies in the United States, complainants utilize
two theories of employment discrimination: the disparate treatment and the disparate impact.
Under the disparate treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an employee of
a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an
employment policy prohibiting the employer from hiring wives of male employees, but not
husbands of female employees, is discriminatory on its face.22

On the other hand, to establish disparate impact, the complainants must prove that a facially
neutral policy has a disproportionate effect on a particular class. For example, although most
employment policies do not expressly indicate which spouse will be required to transfer or leave
the company, the policy often disproportionately affects one sex.23

The state courts rulings on the issue depend on their interpretation of the scope of marital status
discrimination within the meaning of their respective civil rights acts. Though they agree that the
term "marital status" encompasses discrimination based on a person's status as either married,
single, divorced, or widowed, they are divided on whether the term has a broader meaning.
Thus, their decisions vary.24

The courts narrowly25 interpreting marital status to refer only to a person's status as married,
single, divorced, or widowed reason that if the legislature intended a broader definition it would
have either chosen different language or specified its intent. They hold that the relevant inquiry is
if one is married rather than to whom one is married. They construe marital status discrimination
to include only whether a person is single, married, divorced, or widowed and not the "identity,
occupation, and place of employment of one's spouse." These courts have upheld the questioned
policies and ruled that they did not violate the marital status discrimination provision of their
respective state statutes.

The courts that have broadly26 construed the term "marital status" rule that it encompassed the
identity, occupation and employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the state statute. They reason that
the no-spouse employment policy violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without regard to the actual effect on the
individual's qualifications or work performance.27 These courts also find the no-spouse
employment policy invalid for failure of the employer to present any evidence of business
necessity other than the general perception that spouses in the same workplace might adversely
affect the business.28 They hold that the absence of such a bona fide occupational
qualification29 invalidates a rule denying employment to one spouse due to the current
employment of the other spouse in the same office.30 Thus, they rule that unless the employer
can prove that the reasonable demands of the business require a distinction based on marital
status and there is no better available or acceptable policy which would better accomplish the
business purpose, an employer may not discriminate against an employee based on the identity
of the employees spouse.31 This is known as the bona fide occupational qualification
exception.

We note that since the finding of a bona fide occupational qualification justifies an employers
no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There
must be a compelling business necessity for which no alternative exists other than the
discriminatory practice.32 To justify a bona fide occupational qualification, the employer must
prove two factors: (1) that the employment qualification is reasonably related to the essential
operation of the job involved; and, (2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the duties
of the job.33

The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard of reasonableness of the company policy which is parallel to the bona fide
occupational qualification requirement. In the recent case of Duncan Association of Detailman-
PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity
of the policy of a pharmaceutical company prohibiting its employees from marrying employees
of any competitor company. We held that Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and information
from competitors. We considered the prohibition against personal or marital relationships with
employees of competitor companies upon Glaxos employees reasonable under the
circumstances because relationships of that nature might compromise the interests of Glaxo. In
laying down the assailed company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain access to its secrets and
procedures.35

The requirement that a company policy must be reasonable under the circumstances to qualify
as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine
Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in
violation of petitioners policy of disqualifying from work any woman worker who contracts
marriage. We held that the company policy violates the right against discrimination afforded all
women workers under Article 136 of the Labor Code, but established a permissible
exception, viz.:

[A] requirement that a woman employee must remain unmarried could be justified as a "bona
fide occupational qualification," or BFOQ, where the particular requirements of the job would
justify the same, but not on the ground of a general principle, such as the desirability of
spreading work in the workplace. A requirement of that nature would be valid provided it reflects
an inherent quality reasonably necessary for satisfactory job performance.37(Emphases
supplied.)

The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was successfully
discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.

Petitioners sole contention that "the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity"38 is lame. That the
second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is
evidently not the valid reasonable business necessity required by the law.

It is significant to note that in the case at bar, respondents were hired after they were found fit for
the job, but were asked to resign when they married a co-employee. Petitioners failed to show
how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business operations. Neither did
petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a
Production Helper in the Selecting Department, who married Howard Comia, then a helper in the
cutter-machine. The policy is premised on the mere fear that employees married to each other
will be less efficient. If we uphold the questioned rule without valid justification, the employer
can create policies based on an unproven presumption of a perceived danger at the expense of an
employees right to security of tenure.

Petitioners contend that their policy will apply only when one employee marries a co-employee,
but they are free to marry persons other than co-employees. The questioned policy may not
facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under
the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners
to prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.40

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction
cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and
extensive that we cannot prudently draw inferences from the legislatures silence41 that married
persons are not protected under our Constitution and declare valid a policy based on a prejudice
or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business
necessity, we rule that the questioned policy is an invalid exercise of management prerogative.
Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has
become moot and academic.

As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact
that her resignation letter was written in her own handwriting. Both ruled that her resignation
was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella
voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.

Estrella claims that she was pressured to submit a resignation letter because she was in dire need
of money. We examined the records of the case and find Estrellas contention to be more in
accord with the evidence. While findings of fact by administrative tribunals like the NLRC are
generally given not only respect but, at times, finality, this rule admits of exceptions,42 as in the
case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her
alleged immoral conduct. At first, she did not want to sign the termination papers but she was
forced to tender her resignation letter in exchange for her thirteenth month pay.

The contention of petitioners that Estrella was pressured to resign because she got impregnated
by a married man and she could not stand being looked upon or talked about as immoral43 is
incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have
gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is compelled by
personal reason(s) to dissociate himself from employment. It is done with the intention of
relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is illogical for
Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient
evidence on the part of petitioners that the resignation was voluntary, Estrellas dismissal is
declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 is AFFIRMED.1avvphil.net

SO ORDERED.