Вы находитесь на странице: 1из 293

FIRST DIVISION

PEOPLE OF THE PHILIPPINES, G.R. No. 184058


Appellee,
Present:

PUNO, C.J., Chairperson,


CARPIO MORALES,
- versus - LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

MELISSA CHUA, Promulgated:


Appellant. March 10, 2010

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

DECISION

CARPIO MORALES, J.:


Melissa Chua (appellant) was indicted for Illegal Recruitment (Large Scale) and was convicted thereof by
the Regional Trial Court (RTC) of Manila. She was also indicted for five counts of Estafa but was convicted only for
three. The Court of Appeals, by Decision[1] dated February 27, 2008, affirmed appellants conviction.

The Information[2] charging appellant, together with one Josie Campos (Josie), with Illegal Recruitment
(Large Scale), docketed as Criminal Case No. 04-222596, reads:

The undersigned accuses JOSIE CAMPOS and MELISSA CHUA of violation of Article 38 (a)
PD 1413, amending certain provisions of Book I, PD 442, otherwise known as the New Labor Code
of the Philippines, in relation to Art. 13 (b) and (c ) of said Code, as further amended by PD Nos.
1693, 1920 and 2019 and as further amended by Sec. 6 (a), (1) and (m) of RA 8042 committed in a
[sic] large scale as follows:

That sometime during the month of September, 2002, in the City of Manila, Philippines,
the said accused, conspiring and confederating together and mutually helping each other,
representing themselves to have the capacity to contract, enlist and transport Filipino workers for
employment abroad, did then and there willfully, unlawfully and knowingly for a fee, recruit and
promise employment/job placement abroad to ERIK DE GUIA TAN, MARILYN O. MACARANAS,
NAPOLEON H. YU, JR., HARRY JAMES P. KING and ROBERTO C. ANGELES for overseas employment
abroad without first having secured the required license from the Department of Labor and
Employment as required by law, and charge or accept directly from:

ERIK DE GUIA TAN - P73,000.00


MARILYN D. MACARANAS - 83,000.00
NAPOLEON H. YU, JR. - 23,000.00
HARRY JAMES P. KING - 23,000.00

1
ROBERTO C. ANGELES - 23,000.00

For purposes of their deployment, which amounts are in excess of or greater than that specified in
the schedule of allowable fees as prescribed by the POEA, and without valid reasons and without
the fault of said complainants, failed to actually deploy them and failed to reimburse expenses
incurred in connection with their documentation and processing for purposes of their deployment.

xxxx

The five Informations[3] charging appellant and Josie with Estafa, docketed as Criminal Case Nos. 04-222597-
601, were similarly worded and varied only with respect to the names of the five complainants and the amount that
each purportedly gave to the accused. Thus each of the Information reads:

xxxx

That on or about . . . in the City of Manila, Philippines, the said accused, conspiring and
confederating together and mutually helping each other, did then and there willfully, unlawfully
and feloniously defraud xxx in the following manner, to wit: the said accused by means of false
manifestations which they made to the said . . . to the effect that they had the power and capacity
to recruit the latter as factory worker to work in Taiwan and could facilitate the processing of the
pertinent papers if given the necessary amount to meet the requirements thereof, and by means
of other similar deceits, induced and succeeded in inducing said xxx to give and deliver, as in fact
he gave and delivered to the said accused the amount of . . . on the strength of said manifestations
and representations, said accused well knowing that the same were false and fraudulent and were
made solely to obtain, as in fact they did obtain the amount of . . . which amount once in their
possession, with intent to defraud, they willfully, unlawfully and feloniously misappropriated,
misapplied and converted to their own personal use and benefit, to the damage of said . . . in the
aforesaid amount of . . ., Philippine Currency.

xxxx

Appellant pleaded not guilty on arraignment. Her co-accused Josie remained at large. The cases were consolidated,
hence, trial proceeded only with respect to appellant.

Of the five complainants, only three testified, namely, Marilyn D. Macaranas (Marilyn), Erik de Guia Tan
(Tan) and Harry James King (King). The substance of their respective testimonies follows:

Marilyns testimony:

After she was introduced in June 2002 by Josie to appellant as capacitated to deploy factory workers to
Taiwan, she paid appellant P80,000 as placement fee and P3,750 as medical expenses fee, a receipt[4] for the first
amount of which was issued by appellant.

2
Appellant had told her that she could leave for Taiwan in the last week of September 2002 but she did not,
and despite appellants assurance that she would leave in the first or second week of October, just the same she did
not.

She thus asked for the refund of the amount she paid but appellant claimed that she was not in possession
thereof but promised anyway to raise the amount to pay her, but she never did.

She later learned in June 2003 that appellant was not a licensed recruiter, prompting her to file the
complaint against appellant and Josie.

Tans testimony:

After he was introduced by Josie to appellant at the Golden Gate, Inc., (Golden Gate) an agency situated in
Paragon Tower Hotel in Ermita, Manila, he underwent medical examination upon appellants assurance that he could
work in Taiwan as a factory worker with a guaranteed monthly salary of 15,800 in Taiwan currency.

He thus paid appellant, on September 6, 2002, P70,000[5] representing placement fees for which she issued
a receipt. Appellant welched on her promise to deploy him to Taiwan, however, hence, he demanded the refund of
his money but appellant failed to. He later learned that Golden Gate was not licensed to deploy workers to Taiwan,
hence, he filed the complaint against appellant and Josie.

Kings testimony:

His friend and a fellow complainant Napoleon Yu introduced him to Josie who in turn introduced appellant
as one who could deploy him to Taiwan.
On September 24, 2002,[6] he paid appellant P20,000 representing partial payment for placement fees
amounting to P80,000, but when he later inquired when he would be deployed, Golden Gates office was already
closed. He later learned that Golden Gates license had already expired, prompting him to file the complaint.

Appellant denied the charges. Claiming having worked as a temporary cashier from January to October, 2002 at the
office of Golden Gate, owned by one Marilyn Calueng,[7] she maintained that Golden Gate was a licensed recruitment
agency and that Josie, who is her godmother, was an agent.

Admitting having received P80,000 each from Marilyn and Tan, receipt of which she issued but denying
receiving any amount from King, she claimed that she turned over the money to the documentation officer, one
Arlene Vega, who in turn remitted the money to Marilyn Calueng whose present whereabouts she did not know.

3
By Decision of April 5, 2006, Branch 36 of the Manila RTC convicted appellant of Illegal Recruitment (Large Scale) and
three counts of Estafa, disposing as follows:

WHEREFORE, the prosecution having established the guilt of accused Melissa Chua beyond
reasonable doubt, judgment is hereby rendered convicting the accused as principal of a large scale
illegal recruitment and estafa three (3) counts and she is sentenced to life imprisonment and to
pay a fine of Five Hundred Thousand Pesos (P500,000.00) for illegal recruitment.

The accused is likewise convicted of estafa committed against Harry James P. King and she is
sentenced to suffer the indeterminate penalty of Four (4) years and Two (2) months of prision
correctional as minimum, to Six (6) years and One (1) day of prision mayor as maximum; in Criminal
Case No. 04-22598; in Criminal Case No. 04-222600 committed against Marilyn Macaranas,
accused is sentence [sic] to suffer the indeterminate penalty of Four (4) years and Two (2) months
of prision correctional as minimum, to Twelve (12) years and one (1) day of reclusion temporal as
maximum; and in Criminal Case No. 04-222601 committed against Erik de Guia Tan, she is likewise
sentence [sic] to suffer an indeterminate penalty of Four (4) years and Two (2) months of prision
correctional as minimum, to Eleven (11) years and One (1) day of prision mayor as maximum.

Accused Melissa Chua is also ordered to return the amounts of P20,000.00 to Harry James
P. King, P83,750.00 to Marilyn D. Macaranas, and P70,000.00 to Erik de Guia Tan.

As regards Criminal Cases Nos. 04-222597 and 04-222599, both are dismissed for lack of
interest of complainants Roberto Angeles and Napoleon Yu, Jr.

In the service of her sentence, the accused is credited with the full period of preventive
imprisonment if she agrees in writing to abide by the disciplinary rules imposed, otherwise only
4/5 shall be credited.

SO ORDERED.

The Court of Appeals, as stated early on, affirmed the trial courts decision by the challenged Decision of February
27, 2008, it holding that appellants defense that, as temporary cashier of Golden Gate, she received the money
which was ultimately remitted to Marilyn Calueng is immaterial, she having failed to prove the existence of an
employment relationship between her and Marilyn, as well as the legitimacy of the operations of Golden Gate and
the extent of her involvement therein.

Citing People v. Sagayaga,[8] the appellate court ruled that an employee of a company engaged in illegal
recruitment may be held liable as principal together with his employer if it is shown that he, as in the case of
appellant, actively and consciously participated therein.

Respecting the cases for Estafa, the appellate court, noting that a person convicted of illegal recruitment may, in
addition, be convicted of Estafa as penalized under Article 315, paragraph 2(a) of the Revised Penal Code, held that

4
the elements thereof were sufficiently established, viz: that appellant deceived the complainants by assuring them
of employment in Taiwan provided they pay the required placement fee; that relying on such representation, the
complainants paid appellant the amount demanded; that her representation turned out to be false because she
failed to deploy them as promised; and that the complainants suffered damages when they failed to be reimbursed
the amounts they paid.

Hence, the present appeal, appellant reiterating the same arguments she raised in the appellate court.

The appeal is bereft of merit.

The term recruitment and placement is defined under Article 13(b) of the Labor Code of the Philippines as
follows:

(b) Recruitment and placement refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not. Provided,
That any person or entity which, in any manner, offers or promises for a fee employment to two
or more persons shall be deemed engaged in recruitment and placement. (emphasis supplied)

On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which appellant was
charged, provides:

Art. 38. Illegal Recruitment. (a) Any recruitment activities, including the prohibited
practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-
holders of authority shall be deemed illegal and punishable under Article 39 of this Code. The
Ministry of Labor and Employment or any law enforcement officer may initiate complaints under
this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be
considered an offense involving economic sabotage and shall be penalized in accordance with
Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three
(3) or more persons conspiring and/or confederating with one another in carrying out any unlawful
or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal
recruitment is deemed committed in large scale if committed against three (3) or more persons
individually or as a group. (emphasis supplied)

From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-licensee or non-
holder of contracts, or as in the present case, an agency with an expired license, shall be deemed illegal and

5
punishable under Article 39 of the Labor Code of the Philippines. And illegal recruitment is deemed committed
in large scale if committed against three or more persons individually or as a group.

Thus for illegal recruitment in large scale to prosper, the prosecution has to prove three essential elements, to wit:
(1) the accused undertook a recruitment activity under Article 13(b) or any prohibited practice under Article 34 of
the Labor Code; (2) the accused did not have the license or the authority to lawfully engage in the recruitment and
placement of workers; and (3) the accused committed such illegal activity against three or more persons individually
or as a group.[9]

In the present case, Golden Gate, of which appellant admitted being a cashier from January to October
2002, was initially authorized to recruit workers for deployment abroad. Per the certification from the POEA, Golden
Gates license only expired on February 23, 2002 and it was delisted from the roster of licensed agencies on April 2,
2002.

Appellant was positively pointed to as one of the persons who enticed the complainants to part with their
money upon the fraudulent representation that they would be able to secure for them employment abroad. In the
absence of any evidence that the complainants were motivated by improper motives, the trial courts assessment of
their credibility shall not be interfered with by the Court.[10]

Even if appellant were a mere temporary cashier of Golden Gate, that did not make her any less an
employee to be held liable for illegal recruitment as principal by direct participation, together with the employer, as
it was shown that she actively and consciously participated in the recruitment process. [11]

Assuming arguendo that appellant was unaware of the illegal nature of the recruitment business of Golden
Gate, that does not free her of liability either. Illegal Recruitment in Large Scale penalized under Republic Act No.
8042, or The Migrant Workers and Overseas Filipinos Act of 1995, is a special law, a violation of which is malum
prohibitum,not malum in se. Intent is thus immaterial. And that explains why appellant was, aside from Estafa,
convicted of such offense.

[I]llegal recruitment is malum prohibitum, while estafa is malum in se. In the first, the
criminal intent of the accused is not necessary for conviction. In the second, such an intent is
imperative. Estafa under Article 315, paragraph 2, of the Revised Penal Code, is committed by
any person who defrauds another by using fictitious name, or falsely pretends to possess power,
influence, qualifications, property, credit, agency, business or imaginary transactions,
or by means of similar deceits executed prior to or simultaneously with the commission
of fraud.[12] (emphasis supplied)

6
WHEREFORE, the appeal is hereby DENIED.

SO ORDERED.

G.R. No. 196036 October 23, 2013

ELIZABETH M. GAGUI, Petitioner,


vs.
SIMEON DEJERO and TEODORO R. PERMEJO, Respondents.

DECISION

SERENO, CJ:

This is a Rule 45 Petition1 dated 30 March 2011 assailing the Decision2 and Resolution3 of the Court of Appeals (CA)
in CA-G.R. SP No. 104292, which affirmed the Decision4 of the National Labor Relations Commission (NLRC) in NLRC
Case No. OCW-RAB-IV-4-392-96-RI, finding petitioner Elizabeth M. Gagui solidarily liable with the placement
agency, PRO Agency Manila, Inc., to pay respondents all the money claims awarded by virtue of their illegal
dismissal.

The antecedent facts are as follows:

On 14 December 1993, respondents Simeon Dejero and Teodoro Permejo filed separate Complaints5 for illegal
dismissal, nonpayment of salaries and overtime pay, refund of transportation expenses, damages, and attorney’s
fees against PRO Agency Manila, Inc., and Abdul Rahman Al Mahwes.

After due proceedings, on 7 May 1997, Labor Arbiter Pedro Ramos rendered a Decision,6 the dispositive portion of
which reads:

WHEREFORE, ALL FOREGOING CONSIDERED, judgment is hereby rendered ordering respondents Pro Agency
Manila, Inc., and Abdul Rahman Al Mahwes to jointly and severally pay complainants, as follows:

a) US$4,130.00 each complainant or a total of US$8,260.00, their unpaid salaries from July 31, 1992 up to
September 1993, less cash advances of total of SR11,000.00, or its Peso equivalent at the time of
payment;

b) US$1,032.00 each complainant for two (2) hours overtime pay for fourteen (14) months of services
rendered or a total of US$2,065.00 or its Peso equivalent at the time of payment;

c) US$2,950.00 each complainant or a total of US$5,900.00 or its Peso equivalent at the time of payment,
representing the unexpired portion of their contract;

d) Refund of plane ticket of complainants Teodoro Parejo and Simeon Dejero from Saudi Arabia to the
Philippines, in the amount of ₱15,642.90 and ₱16,932.00 respectively;

e) Refund of excessive collection of placement fees in the amount of ₱4,000.00 each complainant, or a
total of ₱8,000.00;

7
f) Moral and exemplary damages in the amount of ₱10,000.00 each complainant, or a total of ₱20,000.00;

g) Attorney’s fees in the amount of ₱48,750.00.

SO ORDERED.

Pursuant to this Decision, Labor Arbiter Ramos issued a Writ of Execution7 on 10 October 1997. When the writ was
returned unsatisfied,8 an Alias Writ of Execution was issued, but was also returned unsatisfied.9

On 30 October 2002, respondents filed a Motion to Implead Respondent Pro Agency Manila, Inc.’s Corporate
Officers and Directors as Judgment Debtors.10 It included petitioner as the Vice-President/Stockholder/Director of
PRO Agency, Manila, Inc.

After due hearing, Executive Labor Arbiter Voltaire A. Balitaan issued an Order11 on 25 April 2003 granting
respondents’ motion, to wit:

WHEREFORE, the motion to implead is hereby granted insofar as Merlita G. Lapuz and Elizabeth M. Gagui as
parties-respondents and accordingly held liable to complainant jointly and solidarily with the original party-
respondent adjudged liable under the Decision of May 7, 1998. Let 2nd Alias Writ of Execution be issued for the
enforcement of the Decision consistent with the foregoing tenor.

SO ORDERED.

On 10 June 2003, a 2nd Alias Writ of Execution was issued,12 which resulted in the garnishment of petitioner’s bank
deposit in the amount of ₱85,430.48.13 However, since the judgment remained unsatisfied, respondents sought
the issuance of a third alias writ of execution on 26 February 2004.14

On 15 December 2004, Executive Labor Arbiter Lita V. Aglibut issued an Order15 granting respondents’ motion for a
third alias writ. Accordingly, the 3rd Alias Writ of Execution16 was issued on 6 June 2005, resulting in the levying of
two parcels of lot owned by petitioner located in San Fernando, Pampanga.17

On 14 September 2005, petitioner filed a Motion to Quash 3rd Alias Writ of Execution;18 and on 29 June 2006, a
Supplemental Motion to Quash Alias Writ of Execution.19 In these motions, petitioner alleged that apart from not
being made aware that she was impleaded as one of the parties to the case,20 the dispositive portion of the 7 May
1997 Decision (1997 Decision) did not hold her liable in any form whatsoever.21 More importantly, impleading her
for the purpose of execution was tantamount to modifying a decision that had long become final and executory.22

On 26 June 2006, Executive Labor Arbiter Lita V. Aglibut issued an Order23 denying petitioner’s motions on the
following grounds: (1) records disclosed that despite having been given sufficient notices to be able to register an
opposition, petitioner refused to do so, effectively waiving her right to be heard;24 and (2) under Section 10 of
Republic Act No. 8042 (R.A. 8042) or the Migrant Workers and Overseas Filipinos Act of 1995, corporate officers
may be held jointly and severally liable with the placement agency for the judgment award.25

Aggrieved, petitioner appealed to the NLRC, which rendered a Decision26 in the following wise:

WHEREFORE, premises considered, the appeal of the respondent Elizabeth M. Gagui is hereby DENIED for lack of
merit. Accordingly, the Order of Labor Arbiter Lita V. Aglibut dated June 26, 2006 is AFFIRMED.

SO ORDERED.

8
The NLRC ruled that "in so far as overseas migrant workers are concerned, it is R.A. 8042 itself that describes the
nature of the liability of the corporation and its officers and directors. x x x [I]t is not essential that the individual
officers and directors be impleaded as party respondents to the case instituted by the worker. A finding of liability
on the part of the corporation will necessarily mean the liability of the corporate officers or directors."27

Upon appellate review, the CA affirmed the NLRC in a Decision28 promulgated on 15 November 2010:

From the foregoing, the Court finds no reason to hold the NLRC guilty of grave abuse of discretion amounting to
lack or excess of jurisdiction in affirming the Order of Executive Labor Arbiter Aglibut which held petitioner
solidarily liable with PRO Agency Manila, Inc. and Abdul Rahman Al Mahwes as adjudged in the May 7, 1997
Decision of Labor Arbiter Pedro Ramos.

WHEREFORE, the Petition is DENIED.

SO ORDERED. (Emphasis in the original)

The CA stated that there was "no need for petitioner to be impleaded x x x because by express provision of the
law, she is made solidarily liable with PRO Agency Manila, Inc., for any and all money claims filed by private
respondents."29 The CA further said that this is not a case in which the liability of the corporate officer must be
established because an allegation of malice must be proven. The general rule is that corporate officers, directors
and stockholders are not liable, except when they are made liable for their corporate act by a specific provision of
law, such as R.A. 8042.30

On 8 and 15 December 2010, petitioner filed two Motions for Reconsideration, but both were denied in a
Resolution31 issued by the CA on 25 February 2011.

Hence, this Petition for Review filed on 30 March 2011.

On 1 August 2011, respondents filed their Comment,32 alleging that the petition had been filed 15 days after the
prescriptive period of appeal under Section 2, Rule 45 of the Rules of Court.

On 14 February 2012, petitioner filed a Reply,33 countering that she has a fresh period of 15 days from 16 March
2011 (the date she received the Resolution of the CA) or up to 31 March 2011 to file the Petition.

ISSUES

From the foregoing, we reduce the issues to the following:

1. Whether or not this petition was filed on time; and

2. Whether or not petitioner may be held jointly and severally liable with PRO Agency Manila, Inc. in
accordance with Section 10 of R.A. 8042, despite not having been impleaded in the Complaint and named
in the Decision.

THE COURT’S RULING

Petitioner has a fresh period of 15 days within which to file this petition, in accordance with the Neypes rule.

We first address the procedural issue of this case.

9
In a misleading attempt to discredit this petition, respondents insist that by opting to file a Motion for
Reconsideration instead of directly appealing the CA Decision, petitioner effectively lost her right to appeal. Hence,
she should have sought an extension of time to file her appeal from the denial of her motion.

This contention, however, deserves scant consideration. We agree with petitioner that starting from the date she
received the Resolution denying her Motion for Reconsideration, she had a "fresh period" of 15 days within which
to appeal to this Court. The matter has already been settled in Neypes v. Court of Appeals,34 as follows:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their
cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the
Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for
reconsideration.

Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial Courts to
the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to the Court of Appeals;
Rule 43 on appeals from quasi-judicial agencies to the Court of Appeals and Rule 45 governing appeals by certiorari
to the Supreme Court. The new rule aims to regiment or make the appeal period uniform, to be counted from
receipt of the order denying the motion for new trial, motion for reconsideration (whether full or partial) or any
final order or resolution.

Since petitioner received the CA Resolution denying her two Motions for Reconsideration only on 16 March 2011,
she had another 15 days within which to file her Petition, or until 31 March 2011. This Petition, filed on 30 March
2011, fell within the prescribed 15-day period.

Petitioner may not be held jointly and severally liable, absent a finding that she was remiss in directing the affairs
of the agency.

As to the merits of the case, petitioner argues that while it is true that R.A. 8042 and the Corporation Code provide
for solidary liability, this liability must be so stated in the decision sought to be implemented.35 Absent this express
statement, a corporate officer may not be impleaded and made to personally answer for the liability of the
corporation.36 Moreover, the 1997 Decision had already been final and executory for five years and, as such, can
no longer be modified.37 If at all, respondents are clearly guilty of laches for waiting for five years before taking
action against petitioner.38

In disposing the issue, the CA cited Section 10 of R.A. 8042, stating that there was "no need for petitioner to be
impleaded x x x because by express provision of the law, she is made solidarily liable with PRO Agency Manila, Inc.,
for any and all money claims filed by private respondents."39

We reverse the CA.

At the outset, we have declared that "R.A. 8042 is a police power measure intended to regulate the recruitment
and deployment of OFWs. It aims to curb, if not eliminate, the injustices and abuses suffered by numerous OFWs
seeking to work abroad."40

The pertinent portion of Section 10, R.A. 8042 reads as follows:

SEC. 10. MONEY CLAIMS. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.

10
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The performance bond to be filed by the recruitment/placement
agency, as provided by law, shall be answerable for all money claims or damages that may be awarded to the
workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners
as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the
aforesaid claims and damages. (Emphasis supplied)

In Sto. Tomas v. Salac,41 we had the opportunity to pass upon the constitutionality of this provision. We have thus
maintained:

The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042, which
holds the corporate directors, officers, and partners of recruitment and placement agencies jointly and solidarily
liable for money claims and damages that may be adjudged against the latter agencies, is unconstitutional.

xxxx

But the Court has already held, pending adjudication of this case, that the liability of corporate directors and
officers is not automatic. To make them jointly and solidarily liable with their company, there must be a finding
that they were remiss in directing the affairs of that company, such as sponsoring or tolerating the conduct of
illegal activities. In the case of Becmen and White Falcon, while there is evidence that these companies were at
fault in not investigating the cause of Jasmin’s death, there is no mention of any evidence in the case against them
that intervenors Gumabay, et al., Becmen’s corporate officers and directors, were personally involved in their
company’s particular actions or omissions in Jasmin’s case. (Emphasis supplied)

Hence, for petitioner to be found jointly and solidarily liable, there must be a separate finding that she was remiss
in directing the affairs of the agency, resulting in the illegal dismissal of respondents. Examination of the records
would reveal that there was no finding of neglect on the part of the petitioner in directing the affairs of the agency.
In fact, respondents made no mention of any instance when petitioner allegedly failed to manage the agency in
accordance with law, thereby contributing to their illegal dismissal.

Moreover, petitioner is correct in saying that impleading her for the purpose of execution is tantamount to
modifying a decision that had long become final and executory.42 The fallo of the 1997 Decision by the NLRC only
held "respondents Pro Agency Manila Inc., and Abdul Rahman Al Mahwes to jointly and severally pay complainants
x x x."43 By holding her liable despite not being ordained as such by the decision, both the CA and NLRC violated
the doctrine on immutability of judgments.

In PH Credit Corporation v. Court of Appeals,44 we stressed that "respondent's petitioner’s obligation is based on
the judgment rendered by the trial court. The dispositive portion or the fallo is its decisive resolution and is thus
the subject of execution. x x x. Hence the execution must conform with that which is ordained or decreed in the
dispositive portion of the decision."

In JNIMACO v. NLRC,45 we a]so held thus:

None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987, hence the
same became final and executory. It was, therefore, removed from the jurisdiction of the Labor Arbiter or the
NLRC to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering the
dispositive portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of Execution is
null and void because it varied the tenor of the judgment in that it sought to enforce the final judgment against
''Antonio Gonzales/Industrial Management Development Corp. (INIMACO) and/or Filipinas Carbon and Mining
Corp. and Gerardo Sicat, which makes the liability solidary.

11
In other words, "once a decision or order becomes final and executory, it is removed from. the power or
jurisdiction of the court which rendered it to further alter or amend it. It thereby becomes immutable and
unalterable and any amendment or alteration which substantially affects a final and executory judgment is null and
void for lack of jurisdiction, including the entire proceedings held for that purpose. An order of exen1tion which
varies the tenor of the judgment or exceeds the terms thereof is a nullity."46

While labor laws should be construed liberally in favor of labor, we must be able to balance this with the equally
important right of petitioner to due process. Because the 1997 Decision of Labor Arbiter Ramos was not appealed,
it became final and executory and was therefore removed from his jurisdiction. Modifying the tenor of the
judgment via a motion impleading petitioner and filed only in 2002 runs contrary to settled jurisprudence,
rendering such action a nullity. WHEREFORE, the Petition for Review on Certiorari is hereby GRANTED The assailed
Decision dated 5 November 2010 and Resolution dated 25 February 2011 of the Court of Appeals in CA-G.R. SP No.
104292 are hereby REVERSED.

SO ORDERED.

G.R. No. 205703, March 07, 2016

INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN ENGINEERS & CONTRACTORS,
INC. AND ANGELITO C. HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND ALBERTO B. ARRIOLA, Respondents.

DECISION

MENDOZA, J.:

When can a foreign law govern an overseas employment contract? This is the fervent question that the Court shall
resolve, once and for all.

This petition for review on certiorari seeks to reverse and set aside the January 24, 2013 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 118869, which modified the November 30, 2010 Decision2 of the National Labor
Relations Commission (NLRC) and its February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case
No. NCR 09-13563-09, a case for illegal termination of an Overseas Filipino Worker (OFW).

The Facts

Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement agency duly organized
and existing under Philippine laws, with petitioner Angelito C. Hernandez as its president and managing director.
Petitioner SNC Lavalin Engineers & Contractors, Inc. (SNC-Lavalin) is the principal of IPAMS, a Canadian company
with business interests in several countries. On the other hand, respondent Alberto Arriola (Arriola) is a licensed
general surgeon in the Philippines.4

Employee's Position

Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of Safety Officer in its
Ambatovy Project site in Madagascar. The position offered had a rate of CA$32.00 per hour for forty (40) hours a
week with overtime pay in excess of forty (40) hours. It was for a period of nineteen (19) months starting from
June 9, 2008 to December 31, 2009.

Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his overseas employment
contract was processed with the Philippine Overseas Employment Agency (POEA)6 In a letter of
understanding,7 dated June 5, 2008, SNC-Lavalin confirmed Arriola's assignment in the Ambatovy Project.
According to Arriola, he signed the contract of employment in the Philippines.8 On June 9, 2008, Arriola started

12
working in Madagascar.

After three months, Arriola received a notice of pre-termination of employment,9 dated September 9, 2009, from
SNC-Lavalin. It stated that his employment would be pre-terminated effective September 11, 2009 due to
diminishing workload in the area of his expertise and the unavailability of alternative assignments. Consequently,
on September 15, 2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank account his pay
amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos (CA$2,636.80), based on Canadian
labor law.

Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-payment of overtime pay,
vacation leave and sick leave pay before the Labor Arbiter (LA). He claimed that SNC-Lavalin still owed him unpaid
salaries equivalent to the three-month unexpired portion of his contract, amounting to, more or less, One Million
Sixty-Two Thousand Nine Hundred Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin never offered
any valid reason for his early termination and that he was not given sufficient notice regarding the same. Arriola
also insisted that the petitioners must prove the applicability of Canadian law before the same could be applied to
his employment contract.

Employer's Position

The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-Lavalin was greatly
affected by the global financial crises during the latter part of 2008. The economy of Madagascar, where SNC-
Lavalin had business sites, also slowed down. As proof of its looming financial standing, SNC-Lavalin presented a
copy of a news item in the Financial Post,10 dated March 5, 2009, showing the decline of the value of its stocks.
Thus, it had no choice but to minimize its expenditures and operational expenses. It re-organized its Health and
Safety Department at the Ambatovy Project site and Arriola was one of those affected.11

The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-Staffbuilders), pointing out that
particular labor laws of a foreign country incorporated in a contract freely entered into between an OFW and a
foreign employer through the latter's agent was valid. In the present case, as all of Arriola's employment
documents were processed in Canada, not to mention that SNC-Lavalin's office was in Ontario, the principle of lex
loci celebrationis was applicable. Thus, the petitioners insisted that Canadian laws governed the contract.

The petitioners continued that the pre-termination of Arriola's contract was valid for being consistent with the
provisions of both the Expatriate Policy and laws of Canada. The said foreign law did not require any ground for
early termination of employment, and the only requirement was the written notice of termination. Even assuming
that Philippine laws should apply, Arriola would still be validly dismissed because domestic law recognized
retrenchment and redundancy as legal grounds for termination.

In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act (ESA) of Ontario, which
was duly authenticated by the Canadian authorities and certified by the Philippine Embassy.

The LA Ruling

In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit. The LA ruled that the
rights and obligations among and between the OFW, the local recruiter/agent, and the foreign employer/principal
were governed by the employment contract pursuant to the EDI-Staffbuilders case. Thus, the provisions on
termination of employment found in the ESA, a foreign law which governed Arriola's employment contract, were
applied. Given that SNC-Lavalin was able to produce the duly authenticated ESA, the LA opined that there was no
other conclusion but to uphold the validity of Arriola's dismissal based on Canadian law. The fallo of the LA
decision reads:
chanRoblesvirtualLawlibrary

13
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered dismissing the complaint
for lack of merit.

SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC.

The NLRC Ruling

In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled that Arriola was illegally
dismissed by the petitioners. Citing PNB v. Cabansag,16 the NLRC stated that whether employed locally or overseas,
all Filipino workers enjoyed the protective mantle of Philippine labor and social legislation, contract stipulations to
the contrary notwithstanding. Thus, the Labor Code of the Philippines and Republic Act (R.A.) No. 8042, or the
Migrant Workers Act, as amended, should be applied. Moreover, the NLRC added that the overseas employment
contract of Arriola was processed in the POEA.

Applying the Philippine laws, the NLRC found that there was no substantial evidence presented by the petitioners
to show any just or authorized cause to terminate Arriola. The ground of financial losses by SNC-Lavalin was not
supported by sufficient and credible evidence. The NLRC concluded that, for being illegally dismissed, Arriola
should be awarded CA$81,920.00 representing sixteen (16) months of Arriola's purported unpaid salary, pursuant
to the Serrano v. Gallant17 doctrine. The decretal portion of the NLRC decision states:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding complainant-appellant to have been
illegally dismissed. Respondents-appellees are hereby ordered to pay complainant-appellant the amount of
CA$81,920.00, or its Philippine Peso equivalent prevailing at the time of payment. Accordingly, the decision of the
Labor Arbiter dated May 31, 2010 is hereby VACATED and SET ASIDE.

SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in its resolution, dated
February 2, 2011.

Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should be the ESA, or the
Ontario labor law, that should be applied in Arriola's employment contract. No temporary restraining order,
however, was issued by the CA.

The Execution Proceedings

In the meantime, execution proceedings were commenced before the LA by Arriola. The LA granted the motion for
execution in the Order,19 dated August 8, 2011.

The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31, 2012, the NLRC
corrected the decretal portion of its November 30, 2010 decision. It decreased the award of backpay in the
amount of CA$26,880.00 or equivalent only to three (3) months and three (3) weeks pay based on 70-hours per
week workload. The NLRC found that when Arriola was dismissed on September 9, 2009, he only had three (3)
months and three (3) weeks or until December 31, 2009 remaining under his employment contract.

Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari before the CA. In its
decision, dated July 25, 2013, the CA affirmed the decrease in Arriola's backpay because the unpaid period in his
contract was just three (3) months and three (3) weeks.

Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No. 212031. The appeal,
however, was dismissed outright by the Court in its resolution, dated August 8, 2014, because it was belatedly filed
and it did not comply with Sections 4 and 5 of Rule 7 of the Rules of Court. Hence, it was settled in the execution

14
proceedings that the award of backpay to Arriola should only amount to three (3) months and three (3) weeks of
his pay.

The CA Ruling

Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision, the CA affirmed that
Arriola was illegally dismissed by the petitioners. The CA explained that even though an authenticated copy of the
ESA was submitted, it did not mean that the said foreign law automatically applied in this case. Although parties
were free to establish stipulations in their contracts, the same must remain consistent with law, morals, good
custom, public order or public policy. The appellate court wrote that the ESA allowed an employer to disregard the
required notice of termination by simply giving the employee a severance pay. The ESA could not be made to apply
in this case for being contrary to our Constitution, specifically on the right of due process. Thus, the CA opined that
our labor laws should find application.

As the petitioners neither complied with the twin notice-rule nor offered any just or authorized cause for his
termination under the Labor Code, the CA held that Arriola's dismissal was illegal. Accordingly, it pronounced that
Arriola was entitled to his salary for the unexpired portion of his contract which is three (3) months and three (3)
weeks salary. It, however, decreased the award of backpay to Arriola because the NLRC made a wrong calculation.
Based on his employment contract, the backpay of Arriola should only be computed on a 40-hour per week
workload, or in the amount of CA$19,200.00. The CA disposed the case in this wise:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED. The assailed Order of the
National Labor Relations Commission in NLRC LAC No. 08-000572-10/NLRC Case No. NCR 09-13563-09 is MODIFIED
in that private respondent is only entitled to a monetary judgment equivalent to his unpaid salaries in the amount
of CA$19,200.00 or its Philippine Peso equivalent.

SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES

WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT TO THE EMPLOYMENT
CONTRACT.

II

GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER OR NOT THE SIX-WEEK ON,
TWO-WEEK OFF SCHEDULE SHOULD BE USED IN THE COMPUTATION OF ANY MONETARY AWARD.

III

GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE AMOUNT BEING CLAIMED BY
RESPONDENTS HAD ALREADY BEEN SATISFIED, OR AT THE VERY LEAST, WHETHER OR NOT THE AMOUNT OF
CA$2,636.80 SHOULD BE DEDUCTED FROM THE MONETARY AWARD.22ChanRoblesVirtualawlibrary
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the foreign employer are
governed by the employment contract, citing EDI-Staffbuilders; that the terms and conditions of Arriola's
employment are embodied in the Expatriate Policy, Ambatovy Project - Site, Long Term, hence, the laws of Canada
must be applied; that the ESA, or the Ontario labor law, does not require any ground for the early termination of
employment and it permits the termination without any notice provided that a severance pay is given; that the
ESA was duly authenticated by the Canadian authorities and certified by the Philippine Embassy; that the NLRC
Sixth Division exhibited bias and bad faith when it made a wrong computation on the award of backpay; and that,
assuming there was illegal dismissal, the CA$2,636.80, earlier paid to Arriola, and his home leaves should be

15
deducted from the award of backpay.

In his Comment,23 Arriola countered that foreign laws could not apply to employment contracts if they were
contrary to law, morals, good customs, public order or public policy, invoking Pakistan International Airlines
Corporation v. Ople (Pakistan International);24 that the ESA was not applicable because it was contrary to his
constitutional right to due process; that the petitioners failed to substantiate an authorized cause to justify his
dismissal under Philippine labor law; and that the petitioners could not anymore claim a deduction of CA$2,636.80
from the award of backpay because it was raised for the first time on appeal.

In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of foreign laws on labor
contracts; that the Pakistan International case was superseded by EDI-Staffbuilders and other subsequent cases;
and that SNC-Lavalin suffering financial losses was an authorized cause to terminate Arriola's employment.

In his Memorandum,26 Arriola asserted that his employment contract was executed in the Philippines and that the
alleged authorized cause of financial losses by the petitioners was not substantiated by evidence.

In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was applicable in the present case
and that recent jurisprudence recognized that the parties could agree on the applicability of foreign laws in their
labor contracts.

The Court's Ruling

The petition lacks merit.

Application of foreign laws with labor contracts

At present, Filipino laborers, whether skilled or professional, are enticed to depart from the motherland in search
of greener pastures. There is a distressing reality that the offers of employment abroad are more lucrative than
those found in our own soils. To reap the promises of the foreign dream, our unsung heroes must endure
homesickness, solitude, discrimination, mental and emotional struggle, at times, physical turmoil, and, worse,
death. On the other side of the table is the growing number of foreign employers attracted in hiring Filipino
workers because of their reasonable compensations and globally-competitive skills and qualifications. Between the
dominant foreign employers and the vulnerable and desperate OFWs, however, there is an inescapable truth that
the latter are in need of greater safeguard and protection.

In order to afford the full protection of labor to our OFWs, the State has vigorously enacted laws, adopted
regulations and policies, and established agencies to ensure that their needs are satisfied and that they continue to
work in a humane living environment outside of the country. Despite these efforts, there are still issues left
unsolved in the realm of overseas employment. One existing question is posed before the Court -when should an
overseas labor contract be governed by a foreign law? To answer this burning query, a review of the relevant laws
and jurisprudence is warranted.

R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on overseas employment and to
establish a higher standard of protection and promotion of the welfare of migrant workers.28 It emphasized that
while recognizing the significant contribution of Filipino migrant workers to the national economy through their
foreign exchange remittances, the State does not promote overseas employment as a means to sustain economic
growth and achieve national development.29 Although it acknowledged claims arising out of law or contract
involving Filipino workers,30 it does not categorically provide that foreign laws are absolutely and automatically
applicable in overseas employment contracts.

The issue of applying foreign laws to labor contracts was initially raised before the Court in Pakistan International.
It was stated in the labor contract therein (1) that it would be governed by the laws of Pakistan, (2) that the
employer have the right to terminate the employee at any time, and (3) that the one-month advance notice in

16
terminating the employment could be dispensed with by paying the employee an equivalent one-month salary.
Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to wit:
chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between
the parties. The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article
1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem
convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus,
counterbalancing the principle of autonomy of contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters affected with public policy, are deemed written into the
contract. Put a little differently, the governing principle is that parties may not contract away applicable provisions
of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply contracting with each other. x x
x31

[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign employer is "much affected
with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory
by the parties agreeing upon some other law to govern their relationship."32 Thus, the Court applied the Philippine
laws, instead of the Pakistan laws. It was also held that the provision in the employment contract, where the
employer could terminate the employee at any time for any ground and it could even disregard the notice of
termination, violates the employee's right to security of tenure under Articles 280 and 281 of the Labor Code.

In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n formulating the
contract, the parties may establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public policy."33 In that case, the
overseas contract specifically stated that Saudi Labor Laws would govern matters not provided for in the contract.
The employer, however, failed to prove the said foreign law, hence, the doctrine of processual presumption came
into play and the Philippine labor laws were applied. Consequently, the Court did not discuss any longer whether
the Saudi labor laws were contrary to Philippine labor laws.

The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though not an illegal termination
case, elucidated on the effect of foreign laws on employment. It involved a complaint for insurance benefits and
damages arising from the death of a Filipina nurse from Saudi Arabia. It was initially found therein that there was
no law in Saudi Arabia that provided for insurance arising from labor accidents. Nevertheless, the Court concluded
that the employer and the recruiter in that case abandoned their legal, moral and social obligation to assist the
victim's family in obtaining justice for her death, and so her family was awarded P5,000,000.00 for moral and
exemplary damages.

In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency invoked the defense that
the foreign employer was immune from suit and that it did not sign any document agreeing to be held jointly and
solidarily liable. Such defense, however, was rejected because R.A. No. 8042 precisely afforded the OFWs with a
recourse against the local agency and the foreign employer to assure them of an immediate and sufficient
payment of what was due. Similar to EDI-Staffbuilders, the local agency therein failed to prove the Kuwaiti law
specified in the labor contract, pursuant to Sections 24 and 25 of Rule 132 of the Revised Rules of Court.

Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer Overseas), it was declared
that the security of tenure for labor was guaranteed by our Constitution and employees were not stripped of the
same when they moved to work in other jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the
Court held that the principle of lex loci contractus (the law of the place where the contract is made) governed in
this jurisdiction. As it was established therein that the overseas labor contract was executed in the Philippines, the
Labor Code and the fundamental procedural rights were observed. It must be noted that no foreign law was
specified in the employment contracts in both cases.

17
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted the doctrine of forum non
conveniens because the overseas employment contracts required the application of the laws of Saudi Arabia, and
so, the Philippine courts were not in a position to hear the case. In striking down such argument, the Court held
that while a Philippine tribunal was called upon to respect the parties' choice of governing law, such respect must
not be so permissive as to lose sight of considerations of law, morals, good customs, public order, or public policy
that underlie the contract central to the controversy. As the dispute in that case related to the illegal termination
of the employees due to their pregnancy, then it involved a matter of public interest and public policy. Thus, it was
ruled that Philippine laws properly found application and that Philippine tribunals could assume jurisdiction.

Based on the foregoing, the general rule is that Philippine laws apply even to overseas employment contracts. This
rule is rooted in the constitutional provision of Section 3, Article XIII that the State shall afford full protection to
labor, whether local or overseas. Hence, even if the OFW has his employment abroad, it does not strip him of his
rights to security of tenure, humane conditions of work and a living wage under our Constitution.39

As an exception, the parties may agree that a foreign law shall govern the employment contract. A synthesis of the
existing laws and jurisprudence reveals that this exception is subject to the following requisites:
chanRoblesvirtualLawlibrary

1. That it is expressly stipulated in the overseas employment contract that a specific foreign law shall govern;

2. That the foreign law invoked must be proven before the courts pursuant to the Philippine rules on
evidence;

3. That the foreign law stipulated in the overseas employment contract must not be contrary to law, morals,
good customs, public order, or public policy of the Philippines; and

4. That the overseas employment contract must be processed through the POEA.

The Court is of the view that these four (4) requisites must be complied with before the employer could invoke the
applicability of a foreign law to an overseas employment contract. With these requisites, the State would be able
to abide by its constitutional obligation to ensure that the rights and well-being of our OFWs are fully protected.
These conditions would also invigorate the policy under R.A. No. 8042 that the State shall, at all times, uphold the
dignity of its citizens whether in country or overseas, in general, and the Filipino migrant workers, in
particular.40 Further, these strict terms are pursuant to the jurisprudential doctrine that "parties may not contract
away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with
public interest,"41 such as laws relating to labor. At the same time, foreign employers are not at all helpless to
apply their own laws to overseas employment contracts provided that they faithfully comply with these requisites.

If the first requisite is absent, or that no foreign law was expressly stipulated in the employment contract which
was executed in the Philippines, then the domestic labor laws shall apply in accordance with the principle of lex
loci contractus. This is based on the cases of Sameer Overseas and PCL Shipping.

If the second requisite is lacking, or that the foreign law was not proven pursuant to Sections 24 and 25 of Rule 132
of the Revised Rules of Court, then the international law doctrine of processual presumption operates. The said
doctrine declares that "[w]here a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is
that foreign law is the same as ours."42 This was observed in the cases of EDI-Staffbuilders and ATCI Overseas.

If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals, good customs, public
order or public policy, then Philippine laws govern. This finds legal bases in the Civil Code, specifically: (1) Article
17, which provides that laws which have, for their object, public order, public policy and good customs shall not be
rendered ineffective by laws of a foreign country; and (2) Article 1306, which states that the stipulations, clauses,

18
terms and conditions in a contract must not be contrary to law, morals, good customs, public order, or public
policy. The said doctrine was applied in the case of Pakistan International.

Finally, if the fourth requisite is missing, or that the overseas employment contract was not processed through the
POEA, then Article 18 of the Labor Code is violated. Article 18 provides that no employer may hire a Filipino worker
for overseas employment except through the boards and entities authorized by the Secretary of Labor. In relation
thereto, Section 4 of R.A. No. 8042, as amended, declares that the State shall only allow the deployment of
overseas Filipino workers in countries where the rights of Filipino migrant workers are protected. Thus, the POEA,
through the assistance of the Department of Foreign Affairs, reviews and checks whether the countries have
existing labor and social laws protecting the rights of workers, including migrant workers.43 Unless processed
through the POEA, the State has no effective means of assessing the suitability of the foreign laws to our migrant
workers. Thus, an overseas employment contract that was not scrutinized by the POEA definitely cannot be
invoked as it is an unexamined foreign law.

In other words, lacking any one of the four requisites would invalidate the application of the foreign law, and the
Philippine law shall govern the overseas employment contract.

As the requisites of the applicability of foreign laws in overseas labor contract have been settled, the Court can
now discuss the merits of the case at bench.

A judicious scrutiny of the records of the case demonstrates that the petitioners were able to observe the second
requisite, or that the foreign law must be proven before the court pursuant to the Philippine rules on evidence.
The petitioners were able to present the ESA, duly authenticated by the Canadian authorities and certified by the
Philippine Embassy, before the LA. The fourth requisite was also followed because Arriola's employment contract
was processed through the POEA.44

Unfortunately for the petitioners, those were the only requisites that they complied with. As correctly held by the
CA, even though an authenticated copy of the ESA was submitted, it did not mean that said foreign law could be
automatically applied to this case. The petitioners miserably failed to adhere to the two other requisites, which
shall be discussed in seratim.

The foreign law was not expressly specified in the employment contract

The petitioners failed to comply with the first requisite because no foreign law was expressly stipulated in the
overseas employment contract with Arriola. In its pleadings, the petitioners did not directly cite any specific
provision or stipulation in the said labor contract which indicated the applicability of the Canadian labor laws or
the ESA. They failed to show on the face of the contract that a foreign law was agreed upon by the parties. Rather,
they simply asserted that the terms and conditions of Arriola's employment were embodied in the Expatriate
Policy, Ambatovy Project - Site, Long Term.45 Then, they emphasized provision 8.20 therein, regarding
interpretation of the contract, which provides that said policy would be governed and construed with the laws of
the country where the applicable SNC-Lavalin, Inc. office was located.46 Because of this provision, the petitioners
insisted that the laws of Canada, not of Madagascar or the Philippines, should apply. Then, they finally referred to
the ESA.

It is apparent that the petitioners were simply attempting to stretch the overseas employment contract of Arriola,
by implication, in order that the alleged foreign law would apply. To sustain such argument would allow any
foreign employer to improperly invoke a foreign law even if it is not anymore reasonably contemplated by the
parties to control the overseas employment. The OFW, who is susceptible by his desire and desperation to work
abroad, would blindly sign the labor contract even though it is not clearly established on its face which state law
shall apply. Thus, a better rule would be to obligate the foreign employer to expressly declare at the onset of the
labor contract that a foreign law shall govern it. In that manner, the OFW would be informed of the applicable law
before signing the contract.

19
Further, it was shown that the overseas labor contract was executed by Arriola at his residence in Batangas and it
was processed at the POEA on May 26, 2008.47 Considering that no foreign law was specified in the contract and
the same was executed in the Philippines, the doctrine of lex loci celebrationis applies and the Philippine laws shall
govern the overseas employment of Arriola.

The foreign law invoked is contrary to the Constitution and the Labor Code

Granting arguendo that the labor contract expressly stipulated the applicability of Canadian law, still, Arriola's
employment cannot be governed by such foreign law because the third requisite is not satisfied. A perusal of the
ESA will show that some of its provisions are contrary to the Constitution and the labor laws of the Philippines.

First, the ESA does not require any ground for the early termination of employment.48 Article 54 thereof only
provides that no employer should terminate the employment of an employee unless a written notice had been
given in advance.49 Necessarily, the employer can dismiss any employee for any ground it so desired. At its own
pleasure, the foreign employer is endowed with the absolute power to end the employment of an employee even
on the most whimsical grounds.

Second, the ESA allows the employer to dispense with the prior notice of termination to an employee. Article 65(4)
thereof indicated that the employer could terminate the employment without notice by simply paying the
employee a severance pay computed on the basis of the period within which the notice should have been
given.50 The employee under the ESA could be immediately dismissed without giving him the opportunity to
explain and defend himself.

The provisions of the ESA are patently inconsistent with the right to security of tenure. Both the Constitution51 and
the Labor Code52 provide that this right is available to any employee. In a host of cases, the Court has upheld the
employee's right to security of tenure in the face of oppressive management behavior and management
prerogative. Security of tenure is a right which cannot be denied on mere speculation of any unclear and nebulous
basis.53

Not only do these provisions collide with the right to security of tenure, but they also deprive the employee of his
constitutional right to due process by denying him of any notice of termination and the opportunity to be
heard.54 Glaringly, these disadvantageous provisions under the ESA produce the same evils which the Court
vigorously sought to prevent in the cases of Pakistan International and Sameer Overseas. Thus, the Court concurs
with the CA that the ESA is not applicable in this case as it is against our fundamental and statutory laws.

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a foreign law, then the
Philippine labor laws must govern the overseas employment contract of Arriola.

No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer shall not terminate the
services of an employee except for a just cause or when authorized by law.55 Concomitant to the employer's right
to freely select and engage an employee is the employer's right to discharge the employee for just and/or
authorized causes. To validly effect terminations of employment, the discharge must be for a valid cause in the
manner required by law. The purpose of these two-pronged qualifications is to protect the working class from the
employer's arbitrary and unreasonable exercise of its right to dismiss.56

Some of the authorized causes to terminate employment under the Labor Code would be installation of labor-
saving devices, redundancy, retrenchment to prevent losses and the closing or cessation of operation of the
establishment or undertaking.57 Each authorized cause has specific requisites that must be proven by the employer
with substantial evidence before a dismissal may be considered valid.

Here, the petitioners assert that the economy of Madagascar weakened due to the global financial crisis.

20
Consequently, SNC-Lavalin's business also slowed down. To prove its sagging financial standing, SNC-Lavalin
presented a copy of a news item in the Financial Post, dated March 5, 2009. They insist that SNC-Lavalin had no
choice but to minimize its expenditures and operational expenses.58 In addition, the petitioners argued that the
government of Madagascar prioritized the employment of its citizens, and not foreigners. Thus, Arriola was
terminated because there was no more job available for him.59

The Court finds that Arriola was not validly dismissed. The petitioners simply argued that they were suffering from
financial losses and Arriola had to be dismissed. It was not even clear what specific authorized cause, whether
retrenchment or redundancy, was used to justify Arriola's dismissal. Worse, the petitioners did not even present a
single credible evidence to support their claim of financial loss. They simply offered an unreliable news article
which deserves scant consideration as it is undoubtedly hearsay. Time and again the Court has ruled that in illegal
dismissal cases like the present one, the onus of proving that the employee was dismissed and that the dismissal
was not illegal rests on the employer, and failure to discharge the same would mean that the dismissal is not
justified and, therefore, illegal.60

As to the amount of backpay awarded, the Court finds that the computation of the CA was valid and proper based
on the employment contract of Arriola. Also, the issue of whether the petitioners had made partial payments on
the backpay is a matter best addressed during the execution process.chanrobleslaw

WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of Appeals in CA-G.R. SP No.
118869 is AFFIRMED in toto.

SO ORDERED.

G.R. No. 167217 February 4, 2008

P.I. MANUFACTURING, INCORPORATED, petitioner,


vs.
P.I. MANUFACTURING SUPERVISORS AND FOREMAN ASSOCIATION and the NATIONAL LABOR
UNION,respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

The Court has always promoted 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.
Consistent with this, the Court also adopts the policy that requires recognition and validation of wage increases
given by employers either unilaterally or as a result of collective bargaining negotiations in an effort to correct
wage distortions.1

Before us is a motion for reconsideration of our Resolution dated April 18, 2005 denying the present petition for
review on certiorari for failure of the petitioner to show that a reversible error has been committed by the Court of
Appeals in its (a) Decision dated July 21, 2004 and (b) Resolution dated February 18, 2005.

The facts are:

Petitioner P.I. Manufacturing, Incorporated is a domestic corporation engaged in the manufacture and sale of
household appliances. On the other hand, respondent P.I. Manufacturing Supervisors and Foremen Association
(PIMASUFA) is an organization of petitioner’s supervisors and foremen, joined in this case by its federation, the
National Labor Union (NLU).

21
On December 10, 1987, the President signed into law Republic Act (R.A.) No. 66402 providing, among others, an
increase in the statutory minimum wage and salary rates of employees and workers in the private sector. Section 2
provides:

SEC. 2. The statutory minimum wage rates of workers and employees in the private sector, whether
agricultural or non-agricultural, shall be increased by ten pesos (P10.00) per day, except non-agricultural
workers and employees outside Metro Manila who shall receive an increase of eleven pesos (P11.00) per
day: Provided, That those already receiving above the minimum wage up to one hundred pesos
(P100.00) shall receive an increase of ten pesos (P10.00) per day. Excepted from the provisions of this
Act are domestic helpers and persons employed in the personal service of another.

Thereafter, on December 18, 1987, petitioner and respondent PIMASUFA entered into a new Collective Bargaining
Agreement (1987 CBA) whereby the supervisors were granted an increase of P625.00 per month and the
foremen, P475.00 per month. The increases were made retroactive to May 12, 1987, or prior to the passage of
R.A. No. 6640, and every year thereafter until July 26, 1989. The pertinent portions of the 1987 CBA read:

ARTICLE IV

SALARIES AND OVERTIME

Section 1. The COMPANY shall grant to all regular supervisors and foremen within the coverage of the
unit represented by the ASSOCIATION, wage or salary increases in the amount set forth as follows:

A. For FOREMEN

Effective May 12, 1987, an increase of P475,00 per month to all qualified regular foremen who are in the
service of the COMPANY as of said date and who are still in its employ on the signing of this Agreement,
subject to the conditions set forth in sub-paragraph (d) hereunder;

a) Effective July 26, 1988, an increase of P475.00 per month/employee to all covered foremen;

b) Effective July 26, 1989, an increase of P475.00 per month/per employee to all covered foremen;

c) The salary increases from May 12, 1987 to November 30, 1987 shall be excluding and without
increment on fringe benefits and/or premium and shall solely be on basic salary.

B. For SUPERVISORS

a) Effective May 12, 1987, an increase of P625.00 per month/employee to all qualified regular supervisors
who are in the service of the COMPANY as of said date and who are still in its employ on the signing of the
Agreement, subject to the conditions set forth in subparagraph (d) hereunder;

b) Effective July 26, 1988, an increase of P625.00 per month/employee to all covered supervisors;

c) Effective July 26, 1989, an increase of P625.00 per month/employee to all covered supervisors;

d) The salary increase from May 12, 1987 to November 30, 1987 shall be excluding and without increment
on fringe benefits and/or premiums and shall solely be on basic salary.

22
On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the Arbitration Branch of the
National Labor Relations Commission (NLRC), docketed as NLRC-NCR Case No. 00-01-00584, charging petitioner
with violation of R.A. No. 6640.3 Respondents attached to their complaint a numerical illustration of wage
distortion resulting from the implementation of R.A. No. 6640.

On March 19, 1990, the Labor Arbiter rendered his Decision in favor of respondents. Petitioner was ordered to give
the members of respondent PIMASUFA wage increases equivalent to 13.5% of their basic pay they were receiving
prior to December 14, 1987. The Labor Arbiter held:

As regards the issue of wage distortion brought about by the implementation of R.A. 6640 – It is correctly
pointed out by the union that employees cannot waive future benefits, much less those mandated by law.
That is against public policy as it would render meaningless the law. Thus, the waiver in the CBA does not
bar the union from claiming adjustments in pay as a result of distortion of wages brought about by the
implementation of R.A. 6640.

Just how much are the supervisors and foremen entitled to correct such distortion is now the question.
Pursuant to the said law, those who on December 14, 1987 were receiving less than P100.00 are all
entitled to an automatic across- the-board increase of P10.00 a day. The percentage in increase given
those who received benefits under R.A. 6640 should be the same percentage given to the supervisors
and foremen.

The statutory minimum pay then was P54.00 a day. With the addition of P10.00 a day, the said minimum
pay raised to P64.00 a day. The increase of P10.00 a day is P13.5% of the minimum wage prior to
December 14, 1987. The same percentage of the pay of members of petitioner prior to December 14,
1987 should be given them.

Finally, the claim of respondent that the filing of the present case, insofar as the provision of R.A. 6640 is
concerned, is premature does not deserve much consideration considering that as of December 1988,
complainant submitted in grievance the aforementioned issue but the same was not settled.4

On appeal by petitioner, the NLRC, in its Resolution dated January 8, 1991, affirmed the Labor Arbiter’s judgment.

Undaunted, petitioner filed a petition for certiorari with this Court. However, we referred the petition to the Court
of Appeals pursuant to our ruling in St. Martin Funeral Homes v. NLRC.5 It was docketed therein as CA-G.R. SP No.
54379.

On July 21, 2004, the appellate court rendered its Decision affirming the Decision of the NLRC with modification by
raising the 13.5% wage increase to 18.5%. We quote the pertinent portions of the Court of Appeals Decision, thus:

Anent the fourth issue, petitioner asseverates that the wage distortion issue is already barred by Sec. 2
Article IV of the Contract denominated as "The Company and Supervisors and Foremen Contract" dated
December 18, 1987 declaring that it "absolves, quit claims and releases the COMPANY for any monetary
claim they have, if any there might be or there might have been previous to the signing of this
agreement." Petitioner interprets this as absolving it from any wage distortion brought about by the
implementation of the new minimum wage law. Since the contract was signed on December 17, 1987, or
after the effectivity of Republic Act No. 6640, petitioner claims that private respondent is deemed to have
waived any benefit it may have under the new law.

We are not persuaded.

23
Contrary to petitioner’s stance, the increase resulting from any wage distortion caused by the
implementation of Republic Act 6640 is not waivable. As held in the case of Pure Foods Corporation vs.
National Labor Relations Commission, et al.:

"Generally, quitclaims by laborers are frowned upon as contrary to public policy and are held to
be ineffective to bar recovery for the full measure of the worker’s rights. The reason for the rule
is that the employer and the employee do not stand on the same footing."

Moreover, Section 8 of the Rules Implementing RA 6640 states:

No wage increase shall be credited as compliance with the increase prescribed herein unless
expressly provided under valid individual written/collective agreements; and provided further
that such wage increase was granted in anticipation of the legislated wage increase under the
act. But such increases shall not include anniversary wage increases provided in collective
bargaining agreements.

Likewise, Article 1419 of the Civil Code mandates that:

When the law sets, or authorizes the setting of a minimum wage for laborers, and a contract is
agreed upon by which a laborer accepts a lower wage, he shall be entitled to recover the
deficiency.

Thus, notwithstanding the stipulation provided under Section 2 of the Company and Supervisors and
Foremen Contract, we find the members of private respondent union entitled to the increase of their
basic pay due to wage distortion by reason of the implementation of RA 6640.

On the last issue, the increase of 13.5% in the supervisors and foremen’s basic salary must further be
increased to 18.5% in order to correct the wage distortion brought about by the implementation of RA
6640. It must be recalled that the statutory minimum pay before RA 6640 was P54.00 a day. The increase
of P10.00 a day under RA 6640 on the prior minimum pay of P54.00 is 18.5% and not 13.5%. Thus,
petitioner should be made to pay the amount equivalent to 18.5% of the basic pay of the members or
private respondent union in compliance with the provisions of Section 3 of RA 6640."

Petitioner filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated
February 18, 2005.

Hence, the present recourse, petitioner alleging that the Court of Appeals erred:

1) In awarding wage increase to respondent supervisors and foremen to cure an alleged wage distortion
that resulted from the implementation of R.A. No. 6640.

2) In disregarding the wage increases granted under the 1987 CBA correcting whatever wage distortion
that may have been created by R.A. No. 6640.

3) In awarding wage increase equivalent to 18.5% of the basic pay of the members of respondent
PIMASUFA in violation of the clear provision of R.A. No. 6640 excluding from its coverage employees
receiving wages higher than P100.00.

4) In increasing the NLRC’s award of wage increase from 13.5% to 18.5%, which increase is very much
higher than the P10.00 daily increase mandated by R.A. No. 6640.

24
Petitioner contends that the findings of the NLRC and the Court of Appeals as to the existence of a wage distortion
are not supported by evidence; that Section 2 of R.A. No. 6640 does not provide for an increase in the wages of
employees receiving more than P100.00; and that the 1987 CBA has obliterated any possible wage distortion
because the increase granted to the members of respondent PIMASUFA in the amount of P625.00 and P475.00 per
month substantially widened the gap between the foremen and supervisors and as against the rank and file
employees.

Respondents PIMASUFA and NLU, despite notice, failed to file their respective comments.

In a Minute Resolution dated April 18, 2005, we denied the petition for petitioner’s failure to show that the Court
of Appeals committed a reversible error.

Hence, this motion for reconsideration.

We grant the motion.

In the ultimate, the issue here is whether the implementation of R.A. No. 6640 resulted in a wage distortion and
whether such distortion was cured or remedied by the 1987 CBA.

R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly defines "wage distortion" as:

x x x a situation where an increase in prescribed wage rates results in the elimination or 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.

Otherwise stated, wage distortion means the disappearance or virtual disappearance of pay differentials between
lower and higher positions in an enterprise because of compliance with a wage order.6

In this case, the Court of Appeals correctly ruled that a wage distortion occurred due to the implementation of R.A.
No. 6640. The numerical illustration submitted by respondents7 shows such distortion, thus:

II WAGE DISTORTION REGARDING RA-6640 (P10.00 per day increase effective December 31, 1987)

Illustration of Wage Distortion and corresponding wage adjustments as provided in RA-6640

NAME OF SUPERVISOR (S) RATE BEFORE RATE AFTER P109.01 P118.80 P128.08
AND INCREASE OF INCREASE OF OVER- OVER- OVER-
FOREMAN (F) RA- RA- PASSED PASSED PASSED
6640 P10.00 6640 P10.00 P108.80 P118.08 P123.76
RATE AFTER RATE AFTER RATE AFTER
ADJUSTMENT ADJUSTMENT ADJUSTMENT
P10.00 P10.00 P10.00
1. ALCANTARA, V (S) P 99.01 P 109.01
2. MORALES, A (F) 94.93 104.93
3. SALVO, R (F) 96.45 106.45
Note: No. 1 to 3 with increase of RA-6640
4.BUENCUCHILLO, C (S) 102.38 102.38 P 112.38

25
5. MENDOZA, D (F) 107.14 107.14 117.14
6. DEL PRADO, M (S) 108.80 108.80 118.80
7. PALENSO, A (F) 109.71 109.71 P 119.71
8. OJERIO, E (S) 111.71 111.71 121.71
9. REYES, J (S) 114.98 114.98 124.98
10. PALOMIQUE, S (F) 116.79 116.79 126.79
11. PAGLINAWAN, A (S) 116.98 116.98 126.98
12. CAMITO, M (S) 117.04 117.04 127.04
13. TUMBOCON, P (S) 117.44 117.44 127.44
14. SISON JR., B (S) 118.08 118.08 128.08
15. BORJA, R (S) 119.80 119.80 P 129.80
16. GINON, D (S) 123.76 123.76 133.76
17. GINON, T (S) 151. 49 151.49
18. ANDRES, M (S) 255.72 255.72
Note: No. 4 to 18 no increase in R.A. No. 6640

Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in the wage rates
of Alcantara, supervisor, and Morales and Salvo, both foremen. They are petitioner’s lowest paid supervisor and
foremen. As a consequence, the increased wage rates of foremen Morales and Salvo exceeded that of supervisor
Buencuchillo. Also, the increased wage rate of supervisor Alcantara exceeded those of supervisors
Buencuchillo and Del Prado. Consequently, the P9.79 gap or difference between the wage rate of supervisor Del
Prado and that of supervisor Alcantara was eliminated. Instead, the latter gained a P.21 lead over Del Prado. Like a
domino effect, these gaps or differences between and among the wage rates of all the above employees have
been substantially altered and reduced. It is therefore undeniable that the increase in the wage rates by virtue of
R.A. No. 6640 resulted in wage distortion or the elimination of the intentional quantitative differences in the
wage rates of the above employees.

However, while we find the presence of wage distortions, we are convinced that the same were cured or
remediedwhen respondent PIMASUFA entered into the 1987 CBA with petitioner after the effectivity of R.A. No.
6640. The 1987 CBA increased the monthly salaries of the supervisors by P625.00 and the foremen,
by P475.00, effective May 12, 1987. These increases re-established and broadened the gap, not only between the
supervisors and the foremen, but also between them and the rank-and-file employees. Significantly, the 1987 CBA
wage increases almost doubled that of the P10.00 increase under R.A. No. 6640.
The P625.00/month means P24.03 increase per day for the supervisors, while
the P475.00/month means P18.26 increase per day for the foremen. These increases were to be observed every
year, starting May 12, 1987 until July 26, 1989. Clearly, the gap between the wage rates of the supervisors and
those of the foremen was inevitably re-established. It continued to broaden through the years.

Interestingly, such gap as re-established by virtue of the CBA is more than a substantial compliance with R.A. No.
6640. We hold that the Court of Appeals erred in not taking into account the provisions of the CBA viz-a-viz the
wage increase under the said law. In National Federation of Labor v. NLRC,8 we held:

We believe and so hold that the re-establishment of a significant gap or differential between regular
employees and casual employees by operation of the CBA was more than substantial compliance with the
requirements of the several Wage Orders (and of Article 124 of the Labor Code). That this re-
establishment of a significant differential was the result of collective bargaining negotiations, rather

26
than of a special grievance procedure, is not a legal basis for ignoring it. The NLRC En Banc was in serious
error when it disregarded the differential of P3.60 which had been restored by 1 July 1985 upon the
ground that such differential "represent[ed] negotiated wage increase[s] which should not be considered
covered and in compliance with the Wage Orders. x x x"

In Capitol Wireless, Inc. v. Bate,9 we also held:

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.

It has not escaped our attention that requiring petitioner to pay all the members of respondent PIMASUFA a wage
increase of 18.5%, over and above the negotiated wage increases provided under the 1987 CBA, is highly unfair
and oppressive to the former. Obviously, it was not the intention of R.A. No. 6640 to grant an across-the-board
increase in pay to all the employees of petitioner. Section 2 of R.A. No. 6640 mandates only the following increases
in the private sector: (1) P10.00 per day for the employees in the private sector, whether agricultural or non-
agricultural, who are receiving the statutory minimum wage rates; (2) P11.00 per day for non-agricultural workers
and employees outside Metro Manila; and (3) P10.00 per day for those already receiving the minimum wage up
to P100.00. To be sure, only those receiving wages P100.00 and below are entitled to the P10.00 wage
increase. The apparent intention of the law is only to upgrade the salaries or wages of the employees specified
therein.10 As the numerical illustration shows, almost all of the members of respondent PIMASUFA have been
receiving wage rates above P100.00 and, therefore, not entitled to the P10.00 increase. Only three (3) of them are
receiving wage rates below P100.00, thus, entitled to such increase. Now, to direct petitioner to grant an across-
the-board increase to all of them, regardless of the amount of wages they are already receiving, would be harsh
and unfair to the former. As we ruled in Metropolitan Bank and Trust Company Employees Union ALU-TUCP v.
NLRC:11

x x x To compel employers simply to add on legislative 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 statutory prescribed minimum rates of increases. Clearly, this would be counter-productive so
far as securing the interests of labor is concerned.

Corollarily, the Court of Appeals erred in citing Pure Foods Corporation v. National Labor Relations Commission12as
basis in disregarding the provisions of the 1987 CBA. The case involves, not wage distortion, but illegal dismissal of
employees from the service. The Release and Quitclaim executed therein by the Pure Food’s employees were
intended to preclude them from questioning the termination of their services, not their entitlement to wage
increase on account of a wage distortion.

At this juncture, it must be stressed that a CBA constitutes the law between the
parties when freely and voluntarily entered into.13 Here, it has not been shown that respondent PIMASUFA
was coerced or forced by petitioner to sign the 1987 CBA. All of its thirteen (13) officers signed the CBA with the
assistance of respondent NLU. They signed it fully aware of the passage of R.A. No. 6640. The duty to bargain
requires that the parties deal with each other with open and fair minds. A sincere endeavor to overcome obstacles
and difficulties that may arise, so that employer-employee relations may be stabilized and industrial strife
eliminated, must be apparent.14Respondents cannot invoke the beneficial provisions of the 1987 CBA but disregard
the concessions it voluntary extended to petitioner. The goal of collective bargaining is the making of agreements
that will stabilize business conditions and fix fair standards of working conditions.15 Definitely, respondents’
posture contravenes this goal.

27
In fine, it must be emphasized that in the resolution of labor cases, this Court has always been guided by the State
policy enshrined in the Constitution that the rights of workers and the promotion of their welfare shall be
protected. However, consistent with such policy, the Court cannot favor one party, be it labor or management, in
arriving at a just solution to a controversy if the party concerned has no valid support to its claim, like respondents
here.

WHEREFORE, we GRANT petitioner’s motion for reconsideration and REINSTATE the petition we likewise GRANT.
The assailed Decision of the Court of Appeals in CA-G.R. SP No. 54379 is REVERSED.

SO ORDERED.

G.R. No. 198587, January 14, 2015

SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA. JOPETTE M. REBESENCIO,
MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S. SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary restraining order and/or
writ of preliminary injunction under Rule 45 of the 1997 Rules of Civil Procedure praying that judgment be
rendered reversing and setting aside the June 16, 2011 Decision1 and September 13, 2011 Resolution2 of the Court
of Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing under the laws of
Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F, Metro House Building, Sen. Gil J. Puyat
Avenue, Makati City.3 In its Petition filed with this court, Saudia identified itself as
follows:chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree No. M/24 of
18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is located at 4/F Metro
House Building, Sen, Gil J. Puyat Avenue, Makati City (Philippine Office). It may be served with orders of this
Honorable Court through undersigned counsel at 4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas,
Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as Temporary Flight
Attendants with the accreditation and approval of the Philippine Overseas Employment Administration.5 After
undergoing seminars required by the Philippine Overseas Employment Administration for deployment overseas, as
well as training modules offered by Saudia (e.g., initial flight attendant/training course and transition training), and
after working as Temporary Flight Attendants, respondents became Permanent Flight Attendants. They then
entered into Cabin Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16,
1990;6 Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on May 22, 1993;7 and
Loraine Schneider-Cruz (Loraine) on August 27, 1995.8

Respondents continued their employment with Saudia until they were separated from service on various dates in
2006.9

Respondents contended that the termination of their employment was illegal. They alleged that the termination
was made solely because they were pregnant.10

28
As respondents alleged, they had informed Saudia of their respective pregnancies and had gone through the
necessary procedures to process their maternity leaves. Initially, Saudia had given its approval but later on
informed respondents that its management in Jeddah, Saudi Arabia had disapproved their maternity leaves. In
addition, it required respondents to file their resignation letters.11

Respondents were told that if they did not resign, Saudia would terminate them all the same. The threat of
termination entailed the loss of benefits, such as separation pay and ticket discount entitlements.12

Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager, Abdulmalik Saddik
(Abdulmalik).13 Montassah was informed personally by Abdulmalik and a certain Faisal Hussein on October 20,
2006 after being required to report to the office one (1) month into her maternity leave.14Rouen Ruth was also
personally informed by Abdulmalik on October 17, 2006 after being required to report to the office by her Group
Supervisor.15 Loraine received a call on October 12, 2006 from her Group Supervisor, Dakila Salvador.16

Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation on its "Unified
Employment Contract for Female Cabin Attendants" (Unified Contract).17 Under the Unified Contract, the
employment of a Flight Attendant who becomes pregnant is rendered void. It provides:chanroblesvirtuallawlibrary
(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to provide various services
required in normal or emergency cases on both domestic/international flights beside her role in maintaining
continuous safety and security of passengers, and since she will not be able to maintain the required medical
fitness while at work in case of pregnancy, accordingly, if the Air Hostess becomes pregnant at any time during
the term of this contract, this shall render her employment contract as void and she will be terminated due to
lack of medical fitness.18 (Emphasis supplied)
In their Comment on the present Petition,19 respondents emphasized that the Unified Contract took effect on
September 23, 2006 (the first day of Ramadan),20 well after they had filed and had their maternity leaves
approved. Ma. Jopette filed her maternity leave application on September 5, 2006.21 Montassah filed her
maternity leave application on August 29, 2006, and its approval was already indicated in Saudia's computer
system by August 30, 2006.22 Rouen Ruth filed her maternity leave application on September 13, 2006,23 and
Loraine filed her maternity leave application on August 22, 2006.24

Rather than comply and tender resignation letters, respondents filed separate appeal letters that were all
rejected.25

Despite these initial rejections, respondents each received calls on the morning of November 6, 2006 from Saudia's
office secretary informing them that their maternity leaves had been approved. Saudia, however, was quick to
renege on its approval. On the evening of November 6, 2006, respondents again received calls informing them that
it had received notification from Jeddah, Saudi Arabia that their maternity leaves had been disapproved.26

Faced with the dilemma of resigning or totally losing their benefits, respondents executed handwritten resignation
letters. In Montassah's and Rouen Ruth's cases, their resignations were executed on Saudia's blank letterheads
that Saudia had provided. These letterheads already had the word "RESIGNATION" typed on the subject portions
of their headings when these were handed to respondents.27

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for illegal dismissal and for
underpayment of salary, overtime pay, premium pay for holiday, rest day, premium, service incentive leave pay,
13th month pay, separation pay, night shift differentials, medical expense reimbursements, retirement benefits,
illegal deduction, lay-over expense and allowances, moral and exemplary damages, and attorney's fees.28 The case
was initially assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that all the determining points of contact referred
to foreign law and insisted that the Complaint ought to be dismissed on the ground of forum non conveniens.30 It
added that respondents had no cause of action as they resigned voluntarily.31

29
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the Decision32dismissing
respondents' Complaint. The dispositive portion of this Decision reads:chanroblesvirtuallawlibrary
WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed the ruling of Executive
Labor Arbiter Jambaro-Franco. It explained that "[considering that complainants-appellants are OFWs, the Labor
Arbiters and the NLRC has [sic] jurisdiction to hear and decide their complaint for illegal termination."34 On the
matter of forum non conveniens, it noted that there were no special circumstances that warranted its abstention
from exercising jurisdiction.35 On the issue of whether respondents were validly dismissed, it held that there was
nothing on record to support Saudia's claim that respondents resigned voluntarily.

The dispositive portion of the November 19, 2009 National Labor Relations Commission
Decision36reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal impressed with merit. The
respondents-appellees are hereby directed to pay complainants-appellants the aggregate amount of SR614,001.24
corresponding to their backwages and separation pay plus ten (10%) percent thereof as attorney's fees. The
decision of the Labor Arbiter dated December 12, 2008 is hereby VACATED and SET ASIDE. Attached is the
computation prepared by this Commission and made an integral part of this Decision.37cralawlawlibrary
In the Resolution dated February 11, 2010,38 the National Labor Relations Commission denied petitioners' Motion
for Reconsideration.

In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule 65 Petition and modified the
Decision of the National Labor Relations Commission with respect to the award of separation pay and backwages.

The dispositive portion of the Court of Appeals Decision reads:chanroblesvirtuallawlibrary


WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19, 2009 issued by public
respondent, Sixth Division of the National Labor Relations Commission - National Capital Region is MODIFIED only
insofar as the computation of the award of separation pay and backwages. For greater clarity, petitioners are
ordered to pay private respondents separation pay which shall be computed from private respondents' first day of
employment up to the finality of this decision, at the rate of one month per year of service and backwages which
shall be computed from the date the private respondents were illegally terminated until finality of this decision.
Consequently, the ten percent (10%) attorney's fees shall be based on the total amount of the award. The assailed
Decision is affirmed in all other respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011,41 the Court of Appeals denied petitioners' Motion for
Reconsideration.

Hence, this Appeal was filed.

The issues for resolution are the following:

First, whether the Labor Arbiter and the National Labor Relations Commission may exercise jurisdiction over Saudi
Arabian Airlines and apply Philippine law in adjudicating the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian
Airlines.chanRoblesvirtualLawlibrary

30
Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its counsel.42 Saudia, however,
claims that the Labor Arbiter and the National Labor Relations Commission had no jurisdiction over it because
summons were never served on it but on "Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims that
"Saudia Jeddah" and not "Saudia Manila" was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and benefits; and

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations.44

Saudia posits that respondents' Complaint was brought against the wrong party because "Saudia Manila," upon
which summons was served, was never the employer of respondents.45

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare allegation, there is no
basis for concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office . . . located at 4/F
Metro House Building, Sen. Gil J. Puyat Avenue, Makati City."46 Even in the position paper that Saudia submitted to
the Labor Arbiter,47 what Saudia now refers to as "Saudia Jeddah" was then only referred to as "Saudia Head Office
at Jeddah, KSA,"48 while what Saudia now refers to as "Saudia Manila" was then only referred to as "Saudia's office
in Manila."49

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of 1991, provides the
following:chanroblesvirtuallawlibrary
The phrase "doing business" shall include . . . opening offices, whether called "liaison" offices or branches; . . .
and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or of the purpose and object of the business organization. (Emphasis
supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other conclusion than that Saudia is a
foreign corporation doing business in the Philippines. As such, Saudia may be sued in the Philippines and is subject
to the jurisdiction of Philippine tribunals.

Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila" — the latter being
nothing more than Saudia's local office — service of summons to Saudia's office in Manila sufficed to vest
jurisdiction over Saudia's person in Philippine tribunals.chanRoblesvirtualLawlibrary

II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an intelligent decision as to the
law and the facts. This is because respondents' Cabin Attendant contracts require the application of the laws of
Saudi Arabia, rather than those of the Philippines.50 It claims that the difficulty of ascertaining foreign law calls into
operation the principle of forum non conveniens, thereby rendering improper the exercise of jurisdiction by
Philippine tribunals.51

A choice of law governing the validity of contracts or the interpretation of its provisions dees not necessarily
imply forum non conveniens. Choice of law and forum non conveniens are entirely different matters.

31
Choice of law provisions are an offshoot of the fundamental principle of autonomy of contracts. Article 1306 of the
Civil Code firmly ensconces this:chanroblesvirtuallawlibrary
Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is designed to frustrate
illicit means for securing advantages and vexing litigants that would otherwise be possible if the venue of litigation
(or dispute resolution) were left entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute resolution in one of or in a
combination of four ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum, i.e., venue; (3)
governing law; and (4) basis for interpretation. Forum non conveniens relates to, but is not subsumed by, the
second of these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the laws of a given
jurisdiction as the governing law of a contract does not preclude the exercise of jurisdiction by tribunals elsewhere.
The reverse is equally true: The assumption of jurisdiction by tribunals does not ipso factomean that it cannot
apply and rule on the basis of the parties' stipulation. In Hasegawa v. Kitamura:52ChanRoblesVirtualawlibrary
Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to
cause a defendant to travel to this state; choice of law asks the further question whether the application of a
substantive law V'hich will determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and
the choice of the lex fori will often, coincide, the "minimum contacts" for one do not always provide the necessary
"significant contacts" for the other. The question of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state have jurisdiction to enter a
judgment.53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the progressive ease of communication and travel,
persons from various jurisdictions find themselves transacting with each other. Contracts involving foreign
elements are, however, nothing new. Conflict of laws situations precipitated by disputes and litigation anchored on
these contracts are not totally novel.

Transnational transactions entail differing laws on the requirements Q for the validity of the formalities and
substantive provisions of contracts and their interpretation. These transactions inevitably lend themselves to the
possibility of various fora for litigation and dispute resolution. As observed by an eminent expert on transnational
law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point of contact with, a transaction or relationship,
the greater the number of potential fora for the resolution of disputes arising out of or related to that transaction
or relationship. In a world of increased mobility, where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily be invoked in a single or a set of related
disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The first paragraph of
Article 17 of the Civil Code provides that "[t]he forms and solemnities of contracts . . . shall be governed by the
laws of the country in which they are executed"55 (i.e., lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations on matters pertaining to
substantive content of contracts. It has been noted that three (3) modes have emerged: (1) lex loci contractus or
the law of the place of the making; (2) lex loci solutionis or the law of the place of performance; and (3) lex loci
intentionis or the law intended by the parties.56

Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis."57 These jurists and
commentators proceed from the Civil Code of Spain, which, like our Civil Code, is silent on what governs the

32
intrinsic validity of contracts, and the same civil law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio Construction,
Inc.,58 manifested preference for allowing the parties to select the law applicable to their
contract":chanroblesvirtuallawlibrary

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most
legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper
law of the contract." This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law
intended by them either expressly or implicitly (the lex loci intentionis). The law selected may be implied from such
factors as substantial connection with the transaction, or the nationality or domicile of the parties. Philippine
courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow the parties to
select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public
policy of the forum and that the chosen law must bear a substantive relationship to the transaction.59(Emphasis in
the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application of the laws of Saudi
Arabia. It insists that the need to comply with these stipulations calls into operation the doctrine of forum non
conveniens and, in turn, makes it necessary for Philippine tribunals to refrain from exercising jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a combination of four (4)
ways. Moreover, forum non conveniens relates to one of these: choosing between multiple possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora — along with the host of difficulties it poses — is
not unique to transnational litigation. It is a difficulty that similarly arises in disputes well within the bounds of a
singe jurisdiction.

When parallel litigation arises strictly within the context of a single jurisdiction, such rules as those on forum
shopping, litis pendentia, and res judicata come into operation. Thus, in the Philippines, the 1997 Rules on Civil
Procedure provide for willful and deliberate forum shopping as a ground not only for summary dismissal with
prejudice but also for citing parties and counsels in direct contempt, as well as for the imposition of administrative
sanctions.60 Likewise, the same rules expressly provide that a party may seek the dismissal of a Complaint or
another pleading asserting a claim on the ground "[t]hat there is another action pending between the same parties
for the same cause," i.e., litis pendentia, or "[t]hat the cause of action is barred by a prior judgment,"61 i.e., res
judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a means of addressing
the problem of parallel litigation. While the rules of forum shopping, litis pendentia, and res judicata are designed
to address the problem of parallel litigation within a single jurisdiction, forum non conveniens is a means devised to
address parallel litigation arising in multiple jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient."62 It is a concept in private international
law and was devised to combat the "less than honorable" reasons and excuses that litigants use to secure
procedural advantages, annoy and harass defendants, avoid overcrowded dockets, and select a "friendlier"
venue.63 Thus, the doctrine of forum non conveniens addresses the same rationale that the rule against forum
shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata,64 is a concept originating in common law.65 However, unlike the rule on res
judicata, as well as those on litis pendentia and forum shopping, forum non conveniens finds no textual anchor,
whether in statute or in procedural rules, in our civil law system. Nevertheless, jurisprudence has applied forum
non conveniens as basis for a court to decline its exercise of jurisdiction.66

Forum non conveniens is soundly applied not only to address parallel litigation and undermine a litigant's capacity
to vex and secure undue advantages by engaging in forum shopping on an international scale. It is also grounded

33
on principles of comity and judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on account of forum non
conveniens is a deferential gesture to the tribunals of another sovereign. It is a measure that prevents the former's
having to interfere in affairs which are better and more competently addressed by the latter. Further, forum non
conveniens entails a recognition not only that tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to enforce judgments and, ultimately, to dispense
justice. Forum non conveniens prevents the embarrassment of an awkward situation where a tribunal is rendered
incompetent in the face of the greater capability — both analytical and practical — of a tribunal in another
jurisdiction.

The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of efficiency and economy as
it is a matter of international courtesy. A court would effectively be neutering itself if it insists on adjudicating a
controversy when it knows full well that it is in no position to enforce its judgment. Doing so is not only an exercise
in futility; it is an act of frivolity. It clogs the dockets of a.tribunal and leaves it to waste its efforts on affairs, which,
given transnational exigencies, will be reduced to mere academic, if not trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law cases, may refuse impositions
on its jurisdiction where it is not the most 'convenient' or available forum and the parties are not precluded from
seeking remedies elsewhere."67 In Puyat v. Zabarte,68 this court recognized the following situations as among those
that may warrant a court's desistance from exercising jurisdiction:chanroblesvirtuallawlibrary
1) The belief that the matter can be better tried and decided elsewhere, either because the main aspects of the
case transpired in a foreign jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum shopping[,] merely to
secure procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non residents or aliens when the docket may already be
overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70 this court underscored that a
Philippine court may properly assume jurisdiction over a case if it chooses to do so to the extent: "(1) that the
Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position
to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."71

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"72) in the decisions shows that the
matter of jurisdiction rests on the sound discretion of a court. Neither the mere invocation of forum non
conveniens nor the averment of foreign elements operates to automatically divest a court of jurisdiction. Rather, a
court should renounce jurisdiction only "after 'vital facts are established, to determine whether special
circumstances' require the court's desistance."73 As the propriety of applying forum non conveniens is contingent
on a factual determination, it is, therefore, a matter of defense.74

The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is exclusive in its recital of the
grounds for dismissal that are exempt from the omnibus motion rule: (1) lack of jurisdiction over the subject
matter; (2) litis pendentia; (3) res judicata; and (4) prescription. Moreover, dismissal on account offorum non
conveniens is a fundamentally discretionary matter. It is, therefore, not a matter for a defendant to foist upon the
court at his or her own convenience; rather, it must be pleaded at the earliest possible opportunity.

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non conveniens must not only be
clearly pleaded as a ground for dismissal; it must be pleaded as such at the earliest possible opportunity.
Otherwise, it shall be deemed waived.

This court notes that in Hasegawa,76 this court stated that forum non conveniens is not a ground for a motion to

34
dismiss. The factual ambience of this case however does not squarely raise the viability of this doctrine. Until the
opportunity comes to review the use of motions to dismiss for parallel litigation, Hasegawa remains existing
doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that it proceed from
& factually established basis. It would be improper to dismiss an action pursuant to forum non conveniens based
merely on a perceived, likely, or hypothetical multiplicity of fora. Thus, a defendant must also plead and show that
a prior suit has, in fact, been brought in another jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous litigation, the embarrassment of
intruding into the affairs of another sovereign, and the squandering of judicial efforts in resolving a dispute already
lodged and better resolved elsewhere. As has been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff is shown to have an
available alternative forum elsewhere. On this, the moving party bears the burden of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The statute of limitations abroad
may have run, of the foreign court may lack either subject matter or personal jurisdiction over the defendant. . . .
Occasionally, doubts will be raised as to the integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the fairness of its judicial procedures, or as to is
operational efficiency (due, for example, to lack of resources, congestion and delay, or interfering circumstances
such as a civil unrest). In one noted case, [it was found] that delays of 'up to a quarter of a century' rendered the
foreign forum... inadequate for these purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of prudence that a defendant not only allege supposed
dangerous tendencies in litigating in this jurisdiction; the defendant must also show that such danger is real and
present in that litigation or dispute resolution has commenced in another jurisdiction and that a foreign tribunal
has chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine tribunals of jurisdiction and to
require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin Attendant contracts
that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non conveniensmay
ultimately result in the application of foreign law is merely an incident of its application. In this strict sense, forum
non conveniens is not applicable. It is not the primarily pivotal consideration in this case.

In any case, even a further consideration of the applicability of forum non conveniens on the incidental matter of
the law governing respondents' relation with Saudia leads to the conclusion that it is improper for Philippine
tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must grapple with two (2)
considerations: first, the availability and adequacy of recourse to a foreign tribunal; and second, the question of
where, as between the forum court and a foreign court, the balance of interests inhering in a dispute weighs more
heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal and can be
resolved by juxtaposing the competencies and practical circumstances of the tribunals in alternative fora.
Exigencies, like the statute of limitations, capacity to enforce orders and judgments, access to records,
requirements for the acquisition of jurisdiction, and even questions relating to the integrity of foreign courts, may
render undesirable or even totally unfeasible recourse to a foreign court. As mentioned, we consider it in the

35
greater interest of prudence that a defendant show, in pleading forum non conveniens, that litigation has
commenced in another jurisdiction and that a foieign tribunal has, in fact, chosen to exercise jurisdiction.

Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a dispute: first, the vinculum
which the parties and their relation have to a given jurisdiction; and second, the public interest that must animate
a tribunal, in its capacity as an agent of the sovereign, in choosing to assume or decline jurisdiction. The first is
more concerned with the parties, their personal circumstances, and private interests; the second concerns itself
with the state and the greater social order.

In considering the vinculum, a court must look into the preponderance of linkages which the parties and their
transaction may have to either jurisdiction. In this respect, factors, such as the parties' respective nationalities and
places of negotiation, execution, performance, engagement or deployment, come into play.

In considering public interest, a court proceeds with a consciousness that it is an organ of the state. It must, thus,
determine if the interests of the sovereign (which acts through it) are outweighed by those of the alternative
jurisdiction. In this respect, the court delves into a consideration of public policy. Should it find that public interest
weighs more heavily in favor of its assumption of jurisdiction, it should proceed in adjudicating the dispute, any
doubt or .contrary view arising from the preponderance of linkages notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions. Where such provisions exist,
Philippine tribunals, acting as the forum court, generally defer to the parties' articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of the Civ:l Code expressly
provides that "[t]he contracting parties may establish 'such stipulations, clauses, terms and conditions as they may
deem convenient."78 Nevertheless, while a Philippine tribunal (acting as the forum court) is called upon to respect
the parties' choice of governing law, such respect must not be so permissive as to lose sight of considerations of
law, morals, good customs, public order, or public policy that underlie the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v. Ople,79 this court
explained that:chanroblesvirtuallawlibrary
counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters affected with public policy, are deemed written inta the
contract. Put a little differently, the governing principle is that parties may not contract away applicable provisions
of law especially peremptory provisions dealing with matters heavily impressed with public interest.80(Emphasis
supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the fundamental equality
before the law of women and men." Contrasted with Article II, Section 1 of the 1987 Constitution's statement that
"[n]o person shall ... be denied the equal protection of the laws," Article II, Section 14 exhorts the State to
"ensure." This does not only mean that the Philippines shall not countenance nor lend legal recognition and
approbation to measures that discriminate on the basis of one's being male or female. It imposes an obligation
to actively engage in securing the fundamental equality of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), signed and ratified by
the Philippines on July 15, 1980, and on August 5, 1981, respectively,81 is part of the law of the land. In view of the
widespread signing and ratification of, as well as adherence (in practice) to it by states, it may even be said that
many provisions of the CEDAW may have become customary international law. The CEDAW gives effect to the
Constitution's policy statement in Article II, Section 14. Article I of the CEDAW defines "discrimination against
women" as:cany distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of
impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital status, on a
basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social,
cultural, civil or any other field.82cralawla
wlibrary

36
The constitutional exhortation to ensure fundamental equality, as illumined by its enabling law, the CEDAW, must
inform and animate all the actions of all personalities acting on behalf of the State. It is, therefore, the bounden
duty of this court, in rendering judgment on the disputes brought before it, to ensure that no discrimination is
heaped upon women on the mere basis of their being women. This is a point so basic and central that all our
discussions and pronouncements — regardless of whatever averments there may be of foreign law — must
proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's policy. As argued by
respondents, Saudia's policy entails the termination of employment of flight attendants who become pregnant. At
the risk of stating the obvious, pregnancy is an occurrence that pertains specifically to women. Saudia's policy
excludes from and restricts employment on the basis of no other consideration but sex.

We do not lose sight of the reality that pregnancy does present physical limitations that may render difficult the
performance of functions associated with being a flight attendant. Nevertheless, it would be the height of iniquity
to view pregnancy as a disability so permanent and immutable that, it must entail the termination of one's
employment. It is clear to us that any individual, regardless of gender, may be subject to exigencies that limit the
performance of functions. However, we fail to appreciate how pregnancy could be such an impairing occurrence
that it leaves no other recourse but the complete termination of the means through which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men and women, it is settled
that contracts relating to labor and employment are impressed with public interest. Article 1700 of the Civil Code
provides that "[t]he 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."

Consistent with this, this court's pronouncements in Pakistan International Airlines Corporation83 are clear and
unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement, and, secondly, lays the venue for settlement of any dispute arising
out of or in connection with the agreement "only [in] courts of Karachi, Pakistan". The first clause of paragraph 10
cannot be invoked to prevent the application of Philippine labor laws and'regulations to the subject matter of this
case, i.e., the employer-employee relationship between petitioner PIA and private respondents. We have already
pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine
laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their
relationship. . . . Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so
as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law.84 (Emphasis
supplied)

As the present dispute relates to (what the respondents allege to be) the illegal termination of respondents'
employment, this case is immutably a matter of public interest and public policy. Consistent with clear
pronouncements in law and jurisprudence, Philippine laws properly find application in and govern this case.
'Moreover, as this premise for Saudia's insistence on the application forum non conveniens has been shattered, it
follows that Philippine tribunals may properly assume jurisdiction over the present controversy. Philippine
jurisprudence provides ample illustrations of when a court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'

In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial court failed to consider that
one of the plaintiffs was a domestic corporation, that one of the defendants was a Filipino, and that it was the
extinguishment of the latter's debt that was the object of the transaction subject of the litigation. Thus, this court
held, among others, that the trial court's refusal to assume jurisdiction was not justified by forum non
conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's assumption of jurisdiction
considering that the trial court could properly enforce judgment on the petitioner which was a foreign corporation

37
licensed to do business in the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the trial court's assumption of
jurisdiction over a case in which, as noted by the trial court, "it is more convenient to hear and decide the case in
the Philippines because Todaro [the plaintiff] resides in the Philippines and the contract allegedly breached
involve[d] employment in the Philippines."88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact that the complainant in an
illegal dismissal case was a Canadian citizen and a repatriate did not warrant the application of forum non
conveniens considering that: (1) the Labor Code does not include forum non conveniens as a ground for the
dismissal of a complaint for illegal dismissal; (2) the propriety of dismissing a case based on forum non
conveniens requires a factual determination; and (3) the requisites for assumption of jurisdiction as laid out
in Bank of America, NT&SA90 were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations Commission91 that the National
Labor Relations Q Commission was a seriously inconvenient forum. In that case, private respondent Marcelo G.
Santos was working in the Sultanate of Oman when he received a letter from Palace Hotel recruiting him for
employment in Beijing, China. Santos accepted the offer. Subsequently, however, he was released from
employment supposedly due to business reverses arising from political upheavals in China (i.e., the Tiananmen
Square incidents of 1989). Santos later filed a Complaint for illegal dismissal impleading Palace Hotel's General
Manager, Mr. Gerhard Schmidt, the Manila Hotel International Company Ltd. (which was, responsible for training
Palace Hotel's personnel and staff), and the Manila Hotel Corporation (which owned 50% of Manila Hotel
International Company Ltd.'s capital stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court noted that the main
aspects of the case transpired in two (2) foreign jurisdictions, Oman and China, and that the case involved purely
foreign elements. Specifically, Santos was directly hired by a foreign employer through correspondence sent to
Oman. Also, the proper defendants were neither Philippine nationals nor engaged in business in the Philippines,
while the main witnesses were not residents of the Philippines. Likewise, this court noted that the National Labor
Relations Commission was in no position to conduct the following: first, determine the law governing the
employment contract, as it was entered into in foreign soil; second, determine the facts, as Santos' employment
was terminated in Beijing; and third, enforce its judgment, since Santos' employer, Palace Hotel, was incorporated
under the laws of China and was not even served with summons.

Contrary to Manila Hotel, the case now before us does not entail a preponderance of linkages that favor a foreign
jurisdiction.

Here, the circumstances of the parties and their relation do not approximate the circumstances enumerated
in Puyat,92 which this court recognized as possibly justifying the desistance of Philippine tribunals from exercising
jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried elsewhere. As established
earlier, Saudia is doing business in the Philippines. For their part, all four (4) respondents are Filipino citizens
maintaining residence in the Philippines and, apart from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to respondents' inconvenience if this case were to be
tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in an effort to engage in
forum shopping or to vex and inconvenience Saudia.

Third, there is no indication of "unwillingness to extend local judicial facilities to non-residents or aliens."93 That
Saudia has managed to bring the present controversy all the way to this court proves this.

38
Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the right sought to be
maintained. Summons was properly served on Saudia and jurisdiction over its person was validly acquired.

Lastly, there is not even room for considering foreign law. Philippine law properly governs the present dispute.

As the question of applicable law has been settled, the supposed difficulty of ascertaining foreign law (which
requires the application of forum non conveniens) provides no insurmountable inconvenience or special
circumstance that will justify depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia which should apply, it does
not follow that Philippine tribunals should refrain from exercising jurisdiction. To. recall our pronouncements in
Puyat,94 as well as in Bank of America, NT&SA,95 it is not so much the mere applicability of foreign law which calls
into operation forum non conveniens. Rather, what justifies a court's desistance from exercising jurisdiction is
"[t]he difficulty of ascertaining foreign law"96 or the inability of a "Philippine Court to make an intelligent decision
as to the law[.]"97

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to make an intelligent
decision"98), Philippine tribunals may apply the foreign law selected by the parties. In fact, (albeit without meaning
to make a pronouncement on the accuracy and reliability of respondents' citation) in this case, respondents
themselves have made averments as to the laws of Saudi Arabia. In their Comment, respondents
write:chanroblesvirtuallawlibrary
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to terminate the employment
of any woman by virtue of pregnancy. The law in Saudi Arabia is even more harsh and strict [sic] in that no
employer can terminate the employment of a female worker or give her a warning of the same while on Maternity
Leave, the specific provision of Saudi Labor Laws on the matter is hereto quoted as
follows:chanroblesvirtuallawlibrary
"An employer may not terminate the employment of a female worker or give her a warning of the same while on
maternity leave." (Article 155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree No.
M/51.)99cralawlawlibrary

All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined in Bank of America,
NT&SA100 have been satisfied. First, all the parties are based in the Philippines and all the material incidents
transpired in this jurisdiction. Thus, the parties may conveniently seek relief from Philippine tribunals. Second,
Philippine tribunals are in a position to make an intelligent decision as to the law and the facts. Third, Philippine
tribunals are in a position to enforce their decisions. There is no compelling basis for ceding jurisdiction to a foreign
tribunal. Quite the contrary, the immense public policy considerations attendant to this case behoove Philippine
tribunals to not shy away from their duty to rule on the case.chanRoblesvirtualLawlibrary

IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the voluntary act of an employee
who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the
service, and one has no other choice but to dissociate oneself from employment. It is a formal pronouncement or
relinquishment of an office, with the intention of relinquishing the office accompanied by the act of
relinquishment."102 Thus, essential to the act of resignation is voluntariness. It must be the result of an employee's
exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an employee resigned
voluntarily:chanroblesvirtuallawlibrary

39
As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee before and
after the alleged resignation must be considered in determining whether he or she, in fact, intended, to sever his or
her employment.103 (Emphasis supplied)

On the other hand, constructive dismissal has been defined as "cessation of work because 'continued employment
is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay'
and other benefits."104

In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal has been described as
tantamount to "involuntarily [sic] resignation due to the harsh, hostile, and unfavorable conditions set by the
employer."106 In the same case, it was noted that "[t]he gauge for constructive dismissal is whether a reasonable
person in the employee's position would feel compelled to give up his employment under the prevailing
circumstances."107

Applying the cited standards on resignation and constructive dismissal, it is clear that respondents were
constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and expecting to incur costs on
account of child delivery and infant rearing. As noted by the Court of Appeals, pregnancy is a time when they need
employment to sustain their families.108 Indeed, it goes against normal and reasonable human behavior to
abandon one's livelihood in a time of great financial need.

It is clear that respondents intended to remain employed with Saudia. All they did was avail of their maternity
leaves. Evidently, the very nature of a maternity leave means that a pregnant employee will not report for
work only temporarily and that she will resume the performance of her duties as soon as the leave allowance
expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of them repeatedly filed
appeal letters (as much as five [5] letters in the case of Rebesencio109) asking Saudia to reconsider the ultimatum
that they resign or be terminated along with the forfeiture of their benefits. Some of them even went to Saudia's
office to personally seek reconsideration.110

Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin Attendants."111This
contract deemed void the employment of a flight attendant who becomes pregnant and threatened termination
due to lack of medical fitness.112 The threat of termination (and the forfeiture of benefits that it entailed) is enough
to compel a reasonable person in respondents' position to give up his or her employment.

Saudia draws attention to how respondents' resignation letters were supposedly made in their own handwriting.
This minutia fails to surmount all the other indications negating any voluntariness on respondents' part. If at all,
these same resignation letters are proof of how any supposed resignation did not arise from respondents' own
initiative. As earlier pointed out, respondents' resignations were executed on Saudia's blank letterheads that
Saudia had provided. These letterheads already had the word "RESIGNATION" typed on the subject portion of their
respective headings when these were handed to respondents.113ChanRoblesVirtualawlibrary

"In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the
employer."114 In this case, Saudia makes much of how respondents supposedly completed their exit interviews,
executed quitclaims, received their separation pay, and took more than a year to file their Complaint.115 If at all,
however, these circumstances prove only the fact of their occurrence, nothing more. The voluntariness of
respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of their exit interviews, neither
negates compulsion nor indicates voluntariness.

40
As with respondent's resignation letters, their exit interview forms even support their claim of illegal dismissal and
militates against Saudia's arguments. These exit interview forms, as reproduced by Saudia in its own Petition,
confirms the unfavorable conditions as regards respondents' maternity leaves. Ma. Jopette's and Loraine's exit
interview forms are particularly telling:chanroblesvirtuallawlibrary
a. From Ma. Jopette's exit interview form:

3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.116

b. From Loraine's exit interview form:

1. What are your main reasons for leaving Saudia? What company are you joining?

xxx xxx xxx

Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)117


As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,118 this court noted that "[i]f
(a) there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or (b) the terms of
the settlement are unconscionable, and on their face invalid, such quitclaims must be struck down as invalid or
illegal."119 Respondents executed their quitclaims after having been unfairly given an ultimatum to resign or be
terminated (and forfeit their benefits).chanRoblesvirtualLawlibrary

Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits from the time
of their termination until the finality of this Decision. They are likewise entitled to separation pay in the amount of
one (1) month's salary for every year of service until the fmality of this Decision, with a fraction of a year of at least
six (6) months being counted as one (1) whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's dismissal was attended by
bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was done in a manner
contrary to morals, good customs or public policy."120 In this case, Saudia terminated respondents' employment in
a manner that is patently discriminatory and running afoul of the public interest that underlies employer-employee
relationships. As such, respondents are entitled to moral damages.

To provide an "example or correction for the public good"121 as against such discriminatory and callous schemes,
respondents are likewise entitled to exemplary damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed employees whose "dismissal[s
were] effected in a wanton, oppressive or malevolent manner."122 This court has awarded exemplary damages to
employees who were terminated on such frivolous, arbitrary, and unjust grounds as membership in or involvement
with labor unions,123 injuries sustained in the course of employment,124development of a medical condition due to
the employer's own violation of the employment contract,125and lodging of a Complaint against the
employer.126 Exemplary damages were also awarded to employees who were deemed illegally dismissed by an
employer in an attempt to evade compliance with statutorily established employee benefits.127 Likewise,
employees dismissed for supposedly just causes, but in violation of due process requirements, were awarded
exemplary damages.128

These examples pale in comparison to the present controversy. Stripped of all unnecessary complexities,
respondents were dismissed for no other reason than simply that they were pregnant. This is as wanton,

41
oppressive, and tainted with bad faith as any reason for termination of employment can be. This is no ordinary
case of illegal dismissal. This is a case of manifest gender discrimination. It is an affront not only to our statutes and
policies on employees' security of tenure, but more so, to the Constitution's dictum of fundamental equality
between men and women.129

The award of exemplary damages is, therefore, warranted, not only to remind employers of the need to adhere to
the requirements of procedural and substantive due process in termination of employment, but more importantly,
to demonstrate that gender discrimination should in no case be countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal, respondents are likewise
entitled to attorney's fees in the amount of 10% of the total monetary award.130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons composing it. Thus, as a rule,
corporate directors and officers are not liable for the illegal termination of a corporation's employees. It is only
when they acted in bad faith or with malice that they become solidarity liable with the corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical,132 this court clarified
that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill
will; it partakes of the nature of fraud."133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with malice as regards
their termination. Thus, she may not be held solidarity liable with Saudia.cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not solidarity liable with petitioner
Saudi Arabian Airlines, and second, that petitioner Saudi Arabian Airlines is liable for moral and exemplary
damages. The June 16, 2011 Decision and the September 13, 2011 Resolution of the Court of Appeals in CA-G.R.
SP. No. 113006 are hereby AFFIRMED in all other respects. Accordingly, petitioner Saudi Arabian Airlines is ordered
to pay respondents:

(1) Full backwages and all other benefits computed from the respective dates in which each of the respondents
were illegally terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the respondents commenced
employment until the finality of this Decision at the rate of one (1) month's salary for every year of service,
with a fraction of a year of at least six (6) months being counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of this Decision
until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to respondents
which petitioner Saudi Arabian Airlines should pay without delay.

SO ORDERED.chanroblesvirtuallawlibrary

42
G.R. No. 182800 April 20, 2015

MANILA MINING CORPORATION, Petitioner,


vs.
LOWITO AMOR, ET. AL., Respondents.

DECISION

PEREZ, J.:

Compliance with the requirements for the perfection of an appeal from the decision of a Labor Arbiter is at issue in
this Rule 45 Petition for Review on Certiorari which primarily seeks the nullification of the 29 November 2007
Decision1 rendered by the then Twenty-Second Division of · the Court of Appeals (CA) in CA-G.R. SP No. 00609,2the
decretal portion of which states:

WHEREFORE, the petition is hereby GRANTED. The Resolutions of the NLRC dated 25 April 2005 and 30 June 2007,
respectively, are ANNULLED and SET ASIDE. The 25 October 2004 Resolution of the Labor Arbiter is REINSTATED.

SO ORDERED.3

The facts are not in dispute.

Respondents Lowito Amor, Rollybie Ceredon, Julius Cesar, Ronito Martinez and Fermin Tabili, Jr. were regular
employees of petitioner Manila Mining Corporation, a domestic corporation which operated a mining claim in
Placer, Surigao del Norte, in pursuit of its business of large-scale open-pit mining for gold and copper ore. In
compliance with existing environmental laws, petitioner maintained Tailing Pond No. 7 (TP No. 7), a tailings
containment facility required for the storage of waste materials generated by its mining operations. When the
mine tailings being pumped into TP No. 7 reached the maximum level in December 2000, petitioner temporarily
shut down its mining operations pending approval of its application to increase said facilty’s capacity by the
Department of Environment and Natural Resources-Environment Management Bureau (DENR-EMB), Butuan City.
Although the DENR-EMB issued a temporary authority on 25 January 2001 for it to be able to continue operating
TP No. 7 for another six (6) months and to increase its capacity, petitioner failed to secure an extension permit
when said temporary authority eventually lapsed.4

On 27 July 2001, petitioner served a notice, informing its employees and the Department of Labor and
Employment Regional Office No. XII (DOLE) of the temporary suspension of its operations for six months and the
temporary lay-off of two-thirds of its employees.5 After the lapse of said period, petitioner notified the DOLE on 11
December 2001 that it was extending the temporary shutdown of its operations for another six months.6 Adversely
affected by petitioner’s continued failure to resume its operations, respondents filed the complaint for
constructive dismissal and monetary claims which was docketed as NLRC Case No. RAB-13-10-00226-2003 before
the Regional Arbitration Branch No. XIII of the National Labor Relations Commission (NLRC). On 25 October 2004,
Executive Labor Arbiter Benjamin E. Pelaez rendered a Decision holding petitioner liable for constructive dismissal
in view of the suspension of its operations beyond the six-month period allowed under Article 2867 of the Labor
Code of the Philippines. Finding that the cause of suspension of petitioner’s business was not beyond its
control,8 the Labor Arbiter applied Article 2839 of the same Code and disposed of the case in the following wise:

WHEREFORE, premises considered, judgment is hereby entered:

1) Declaring [respondents] to have been constructively dismissed from their employment; and 2) Ordering
[petitioner] to pay xxx [respondents] their separation pay equivalent to one (1) month pay or to at least one-half
(1/2) month pay for every year of service, whichever is higher, a fraction of at least six (6) months shall be

43
considered as one whole year, moral damages and exemplary damages in the amount of Ten Thousand Pesos
(₱10,000.00) and Five Thousand Pesos (₱5,000.00), respectively, for each of the [respondents] and attorney’s fees
equivalent to ten (10%) percent in the total amount of TWO MILLION ONE HUNDRED THIRTY EIGHT THOUSAND
ONE HUNDRED NINETY & 02/100 PESOS (₱2,138,190.02) ONLY x x x x

All other claims are dismissed for lack of merit.

SO ORDERED.10

Aggrieved, petitioner filed its memorandum of appeal before the NLRC11 and moved for the reduction of the
appeal bond to ₱100,000.00, on the ground that its financial losses in the preceding years had rendered it unable
to put up one in cash and/or surety equivalent to the monetary award.12 In opposition, respondents moved for the
dismissal of the appeal in view of the fact that, despite receipt of the appealed decision on 24 November 2004,
petitioner mailed their copy of the memorandum of appeal only on 7 February 2005. Respondents also argued that
the appeal bond tendered by petitioner was so grossly disproportionate to monetary award for the same to be
considered substantial compliance with the requirements for the perfection of an appeal from a Labor Arbiter’s
decision.13 Without addressing the procedural issues raised by respondents, however, the NLRC Fifth Division went
on to render a Resolution dated 25 April 2005 in NLRC CA No. M-008433-2005, reversing the appealed decision
and dismissing the complaint for lack of merit. Finding that the continued suspension of petitioner’s operations
was due to circumstances beyond its control, the NLRC ruled that, under Article 283 of the Labor Code,
respondents were not even entitled to separation pay considering the eventual closure of their employer’s
business due to serious business losses or financial reverses.14

Unfazed by the denial of their motion for reconsideration in the NLRC’s 30 June 2005 Resolution,15 respondents
filed the Rule 65 petition for certiorari which was docketed as CA-G.R. SP No. 00609 before the Mindanao Station
of the CA. Insisting that petitioner’s memorandum of appeal was filed 65 days after the lapse of reglementary
period for appeal, respondents called attention to the fact that, as grossly inadequate as it already was vis-à-vis the
₱2,138,190.0216 monetary award adjudicated in their favor, the check in the sum of ₱100,000.00 deposited by
petitioner by way of appeal bond was dishonored upon presentment for payment. Aside from the fact that the
Labor Arbiter’s25 October 2004 Decision had already attained finality, respondents faulted the NLRC for applying
Article 283 of the Labor Code absent allegation and proof of compliance with the requirements for the closure of
an employer’s business due to serious business losses.17 In its comment, on the other hand, petitioner claimed
that, having caused the same to be immediately funded, the check it issued for the appeal bond had since been
deposited by the NLRC. Insisting that the cessation of its operations was due to causes beyond its control,
petitioner argued that the subsequent closure of its business due to business losses exempted it from paying
separation pay.18

On 29 November 2007, the CA’s then Twenty-Second Division rendered the herein assailed decision, granting
respondents’ petition and nullifying the NLRC’s 25 April 2005 Resolution. In reinstating the Labor Arbiter’s 25
October 2004 Decision, the CA ruled that petitioner failed to perfect its appeal therefrom considering that the copy
of its 3 December 2004 Memorandum of Appeal intended for respondents was served the latter by registered mail
only on 7 February 2005. Aside from posting an unusually smaller sum as appeal bond, petitioner was likewise
faulted for replenishing the check it issued only on 1 April 2005 or 24 days before the rendition of the assailed
NLRC Decision. Applying the principle that the right to appeal is merely a statutory remedy and that the party who
seeks to avail of the same must strictly follow the requirements therefor, the CA decreed that the Labor Arbiter’s
Decision had already attained finality and, for said reason, had been placed beyond the NLRC’s power of
review.19 Petitioner’s motion for reconsideration of the foregoing decision was denied for lack of merit in the CA’s
2 May 2008 Resolution,20 hence, this Rule 45 petition for review on certiorari.21 Petitioner seeks the reversal of the
CA’s 29 November 2007 Decision and 2 May 2008 Resolution on the following grounds:

44
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONER’S APPEAL FILED WITH THE NATIONAL
LABOR RELATIONS COMMISSION WAS FATALLY DEFECTIVE [SINCE IT] HAD FULLY COMPLIED WITH THE
REQUIREMENTS OF THE LABOR CODE FOR PERFECTING AN APPEAL.

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN IMMEDIATELY SETTING ASIDE THE
DECISION OF THE NLRC WITHOUT REVIEWING THE MERITS OF THE CASE.

AT THE TIME OF THE PROMULGATION OF THE ASSAILED DECISION BY THE COURT OFAPPEALS, THE HONORABLE
SUPREME COURT HAD ALREADY AFFIRMED THE FINDING THAT PETITIONER WAS ALREADY PERMANENTLY CLOSED
DUE TO MASSIVE FINANCIAL LOSSES.22

Time and again, it has been held that the right to appeal is not a natural right or a part of due process; it is merely a
statutory privilege, and may be exercised only in the manner and in accordance with the provisions of law.23 A
party who seeks to avail of the right must, therefore, comply with the requirements of the rules, failing which the
right to appeal is invariably lost.24 Insofar as appeals from decisions of the Labor Arbiter are concerned, Article 223
of the Labor Code of the Philippines25 provides that, "(d)ecisions, awards, or orders of the Labor Arbiter are final
and executory unless appealed to the [NLRC] by any or both parties within ten (10) calendar days from the receipt
of such decisions, awards or orders." In case of a judgment involving a monetary award, the same provision
mandates that, "an appeal by the employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the [NLRC] in the amount equivalent to the monetary
award in the judgment appealed from." Alongside the requirement that "the appellant shall furnish a copy of the
memorandum of appeal to the other party," the foregoing requisites for the perfection of an appeal are reiterated
under Sections 1, 4 and 6, Rule VI of the NLRC Rules of Procedure in force at the time petitioner appealed the
Labor Arbiter’s 25 October 2004 Decision, viz.:

SECTION 1. PERIODS OF APPEAL. - Decisions, resolutions or orders of the Labor Arbiter shall be final and executory
unless appealed to the Commission by any or both parties within ten (10)calendar days from receipt of such
decisions, resolutions or orders of the Labor Arbiter x x x x. If the 10th x x x x day x x x x falls on a Saturday, Sunday
or a holiday, the last day to perfect the appeal shall be the next working day.

SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be filed within the reglementary period
as provided in Section 1 of this Rule; shall be verified by appellant himself in accordance with Section 4, Rule 7 of
the Rules of Court, with proof of payment of the required appeal fee and the posting of a cash or surety bond as
provided in Section 6 of this Rule; shall be accompanied by memorandum of appeal in three (3) legibly typewritten
copies which shall state the grounds relied upon and the arguments in support thereof; the relief prayed for; and a
statement of the date when the appellant received the appealed decision, resolution or order and a certificate of
non-forum shopping with proof of service on the other party of such appeal. A mere notice of appeal without
complying with the other requisites aforestated shall not stop the running of the period for perfecting an appeal.
(Italics supplied)

xxxx

SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director involves a monetary award,
an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The appeal bond shall
either be in cash or surety in an amount equivalent to the monetary award, exclusive of damages and attorney’s
fees.

xxxx

No motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a bond in a
reasonable amount in relation to the monetary award.

45
The filing of the motion to reduce bond without compliance with the requisites in the preceding paragraph shall
not stop the running of the period to perfect an appeal.

Having received the Labor Arbiter’s Decision on 24 November 2004,26 petitioner had ten (10) calendar days or until
4 December 2004 within which to perfect an appeal. Considering that the latter date fell on a Saturday, petitioner
had until the next working day, 6 December 2004, within which to comply with the requirements for the perfection
of its appeal. Our perusal of the record shows that, despite bearing the date 3 December 2004, petitioner’s
memorandum of appeal was subscribed before Notary Public Ronald Rex Recidoro only on 6 December
2004.27Without proof as to the actual date of filing of said pleading being presented by both parties, the CA
discounted the timeliness of its filing in light of the established fact that the copy thereof intended for respondents
was only served by registered mail on 7 February 2005.28 Since proof of service of the memorandum on appeal is
required for the perfection of an appeal from the decision of the Labor Arbiter, the CA ruled that "respondents
filed its appeal not earlier than 07 February 200[5], which is way beyond the ten-day reglementary period to
appeal."29

As allegation is not evidence, however, the rule is settled that the burden of evidence lies with the party who
asserts the affirmative of an issue.30 As the parties claiming the non-perfection of petitioner’s appeal, it was,
therefore, respondents who had the burden of proving that said memorandum of appeal was, indeed, filed out of
time. By and of itself, the fact that the copy of memorandum of appeal intended for respondents was served upon
them by registered mail only on 7 February 2005 does not necessarily mean that petitioner’s appeal from the
Labor Arbiter’s decision was filed out of time. On the principle that justice should not be sacrificed for
technicality,31 it has been ruled that the failure of a party to serve a copy of the memorandum to the opposing
party is not a jurisdictional defect and does not bar the NLRC from entertaining the appeal.32 Considering that such
an omission is merely regarded as a formal lapse or an excusable neglect,33 the CA reversibly erred in ruling that,
under the circumstances, petitioner could not have filed its appeal earlier than 7 February 2005.

The question regarding the appeal bond rises from the record which shows that, in addition to its memorandum of
appeal, petitioner filed a 6 December 2004 motion for the reduction of the appeal bond on the ground that the
cash equivalent of the monetary award and/or cost of the surety bond have proven to be prohibitive in view of the
tremendous business losses it allegedly sustained. As supposed measure of its good faith in complying with the
Rules, petitioner attached to its motion Philam Bank Check No. 0000627153, dated 6 December2004, in the
amount of ₱100,000.00 only. As pointed out by respondents, however, said check was subsequently dishonored
upon presentment for payment for insufficiency of funds. In its 1 April 2005 Ex-Parte Manifestation, petitioner
informed the NLRC that it "only learned belatedly that the same check was dishonored" as there appeared to be
"an inadvertent mix-up as other checks issued for [its] other obligations were negotiated ahead [thereof], leaving
an insufficient balance in its account." As a consequence, petitioner claimed that "the deficiency in deposit has
been promptly and immediately replenished as soon as the check's dishonor was reported" and that the same may
already be re-deposited at any of NLRC's depositary banks.34

The issue that has be devilled labor litigation for long has been clarified by the ruling in McBurnie v. Ganzon, et
al.,35which built on and extended the ruling that while it is true that reduction of the appeal bond has been
allowed in meritorious cases36 on the principle that substantial justice is better served by allowing appeals on the
merits,37 it has been ruled that the employer should comply with the following conditions: (1) the motion to
reduce the bond shall be based on meritorious grounds; and (2) a reasonable amount in relation to the monetary
award is posted by the appellant, otherwise the filing of the motion to reduce bond shall not stop the running of
the period to perfect an appeal.38

The McBurnie ruling pronounced:

xxx

46
Furthermore, on the matter of the filing and acceptance of motions to reduce appeal bond, as provided in Section
6, Rule VI of the 2011 NLRC Rules of Procedure, the Court hereby RESOLVES that henceforth, the following
guidelines shall be observed:

(a) The filing of a motion to reduce appeal bond shall be entertained by the NLRC subject to the following
conditions: (1) there is meritorious ground; and (2) a bond in a reasonable amount is posted;

(b) For purposes of compliance with condition no. (2), a motion shall be accompanied by the posting of a
provisional cash or surety bond equivalent to ten percent (10), of the monetary award subject of the
appeal, exclusive of damages and attorney's fees;

(c) Compliance with the foregoing conditions shall suffice to suspend the running of the 10-day
reglementary period to perfect an appeal from the labor arbiter's decision to the NLRC;

(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and determine the final
amount of bond that shall be posted by the appellant, still in accordance with the standards of
meritorious grounds and reasonable amount; and

(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond that exceeds the
amount of the provisional bond, the appellant shall be given a fresh period of ten (10) days from notice of
the NLRC order within which to perfect the appeal by posting the required appeal bond.39

In this case, we see that with no proof to substantiate its claim, petitioner moved for a reduction of the appeal
bond on the proferred basis of serious losses and reverses it supposedly sustained in the years prior to the
rendition of the Labor Arbiter's decision.

The first condition may be left for the nonce. As to the second condition, we may consider that the amount of
₱100,000.00 supposedly posted was provisional bond sufficient to suspend the running of the 10-day reglementary
period to perfect an appeal from the Labor Arbiter's decision. That would however not improve petitioner's
position one bit.

Respondent correctly called attention to the fact that the check submitted by petitioner was dishonored upon
presentment for payment, thereby rendering the tender thereof ineffectual. Although the NLRC chose not to
address the issue of the perfection of the appeal as well as the reduction of the bond in its Resolution dated 25
April 2005, the record shows that petitioner only manifested its deposit of the funds for the check 24 days before
the resolution of its appeal or 116 days after its right to appeal the Labor Arbiter’s decision had expired. Having
filed its motion and memorandum on the very last day of the reglementary period for appeal, moreover, petitioner
had no one but itself to blame for failing to post the full amount pending the NLRC’s action on its motion for
reduction of the appeal bond. If redundancy be risked it must be emphasized that the posting of a bond is
indispensable to the perfection of an appeal in cases involving monetary awards from the decision of the Labor
Arbiter. Since it is the posting of a cash or surety bond which confers jurisdiction upon the NLRC,40 the rule is
settled that non-compliance is fatal and has the effect of rendering the award final and executory.41

Viewed in the light of the foregoing considerations, the CA cannot be faulted for no longer discussing the merits of
petitioner’s case.1avvphi1 Although appeal is an essential part of our judicial process, it has been held, time and
again, that the right thereto is not a natural right or a part of due process but is merely a statutory privilege. Thus,
the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but also
jurisdictional and failure of a party to conform to the rules regarding appeal will render the judgment final and
executory. Once a decision attains finality, it becomes the law of the case and can no longer be revised, reviewed,
changed or altered. The basic rule of finality of judgment is grounded on the fundamental principle of public policy

47
and sound practice that, at the risk of occasional error, the judgment of courts and the award of quasi-judicial
agencies must become final at some definite date fixed by law.42

Without necessarily resulting to a termination of employment, an employer may at any rate, bona fide suspend
the operation of its business for a period of not exceeding six months under Article 286 of the Labor Code.43 While
the employer is, on the one hand, duty bound to reinstate his employees to their former positions without loss of
seniority rights if the operation of the business is resumed within six months, employment is deemed terminated
where the suspension exceeds said period.44 Not having resumed its operations within six months from the time it
suspended its operations on 27 July 2001, it necessarily follows that petitioner is liable to pay respondents’
separation pay45 computed at one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher,46 as well as the damages and attorney’s fees adjudicated by the Labor Arbiter. Without proof
of the serious business losses it allegedly sustained and/or compliance with the reportorial requirements under
Article 283 of the Labor Code, petitioner cannot expediently plead exemption from said liabilities due to the
supposed financial reverses which led to the eventual closure of its business. It is essentially required that the
alleged losses in business operations must be proven for, otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their
business ventures in order to ease out employees.47 The condition of business losses justifying retrenchment is
normally shown by audited financial documents like yearly balance sheets and profit and loss statements as well as
annual income tax returns48which were not presented in this case.

Neither can petitioner evade said liabilities on the strength of the 28 July 2005 Decision rendered by the CA's
Twenty-Second Division in CAG.R. SP No. 00072, entitled Rosita Asumen, et al. v. National Labor Relations
Commission, et al., where its employees' claim for separation pay was denied on account of the subsequent
closure of its business due to serious business losses and financial reverses.49 Although the employees Rule 45
petition for review on certiorari had been denied in the 7 February 2007 Resolution issued by this Court's Second
Division in UDK-13776,50 the ruling in said case can hardly be considered binding on respondents who were not
parties thereto. As for the inequality in benefits which would supposedly result if the CA's assailed decision and
resolution were not reversed, suffice it to say that this Court had sustained the claim for . separation pay of
petitioner's employees in the case of Manila Mining Corp Employees Association-Federation of Free Workers
Chapter, et al. v. Manila Mining Corporation, et al.51 Stare decisis is inapplicable; the matter of separation pay for
petitioner's employees has been decided case to case.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 154113 December 7, 2011

EDEN GLADYS ABARIA vs. NATIONAL LABOR RELATIONS COMMISSION

VILLARAMA, JR., J.:

The consolidated petitions before us involve the legality of mass termination of hospital employees who
participated in strike and picketing activities.

The factual antecedents:

Metro Cebu Community Hospital, Inc. (MCCHI), presently known as the Visayas Community Medical Center
(VCMC), is a non-stock, non-profit corporation organized under the laws of the Republic of the Philippines. It
operates the Metro Cebu Community Hospital (MCCH), a tertiary medical institution located at Osmeña Boulevard,

48
Cebu City. MCCH is owned by the United Church of Christ in the Philippines (UCCP) and Rev. Gregorio P. Iyoy is the
Hospital Administrator.

The National Federation of Labor (NFL) is the exclusive bargaining representative of the rank-and-file employees of
MCCHI. Under the 1987 and 1991 Collective Bargaining Agreements (CBAs), the signatories were Ciriaco B.
Pongasi, Sr. for MCCHI, and Atty. Armando M. Alforque (NFL Legal Counsel) and Paterno A. Lumapguid as President
of NFL-MCCH Chapter. In the CBA effective from January 1994 until December 31, 1995, the signatories were
Sheila E. Buot as Board of Trustees Chairman, Rev. Iyoy as MCCH Administrator and Atty. Fernando Yu as Legal
Counsel of NFL, while Perla Nava, President of Nagkahiusang Mamumuo sa MCCH (NAMA-MCCH-NFL) signed the
Proof of Posting.1

On December 6, 1995, Nava wrote Rev. Iyoy expressing the union’s desire to renew the CBA, attaching to her letter
a statement of proposals signed/endorsed by 153 union members. Nava subsequently requested that the
following employees be allowed to avail of one-day union leave with pay on December 19, 1995: Celia Sabas,
Jesusa Gerona, Albina Bañez, Eddie Villa, Roy Malazarte, Ernesto Canen, Jr., Guillerma Remocaldo, Catalina Alsado,
Evelyn Ong, Melodia Paulin, Sofia Bautista, Hannah Bongcaras, Ester Villarin, Iluminada Wenceslao and Perla Nava.
However, MCCHI returned the CBA proposal for Nava to secure first the endorsement of the legal counsel of NFL
as the official bargaining representative of MCCHI employees.2

Meanwhile, Atty. Alforque informed MCCHI that the proposed CBA submitted by Nava was never referred to NFL
and that NFL has not authorized any other legal counsel or any person for collective bargaining negotiations. By
January 1996, the collection of union fees (check-off) was temporarily suspended by MCCHI in view of the existing
conflict between the federation and its local affiliate. Thereafter, MCCHI attempted to take over the room being
used as union office but was prevented to do so by Nava and her group who protested these actions and insisted
that management directly negotiate with them for a new CBA. MCCHI referred the matter to Atty. Alforque, NFL’s
Regional Director, and advised Nava that their group is not recognized by NFL.3

In his letter dated February 24, 1996 addressed to Nava, Ernesto Canen, Jr., Jesusa Gerona, Hannah Bongcaras,
Emma Remocaldo, Catalina Alsado and Albina Bañez, Atty. Alforque suspended their union membership for serious
violation of the Constitution and By-Laws. Said letter states:

During the last General Membership Meeting of the union on February 20, 1996, you openly declared that you
recognized the officers of the KMU not those of the NFL, that you submit to the stuctures [sic] and authority of the
KMU not of the NFL, and that you are loyal only to the KMU not to the NFL.

Also, in the same meeting, you admitted having sent a proposal for a renewed collective bargaining agreement to
the management without any consultation with the NFL. In fact, in your letter dated February 21, 1996 addressed
to Rev. Gregorio Iyoy, the Administrator of the hospital, you categorically stated as follows: "We do not need any
endorsement from NFL, more particularly from Atty. Armando Alforque to negotiate our CBA with MCCH." You did
not only ignore the authority of the undersigned as Regional Director but you maliciously prevented and bluntly
refused my request to join the union negotiating panel in the CBA negotiations.

Your above flagrant actuations, made in the presence of the union membership, constitute the following offenses:

1. Willful violation of the Constitution and By-Laws of the Federation and the orders and decisions of duly
constituted authorities of the same (Section 4 (b), Article III), namely:

a) Defying the decision of the organization disaffiliating from the KMU; and

49
b) Section 9 (b), Article IX which pertains to the powers and responsibilities of the Regional
Director, particularly, to negotiate and sign collective bargaining agreement together with the
local negotiating panel subject to prior ratification by the general membership;

2. Joining or assisting another labor organization or helping in the formation of a new labor organization
that seeks or tends to defeat the purpose of the Federation (Section 4 (d), Article III) in relation to the
National Executive Board’s Resolution No. 8, September 26-27, 1994, to wit:

"Pursuant to the NEB Resolution disaffiliating from the KMU dated September 11, 1993, the NEB in session hereby
declare that KMU is deemed an organization that seeks to defeat the objective of establishing independent and
democratic unions and seeks to replace the Federation as exclusive representative of its members.

Committing acts that tend to alienate the loyalty of the members to the Federation, subvert its duly constituted
authorities, and divide the organization in any level with the objective of establishing a pro-KMU faction or
independent union loyal to the KMU shall be subject to disciplinary action, suspension or expulsion from union
membership, office or position in accordance with paragraph[s] d and f of Section 4, Article III, and paragraph h,
Section 6, Article VI, paragraph d, Section 9, Article IX."

You are, therefore, directed to submit written explanation on the above charges within five (5) days from receipt
hereof. Failure on your part shall be considered a waiver of your right to be heard and the Federation will act
accordingly.

Considering the gravity of the charges against you, the critical nature of the undertaking to renew the collective
bargaining agreement, and the serious threat you posed to the organization, you are hereby placed under
temporary suspension from your office and membership in the union immediately upon receipt hereof pending
investigation and final disposition of your case in accordance with the union’s constitution and by-laws.

For your guidance and compliance.4

On February 26, 1996, upon the request of Atty. Alforque, MCCHI granted one-day union leave with pay for 12
union members.5 The next day, several union members led by Nava and her group launched a series of mass
actions such as wearing black and red armbands/headbands, marching around the hospital premises and putting
up placards, posters and streamers. Atty. Alforque immediately disowned the concerted activities being carried
out by union members which are not sanctioned by NFL. MCCHI directed the union officers led by Nava to submit
within 48 hours a written explanation why they should not be terminated for having engaged in illegal concerted
activities amounting to strike, and placed them under immediate preventive suspension. Responding to this
directive, Nava and her group denied there was a temporary stoppage of work, explaining that employees wore
their armbands only as a sign of protest and reiterating their demand for MCCHI to comply with its duty to bargain
collectively. Rev. Iyoy, having been informed that Nava and her group have also been suspended by NFL, directed
said officers to appear before his office for investigation in connection with the illegal strike wherein they
reportedly uttered slanderous and scurrilous words against the officers of the hospital, threatening other workers
and forcing them to join the strike. Said union officers, however, invoked the grievance procedure provided in the
CBA to settle the dispute between management and the union.6

On March 13 and 19, 1996, the Department of Labor and Employment (DOLE) Regional Office No. 7 issued
certifications stating that there is nothing in their records which shows that NAMA-MCCH-NFL is a registered labor
organization, and that said union submitted only a copy of its Charter Certificate on January 31, 1995.7 MCCHI then
sent individual notices to all union members asking them to submit within 72 hours a written explanation why they
should not be terminated for having supported the illegal concerted activities of NAMA-MCCH-NFL which has no
legal personality as per DOLE records. In their collective response/statement dated March 18, 1996, it was
explained that the picketing employees wore armbands to protest MCCHI’s refusal to bargain; it was also

50
contended that MCCHI cannot question the legal personality of the union which had actively assisted in CBA
negotiations and implementation.8

On March 13, 1996, NAMA-MCCH-NFL filed a Notice of Strike but the same was deemed not filed for want of legal
personality on the part of the filer. The National Conciliation and Mediation Board (NCMB) Region 7 office likewise
denied their motion for reconsideration on March 25, 1996. Despite such rebuff, Nava and her group still
conducted a strike vote on April 2, 1996 during which an overwhelming majority of union members approved the
strike.9

Meanwhile, the scheduled investigations did not push through because the striking union members insisted on
attending the same only as a group. MCCHI again sent notices informing them that their refusal to submit to
investigation is deemed a waiver of their right to explain their side and management shall proceed to impose
proper disciplinary action under the circumstances. On March 30, 1996, MCCHI sent termination letters to union
leaders and other members who participated in the strike and picketing activities. On April 8, 1996, it also issued a
cease-and-desist order to the rest of the striking employees stressing that the wildcat concerted activities
spearheaded by the Nava group is illegal without a valid Notice of Strike and warning them that non-compliance
will compel management to impose disciplinary actions against them. For their continued picketing activities
despite the said warning, more than 100 striking employees were dismissed effective April 12 and 19, 1996.

Unfazed, the striking union members held more mass actions. The means of ingress to and egress from the
hospital were blocked so that vehicles carrying patients and employees were barred from entering the premises.
Placards were placed at the hospital’s entrance gate stating: "Please proceed to another hospital" and "we are on
protest." Employees and patients reported acts of intimidation and harassment perpetrated by union leaders and
members. With the intensified atmosphere of violence and animosity within the hospital premises as a result of
continued protest activities by union members, MCCHI suffered heavy losses due to low patient admission rates.
The hospital’s suppliers also refused to make further deliveries on credit.

With the volatile situation adversely affecting hospital operations and the condition of confined patients, MCCHI
filed a petition for injunction in the NLRC (Cebu City) on July 9, 1996 (Injunction Case No. V-0006-96). A temporary
restraining order (TRO) was issued on July 16, 1996. MCCHI presented 12 witnesses (hospital employees and
patients), including a security guard who was stabbed by an identified sympathizer while in the company of Nava’s
group. MCCHI’s petition was granted and a permanent injunction was issued on September 18, 1996 enjoining the
Nava group from committing illegal acts mentioned in Art. 264 of the Labor Code.10

On August 27, 1996, the City Government of Cebu ordered the demolition of the structures and obstructions put
up by the picketing employees of MCCHI along the sidewalk, having determined the same as a public nuisance or
nuisance per se.11

Thereafter, several complaints for illegal dismissal and unfair labor practice were filed by the terminated
employees against MCCHI, Rev. Iyoy, UCCP and members of the Board of Trustees of MCCHI.

On August 4, 1999, Executive Labor Arbiter Reynoso A. Belarmino rendered his decision12 dismissing the
complaints for unfair labor practice in NLRC Case Nos. RAB-VII-02-0309-98, RAB-VII-02-0394-98 and RAB-VII-03-
0596-98 filed by Nava and 90 other complainants. Executive Labor Arbiter Belarmino found no basis for the charge
of unfair labor practice and declared the strike and picketing activities illegal having been conducted by NAMA-
MCCH-NFL which is not a legitimate labor organization. The termination of union leaders Nava, Alsado, Bañez,
Bongcaras, Canen, Gerona and Remocaldo were upheld as valid but MCCHI was directed to grant separation pay
equivalent to one-half month for every year of service, in the total amount of ₱3,085,897.40 for the 84
complainants.13

51
Complainants appealed to the Commission. On March 14, 2001, the NLRC’s Fourth Division rendered its
Decision,14 the dispositive portion of which reads:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring the dismissal of all the
complainants in RAB Case No. 07-02-0394-98 and RAB Case No. 07-03-0596-98 valid and legal. Necessarily, the
award of separation pay and attorney’s fees are hereby Deleted.

Resolution on RAB Case No. 07-02-0309-98 is hereby Deferred upon Joint Motion of the parties.

SO ORDERED.15

In its Resolution dated July 2, 2001, the NLRC denied complainants’ motion for reconsideration.16

Complainants elevated the case to the Court of Appeals (CA) (Cebu Station) via a petition for certiorari, docketed
as CA-G.R. SP No. 66540.17

In its Resolution dated November 14, 2001, the CA’s Eighth Division dismissed the petition on the ground that out
of 88 petitioners only 47 have signed the certification against forum shopping.18 Petitioners moved to reconsider
the said dismissal arguing that the 47 signatories more than constitute the principal parties as the petition involves
a matter of common concern to all the petitioning employees.19 By Resolution20 dated May 28, 2002, the CA
reinstated the case only insofar as the 47 petitioners who signed the petition are concerned.

Petitioners challenged the validity of the November 14, 2001 and May 28, 2002 resolutions before this Court in a
petition for review on certiorari, docketed as G.R. No. 154113.

Meanwhile, the NLRC’s Fourth Division (Cebu City) rendered its Decision21 dated March 12, 2003 in RAB Case Nos.
07-02-0309-98 (NLRC Case No. V-001042-99) pertaining to complainants Erma Yballe, Evelyn Ong, Nelia Angel and
Eleuteria Cortez as follows:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring all complainants to have been
validly dismissed. Necessarily, the award of separation pay and attorney’s fees are hereby Deleted.

SO ORDERED.22

The NLRC likewise denied the motion for reconsideration filed by complainants Yballe, et al. in its Resolution dated
April 13, 2004.23

On October 17, 2008, the CA rendered its Decision24 in CA-G.R. SP No. 66540, the dispositive portion of which
states:

WHEREFORE, premises considered, judgment is hereby rendered AFFIRMING the Decision of the National Labor
Relations Commission (NLRC) – Fourth Division dated March 14, 2001 in NLRC Case No. V-001042-99, WITH
MODIFICATIONS to the effect that (1) the petitioners, except the union officers, shall be awarded separation pay
equivalent to one-half (1/2) month pay for every year of service, and (2) petitioner Cecilia Sabas shall be awarded
overtime pay amounting to sixty-three (63) hours.

SO ORDERED.25

52
Petitioners filed a motion for reconsideration while private respondents filed a motion for partial reconsideration
questioning the award of separation pay. The former also invoked the decision of this Court in Bascon v. Court of
Appeals,26 while the latter argued for the application of the ruling in decision rendered by the CA (Cebu City) in
Miculob v. NLRC, et al. (CA-G.R. SP No. 84538),27 both involving similar complaints filed by dismissed employees of
MCCHI.

By Resolution28 dated April 17, 2009, the CA denied both motions:

WHEREFORE, the petitioners’ Motion for Reconsideration and the private respondent[s’] Motion for Partial
Reconsideration of the October 17, 2008 Decision are both DENIED for lack of merit.

The Motions for Substitution of Counsel and Compromise Agreements submitted by petitioners Bernardito Lawas,
Avelina Bangalao, Dailenda Hinampas and Daylinda Tigo are hereby approved. Consequently, said petitioners are
ordered dropped from the list of petitioners and the case is deemed dismissed as to them.

SO ORDERED.29

Complainants Yballe, et al. also challenged before the CA the March 12, 2003 Decision and April 13, 2004
Resolution of the NLRC in a petition for certiorari, docketed as CA-G.R. SP No. 84998 (Cebu City). By
Decision30dated November 7, 2008, the CA granted their petition, as follows:

WHEREFORE, the challenged Decision of public respondent dated March 12, 2003 and its Resolution dated April
13, 2004 are hereby REVERSED AND SET ASIDE. Private respondent Metro Cebu Community Hospital is ordered to
reinstate petitioners Erma Yballe, Eleuteria Cortes, Nelia Angel and Evelyn Ong without loss of seniority rights and
other privileges; to pay them their full backwages inclusive of their allowances and other benefits computed from
the time of their dismissal up to the time of their actual reinstatement.

No pronouncement as to costs.

SO ORDERED.31

Private respondents (MCCHI, et al.) moved to reconsider the above decision but the CA denied their motion on
February 22, 2011.32

Both petitioners and private respondents in CA-G.R. SP No. 66540 appealed to this Court. Private respondent
MCCHI in CA-G.R. SP No. 84998, under its new name Visayas Community Medical Center (VCMC), filed a petition
for certiorari in this Court.

In G.R. No. 187778, petitioners Nava, et al. prayed that the CA decision be set aside and a new judgment be
entered by this Court (1) declaring private respondents guilty of unfair labor practice and union busting; (2)
directing private respondents to cease and desist from further committing unfair labor practices against the
petitioners; (3) imposing upon MCCH the proposed CBA or, in the alternative, directing the hospital and its officers
to bargain with the local union; (4) declaring private respondents guilty of unlawfully suspending and illegally
dismissing the individual petitioners-employees; (5) directing private respondents to reinstate petitioners-
employees to their former positions, or their equivalent, without loss of seniority rights with full backwages and
benefits until reinstatement; and (6) ordering private respondents to pay the petitioners moral damages,
exemplary damages, legal interests, and attorney’s fees.33

On the other hand, petitioner MCCHI in G.R. No. 187861 prayed for the modification of the CA decision by deleting
the award of separation pay and reinstating the March 14, 2001 decision of the NLRC.34

53
In G.R. No. 196156, MCCHI/VCMC prayed for the annulment of the November 7, 2008 Decision and February 22,
2011 Resolution of the CA, for this Court to declare the dismissal of respondents Yballe, et al. as valid and legal and
to reinstate the March 12, 2003 Decision and April 13, 2004 Resolution of the NLRC.

G.R. No. 187861 was consolidated with G.R. Nos. 154113 and 187778 as they involve similar factual circumstances
and identical or related issues. G.R. No. 196156 was later also consolidated with the aforesaid cases.

The issues are: (1) whether the CA erred in dismissing the petition for certiorari (CA-G.R. SP No. 66540) with
respect to the petitioners in G.R. No. 154113 for their failure to sign the certification against forum shopping; (2)
whether MCCHI is guilty of unfair labor practice; (3) whether petitioning employees were illegally dismissed; and
(4) if their termination was illegal, whether petitioning employees are entitled to separation pay, backwages,
damages and attorney’s fees.

Dropping of petitioners who did not sign the certification against forum shopping improper

The Court has laid down the rule in Altres v. Empleo35 as culled from "jurisprudential pronouncements", that the
certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise, those
who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or defense,
the signature of only one of them in the certification against forum shopping substantially complies with the Rule.

In the case at bar, the signatures of 47 out of 88 petitioning employees in the certification against forum shopping
constitute substantial compliance with the rule. There is no question that they shared a common interest and
invoked a common cause of action when they filed suit before the Labor Arbiter and NLRC questioning the validity
of their termination and charging MCCHI with unfair labor practice. Thus, when they appealed their case to the CA,
they pursued the same as a collective body, raising only one argument in support of their cause of action, i.e., the
illegal dismissal allegedly committed by MCCHI when union members resorted to strike and mass actions due to
MCCHI’s refusal to bargain with officers of the local chapter. There is sufficient basis, therefore, for the 47
signatories to the petition, to speak for and in behalf of their co-petitioners and to file the Petition for Certiorari in
the appellate court.36 Clearly, the CA erred in dropping as parties-petitioners those who did not sign the
certification against forum shopping.lavvphil

However, instead of remanding the case to the CA for it to resolve the petition with respect to the herein
petitioners in G.R. No. 154113, and as prayed for, the Court shall consider them parties-petitioners in CA-G.R. SP
No. 66540,which case has already been decided and now subject of appeal in G.R. No. 187778.

MCCHI not guilty of unfair labor practice

Art. 248 (g) of the Labor Code, as amended, makes it an unfair labor practice for an employer "[t]o violate the duty
to bargain collectively" as prescribed by the Code. The applicable provision in this case is Art. 253 which provides:

ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement. – When there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or
modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the existing agreement during
the 60-day period and/or until a new agreement is reached by the parties.

NAMA-MCCH-NFL charged MCCHI with refusal to bargain collectively when the latter refused to meet and convene
for purposes of collective bargaining, or at least give a counter-proposal to the proposed CBA the union had
submitted and which was ratified by a majority of the union membership. MCCHI, on its part, deferred any

54
negotiations until the local union’s dispute with the national union federation (NFL) is resolved considering that
the latter is the exclusive bargaining agent which represented the rank-and-file hospital employees in CBA
negotiations since 1987.

We rule for MCCHI.

Records of the NCMB and DOLE Region 7 confirmed that NAMA-MCCH-NFL had not registered as a labor
organization, having submitted only its charter certificate as an affiliate or local chapter of NFL.37 Not being a
legitimate labor organization, NAMA-MCCH-NFL is not entitled to those rights granted to a legitimate labor
organization under Art. 242, specifically:

(a) To act as the representative of its members for the purpose of collective bargaining;

(b) To be certified as the exclusive representative of all the employees in an appropriate collective
bargaining unit for purposes of collective bargaining;

xxxx

Aside from the registration requirement, it is only the labor organization designated or selected by the majority of
the employees in an appropriate collective bargaining unit which is the exclusive representative of the employees
in such unit for the purpose of collective bargaining, as provided in Art. 255.38 NAMA-MCCH-NFL is not the labor
organization certified or designated by the majority of the rank-and-file hospital employees to represent them in
the CBA negotiations but the NFL, as evidenced by CBAs concluded in 1987, 1991 and 1994. While it is true that a
local union has the right to disaffiliate from the national federation, NAMA-MCCH-NFL has not done so as there
was no any effort on its part to comply with the legal requisites for a valid disaffiliation during the "freedom
period"39 or the last 60 days of the last year of the CBA, through a majority vote in a secret balloting in accordance
with Art. 241 (d).40 Nava and her group simply demanded that MCCHI directly negotiate with the local union which
has not even registered as one.

To prove majority support of the employees, NAMA-MCCH-NFL presented the CBA proposal allegedly signed by
153 union members. However, the petition signed by said members showed that the signatories endorsed the
proposed terms and conditions without stating that they were likewise voting for or designating the NAMA-MCCH-
NFL as their exclusive bargaining representative. In any case, NAMA-MCCH-NFL at the time of submission of said
proposals was not a duly registered labor organization, hence it cannot legally represent MCCHI’s rank-and-file
employees for purposes of collective bargaining. Hence, even assuming that NAMA-MCCH-NFL had validly
disaffiliated from its mother union, NFL, it still did not possess the legal personality to enter into CBA negotiations.
A local union which is not independently registered cannot, upon disaffiliation from the federation, exercise the
rights and privileges granted by law to legitimate labor organizations; thus, it cannot file a petition for certification
election.41 Besides, the NFL as the mother union has the right to investigate members of its local chapter under the
federation’s Constitution and By-Laws, and if found guilty to expel such members.42 MCCHI therefore cannot be
faulted for deferring action on the CBA proposal submitted by NAMA-MCCH-NFL in view of the union leadership’s
conflict with the national federation. We have held that the issue of disaffiliation is an intra-union dispute43 which
must be resolved in a different forum in an action at the instance of either or both the federation and the local
union or a rival labor organization, not the employer.44

Not being a legitimate labor organization nor the certified exclusive bargaining representative of MCCHI’s rank-
and-file employees, NAMA-MCCH-NFL cannot demand from MCCHI the right to bargain collectively in their
behalf.45Hence, MCCHI’s refusal to bargain then with NAMA-MCCH-NFL cannot be considered an unfair labor
practice to justify the staging of the strike.46

Strike and picketing activities conducted by union officers and members were illegal

55
Art. 263 (b) of the Labor Code, as amended, provides:

ART. 263. Strikes, picketing and lockouts. – x x x

(b) Workers shall have the right to engage in concerted activities for purposes of collective bargaining or for their
mutual benefit and protection. The right of legitimate labor organizations to strike and picket and of employers to
lockout, consistent with the national interest, shall continue to be recognized and respected. However, no labor
union may strike and no employer may declare a lockout on grounds involving inter-union and intra-union
disputes.

x x x x (Emphasis supplied.)

As borne by the records, NAMA-MCCH-NFL was not a duly registered or an independently registered union at the
time it filed the notice of strike on March 13, 1996 and when it conducted the strike vote on April 2, 1996. It could
not then legally represent the union members. Consequently, the mandatory notice of strike and the conduct of
the strike vote report were ineffective for having been filed and conducted by NAMA-MCCH-NFL which has no
legal personality as a legitimate labor organization, in violation of Art. 263 (c), (d) and (f) of the Labor Code and
Rule XXII, Book V of the Omnibus Rules Implementing the Labor Code.47

Art. 263 of the Labor Code provides:

ART. 263. Strikes, picketing and lockouts. — (a) x x x

xxxx

(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a notice of strike or
the employer may file a notice of lockout with the Department at least 30 days before the intended date thereof.
In cases of unfair labor practice, the period of notice shall be 15 days and in the absence of a duly certified or
recognized bargaining agent, the notice of strike may be filed by any legitimate labor organization in behalf of its
members. However, in case of dismissal from employment of union officers duly elected in accordance with the
union constitution and by-laws, which may constitute union busting, where the existence of the union is
threatened, the 15-day cooling-off period shall not apply and the union may take action immediately. (As amended
by Executive Order No. 111, December 24, 1986.)

(d) The notice must be in accordance with such implementing rules and regulations as the Department of Labor
and Employment may promulgate.

xxxx

(f) A decision to declare a strike must be approved by a majority of the total union membership in the bargaining
unit concerned, obtained by secret ballot in meetings or referenda called for that purpose. A decision to declare a
lockout must be approved by a majority of the board of directors of the corporation or association or of the
partners in a partnership, obtained by secret ballot in a meeting called for that 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 Department may, at its own initiative or upon the request of any affected party, supervise the
conduct of the secret balloting. In every case, the union or the employer shall furnish the Ministry the voting at
least seven days before the intended strike or lockout, subject to the cooling-off period herein provided. (As
amended by Batas Pambansa Bilang 130, August 21, 1981 and further amended by Executive Order No. 111,
December 24, 1986.) (Emphasis supplied.)

Rule XXII, Book V of the Omnibus Rules Implementing the Labor Code reads:

56
RULE XXII
CONCILIATION, STRIKES AND LOCKOUTS

xxxx

SEC. 6. Who may declare a strike or lockout. — Any certified or duly recognized bargaining representative may
declare a strike in cases of bargaining deadlocks and unfair labor practices. The employer may declare a lockout in
the same cases. In the absence of a certified or duly recognized bargaining representative, any legitimate labor
organization in the establishment may declare a strike but only on grounds of unfair labor practice. (Emphasis
supplied.)

Furthermore, the strike was illegal due to the commission of the following prohibited activities48 : (1) violence,
coercion, intimidation and harassment against non-participating employees; and (2) blocking of free ingress to and
egress from the hospital, including preventing patients and their vehicles from entering the hospital and other
employees from reporting to work, the putting up of placards with a statement advising incoming patients to
proceed to another hospital because MCCHI employees are on strike/protest. As shown by
photographs49 submitted by MCCHI, as well as the findings of the NCMB and Cebu City Government, the hospital
premises and sidewalk within its vicinity were full of placards, streamers and makeshift structures that obstructed
its use by the public who were likewise barraged by the noise coming from strikers using megaphones.50 On the
other hand, the affidavits51executed by several hospital employees and patients narrated in detail the incidents of
harassment, intimidation, violence and coercion, some of these witnesses have positively identified the
perpetrators. The prolonged work stoppage and picketing activities of the striking employees severely disrupted
hospital operations that MCCHI suffered heavy financial losses.

The findings of the Executive Labor Arbiter and NLRC, as sustained by the appellate court, clearly established that
the striking union members created so much noise, disturbance and obstruction that the local government
authorities eventually ordered their removal for being a public nuisance. This was followed by an injunction from
the NCMB enjoining the union leaders from further blocking the free ingress to and egress from the hospital, and
from committing threats, coercion and intimidation against non-striking employees and patients/vehicles desiring
to enter for the purpose of seeking medical treatment/confinement. By then, the illegal strike had lasted for
almost five months.

Consequences of illegal strike to union officers and members

Art. 264 (a) of the Labor Code, as amended, provides for the consequences of an illegal strike to the participating
workers:

x x x Any union officer who knowingly participates in illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for
termination of his employment, even if a replacement had been hired by the employer during such lawful strike.

The above provision makes a distinction between workers and union officers who participate in an illegal strike: an
ordinary striking worker cannot be terminated for mere participation in an illegal strike. There must be proof that
he or she committed illegal acts during a strike. A union officer, on the other hand, may be terminated from work
when he knowingly participates in an illegal strike, and like other workers, when he commits an illegal act during a
strike.52

Considering their persistence in holding picketing activities despite the declaration by the NCMB that their union
was not duly registered as a legitimate labor organization and the letter from NFL’s legal counsel informing that
their acts constitute disloyalty to the national federation, and their filing of the notice of strike and conducting a

57
strike vote notwithstanding that their union has no legal personality to negotiate with MCCHI for collective
bargaining purposes, there is no question that NAMA-MCCH-NFL officers knowingly participated in the illegal
strike. The CA therefore did not err in ruling that the termination of union officers Perla Nava, Catalina Alsado,
Albina Bañez, Hannah Bongcaras, Ernesto Canen, Jesusa Gerona and Guillerma Remocaldo was valid and justified.

With respect to the dismissed union members, although MCCHI submitted photographs taken at the picket line, it
did not individually name those striking employees and specify the illegal act committed by each of them. As to the
affidavits executed by non-striking employees, they identified mostly union officers as the persons who blocked
the hospital entrance, harassed hospital employees and patients whose vehicles were prevented from entering the
premises. Only some of these witnesses actually named a few union members who committed similar acts of
harassment and coercion. Consequently, we find no error committed by the CA in CA-G.R. SP No. 66540 when it
modified the decision of the NLRC and ruled that the dismissal of union members who merely participated in the
illegal strike was illegal. On the other hand, in CA-G.R. SP No. 84998, the CA did not err in ruling that the dismissal
of Yballe, et al. was illegal; however, it also ordered their reinstatement with full back wages.

Dismissed union members not entitled to backwages but should be awarded separation pay in lieu of
reinstatement

Since there is no clear proof that union members actually participated in the commission of illegal acts during the
strike, they are not deemed to have lost their employment status as a consequence of a declaration of illegality of
the strike.

Petitioners in G.R. Nos. 154113 and 187778 assail the CA in not ordering their reinstatement with back wages.
Invoking stare decisis, they cited the case of Bascon v. Court of Appeals53 decided by this Court in 2004 and which
involved two former hospital employees who likewise sued MCCHI after the latter terminated their employment
due to their participation in the same illegal strike led by NAMA-MCCH-NFL. In said case we ruled that petitioners
Cole and Bascon were illegally dismissed because MCCHI failed to prove that they committed illegal acts during the
strike. We thus ordered the reinstatement of petitioners Bascon and Cole without loss of seniority rights and other
privileges and payment of their back wages inclusive of allowances, and other benefits computed from the time
they were dismissed up to the time of their actual reinstatement. Bascon was also the basis of the award of back
wages in CA-G.R. SP No. 84998.

Stare decisis et non quieta movere. Stand by the decision and disturb not what is settled. Under the doctrine of
stare decisis, once a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to
that principle and apply it to all future cases where the facts are substantially the same,54 even though the parties
may be different. It proceeds from the first principle of justice that, absent any powerful countervailing
considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event
have been put forward by parties similarly situated as in a previous case litigated and decided by a competent
court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.55

The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular case
override the great benefits derived by our judicial system from the doctrine of stare decisis, the Court is justified in
setting it aside.56 For the Court, as the highest court of the land, may be guided but is not controlled by precedent.
Thus, the Court, especially with a new membership, is not obliged to follow blindly a particular decision that it
determines, after re-examination, to call for a rectification.57

Although the Bascon case involved the very same illegal strike in MCCHI which led to the termination of herein
petitioners, its clearly erroneous application of the law insofar only as the award of back wages warrants setting
aside the doctrine. Indeed, the doctrine of stare decisis notwithstanding, the Court has abandoned or overruled
precedents whenever it realized that the Court erred in the prior decisions. "Afterall, more important than
anything else is that this Court should be right."58

58
In G & S Transport Corporation v. Infante,59 the Court explained the rationale for its recent rulings deleting back
wages awarded to the dismissed workers if the strike was found to be illegal. Considering that they did not render
work for the employer during the strike, they are entitled only to reinstatement.

With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor" remains as the basic factor in
determining the award thereof. If there is no work performed by the employee there can be no wage or pay
unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or
dismissed or otherwise illegally prevented from working. While it was found that respondents expressed their
intention to report back to work, the latter exception cannot apply in this case. In Philippine Marine Officers’ Guild
v. Compañia Maritima, as affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees
Union, the Court stressed that for this exception to apply, it is required that the strike be legal, a situation that
does not obtain in the case at bar.

Under the circumstances, respondents’ reinstatement without backwages suffices for the appropriate relief. If
reinstatement is no longer possible, given the lapse of considerable time from the occurrence of the strike, the
award of separation pay of one (1) month salary for each year of service, in lieu of reinstatement, is in
order.60(Emphasis supplied.)

The CA decision in CA-G.R. SP No. 66540 ordering the payment of separation pay in lieu of reinstatement without
back wages is thus in order, to conform to the policy of a fair day’s wage for a fair day’s labor. The amount of
separation pay is increased to one month pay for every year of service, consistent with jurisprudence. Accordingly,
the decision in CA-G.R. SP No. 84998 is modified by deleting the award of back wages and granting separation pay
in lieu of reinstatement.

It is to be noted that as early as April 8, 1996, union members who took part in the concerted activities have been
warned by management that NAMA-MCCH-NFL is not a legitimate labor organization and its notice of strike was
denied by the NCMB, and directed to desist from further participating in such illegal activities. Despite such
warning, they continued with their picketing activities and held more mass actions after management sent them
termination notices. The prolonged work stoppage seriously disrupted hospital operations, which could have
eventually brought MCCHI into bankruptcy had the City Government of Cebu not issued a demolition order and
the NLRC Region 7 not formally enjoined the prohibited picketing activities. Also, the illegal dismissal complaints
subsequently filed by the terminated employees did not obliterate the fact that they did not suffer loss of earnings
by reason of the employer’s unjustified acts, there being no unfair labor practice committed by MCCHI. Hence,
fairness and justice dictate that back wages be denied the said employees who participated in the illegal concerted
activities to the great detriment of the employer.

Separation pay is made an alternative relief in lieu of reinstatement in certain circumstances, like: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the realities
of the situation; (b) reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the parties involved; (e) the employer is prejudiced by the
workers’ continued employment; (f) facts that make execution unjust or inequitable have supervened; or (g)
strained relations between the employer and employee.61

Considering that 15 years had lapsed from the onset of this labor dispute, and in view of strained relations that
ensued, in addition to the reality of replacements already hired by the hospital which had apparently recovered
from its huge losses, and with many of the petitioners either employed elsewhere, already old and sickly, or
otherwise incapacitated, separation pay without back wages is the appropriate relief. We note that during the
pendency of the cases in this Court, some of the petitioners have entered into compromise agreements with
MCCHI, all of which were duly approved by this Court. Thus, excluded from the herein monetary awards are the
following petitioners whose compromise agreements have been approved by this Court and judgment having been
entered therein: Gloria Arguilles, Romulo Alforque, Gerna Patigdas-Barte, Daylinda Tigo Merlyn Nodado, Ramon

59
Tagnipis, Bernabe Lumapguid, Romeo Empuerto, Marylen Labra, Milagros Castillo Bernadette Pontillas-Tibay,
Constancio Pagador, Nolan Alvin Panal, Edilberto Villa, Roy Malazarte, Felecianita Malazarte and Noel Hortelano.

Attorney’s fees

The dismissed employees having been compelled to litigate in order to seek redress and protect their rights, they
are entitled to reasonable attorney’s fees pursuant to Art. 2208 (2) of the Civil Code. In view of the attendant
circumstances of this case, we hold that attorney’s fees in the amount of ₱50,000.00 is reasonable and justified.
However, the respondents in G.R. No. 196156 are not entitled to the same relief since they did not appeal from the
CA decision which did not include the award of attorney’s fees.

WHEREFORE, the petition for review on certiorari in G.R. No. 187861 is DENIED while the petitions in G.R. Nos.
154113, 187778 and 196156 are PARTLY GRANTED. The Decision dated October 17, 2008 of the Court of Appeals in
CA-G.R. SP No. 66540 is hereby AFFIRMED with MODIFICATIONS in that MCCHI is ordered to pay the petitioners in
G.R. Nos. 154113 and 187778, except the petitioners who are union officers, separation pay equivalent to one
month pay for every year of service, and reasonable attorney’s fees in the amount of ₱50,000.00. The Decision
dated November 7, 2008 is likewise AFFIRMED with MODIFICATIONS in that MCCHI is ordered to pay the private
respondents in G.R. No. 196156 separation pay equivalent to one month pay for every year of service, and that the
award of back wages is DELETED.

The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due to each
of the petitioners union members in G.R. Nos. 154113, 187778 and 196156 except those who have executed
compromise agreements approved by this Court.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 187226 January 28, 2015

CHERYLL SANTOS LEUS, Petitioner,


vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove (SSCW), a Catholic educational
institution, as a non-teaching personnel, engaged in pre-marital sexual relations, got pregnant out of wedlock,
married the father of her child, and was dismissed by SSCW, in that order. The question that has to be resolved is
whether the petitioner's conduct constitutes a ground for her dismissal.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 dated September 24, 2008 and Resolution2 dated March 2, 2009 issued by the Court of Appeals
(CA) in CA-G.R. SP No. 100188, which affirmed the Resolutions dated February 28, 20073 and May 21, 20074 of the
National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.

The Facts

60
SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001, SSCW hired the petitioner as
an Assistant to SSCW’s Director of the Lay Apostolate and Community Outreach Directorate.

Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock. When SSCW learned of the
petitioner’s pregnancy, Sr. Edna Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a resignation
letter effective June 1, 2003. In response, the petitioner informed Sr. Quiambao that she would not resign from her
employment just because she got pregnant without the benefit of marriage.5

On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why she should not be
dismissed for engaging in pre-marital sexual relations and getting pregnant as a result thereof, which amounts to
serious misconduct and conduct unbecoming of an employee of a Catholic school.6

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not amount to
serious misconduct or conduct unbecoming of an employee. She averred that she is unaware of any school policy
stating that being pregnant out of wedlock is considered as a serious misconduct and, thus, a ground for dismissal.
Further, the petitioner requested a copy of SSCW’s policy and guidelines so that she may better respond to the
charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the promulgation of a
"Support Staff Handbook," SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on the
causes for termination of employments; that Section 94(e) of the 1992 MRPS cites "disgraceful or immoral
conduct" as a ground for dismissal in addition to the just causes for termination of employment provided under
Article 282 of the Labor Code.8

On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in part, reads:

To us, pre-marital sex between two consenting adults without legal impediment to marry each other who later on
married each other does not fall within the contemplation of "disgraceful or immoral conduct" and "serious
misconduct" of the Manual of Regulations for Private Schools and the Labor Code of the Philippines.

Your argument that what happened to our client would set a bad example to the students and other employees of
your school is speculative and is more imaginary than real. To dismiss her on that sole ground constitutes grave
abuse of management prerogatives.

Considering her untarnished service for two years, dismissing her with her present condition would also mean
depriving her to be more secure in terms of financial capacity to sustain maternal needs.10

In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital sexual relations, evenif
between two consenting adults without legal impediment to marry, is considered a disgraceful and immoral
conduct or a serious misconduct, which are grounds for the termination of employment under the 1992 MRPS and
the Labor Code. That SSCW, as a Catholic institution of learning, has the right to uphold the teaching of the
Catholic Church and expect its employees to abide by the same. They further asserted that the petitioner’s
indiscretion is further aggravated by the fact that she is the Assistant to the Director of the Lay Apostolate and
Community Outreach Directorate, a position of responsibility that the students look up to as rolemodel. The
petitioner was again directed to submit a written explanation on why she should not be dismissed.

On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s letter dated June 4, 2003 as
her written explanation.12

Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the petitioner that her employment with
SSCW is terminated on the ground of serious misconduct. She stressed that pre-marital sexual relations between
two consenting adults with no impediment to marry, even if they subsequently married, amounts to immoral

61
conduct. She further pointed out that SSCW finds unacceptable the scandal brought about by the petitioner’s
pregnancy out of wedlock as it ran counter to the moral principles that SSCW stands for and teaches its students.

Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in
Quezon City against SSCW and Sr. Quiambao (respondents). In her position paper,14 the petitioner claimed that
SSCW gravely abused its management prerogative as there was no just cause for her dismissal. She maintained
that her pregnancy out of wedlock cannot be considered as serious misconduct since the same is a purely private
affair and not connected in any way with her duties as an employee of SSCW. Further, the petitioner averred that
she and her boyfriend eventually got married even prior to her dismissal.

For their part, SSCW claimed that there was just cause to terminate the petitioner’s employment with SSCW and
that the same is a valid exercise of SSCW’s management prerogative. They maintained that engaging in pre-marital
sex, and getting pregnant as a result thereof, amounts to a disgraceful or immoral conduct, which is a ground for
the dismissal of an employee under the 1992 MRPS.

They pointed out that SSCW is a Catholic educational institution, which caters exclusively to young girls; that SSCW
would lose its credibility if it would maintain employees who do not live up to the values and teachings it
inculcates to its students. SSCW further asserted that the petitioner, being an employee of a Catholic educational
institution, should have strived to maintain the honor, dignity and reputation of SSCW as a Catholic school.15

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 6-17657-03-C which
dismissed the complaint filed by the petitioner. The LA found that there was a valid ground for the petitioner’s
dismissal; that her pregnancy out of wedlock is considered as a "disgraceful and immoral conduct." The LA pointed
out that, as an employee of a Catholic educational institution, the petitioner is expected to live up to the Catholic
values taught by SSCW to its students. Likewise, the LA opined that:

Further, a deep analysis of the facts would lead us to disagree with the complainant that she was dismissed simply
because she violate[d] a Catholic [teaching]. It should not be taken in isolation but rather it should be analyzed in
the lightof the surrounding circumstances as a whole. We must also take into [consideration] the nature of her
work and the nature of her employer-school. For us, it is not just an ordinary violation. It was committed by the
complainant in an environment where her strict adherence to the same is called for and where the reputation of
the school is at stake. x x x.17

The LA further held that teachers and school employees, both in their official and personal conduct, must display
exemplary behavior and act in a manner that is beyond reproach.

The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of her
employment. She maintained that her pregnancy out of wedlock cannot be considered as "serious misconduct"
under Article 282 of the Labor Code since the same was not of such a grave and aggravated character. She asserted
that SSCW did not present any evidence to establish that her pregnancy out of wedlock indeed eroded the moral
principles that it teaches its students.18

The Ruling of the NLRC

On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA Decision dated February 28, 2006.
The NLRC pointed out that the termination of the employment of the personnel of private schools is governed by
the 1992 MRPS; that Section 94(e) thereof cites "disgraceful or immoral conduct" as a just cause for dismissal, in
addition to the grounds for termination of employment provided for under Article 282 of the Labor Code. The
NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral conduct" within the

62
contemplation of Section 94(e) of the 1992 MRPS and, thus, SSCW had a valid reason to terminate her
employment.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but it was denied by the NLRC
in its Resolution21 dated May 21, 2007.

Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the NLRC gravely abused its
discretion in ruling that there was a valid ground for her dismissal. She maintained that pregnancy out of wedlock
cannot be considered as a disgraceful or immoral conduct; that SSCW failed to prove that its students were indeed
gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred in applying Section
94(e) of the 1992 MRPS.

The Ruling of the CA

On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied the petition for certiorari
filed by the petitioner. The CA held that it is the provisions of the 1992 MRPS and not the Labor Code which
governs the termination of employment of teaching and non-teaching personnel of private schools, explaining
that:

It is a principle of statutory construction that where there are two statutes that apply to a particular case, that
which was specially intended for the said case must prevail. Petitioner was employed by respondent private
Catholic institution which undeniably follows the precepts or norms of conduct set forth by the Catholic Church.
Accordingly, the Manual of Regulations for Private Schools followed by it must prevail over the Labor Code, a
general statute. The Manual constitutes the private schools’ Implementing Rules and Regulations of Batas
Pambansa Blg. 232 or the Education Act of 1982. x x x.24

The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management prerogative to
discipline and impose penalties on erring employees pursuant toits policies, rules and regulations. The CA upheld
the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock is considered as a "disgraceful and immoral
conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise opined that the
petitioner’s pregnancy out of wedlock is scandalous per segiven the work environment and social milieu that she
was in, viz:

Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of the Labor Code,
"disgraceful and immoral conduct" is a basis for termination of employment.

xxxx

Petitioner contends that her pre-marital sexual relations with her boyfriend and her pregnancy prior to marriage
was not disgraceful or immoral conduct sufficient for her dismissal because she was not a member of the school’s
faculty and there is no evidence that her pregnancy scandalized the school community.

We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself given the work environment
and social milieu she was in. Respondent school for young ladies precisely seeks to prevent its students from
situations like this, inculcating in them strict moral values and standards. Being part of the institution,
petitioner’sprivate and public life could not be separated. Her admitted pre-marital sexual relations was a violation
of private respondent’s prescribed standards of conduct that views pre-marital sex as immoral because sex
between a man and a woman must only take place within the bounds of marriage.

Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management prerogative to discipline and
impose penalties on erring employees pursuant to its policies, rules and regulations. x x x.25 (Citations omitted)

63
The petitioner moved for reconsideration26 but it was denied by the CA in its Resolution27 dated March 2, 2009.

Hence, the instant petition.

Issues

Essentially, the issues set forth by the petitioner for this Court’s decision are the following: first, whether the CA
committed reversible error in ruling that it is the 1992 MRPS and not the Labor Code that governs the termination
of employment of teaching and non-teaching personnel of private schools; and second, whether the
petitioner’spregnancy out of wedlock constitutes a valid ground to terminate her employment.

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

The petitioner contends that the CA, in ruling that there was a valid ground to dismiss her, erred in applying
Section 94 of the 1992 MRPS. Essentially, she claims that the 1992 MRPS was issued by the Secretary of Education
as the revised implementing rules and regulations of Batas Pambansa Bilang 232 (BP 232) or the "Education Act of
1982." That there is no provision in BP 232, which provides for the grounds for the termination of employment of
teaching and non-teaching personnel of private schools. Thus, Section 94 of the 1992 MRPS, which provides for the
causes of terminating an employment, isinvalid as it "widened the scope and coverage" of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94 thereof, is raised
by the petitioner for the first time in the instant petition for review. Nowhere in the proceedings before the LA, the
NLRC or the CA did the petitioner assail the validity of the provisions of the 1992 MRPS.

"It is well established that issues raised for the first time on appeal and not raised in the proceedings in the lower
court are barred by estoppel. Points of law, theories, issues, and arguments not brought to the attention of the
trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal.
To consider the alleged facts and arguments belatedly raised would amount to trampling on the basic principles of
fair play, justice, and due process."28

In any case, even if the Court were to disregard the petitioner’s belated claim of the invalidity of the 1992 MRPS,
the Court still finds the same untenable.

The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued by the Secretary of
Education pursuant to BP 232. Section 7029 of BP 232 vests the Secretary of Education with the authority to issue
rules and regulations to implement the provisions of BP 232. Concomitantly, Section 5730 specifically empowers
the Department of Education to promulgate rules and regulations necessary for the administration, supervision
and regulation of the educational system in accordance with the declared policy of BP 232.

The qualifications of teaching and non-teaching personnel of private schools, as well as the causes for the
termination of their employment, are an integral aspect of the educational system of private schools. Indubitably,
ensuring that the teaching and non-teaching personnel of private schools are not only qualified, but competent
and efficient as well goes hand in hand with the declared objective of BP 232 – establishing and maintaining
relevant quality education.31 It is thus within the authority of the Secretary of Education to issue a rule, which

64
provides for the dismissal of teaching and non-teaching personnel of private schools based on their incompetence,
inefficiency, or some other disqualification.

Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to "prescribe and impose such
administrative sanction as he may deem reasonable and appropriate in the implementing rules and regulations"
for the "[g]ross inefficiency of the teaching or non-teaching personnel" of private schools.32 Accordingly, contrary
to the petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992 MRPS, specifically
Section 94 thereof. Second Issue: Validity of the Petitioner’s Dismissal

The validity of the petitioner’s dismissal hinges on the determination of whether pregnancy out of wedlock by an
employee of a catholic educational institution is a cause for the termination of her employment.

In resolving the foregoing question,the Court will assess the matter from a strictly neutral and secular point of view
– the relationship between SSCW as employer and the petitioner as an employee, the causes provided for by law in
the termination of suchrelationship, and the evidence on record. The ground cited for the petitioner’s dismissal,
i.e., pre-marital sexual relations and, consequently, pregnancy outof wedlock, will be assessed as to whether the
same constitutes a valid ground for dismissal pursuant to Section 94(e) of the 1992 MRPS.

The standard of review in a Rule 45


petition from the CA decision in
labor cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s disposition
in a labor case is sought to be calibrated, the Court’s review isquite limited. In ruling for legal correctness, the
Court has to view the CA decision in the same context that the petition for certiorari it ruled upon was presented
to it; the Court has to examine the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision
on the merits of the case was correct.33

The phrase "grave abuse of discretion" is well-defined in the Court’s jurisprudence. It exists where an act of a court
or tribunal is performed with a capricious or whimsical exercise ofjudgment equivalent to lack of jurisdiction.34 The
determination of the presence or absence of grave abuse of discretion does not include an inquiry into the
correctness of the evaluation of evidence, which was the basis of the labor agency in reaching its conclusion.35

Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the correctness of the
evaluation of evidence (that was the basis of the labor tribunals in determining their conclusion), the incorrectness
of its evidentiary evaluation should not result in negating the requirement of substantial evidence. Indeed, when
there is a showing that the findings or conclusions, drawn from the same pieces of evidence, were arrived at
arbitrarily or in disregard of the evidence on record, they may be reviewed by the courts. In particular, the CA can
grant the petition for certiorariif it finds that the NLRC, in its assailed decision or resolution, made a factual finding
not supported by substantial evidence. A decision that is not supported by substantial evidence is definitely a
decision tainted with grave abuse of discretion.36

The labor tribunals’ respective


conclusions that the petitioner’s
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.

The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal pursuant to Section 94(e) of the
1992 MRPS, which provides that:

65
Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code, the
employment of school personnel, including faculty, may be terminated for any of the following causes:

xxxx

e. Disgraceful or immoral conduct;

xxxx

The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is "disgraceful and
immoral"considering that she is employed in a Catholic educational institution. In arriving at such conclusion, the
labor tribunals merely assessed the fact of the petitioner’s pregnancy vis-à-visthe totality of the circumstances
surrounding the same.

However, the Court finds no substantial evidence to support the aforementioned conclusion arrived at by the labor
tribunals. The fact of the petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the
petitioner’s conduct as disgraceful or immoral. There must be substantial evidence to establish that pre-marital
sexual relations and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or immoral.

The totality of the circumstances


surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.

In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the circumstances of each particular case
must be holistically considered and evaluated in light of the prevailing norms of conductand applicable
laws.38Otherwise stated, it is not the totality of the circumstances surrounding the conduct per se that determines
whether the same is disgraceful or immoral, but the conduct that is generally accepted by society as respectable or
moral. If the conduct does not conform to what society generally views as respectable or moral, then the conduct
is considered as disgraceful or immoral. Tersely put, substantial evidence must be presented, which would
establish that a particular conduct, viewed in light of the prevailing norms of conduct, is considered disgraceful or
immoral.

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step process: first, a
consideration of the totality of the circumstances surrounding the conduct; and second, an assessment of the said
circumstances vis-à-visthe prevailing norms of conduct, i.e., what the society generally considers moral and
respectable.

That the petitioner was employed by a Catholic educational institution per se does not absolutely determine
whether her pregnancy out of wedlock is disgraceful or immoral. There is still a necessity to determine whether
the petitioner’s pregnancy out of wedlock is considered disgraceful or immoral in accordance with the prevailing
norms of conduct.

Public and secular morality should


determine the prevailing norms of
conduct, not religious morality.

However, determining what the prevailing norms of conduct are considered disgraceful or immoral is not an easy
task. An individual’s perception of what is moral or respectable is a confluence of a myriad of influences, such as

66
religion, family, social status, and a cacophony of others. In this regard, the Court’s ratiocination in Estrada v.
Escritor39 is instructive.

In Estrada, an administrative case against a court interpreter charged with disgraceful and immoral conduct, the
Court stressed that in determining whether a particular conduct can be considered as disgraceful and immoral, the
distinction between public and secular morality on the one hand, and religious morality, on the other, should be
kept in mind.40 That the distinction between public and secular morality and religious morality is important
because the jurisdiction of the Court extends only to public and secular morality.41 The Court further explained
that:

The morality referred to in the law is public and necessarily secular, not religiousx x x. "Religious teachings as
expressed in public debate may influence the civil public order but public moral disputes may be resolved only on
grounds articulable in secular terms." Otherwise, if government relies upon religious beliefs in formulating public
policies and morals, the resulting policies and morals would require conformity to what some might regard as
religious programs or agenda.The non-believers would therefore be compelled to conform to a standard of
conduct buttressed by a religious belief, i.e., to a "compelled religion," anathema to religious freedom. Likewise, if
government based its actions upon religious beliefs, it would tacitly approve or endorse that belief and thereby
also tacitly disapprove contrary religious or non-religious views that would not support the policy. As a result,
government will not provide full religious freedom for all its citizens, or even make it appear that those whose
beliefs are disapproved are second-class citizens. Expansive religious freedom therefore requires that government
be neutral in matters of religion; governmental reliance upon religious justification is inconsistent with this policy
of neutrality.

In other words, government action, including its proscription of immorality as expressed in criminal law like
concubinage, must have a secular purpose. That is, the government proscribes this conduct because it is
"detrimental (or dangerous) to those conditions upon which depend the existence and progress of human society"
and not because the conduct is proscribed by the beliefs of one religion or the other. Although admittedly, moral
judgments based on religion might have a compelling influence on those engaged in public deliberations over what
actions would be considered a moral disapprobation punishable by law. After all, they might also be adherents of a
religion and thus have religious opinions and moral codes with a compelling influence on them; the human mind
endeavors to regulate the temporal and spiritual institutions of society in a uniform manner, harmonizing earth
with heaven. Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its deepest roots, but it
must have an articulable and discernible secular purpose and justification to pass scrutiny of the religion clauses.x
x x.42(Citations omitted and emphases ours)

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and secular
morality; it refers to those conducts which are proscribed because they are detrimental to conditions upon which
depend the existence and progress of human society. Thus, in Anonymous v. Radam,43 an administrative case
involving a court utility worker likewise charged with disgraceful and immoral conduct, applying the doctrines laid
down in Estrada, the Court held that:

For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must be
regulated on account of the concerns of public and secular morality. It cannot be judged based on personal bias,
specifically those colored by particular mores. Nor should it be grounded on "cultural" values not convincingly
demonstrated to have been recognized in the realm of public policy expressed in the Constitution and the laws. At
the same time, the constitutionally guaranteed rights (such as the right to privacy) should be observed to the
extent that they protect behavior that may be frowned upon by the majority.

Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of
wedlock:

67
(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for
disgraceful and immoral conduct.It may be a not-so-ideal situation and may cause complications for both
mother and child but it does not give cause for administrative sanction. There is no law which penalizes an
unmarried mother under those circumstances by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons. Neither does the situation contravene any
fundamental state policy as expressed in the Constitution, a document that accommodates various belief
systems irrespective of dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other thanthe mother,
then there is a cause for administrative sanction against either the father or the mother. In sucha case,
the "disgraceful and immoral conduct" consists of having extramarital relations with a married person.
The sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as a special
contract of permanent union. Accordingly, judicial employees have been sanctioned for their dalliances
with married persons or for their own betrayals of the marital vow of fidelity.

In this case, it was not disputed that, like respondent, the father of her child was unmarried. Therefore,
respondent cannot be held liable for disgraceful and immoral conduct simply because she gave birth to the child
Christian Jeon out of wedlock.44 (Citations omitted and emphases ours)

Both Estrada and Radamare administrative cases against employees in the civil service. The Court, however, sees
no reason not to apply the doctrines enunciated in Estrada and Radamin the instant case. Estrada and Radamalso
required the Court to delineate what conducts are considered disgraceful and/or immoral as would constitute a
ground for dismissal. More importantly, as in the said administrative cases, the instant case involves an employee’s
security of tenure; this case likewise concerns employment, which is not merely a specie of property right, but also
the means by which the employee and those who depend on him live.45

It bears stressing that the right of an employee to security of tenure is protected by the Constitution. Perfunctorily,
a regular employee may not be dismissed unless for cause provided under the Labor Code and other relevant laws,
in this case, the 1992 MRPS. As stated above, when the law refers to morality, it necessarily pertains to public and
secular morality and not religious morality. Thus, the proscription against "disgraceful or immoral conduct" under
Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must necessarily refer to public and
secular morality. Accordingly, in order for a conduct tobe considered as disgraceful or immoral, it must be
"‘detrimental (or dangerous) to those conditions upon which depend the existence and progress of human society’
and not because the conduct is proscribed by the beliefs of one religion or the other."

Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an extra-marital affair with his co-
teacher, who is likewise married, on the ground of disgraceful and immoral conduct under Section 94(e) of the
1992 MRPS. The Court pointed out that extra-marital affair is considered as a disgraceful and immoral conduct is
an afront to the sanctity of marriage, which is a basic institution of society, viz:

We cannot overemphasize that having an extra-marital affair is an afront to the sanctity of marriage, which is a
basic institution of society. Even our Family Code provides that husband and wife must live together, observe
mutual love, respect and fidelity. This is rooted in the fact that both our Constitution and our laws cherish the
validity of marriage and unity of the family. Our laws, in implementing this constitutional edict on marriage and the
family underscore their permanence, inviolability and solidarity.47

The petitioner’s pregnancy out of


wedlock is not a disgraceful or
immoral conduct since she and the
father of her child have no
impediment to marry each other.

68
In stark contrast to Santos, the Court does not find any circumstance in this case which would lead the Court to
conclude that the petitioner committed a disgraceful or immoral conduct. It bears stressing that the petitioner and
her boyfriend, at the time they conceived a child, had no legal impediment to marry. Indeed, even prior to her
dismissal, the petitioner married her boyfriend, the father of her child. As the Court held in Radam, there is no law
which penalizes an unmarried mother by reason of her sexual conduct or proscribes the consensual sexual activity
between two unmarried persons; that neither does such situation contravene any fundamental state policy
enshrined in the Constitution.

Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the
Catholic Church, including that on pre-marital sexual relations, is strictly upheld and taught to the students. That
her indiscretion, which resulted in her pregnancy out of wedlock, is anathema to the doctrines of the Catholic
Church. However, viewed against the prevailing norms of conduct, the petitioner’s conduct cannot be considered
as disgraceful or immoral; such conduct is not denounced by public and secular morality. It may be an unusual
arrangement, but it certainly is not disgraceful or immoral within the contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no impediment to marry each
other, and, consequently, conceiving a child out of wedlock, gauged from a purely public and secular view of
morality, does not amount to a disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.

Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s dismissal. The labor tribunals
arbitrarily relied solely on the circumstances surrounding the petitioner’s pregnancy and its supposed effect on
SSCW and its students without evaluating whether the petitioner’s conduct is indeed considered disgraceful or
immoral in view of the prevailing norms of conduct. In this regard, the labor tribunals’ respective haphazard
evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.

The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the absence of substantial
evidence is not only arbitrary, but a grave abuse of discretion, which should have been set right by the CA.

There is no substantial evidence to


prove that the petitioner’s pregnancy
out of wedlock caused grave scandal
to SSCW and its students.

SSCW claimed that the petitioner was primarily dismissed because her pregnancy out of wedlock caused grave
scandal to SSCW and its students. That the scandal brought about by the petitioner’s indiscretion prompted them
to dismiss her. The LA upheld the respondents’ claim, stating that:

In this particular case, an "objective" and "rational evaluation" of the facts and circumstances obtaining in this case
would lead us to focus our attention x x x on the impact of the act committed by the complainant. The act of the
complainant x x x eroded the moral principles being taught and project[ed] by the respondent [C]atholic school to
their young lady students.48 (Emphasis in the original)

On the other hand, the NLRC opined that:

In the instant case, when the complainant-appellant was already conceiving a child even before she got married,
such is considered a shameful and scandalous behavior, inimical to public welfare and policy. It eroded the moral
doctrines which the respondent Catholic school, an exclusive school for girls, is teaching the young girls. Thus,
when the respondent-appellee school terminated complainant-appellant’s services, it was a valid exercise of its
management prerogative. Whether or not she was a teacher is of no moment. There is no separate set of rules for
non-teaching personnel. Respondents-appellees uphold the teachings of the Catholic Church on pre-marital sex
and that the complainant-appellant as an employee of the school was expected to abide by this basic principle and

69
to live up with the standards of their purely Catholic values. Her subsequent marriage did not take away the fact
that she had engaged in pre-marital sex which the respondent-appellee school denounces as the same is opposed
to the teachings and doctrines it espouses.49 (Emphasis ours)

Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce substantial evidence to
prove that the petitioner’s indiscretion indeed caused grave scandal to SSCW and its students. Other than the
SSCW’s bare allegation, the records are bereft of any evidence that would convincingly prove that the petitioner’s
conduct indeed adversely affected SSCW’s integrity in teaching the moral doctrines, which it stands for. The
petitioner is only a non-teaching personnel; her interaction with SSCW’s students is very limited. Itis thus quite
impossible that her pregnancy out of wedlock caused such a grave scandal, as claimed by SSCW, as to warranther
dismissal.

Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees was for a
valid and authorized cause rests on the employer. It is incumbent upon the employer to show by substantial
evidence that the termination of the employment of the employees was validly made and failure to discharge that
duty would mean that the dismissal is not justified and therefore illegal.50 "Substantial evidence is more than a
mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as adequateto
support a conclusion, even if other minds equally reasonable mightconceivably opine otherwise."51

Indubitably, bare allegations do not amount to substantial evidence. Considering that the respondents failed to
adduce substantial evidence to prove their asserted cause for the petitioner’s dismissal, the labor tribunals should
not have upheld their allegations hook, line and sinker. The labor tribunals’ respective findings, which were arrived
at sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should have rectified.
"Security of tenure is a right which may not be denied on mere speculation of any unclearand nebulous basis."52

The petitioner’s dismissal is not a


valid exercise of SSCW’s
management prerogative.

The CA be labored the management prerogative of SSCW to discipline its employees. The CA opined that the
petitioner’s dismissal is a valid exercise of management prerogative to impose penalties on erring employees
pursuant to its policies, rules and regulations.

The Court does not agree.

The Court has held that "management is free to regulate, according to its own discretion and judgment, all aspects
of employment, including hiring, work assignments, working methods, time, place and manner of work, processes
to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not
absolute as it must beexercised in good faith and with due regard to the rights of labor." Management cannot
exercise its prerogative in a cruel, repressive, or despotic manner.53

SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there is a
valid cause to do so. However, as already explained, there is no cause to dismiss the petitioner. Her conduct is not
considered by law as disgraceful or immoral. Further, the respondents themselves have admitted that SSCW, at
the time of the controversy, does not have any policy or rule against an employee who engages in pre-marital
sexual relations and conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy
and rules, SSCW’s dismissal of the petitioner is despotic and arbitrary and, thus, not a valid exercise of
management prerogative.

70
In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination of
her employment. SSCW failed to adduce substantial evidence to establish that the petitioner’s conduct, i.e.,
engaging in pre-marital sexual relations and conceiving a child out of wedlock, assessed in light of the prevailing
norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their discretion in
upholding the validity of the petitioner’s dismissal as the charge against the petitioner lay not on substantial
evidence, but on the bare allegations of SSCW. In turn, the CA committed reversible error in upholding the validity
of the petitioner’s dismissal, failing torecognize that the labor tribunals gravely abused their discretion in ruling for
the respondents.

The petitioner is entitled to


separation pay, in lieu of actual
reinstatement, full backwages and
attorney’s fees, but not to moral and
exemplary damages.

Having established that the petitioner was illegally dismissed, the Court now determines the reliefs thatshe is
entitled to and their extent. Under the law and prevailing jurisprudence, "an illegally dismissed employee is
entitled to reinstatement as a matter of right."54 Aside from the instances provided under Articles 28355 and
28456 of the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the accepted doctrine is
that separation pay is available in lieu of reinstatement when the latter recourse is no longer practical or in the
best interest of the parties.57

In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the illegally dismissed
high school teacher separation pay in lieu of actual reinstatement since her continued presence as a teacher in the
school "may well bemet with antipathy and antagonism by some sectors in the school community."59

In view of the particular circumstances of this case, it would be more prudent to direct SSCW to pay the petitioner
separation pay inlieu of actual reinstatement. The continued employment of the petitioner with SSCW would only
serve to intensify the atmosphere of antipathy and antagonism between the parties. Consequently, the Court
awards separation pay to the petitioner equivalent to one (1) month pay for every year of service, with a fraction
of at least six (6) months considered as one (1) whole year, from the time of her illegal dismissal up to the finality
of this judgment, as an alternative to reinstatement.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time their actual compensation was withheld from
them up to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages shall
be computed from the time of their illegal termination up to the finality of the decision."60 Accordingly, the
petitioner is entitled to an award of full backwages from the time she was illegally dismissed up to the finality of
this decision.

Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A dismissed employee isentitled to
moral damages when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor, or is
done in a manner contrary to good morals, good customs or public policy. Exemplary damages may be awarded if
the dismissal is effected in a wanton, oppressive or malevolent manner."61

"Bad faith, under the law, does not simply connote bad judgment or negligence.1âwphi1 It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, or a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud."62

71
"It must be noted that the burden of proving bad faith rests on the one alleging it"63 since basic is the principle that
good faith is presumed and he who alleges bad faith has the duty to prove the same.64 "Allegations of bad faith
and fraud must be proved by clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that the respondents acted in bad
faith or in a wanton or fraudulent manner in dismissing the petitioner. That the petitioner was illegally dismissed is
insufficient to prove bad faith. A dismissal may be contrary to law but by itself alone, it does not establish bad faith
to entitle the dismissed employee to moral damages. The award of moral and exemplary damages cannot be
justified solely upon the premise that the employer dismissed his employee without cause.66

However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total monetary award pursuant
to Article 11167 of the Labor Code. "It is settled that where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney’s fees is legally and morally justifiable."68

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per
annumfrom the finality of this judgment until fully paid.69

WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision dated
September 24, 2008 and Resolution dated March 2, 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are
hereby REVERSED and SET ASIDE.

The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of illegal dismissal and is hereby
ORDERED to pay the petitioner, Cheryll Santos Leus, the following: (a) separation pay in lieu of actual
reinstatement equivalent to one (1) month pay for every year of service, with a fraction of at least six (6) months
considered as one (1) whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and (c) attorney’s fees
equivalent to ten percent (10%) of the total monetary award. The monetary awards herein granted shall earn legal
interest at the rate of six percent (6%) per annumfrom the date of the finality of this Decision untilfully paid. The
case is REMANDED to the Labor Arbiter for the computation of petitioner’s monetary awards.

SO ORDERED.

G.R. No. 190828

ONOFRE V. MONTERO vs.TIMES TRANSPORTATION CO.,INC.,

REYES, J.:

This appeal by petition for review1 seeks to annul and set aside the Decision2 dated August 28, 2009 and
Resolution3 dated December 11, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106260, which affirmed the
Decision4 dated March 31, 2008 of the National Labor Relations Commission (NLRC) in NLRC CA No. 046325-05
(08), and its Resolution5 dated September 5, 2008, denying the petitioner’s Motion for Reconsideration. The NLRC
decision vacated and set aside the Decision6 dated June 29, 2005 of the Labor Arbiter (LA) on the ground that the
consolidated complaints for illegal dismissal, unfair labor practice and money claims have already prescribed.

The Facts

Respondent Times Transportation Co., Inc., (TTCI) is a company engaged in the business of land transportation for
passengers and goods serving the Ilocos Region to Metro Manila route. TTCI employed the herein 21 petitioners as
bus drivers, conductors, mechanics, welders, security guards and utility personnel, namely: Onofre V. Montero
(Montero), Edgardo N. Estrañero (Estrañero), Rening P. Padre (Padre), Gabriel A. Madera (Madera), Herminio T.

72
Tacla, Nelson C. Viloria, Demetrio Q. Pajarillo (Pajarillo), Alfredo R. Aganon (Aganon), Reynaldo Avila (Avila), Albert
T. Ruiz, Nestor Y. Yago (Yago), Harty M. Tupasi (Tupasi), Agustin R. Avila, Jr. (Avila, Jr.), Bonifacio B. Gaano (Gaano),
Joselito D. Cuenta (Cuenta), Jonas P. Estilong (Estilong), Dominador C. Canaria (Canaria), Genaro C. Rondaris
(Genaro), Herardo M. Dulay (Dulay), Franklin A. Ravina, Jr. (Ravina), and Ruben C. Cabello (Cabello) (petitioners).7

Sometime in 1995, the rank-and-file employees of TTCI formed a union named as Times Employees Union (TEU)
which was later certified as the sole and exclusive bargaining unit within TTCI.8

In March 1997, members of TEU went on strike; but when former Labor Secretary Leonardo A. Quisimbing
assumed jurisdiction over the labor dispute and certified the same for compulsory arbitration, a return-to-work
Order dated March 10, 1997 was issued which ended the strike and enjoined the parties from committing any
other act that may intensify the situation.9

On August 23, 1997, TTCI Board of Directors approved a resolution confirming the authority given to respondent
Santiago Rondaris (Santiago), TTCI President and Chairman of the Board of Directors, to gradually dispose the
assets of the TTCI as a result of its unabated increase of the cost of operations and losses for the last two years.
TTCI also adopted a company-wide retrenchment program, which will take effect on October 1, 1997, where
Santiago was given the authority to determine the number of excess employees who would be the subject of
retrenchment.10

The sale of 25 buses of TTCI, as well as the Certificates of Public Convenience for the operation of the buses, were
likewise approved and subsequently transferred to respondent Mencorp Transport Systems, Inc., (MENCORP) by
virtue of a Deed of Sale dated December 12, 1997. Thereafter, several union members received notices that they
were being retrenched effective 30 days from September 16, 1997.11

For a second time, on October 17, 1997, TEU declared a strike against TTCI, but the latter merely reiterated the
earlier return-to-work order of the Labor Secretary. For disregarding the said return-to-work order, Santiago issued
two notices of termination dated October 26, 199712 terminating some 106 workers and a revised list dated
November 24, 199713 increasing the number of dismissed employees to 119, for participating in the illegal strike.14

On December 4, 1997, Santiago served to the Department of Labor and Employment Regional Office I a notice that
TTCI would be closing its operations due to heavy business losses.15

On May 14, 1998, petitioners Estrañero, Pajarillo, Padre, Avila, Avila, Jr., Tupasi, Cuenta, Dulay, Yago, and Aganon
filed several complaints against TTCI and MENCORP before the NLRC. The complaints were thereafter consolidated
under the case entitled "Malana v. TTCI" docketed as NLRC RAB-I-01-1007.16 However, this case was withdrawn on
March 4, 1999 upon motion by the TEU’s counsel which was given due course on March 22, 1999.17

Four years later, several complaints for unfair labor practice, illegal dismissal with money claims, damages and
attorney’s fees were filed against TTCI, Santiago, MENCORP and its General Manager Virginia Mendoza, including
the latter’s husband Reynaldo Mendoza (collectively called the respondents), before the LA from June to July
2002.18 Accordingly, these complaints were consolidated.

In response, TTCI asserted that the petitioners’ cause of action had already been barred by prescription because
the complaints were filed only in June 2002 or after almost five years from the date of their dismissal. MENCORP,
on the other hand, raised the defense of lack of employer-employee relationship since it never engaged the
services of the petitioners when TTCI sold to them its buses and the Certificates of Public Convenience.19

On June 9, 2005, the LA rendered a Decision dismissing the petitioners’ claim for unfair labor practice and money
claims on the ground of prescription. However, with regard to the issue of illegal dismissal, only the complaints of

73
Montero, Ravina, Cabello, Genaro, Madera, Gaano, Arsenio Donato and Estilong were dismissed for having been
barred by prescription.20

The LA found that petitioners Estrañero, Pajarillo, Aganon, Padre, Dulay, Cuenta, Canaria, Yago, Avila and Avila, Jr.
were illegally dismissed and were awarded their separation pay and backwages. According to the LA, the
complaints of these 10 petitioners were timely filed in June 2002 because the eight-month period during which
their cases were pending should be excluded from the four-year prescriptive period.21

Disagreeing with the LA decision, all parties interposed an appeal before the NLRC. However, said appeals have
both been denied for non-perfection, particularly for failure of the petitioners to verify their appeal, and for failure
of the respondent to post the required cash or surety bond. In a Decision22 dated March 31, 2008, the NLRC
vacated and set aside the findings of the LA, upon finding that the petitioners’ complaints had already been barred
by prescription. The dispositive part of which reads:

WHEREFORE, IN VIEW OF THE FOREGOING, the decision appealed from is hereby VACATED and SET ASIDE, and the
complaints dismissed on ground of prescription.1âwphi1

SO ORDERED.23

The NLRC observed that the LA had ignored the rule on prescription, and chose to be selective in awarding relief to
the 10 complainants by stating in his decision that the period during which the labor cases were pending should be
deducted from the period of prescription. According to the NLRC:

We have thoroughly examined the records and find no justification for the [LA] to rule that the pendency of the
cases has worked in favor of the complainants to whom he awarded separation pay and backwages. The [LA] has
not at all indicated in his decision when the eight (8)[-]month period of pendency he alluded to commenced and
when it ended. As a matter of fact, these cases took almost three (3) years from filing of the complaints to the
rendition of the appealed decision.24

The NLRC added that the application of the principle of prescription should not be done on a selective basis,
especially when the dates of accrual of the causes of action and the filing of the complaints readily show that
prescription has set in.25

The petitioners filed a motion for reconsideration26 dated May 16, 2008, but it was denied.27 Hence, they filed a
petition for certiorari28 before the CA.

On August 28, 2009, the CA Decision dismissed the petition.29 In sustaining the NLRC decision, the appellate court
ratiocinated:

Here, the illegal dismissal case was filed only in June 2002 or for more than four (4) years and seven (7) months
from the time petitioners received the notices of their dismissal in November and October 1997. Clearly, the four-
year prescriptive period has already elapsed.

Moreover, there is likewise no merit in petitioners’ contention that the period when they filed a complaint on May
14, 1998 but withdrawn on March 30, 1998 should be excluded from the computation of the four-year prescriptive
[period] for illegal dismissal cases. The prescriptive period continues even after the withdrawal of the case as
though no action has been filed at all. This was clarified in the case of Intercontinental Broadcasting Corporation
vs. Panganiban, where the Supreme Court held that although the commencement of an action stops the running of
the statute of prescription or limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in
exactly the same position as though no action had been commenced at all. x x x.30

74
Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration31 but it was denied by the
CA.32Hence, the present petition for review on certiorari.33

The Issue

The main issue in this case is whether or not the petitioners’ complaints for illegal dismissal have already
prescribed.

Ruling of the Court

The petition is bereft of merit.

"It should be emphasized at the outset that as a rule, this Court is not a trier of facts and this applies with greater
force in labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide
with those of the [LA] and if supported by substantial evidence, are accorded respect and even finality by this
Court. But where the findings of the NLRC and the [LA] are contradictory, as in the present case, this Court may
delve into the records and examine for itself the questioned findings."34

Nevertheless, the Court has thoroughly reviewed the records in this case and finds that the NLRC did not commit
any grave abuse of its discretion amounting to lack or in excess of jurisdiction in rendering its decision in favor of
the respondents. The CA acted in accord with the evidence on record and case law when it dismissed the petition
and affirmed the assailed decision and resolution of the NLRC.

In the case at bar, October 26, 1997 and November 24, 1997 appear on record to be the dates when the
petitioners’ employment were terminated by TTCI. The antecedent facts that gave rise to the petitioners’ dismissal
from employment are not disputed in this case. There is no question about the fact that the petitioners’
complaints for unfair labor practice and money claims have already prescribed. The petitioners however argue that
their complaints for illegal dismissal were duly filed within the four-year prescriptive period since the period during
which their cases were pending should be deducted from the period of prescription. On the other hand, the
respondents insist that said complaints have already prescribed. Hence, the pivotal question in resolving the issues
hinges on the resolution of whether the period during which the petitioners’ cases were pending should be
excluded from the period of prescription.

Settled is the rule that when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of one’s dismissal from employment constitutes, in essence, an action predicated
upon an injury to the rights of the plaintiff, as contemplated under Article 114635 of the New Civil Code, which
must be brought within four years.36

The petitioners contend that the period when they filed a labor case on May 14, 1998 but withdrawn on March 22,
1999 should be excluded from the computation of the four-year prescriptive period for illegal dismissal cases.
However, the Court had already ruled that the prescriptive period continues even after the withdrawal of the case
as though no action has been filed at all. The applicability of Article 115537 of the Civil Code in labor cases was
upheld in the case of Intercontinental Broadcasting Corporation v. Panganiban38 where the Court held that
"although the commencement of a civil action stops the running of the statute of prescription or limitations, its
dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same position as though no action
had been commenced at all."39

In like manner, while the filing of the complaint for illegal dismissal before the LA interrupted the running of the
prescriptive period, its voluntary withdrawal left the petitioners in exactly the same position as though no
complaint had been filed at all. The withdrawal of their complaint effectively erased the tolling of the reglementary
period.

75
A prudent review of the antecedents of the claim reveals that it has in fact prescribed due to the petitioners’
withdrawal of their labor case docketed as NLRC RAB-I-01-1007.40 Hence, while the filing of the said case could
have interrupted the running of the four-year prescriptive period, the voluntary withdrawal of the petitioners
effectively cancelled the tolling of the prescriptive period within which to file their illegal dismissal case, leaving
them in exactly the same position as though no labor case had been filed at all. The running of the four-year
prescriptive period not having been interrupted by the filing of NLRC RAB-I-01-1007, the petitioners’ cause of
action had already prescribed in four years after their cessation of employment on October 26, 1997 and
November 24, 1997. Consequently, when the petitioners filed their complaint for illegal dismissal, separation pay,
retirement benefits, and damages in 2002, their claim, clearly, had already been barred by prescription.41

Sadly, the petitioners have no one but themselves to blame for their own predicament. By their own allegations in
their respective complaints, they have barred their remedy and extinguished their right of action. Although the
Constitution is committed to the policy of social justice and the protection of the working class, it does not
necessary follow that every labor dispute will be automatically decided in favor of labor. The management also has
its own rights. Out of concern for the less privileged in life, this Court, has more often than not inclined, to uphold
the cause of the worker in his conflict with the employer. Such leaning, however, does not blind the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and
applicable law and doctrine.42

WHEREFORE, the Decision dated August 28, 2009 and Resolution dated December 11, 2009 of the Court of Appeals
in CA-G.R. SP No. 106260 are AFFIRMED.

SO ORDERED.

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision
and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP
No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The
appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April
15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for
constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was
also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other
licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents;
neither did she attend any board meeting nor required to do so. She never prepared any legal document and never

76
represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially
with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and
to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by
Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to
sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as
Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001
for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not receive her salary from the
company. She made repeated follow-ups with the company cashier but she was advised that the company was not
earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed
that she is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner
was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the management would ask
her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of
employees, but her services were engaged through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the
company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and
dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of
employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the
employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included
petitioner. SSS records were also submitted showing that petitioner’s latest employer was Seiji Corporation. 13

77
The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly
and severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 – 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of
which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in
addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;

78
3) The award of 10% attorney’s fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are
AFFIRMED.

SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions
dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the
complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one
hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to control not only the end to be achieved
but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between
the parties, owing to the complexity of such a relationship where several positions have been held by the worker.
There are instances when, aside from the employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2)
the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the
totality of circumstances surrounding the true nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or terms of reference to base the relationship on;
and due to the complexity of the relationship based on the various positions and responsibilities given to the
worker over the period of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v.
Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom

79
the services are performed reserves the right to control not only the end achieved but also the manner and means
used to achieve that end.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the
payrolls, to give a clearer picture in determining the existence of an employer-employee relationship based on an
analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of
the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the
employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and
degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of
initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 24 In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By
analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the
Labor Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for
work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting
Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General
Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in
the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei
Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification
card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee
of the firm that issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated
therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an
employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the
latter were the former’s employees. The coverage of Social Security Law is predicated on the existence of an
employer-employee relationship.

80
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never
acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of
petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the
company to secure construction permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document for the corporation, although
once in a while she was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced
that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei
Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with
favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell
the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of
unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other
testimony the same is subject to the test of credibility and should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss
her for cause. More importantly, respondent corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is
an involuntary resignation resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom,
Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a
diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or
creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of
employees. This would enable employees to avail of the benefits accorded to them by law, in line with the
constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as
a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29,
2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages

81
from the time she was illegally terminated until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a fraction of at least six months shall be
considered as one whole year.

SO ORDERED.

G.R. No. 138051 June 10, 2004

JOSE Y. SONZA, petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of
Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals
affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s
dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement")
with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide
SONZA’s services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for
the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the
month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on
behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs
and career. We consider these acts of the station violative of the Agreement and the station as in breach

82
thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance
effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment,
National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay,
service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZA’s talent fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to
file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a
result of a hearing. Thus, the respondent’s plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers
on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The
pertinent parts of the decision read as follows:

xxx

83
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of
a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by
reason of the peculiar circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent
as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services
he undertook to render in accordance with his own style. The benefits conferred to complainant under
the May 1994 Agreement are certainly very much higher than those generally given to employees. For
one, complainant Sonza’s monthly talent fees amount to a staggering ₱317,000. Moreover, his
engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8)
hours of work per day as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by
the parties and not by reason of employer-employee relationship. As correctly put by the respondent,
"All these benefits are merely talent fees and other contractual benefits and should not be deemed as
‘salaries, wages and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature
appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a
stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such
benefit."

The fact that complainant was made subject to respondent’s Rules and Regulations, likewise, does not
detract from the absence of employer-employee relationship. As held by the Supreme Court, "The line
should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et
al., G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the
decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the
case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA
and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an
agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is
the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a
management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast
partner, Mrs. Carmela C. Tiangco.’ (Opposition to Motion to Dismiss)

84
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and
not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the
parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement,
which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said
Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular
courts, the same being in the nature of an action for alleged breach of contractual obligation on the part
of respondent-appellee. As squarely apparent from complainant-appellant’s Position Paper, his claims for
compensation for services, ‘13th month pay’, signing bonus and travel allowance against respondent-
appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while
his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED
THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’

Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of
merely resigning from ABS-CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of
Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, ‘he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said
Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint.
Complainant-appellant’s claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for
breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)

85
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN
is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRC’s conclusion.12 The Court of
Appeals added that it could not re-examine the parties’ evidence and substitute the factual findings of the NLRC
with its own.13

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING TO FIND
THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly
the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of
the relationship between a television and radio station and one of its "talents." There is no case law stating that a
radio and television program host is an employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On
the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual
findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there
is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of
the tribunal in determining where the weight of evidence lies or what evidence is credible.17

SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case
law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power
to control the employee on the means and methods by which the work is accomplished.18 The last element, the so-
called "control test", is the most important element.19

A. Selection and Engagement of Employee

86
ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and
hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies
respondent’s claim of independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that
this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job
contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare,
x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee
contract.21Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees
way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to
show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment
to prevent losses as provided under labor laws.23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza
shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees during
the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA
and ABS-CBN.

87
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is not
an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee,
he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZA’s letter clearly bears this out.26 However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned
from work does not determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of
Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública
("WIPR")27 that a television program host is an independent contractor. We quote the following findings of the
U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a
skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty
possesses a master’s degree in public communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty
provided the "tools and instrumentalities" necessary for her to perform. Specifically, she provided, or
obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the "equipment necessary to tape the show." Alberty’s argument is misplaced.
The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her
appearance on the show. Others provided equipment for filming and producing the show, but these were
not the primary tools that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s contracts
with WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program
Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to
these tapings. x x x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well – the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s

88
control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not
dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show,
ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with
the means and methods of SONZA’s performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but
ABS-CBN must still pay his talent fees in full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in
full SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s
work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBN’s approval. This proves that
ABS-CBN’s control was limited only to the result of SONZA’s work, whether to broadcast the final product or not. In
either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in
their shows. Since the management did not have control over the manner of performance of the skills of the
artists, it could only control the result of the work by deleting objectionable features.37

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance.38Even
though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for
SONZA to display his talent during the airing of the programs.39

A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZA’s work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and
talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of work
but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement

89
refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to
talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of
the former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these
general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to
the services being rendered may be accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.44

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired
from performing his services according to his own initiative.45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-
CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice
is not designed to control the means and methods of work of the talent, but simply to protect the investment of
the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in
building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive
with the station for a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to
work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-
CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that
MJMDC is a "labor-only" contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal
responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the
employees.48 These circumstances are not present in this case.

90
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The
records do not show that MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay Management
and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and
General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled,
headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who
himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and
his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC
does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the
broadcast and television industry.49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally
settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no
legal presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot
exclude independent contractors from the class of service providers to the broadcast industry. The classification of
workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving
his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading
and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint
excluding those that may have been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall take the place of the latter’s
direct testimony. x x x

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of
their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is
need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making

91
such determination, ask clarificatory questions to further elicit facts or information, including but not
limited to the subpoena of relevant documentary evidence, if any from any party or witness.50

The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat
talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the
right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-
employee relationship. To hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The
right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise
and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their services only as employees, the station
owners and managers can dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act
No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are
subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an
employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are
present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the
findings of the Labor Arbiter and the Court of Appeals that SONZA’s claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In
effect, SONZA’s cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the
regular courts.58

92
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R.
SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,


vs.
ANTONIO BAUTISTA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of Appeals
affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision
of the Labor Arbiter (finding respondent entitled to the award of 13th month pay and service incentive leave pay)
by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems,
Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via
Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total
gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was
driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back to
Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from
Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite
respondent’s pleas for reconsideration, the same was ignored by management. After a month, management sent
him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses involving
reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters,
memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was
involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s employment was
terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03
January 2000.

93
On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter
Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg
to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the
following:

a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed
at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the respondent,
presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered
its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

"Section 3. Employers covered. – The Decree shall apply to all employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the
award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month
pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration
of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with
the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the
dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in
toto. No costs.7

94
Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as
amended, is applicable to respondent’s claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-
visSection 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. – This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as "field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow.9 Hence, employees engaged on
task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive leave just
because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the
issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.

95
According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by
the employer or his representative, the workplace being away from the principal office and whose hours
and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount
for rendering specific service or performing specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee
would ever be considered a field personnel because every employer, in one way or another, exercises control over
his employees. Petitioner further argues that the only criterion that should be considered is the nature of work of
the employee in that, if the employee’s job requires that he works away from the principal office like that of a
messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not merely
concerned with the location where the employee regularly performs his duties but also with the fact that the
employee’s performance is unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee
is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s
time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are
problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic]
specified time, as they generally observe prompt departure and arrival from their point of origin to their
point of destination. In each and every depot, there is always the Dispatcher whose function is precisely
to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated
proper time. These, are present in the case at bar. The driver, the complainant herein, was therefore
under constant supervision while in the performance of this work. He cannot be considered a field
personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a
field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of
petitioner’s business. Accordingly, respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is
entitled to.

96
The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year
prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of service incentive
leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be
filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of
action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative
of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a
cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a
determination must be made as to the period when the act constituting a violation of the workers’ right to the
benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the
filing of the money claim, said cause of action has already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the
benefits being claimed have been withheld from the employee for a period longer than three (3) years, the
amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription. The
amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits
withheld within three (3) years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to
other benefits granted by the law to every employee. In the case of service incentive leave, the employee may
choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the
year.15 Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is
entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave.
As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,
subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations
provides that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay." Service incentive leave is a right which accrues to every
employee who has served "within 12 months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular holidays unless the working
days in the establishment as a matter of practice or policy, or that provided in the employment contracts,
is less than 12 months, in which case said period shall be considered as one year." It is also "commutable
to its money equivalent if not used or exhausted at the end of the year." In other words, an employee who
has served for one year is entitled to it. He may use it as leave days or he may collect its monetary
value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such
right.17 [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his
service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent
if the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or

97
separation from employment, his cause of action to claim the whole amount of his accumulated service incentive
leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from
employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude
that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes
entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case
may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary
principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman’s welfare should be the primordial and paramount consideration.18 The policy is to
extend the applicability of the decree to a greater number of employees who can avail of the benefits under the
law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation
until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service
incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former employer commutation of his
accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave
thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from
the time the employer failed to compensate his accumulated service incentive leave pay at the time of his
dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

G.R. No. 195466 July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2 and the
January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled and
set aside the May 26, 2010 decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed
the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's
monetary claims.

The Factual Antecedents

98
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business under
the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month pay. He also
claimed payment for moral and exemplary damages and attorney’s fees. Macasio also claimed payment for service
incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995. Macasio
claimed that David exercised effective control and supervision over his work, pointing out that David: (1) set the
work day, reporting time and hogs to be chopped, as well as the manner by which he was to perform his work; (2)
daily paid his salary of ₱700.00, which was increased from ₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005;
and (3) approved and disapproved his leaves. Macasio added that David owned the hogs delivered for chopping, as
well as the work tools and implements; the latter also rented the workplace. Macasio further claimed that David
employs about twenty-five (25) butchers and delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten employees.
He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is, therefore, not entitled
to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the Implementing Rules and
Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and
ends at 2:00 a.m. of the following day or earlier, depending on the volume of the delivered hogs; (2) received the
fixed amount of ₱700.00 per engagement, regardless of the actual number of hours that he spent chopping the
delivered hogs; and (3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs
were delivered.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in 2005. He
pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his employment,
albeit erroneously, in January 2000. Second, he reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the latter on
"pakyaw" or task basis. He also claimed that he issued the Certificate of Employment, upon Macasio’s request,
only for overseas employment purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay,"14 executed by
Presbitero Solano and Christopher (Antonio Macasio’s co-butchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave credence to
David’s claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following facts to support this
finding: (1) Macasio received the fixed amount of ₱700.00 for every work done, regardless of the number of hours
that he spent in completing the task and of the volume or number of hogs that he had to chop per engagement;
(2) Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day;
and (3) the ₱700.00 fixed wage far exceeds the then prevailing daily minimum wage of ₱382.00. The LA added that
the nature of David’s business as hog dealer supports this "pakyaw" or task basis arrangement.

The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime, holiday,
SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not require
Macasio to observe an eight hour work schedule to earn the fixed ₱700.00 wage; and that Macasio had been
performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion of the
assigned task, irrespective of the time consumed in its performance. Since Macasio was paid by result and not in
terms of the time that he spent in the workplace, Macasio is not covered by the Labor Standards laws on overtime,
SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18

99
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed the NLRC’s
ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found
Macasio entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos
Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage of holiday, SIL
and 13th month pay only if he is likewise a "field personnel." As defined by the Labor Code, a "field personnel" is
one who performs the work away from the office or place of work and whose regular work hours cannot be
determined with reasonable certainty. In Macasio’s case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at David’s "Yiels Hog Dealer" business in Sta. Mesa, Manila
under David’s supervision and control, and for a fixed working schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years, with 10%
attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for moral and exemplary
damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s January 31, 2011
resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a "pakyaw" or task basis. Hence, the latter is
excluded from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions before the lower
tribunals27 and adds that he never had any control over the manner by which Macasio performed his work and he
simply looked on to the "end-result." He also contends that he never compelled Macasio to report for work and
that under their arrangement, Macasio was at liberty to choose whether to report for work or not as other
butchers could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their (David and
Macasio’s) established "pakyawan" arrangement that rendered a written contract unnecessary. In as much as
Macasio is a task basis employee – who is paid the fixed amount of ₱700.00 per engagement regardless of the time
consumed in the performance – David argues that Macasio is not entitled to the benefits he claims. Also, he posits
that because he engaged Macasio on "pakyaw" or task basis then no employer-employee relationship exists
between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when, as
in this case, they are supported by substantial evidence. Hence, David posits that the CA erred in reversing the
labor tribunals’ findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court
believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to David’s position, the
₱700.00 fee that he was paid for each day that he reported for work does not indicate a "pakyaw" or task basis
employment as this amount was paid daily, regardless of the number or pieces of hogs that he had to chop.
Rather, it indicates a daily-wage method of payment and affirms his regular employment status. He points out that
David did not allege or present any evidence as regards the quota or number of hogs that he had to chop as basis
for the "pakyaw" or task basis payment; neither did David present the time record or payroll to prove that he

100
worked for less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or "pakyawan" agreement, Macasio
concludes that he was David’s employee. Procedurally, Macasio points out that David’s submissions in the present
petition raise purely factual issues that are not proper for a petition for review on certiorari. These issues –
whether he (Macasio) was paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an
employer-employee relationship existed between him and David; and whether David exercised control and
supervision over his work – are all factual in nature and are, therefore, proscribed in a Rule 45 petition. He argues
that the CA’s factual findings bind this Court, absent a showing that such findings are not supported by the
evidence or the CA’s judgment was based on a misapprehension of facts. He adds that the issue of whether an
employer-employee relationship existed between him and David had already been settled by the LA29 and the
NLRC30 (as well as by the CA per Macasio’s manifestation before this Court dated November 15, 2012),31 in his
favor, in the separate illegal case that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and
13th month pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition before the
CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion in ruling that Macasio is
entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65 proceeding, this
Court’s power of review is limited to resolving matters pertaining to any perceived legal errors that the CA may
have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional errors, which
we undertake in an original certiorari action. In reviewing the legal correctness of the CA decision, we examine the
CA decision based on how it determined the presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the merits of the case was correct.32 In other
words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised against the
assailed CA decision.34

In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and 13th month
pay. This one is a question of law. The determination of this question of law however is intertwined with the
largely factual issue of whether Macasio falls within the rule on entitlement to these claims or within the
exception. In either case, the resolution of this factual issue presupposes another factual matter, that is, the
presence of an employer-employee relationship between David and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on
"pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of
employment relationship. Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of employment or independent

101
contractorship. Article 97(6) of the Labor Code defines wages as "xxx the 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 services rendered or to
be rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by results or
those whose pay is calculated in terms of the quantity or quality of their work output which includes "pakyaw"
work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates
employer-employee relationship, David would want the Court to engage on a factual appellate review of the entire
case to determine the presence or existence of that relationship. This approach however is not authorized under a
Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-employee but
because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday and
13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA,
the LA, the NLRC and the CA uniformly found the existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact a
non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by the CA
under 65, the narrow scope of inquiry is whether the CA correctly determined the presence or absence of grave
abuse of discretion on the part of the NLRC. In concrete question form, "did the NLRC gravely abuse its discretion
in denying Macasio’s claims simply because he is paid on a non-time basis?"

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists
baseless. Employing the control test,38 we find that such a relationship exist in the present case.

Even a factual review shows that Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally need to be considered,
namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee’s conduct. These elements or indicators comprise the so-called "four-
fold" test of employment relationship. Macasio’s relationship with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the
employee." David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply
po siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang
Sinumpaang Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and
"kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming trabaho."

Second, David paid Macasio’s wages.Both David and Macasio categorically stated in their respective pleadings
before the lower tribunals and even before this Court that the former had been paying the latter ₱700.00 each day
after the latter had finished the day’s task. Solano and Antonio also confirmed this fact of wage payment in their
"Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of wages."

Third, David had been setting the day and time when Macasio should report for work. This power to determine the
work schedule obviously implies power of control. By having the power to control Macasio’s work schedule, David
could regulate Macasio’s work and could even refuse to give him any assignment, thereby effectively dismissing
him.

102
And fourth, David had the right and power to control and supervise Macasio’s work as to the means and methods
of performing it. In addition to setting the day and time when Macasio should report for work, the established
facts show that David rents the place where Macasio had been performing his tasks. Moreover, Macasio would
leave the workplace only after he had finished chopping all of the hog meats given to him for the day’s task. Also,
David would still engage Macasio’s services and have him report for work even during the days when only few
hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe
certain rules and requirements and David would necessarily exercise some degree of control as the chopping of
the hog meats would be subject to his specifications. Also, since Macasio performed his tasks at David’s workplace,
David could easily exercise control and supervision over the former. Accordingly, whether or not David actually
exercised this right or power to control is beside the point as the law simply requires the existence of this power to
control 4243 or, as in this case, the existence of the right and opportunity to control and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-
employee relationship existing between David and Macasio.

Macasio is engaged on "pakyaw" or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio was engaged or
paid on "pakyaw" or task basis. This factual finding binds the Court under the rule that factual findings of labor
tribunals when supported by the established facts and in accord with the laws, especially when affirmed by the CA,
is binding on this Court.

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage payment,
is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on the task itself, in the
sense that payment is reckoned in terms of completion of the work, not in terms of the number of time spent in
the completion of work.45 Once the work or task is completed, the worker receives a fixed amount as wage,
without regard to the standard measurements of time generally used in pay computation.

In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter,
regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to him for
chopping, Macasio would receive the fixed amount of ₱700.00 once he had completed his task. Clearly, these
circumstances show a "pakyaw" or task basis engagement that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by applying the "four-fold"
test; engagement on "pakyaw" or task basis does not determine the parties’ relationship as it is simply a method of
pay computation. Accordingly, Macasio is David’s employee, albeit engaged on "pakyaw" or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is entitled
to holiday, 13th month, and SIL pay.

On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of the
IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC, on
the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations Implementing PD No. 851.
Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from the coverage of holiday, SIL and
13th month pay.

103
In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on Section 1, Rule V
of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos Transit.46 These labor law
provisions, when read together with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if
they qualify as "field personnel."

In other words, what we have before us is largely a question of law regarding the correct interpretation of these
labor code provisions and the implementing rules; although, to conclude that the worker is exempted or covered
depends on the facts and in this sense, is a question of fact: first, whether Macasio is a "field personnel"; and
second, whether those engaged on "pakyaw" or task basis, but who are not "field personnel," are exempted from
the coverage of holiday, SIL and 13th month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under Rule
65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave abuse of
discretion on the part of the NLRC to deny Macasio’s monetary claims simply because he is paid on a non-time
basis without determining whether he is a field personnel or not.

To resolve these issues, we need tore-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code -
provisions governing working conditions and rest periods.

Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.

xxxx

"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay
(under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are paid by
results" on the other hand, are not covered by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel" as separate and distinct types of employees
who are exempted from the Title I provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]

xxxx

SECTION 1. Coverage. – This Rule shall apply to all employees except:

xxxx

104
(e)Field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently provides:

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those employed in establishments regularly employing less than
ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment. [emphases ours]

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose performance is unsupervised by the employer including those who
are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be excluded
from their coverage, an employee must be one of those that these provisions expressly exempt, strictly in
accordance with the exemption. Under the IRR, exemption from the coverage of holiday and SIL pay refer to "field
personnel and other employees whose time and performance is unsupervised by the employer including those
who are engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on holiday and
SIL pay do not exclude employees "engaged on task basis" as a separate and distinct category from employees
classified as "field personnel." Rather, these employees are altogether merged into one classification of exempted
employees.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are
engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor Code
provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this rule may be conceded to
be within the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase "those who are engaged
on task or contract basis" in the rule has already been interpreted to mean as follows:

[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that general
and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly, petitioner's
teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the
Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit
cannot therefore be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL pay)

105
only if they qualify as "field personnel." The IRR therefore validly qualifies and limits the general exclusion of
"workers paid by results" found in Article 82 from the coverage of holiday and SIL pay. This is the only reasonable
interpretation since the determination of excluded workers who are paid by results from the coverage of Title I is
"determined by the Secretary of Labor in appropriate regulations."

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has
been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as "field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those "whose actual hours of work in the field cannot be determined with
reasonable certainty."

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting
Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees engaged on task or
contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall under
the classification of field personnel."51 The Court explained that the phrase "including those who are engaged on
task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book III of the IRR should not be
understood as a separate classification of employees to which SIL shall not be granted. Rather, as with its
preceding phrase - "other employees whose performance is unsupervised by the employer" - the phrase "including
those who are engaged on task or contract basis" serves to amplify the interpretation of the Labor Code definition
of "field personnel" as those "whose actual hours of work in the field cannot be determined with reasonable
certainty."

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code
provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply and
solely on the mode of payment of an employee. The NLRC’s utter disregard of this consistent jurisprudential ruling
is a clear act of grave abuse of discretion.52 In other words, by dismissing Macasio’s complaint without considering
whether Macasio was a "field personnel" or not, the NLRC proceeded based on a significantly incomplete
consideration of the case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel from
Serrano and earlier cases, they would have correctly reached a similar conclusion regarding the payment of holiday
pay since the rule exempting "field personnel" from the grant of holiday pay is identically worded with the rule
exempting "field personnel" from the grant of SIL pay. To be clear, the phrase "employees engaged on task or
contract basis "found in the IRR on both SIL pay and holiday pay should be read together with the exemption of
"field personnel."

In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay, the
presence (or absence) of employer supervision as regards the worker’s time and performance is the key: if the

106
worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and
SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday pay) and Article95 (SIL
pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also falls within the meaning of
"field personnel" under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall under
the definition of "field personnel." The CA’s finding in this regard is supported by the established facts of this case:
first, Macasio regularly performed his duties at David’s principal place of business; second, his actual hours of work
could be determined with reasonable certainty; and, third, David supervised his time and performance of duties.
Since Macasio cannot be considered a "field personnel," then he is not exempted from the grant of holiday, SIL pay
even as he was engaged on "pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling dismissing
Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC
gravely abused its discretion in denying this benefit to Macasio.1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of
those expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No.
85154enumerates the exemptions from the coverage of 13th month pay benefits. Under Section 3(e), "employers
of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations
Implementing PD No. 851 exempts employees "paid on task basis" without any reference to "field personnel." This
could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field personnel" at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment of
13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated November 22,
2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.

SO ORDERED.

SECOND DIVISION

G.R. No. 212774, January 23, 2017

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner, v. GUILLERMO T. MAGLAYA, SR., Respondent.

DECISION

PERALTA, J.:

107
For this Court's resolution is a petition for review on certiorari filed by petitioner Wesleyan University-
Philippines (WUP) assailing the Resolution1 dated January 20, 2014 of the Court of Appeals (CA) which denied its
petition for certiorari.

The facts are as follows:chanRoblesvirtualLawlibrary

WUP is a non-stock, non-profit, non-sectarian educational corporation duly organized and existing under the
Philippine laws on April 28, 1948.2

Respondent Atty. Guillenno T. Maglaya, Sr. (Maglaya) was appointed as a corporate member on January 1, 2004,
and was elected as a member of the Board of Trustees (Board) on January 9, 2004 both for a period of five (5)
years. On May 25, 2005, he was elected as President of the University for a five-year term. He was re-elected as a
trustee on May 25, 2007.3

In a Memorandum dated November 28, 2008, the incumbent Bishops of the United Methodist
Church (Bishops) apprised all the corporate members of the expiration of their terms on December 31, 2008,
unless renewed by the former.4 The said members, including Maglaya, sought the renewal of their membership in
the WUP's Board, and signified their willingness to serve the corporation.5

On January 10, 2009, Dr. Dominador Cabasal, Chairman of the Board, informed the Bishops of the cessation of
corporate terms of some of the members and/or trustees since the by-laws provided that the vacancy shall only be
filled by the Bishops upon the recommendation of the Board.6

On March 25, 2009, Maglaya learned that the Bishops created an Ad Hoc Committee to plan the efficient and
orderly turnover of the administration of the WUP in view of the alleged "gentleman's agreement" reached in
December 2008, and that the Bishops have appointed the incoming corporate members and trustees.7 He clarified
that there was no agreement and any discussion of the turnover because the corporate members still have valid
and existing corporate terms.8

On April 24, 2009, the Bishops, through a formal notice to all the officers, deans, staff, and employees of WUP,
introduced the new corporate members, trustees, and officers. In the said notice, it was indicated that the new
Board met, organized, and elected the new set of officers on April 20, 2009.9 Manuel Palomo (Palomo), the new
Chairman of the Board, informed Maglaya of the termination of his services and authority as the President of the
University on April 27, 2009.10

Thereafter, Maglaya and other fonner members of the Board (Plaintiffs) filed a Complaint for Injunction and
Damages before the Regional Trial Court (RTC) of Cabanatuan City, Branch 28.11 In a Resolution12dated August 19,
2009, the RTC dismissed the case declaring the same as a nuisance or harassment suit prohibited under Section
1(b),13 Rule 1 of the Interim Rules for Intra-Corporate Controversies.14 The RTC observed that it is clear from the
by-laws of WUP that insofar as membership in the corporation is concerned, which can only be given by the
College of Bishops of the United Methodist Church, it is a precondition to a seat in the WUP Board.15 Consequently,
the expiration of the terms of the plaintiffs, including Maglaya, as corporate members carried with it their
termination as members of the Board.16Moreover, their continued stay in their office beyond their terms was only
in hold-over capacities, which ceased when the Bishops appointed new members of the corporation and the
Board.17

The CA, in a Decision18 dated March 15, 2011, affirmed the decision of the RTC, and dismissed the petition
for certiorari filed by the plaintiffs for being the improper remedy. The CA held that their status as corporate
members of WUP which expired on December 31, 2008 was undisputed. The CA agreed with the RTC that the
plaintiffs had no legal standing to question the Bishops' alleged irregular appointment of the new members in their
Complaint on May 18, 2009 as the termination of their membership in the corporation necessarily resulted in the
conclusion of their positions as members of the Board pursuant to the WUP by-laws.19

108
Thereafter, Maglaya filed on March 22, 2011 the present illegal dismissal case against WUP, Palomo, Bishop Lito C.
Tangonan (Tangonan), and Bishop Leo A. Soriano (Soriano).20 Maglaya claimed that he was unceremoniously
dismissed in a wanton, reckless, oppressive and malevolent manner on the eve of April 27, 2009.21 Tangonan and
Soriano acted in evident bad faith when they disregarded his five-year term of office and delegated their protege
Palomo as the new university president.22 Maglaya alleged that he faithfully discharged his necessary and desirable
functions as President, and received P175,000.00 as basic salary, P10,000.00 as cost of living allowance, and
P10,000.00 as representation allowance. He was also entitled to other benefits such as: the use of university
vehicles; the use of a post paid mobile cellular phone in his official transactions; the residence in the University
Executive House located at Inday Street, Magsaysay Sur, Cabanatuan City, with free water, electricity, and services
of a household helper; and receipt of 13th month pay, vacation leave pay, retirement pay, and shares in related
learning experience.23 On May 31, 2006, his basic salary was increased to P95,000.00 due to his additional duty in
overseeing the operations of the WUP Cardiovascular and Medical Center.

Maglaya presented the following pieces of evidence: copies of his appointment as President, his Identification
Card, the WUP Administration and Personnel Policy Manual which specified the retirement of the university
president, and the check disbursement in his favor evidencing his salary, to substantiate his claim that he was a
mere employee.24

WUP, on the other hand, asseverated that the dismissal or removal of Maglaya, being a corporate officer and not a
regular employee, is a corporate act or intra-corporate controversy under the jurisdiction of the RTC.25 WUP also
maintained that since Maglaya's appointment was not renewed, he ceased to be a member of the corporation and
of the Board; thus, his term for presidency has also been terminated.26

Meanwhile, this Court, in a Resolution dated June 13, 2011, denied the petition for review on certiorarifiled by
Maglaya and the other former members of the Board for failure to show any reversible error in the decision of the
CA. The same became final and executory on August 24, 2011.27

In a Decision28 dated September 20, 2011, the Labor Arbiter (LA) ruled in favor of WUP. The LA held that the action
between employers and employees where the employer-employee relationship is merely incidental is within the
exclusive and original jurisdiction of the regular courts.29 Since he was appointed as President of the University by
the Board, Maglaya was a corporate officer and not a mere employee. The instant case involves intra-corporate
dispute which was definitely beyond the jurisdiction of the labor tribunal.30 The dispositive portion of the decision
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the instant complaint is hereby dismissed for lack of jurisdiction.

SO ORDERED.31

In a Decision32 dated April 25, 2012, the National Labor Relations Commission (NLRC) in NLRC-LAC No. 01-000470-
12, reversed and set aside the Decision of the LA ruling that the illegal dismissal case falls within the jurisdiction of
the labor tribunals. Since the reasons for his termination cited by WUP were not among the just causes provided
under Article 28233 (now Article 297) of the Labor Code, Maglaya was illegally dismissed. The NLRC observed that
the Board did not elect Maglaya, but merely appointed him. Maglaya was appointed for a fixed period of five (5)
years from May 7, 2005 to May 6, 2010, while the period of his appointment as member of the corporation was
five (5) years from January 2004.34 The decretal portion of the decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE,
declaring:chanRoblesvirtualLawlibrary

109
(a) jurisdiction over this case by virtue of the employer-employee relation of the
parties

(b) the illegality of the dismissal of [respondent] by [petitioner]

[Petitioner] therefore [is] hereby ordered to pay [respondent]:

1. separation pay - [P] 375,000.00

2. full backwages - 1,252,462.50

3. retirement pay - 500,000.00

4. moral damages - 100,000.00

5. exemplary damages - 50,000.00

6. 10% of the above as attorney's fees - 227,746.25

TOTAL AWARDS - [P]2,505,208.75

based on the attached computation of this Commission's Computation Unit.

SO ORDERED.35

Ruling in favor of Maglaya, the NLRC explicated that although the position of the President of the University is a
corporate office, the manner of Maglaya's appointment, and his duties, salaries, and allowances point to his being
an employee and subordinate.36 The control test is the most important indicator of the presence of employer-
employee relationship. Such was present in the instant case as Maglaya had the duty to report to the Board, and it
was the Board which terminated or dismissed him even before his term ends.37

Thereafter, the NLRC denied the motion for reconsideration filed by WUP in a Resolution38 dated February 11,
2013.

In a Resolution, the CA dismissed the petition for certiorari filed by WUP. The CA noted that the decision and
resolution of the NLRC became final and executory on March 16, 2013.39 WUP's attempt to resurrect its lost
remedy through filing the petition would not prosper since final and executory judgment becomes unalterable and
may no longer be modified in any respect.40 Thus:chanRoblesvirtualLawlibrary

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.41

Upon denial of his Motion for Reconsideration, WUP elevated the case before this Court raising the
issue:chanRoblesvirtualLawlibrary

110
The Court of Appeals committed an error of law when it summarily dismissed the special civil action
for certiorari raising lack of jurisdiction of the NLRC filed by [WUP] where it was very clear that the NLRC had no
jurisdiction over the case involving a corporate officer and where the nature of the controversy is an intra-
corporate dispute.

We find the instant petition impressed with merit.

WUP alleges that while the NLRC decision became final and executory on March 16, 2013, it did not mean that the
said decision had become immutable and unalterable as the CA ruled. WUP maintains that the remedy of the
aggrieved party against a final and executory decision of the NLRC is the filing of the petition for certiorari under
Rule 65 of the Rules of Court. As such, it was able to meet the conditions set forth in filing the said remedy before
the CA.

Settled is the rule that while the decision of the NLRC becomes final and executory after the lapse of ten calendar
days from receipt thereof by the parties under Article 22342 (now Article 229) of the Labor Code, the adverse party
is not precluded from assailing it via Petition for Certiorari under Rule 65 before the CA and then to this Court via a
Petition for Review under Rule 45.43

This Court has explained and clarified the power of the CA to review NLRC decisions, viz.:

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled
as early as in our decision in St. Martin Funeral Home v. National Labor Relations Commission. This Court held that
the proper vehicle for such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, and
that this action should be filed in the Court of Appeals in strict observance of the doctrine of the hierarchy of
courts. Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic
Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of Appeals, amending for the purpose of Section
Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of
Appeals — pursuant to the exercise of its original jurisdiction over Petitions for Certiorari - is specifically given the
power to pass upon the evidence, if and when necessary, to resolve factual issues.44

Consequently, the remedy of the aggrieved party is to timely file a motion for reconsideration as a precondition
for any further or subsequent remedy, and then seasonably avail of the special civil action of certiorari under Rule
65, for a period of sixty (60) days from notice of the decision.45

Records reveal that WOP received the decision of the NLRC on May 12, 2012, and filed its motion for
reconsideration on May 24, 2012.46 WUP received the Resolution dated February 11, 2013 denying its motion on
March 12, 2013.47 Thereafter, it filed its petition for certiorari before the CA on March 26, 2013.48

We find that the application of the doctrine of immutability of judgment in the case at bar is misplaced. To
reiterate, although the 10-day period for finality of the decision of the NLRC may already have lapsed as
contemplated in the Labor Code, this Court may still take cognizance of the petition for certiorari on jurisdictional
and due process considerations if filed within the reglementary period under Rule 65.49 From the abovementioned,
WUP was able to discharge the necessary conditions in availing its remedy against the final and executory decision
of the NLRC.

There is an underlying power of the courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by statute.50 Furthermore, the purpose of judicial review is to
keep the administrative agency within its jurisdiction and protect the substantial rights of the parties.51

Now on the issue of whether or not the NLRC has jurisdiction over the illegal dismissal case filed by Maglaya.

111
The said issue revolves around the question on whether Maglaya is a corporate officer or a mere employee. For
purposes of identifying an intra-corporate controversy, We have defined corporate officers,
thus:chanRoblesvirtualLawlibrary

"Corporate officers" in the context of Presidential Decree No. 902-A are those officers of the corporation who
are given that character by the Corporation Code or by the corporation's by-laws. There are three specific officers
whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and
the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as
may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager.
The number of corporate officers is thus limited by law and by the corporation's by-laws.52

The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive officers
of a corporation, and they are usually designated as the officers of the corporation. However, other officers are
sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered
under the by-laws of a corporation to create additional offices as may be necessary. This Court expounded that
an "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders,
while an "employee" usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the compensation to be paid to
such employee.53

From the foregoing, that the creation of the position is under the corporation's charter or by-laws, and that
the election of the officer is by the directors or stockholders must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer. It is only when the officer claiming to
have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-corporate
dispute which falls within the jurisdiction of the trial courts.54

In its position paper before the LA, WUP presented its amended By-Laws55 dated November 28, 1988 submitted to
the SEC to prove that Maglaya, as the University President, was a corporate officer whose rights do not fall within
the jurisdiction of the labor tribunal. It also presented the Resolution dated August 19, 2009 of the RTC, and the
Decision dated March 15, 20 11 of the CA to show that the earlier case was filed by Maglaya and others, as
members of the Board, questioning the Bishops' appointment of the new members without their
recommendation.

The relevant portions of the amended By-Laws provide:chanRoblesvirtualLawlibrary

ARTICLE VI. BOARD OF TRUSTEES

xxxx

Section 2. Membership – (a) The Board of Trustees shall be composed of Ten (10) members of the corporation
from among themselves provided, that six (6) shall come from the Ministry and Laity of the United Methodist
[C]hurch in the Philippines, three (3) shall be non-Methodist, friends and sympathizers of the Wesleyan University-
Philippines and of the United Methodist Church, and one (1) representative of the Wesleyan Alumni Association,
as provided in section 1 (c), Article IV hereof, and (b) provided further that the incumbent area bishop and
the President of the Wesleyan University-Philippines shall be honorary members of the Board.

x x x x56

ARTICLE VIII. OFFICERS

Section 1. Officers – The officers of the Board of Trustees shall be:chanRoblesvirtualLawlibrary

112
(a) Chairman
(b) Vice-Chairman
(c) Secretary
(d) Treasurer

xxxx

Section 6. The President of Wesleyan University-Philippines – The President of the University, who must be an
active member of the United Methodist Church in the Philippines at the time of his election shall be in-charge of
and be responsible for the administration of the University and other institutions of learning that [m]ay hereafter
be established by the corporation, and

(a) May, with the Board of Trustees;chanrobleslaw

(1) Organize and/or reorganize the administrative set up of the Wesleyan University-Philippines to effect efficiency
and upgrade institutional administration and supervision;chanrobleslaw

(2) Employ, suspend, dismiss, transfer or replace personnel and prescribe and enforce rules and regulations for
their proper conduct in the discharge of their duties;chanrobleslaw

(3) Shall make reports during the different rumual conference of the United Methodist Church ru1d to such
agencies as may be deemed necessary on the operations of the university and related matters;chanrobleslaw

(4) Shall prescribe and enforce rules and regulations for the promotion and maintenance of discipline in the proper
conduct and discharge of the functions and duties of subordinate administrative officers, professors, teachers,
employees and students and other personnel.

(b) Shall make reports and recommendations to the Board of Trustees or to the Chairman of the Board of Trustees
on matters pertaining to the institution as he may find necessary;chanrobleslaw

(c) Shall countersign all checks drawn by the Treasurer from the depository of the University, and

(d) Shall exercise, perform and discharge all such other powers, functions and duties as are interest in the office of
the President.

x x x57

It is apparent from the By-laws of WUP that the president was one of the officers of the corporation, and was an
honorary member of the Board. He was appointed by the Board and not by a managing officer of the corporation.
We held that one who is included in the by-laws of a corporation in its roster of corporate officers is an officer of
said corporation and not a mere employee.58

The alleged "appointment" of Maglaya instead of "election" as provided by the by-laws neither convert the
president of university as a mere employee, nor amend its nature as a corporate officer. With the office specifically
mentioned in the by-laws, the NLRC erred in taking cognizance of the case, and in concluding that Maglaya was a
mere employee and subordinate official because of the manner of his appointment, his duties and responsibilities,
salaries and allowances, and considering the Identification Card, the Administration and Personnel Policy Manual
which specified the retirement of the university president, and the check disbursement as pieces of evidence
supporting such finding.

A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy which arises between a
stockholder and a corporation, and the nature is not altered by the reason or wisdom with which the Board of

113
Directors may have in taking such action.59 The issue of the alleged termination involving a corporate officer, not a
mere employee, is not a simple labor problem but a matter that comes within the area of corporate affairs and
management and is a corporate controversy in contemplation of the Corporation Code.60

The long-established rule is that the jurisdiction over a subject matter is conferred by law.61 Perforce, Section 5 (c)
of PD 902-A, as amended by Subsection 5.2, Section 5 of Republic Act No. 8799, which provides that the regional
trial courts exercise exclusive jurisdiction over all controversies in the election or appointment of directors,
trustees, officers or managers of corporations, partnerships or associations, applies in the case at bar.62

To emphasize, the determination of the rights of a corporate officer dismissed from his employment, as well as the
corresponding liability of a corporation, if any, is an intra-corporate dispute subject to the jurisdiction of the
regular courts.63

As held in Leonor v. Court of Appeals,64 a void judgment for want of jurisdiction is no judgment at all. It cannot be
the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating
from it have no legal effect. Hence, it can never become final and any writ of execution based on it is void.65

Since this Court is now reversing the challenged decision of the CA and affirming the decision of the LA in
dismissing the case for want of jurisdiction, Maglaya is not entitled to collect the amount of P2,505,208.75
awarded from the time the NLRC decision became final and executory up to the time theCA dismissed WUP's
petition for certiorari.

In sum, this Court finds that the NLRC erred in assuming jurisdiction over, and thereafter in failing to dismiss,
Maglaya's complaint for illegal dismissal against WUP, since the subject matter of the instant case is an intra-
corporate controversy which the NLRC has no jurisdiction.

WHEREFORE, the petition for review on certiorari filed by petitioner Wesleyan University-Philippines is
hereby GRANTED. The assailed Resolution dated January 20, 2014 of the Court of Appeals in CA-G.R. SP No.
129196 is hereby REVERSED and SET ASIDE. Respondent Atty. Guillermo T. Maglaya, Sr. is
hereby ORDERED to REIMBURSE the petitioner the amount of P2,505,208.75 awarded by the National Labor
Relations Commission.

SO ORDERED.chanroblesvirtuallawlibrary

G.R. No. 220617, January 30, 2017

NESTLE PHILIPPINES, INC., Petitioner, v. BENNY A. PUEDAN, JR., JAYFER D. LIMBO, BRODNEY N. AVILA, ARTHUR
C. AQUINO, RYAN A. MIRANDA, RONALD R. ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS REYES, ANGELITO R.
CORDOVA, EDGAR S. BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B. LANGUISAN, EDISON U. VILLAPANDO,
JHEIRNEY S. REMOLIN, MARY LUZ A. MACATALAD,* JENALYN M. GAMUROT, DENNIS G. BAWAG, RAQUEL A.
ABELLERA, AND RICANDRO G. GUATNO, JR., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2015 and the Resolution3 dated
September 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132686, which affirmed the Decision4 dated
May 30, 2013 and the Resolution5 dated August 30, 2013 of the National Labor Relations Commission (NLRC) in
LAC No. 02-000699-13/ NCR-03-04761-12, declaring petitioner Nestle Philippines, Inc. (NPI), jointly and severally
liable with Ocho de Septiembre, Inc. (ODSI) to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Bradney N. Avila,
Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelita R. Cordova,

114
Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan, Edison U. Villapando, Jheirney S. Remolin, Mary Luz A.
Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr. (respondents)
for separation pay, nominal damages, and attorney's fees.

The Facts

The instant case arose from an amended6 complaint7 dated July 6, 2012 for illegal dismissal, damages, and
attorney's fees filed by respondents against, inter alia, ODSI and NPI. Respondents alleged that on various dates,
ODSI and NPI hired them to sell various NPI products in the assigned covered area. After some time, respondents
demanded that they be considered regular employees of NPI, but they were directed to sign contracts of
employment with ODSI instead. When respondents refused to comply with such directives, NPI and ODSI
terminated them from their position.8 Thus, they were constrained to file the complaint, claiming that: (a) ODSI is a
labor-only contractor and, thus, they should be deemed regular employees of NPI; and (b) there was no just or
authorized cause for their dismissal.9

For its part, ODSI averred that it is a company engaged in the business of buying, selling, distributing, and
marketing of goods and commodities of every kind and it enters into all kinds of contracts for the acquisition
thereof. ODSI admitted that on various dates, it hired respondents as its employees and assigned them to execute
the Distributorship Agreement10 it entered with NPI,11 the relevant portions of which
state:ChanRoblesVirtualawlibrary
3.1 DISTRIBUTOR (ODSI) shall assign a sales force in his/her regular employ, dedicated solely to the handling
of NPI Grocery Retail Products under this Agreement, and who shall exclusively cover assigned
areas/channels of distribution.

3.2 DISTRIBUTOR shall service the outlets within the Territory by re-selling Products obtained exclusively
from Nestle Philippines, Inc. and not from any other source.

3.3 DISTRIBUTOR shall utilize booking and distribution salesmen to undertake territory development.
Booking done by DISTRIBUTOR shall be delivered by its personnel. Collection of accounts shall be taken
cared (sic) of by DISTRIBUTOR, without prejudice to the provisions of Clause 13 hereof.

3.4 DISTRIBUTOR's route salesmen shall exclusively cover assigned ex-truck areas/channels of distribution.

3.5 DISTRIBUTOR shall also provide training to its staff or personnel where necessary, to improve
operations in servicing the requirements of DISTRIBUTOR's customers. From time to time, NESTLE shall
offer to DISTRIBUTOR suggestions and recommendations to improve sales and to further develop the
market.

3.6 DISTRIBUTOR shall meet the sales, reach and distribution targets agreed upon by NESTLE and
DISTRIBUTOR. For purposes of this clause, reach targets refer to the number of stores, dealers and/or
outlets which DISTRIBUTOR should cover or service within a particular period. Distribution targets refer
to the number of stock keeping units and/or product lines covered by this Agreement.

In the event of DISTRIBUTOR's failure to meet NESTLE's sales targets, NESTLE has the sole discretion of
assigning another distributor of the Products and/or reducing the Territory covered by DISTRIBUTOR.

115
3.7 DISTRIBUTOR agrees to provide at its own cost and expense facilities and other resources necessary for
the distribution and sale of the Products.

3.8 NESTLE's sales personnel may get orders for the Products distributed by DISTRIBUTOR and pass on the
said orders to DISTRIBUTOR.

3.9 NESTLE shall provide the necessary promotional and marketing support for the Products through
promotional materials, product information literature, participation in trade fairs, and other market
development activities.

3.10 Should NESTLE manufacture and/or distribute other products not subject of this Agreement, which, in
NESTLE's opinion, should likewise be extended to DISTRIBUTOR's outlets, such additional products shall
be included among those listed in Annex "A" hereof.

NESTLE shall deliver the Products to DISTRIBUTOR's warehouse(s) at its own expenses. Immediately
upon receipt of the Products, DISTRIBUTOR shall carry out a visual inspection thereof. In the event any
quantity of the Products is found to be defective upon such visual inspection, NESTLE shall replace such
quantity of the Products at no cost to DISTRIBUTOR.

3.11 All costs for transportation and/or shipment of the Products from DISTRIBUTOR's warehouse(s) to its
outlets/customers shall be the account of the DISTRIBUTOR.12
However, the business relationship between NPI and ODSI turned sour when the former's sales department
badgered the latter regarding the sales targets. Eventually, NPI downsized its marketing and promotional support
from ODSI which resulted to business reverses and in the latter's filing of a petition for corporate rehabilitation
and, subsequently, the closure of its Nestle unit due to the termination of the Distributorship Agreement and the
failure of rehabilitation. Under the foregoing circumstances, ODSI argued that respondents were not dismissed but
merely put in floating status.13

On the other hand, NPI did not file any position paper or appear in the scheduled conferences.14

The Labor Arbiter Ruling

In a Decision15 dated December 28, 2012, the Labor Arbiter (LA) dismissed the complaint for lack of merit, but
nevertheless, ordered, inter alia, ODSI and NPI to pay respondents nominal damages in the aggregate amount of
P235,728.00 plus attorney's fees amounting to ten percent (10%) of the total monetary awards.16 The LA found
that: (a) respondents were unable to prove that they were NPI employees; and (b) respondents were not illegally
dismissed as ODSI had indeed closed down its operations due to business losses.17 As to the issue on the failure to
give respondents a thirty (30)-day notice prior to such closure, the LA concluded that all the impleaded
respondents therein (i.e., including NPI) should be held liable for the payment of nominal damages plus attorney's
fees.18

Aggrieved, respondents appealed to the NLRC.19

The NLRC Ruling

In a Decision20 dated May 30, 2013, the NLRC reversed and set aside the LA ruling and, accordingly, ordered ODSI
and NPI to pay each of the respondents: (a) separation pay amounting to 1/2 month pay for every year of service

116
reckoned from the time they were employed until the finality of the Decision; and (b) nominal damages in the
amount of P30,000.00. The NLRC likewise ordered NPI and ODSI to pay respondents attorney's fees amounting to
ten percent (10%) of the monetary awards.21

Contrary to the LA's findings, the NLRC found that while ODSI indeed shut down its operations, it failed to prove
that such closure was due to serious business losses as it did not present evidence, e.g., financial statements, to
corroborate its claims. As such, it ruled that respondents are entitled to separation pay. In this relation, the NLRC
also found that since ODSI failed to notify respondents of such closure, the latter are likewise entitled to nominal
damages.22

Further, the NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI had no substantial
capitalization or investment; (b) respondents performed activities directly related to NPI's principal business; and
(c) the fact that respondents' employment depended on the continuous supply of NPI products shows that ODSI
had not been carrying an independent business according to its own manner and method.23 Consequently, the
NLRC deemed NPI to be respondents' true employer, and thus, ordered it jointly and severally liable with ODSI to
pay the monetary claims of respondents.24

Respondents moved for a partial reconsideration,25 arguing that since it was only ODSI that closed down
operations and not NPI and, considering the finding that the latter was deemed to be their true employer, NPI
should reinstate them, or if not practicable, to pay them separation pay equivalent to one (1) month pay for every
year of service. NPI also moved for reconsideration,26 contending that: (a) it was deprived of its right to participate
in the proceedings before the LA and the NLRC; and (b) it had no employer-employee relationship with
respondents as ODSI was never its contractor, whether independent or labor-only.27 However, the NLRC denied
both motions in a Resolution28 dated August 30, 2013, holding that: (a) respondents' termination was due to the
closure of ODSI's Nestle unit, an authorized cause and, thus, the monetary awards in their favor were proper; (b)
NPI was not deprived of its right to participate in the proceedings as it was duly served with copies of the parties'
respective pleadings, as well as the rulings of both the LA and the NLRC; (c) assuming arguendo that NPI was
indeed deprived of due process, its subsequent filing of a motion for reconsideration before the NLRC cured the
defect as it was able to argue its position in the said motion; and (d) the circumstances surrounding the
Distributorship Agreement between ODSI and NPI showed that the former is indeed a labor-only contractor of the
latter.29

Dissatisfied, NPI filed a petition for certiorari30 before the CA, essentially insisting that: (a) it was deprived of due
process before the tribunals a quo; and (b) there was no employer-employee relationship between NPI and
respondents.31 Records reveal that no other party elevated the matter before the CA.

The CA Ruling

In a Decision32 dated March 26, 2015, the CA affirmed the NLRC ruling. Anent the issue on due process, the CA held
that NPI was not deprived of its opportunity to be heard as it was able to receive a copy of the complaint and other
pleadings, albeit it failed to respond thereto.33 As regards the substantive issue, the CA ruled that despite ODSI and
NPI's contract being denominated as a "Distributorship Agreement," it contained provisions demonstrating a labor-
only contracting arrangement between them, as well as NPI's exercise of control over the business of ODSI.
Moreover, the CA pointed out that: (a) there was nothing in the records which showed that ODSI had substantial
capital to undertake an independent business; and (b) respondents performed tasks essential to NPI's business.34

Undaunted, NPI moved for reconsideration,35 which was, however, denied in a Resolution36 dated September 17,
2015; hence, this petition.

The Issues Before the Court

The essential issues for the Court's resolution are whether or not the CA correctly ruled that: (a) NPI was accorded
due process by the tribunals a quo; and (b) ODSI is a labor-only contractor of NPI, and consequently, NPI is

117
respondents' true employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary
claims.

The Court's Ruling

To justify the grant of the extraordinary remedy of certiorari, the petitioner must satisfactorily show that the court
or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a
capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal
hostility, the character of which being so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.37

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.38

Guided by the foregoing considerations, the Court finds that the CA was correct in ruling that the labor tribunals a
quo gave NPI an opportunity to be heard. However, it erred in not ascribing grave abuse of discretion on the
NLRC's finding that ODSI is a labor-only contractor of NPI and, thus, the latter is the respondents' true employer,
and jointly and severally liable with ODSI for respondents' monetary claims. As will be explained hereunder, such
finding by the NLRC is not supported by substantial evidence.

I.

The observance of fairness in the conduct of any investigation is at the very heart of procedural due process. The
essence of due process is to be heard, and, as applied to administrative proceedings, this means a fair and
reasonable opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling
complained of. Administrative due process cannot be fully equated with due process in its strict judicial sense, for
in the former a formal or trial-type hearing is not always necessary, and technical rules of procedure are not strictly
applied.39 The Court's disquisition in Ledesma v. CA40 is instructive on this matter, to
wit:ChanRoblesVirtualawlibrary
Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding. Due
process is satisfied when a person is notified of the charge against him and given an opportunity to explain or
defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the
person so charged to answer the accusations against him constitute the minimum requirements of due
process. The essence of due process is simply to be heard, or as applied to administrative proceedings, an
opportunity to explain ones side, or an opportunity to seek a reconsideration of the action or ruling complained
of.41 (Emphasis and underscoring supplied)
In this case, NPI essentially claims that it was deprived of its right to due process when it was not notified of the
proceedings before the LA and did not receive copies and issuances from the other parties and the LA,
respectively.42 However, as correctly pointed out by the CA, NPI was furnished via courier of a copy of the
amended complaint filed by the respondents against it as shown by LBC Receipt No. 125158910840.43It is also
apparent that NPI was also furnished with the respondents' Position Paper, Reply, and Rejoinder.44 Verily, NPI was
indeed accorded due process, but as the LA mentioned, the former chose not to file any position paper or appear
in the scheduled conferences.45

Assuming arguendo that NPI was somehow deprived of due process by either of the labor tribunals, such defect
was cured by: (a) NPI's filing of its motion for reconsideration before the NLRC; (b) the NLRC's subsequent issuance
of its Resolution dated August 30, 2013 wherein the tribunal considered all ofNPI's arguments as contained in its
motion; and (c) NPI's subsequent elevation of the case to the CA. In Gonzales v. Civil Service Commission,46 the
Court reiterated the rule that "[a]ny seeming defect in [the] observance [of due process] is cured by the filing of a
motion for reconsideration," and that "denial of due process cannot be successfully invoked by a party who [was]
afforded the opportunity to be heard x x x."47 Similarly, in Autencio v. Manara,48 it was held that defects in
procedural due process may be cured when the party has been afforded the opportunity to appeal or to seek

118
reconsideration of the action or ruling complained of.49

Evidently, the foregoing shows that NPI was not denied due process of law as it was afforded the fair and
reasonable opportunity to explain its side.

II.

In holding NPI jointly and severally liable with ODSI for the monetary awards in favor of respondents, both the
NLRC and the CA held that based on the provisions of the Distributorship Agreement between them, ODSI is
merely a labor-only contractor of NPI.50 In this regard, the CA opined that the following stipulations of the said
Agreement evinces that NPI had control over the business of ODSI, namely, that: (a) NPI shall offer to ODSI
suggestions and recommendations to improve sales and to further develop the market; (b) NPI prohibits ODSI from
exporting its products (the No-Export provision); (c) NPI provided standard requirements to ODSI for the
warehousing and inventory management of the sold goods; and (d) prohibition imposed on ODSI to sell any other
products that directly compete with those of NPI.51

However, a closer examination of the Distributorship Agreement reveals that the relationship of NPI and ODSI is
not that of a principal and a contractor (regardless of whether labor-only or independent), but that of a seller and
a buyer/re-seller. As stipulated in the Distributorship Agreement, NPI agreed to sell its products to ODSI at
discounted prices,52 which in turn will be re-sold to identified customers, ensuring in the process the integrity and
quality of the said products based on the standards agreed upon by the parties.53 As aptly explained by NPI, the
goods it manufactures are distributed to the market through various distributors, e.g., ODSI, that in turn, re-sell
the same to designated outlets through its own employees such as the respondents. Therefore, the reselling
activities allegedly performed by the respondents properly pertain to ODSI, whose principal business consists of
the "buying, selling, distributing, and marketing goods and commodities of every kind" and "[entering] into all
kinds of contracts for the acquisition of such goods [and commodities]."54

Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship Agreement hardly
demonstrate control on the part of NPI over the means and methods by which ODSI performs its business, nor
were they intended to dictate how ODSI shall conduct its business as a distributor. Otherwise stated, the
stipulations in the Distributorship Agreement do not operate to control or fix the methodology on how ODSI
should do its business as a distributor of NPI products, but merely provide rules of conduct or guidelines towards
the achievement of a mutually desired result55 - which in this case is the sale of NPI products to the end consumer.
In Steelcase, Inc. v. Design International Selections, Inc.,56 the Court held that the imposition of minimum standards
concerning sales, marketing, finance and operations are nothing more than an exercise of sound business practice
to increase sales and maximize profits, to wit:

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed
certain conditions pertaining to business planning, organizational structure, operational effectiveness and
efficiency, and financial stability. It is actually logical to expect that Steelcase, being one of the major
manufacturers of office systems furniture, would require its dealers to meet several conditions for the grant and
continuation of a distributorship agreement. The imposition of minimum standards concerning sales, marketing,
finance and operations is nothing more than an exercise of sound business practice to increase sales and
maximize profits for the benefit of both Steelcase and its distributors. For as long as these requirements do not
impinge on a distributor's independence, then there is nothing wrong with placing reasonable expectations on
them.57 (Emphasis and underscoring supplied)

Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers of foods and grocery
products worldwide - to require its distributors, such as ODSI, to meet various conditions for the grant and
continuation of a distributorship agreement for as long as these conditions do not control the means and methods
on how ODSI does its distributorship business, as shown in this case. This is to ensure the integrity and quality of
the products which will ultimately fall into the hands of the end consumer.

119
Thus, the foregoing circumstances show that ODSI was not a labor only contractor of NPI; hence, the latter cannot
be deemed the true employer of respondents. As a consequence, NPI cannot be held jointly and severally liable to
ODSI's monetary obligations towards respondents.

WHEREFORE, the petition is GRANTED. The Decision dated March 26, 2015 and the Resolution dated September
17, 2015 of the Court of Appeals in CA-G.R. SP No. 132686 are hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated May 30, 2013 and the Resolution dated August 30, 2013 of the National Labor Relations
Commission in LAC No. 02-000699-13/NCR-03-04761-12 are MODIFIED, DELETING petitioner Nestle Philippines,
Inc.'s solidary liability with Ocho de Septiembre, Inc. (ODSI) for the latter's monetary obligations to respondents
Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave,
Johnny A. Dimaya, Marlon B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B.
Languisan, Edison U. Villapando, Jheimey S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G.
Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr.

SO ORDERED.chanroblesvirtuallawlibrary

G.R. No. 172161 March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,


vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO ZUÑIGA and DANILO
CAÑETE, Respondents.

DECISION

MENDOZA, J.:

Assailed in this petition for review on certiorari are the January 11, 2006 Decision1 and the March 31, 2006
Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the March 31,
2004 Decision3 and December 15, 2004 Resolution4 of the National Labor Relations Commission (NLRC). The NLRC
Decision found the petitioners, SLL International Cables Specialist (SLL) and its manager, Sonny L.
Lagon (petitioners), not liable for the illegal dismissal of Roldan Lopez, Danilo Cañete and Edgardo Zuñiga (private
respondents) but held them jointly and severally liable for payment of certain monetary claims to said
respondents.

A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:

Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and Danilo Cañete
(Cañete for brevity), and Edgardo Zuñiga (Zuñiga for brevity) respectively, were hired by petitioner Lagon as
apprentice or trainee cable/lineman. The three were paid the full minimum wage and other benefits but since they
were only trainees, they did not report for work regularly but came in as substitutes to the regular workers or in
undertakings that needed extra workers to expedite completion of work. After their training, Zuñiga, Cañete and
Lopez were engaged as project employees by the petitioners in their Islacom project in Bohol. Private respondents
started on March 15, 1997 until December 1997. Upon the completion of their project, their employment was also
terminated. Private respondents received the amount of ₱145.00, the minimum prescribed daily wage for Region
VII. In July 1997, the amount of ₱145 was increased to ₱150.00 by the Regional Wage Board (RWB) and in October
of the same year, the latter was increased to ₱155.00. Sometime in March 1998, Zuñiga and Cañete were engaged
again by Lagon as project employees for its PLDT Antipolo, Rizal project, which ended sometime in (sic) the late
September 1998. As a consequence, Zuñiga and Cañete’s employment was terminated. For this project, Zuñiga and
Cañete received only the wage of ₱145.00 daily. The minimum prescribed wage for Rizal at that time was ₱160.00.

120
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in Bulacan.
Zuñiga and Cañete were re-employed. Lopez was also hired for the said specific project. For this, private
respondents received the wage of ₱145.00. Again, after the completion of their project in March 1999, private
respondents went home to Cebu City.

On May 21, 1999, private respondents for the 4th time worked with Lagon’s project in Camarin, Caloocan City with
Furukawa Corporation as the general contractor. Their contract would expire on February 28, 2000, the period of
completion of the project. From May 21, 1997-December 1999, private respondents received the wage of ₱145.00.
At this time, the minimum prescribed rate for Manila was ₱198.00. In January to February 28, the three received
the wage of ₱165.00. The existing rate at that time was ₱213.00.

For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin project was
not completed on the scheduled date of completion. Face[d] with economic problem[s], Lagon was constrained to
cut down the overtime work of its worker[s][,] including private respondents. Thus, when requested by private
respondents on February 28, 2000 to work overtime, Lagon refused and told private respondents that if they insist,
they would have to go home at their own expense and that they would not be given anymore time nor allowed to
stay in the quarters. This prompted private respondents to leave their work and went home to Cebu. On March 3,
2000, private respondents filed a complaint for illegal dismissal, non-payment of wages, holiday pay, 13th month
pay for 1997 and 1998 and service incentive leave pay as well as damages and attorney’s fees.

In their answers, petitioners admit employment of private respondents but claimed that the latter were only
project employees[,] for their services were merely engaged for a specific project or undertaking and the same
were covered by contracts duly signed by private respondents. Petitioners further alleged that the food allowance
of ₱63.00 per day as well as private respondents allowance for lodging house, transportation, electricity, water and
snacks allowance should be added to their basic pay. With these, petitioners claimed that private respondents
received higher wage rate than that prescribed in Rizal and Manila.

Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the complaint
should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of jurisdiction and utter
lack of merit. (Citations omitted.)

On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that his office had
jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of the
NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had jurisdiction because the "workplace," as
defined in the said rule, included the place where the employee was supposed to report back after a temporary
detail, assignment or travel, which in this case was Cebu.

As to the status of their employment, the LA opined that private respondents were regular employees because
they were repeatedly hired by petitioners and they performed activities which were usual, necessary and desirable
in the business or trade of the employer.

With regard to the underpayment of wages, the LA found that private respondents were underpaid. It ruled that
the free board and lodging, electricity, water, and food enjoyed by them could not be included in the computation
of their wages because these were given without their written consent.

The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private respondents’
act of going home as an act of indifference when petitioners decided to prohibit overtime work.7

In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted that not a
single report of project completion was filed with the nearest Public Employment Office as required

121
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993.8 The NLRC later
denied9 the motion for reconsideration10 subsequently filed by petitioners.

When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the private
respondents were regular employees. It considered the fact that they performed functions which were the regular
and usual business of petitioners. According to the CA, they were clearly members of a work pool from which
petitioners drew their project employees.

The CA also stated that the failure of petitioners to comply with the simple but compulsory requirement to submit
a report of termination to the nearest Public Employment Office every time private respondents’ employment was
terminated was proof that the latter were not project employees but regular employees.

The CA likewise found that the private respondents were underpaid. It ruled that the board and lodging, electricity,
water, and food enjoyed by the private respondents could not be included in the computation of their wages
because these were given without their written consent. The CA added that the private respondents were entitled
to 13th month pay.

The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the petitioners’
prerogative to grant or deny any request for overtime work and that the private respondents’ act of leaving the
workplace after their request was denied was an act of abandonment.

In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did not work
in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the differentials for the
period January and February 2000, the CA disagreed in the award of differentials based on the minimum daily
wage of ₱223.00, as the prevailing minimum daily wage then was only ₱213.00. Petitioners sought reconsideration
but the CA denied it in its March 31, 2006 Resolution.11

In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA decision
anchored on this lone:

GROUND/ASSIGNMENT OF ERROR

THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING WAGE DIFFERENTIALS TO
THE PRIVATE COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN
CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND
THUS, THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC DECISION IN THE
LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963,
NOVEMBER 17, 2004, 442 SCRA 573, [AND SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW –DFA), ET AL., GR NO. 149349, 11 MARCH 2005],
WHICH FINDS APPLICATION IN THE INSTANT CASE BY ANALOGY.13

Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed should be
included in the computation of the "wages" received by them. They argued that the rulings in Agabon v. NLRC14and
Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome-DFA15 should be applied by analogy, in
the sense that the lack of written acceptance of the employees of the facilities enjoyed by them should not mean
that the value of the facilities could not be included in the computation of the private respondents’ "wages."

On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining the public
respondent from enforcing the NLRC and CA decisions until further orders from the Court.

After a thorough review of the records, however, the Court finds no merit in the petition.

122
This petition generally involves factual issues, such as, whether or not there is evidence on record to support the
findings of the LA, the NLRC and the CA that private respondents were project or regular employees and that their
salary differentials had been paid. This calls for a re-examination of the evidence, which the Court cannot
entertain. Settled is the rule that 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 Court’s function to assess and evaluate the evidence

all over again, particularly where the findings of both the Labor tribunals and the CA concur. 16

As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of proving
it.17Specifically with respect to labor cases, the burden of proving payment of monetary claims rests on the
employer, the rationale being that the pertinent personnel files, payrolls, records, remittances and other similar
documents — which will show that overtime, differentials, service incentive leave and other claims of workers
have been paid — are not in the possession of the worker but in the custody and absolute control of the
employer.18

In this case, petitioners, aside from bare allegations that private respondents received wages higher than the
prescribed minimum, failed to present any evidence, such as payroll or payslips, to support their defense of
payment. Thus, petitioners utterly failed to discharge the onus probandi.

Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are regular or
non-regular employees.

Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically enumerates those who are not covered
by the payment of minimum wage. Project employees are not among them.

On whether the value of the facilities should be included in the computation of the "wages" received by private
respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized
meals and snacks to his employees provided that the subsidy shall not be less that 30% of the fair and reasonable
value of such facilities. In such cases, the employer may deduct from the wages of the employees not more than
70% of the value of the meals and snacks enjoyed by the latter, provided that such deduction is with the written
authorization of the employees concerned.

Moreover, before the value of facilities can be deducted from the employees’ wages, the following requisites must
all be attendant: first, proof must be shown that such facilities are customarily furnished by the trade; second, the
provision of deductible facilities must be voluntarily accepted in writing by the employee; and finally, facilities
must be charged at reasonable value.20 Mere availment is not sufficient to allow deductions from employees’
wages.21

These requirements, however, have not been met in this case. SLL failed to present any company policy or
guideline showing that provisions for meals and lodging were part of the employee’s salaries. It also failed to
provide proof of the employees’ written authorization, much less show how they arrived at their valuations. At any
rate, it is not even clear whether private respondents actually enjoyed said facilities.

The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view that the food
and lodging, or the electricity and water allegedly consumed by private respondents in this case were not facilities
but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22 the two terms were distinguished
from one another in this wise:

"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or received by
the laborers over and above their ordinary earnings or wages. "Facilities," on the other hand, are items of expense

123
necessary for the laborer's and his family's existence and subsistence so that by express provision of law (Sec.
2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are
not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over
his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers' basic
wages, it is a facility. The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick
leave) given, but in the purpose for which it is given.23 In the case at bench, the items provided were given freely
by SLL for the purpose of maintaining the efficiency and health of its workers while they were working at their
respective projects.1avvphi1

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases of
dismissal with just and authorized causes. The present case involves the matter of the failure of the petitioners to
comply with the payment of the prescribed minimum wage.

The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez. As correctly
pointed out by the CA, he did not work for the project in Antipolo.

WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on November 29, 2006 is
deemed, as it is hereby ordered, DISSOLVED.

SO ORDERED.

G.R. No. 180866 March 2, 2010

LEPANTO CERAMICS, INC., Petitioner,


vs.
LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari under Rule 451 of the 1997 Rules of Civil Procedure filed by
petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision2 of the Court of Appeals, dated 5 April
2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the Voluntary Arbitrator3 granting the
members of the respondent association a Christmas Bonus in the amount of Three Thousand Pesos (₱3,000.00), or
the balance of Two Thousand Four Hundred Pesos (₱2,400.00) for the year 2002, and the (2) Resolution4 of the
same court dated 13 December 2007 denying Petitioner’s Motion for Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by virtue of
Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale basis, among others,
tiles, marbles, mosaics and other similar products.5

Respondent Lepanto Ceramics Employees Association (respondent Association) is a legitimate labor organization
duly registered with the Department of Labor and Employment. It is the sole and exclusive bargaining agent in the
establishment of petitioner.6

In December 1998, petitioner gave a ₱3,000.00 bonus to its employees, members of the respondent Association.7

124
Subsequently, in September 1999, petitioner and respondent Association entered into a Collective Bargaining
Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the members
of the respondent Association.8 The Christmas bonus was one of the enumerated "existing benefit, practice of
traditional rights" which "shall remain in full force and effect."

The text reads:

Section 8. – All other existing benefits, practice of traditional rights consisting of Christmas Gift package/bonus,
reimbursement of transportation expenses in case of breakdown of service vehicle and medical services and
safety devices by virtue of company policies by the UNION and employees shall remain in full force and effect.

Section 1. EFFECTIVITY

This agreement shall become effective on September 1, 1999 and shall remain in full force and effect without
change for a period of four (4) years or up to August 31, 2004 except as to the representation aspect which shall
be effective for a period of five (5) years. It shall bind each and every employee in the bargaining unit including
the present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each of the
members of respondent Association Tile Redemption Certificates equivalent to ₱3,000.00.9 The bonus for the year
2002 is the root of the present dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (₱600.00) and
offered a cash advance to interested employees equivalent to one (1) month salary payable in one year.10 The
respondent Association objected to the ₱600.00 cash benefit and argued that this was in violation of the CBA it
executed with the petitioner.

The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike with the
National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of the CBA. The case was
placed under preventive mediation. The efforts to conciliate failed. The case was then referred to the Voluntary
Arbitrator for resolution where the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional practice of the company to
grant its members Christmas bonuses during the end of the calendar year, each in the amount of ₱3,000.00 as an
expression of gratitude to the employees for their participation in the company’s continued existence in the
market. The bonus was either in cash or in the form of company tiles. In 2002, in a speech during the Christmas
celebration, one of the company’s top executives assured the employees of said bonus. However, the Human
Resources Development Manager informed them that the traditional bonus would not be given as the company’s
earnings were intended for the payment of its bank loans. Respondent Association argued that this was in violation
of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as the same
was not a demandable and enforceable obligation. It argued that the giving of extra compensation was based on
the company’s available resources for a given year and the workers are not entitled to a bonus if the company
does not make profits. Petitioner adverted to the fact that it was debt-ridden having incurred net losses for the
years 2001 and 2002 totaling to ₱1.5 billion; and since 1999, when the CBA was signed, the company’s
accumulated losses amounted to over ₱2.7 billion. Petitioner further argued that the grant of a one (1) month
salary cash advance was not meant to take the place of a bonus but was meant to show the company’s sincere
desire to help its employees despite its precarious financial condition. Petitioner also averred that the CBA
provision on a "Christmas gift/bonus" refers to alternative benefits. Finally, petitioner emphasized that even if the
CBA contained an unconditional obligation to grant the bonus to the respondent Association, the present difficult
economic times had already legally released it therefrom pursuant to Article 1267 of the Civil Code.11

125
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to grant each
of its workers a Christmas bonus of ₱3,000.00 for the reason that the bonus was given prior to the effectivity of
the CBA between the parties and that the financial losses of the company is not a sufficient reason to exempt it
from granting the same. It stressed that the CBA is a binding contract and constitutes the law between the parties.
The Voluntary Arbitrator further expounded that since the employees had already been given ₱600.00 cash bonus,
the same should be deducted from the claimed amount of ₱3,000.00, thus leaving a balance of ₱2,400.00. The
dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the complainant
union LCEA their respective Christmas bonus in the amount of three thousand (₱3,000.00) pesos for the year 2002
less the ₱600.00 already given or a balance of ₱2,400.00.12

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order dated 27 June
2003, in this wise:

The Motion for Reconsideration filed by the respondent in the above-entitled case which was received by the
Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance Machinery and
Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the Philippines; to wit:

Section 7. Finality of Award/Decision − The decision, order, resolution or award of the voluntary arbitrator or panel
of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the
award or decision by the parties and it shall not be subject of a motion for reconsideration.13

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court
docketed as CA-G.R. SP No. 78334.14 As adverted to earlier, the Court of Appeals affirmed in toto the decision of
the Voluntary Arbitrator. The appellate court also denied petitioner’s motion for reconsideration.

In affirming respondent Association’s right to the Christmas bonus, the Court of Appeals held:

In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in 1998 or
before the execution of the 1999 CBA which incorporated the said benefit as a traditional right of the employees.
Hence, the grant of said bonus to private respondent can be deemed a practice as the same has not been given
only in the 1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas
bonus/gift as a practice or tradition as stated in the CBA. x x x.

xxxx

Evidently, the argument of petitioner that the giving of a Christmas bonus is a management prerogative holds no
water. There were no conditions specified in the CBA for the grant of said benefit contrary to the claim of
petitioner that the same is justified only when there are profits earned by the company. As can be gleaned from
the CBA, the payment of Christmas bonus was not contingent upon the realization of profits. It does not state that
if the company derives no profits, there are no bonuses to be given to the employees. In fine, the payment thereof
was not related to the profitability of business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has further been
giving its employees an additional Christmas bonus at the end of the year since 1998 or before the effectivity of
the CBA in September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about the
filing of the complaint for alleged non-payment of the 2002 Christmas bonus does not involve the exercise of
management prerogative as the same was given continuously on or about Christmas time pursuant to the CBA.
Consequently, the giving of said bonus can no longer be withdrawn by the petitioner as this would amount to a
diminution of the employee’s existing benefits.15

126
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not the Court of
Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is obliged to give the members
of the respondent Association a Christmas bonus in the amount of ₱3,000.00 in 2002.16

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor officials, who are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only
respect but even finality, and bind us when supported by substantial evidence. This is the rule particularly where
the findings of both the arbitrator and the Court of Appeals coincide.17

As a general proposition, an arbitrator is confined to the interpretation and application of the CBA. He does not sit
to dispense his own brand of industrial justice: his award is legitimate only in so far as it draws its essence from the
CBA.18 That was done in this case.

By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to what is
ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his industry and
loyalty which contributed to the success of the employer’s business and made possible the realization of profits.19

A bonus 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.20

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have
been promised by the employer and expressly agreed upon by the parties.21 Given that the bonus in this case is
integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act of
generosity on the part of the petitioner but a contractual obligation it has undertaken.22

A CBA refers to a 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. As in all other
contracts, the parties to 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.23

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are
obliged to comply with its provisions.24 This principle stands strong and true in the case at bar.1avvphi1

A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas gift
package/bonus" without qualification. Terse and clear, the said provision did not state that the Christmas package
shall be made to depend on the petitioner’s financial standing. The records are also bereft of any showing that the
petitioner made it clear during CBA negotiations that the bonus was dependent on any condition. Indeed, if the
petitioner and respondent Association intended that the ₱3,000.00 bonus would be dependent on the company
earnings, such intention should have been expressed in the CBA.

It is noteworthy that in petitioner’s 1998 and 1999 Financial Statements, it took note that "the 1997 financial crisis
in the Asian region adversely affected the Philippine economy."25

From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is
manifestly clear that petitioner was very much aware of the imminence and possibility of business losses owing to
the 1997 financial crisis. In 1998, petitioner suffered a net loss of ₱14,347,548.00.26 Yet it gave a ₱3,000.00 bonus
to the members of the respondent Association. In 1999, when petitioner’s very own financial statement reflected
that "the positive developments in the economy have yet to favorably affect the operations of the
company,"27 and reported a loss of ₱346,025,733.00,28 it entered into the CBA with the respondent Association
whereby it contracted to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to

127
incur losses in the years 200029 and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give ₱3,000.00 each to the members of the respondent Association in the years
1999, 2000 and 2001.

All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is
settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full
protection.30

Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or duress, it is presumed that it
entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of its
commitments under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete
petitioner’s resources. Petitioner’s remedy though lies not in the Court’s invalidation of the provision but in the
parties’ clarification of the same in subsequent CBA negotiations. Article 253 of the Labor Code is relevant:

Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or
modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the existing agreement during
the sixty (60)-day period and/or until a new agreement is reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the Court of Appeals
dated 5 April 2006 and the Resolution of the same court dated 13 December 2007 in CA-G.R. SP No. 78334
are AFFIRMED.

SO ORDERED.

G.R. No. 177578 January 25, 2012

MAGSAYSAY MARITIME CORPORATION and/or WASTFEL-LARSEN MANAGEMENT A/S+ Petitioners,


vs.
OBERTO S. LOBUSTA, Respondent.

DECISION

VILLARAMA, JR., J.:

Petitioners appeal the Decision1 dated August 18, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 74035 and its
Resolution2 dated April 19, 2007, denying the motion for reconsideration thereof. The CA declared that respondent
is suffering from permanent total disability and ordered petitioners to pay him US$2,060 as medical allowance,
US$60,000 as disability benefits and 5% of the total monetary award as attorney’s fees.

The facts follow:

Petitioner Magsaysay Maritime Corporation is a domestic corporation and the local manning agent of the vessel
MV "Fossanger" and of petitioner Wastfel-Larsen Management A/S.3

128
Respondent Oberto S. Lobusta is a seaman who has worked for Magsaysay Maritime Corporation since 1994.4 In
March 1998, he was hired again as Able Seaman by Magsaysay Maritime Corporation in behalf of its principal
Wastfel-Larsen Management A/S. The employment contract5 provides for Lobusta's basic salary of US$515 and
overtime pay of US$206 per month. It also provides that the standard terms and conditions governing the
employment of Filipino seafarers on board ocean-going vessels, approved per Department Order No. 33 of the
Department of Labor and Employment and Memorandum Circular No. 55 of the Philippine Overseas Employment
Administration (POEA Standard Employment Contract), both series of 1996, shall be strictly and faithfully
observed.

Lobusta boarded MV "Fossanger" on March 16, 1998.6 After two months, he complained of breathing difficulty and
back pain. On May 12, 1998, while the vessel was in Singapore, Lobusta was admitted at Gleneagles Maritime
Medical Center and was diagnosed to be suffering from severe acute bronchial asthma with secondary infection
and lumbosacral muscle strain. Dr. C K Lee certified that Lobusta was fit for discharge on May 21, 1998, for
repatriation for further treatment.7

Upon repatriation, Lobusta was referred to Metropolitan Hospital. The medical coordinator, Dr. Robert Lim, issued
numerous medical reports regarding Lobusta’s condition. Lobusta was first seen by a Pulmonologist and an
Orthopedic Surgeon on May 22, 1998.8 Upon reexamination by the Orthopedic Surgeon on August 11, 1998, he
opined that Lobusta needs surgery, called decompression laminectomy,9 which was done on August 30, 1998.10 On
October 12, 1998, Dr. Lim issued another medical report stating the opinion of the Orthopedic Surgeon that the
prognosis for Lobusta’s recovery after the spine surgery is good. However, the Pulmonologist opined that
Lobusta’s obstructive airway disease needs to be monitored regularly and that Lobusta needs to be on
bronchodilator indefinitely. Hence, Lobusta should be declared disabled with a suggested disability grading of 10-
20%.11 The suggestion was not heeded and Lobusta's treatment continued.

On February 16, 1999, Lobusta was reexamined. Dr. Lim reported that Lobusta still complains of pain at the
lumbosacral area although the EMG/NCV12 test revealed normal findings. Lobusta was prescribed medications and
was advised to return on March 16, 1999 for re-evaluation.13

On February 19, 1999, Dr. Lim reported that Lobusta has been diagnosed to have a moderate obstructive
pulmonary disease which tends to be a chronic problem, such that Lobusta needs to be on medications
indefinitely. Dr. Lim also stated that Lobusta has probably reached his maximum medical care.14

Petitioners "then faced the need for confirmation and grading by a second opinion" and "it took the parties time to
agree on a common doctor, until they agreed on Dr. Camilo Roa."15 Dr. Roa’s clinical summary states that Lobusta's
latest follow-up check-up was on December 16, 1999; that Lobusta is not physically fit to resume his normal work
as a seaman due to the persistence of his symptoms; that his asthma will remain chronically active and will be
marked by intermittent exacerbations; and that he needs multiple controller medications for his asthma.16

As the parties failed to reach a settlement as to the amount to which Lobusta is entitled, Lobusta filed on October
2, 2000, a complaint17 for disability/medical benefits against petitioners before the National Labor Relations
Commission (NLRC).

Sometime in October 2000, Magsaysay Maritime Corporation suggested that Lobusta be examined by another
company-designated doctor for an independent medical examination. The parties agreed on an independent
medical examination by Dr. Annette M. David, whose findings it was agreed upon, would be considered final.

On November 17, 2000, Dr. David interviewed and examined Lobusta.18 Pertinent portions of Dr. David’s report
read:

129
xxx Based on the Classes of Respiratory Impairment as described in the American Medical Association's
Guidelines for the Evaluation of Permanent Impairment, this is equivalent to Class 2 or Mild Impairment of the
Whole Person (level of impairment: 10-25% of the whole person). Given the persistence of the symptoms despite
an adequate medical regimen, the impairment may be considered permanent.

The determination of disability and fitness for duty/return-to-work is more complex. During asymptomatic periods,
Mr. Lobusta could conceivably be capable of performing the duties and responsibilities of an Able Seaman as listed
in the memos provided by Pandiman (Duties of an Able Seaman on board an average vessel, January 26, 2000; and
Deck Crew general Responsibilities, 95.11.01). However, consideration needs to be given to the following:

• During the personal interview, Mr. Lobusta reported the need to use a self-contained breathing apparatus
(SCBA) for "double bottom" work. While the use of these devices may not appreciably increase the work
of breathing, an individual who develops an acute asthmatic attack under conditions requiring the use of
an SCBA (oxygen-poor atmospheres) may be at increased risk for a poor outcome.
• When out at sea, the medical facilities on board an average vessel may not be adequate to provide
appropriate care for an acute asthmatic exacerbation. Severe asthmatic attacks require life-sustaining
procedures such as endotracheal intubation and on occasion, mechanical ventilation. Asthma can be fatal
if not treated immediately. The distance from and the time required to transport an individual having an
acute asthmatic attack on a vessel at sea to the appropriate medical facilities on land are important
factors in the decision regarding fitness for duty.
• Several of the duties listed for an Able Seaman require the use of a variety of chemical substances (e.g.
grease, solvents, cleaning agents, de-greasers, paint, etc.), many of which are known or suspected asthma
triggers in sensitized individuals. The potential for an Able Seaman's exposure to these asthma triggers is
considerable.

Taken altogether, it is my opinion that Mr. Lobusta ought not to be considered fit to return to work as an Able
Seaman. While the degree of impairment is mild, for the reasons stated above, it would be in the interest of all
parties involved if he were to no longer be considered as capable of gainful employment as a seafarer. It is possible
that he may perform adequately in another capacity, given a land-based assignment.19 (Stress in the original by Dr.
David.)

As no settlement was reached despite the above findings, the Labor Arbiter ordered the parties to file their
respective position papers.

On April 20, 2001, the Labor Arbiter rendered a decision20 ordering petitioners to pay Lobusta (a) US$2,060 as
medical allowance, (b) US$20,154 as disability benefits, and (c) 5% of the awards as attorney’s fees.

The Labor Arbiter ruled that Lobusta suffered illness during the term of his contract. Hence, petitioners are liable
to pay Lobusta his medical allowance for 120 days or a total of US$2,060. The Labor Arbiter held that provisions of
the Labor Code, as amended, on permanent total disability do not apply to overseas seafarers. Hence, he awarded
Lobusta US$20,154 instead of US$60,000, the maximum rate for permanent and total disability under Section 30
and 30-A of the 1996 POEA Standard Employment Contract. The Labor Arbiter also awarded attorney’s fees
equivalent to 5% of the total award since Lobusta was assisted by counsel.21 1avvphi1

Lobusta appealed. The NLRC dismissed his appeal and affirmed the Labor Arbiter’s decision. The NLRC ruled that
Lobusta’s condition may only be considered permanent partial disability. While Dr. David suggested that Lobusta’s
prospects as seafarer may have been restricted by his bronchial asthma, Dr. David also stated that the degree of
impairment is mild. Said qualification puts Lobusta's medical condition outside the definition of total permanent
disability, said the NLRC.22 Later, the NLRC also denied Lobusta’s motion for reconsideration.

130
Unsatisfied, Lobusta brought the case to the CA under Rule 65 of the 1997 Rules of Civil Procedure, as amended.
As aforesaid, the CA declared that Lobusta is suffering from permanent total disability and increased the award of
disability benefits in his favor to US$60,000, to wit:

WHEREFORE, the petition for certiorari is hereby GRANTED. The challenged resolution of the NLRC dated 20 June
2002 is MODIFIED, declaring [Lobusta] to be suffering from permanent total disability.

[Petitioners] are ORDERED to pay [Lobusta] the following:

a) US$2,060.00 as medical allowance,

b) US$60,000.00 as disability benefits, and

c) 5% of the total monetary award as attorney’s fees

x x x x23

The CA faulted the NLRC for "plucking only particular phrases" from Dr. David’s report and said that the NLRC
cannot wantonly disregard the full import of said report. The CA ruled that Lobusta's disability brought about by
his bronchial asthma is permanent and total as he had been unable to work since May 14, 1998 up to the present
or for more than 120 days, and because Dr. David found him not fit to return to work as an able seaman.

Hence, this petition which raises two legal issues:

WHETHER OR NOT THE POEA CONTRACT CONSIDERS THE MERE LAPSE OF MORE THAN ONE HUNDRED
TWENTY (120) DAYS AS TOTAL AND PERMANENT DISABILITY.

WHETHER OR NOT THERE IS LEGAL BASIS TO AWARD RESPONDENT LOBUSTA ATTORNEY’S FEES.24

Petitioners argue that the CA erred in applying the provisions of the Labor Code instead of the provisions of the
POEA contract in determining Lobusta’s disability, and in ruling that the mere lapse of 120 days entitles Lobusta to
total and permanent disability benefits. The CA allegedly erred also in holding them liable for attorney’s fees,
despite the absence of legal and factual bases.

The petition lacks merit.

Petitioners are mistaken that it is only the POEA Standard Employment Contract that must be considered in
determining Lobusta's disability. In Palisoc v. Easways Marine, Inc.,25 we said that whether the Labor
Code’sprovision on permanent total disability applies to seafarers is already a settled matter. In Palisoc, we cited
the earlier case of Remigio v. National Labor Relations Commission26 where we said (1) that the standard
employment contract for seafarers was formulated by the POEA pursuant to its mandate under Executive Order
No. 24727 "to secure the best terms and conditions of employment of Filipino contract workers and ensure
compliance therewith," and "to promote and protect the well-being of Filipino workers overseas"; (2) that Section
29 of the 1996 POEA Standard Employment Contract itself provides that all rights and obligations of the parties to
the contract, including the annexes thereof, shall be governed by the laws of the Republic of the Philippines,
international conventions, treaties and covenants where the Philippines is a signatory; and (3) that even without
this provision, a contract of labor is so impressed with public interest that the Civil Code expressly subjects it to the
special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions,
hours of labor and similar subjects.28

In affirming the Labor Code concept of permanent total disability, Remigio further stated:

131
Thus, the Court has applied the Labor Code concept of permanent total disability to the case of seafarers.
In Philippine Transmarine Carriers v. NLRC, seaman Carlos Nietes was found to be suffering from congestive heart
failure and cardiomyopathy and was declared as unfit to work by the company-accredited physician. The Court
affirmed the award of disability benefits to the seaman, citing ECC v. Sanico, GSIS v. CA, and Bejerano v. ECC that
"disability should not be understood more on its medical significance but on the loss of earning capacity.
Permanent total disability means disablement of an employee to earn wages in the same kind of work, or work of
similar nature that [he] was trained for or accustomed to perform, or any kind of work which a person of [his]
mentality and attainment could do. It does not mean absolute helplessness." It likewise cited Bejerano v. ECC, that
in a disability compensation, it is not the injury which is compensated, but rather it is the incapacity to work
resulting in the impairment of one’s earning capacity.

The same principles were cited in the more recent case of Crystal Shipping, Inc. v. Natividad. In addition, the Court
cited GSIS v. Cadiz and Ijares v. CA that "permanent disability is the inability of a worker to perform his job for
more than 120 days, regardless of whether or not he loses the use of any part of his body."

xxxx

These facts clearly prove that petitioner was unfit to work as drummer for at least 11-13 months – from the onset
of his ailment on March 16, 1998 to 8-10 months after June 25, 1998. This, by itself, already constitutes permanent
total disability. x x x29

In Vergara v. Hammonia Maritime Services, Inc.,30 we also said that the standard terms of the POEA Standard
Employment Contract agreed upon are intended to be read and understood in accordance with Philippine laws,
particularly, Articles 191 to 193 of the Labor Code, as amended, and the applicable implementing rules and
regulations in case of any dispute, claim or grievance.

Thus, the CA was correct in applying the Labor Code provisions in Lobusta’s claim for disability benefits. The Labor
Arbiter erred in failing to apply them.

Article 192(c)(1) under Title II, Book IV of the Labor Code, as amended, reads:

ART. 192. Permanent total disability. – x x x

xxxx

(c) The following disabilities shall be deemed total and permanent:

(1) Temporary total disability lasting continuously for more than one hundred twenty days, except as otherwise
provided in the Rules;

xxxx

Section 2(b), Rule VII of the Implementing Rules of Title II, Book IV of the Labor Code, as amended, or the Amended
Rules on Employees’ Compensation Commission (ECC Rules), reads:

Sec. 2. Disability. – x x x

(b) A disability is total and permanent if as a result of the injury or sickness the employee is unable to perform any
gainful occupation for a continuous period exceeding 120 days, except as otherwise provided for in Rule X of these
Rules.

132
xxxx

Section 2, Rule X of the ECC Rules reads:

SEC. 2. Period of entitlement.— (a) The income benefit shall be paid beginning on the first day of such disability. If
caused by an injury or sickness it shall not be paid longer than 120 consecutive days except where such injury or
sickness still requires medical attendance beyond 120 days but not to exceed 240 days from onset of disability in
which case benefit for temporary total disability shall be paid. However, the System may declare the total and
permanent status at any time after 120 days of continuous temporary total disability as may be warranted by the
degree of actual loss or impairment of physical or mental functions as determined by the System.

xxxx

According to Vergara,31 these provisions of the Labor Code, as amended, and implementing rules are to be read
hand in hand with the first paragraph of Section 20(B)(3) of the 2000 POEA Standard Employment Contract which
reads:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his
basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the
company-designated physician[,] but in no case shall this period exceed one hundred twenty (120) days.

Vergara continues:

As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the company-designated
physician within three (3) days from arrival for diagnosis and treatment. For the duration of the treatment but in
no case to exceed 120 days, the seaman is on temporary total disability as he is totally unable to work. He receives
his basic wage during this period until he is declared fit to work or his temporary disability is acknowledged by the
company to be permanent, either partially or totally, as his condition is defined under the POEA Standard
Employment Contract and by applicable Philippine laws. If the 120 days initial period is exceeded and no such
declaration is made because the seafarer requires further medical attention, then the temporary total disability
period may be extended up to a maximum of 240 days, subject to the right of the employer to declare within this
period that a permanent partial or total disability already exists. The seaman may of course also be declared fit to
work at any time such declaration is justified by his medical condition.

xxxx

As we outlined above, a temporary total disability only becomes permanent when so declared by the company
physician within the periods he is allowed to do so, or upon the expiration of the maximum 240-day medical
treatment period without a declaration of either fitness to work or the existence of a permanent disability.32

To be sure, there is one Labor Code concept of permanent total disability, as stated in Article 192(c)(1) of the Labor
Code, as amended, and the ECC Rules. We also note that the first paragraph of Section 20(B)(3) of the 2000 POEA
Standard Employment Contract was lifted verbatim from the first paragraph of Section 20(B)(3) of the 1996 POEA
Standard Employment Contract, to wit:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his
basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the
company-designated physician, but in no case shall this period exceed one hundred twenty (120) days.

Applying the foregoing considerations, we agree with the CA that Lobusta suffered permanent total disability. On
this point, the NLRC ruling was not in accord with law and jurisprudence.

133
Upon repatriation, Lobusta was first examined by the Pulmonologist and Orthopedic Surgeon on May 22, 1998.
The maximum 240-day (8-month) medical-treatment period expired, but no declaration was made that Lobusta is
fit to work. Nor was there a declaration of the existence of Lobusta’s permanent disability. On February 16, 1999,
Lobusta was still prescribed medications for his lumbosacral pain and was advised to return for reevaluation. May
22, 1998 to February 16, 1999 is 264 days or 6 days short of 9 months.

On Lobusta’s other ailment, Dr. Roa’s clinical summary also shows that as of December 16, 1999, Lobusta was still
unfit to resume his normal work as a seaman due to the persistence of his symptoms. But neither did Dr. Roa
declare the existence of Lobusta’s permanent disability. Again, the maximum 240-day medical treatment period
had already expired. May 22, 1998 to December 16, 1999 is 19 months or 570 days. In Remigio, unfitness to work
for 11-13 months was considered permanent total disability. So it must be in this case. And Dr. David’s much later
report that Lobusta "ought not to be considered fit to return to work as an Able Seaman" validates that his
disability is permanent and total as provided under the POEA Standard Employment Contract and the Labor Code,
as amended.

In fact, the CA has found that Lobusta was not able to work again as a seaman and that his disability is permanent
"as he has been unable to work since 14 May 1998 to the present or for more than 120 days." This period is more
than eight years, counted until the CA decided the case in August 2006. On the CA ruling that Lobusta’s disability is
permanent since he was unable to work "for more than 120 days," we have clarified in Vergara that this
"temporary total disability period may be extended up to a maximum of 240 days."

Thus, we affirm the award to Lobusta of US$60,000 as permanent total disability benefits, the maximum award
under Section 30 and 30-A of the 1996 POEA Standard Employment Contract. We also affirm the award of
US$2,060 as sickness allowance which is not contested and appears to have been accepted by the parties.

On the matter of attorney’s fees, under Article 220833 of the Civil Code, attorney’s fees can be recovered in actions
for recovery of wages of laborers and actions for indemnity under employer’s liability laws. Attorney’s fees are also
recoverable when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his
interest.34 Such conditions being present here, we affirm the award of attorney’s fees, which we compute as
US$3,103 or 5% of US$62,060.

Before we end, we note petitioners’ repeated failure to comply with our resolutions, as well as the orders issued
by the tribunals below. We remind petitioners and their counsels that our resolutions requiring them to file
pleadings are not to be construed as mere requests, nor should they be complied with partially, inadequately or
selectively. Counsels are also reminded that lawyers are called upon to obey court orders and willful disregard
thereof will subject the lawyer not only for contempt but to disciplinary sanctions as well.35 We may also dismiss
petitioners’ appeal for their failure to comply with any circular, directive or order of the Supreme Court without
justifiable cause.36In fact, we actually denied the instant petition on July 9, 2008 since petitioners failed to file the
required reply to the comment filed by Lobusta.37 On reconsideration, however, we reinstated the petition.38 But
when we required the parties to submit memoranda, petitioners again did not comply.39 As regards the
proceedings below, they did not file their position paper on time, despite the extensions granted by the Labor
Arbiter.40 Nor did they file the comment and memorandum required by the CA.41

Finally, we note that the Labor Arbiter improperly included Miguel Magsaysay as respondent in his decision.42 It
should be noted that Lobusta sued Magsaysay Maritime Corporation and/or Wastfel-Larsen Management A/S in
his complaint.43 He also named them as the respondents in his position paper.44 Petitioners are the proper parties.

WHEREFORE, we DENY the present petition for review on certiorari and AFFIRM the Decision dated August 18,
2006 of the Court of Appeals and its Resolution dated April 19, 2007 in CA-G.R. SP No. 74035.
We ORDERpetitioners Magsaysay Maritime Corporation and/or Wastfel-Larsen Management A/S to pay
respondent Oberto S. Lobusta US$65,163 as total award, to be paid in Philippine pesos at the exchange rate
prevailing during the time of payment.

134
With costs against the petitioners.

SO ORDERED.

G.R. No. 164856 January 20, 2009

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners,


vs.
PHILIPPINE AIRLINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004
Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the petition for certiorari of
respondent, Philippine Airlines, Inc. (PAL), and denied petitioners’ Motion for Reconsideration, respectively. The
dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE.
The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent
National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave
abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice
of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.2

The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners3 after they
were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers
raided the PAL Technical Center’s Toolroom Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of
Discipline,4prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January
11, 1999,5resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the
reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange Commission (SEC) placed
PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim
Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiter’s decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000,
reversed said decision and dismissed petitioners’ complaint for lack of merit.6

Petitioners’ Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of Judgment was
issued on July 13, 2000.7

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting
the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of
Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners
moved to release the garnished amount.

135
In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of
November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor
Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution
nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid
dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision (the first
ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides
a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second
ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the
NLRC Resolutions insofar as it suspended the proceedings, viz:

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the
NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC,
as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal and
should instead have directed them to lodge their claim before PAL’s receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar
circumstances of the case– that their dismissal was eventually held valid with only the matter of reinstatement
pending appeal being the issue– this Court deems it legally expedient to suspend the proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED
until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to
quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SO ORDERED.8 (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order of
September 28, 2007, granted its request to exit from rehabilitation proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining
issuefor consideration, which is whether petitioners may collect their wages during the period between the Labor
Arbiter’s order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now
that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes
the basis for implementing the reinstatement aspect of a labor arbiter’s decision.

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning reinstatement pending
appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as
expounded in a line of cases including Air Philippines Corp. v. Zamora,10 while on the other is the recent case
of Genuino v. National Labor Relations Commission.11 At the core of the seeming divergence is the application of
paragraph 3 of Article 223 of the Labor Code which reads:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at

136
the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay
the execution for reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of
the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and
such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he
received for he is entitled to such, more so if he actually rendered services during the period.12 (Emphasis in the
original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive
wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it
is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer
to comply therewith.13

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the
salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is
based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the
September 3, 1994 NLRC Decision.14 (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was
found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was
required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases,15 the Court did not
order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal
of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the
rationale of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions
of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as
to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution
also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability.

137
xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act
is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing
threat or danger to the survival or even the life of the dismissed or separated employee and his family.16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment
espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts
portray the otherwise "unjust" situation as a condition affording full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help,
a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll
reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior
to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of
concerned employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a
scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve
as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter’s decision
ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond
premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash
bond] by the employer shall not stay the execution for reinstatement."17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund
the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the
prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more basis to enforce the
reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this
argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the
present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiter’s decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there
without considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the
immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v.
NLRC,18which was cited in Panuncillo v. CAP Philippines, Inc.,19 the Court observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution

138
for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object
and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An
application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or
postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC
could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose
envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or
award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the
legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be
necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be
achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a labor
decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. x x x20 (Italics in the original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed
on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher court.21 It settles the view that the Labor Arbiter's order of
reinstatement is immediately executory and the employer has to either re-admit them to work under the same
terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to
exercise the options in the alternative, employer must pay the employee’s salaries.22

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by
the appellate court in the assailed issuances. The Court sustains the appellate court’s finding that the peculiar
predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the
circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the
decision containing an order of reinstatement. The immediacy of its execution needs no further
elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the
appeal, if the law is to serve its noble purpose. At the same time, any attempt on the part of the employer to
evade or delay its execution, as observed in Panuncillo and as what actually transpired
in Kimberly,23 Composite,24 Air Philippines,25and Roquero,26 should not be countenanced.

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from collecting
the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault
on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was
not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission.
If the delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries
notwithstanding the reversal of the Labor Arbiter’s decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury
Sales Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor
Arbiter’s Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC
Rules of Procedure did not lay down a mechanism to promptly effectuate the self-executory order of
reinstatement, making it difficult to establish that the employer actually refused to comply.

139
In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was alleged that the
employer was willing to comply with the order and that the employee opted not to pursue the execution of the
order, the Court upheld the self-executory nature of the reinstatement order and ruled that the salary
automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the
NLRC. It was later discovered that the employee indeed moved for the issuance of a writ but was not acted upon
by the Labor Arbiter. In that scenario where the delay was caused by the Labor Arbiter, it was ruled that the
inaction of the Labor Arbiter who failed to act upon the employee’s motion for the issuance of a writ of execution
may no longer adversely affect the cause of the dismissed employee in view of the self-executory nature of the
order of reinstatement.28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to submit
a report of compliance within 10 calendar days from receipt of the Labor Arbiter’s decision,29 disobedience to
which clearly denotes a refusal to reinstate. The employee need not file a motion for the issuance of the writ of
execution since the Labor Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is
hardly any difficulty in determining the employer’s intransigence in immediately complying with the order.

In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiter’s order of reinstatement until they
were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC of the
Labor Arbiter’s decision. Technically, there was still actual delay which brings to the question of whether the delay
was due to respondent’s unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was
justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court,
tribunal or board against the corporation shall ipso jure be suspended.31 As stated early on, during the pendency of
petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation
Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a
Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is
ministerial and mandatory.32 This injunction or suspension of claims by legislative fiat33 partakes of the nature of a
restraining order that constitutes a legal justification for respondent’s non-compliance with the reinstatement
order. Respondent’s failure to exercise the alternative options of actual reinstatement and payroll reinstatement
was thus justified. Such being the case, respondent’s obligation to pay the salaries pending appeal, as the normal
effect of the non-exercise of the options, did not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life
of the dismissed employee and his family, it does not contemplate the period when the employer-corporation
itself is similarly in a judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its
options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on
the other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial
gloom, as discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike
the ground of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was
judicially pre-determined by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case, effectively deprived of the alternative choices under
Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim

140
relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver.
Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending
appeal to optimize the utilization of resources. Then again, though the management may think this wise, the
rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims.

In sum, the obligation to pay the employee’s salaries upon the employer’s failure to exercise the alternative
options under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of
corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003 and
Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and the
Notice of Garnishment are concerned, the Court finds no reversible error.

SO ORDERED.

SEPARATE OPINION

QUISUMBING, J.:

From this Court’s Decision1 dated August 29, 2007, which ordered the suspension of the proceedings in this case,
respondent Philippine Airlines, Inc. (PAL) filed a Manifestation and Compliance2 on November 13, 2007 containing
an Order3 dated September 28, 2007, from the Securities and Exchange Commission (SEC) granting its request to
exit from the rehabilitation proceedings.

In a letter dated September 14, 2007, the members of the Permanent Rehabilitation Receiver (PRR) recommended
PAL’s exit from rehabilitation "because the same is feasible based on the corporation’s improved financial
condition, capability to service debts or obligations, rosy projected cash flows, sustainable profitability and
adherence to its Amended and Restated Rehabilitation Plan."4 This assessment was bolstered by the Office of the
General Accountant of the SEC in its Memorandum dated September 26, 2007, which concluded that PAL’s
projected income and projected cash flow for the next three years, cost of debt and equity capital, and latest
interim (unaudited) financial statements, satisfactorily addressed concerns on its financial condition and
sustainability of profit.5

Based on these recommendations, the SEC found the termination of the rehabilitation proceedings, on the ground
of successful rehabilitation, in order, thus:

WHEREFORE, in the light of the foregoing, and considering PAL’s firm commitment to settle its outstanding
obligations as well as the fact that its operations and its financial condition have been normalized and stabilized in
conformity with the Amended and Restated Rehabilitation Plan, exemplifying a successful corporate rehabilitation,
the PAL’s request to exit from rehabilitation is hereby GRANTED.

The PRR is likewise directed to furnish all creditors and parties concerned with copies of this Order at the expense
of the Petitioner and submit proof of service thereof to the Commission, within fifteen (15) days from date of
receipt of this Order.

SO ORDERED.6

In view of the foregoing development, the instant case may now be resolved. But first, a brief summation of the
antecedent proceedings.

141
Petitioners Alberto J. Dumago and Juanito A. Garcia were Aircraft Furnishers Master "C" and Aircraft Inspector,
respectively, assigned in the PAL Technical Center. On October 9, 1995, they were dismissed for violation of
Chapter II, Section 6, Article 46 (Violation of Law/Government Regulations) and Chapter II, Section 6, Article 48
(Prohibited Drugs) of the PAL Code of Discipline.7 Both simultaneously filed a case for illegal dismissal and
damages.

On January 11, 1999, the Labor Arbiter rendered a Decision8 in petitioners’ favor:

WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the respondents guilty of
illegal suspension and illegal dismissal and ordering them to reinstate complainants to their former position
without loss of seniority rights and other privileges. Respondents are hereby further ordered to pay jointly and
severally unto the complainants the following:

Alberto J. Dumago – ₱409,500.00 backwages as of 1/10/99

34,125.00 for 13th month pay

Juanito A. Garcia – ₱1,290,744.00 backwages as of 1/10/99 107,562.00 for 13th month pay

The amounts of ₱100,000.00 and ₱50,000.00 to each complainant as and by way of moral and exemplary
damages; and

The sum equivalent to ten percent (10%) of the total award as and for attorneys fees.

Respondents are directed to immediately comply with the reinstatement aspect of this Decision. However, in the
event that reinstatement is no longer feasible, respondent[s] are hereby ordered, in lieu thereof, to pay unto the
complainants their separation pay computed at one month for [e]very year of service.

SO ORDERED.9

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter’s decision and dismissed
the case for lack of merit.10 Reconsideration having been denied, an Entry of Judgment11 was issued on July 13,
2000.

On October 5, 2000, the Labor Arbiter issued a Writ of Execution12 commanding the sheriff to proceed:

xxxx

1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or to any of its
Offices in the Philippines and cause reinstatement of complainants to their former position and to cause
the collection of the amount of [₱]549,309.60 from respondent PAL representing the backwages of said
complainants on the reinstatement aspect;

2. In case you cannot collect from respondent PAL for any reason, you shall levy on the office equipment
and other movables and garnish its deposits with any bank in the Philippines, subject to the limitation that
equivalent amount of such levied movables and/or the amount garnished in your own judgment, shall be
equivalent to [₱]549,309.60. If still insufficient, levy against immovable properties of PAL not otherwise
exempt from execution.

x x x x13

142
Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a Notice of
Garnishment14 addressed to the President/Manager of the Allied Bank Head Office in Makati City for the amount
of ₱549,309.60.

PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the garnished amount. PAL
opposed petitioners’ motion. It also filed an Urgent Petition for Injunction which the NLRC resolved as follows:

WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ of Execution dated
October 5, 2000 and related [N]otice of Garnishment [dated October 25, 2000] are DECLARED valid. However, the
instant action is SUSPENDED and REFERRED to the Receiver of Petitioner PAL for appropriate action.

SO ORDERED.15

PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of execution and the notice of
garnishment valid, the NLRC gave petitioners undue advantage and preference over PAL’s other creditors and
hampered the task of the PRR; and (2) there was no longer any legal or factual basis to reinstate petitioners as a
result of the reversal by the NLRC of the Labor Arbiter’s decision.

On December 5, 2003,16 the appellate court ruled that the Labor Arbiter issued the writ of execution and the
notice of garnishment without jurisdiction. Hence, the NLRC erred in upholding its validity. Since PAL was under
receivership, it could not have possibly reinstated petitioners due to retrenchment and cash-flow constraints. The
appellate court declared that a stay of execution may be warranted by the fact that PAL was under rehabilitation
receivership. The dispositive portion of the decision dated December 5, 2003, reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE.
The assailed November 26, 2001 Resolution, as well as the January 28, 2002 Resolution of public respondent
National Labor Relations Commission is hereby ANNULLED and SET ASIDE for having been issued with grave abuse
of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of
Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.17

Petitioners moved for reconsideration which the appellate court denied on April 16, 2004,18 thus:

Considering the Motion for Reconsideration filed by private respondents dated [January] 6, 2004 of this Court’s
Decision promulgated on December 5, 2003, as well as the Comment filed by petitioner dated February 20, 2003,
the Court, finding no sufficient and compelling reason which will merit a reconsideration of the Decision rendered
in this case as the issues raised therein had already been carefully considered and passed upon in the Decision
sought to be reconsidered, hereby resolves to DENY the instant motion for reconsideration for lack of merit.

SO ORDERED.19

Hence, the instant petition raising a single issue as follows:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS ARE ENTITLED TO
THEIR ACCRUED WAGES DURING THE PENDENCY OF PAL’S APPEAL.20

Simply put, the issue is: Are petitioners entitled to their wages during the pendency of PAL’s appeal to the NLRC?

Petitioners argue that pursuant to this Court’s ruling in International Container Terminal Services, Inc. v.
NLRC,21the reinstatement aspect of the Labor Arbiter’s decision, albeit under appeal, is immediately enforceable as

143
a consequence of which, the employer is duty-bound to choose forthwith whether to re-admit the employee or to
reinstate him in the payroll. Failing to exercise the options in the alternative, the employer must pay the salary of
the employee which automatically accrued from notice of the Labor Arbiter’s order of reinstatement until its
ultimate reversal by the NLRC.22 Petitioners add that PAL should not be excused from complying with the order of
reinstatement on the ground that it was under receivership. At the time PAL received a copy of the Labor Arbiter’s
decision, PAL was not yet under receivership.

Respondent counters that PAL was already under an Interim Rehabilitation Receiver at the time it received a copy
of the Labor Arbiter’s decision. It also contends that it cannot be compelled to reinstate petitioners pending appeal
to the NLRC since retrenchment and cash flow constraints rendered it impossible to exercise its option under
Article 223 of the Labor Code.

At the crux of the controversy is the application of Article 223 of the Labor Code which provides that:

ART. 223. Appeal.— …

xxxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation, or at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.

xxxx

To be sure, the Court has divergent views on the immediately executory nature of reinstatement pending appeal
particularly where the reinstatement order is reversed on appeal. On one hand, the Court has ruled that even if
the Labor Arbiter’s reinstatement order is reversed on appeal, it is the employer’s obligation to reinstate and pay
the wages of the dismissed employee during the period of appeal until reversal by the NLRC. However, if the
employee has been reinstated during the period of appeal and such reinstatement order is reversed with finality,
the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he
actually rendered services during the period.23

On the other hand, the Court has held that if the decision of the Labor Arbiter is later reversed on appeal upon the
finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on
payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer
under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee
was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation
received for actual services rendered without need of refund.24

In his dissenting opinion, Justice Presbitero J. Velasco, Jr. adopts the second interpretation and explains that since
no actual or payroll reinstatement pending appeal transpired, petitioners are no longer entitled to their salaries for
the period in question with the reversal of the Labor Arbiter’s reinstatement order. There is no more legal basis for
the payment of their salaries since their right to reinstatement pending appeal has been lost and extinguished. To
release their salaries for the period in question would constitute unjust enrichment.

The rationale for execution pending appeal has been explained by this Court in Aris (Phil.) Inc. v. NLRC,25 thus:

144
In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a
dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies
and enhances the provisions of the 1987 Constitution on labor and the working-man.26

xxxx

If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the determination of
which is merely left to the discretion of the judge, We find no plausible reason to withhold it in cases of decisions
reinstating dismissed or separated employees. In such cases, the poor employees had been deprived of their only
source of livelihood, their only means of support for their family — their very lifeblood. To Us, this special
circumstance is far better than any other which a judge, in his sound discretion, may determine. In short, with
respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its
execution pending appeal.27

Clearly, the principle of unjust enrichment does not apply. First, the provision on reinstatement pending appeal is
in accord with the social justice philosophy of our Constitution. It is meant to afford full protection to labor as it
aims to stop (albeit temporarily, since the appeal may be decided in favor of the employer) a continuing threat or
danger to the survival or even the life of the dismissed employee and his family.28 Second, the provision on
reinstatement pending appeal partakes of a special law that must govern the instant case. The provision of the
Civil Code on unjust enrichment, being of general application, must give way.

In any case, Justice Velasco points out that the writ of execution in the instant case was issued after the
promulgation of the NLRC resolution. As petitioners failed to act on their rights and seek enforcement of the
reinstatement pending appeal, PAL is not liable to pay their accrued salaries for the period in question.

In Pioneer Texturizing Corp. v. NLRC,29 this Court clarified that an award or order for reinstatement is self-
executory, to wit:

A closer examination, however, shows that the necessity for a writ of execution under Article 224 applies only to
final and executory decisions which are not within the coverage of Article 223. ...

xxxx

… It can not relate to an award or order of reinstatement still to be appealed or pending appeal which Article 223
contemplates. The provision of Article 223 is clear that an award for reinstatement shall be immediately executory
even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement.
The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even
pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the
execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article
223, i.e., the immediate execution of a reinstatement order. …30 (Italics in the original.)

Since the reinstatement order is self-executory, it is inaccurate to say that its non-implementation was due to
petitioners’ fault who failed to enforce their rights at the proper and opportune time. To reiterate, the
reinstatement order does not require a writ of execution, much less a motion for its issuance. To require
petitioners to move for the enforcement of the reinstatement order and blame them for its belated enforcement,
as Justice Velasco does, would render nugatory the self-executory nature of the award.

Justice Velasco also posits that Article 223 of the Labor Code does not automatically make the employer liable for
accrued salaries during the reinstatement pending appeal where no reinstatement took place. He stresses that the
only relief given under the NLRC Rules of Procedure is the remedy of compulsion via a citation for contempt, thus:

145
RULE V. SEC. 14. Contents of Decisions. --- …

In case the decision of the Labor Arbiter includes an order of reinstatement, it shall likewise contain: a) a
statement that the reinstatement aspect is immediately executory; and b) a directive for the employer to submit a
report of compliance within ten (10) calendar days from receipt of the said decision.

RULE IX. SEC. 6. EXECUTION OF REINSTATEMENT PENDING APPEAL. --- In case the decision includes an order of
reinstatement, and the employer disobeys the directive under the second paragraph of Section 14 of Rule V or
refuses to reinstate the dismissed employee, the Labor Arbiter shall immediately issue a writ of execution, even
pending appeal, directing the employer to immediately reinstate the dismissed employee either physically or in the
payroll, and to pay the accrued salaries as a consequence of such reinstatement at the rate specified in the
decision.

The Sheriff shall serve the writ of execution upon the employer or any other person required by law to obey the
same. If he disobeys the writ, such employer or person may be cited for contempt in accordance with Rule IX.
(Emphasis and underscoring supplied.)

Contrary to the position of Justice Velasco, there are actually two reliefs given in the foregoing provisions: (1) the
payment of accrued salaries, and (2) a citation for contempt.

If the Labor Arbiter’s decision includes a reinstatement order, the decision should state that the reinstatement
aspect is immediately executory and direct the employer to submit a compliance report within ten calendar days
from receipt of the said decision. Should the employer disobey the directive of the Labor Arbiter or refuse to
reinstate the dismissed employee, the Labor Arbiter shall immediately issue a writ of execution, even pending
appeal, directing the employer to immediately reinstate the dismissed employee either physically or in the payroll,
and to pay the accrued salaries as a consequence of such reinstatement. If the employer still disobeys the writ of
execution, then he may be cited for contempt.

Finally, the majority put forth the view that after the Labor Arbiter’s reinstatement order is reversed by the NLRC,
the employee may be barred from collecting his accrued salaries if it is shown that the non-implementation of the
reinstatement order was not due to the fault of the employer. In the instant case, the corporate rehabilitation of
PAL had the effect of suspending all actions or claims against it. It partakes of the nature of a restraining order that
constitutes a legal justification for PAL’s non-compliance with the reinstatement order. The writer adds that
reinstatement pending appeal does not contemplate the period when the employer is similarly in a state of being
resuscitated in order to survive.

In Rubberworld (Phils.), Inc. v. NLRC,31 we recognized that the automatic stay of all pending actions for claims is
intended to enable the management committee or the rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extra judicial interference that might unduly hinder or prevent the ‘rescue’ of the
distressed corporation. To allow such other actions to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring and rehabilitation.

Indeed, rehabilitation merely provides for the automatic stay of all pending actions or the suspension of payments
of the distressed corporation to prevent the dissipation of its assets; it does not relieve the corporation of its
obligations. Upon its successful rehabilitation, it must settle in full all claims previously suspended.

Applying the foregoing rule, we cannot adhere to the posture taken by the majority. Just because PAL was under
rehabilitation did not necessarily mean that immediately executory orders such as reinstatement pending appeal
will be put to naught. That would in effect nullify the relief given to the employee when all the law seeks to do is
suspend it.

146
Furthermore, we do not agree that reinstatement pending appeal is inapplicable in the instant case since, as the
majority puts it, PAL is similarly in a state of being resuscitated in order to survive. PAL even argues that
retrenchment and cash flow constraints rendered it impossible to comply with the reinstatement order. In Flight
Attendants and Stewards Association of the Philippines (FASAP) v. Philippine Airlines, Inc., et al.,32 we noted that
PAL failed to substantiate its claim of actual and imminent substantial losses which would justify the retrenchment
of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely affected by the Asian
financial crisis, however, it cannot be assumed that it has likewise brought PAL to the brink of bankruptcy.33 In
effect, we held that the mere fact that PAL underwent corporate rehabilitation does not automatically mean that it
suffered specific and substantial losses that would necessitate retrenchment. In fact, PAL was on the road to
recovery as early as February 1999 and was declaring profits in millions in the succeeding years.34

Given the circumstances in this case, delay on the employee’s part was not an issue. But we cannot agree that the
petitioners could be barred from collecting accrued wages, merely on the ground of their delay in enforcing
reinstatement pending appeal. For it was the statutory duty of the respondent as employer to comply with a self-
executory order in favor of the employees, herein petitioners.

Thus, while its rehabilitation may have prevented PAL from exercising its option either to re-admit petitioners to
work or to reinstate them in the payroll, it did not defeat petitioners’ right to reinstatement pending appeal which
vested upon rendition of the Labor Arbiter’s decision; more so when no actual and imminent substantial losses
were proven by PAL.

To reiterate, there is no longer any legal impediment to hold PAL liable for petitioners’ salaries which automatically
accrued from notice of the Labor Arbiter’s order of reinstatement until its ultimate reversal by the NLRC.35

WHEREFORE, I would vote to GRANT the petition.

G.R. No. 173076 October 10, 2007

MT. CARMEL COLLEGE, petitioner,


vs.
JOCELYN RESUENA, EDDIE VILLALON, SYLVIA SEDAYON and ZONSAYDA EMNACE, respondents.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner seeks the reversal
of the Decision1 dated 2 June 2006 of the Court of Appeals in CA-G.R. CEB-SP No. 01615 entitled, Mt. Carmel
College v. National Labor Relations Commission, Labor Arbiter Phibun D. Pura, Jocelyn Resuena, et al. Petitioner
seeks remedy from this Court for an alleged illegal execution of the Decision2 dated 30 October 2001 by the
National Labor Relations Commission (NLRC) in NLRC CASE No. V-000176-2000 (RAB CASE Nos. 06-06-10393-98;
06-06-10394-98; 06-06-10395-98; 06-06-10414-98) as affirmed by the Court of Appeals in CA-G.R. SP No. 80639 in
a Decision3 dated 17 March 2004, insisting it was not in accord with the dispositive portion thereof. Petitioner is
not appealing the judgment itself but the manner of execution of the same.

The following are the factual antecedents of the instant Petition:

Petitioner Mt. Carmel College is a private educational institution. It is administered by the Carmelite Fathers at
New Escalante, Negros Occidental. Respondents were employees of petitioner, namely: Jocelyn Resuena

147
(Accounting Clerk), Eddie Villalon (Elementary Department Principal); Sylvia Sedayon (Treasurer), and Zonsayda
Emnace (Secretary to the Director).

On 21 November 1997, respondents, together with several faculty members, non-academic personnel, and other
students, participated in a protest action against petitioner. Thereafter, petitioner’s Director, Rev. Fr. Modesto E.
Malandac, issued a Memorandum to each of the respondents. The Memorandum directed respondents to explain
in writing why they should not be dismissed for loss of trust and confidence for joining the protest action against
the school administration. Petitioner maintained that respondents were occupying positions of highly confidential
nature. After a hearing conducted by petitioner’s Fact-Finding Committee and submission of its Report on 25 April
1998, recommending dismissal or suspension of respondents, petitioner issued written notices of termination to
respondents on 7 May 1998. Respondents were terminated by petitioner on 15 May 1998.

Separate complaints were filed by each of the four respondents against petitioner before Regional Arbitration
Branch VI of the NLRC in Bacolod City. Respondents charged petitioner with illegal dismissal and claimed
13thmonth pay, separation pay, damages and attorney’s fees. The cases were docketed as RAB Cases No. 06-06-
10393-98, 06-06-10394-98, 06-06-10395-98, and 06-06-10414-98. All four cases were consolidated, and Labor
Arbiter Ray T. Drilon thereafter issued a Decision4 dated 25 May 1999 affirming the validity of respondents’
termination by petitioner on the ground of loss of trust and confidence. Although the Decision found respondents
to have been legally dismissed, as equitable relief, however, they were awarded separation pay computed at one
month pay for every year of service,5 their proportionate 13th month pay, and attorney’s fees. Their claims for
moral and exemplary damages were denied. In issuing the aforesaid Decision, the Labor Arbiter ruled:

WHEREFORE, premises considered, judgment is hereby rendered ordering [herein petitioner] Mount
Carmel College represented by Fr. Modesto Malandac to pay [herein respondents] Jocelyn Resuena,
Zonsayda Emnace, Eddie Villalon and Sylvia Sedayon, their respective 13th month pay, separation pay and
attorney’s fee in the total sum of THREE HUNDRED THIRTY-FOUR THOUSAND EIGHT HUNDRED SEVENTY-
FIVE PESOS AND 67/100 (P334,875.47) to be deposited with this office within ten (10) days from receipt
of this decision.

The complaint for moral and exemplary damages is hereby dismissed for lack of legal basis.

All other claims are hereby dismissed for lack of merit.6

On 9 September 1999, Labor Arbiter Drilon issued to the parties a Notice of Judgment/Decision of his 25 May 1999
Decision. The notice indicated that a "decision of the Labor Arbiter reinstating a dismissed or separated employee,
in so far as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or at the option of the employee (sic) merely reinstated in the payroll."7

In the meantime, petitioner appealed to the NLRC Fourth Division in Cebu City, seeking the reversal of the portion
of the Labor Arbiter’s Decision dated 25 May 1999 awarding separation pay to respondents. The NLRC dismissed
the appeal in its Decision dated 30 October 2001. In the same Decision dismissing the appeal, the NLRC reversed
and modified the 25 May 1999 Decision of the Labor Arbiter, and declared the termination of respondents to be
illegal. It ordered the reinstatement of respondents, with payment of backwages or payment of separation pay in
lieu thereof. The pertinent portion of the 30 October 2001 NLRC Decision reads:

We rule that complainants were illegally dismissed and must therefore be ordered reinstated with
payment of backwages from the time they were illegally dismissed up to the time of their actual
reinstatement.

All other claims are hereby dismissed for lack of merit.

148
WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the
appealed decision is hereby AFFIRMED with modification ordering the [herein petitioner] the payment of
the backwages of the [herein respondents] from May 15, 1998 up to May 25, 1999, further directing the
reinstatement of the [respondents] to their original positions without loss of seniority or in lieu thereof
the payment of their separation pay as computed in the appealed decision.8

Petitioner filed a Motion for Reconsideration of the 30 October 2001 Decision of the NLRC. The said Motion was
denied in the 19 June 2003 Resolution of the NLRC.

The case was elevated to the Court of Appeals via a Special Civil Action for Certiorari and Prohibition, docketed as
CA-G.R. SP No. 80639 where petitioner assailed the aforementioned NLRC Decision dated 30 October 2001 and
Resolution dated 19 June 2003, arguing that there is more than enough basis for loss of trust and confidence as
ground for dismissing respondents. It also reiterated compliance with the twin requirements of notice and hearing.
The Court of Appeals denied the petition in a Decision promulgated on 17 March 2004, ruling thus:

Consequently, we find no grave abuse of discretion committed by the NLRC in ruling that [herein
respondents] have been illegally dismissed. Likewise, said [NLRC] correctly held that even if such
participation of [respondents] in the protest picket is rather improper under the circumstances or
disappointing to the School Administrator who had rightly expected them to take the side of the
administration or at least stayed neutral on the demand for ouster of Fr. Malandac and Barairo, dismissal
is definitely too harsh where a less punitive action such as reprimand or disciplinary action would have
been sufficient. Considering the long years of faithful service of [respondents] in the School without
previous record of misconduct, as duly noted by the NLRC in its decision, their termination on the basis of
alleged loss of confidence by taking part in an otherwise legitimate and constitutionally-protected right to
free speech and peaceful assembly, is certainly illegal and unjustified.

xxxx

Having been illegally dismissed, [respondents] are entitled to back wages from the time of their
termination until reinstatement, and if reinstatement is no longer possible, the grant of separation pay
equivalent to one (1) month for every year of service. However, in this case since the Labor Arbiter did not
order reinstatement, the NLRC correctly excluded the period of the appeal in the computation of back
wages due to [respondents].

Finally, on the prayer for injunctive relief sought by petitioner on the ground that [public respondent]
Labor Arbiter exceeded his jurisdiction in issuing the writ of execution despite the fact that his decision
did not order reinstatement and that he is bereft of authority to implement the decision of the NLRC
(Fourth Division).

xxxx

Considering that there is already an entry of judgment on the Decision dated October 30, 2001, and in
view of Our disposition of this petition, we find no more obstacle for the enforcement of the said
judgment even pending appeal, in accordance with Sections 1 and 2, Rule VIII of the NLRC Rules of
Procedure, as amended, as well as Sections 2, 4 and 6, Rule III of the NLRC Manual on Execution of
Judgment.

xxxx

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED for lack of merit. The assailed Decision and Resolution are AFFIRMED.9

149
No Motion for Reconsideration of the afore-quoted Court of Appeals Decision in CA-G.R. SP No. 80639 was filed
and it became final and executory on 14 April 2004.

At about the same time as the foregoing developments in CA-G.R. SP No. 80639, Labor Arbiter Phibun D. Pura
issued an Order on 19 May 2003 opining on the self-executory nature of a reinstatement order:

To be sure the Court has not been consistent in its interpretation of Art. 223. The nagging issue has always
been whether the reinstatement order is self-executory. Citing the divergent views of the court beginning
with Inciong v. NLRC followed by the deviation in interpretation in Maranaw Hotel Corporation (Century
Park Sheraton Manila) v. NLRC, as reiterated and adopted in Archilles Manufacturing Corporation v. NLRC
and Purificacion Ram v. NLRC, the Court in the 1997 Pioneer case has laid down the doctrine that
henceforth an Order or award for reinstatement is self-executory, meaning that it does not require a writ
of execution, much less a motion for its issuance, as maintained by petitioner. x x x.

Successive writs of execution pertaining to the backwages and accrued salaries of the respondents were issued by
Labor Arbiter Pura on these dates: 9 June 2003,10 10 December 2003,11 and 20 January 2004.12

The first writ of execution, issued on 9 June 2003, directed the sheriff to collect from petitioner, the amount
of P503,028.05 representing backwages from 15 May 1998 to 25 May 1999. Based on the Sheriff’s Report dated 25
June 2003, reinstatement had not been effected. There was a Notice of Garnishment issued to the Equitable-PCI
Bank Escalante Branch. Labor Arbiter Pura ordered the release of the garnished amount of P508,168.05 with the
said bank for deposit to the Cashier of NLRC Regional Arbitration Branch VI in Bacolod City. Petitioner moved to
quash the Writ of Execution dated 9 June 2003. It was denied.

By 4 December 2003, the NLRC entered in its Book of Entries of Judgment its Decision dated 30 October 2001. The
records of the case were endorsed back to NLRC Regional Arbitration Branch VI for the execution of its final and
executory decision, as no restraining order was issued by the Court of Appeals.

After an exchange of pleadings, respondents filed an Ex-Parte Motion for Issuance of Writ of Execution with the
Labor Arbiter considering that the Entry of Judgment was already issued by the NLRC. On 10 December 2003, the
Labor Arbiter granted the Motion and issued the second Writ of Execution. On motion of respondents, the Labor
Arbiter ordered the release to them of the garnished amount of P503,028.05 deposited with the Cashier of NLRC
Regional Arbitration Branch VI.

However, the foregoing amount was considered to be only a partial payment of the monetary awards due the
respondents and the unpaid balance thereof continued to grow to P1,307,806.50. Respondents thus filed a motion
for partial writ of execution, which the Labor Arbiter granted by issuing the third Writ of Execution on 20 January
2004.13 Under the foregoing writs of execution, the aggregate amount of P1,736.592.0814 was garnished by
Bailiff/Acting Sheriff Romeo D. Pasustento, representing respondents’ accrued salaries, backwages, attorney’s fees
and sheriff’s fees computed from the promulgation of the NLRC Decision 30 October 2001.

Respondents filed on 14 July 2004 yet another Motion to Issue a Writ of Execution to collect backwages from 1
January 2004 to 30 June 2004. Petitioner opposed the motion, but the Motion to Issue a Writ of Execution was
granted.

On 31 January 2005, Labor Arbiter Pura issued an Order15 adopting the computation of the Fiscal Examiner of NLRC
Regional Arbitration Branch VI and issuing a writ of execution to enforce the NLRC Decision dated 30 October
2001. The dispositive portion of the said Order reads:

In light of the foregoing, we have no choice but to adopt the computation of the RAB Fiscal Examiner,
hereto attached and forming part of the record of these cases and conformably thereto, we grant the

150
Motion to Issue Writ of Execution on backwages for the period stated in this computation, taking into
consideration the grant of differentials as there are benefits which accrued to the [herein respondents]
and which they should have enjoyed had they been employed and/or reinstated, as the case may be, and
such other amount as may accrue until actually reinstated or in lieu of reinstatement, to pay
[respondents] separation pay to be computed at one (1) month salary for every year of service in addition
to backwages the formula adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7,
paragraph 1.

Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in the above entitled
cases.16

On 8 February 2005, petitioner filed a Motion for Reconsideration of the foregoing Order contending that the
judgment of the NLRC mandated the payment of separation pay as computed in the appealed decision.
Respondents likewise filed a Manifestation and Motion to include the month of November 2004 in the
computation. In an Order dated 10 February 2005, the Labor Arbiter denied the petitioner’s Motion for
Reconsideration. On 22 February 2005, he issued an Alias Writ of Execution17 for the collection from petitioner of
the amount of P1,131,035.00 representing respondents’ backwages, separation pay, and attorney’s fees.
Petitioner filed a Motion to Quash the Alias Writ of Execution on 17 March 2005.18

On 15 April 2005, the Labor Arbiter issued an Order where it found no compelling reason to warrant the grant of
the Motion to Quash the Alias Writ of Execution. The afore-stated Order thus reads:

WHEREFORE, for lack of merit the Motion to Quash the Alias Writ dated March 17, 2005 is denied.
[Respondents’] Motion to Include February and March 2005 in the Computation of wages is hereby
GRANTED. The entry of appearance of the collaborating counsel is duly noted.19

From the said Order of the Labor Arbiter, petitioner filed with the NLRC an appeal with an application for issuance
of a writ of preliminary injunction on the execution of judgment, docketed as NLRC Case No. V-000377-05.
Petitioner assailed the 15 April 2005 Order of the Labor Arbiter averring that the latter seriously committed errors
when he ordered the payment and garnishment of backwages beyond the period 15 May 1998 to 25 May 1999.
The NLRC dismissed the petitioner’s appeal in a Resolution20 dated 15 August 2005 for lack of merit. Petitioner
filed a Motion for Reconsideration but it was denied by the NLRC in a Resolution dated 30 November 2005,
disposed of as follows:

WHEREFORE, premises considered, the appeal of respondents is hereby DISMISSED for lack of merit. The
15 April 2005 Order of Labor Arbiter Phibun Pura is AFFIRMED.21

From the foregoing, petitioner filed with the Court of Appeals a Special Civil Action for Certiorari and Prohibition,
docketed as CA-G.R. CEB-SP No. 01615, praying for the setting aside and nullification of the Resolutions dated 15
August 2005 and 30 November 2005 of the NLRC in NLRC Case No. V-000377-05. Petitioner contended that the
NLRC acted with grave abuse of discretion when it denied its appeal and motion for reconsideration and in not
ruling that there was already satisfaction of judgment. The crux of petitioner’s case, as succinctly worded by the
Court of Appeals in CA-G.R. CEB-SP No. 01615:

[P]etitioner seeks to annul and set aside the resolutions dated August 15, 2005 and November 30, 2005 of
the respondent NLRC in NLRC Case No. V-000377-05 when the latter refuses to invalidate the various
writs of executions and to refund petitioner of whatever excess there might be on the theory that the
execution done by the respondent Labor Arbiter was illegal and in fact goes beyond what is stated in the
decision dated October 30, 2001 of the respondent NLRC in NLRC Case No. V-000176-2000.22

The Court of Appeals eventually dismissed CA-G.R. CEB-SP No. 01615, ruling as follows:

151
Thus, petitioner’s avowal that their liability for private respondents’ backwages is limited from May 15,
1998 up to May 25, 1999 is untenable on these grounds:

First, there is no showing, in the case at bench, that petitioner exercised its option to reinstate private
respondents to their former position or to grant them separation pay. Accordingly, backwages have to be
granted to private respondents until their reinstatement to their former position is effected or upon
petitioner’s payment of separation pay to private respondents if reinstatement is no longer feasible; and

Second, the decision dated March 17, 2004 of the 17th Division of the Court of Appeals in CA-G.R. SP No.
80639 acquiesced the propriety of the issuance of the writs of execution by the respondent labor arbiter
on June 9, 2003, December 10, 2003 and January 30, 2004. On April 14, 2004, the said decision which
sanctioned the payment of backwages even beyond May 25, 1999, became final and executory x x x.

xxxx

In light of the foregoing disquisition, we hereby find public respondent NLRC to have acted accordingly
and without grave abuse of discretion when it issued the questioned Resolutions dated August 15, 2005
and November 30, 2005, respectively. Grave abuse of discretion means such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. It is not sufficient that a tribunal, in the exercise of
power, abused its discretion; such abuse must be grave.

WHEREFORE, in view of the foregoing, the present petition is hereby DISMISSED and the assailed
Resolutions dated August 15, 2005 and November 30, 2005, respectively, issued by the respondent NLRC
in NLRC Case No. V-000377-05 are hereby AFFIRMED.23

Hence, petitioner filed the instant Petition for Review on Certiorari, raising the following issues:

I.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE LABOR ARBITER AND THE NLRC THAT
THE AWARD OF BACKWAGES GOES BEYOND THE PERIOD FROM 15 MAY 1998 UP TO 25 MAY 1999 ON
THE SUPPOSITION THAT REINSTATEMENT IS SELF-EXECUTORY AND DOES NOT NEED A WRIT OF
EXECUTION FOR ITS ENFORCEMENT.

II.

THE HONORABLE COURT OF APPEALS ERRED IN NOT FINIDING THAT THE CONTINUING GRANT AND
AWARD OF BACKWAGES UP TO THE PRESENT IS CONTRARY TO LAW AND JURISPRUDENCE AS LAID DOWN
BY THIS HONORABLE SUPREME COURT.

Petitioner prays that this Court render judgment (a) annulling and setting aside the assailed Decision on 02 June
2006 of the Court of Appeals in CA-G.R. CEB-SP No. 01615 and all its orders and issuances; (b) ordering that
backwages be computed and executed corresponding only to the period from 15 May 1998 to 25 May 1999; (c)
ordering that separation pay be computed based on the computation as originally submitted by the Labor
Arbiter, P344,875.47, which corresponds to the date of respondents’ employment until 15 May 1998; (d) that no
other award except for backwages for the period 15 May 1998 to 25 May 1999 and separation pay amounting
to P344,875.47 shall be paid by petitioner; and (e) that the respondents be ordered to refund and pay the alleged

152
excess in the amounts garnished by virtue of the Writs of Execution dated 9 June 2003, 10 December 2003, and 30
January 2004.

In sum, the resolution of this petition hinges on the following issues: (1) whether reinstatement in the instant case
is self-executory and does not need a writ of execution for its enforcement; and (2) whether the continuing award
of backwages is proper.

Petitioner insists that what is at issue is the manner of execution of the NLRC Decision dated 30 October 2001 in
NLRC CASE No. V-000176-2000 (RAB CASE Nos. 06-06-10393-98; 06-06-10394-98; 06-06-10395-98; 06-06-10414-
98), as affirmed by the Decision dated 17 March 2004 of the Court of Appeals in CA-G.R. No. 80639.

In ruling on the consolidated complaints filed by the four respondents, Labor Arbiter Drilon found that they were
not illegally dismissed but ordered that they be awarded 13th month pay, separation pay and attorney’s fees in the
amount of P334,875.47. Upon appeal to the NLRC, the NLRC reversed the findings of the Labor Arbiter ruling that
the termination of respondents was illegal and ordering the payment of backwages of respondents from 15 May
1998 up to 25 May 1999. It further directed the reinstatement of respondents or payment of separation pay, with
backwages. This was affirmed by the Court of Appeals.

While petitioner concedes that the case pertaining to the complaints for illegal dismissal filed by the respondents
before the Labor Arbiter had been resolved with finality by the Court of Appeals in CA-G.R. No. 80639, no other
remedy having been taken therefrom, it however assails the correctness and validity of the execution of the
judgment therein. Petitioner avers that the Court of Appeals erred in upholding the Labor Arbiter and the NLRC
that the award of backwages goes beyond the period 15 May 1998 to 25 May 1999 on the supposition that
reinstatement is self-executory and does not need a writ of execution for its enforcement. Petitioner postulates
that the Labor Arbiter went beyond the terms of the NLRC Decision, as affirmed by the Court of Appeals, and
erroneously used as bases inapplicable law24 and jurisprudence25 in the execution of the same. Petitioner contends
that the Labor Arbiter’s reliance on Pioneer Texturizing Corp. v. National Labor Relations Commission26 is
misplaced, for it applied Article 223 of the Labor Code 27 since reinstatement was ordered at the Labor Arbiter’s
level while in the instant case, reinstatement was ordered upon appeal to the NLRC. Petitioner argues that the
relevant statutory and regulatory provisions herein are Article 224 of the Labor Code,28 and Rule III of the NLRC
Manual for Execution of Judgment,29 given that there was no order of reinstatement at the Labor Arbiter level but
only at the NLRC level. Petitioner insists that, applying Article 224 of the Labor Code in the instant case, any
reinstatement aspect of the NLRC Decision, as affirmed by the Court of Appeals, should have been done through
the issuance of a Writ of Execution as it is no longer self-executory. It furthermore contends that it was impossible
to reinstate respondents, whether by way of an immediate execution or by way of a self-executory nature, since
there was nothing to execute pending appeal because there was no order for reinstatement.

Petitioner vehemently raises the argument that the award of backwages subject to execution is limited to the
period prior to the appeal and does not include the period during the pendency of the appeal, on the contention
that reinstatement during appeal is warranted only when the Labor Arbiter rules that the dismissed employee
should be reinstated. In support of its foregoing argument, petitioner invokes Filflex Industrial & Manufacturing
Corporation v. National Labor Relations Commission30 where this Court ruled:

In other words, reinstatement during appeal is warranted only when the labor arbiter (LA) himself rules
that the dismissed employee should be reinstated. In the present case, neither the dispositive portion nor
the text of the labor arbiter’s decision ordered the reinstatement of private respondent. Further, the back
wages granted to private respondent were specifically limited to the period prior to the filing of the appeal
with Respondent NLRC. In fact, the LA’s decision ordered her separation from service for the parties’
"mutual advantage and most importantly to physical and health welfare of the complainant." Hence, it is
an error and an abuse of discretion for the NLRC to hold that the award of limited back wages, by
implication, included an order for private respondent’s reinstatement.

153
An order for reinstatement must be specifically declared and cannot be presumed; like back wages, it is a
separate and distinct relief given to an illegally dismissed employee. There being no specific order for
reinstatement and the order being for complainant’s separation, there can be no basis for the award of
salaries/back wages during the pendency of appeal.

Petitioner’s reliance on Filflex is misplaced and inapplicable to the case at bar. Indeed in Filflex, this Court ruled
that the award of backwages is limited to the period prior to the filing of the appeal with the NLRC. This Court had
declared in the aforesaid case that reinstatement during appeal is warranted only when the Labor Arbiter himself
rules that the dismissed employee should be reinstated. But this was precisely because on appeal to the NLRC, it
found that there was no illegal dismissal; thus, neither reinstatement nor backwages may be awarded. In
fact, Filfexdeleted the award of backwages granted during appeal, reiterating that an award of backwages by the
NLRC during the period of appeal is totally inconsistent with its finding of a valid dismissal. In the instant petition,
the NLRC Decision dated 30 October 2001 finding the termination of respondents illegal, had the effect of
reversing Labor Arbiter Drilon’s Decision dated 25 May 1999.

This Court sees no cogent reason as to the relevance of a discussion on whether or not reinstatement is self-
executory. However, since petitioner raised this issue, this Court has opted to discuss it. Verily, Article 223 of the
Labor Code is not applicable in the instant case. The said provision stipulates that the decision of the Labor Arbiter
reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately
be executory, even pending appeal.

Petitioner contends that the statutory provision applicable is Article 224 of the Labor Code, as well as Rule III,
Section 2(b) of the NLRC Manual on Execution of Judgment, because the case was decided on appeal.
Furthermore, it is a decision which is of a final and executory nature. The provisions invoked by petitioner reads:

Art. 224. Execution of decisions, orders or awards. -- (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years
from the date it becomes final and executory x x x.31

If the execution be for the reinstatement of any person to any position, office or employment, such writ
shall be served by the sheriff upon the losing party or upon any other person required by law to obey the
same, and such party or person may be punished for contempt if he disobeys such decisions, order for
reinstatement.32

The records of the case indicate that when Labor Arbiter Drilon issued its 25 May 1999 Decision, there was no
order of reinstatement yet although the dispositive portion of the 31 January 2005 Order issued by Labor Arbiter
Pura already provided for reinstatement or payment of separation pay, to wit:

In light of the foregoing, we have no choice but to adopt the computation of the RAB Fiscal Examiner,
hereto attached and forming part of the record of these cases and conformably thereto, we grant the
Motion to Issue Writ of Execution on backwages for the period stated in this computation, taking into
consideration the grant of differentials as there are benefits which accrued to the complainants and which
they should have enjoyed had they been employed and/or reinstated, as the case may be, and such other
amount as may accrue until actually reinstated or in lieu of reinstatement, to pay complainants separation
pay to be computed at one (1) month salary for every year of service in addition to backwages the
formula adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7, paragraph 1.

Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in the above entitled
cases.33

154
Art. 223 of the Labor Code provides that reinstatement is immediately executory even pending appeal only when
the Labor Arbiter himself ordered the reinstatement. In this case, the original Decision of Labor Arbiter Drilon did
not order reinstatement. Reinstatement in this case was actually ordered by the NLRC, affirmed by the Court of
Appeals. The order of Labor Arbiter Pura on 31 January 2005 directing reinstatement was issued after the Court of
Appeals Decision dated 17 March 2004 which affirmed the NLRC’s order of reinstatement. Thus, Art. 223 finds no
application in the instant case. Considering that the order for reinstatement was first decided upon appeal to the
NLRC and affirmed with finality by the Court of Appeals in CA-G.R. SP 80369 on 17 March 2004, petitioner rightly
invoked Art. 224 of the Labor Code. As contemplated by Article 224 of the Labor Code, the Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator
may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5)
years from the date it becomes final and executory. Consequently, under Rule III of the NLRC Manual on the
Execution of Judgment, it is provided that if the execution be for the reinstatement of any person to a position, an
office or an employment, such writ shall be served by the sheriff upon the losing party or upon any other person
required by law to obey the same, and such party or person may be punished for contempt if he disobeys such
decision or order for reinstatement.34

However, as we can glean from the succeeding discussion, the above findings will not affect the award of
backwages for the period beyond 25 May 1999.

Anent the second issue, petitioner contends that the 25 May 1999 Decision of Labor Arbiter Drilon did not order
the reinstatement of respondents. Petitioner posits that since there was no finding of illegal dismissal at the Labor
Arbiter’s level, then it follows that there was no reinstatement aspect, and its liability for backwages is limited to
the period from 15 May 1998 up to 25 May 1999, i.e., from dismissal to promulgation of the Labor Arbiter’s
Decision only, as allegedly determined by the NLRC in its Decision dated 30 October 2001. It argues that while the
said NLRC Decision awarded backwages from 15 May 1998 to 25 May 1999 only, the Writs of Execution issued
pursuant thereto ordered the payment of backwages way beyond the period stated in the Decision35 it is supposed
to execute.

Petitioner’s argument is absurd. Abbott v. National Labor Relations Commission,36 as cited by petitioner, declared
that there exists a big difference when what is sought to be reviewed is the manner of execution of a decision and
not the decision itself. "While it is true that the decision itself has become final and executory and so can no longer
be challenged, there is no question that it must be enforced in accordance with its terms and conditions. Any
deviation therefrom can be the subject of a proper appeal."37 In the instant case, however, the manner of
execution falls squarely within the terms of the Decision it seeks to implement.

The 30 October 2001 NLRC Decision ruled as follows:

We rule that complainants were illegally dismissed and must therefore be ordered reinstated with
payment of backwages from the time they were illegally dismissed up to the time of their actual
reinstatement.

All other claims are hereby dismissed for lack of merit.

WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the
appealed decision is hereby AFFIRMED with modification ordering the respondents the payment of the
backwages of the complainants from May 15, 1998 up to May 25, 1999, further directing the
reinstatement of the complainants to their original positions without loss of seniority or in lieu thereof the
payment of their separation pay as computed in the appealed decision.38

155
When the afore-quoted NLRC Decision was appealed to the Court of Appeals in CA-G.R. SP No. 80639, there
seemed to be a contradiction between the body and the fallo of the appellate court’s Decision dated 17 March
2004. Petitioner cites the following from the text of the Court of Appeals Decision:

However, in this case since the Labor Arbiter did not order reinstatement, the NLRC correctly excluded
the period of the appeal in the computation of back wages due to private respondents.39

The dispositive portion of the same Decision, however, concludes:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED for lack of merit. The assailed Decision and Resolution are AFFIRMED.40

The general rule is that where there is conflict between the dispositive portion or the fallo and the body of the
decision, the fallo controls. This rule rests on the theory that the fallo is the final order while the opinion in the
body is merely a statement ordering nothing.41 Clearly, the award of backwages to respondents does not merely
cover the period from 15 May 1998 up to 25 May 1999 alone.42 The findings of the NLRC, which were affirmed with
finality in CA-G.R. SP No. 80639, and subject of execution in the instant petition, pronounced:

We rule that [respondents] were illegally dismissed and must therefore be ordered reinstated with
payment of backwages from the time they were illegally dismissed up to the time of their actual
reinstatement.

All other claims are hereby dismissed for lack of merit.

WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the
appealed decision is hereby AFFIRMED with modification ordering the [petitioner] payment of the
backwages of the [respondents] from May 15, 1998 up to May 25, 1999, further directing the
reinstatement of the [respondents] to their original positions without loss of seniority or in lieu thereof
the payment of their separation pay as computed in the appealed decision.43

The above ruling of the NLRC in its Decision dated 30 October 2001 had the effect of reversing and modifying the
findings of the Labor Arbiter. Under Article 218(c) of the Labor Code, the Commission is empowered to "correct,
amend, or waive any error, defect or irregularity whether in substance or form," in the exercise of its appellate
jurisdiction.44 The dispositive portion of the Labor Arbiter’s Decision as worded is clear and needs no further
interpretation. The NLRC found respondents to have been illegally dismissed by petitioner, and ordered
reinstatement and payment of backwages. Additionally, it stated that where reinstatement is not
possible, separation pay as computed in the appealed decision should be awarded to respondents. Petitioner
interprets the dispositive portion of the NLRC Decision to mean that it is ordered to pay respondents backwages
from 15 May 1998 to 25 May 1999 only. Petitioner seems to have missed that the aforestated NLRC Decision also
directed it to reinstate respondents, or in lieu thereof, pay separation pay. This, petitioner failed to do. Petitioner
did not exercise the option of either reinstatement or paying the separation pay of respondents.

Backwages are to be computed from the time of illegal dismissal until reinstatement or upon petitioner’s payment
of separation pay to respondents if reinstatement is no longer possible. Article 279 of the Labor Code, as amended,
states:

Art. 279. Security of Tenure. – x x x

In cases of regular employment the employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,

156
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.45

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative.46 The payment of separation pay is in addition
to payment of backwages.

Concomitantly, it is evident that respondents’ backwages should not be limited to the period from 15 May 1998 to
25 May 1999. The backwages due respondents must be computed from the time they were unjustly dismissed
until their actual reinstatement to their former position or upon petitioner’s payment of separation pay to them if
reinstatement is no longer feasible. Thus, until petitioner actually implements the reinstatement aspect of the
NLRC Decision dated 30 October 2001, as affirmed in the Court of Appeals Decision dated 17 March 2004 in CA-
G.R. SP No. 80639, its obligation to respondents, insofar as accrued backwages and other benefits are concerned,
continues to accumulate.

This Court takes this occasion to reiterate that execution is the final stage of litigation, the end of the suit. It can
not and should not be frustrated except for serious reasons demanded by justice and equity.47 "Litigation must end
sometime and somewhere. An effective and efficient administration of justice requires that, once a judgment has
become final, the winning party be not, through a mere subterfuge, be deprived of the fruits of the verdicts. Courts
must, therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an
end to controversies, courts should frown upon any attempt to prolong them."48

WHEREFORE, the instant petition is dismissed. The Decision dated 2 June 2006 of the Court of Appeals in CA-G.R.
CEB-SP No. 01615 is AFFIRMED. Petitioner is ORDERED to (1) reinstate respondents to their original positions
without loss of seniority rights, with payment of (a) backwages computed from 15 May 1998, the time
compensation of respondents was withheld from them when they were unjustly terminated, up to the time of
reinstatement; and (b) accrued 13th month pay for the same period; OR in lieu of reinstatement, (2) pay
respondents (a) separation pay, in the amount equivalent to one (1) month pay for every year of service; and (b)
backwages, computed from 15 May 1998, the time compensation of respondents was withheld from them when
they were unjustly terminated, up to the time of payment thereof; and (c) the accrued 13th month pay for the
same period. For this purpose, the records of this case are hereby REMANDED to the Labor Arbiter for proper
computation of the subject money claims as discussed above. Costs against petitioner.

SO ORDERED.

G.R. No. 147806 November 12, 2002

NERISSA BUENVIAJE, SONIA FLORES, BELMA OLIVIO,


GENALYN PELOBELLO, MARY JANE MENOR, JOSIE RAQUERO,
ESTRELITA MANAHAN, REBECCA EBOL, and ERLINDA ARGA, petitioners,
vs.

157
THE HONORABLE COURT OF APPEALS (SPECIAL FORMER SEVENTH DIVISION),
HONORABLE ARBITER ROMULUS PROTASIO, COTTONWAY MARKETING CORPORATION and MICHAEL G.
TONG, President and General Manager, respondents.

DECISION

PUNO, J.:

This petition seeks to set aside the Decision dated March 13, 2000 and Resolution dated February 13, 2001 of the
Court of Appeals in CA-G.R. SP No. 53204 entitled "Cottonway Marketing Corp. vs. National Labor Relations
Commission, et al."

The facts are as follows:

Petitioners were former employees of Cottonway Marketing Corp. (Cottonway), hired as promo girls for their
garment products. In October, 1994, after their services were terminated as the company was allegedly suffering
business losses, petitioners filed with the National Labor Relations Commission (NLRC) a complaint for illegal
dismissal, underpayment of salary, and non-payment of premium pay for rest day, service incentive leave pay and
thirteenth month pay against Cottonway Marketing Corp. and Network Fashion Inc./JCT International Trading.1

On December 19, 1995, Labor Arbiter Romulus S. Protasio issued a Decision finding petitioners' retrenchment valid
and ordering Cottonway to pay petitioners' separation pay and their proportionate thirteenth month pay.2

On appeal, the NLRC, in its Decision dated March 26, 1996, reversed the Decision of the Labor Arbiter and ordered
the reinstatement of petitioners without loss of seniority rights and other privileges. It also ordered Cottonway to
pay petitioners their proportionate thirteenth month pay and their full backwages inclusive of allowances and
other benefits, or their monetary equivalent computed from the time their salaries were withheld from them up to
the date of their actual reinstatement.3

Cottonway filed a motion for reconsideration which was denied by the Commission in a Resolution dated July 31,
1996.4

On August 30, 1996, Cottonway filed with the NLRC a manifestation stating that they have complied with the order
of reinstatement by sending notices dated June 5, 1996 requiring the petitioners to return to work, but to no avail;
and consequently, they sent letters to petitioners dated August 1, 1996 informing them that they have lost their
employment for failure to comply with the return to work order.5 Cottonway also filed a petition for certiorari with
the Supreme Court which was dismissed on October 14, 1996.6

On November 6, 1997, petitioners filed with the NLRC a motion for execution of its Decision on the ground that it
had become final and executory.7

On December 4, 1996, the Research and Investigation Unit of the NLRC issued a computation of the monetary
award in accordance with the March 26 Decision of the NLRC.8

Meanwhile, Cottonway filed a motion for reconsideration of the Supreme Court Resolution of October 14, 1996
dismissing the petition for certiorari. The motion for reconsideration was denied with finality on January 13, 1997.9

On March 4, 1997, Cottonway filed a manifestation with the NLRC reiterating their allegations in their
manifestation dated August 30, 1996, and further alleging that petitioners have already found employment
elsewhere.10

158
On March 13, 1997, the Research and Investigation Unit of the NLRC issued an additional computation of
petitioners' monetary award in accordance with the March 26 NLRC decision.11

On the same date, Cottonway filed with the NLRC a supplemental manifestation praying that the Commission
allow the reception of evidence with respect to their claim that petitioners have found new employment. The
Commission denied Cottonway’s prayer in an Order dated March 24, 199712 and Resolution dated July 24, 1997.13

Nonetheless, on April 8, 1998, Labor Arbiter Romulus S. Protasio issued an Order declaring that the award of
backwages and proportionate thirteenth month pay to petitioners should be limited from the time of their illegal
dismissal up to the time they received the notice of termination sent by the company upon their refusal to report
for work despite the order of reinstatement. He cited the fact that petitioners failed to report to their posts
without justifiable reason despite respondent's order requiring them to return to work immediately. The Labor
Arbiter ordered the Research and Investigation Unit to recompute the monetary award in accordance with its
ruling.14

The April 8 Order of the Labor Arbiter, however, was set aside by the Commission in its Resolution dated
September 21, 1998. The Commission ruled that its Decision dated March 26, 1996 has become final and
executory and it is the ministerial duty of the Labor Arbiter to issue the corresponding writ of execution to effect
full and unqualified implementation of said decision.15 The Commission thus ordered that the records of the case
be remanded to the Labor Arbiter for execution. Cottonway moved for reconsideration of said resolution, to no
avail.

Hence, Cottonway filed a petition for certiorari with the Court of Appeals seeking the reversal of the ruling of the
NLRC and the reinstatement of the Order dated April 8, 1998 issued by Labor Arbiter Romulus S. Protasio.

The appellate court granted the petition in its Decision dated March 13, 2000.16 It ruled that petitioners'
reinstatement was no longer possible as they deliberately refused to return to work despite the notice given by
Cottonway. The Court of Appeals thus held that the amount of backwages due them should be computed only up
to the time they received their notice of termination. It said:

"Petitioner's termination of private respondents' employment by reason of their failure to report for work despite
due notice being valid, it would change the substance of the questioned March 26, 1996 decision which awards
backwages to the complainants up to their reinstatement. Again, private respondents' reinstatement is no longer
possible because of the supervening event which is their valid termination. The deliberate failure to report for
work after notice to return bars reinstatement. It would be unjust and inequitable then to require petitioner to pay
private respondents their backwages even after the latter were validly terminated when in fact petitioner dutifully
complied with the reinstatement aspect of the decision. Thus, the period within which the monetary award of
private respondents should be based is limited up to the time of private respondents' receipt of the respective
notices of termination on August 27, 1998."17

The Court of Appeals denied petitioners' motion for reconsideration in a Resolution issued on February 13, 2001.18

Petitioners now question the Decision and Resolution of the Court of Appeals. They impute the following errors:

"I. That the Honorable Court of Appeals gravely abused its discretion amounting to lack of and/or in
excess of jurisdiction in rendering the assailed decision in CA-G.R. No. SP 53204 without first performing
its ministerial duty of taking initial judicial action thereon unlawfully depriving the petitioners the
opportunity to comment and/or file responsive pleadings to the petition resulting to their being
unlawfully denied a day in court;

159
II. That the Honorable Court of Appeals gravely abused its discretion amounting to lack of and/or in excess
of jurisdiction in rendering a decision in CA-G.R. No. SP 53204 reversing and setting aside the lawful and
appropriate September 21, 1998 and March 31, 1999 resolutions of the Honorable NLRC and reinstating
the irregular and illegal April 8, 1998 Order of Honorable Arbiter Romulus Protasio; and

III. That the Honorable Court of Appeals gravely abused its discretion amounting to lack of and/or in
excess of jurisdiction in issuing the February 13, 2001 Resolution which denied petitioners' motion for
reconsideration from the decision of March 13, 2000 without stating the legal basis therefor."19

We proceed directly to the central issue in this case which is the computation of petitioners' backwages—whether
it should be limited from the time they were illegally dismissed until they received the notice of termination sent
by Cottonway on August 1, 1996 as argued by respondent company, or whether it should be computed from the
time of their illegal dismissal until their actual reinstatement as argued by the petitioners.

We agree with the petitioners.

The issue of the legality of the termination of petitioners’ services has been settled in the NLRC decision dated
March 26, 1996. Thus, Cottonway was ordered to reinstate petitioners to their former position without loss of
seniority rights and other privileges and to pay them full backwages. The dispositive portion of the decision read:

"WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Cottonway Marketing Corporation is
hereby ordered to reinstate the complainants without loss of seniority rights and other privileges and to pay them
the following: (1) their proportionate 13th month pay for 1994; and (2) their full backwages inclusive of allowances
and other benefits, or their monetary equivalent computed from the time their salaries were withheld from them
up to the date of their actual reinstatement.

SO ORDERED."

These are the reliefs afforded to employees whose employment is unlawfully severed. Reinstatement restores the
employee to the position from which he was removed, i.e., to his status quo ante dismissal, while the grant of
backwages allows the same employee to recover from the employer that which he lost by way of wages because
of his dismissal.20

Under R.A. 6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and
other benefits or their monetary equivalent, computed from the time their actual compensation was withheld
from them up to the time of their actual reinstatement. If reinstatement is no longer possible, the backwages shall
be computed from the time of their illegal termination up to the finality of the decision.21 The Court explained the
meaning of "full backwages" in the case of Bustamante vs. NLRC:22

"The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of backwages as
enunciated in said Pines City Educational Center case, by now holding that conformably with the evident legislative
intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an illegally dismissed
employee, should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere
during the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating
the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages
have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee.
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that,
i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the
period of his illegal dismissal. In other words, the provision calling for "full backwages" to illegally dismissed

160
employees is clear, plain and free from ambiguity and, therefore, must be applied without attempted or strained
interpretation. Index animi sermo est." (emphasis supplied)

The Court does not see any reason to depart from this rule in the case of herein petitioners. The decision of the
NLRC dated March 26, 1996 has become final and executory upon the dismissal by this Court of Cottonway’s
petition for certiorari assailing said decision and the denial of its motion for reconsideration. Said judgment may no
longer be disturbed or modified by any court or tribunal. It is a fundamental rule that when a judgment becomes
final and executory, it becomes immutable and unalterable, and any amendment or alteration which substantially
affects a final and executory judgment is void, including the entire proceedings held for that purpose. Once a
judgment becomes final and executory, the prevailing party can have it executed as a matter of right, and the
issuance of a writ of execution becomes a ministerial duty of the court. A decision that has attained finality
becomes the law of the case regardless of any claim that it is erroneous. The writ of execution must therefore
conform to the judgment to be executed and adhere strictly to the very essential particulars.23

To justify the modification of the final and executory decision of the NLRC dated March 26, 1996, the Court of
Appeals cited the existence of a supervening event, that is, the valid termination of petitioners' employment due
to their refusal to return to work despite notice from respondents reinstating them to their former position.

We cannot concur with said ruling. Petitioners' alleged failure to return to work cannot be made the basis for their
termination. Such failure does not amount to abandonment which would justify the severance of their
employment. To warrant a valid dismissal on the ground of abandonment, the employer must prove the
concurrence of two elements: (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.24

The facts of this case do not support the claim of Cottonway that petitioners have abandoned their desire to return
to their previous work at said company. It appears that three months after the NLRC had rendered its decision
ordering petitioners’ reinstatement to their former positions, Cottonway sent individual notices to petitioners
mandating them to immediately report to work. The standard letter, signed by the company’s legal counsel, Atty.
Ambrosio B. De Luna, and sent to each of the petitioners read:

"June 5, 1996

Dear Ms. Alivid,25

By virtue of the decision of the National Labor Relation(s) Commission dated March 26, 1996 in Belma Alivid vs.
Network Fashion, Inc., JCT Int’l Trading and, Cotton Mktg., Corp., NLRC CASE NO. NCR-010210-96 and NLRC NCR-
00-10-07238-94, you are hereby ordered to report for work within five (5) days from receipt of this letter,
otherwise, your failure will be deemed lack of interest to continue and considered to have abandoned your
employment with the company.

Please give this matter your utmost attention.

Very truly your(s),

(Sgd) AMBROSIO B. DE LUNA


Legal Counsel"

The petitioners, however, were not able to promptly comply with the order. Instead, their counsel, Atty. Roberto
LL. Peralta, sent a reply letter to Atty. De Luna stating that his clients were not in a position to comply with said
order since the NLRC has not yet finally disposed of the case. The reply letter stated:26

161
"June 20, 1996

ATTY. AMBROSIO B. DE LUNA


Unit 2-D Bouganvilla (sic) Mansions
91 P. Tuazon Street, Cubao
Quezon City

Compañero,

Your letter dated June 5, 1996 to our clients, Erlinda Arga, et al., complainants in NLRC NCR CASE NO. 00-10-07238-
94, Genalyn Pelobello, et al. vs. Network Fashion, et al., was referred to us for reply.

Please be informed that our said clients are not in a position now to comply with your order for them to report for
work within five (5) days from receipt thereof since the National Labor Relations Commission, First Division, has yet
to finally disposed off (sic) the case.

However, if it is now a case that your client, Mr. Michael Tong, is yielding to the Decision dated March 26, 1996 of
the NLRC, we are then willing to sit down with you relative to the satisfaction of the same to avoid said decision
from being enforced by the sheriff.

Trusting your cooperation on this matter.

Thank you.

Very truly yours,

(Sgd) ROBERTO LL. PERALTA


Counsel For The Complainants"

Consequently, Cottonway sent the petitioners individual notices of termination. The standard letter of termination
which was likewise signed by counsel and individually addressed to petitioners stated:

"August 1, 1996

BELMA ALIVID
c/o Sonia Flores
#1256-A St. Nino Street
Tondo(,) Manila

Dear Ms. Alivid,27

For your failure to report for work as per letter dated June 5, 1996 within the period of five days from receipt of
the same, you are considered to have lost your employment status effective this date with the company on the
ground of failure to report for work.

Please be guided accordingly.

Very truly yours,

162
(Sgd) Ambrosio B. De Luna
Legal Counsel of
Network Fashion(,) Inc."

We note that Cottonway, before finally deciding to dispense with their services, did not give the petitioners the
opportunity to explain why they were not able to report to work. The records also do not bear any proof that all
the petitioners received a copy of the letters. Cottonway merely claimed that some of them have left the country
and some have found other employment. This, however, does not necessarily mean that petitioners were no
longer interested in resuming their employment at Cottonway as it has not been shown that their employment in
the other companies was permanent. It should be expected that petitioners would seek other means of income to
tide them over during the time that the legality of their termination is under litigation. Furthermore, petitioners
never abandoned their suit against Cottonway. While the case was pending appeal before the NLRC, the Court of
Appeals and this Court, petitioners continued to file pleadings to ensure that the company would comply with the
directive of the NLRC to reinstate them and to pay them full backwages in case said decision is upheld. Moreover,
in his reply to the company’s first letter, petitioners’ counsel expressed willingness to meet with the company’s
representative regarding the satisfaction of the NLRC decision.

It appears that the supposed notice sent by Cottonway to the petitioners demanding that they report back to work
immediately was only a scheme to remove the petitioners for good. Petitioners’ failure to instantaneously abide by
the directive gave them a convenient reason to dispense with their services. This the Court cannot allow.
Cottonway cited Article 223 of the Labor Code providing that the decision ordering the reinstatement of an illegally
dismissed employee is immediately executory even pending appeal as basis for its decision to terminate the
employment of petitioners. We are not convinced. Article 223 of the Labor Code provides:

"ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to
the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or
orders. x x x

xxxxxxxxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein. x x x

x x x x x x x x x."

The foregoing provision is intended for the benefit of the employee and cannot be used to defeat their own
interest. The law mandates the employer to either admit the dismissed employee back to work under the same
terms and conditions prevailing prior to his dismissal or to reinstate him in the payroll to abate further loss of
income on the part of the employee during the pendency of the appeal. But we cannot stretch the language of the
law as to give the employer the right to remove an employee who fails to immediately comply with the
reinstatement order, especially when there is reasonable explanation for the failure. If Cottonway were really
sincere in its offer to immediately reinstate petitioners to their former positions, it should have given them
reasonable time to wind up their current preoccupation or at least to explain why they could not return to work at
Cottonway at once. Cottonway did not do either. Instead, it gave them only five days to report to their posts and
when the petitioners failed to do so, it lost no time in serving them their individual notices of termination. We are,
therefore, not impressed with the claim of respondent company that petitioners have been validly dismissed on
August 1, 1996 and hence their backwages should only be computed up to that time. We hold that petitioners are
entitled to receive full backwages computed from the time their compensation was actually withheld until their

163
actual reinstatement, or if reinstatement is no longer possible, until the finality of the decision, in accordance with
the Decision of the NLRC dated March 26, 1996 which has attained finality.28

IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of Appeals dated March 13, 2000 and
Resolution dated February 13, 2001 in CA-G.R. SP No. 53204 are REVERSED and SET ASIDE. Let the records of this
case be remanded to the Labor Arbiter for execution in accordance with the Decision of the NLRC dated March 26,
1996.

SO ORDERED.

G.R. No. 177467 March 9, 2011

PFIZER, INC. AND/OR REY GERARDO BACARRO, AND/OR FERDINAND CORTES, AND/OR ALFRED MAGALLON,
AND/OR ARISTOTLE ARCE, Petitioners,
vs.
GERALDINE VELASCO, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure to annul and set aside the
Resolution1 dated October 23, 2006 as well as the Resolution2 dated April 10, 2007 both issued by the Court of
Appeals in CA-G.R. SP No. 88987 entitled, "Pfizer, Inc. and/or Rey Gerardo Bacarro, and/or Ferdinand Cortes,
and/or Alfred Magallon, and/or Aristotle Arce v. National Labor Relations Commission Second Division and
Geraldine Velasco." The October 23, 2006 Resolution modified upon respondent’s motion for reconsideration the
Decision3 dated November 23, 2005 of the Court of Appeals by requiring PFIZER, Inc. (PFIZER) to pay respondent’s
wages from the date of the Labor Arbiter’s Decision4 dated December 5, 2003 until it was eventually reversed and
set aside by the Court of Appeals. The April 10, 2007 Resolution, on the other hand, denied PFIZER’s motion for
partial reconsideration.

The facts of this case, as stated in the Court of Appeals Decision dated November 23, 2005, are as follows:

Private respondent Geraldine L. Velasco was employed with petitioner PFIZER, INC. as Professional Health Care
Representative since 1 August 1992. Sometime in April 2003, Velasco had a medical work up for her high-risk
pregnancy and was subsequently advised bed rest which resulted in her extending her leave of absence. Velasco
filed her sick leave for the period from 26 March to 18 June 2003, her vacation leave from 19 June to 20 June 2003,
and leave without pay from 23 June to 14 July 2003.

On 26 June 2003, while Velasco was still on leave, PFIZER through its Area Sales Manager, herein petitioner
Ferdinand Cortez, personally served Velasco a "Show-cause Notice" dated 25 June 2003. Aside from mentioning
about an investigation on her possible violations of company work rules regarding "unauthorized deals and/or
discounts in money or samples and unauthorized withdrawal and/or pull-out of stocks" and instructing her to
submit her explanation on the matter within 48 hours from receipt of the same, the notice also advised her that
she was being placed under "preventive suspension" for 30 days or from that day to 6 August 2003 and
consequently ordered to surrender the following "accountabilities;" 1) Company Car, 2) Samples and Promats, 3)
CRF/ER/VEHICLE/SOA/POSAP/MPOA and other related Company Forms, 4) Cash Card, 5) Caltex Card, and 6)
MPOA/TPOA Revolving Travel Fund. The following day, petitioner Cortez together with one Efren Dariano retrieved
the above-mentioned "accountabilities" from Velasco’s residence.

164
In response, Velasco sent a letter addressed to Cortez dated 28 June 2003 denying the charges. In her letter,
Velasco claimed that the transaction with Mercury Drug, Magsaysay Branch covered by her check (no. 1072) in the
amount of ₱23,980.00 was merely to accommodate two undisclosed patients of a certain Dr. Renato Manalo. In
support thereto, Velasco attached the Doctor’s letter and the affidavit of the latter’s secretary.

On 12 July 2003, Velasco received a "Second Show-cause Notice" informing her of additional developments in their
investigation. According to the notice, a certain Carlito Jomen executed an affidavit pointing to Velasco as the one
who transacted with a printing shop to print PFIZER discount coupons. Jomen also presented text messages
originating from Velasco’s company issued cellphone referring to the printing of the said coupons. Again, Velasco
was given 48 hours to submit her written explanation on the matter. On 16 July 2003, Velasco sent a letter to
PFIZER via Aboitiz courier service asking for additional time to answer the second Show-cause Notice.

That same day, Velasco filed a complaint for illegal suspension with money claims before the Regional Arbitration
Branch. The following day, 17 July 2003, PFIZER sent her a letter inviting her to a disciplinary hearing to be held on
22 July 2003. Velasco received it under protest and informed PFIZER via the receiving copy of the said letter that
she had lodged a complaint against the latter and that the issues that may be raised in the July 22 hearing "can be
tackled during the hearing of her case" or at the preliminary conference set for 5 and 8 of August 2003. She
likewise opted to withhold answering the Second Show-cause Notice. On 25 July 2003, Velasco received a "Third
Show-cause Notice," together with copies of the affidavits of two Branch Managers of Mercury Drug, asking her for
her comment within 48 hours. Finally, on 29 July 2003, PFIZER informed Velasco of its "Management Decision"
terminating her employment.

On 5 December 2003, the Labor Arbiter rendered its decision declaring the dismissal of Velasco illegal, ordering her
reinstatement with backwages and further awarding moral and exemplary damages with attorney’s fees. On
appeal, the NLRC affirmed the same but deleted the award of moral and exemplary damages.5

The dispositive portion of the Labor Arbiter’s Decision dated December 5, 2003 is as follows:

WHEREFORE, judgment is hereby rendered declaring that complainant was illegally dismissed. Respondents are
ordered to reinstate the complainant to her former position without loss of seniority rights and with full
backwages and to pay the complainant the following:

1. Full backwages (basic salary, company benefits, all allowances


as of December 5, 2003 in the amount of ₱572,780.00);

2. 13th Month Pay, Midyear, Christmas and performance bonuses


in the amount of ₱105,300.00;

3. Moral damages of ₱50,000.00;

4. Exemplary damages in the amount of ₱30,000.00;

5. Attorney’s Fees of 10% of the award excluding damages in the


amount of ₱67,808.00.

The total award is in the amount of ₱758,080.00.6

PFIZER appealed to the National Labor Relations Commission (NLRC) but its appeal was denied via the NLRC
Decision7 dated October 20, 2004, which affirmed the Labor Arbiter’s ruling but deleted the award for damages,
the dispositive portion of which is as follows:

165
WHEREFORE, premises considered, the instant appeal and the motion praying for the deposit in escrow of
complainant’s payroll reinstatement are hereby denied and the Decision of the Labor Arbiter is affirmed with the
modification that the award of moral and exemplary damages is deleted and attorney’s fees shall be based on the
award of 13th month pay pursuant to Article III of the Labor Code.8

PFIZER moved for reconsideration but its motion was denied for lack of merit in a NLRC Resolution9 dated
December 14, 2004.

Undaunted, PFIZER filed with the Court of Appeals a special civil action for the issuance of a writ of certiorari under
Rule 65 of the Rules of Court to annul and set aside the aforementioned NLRC issuances. In a Decision dated
November 23, 2005, the Court of Appeals upheld the validity of respondent’s dismissal from employment, the
dispositive portion of which reads as follows:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the NLRC dated 20 October 2004 as well as
its Resolution of 14 December 2004 is hereby ANNULED and SET ASIDE. Having found the termination of Geraldine
L. Velasco’s employment in accordance with the two notice rule pursuant to the due process requirement and with
just cause, her complaint for illegal dismissal is hereby DISMISSED.10

Respondent filed a Motion for Reconsideration which the Court of Appeals resolved in the assailed Resolution
dated October 23, 2006 wherein it affirmed the validity of respondent’s dismissal from employment but modified
its earlier ruling by directing PFIZER to pay respondent her wages from the date of the Labor Arbiter’s Decision
dated December 5, 2003 up to the Court of Appeals Decision dated November 23, 2005, to wit:

IN VIEW WHEREOF, the dismissal of private respondent Geraldine Velasco is AFFIRMED, but petitioner PFIZER, INC.
is hereby ordered to pay her the wages to which she is entitled to from the time the reinstatement order was
issued until November 23, 2005, the date of promulgation of Our Decision.11

Respondent filed with the Court a petition for review under Rule 45 of the Rules of Civil Procedure, which assailed
the Court of Appeals Decision dated November 23, 2005 and was docketed as G.R. No. 175122. Respondent’s
petition, questioning the Court of Appeals’ dismissal of her complaint, was denied by this Court’s Second Division
in a minute Resolution12 dated December 5, 2007, the pertinent portion of which states:

Considering the allegations, issues and arguments adduced in the petition for review on certiorari, the Court
resolves to DENY the petition for failure to sufficiently show any reversible error in the assailed judgment to
warrant the exercise of this Court’s discretionary appellate jurisdiction, and for raising substantially factual issues.

On the other hand, PFIZER filed the instant petition assailing the aforementioned Court of Appeals Resolutions and
offering for our resolution a single legal issue, to wit:

Whether or not the Court of Appeals committed a serious but reversible error when it ordered Pfizer to pay
Velasco wages from the date of the Labor Arbiter’s decision ordering her reinstatement until November 23, 2005,
when the Court of Appeals rendered its decision declaring Velasco’s dismissal valid.13

The petition is without merit.

PFIZER argues that, contrary to the Court of Appeals’ pronouncement in its assailed Decision dated November 23,
2005, the ruling in Roquero v. Philippine Airlines, Inc.14 is not applicable in the case at bar, particularly with regard
to the nature and consequences of an order of reinstatement, to wit:

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a
dismissed employee entitles him to payment of his salaries effective from the time the employer failed to reinstate

166
him despite the issuance of a writ of execution. Unless there is a restraining order issued, it is ministerial upon the
Labor Arbiter to implement the order of reinstatement. In the case at bar, no restraining order was granted. Thus,
it was mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL
must pay Roquero the salary he is entitled to, as if he was reinstated, from the time of the decision of the NLRC
until the finality of the decision of the Court.15 (Emphases supplied.)

It is PFIZER’s contention in its Memorandum16 that "there was no unjustified refusal on [its part] to reinstate
[respondent] Velasco during the pendency of the appeal,"17 thus, the pronouncement in Roquero cannot be made
to govern this case. During the pendency of the case with the Court of Appeals and prior to its November 23, 2005
Decision, PFIZER claimed that it had already required respondent to report for work on July 1, 2005. However,
according to PFIZER, it was respondent who refused to return to work when she wrote PFIZER, through counsel,
that she was opting to receive her separation pay and to avail of PFIZER’s early retirement program.

In PFIZER’s view, it should no longer be required to pay wages considering that (1) it had already previously paid an
enormous sum to respondent under the writ of execution issued by the Labor Arbiter; (2) it was allegedly ready to
reinstate respondent as of July 1, 2005 but it was respondent who unjustifiably refused to report for work; (3) it
would purportedly be tantamount to allowing respondent to choose "payroll reinstatement" when by law it was
the employer which had the right to choose between actual and payroll reinstatement; (4) respondent should be
deemed to have "resigned" and therefore not entitled to additional backwages or separation pay; and (5) this
Court should not mechanically apply Roquero but rather should follow the doctrine in Genuino v. National Labor
Relations Commission18 which was supposedly "more in accord with the dictates of fairness and justice."19

We do not agree.

At the outset, we note that PFIZER’s previous payment to respondent of the amount of ₱1,963,855.00
(representing her wages from December 5, 2003, or the date of the Labor Arbiter decision, until May 5, 2005) that
was successfully garnished under the Labor Arbiter’s Writ of Execution dated May 26, 2005 cannot be considered
in its favor. Not only was this sum legally due to respondent under prevailing jurisprudence but also this
circumstance highlighted PFIZER’s unreasonable delay in complying with the reinstatement order of the Labor
Arbiter. A perusal of the records, including PFIZER’s own submissions, confirmed that it only required respondent
to report for work on July 1, 2005, as shown by its Letter20 dated June 27, 2005, which is almost two years from the
time the order of reinstatement was handed down in the Labor Arbiter’s Decision dated December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v. National Labor Relations
Commission,21 the Court held that an award or order of reinstatement is immediately self-executory without the
need for the issuance of a writ of execution in accordance with the third paragraph of Article 22322 of the Labor
Code. In that case, we discussed in length the rationale for that doctrine, to wit:

The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately
executory even pending appeal and the posting of a bond by the employer shall not stay the execution for
reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object
and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An
application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or
postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC
could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose
envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or
award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the
legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be
necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be

167
achieved and the evil sought to be prevented. x x x In introducing a new rule on the reinstatement aspect of a
labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. x x x23 (Italics in the original; emphasis and underscoring supplied.)

In the case at bar, PFIZER did not immediately admit respondent back to work which, according to the law, should
have been done as soon as an order or award of reinstatement is handed down by the Labor Arbiter without need
for the issuance of a writ of execution. Thus, respondent was entitled to the wages paid to her under the
aforementioned writ of execution. At most, PFIZER’s payment of the same can only be deemed partial
compliance/execution of the Court of Appeals Resolution dated October 23, 2006 and would not bar respondent
from being paid her wages from May 6, 2005 to November 23, 2005.

It would also seem that PFIZER waited for the resolution of its appeal to the NLRC and, only after it was ordered by
the Labor Arbiter to pay the amount of ₱1,963,855.00 representing respondent’s full backwages from December 5,
2003 up to May 5, 2005, did PFIZER decide to require respondent to report back to work via the Letter dated June
27, 2005.

PFIZER makes much of respondent’s non-compliance with its return- to-work directive by downplaying the reasons
forwarded by respondent as less than sufficient to justify her purported refusal to be reinstated. In PFIZER’s view,
the return-to-work order it sent to respondent was adequate to satisfy the jurisprudential requisites concerning
the reinstatement of an illegally dismissed employee.

It would be useful to reproduce here the text of PFIZER’s Letter dated June 27, 2005:

Dear Ms. Velasco:

Please be informed that, pursuant to the resolutions dated 20 October 2004 and 14 December 2004 rendered by
the National Labor Relations Commission and the order dated 24 May 2005 issued by Executive Labor Arbiter Vito
C. Bose, you are required to report for work on 1 July 2005, at 9:00 a.m., at Pfizer’s main office at the 23rd Floor,
Ayala Life–FGU Center, 6811 Ayala Avenue, Makati City, Metro Manila.

Please report to the undersigned for a briefing on your work assignments and other responsibilities, including the
appropriate relocation benefits.

For your information and compliance.

Very truly yours,

(Sgd.)
Ma. Eden Grace Sagisi

Labor and Employee Relations Manager24

To reiterate, under Article 223 of the Labor Code, an employee entitled to reinstatement "shall either be admitted
back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option
of the employer, merely reinstated in the payroll."

It is established in jurisprudence that reinstatement means restoration to a state or condition from which one had
been removed or separated. The person reinstated assumes the position he had occupied prior to his dismissal.
Reinstatement presupposes that the previous position from which one had been removed still exists, or that there
is an unfilled position which is substantially equivalent or of similar nature as the one previously occupied by the
employee.25

168
Applying the foregoing principle to the case before us, it cannot be said that with PFIZER’s June 27, 2005 Letter, in
belated fulfillment of the Labor Arbiter’s reinstatement order, it had shown a clear intent to reinstate respondent
to her former position under the same terms and conditions nor to a substantially equivalent position. To begin
with, the return-to-work order PFIZER sent respondent is silent with regard to the position or the exact nature of
employment that it wanted respondent to take up as of July 1, 2005. Even if we assume that the job awaiting
respondent in the new location is of the same designation and pay category as what she had before, it is plain from
the text of PFIZER’s June 27, 2005 letter that such reinstatement was not "under the same terms and conditions"
as her previous employment, considering that PFIZER ordered respondent to report to its main office in Makati
City while knowing fully well that respondent’s previous job had her stationed in Baguio City (respondent’s place of
residence) and it was still necessary for respondent to be briefed regarding her work assignments and
responsibilities, including her relocation benefits.

The Court is cognizant of the prerogative of management to transfer an employee from one office to another
within the business establishment, provided that there is no demotion in rank or diminution of his salary, benefits
and other privileges and the action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause.26 Likewise, the management prerogative to transfer personnel
must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair
play. There must be no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.27

The June 27, 2005 return-to-work directive implying that respondent was being relocated to PFIZER’s Makati main
office would necessarily cause hardship to respondent, a married woman with a family to support residing in
Baguio City. However, PFIZER, as the employer, offered no reason or justification for the relocation such as the
filling up of respondent’s former position and the unavailability of substantially equivalent position in Baguio City.
A transfer of work assignment without any justification therefor, even if respondent would be presumably doing
the same job with the same pay, cannot be deemed faithful compliance with the reinstatement order. In other
words, in this instance, there was no real, bona fide reinstatement to speak of prior to the reversal by the Court of
Appeals of the finding of illegal dismissal.

In view of PFIZER’s failure to effect respondent's actual or payroll reinstatement, it is indubitable that
the Roqueroruling is applicable to the case at bar. The circumstance that respondent opted for separation pay in
lieu of reinstatement as manifested in her counsel’s Letter28 dated July 18, 2005 is of no moment. We do not see
respondent’s letter as taking away the option from management to effect actual or payroll reinstatement but,
rather under the factual milieu of this case, where the employer failed to categorically reinstate the employee to
her former or equivalent position under the same terms, respondent was not obliged to comply with PFIZER’s
ambivalent return-to-work order. To uphold PFIZER’s view that it was respondent who unjustifiably refused to
work when PFIZER did not reinstate her to her former position, and worse, required her to report for work under
conditions prejudicial to her, is to open the doors to potential employer abuse. Foreseeably, an employer may
circumvent the immediately enforceable reinstatement order of the Labor Arbiter by crafting return-to-work
directives that are ambiguous or meant to be rejected by the employee and then disclaim liability for backwages
due to non-reinstatement by capitalizing on the employee’s purported refusal to work. In sum, the option of the
employer to effect actual or payroll reinstatement must be exercised in good faith.

Moreover, while the Court has upheld the employer’s right to choose between actually reinstating an employee or
merely reinstating him in the payroll, we have also in the past recognized that reinstatement might no longer be
possible under certain circumstances. In F.F. Marine Corporation v. National Labor Relations Commission,29 we had
the occasion to state:

It is well-settled that when a person is illegally dismissed, he is entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages. In the event, however, that reinstatement is no longer
feasible, or if the employee decides not be reinstated, the employer shall pay him separation pay in lieu of
reinstatement. Such a rule is likewise observed in the case of a strained employer-employee relationship or when
the work or position formerly held by the dismissed employee no longer exists. In sum, an illegally dismissed

169
employee is entitled to: (1) either reinstatement if viable or separation pay if reinstatement is no longer viable, and
(2) backwages.30 (Emphasis supplied.)

Similarly, we have previously held that an employee’s demand for separation pay may be indicative of strained
relations that may justify payment of separation pay in lieu of reinstatement.31 This is not to say, however, that
respondent is entitled to separation pay in addition to backwages. We stress here that a finding of strained
relations must nonetheless still be supported by substantial evidence.32

In the case at bar, respondent’s decision to claim separation pay over reinstatement had no legal effect, not only
because there was no genuine compliance by the employer to the reinstatement order but also because the
employer chose not to act on said claim. If it was PFIZER’s position that respondent’s act amounted to a
"resignation" it should have informed respondent that it was accepting her resignation and that in view thereof
she was not entitled to separation pay. PFIZER did not respond to respondent’s demand at all. As it was, PFIZER’s
failure to effect reinstatement and accept respondent’s offer to terminate her employment relationship with the
company meant that, prior to the Court of Appeals’ reversal in the November 23, 2005 Decision, PFIZER’s liability
for backwages continued to accrue for the period not covered by the writ of execution dated May 24, 2005 until
November 23, 2005.

Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a view that a mechanical
application of the same would cause injustice since, in the present case, respondent was able to gain pecuniary
benefit notwithstanding the circumstance of reversal by the Court of Appeals of the rulings of the Labor Arbiter
and the NLRC thereby allowing respondent to profit from the dishonesty she committed against PFIZER which was
the basis for her termination. In its stead, PFIZER proposes that the Court apply the ruling in Genuino v. National
Labor Relations Commission33 which it believes to be more in accord with the dictates of fairness and justice. In
that case, we canceled the award of salaries from the date of the decision of the Labor Arbiter awarding
reinstatement in light of our subsequent ruling finding that the dismissal is for a legal and valid ground, to wit:

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the salaries due to the
complainant from the date it reinstated complainant in the payroll (computed at ₱60,000.00 a month, as found by
the Labor Arbiter) up to and until the date of this decision," the Court hereby cancels said award in view of its
finding that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal pursuant to Art.
223, paragraph 3 of the Labor Code, which states:

xxxx

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries
s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is
based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the
September 3, 1994 NLRC Decision.34 (Emphases supplied.)

170
Thus, PFIZER implores the Court to annul the award of backwages and separation pay as well as to require
respondent to refund the amount that she was able to collect by way of garnishment from PFIZER as her accrued
salaries.

The contention cannot be given merit since this question has been settled by the Court en banc.

In the recent milestone case of Garcia v. Philippine Airlines, Inc.,35 the Court wrote finis to the stray posture
in Genuino requiring the dismissed employee placed on payroll reinstatement to refund the salaries in case a final
decision upholds the validity of the dismissal. In Garcia, we clarified the principle of reinstatement pending appeal
due to the emergence of differing rulings on the issue, to wit:

On this score, the Court's attention is drawn to seemingly divergent decisions concerning reinstatement pending
appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as
expounded in a line of cases including Air Philippines Corp. v. Zamora, while on the other is the recent case
of Genuino v. National Labor Relations Commission. At the core of the seeming divergence is the application of
paragraph 3 of Article 223 of the Labor Code x x x.

xxxx

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of
the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and
such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he
received for he is entitled to such, more so if he actually rendered services during the period. (Emphasis in the
original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive
wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it
is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer
to comply therewith.

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the
salaries [he] received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from [his] employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is
based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the
September 3, 1994 NLRC Decision. (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was
found to be valid, and to do so would constitute unjust enrichment.

171
Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was
required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases, the Court did not
order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal
of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the
rationale of reinstatement pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act
is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing
threat or danger to the survival or even the life of the dismissed or separated employee and his family.36

Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects of the "refund doctrine"
erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help,
a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.1avvphi1

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll
reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior
to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of
concerned employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a
scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve
as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter's decision
ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond
premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash
bond] by the employer shall not stay the execution for reinstatement."

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund
the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the
prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.

xxxx

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. x x x.37 (Emphasis supplied.)

In sum, the Court reiterates the principle that reinstatement pending appeal necessitates that it must be
immediately self-executory without need for a writ of execution during the pendency of the appeal, if the law is to
serve its noble purpose, and any attempt on the part of the employer to evade or delay its execution should not be
allowed. Furthermore, we likewise restate our ruling that an order for reinstatement entitles an employee to

172
receive his accrued backwages from the moment the reinstatement order was issued up to the date when the
same was reversed by a higher court without fear of refunding what he had received. It cannot be denied that,
under our statutory and jurisprudential framework, respondent is entitled to payment of her wages for the period
after December 5, 2003 until the Court of Appeals Decision dated November 23, 2005, notwithstanding the finding
therein that her dismissal was legal and for just cause. Thus, the payment of such wages cannot be deemed as
unjust enrichment on respondent’s part.

WHEREFORE, the petition is DENIED and the assailed Resolution dated October 23, 2006 as well as the Resolution
dated April 10, 2007 both issued by the Court of Appeals in CA-G.R. SP No. 88987 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 207983 April 7, 2014

WENPHIL CORPORATION, Petitioner,


vs.
ALMER R. ABING and ANABELLE M. TUAZON, Respondents.

DECISION

BRION, J.:

We resolve this petition for review on certiorari1 under Rule 45 of the Rules of Court, challenging the August 31,
2012 decision2 and the June 20, 2013 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP
No. 117366.

These assailed CA rulings annulled and set aside the March 26, 2010 Decision4 and September 15, 20105resolution
(NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC CA No. 02-8233-01 (Rl-08).

The NLRC rulings, in turn, fully affirmed the November 16, 2007 Order6 of the Labor Arbiter (LA) in NLRC-NCR Case
Nos. 30-03-00993-00 and 30-03-01020-00. The LA’s order found that an illegal dismissal took place. Thus, the LA
directed petitioner Wenphil Corporation (Wenphil) to pay respondents Almer Abing and Anabelle Tuazon
(respondents) their backwages for the period from February 15, 2002 to November 8, 2002, pursuant to the rule
that an order of reinstatement is immediately executory even pending appeal.7

Factual Antecedents

This case stemmed from a complaint for illegal dismissal filed by the respondents against Wenphil, docketed as
NLRC NCR Case No. 30-03-00993-00.

On December 8, 2000, LA Geobel A. Bartolabac ruled8 that the respondents had been illegally dismissed by
Wenphil. According to the LA, the allegation of serious misconduct against the respondents had no factual and
legal basis.9 Consequently, LA Bartolabac ordered Wenphil to immediately reinstate the respondents to their
respective positions or to equivalent ones, whether actuall or in the payroll. Also, the LA ordered Wenphil to pay
the respondents their backwages from February 3, 2000 until the date of their actual reinstatement.10

Because of the unfavorable LA decision, Wenphil appealed to the NLRC on April 16, 200111. In the meantime, the
respondents moved for the immediate execution of the LA’s December 8, 2000 decision.12

On October 29, 2001, Wenphil and the respondents entered into a compromise agreement13 before LA Bartolabac.
They agreed to the respondents’ payroll reinstatement while Wenphil’s appeal with the NLRC was ongoing.

173
Wenphil also agreed to pay the accumulated salaries of the respondents for the payroll period from April 5, 2001
until October 15, 2001.14 As for the remaining payroll period starting October 16, 2001, Wenphil committed itself
to credit the respective salaries of the respondents to their ATM payroll accounts until such time that the
questioned decision of LA Bartolabac is either modified, amended or reversed by the Honorable National Labor
Relations Commission.15

On January 30, 2002, the NLRC issued a resolution16 affirming LA Bartolabac’s decision with modifications. Instead
of ordering the respondents’ reinstatement, the NLRC directed Wenphil to pay the respondents their respective
separation pay at the rate of one (1) month salary for every year of service. Also, the NLRC found that while the
respondents had been illegally dismissed, they had not been illegally suspended. Thus, the period from February 3
to February 28, 2000 during which the respondents were on preventive suspension – was excluded by the NLRC in
the computation of the respondents’ backwages.17

Subsequently, Wenphil moved for the reconsideration18 of the NLRC’s January 30, 2002 resolution, but the NLRC
denied the motion in another resolution dated September 24, 2002.19

Wenphil thereafter went up to the CA via a petition for certiorari to question the NLRC’s January 30, 2002 and
September 24, 2002 resolutions.20 On August 27, 2003, the CA rendered its decision21 reversing the NLRC’s finding
that the respondents had been illegally dismissed. According to the CA, there was enough evidence to show that
the respondents had been guilty of serious misconduct; thus, their dismissal was for a valid cause.22 The
respondents moved for the reconsideration of the CA’s decision.23 In a resolution24 dated February 23, 2004, the
CA denied the respondents’ motion.

On appeal to the Supreme Court (SC) via Rule 45 (docketed as G.R. No. 16244725 and dated December 27, 2006),
the SC denied the respondents petition for review on certiorari26 and affirmed the CA’s August 27, 2003 decision
and February 23, 2004 resolution. The respondents did not file any motion for reconsideration to question the SC’s
decision; thus, the decision became final and executory on February 15, 2007.27

The Labor Arbitration Rulings

Sometime after the SC’s decision in G.R. No. 162447 became final and executory, the respondents filed with LA
Bartolabac a motion for computation and issuance of writ of execution.28 The respondents asserted in this motion
that although the CA’s ruling on the absence of illegal dismissal (as affirmed by the SC) was adverse to them, under
the law and settled jurisprudence, they were still entitled to backwages from the time of their dismissal until the
NLRC’s decision finding them to be illegally dismissed was reversed with finality.29

LA Bartolabac granted the respondents’ motion and, in an order dated November 16, 2007,30 directed Wenphil to
pay each complainant their salaries on reinstatement covering the period from February 15, 2002 (the date
Wenphil last paid the respondents’ respective salaries) to November 8, 2002 (since the NLRC’s decision finding the
respondents illegally dismissed became final and executory on February 28, 2002).

Both parties appealed to the NLRC to question LA Bartolabac’s November 16, 2007 order.31 Wenphil argued that
the respondents were no longer entitled to payment of backwages in view of the compromise agreement they
executed on October 29, 2001. According to Wenphil, the compromise agreement provided that Wenphil’s
obligation to pay the respondents’ backwages should cease as soon as LA Bartolabac’s decision was "modified,
amended or reversed" by the NLRC. Since the NLRC modified the LA’s ruling by ordering the payment of separation
pay in lieu of reinstatement, then the respondents, under the terms of the compromise agreement, were entitled
to backwages only up to the finality of the NLRC decision.32

174
The respondents questioned in their appeal the determined period for the computation of their backwages; they
posited that the period for payment should end, not on November 8, 2002, but on February 14, 2007, since the
SC’s decision which upheld the CA’s ruling became final and executory on February 15, 2007.33

The NLRC denied the parties’ respective appeals in its decision dated March 26, 201034 and affirmed in toto the
LA’s order. Both parties moved for the reconsideration of the NLRC’s decision but the NLRC denied their respective
motions in the resolution of September 15, 2010.35

The CA’s Ruling

In its decision dated August 31, 2012,36 the CA reversed the NLRC rulings and prescribed a different computation
period.

The CA ruled that the NLRC committed grave abuse of discretion when it affirmed the LA’s computed period which
was from February 15, 2002 to November 8, 2002. In arriving at this conclusion, the CA cited the case of Pfizer v.
Velasco37 where this Court ruled that even if the order of reinstatement of the Labor Arbiter is reversed on appeal,
it is obligatory on the part of the employer to reinstate and pay the dismissed employee’s wages during the period
of appeal until reversal by the higher court.38 The CA construed this "higher court" to be the CA, not the SC.

The CA reasoned out that it was a "higher court" than the NLRC when it reversed the NLRC’s rulings; thus, the
period for computation should end when it promulgated its decision reversing that of the NLRC, and not on the
date when the SC affirmed its decision.

The CA likewise held that the compromise agreement did not contain any waiver of rights for any award the
respondents might have received when the NLRC changed or modified the LA’s award.39

The Petition

In its petition for review with this Court, Wenphil maintained that the respondents were no longer entitled to
payment of backwages in view of the modification of the LA’s ruling by the NLRC pursuant with their October 29,
2001 compromise agreement.

Wenphil argued that the CA utterly disregarded the terms of the parties’ compromise agreement whose terms
were very clear; the agreement reads:

3. That for the payroll period from October 16-31 and thereafter, their [respondents] salaries (net of withholding
tax, SSS, Philhealth and Pag-ibig) shall be credited every 10th and 25th of the succeeding months through their
respective ATM employee’s account until such time that the questioned decision of the Honorable Labor Arbiter
Geobel Bartolabac is modified, amended or reversed by the Honorable Labor Relations Commission.40 [emphasis
ours]

It was Wenphil’s assertion that since the NLRC’s decision partly changed the decision of LA Bartolabac by ordering
payment of separation pay in lieu of reinstatement, the NLRC decision was a "modification" that should operate to
remove Wenphil’s obligation to pay the respondents’ backwages for the period of the CA’s reversal of the NLRC’s
illegal dismissal ruling.41 According to Wenphil, the words of the compromise agreement left no room for
interpretation as to the parties’ intentions;42 as a valid agreement between the parties, it must be given effect and
respected by the court.

Wenphil also contended that the CA’s cited Pfizer case cannot apply to the present case since there was no
compromise agreement in Pfizer where the dismissed employee waived her entitlement to backwages.43

175
Finally, Wenphil claimed that the reliefs of reinstatement and backwages are only available to illegally dismissed
employees. A ruling that the respondents were still entitled to reinstatement pay notwithstanding the validity of
their dismissal, would amount to the court’s tolerance of an unjust and equitable situation.44

The Court’s Ruling

We resolve to DENY the petition. An order of reinstatement is immediately executory even pending appeal. The
employer has the obligation to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court.

Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal.
The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation, or at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement."

The Court discussed reason behind this legal policy in Aris v. NLRC,45 where it explained:

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a
dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies
and enhances the provisions of the 1987 Constitution on labor and the working-man. These provisions are the
quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the
nation, for the protection of his rights, and the promotion of his welfare… These duties and responsibilities of the
State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully
underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal
intensity. Labor is an indispensable partner for the nation's progress and stability. [emphasis ours]

Since the decision is immediately executory, it is the duty of the employer to comply with the order of
reinstatement, which can be done either actually or through payroll reinstatement. As provided under Article 223
of the Labor Code, this immediately executory nature of an order of reinstatement is not affected by the existence
of an ongoing appeal. The employer has the duty to reinstate the employee in the interim period until a reversal is
decreed by a higher court or tribunal.

In the case of payroll reinstatement, even if the employer’s appeal turns the tide in its favor, the reinstated
employee has no duty to return or reimburse the salary he received during the period that the lower court or
tribunal’s governing decision was for the employee’s illegal dismissal.

Otherwise, the situation would run counter to the immediately executory nature of an order of reinstatement. The
case of Garcia v. Philippine Airlines46 is enlightening on this point:

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help,
a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available.1âwphi1 Notably, the option of
payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work.

176
We see the situation discussed above to be present in the case before us as Wenphil observed the mandate of
Article 223 to immediately comply with the order of reinstatement by the LA. On October 29, 2001, while
Wenphil’s appeal with the NLRC was pending, it entered into a compromise agreement with the respondents. In
this agreement, Wenphil committed to reinstate the respondents in its payroll. However, the commitment came
with a condition: Wenphil stipulated that its obligation to pay the wages due to the respondents would cease if the
decision of the LA would be "modified, amended or reversed" by the NLRC.47

Thus, when the NLRC rendered its decision on the appeal affirming the LA’s finding that the respondents were
illegally dismissed, but modifying the award of reinstatement to payment of separation pay, Wenphil stopped
paying the respondents’ wages.

The reinstatement salaries due to the respondents were, by their nature, payment of unworked backwages. These
were salaries due to the respondents because they had been prevented from working despite the LA and the NLRC
findings that they had been illegally dismissed.

We point out that reinstatement and backwages are two separate reliefs available to an illegally dismissed
employee. The normal consequences of a finding that an employee has been illegally dismissed are: first, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights; and second,
the payment of backwages covers the period running from his illegal dismissal up to his actual
reinstatement.48 These two reliefs are not inconsistent with one another and the labor arbiter can award both
simultaneously.

Moreover, the relief of separation pay may be granted in lieu of reinstatement but it cannot be a substitute for the
payment of backwages. In instances where reinstatement is no longer feasible because of strained relations
between the employee and the employer, separation pay should be granted. In effect, an illegally dismissed
employee should be entitled to either reinstatement – if viable, or separation pay if reinstatement is no longer be
viable, plus backwages in either instance.49 The rationale for such policy of distinction was vividly explained in
Santos v. NLRC under these terms:50

Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-
availability of one does not carry with it the inappropriateness or non-availability of the other. Separation pay was
awarded in favor of petitioner Lydia Santos because the NLRC found that her reinstatement was no longer feasible
or appropriate. As the term suggests, separation pay is the amount that an employee receives at the time of his
severance from the service and, as correctly noted by the Solicitor General in his Comment, is designed to provide
the employee with "the wherewithal during the period that he is looking for another employment." In the instant
case, the grant of separation pay was a substitute for immediate and continued re-employment with the private
respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved by the
second remedy of backwages, that is, the loss of earnings that would have accrued to the dismissed employee
during the period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of
relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast, is
oriented towards the immediate future, the transitional period the dismissed employee must undergo before
locating a replacement job. It was grievous error amounting to grave abuse of discretion on the part of the NLRC to
have considered an award of separation pay as equivalent to the aggregate relief constituted by reinstatement
plus payment of backwages under Article 280 of the Labor Code. The grant of separation pay was a proper
substitute only for reinstatement; it could not be an adequate substitute both for reinstatement and for
backwages. In effect, the NLRC in its assailed decision failed to give to petitioner the full relief to which she was
entitled under the statute. [emphasis ours]

Apparently, when the NLRC changed the LA’s decision (specifically, the order to award separation pay in lieu of
reinstatement), Wenphil read this to mean to be the "modification" envisioned in the compromise agreement,
Wenphil likewise effectively concluded that separation pay and backwages are the same or are interchangeable
reliefs. This conclusion can be deduced from Wenphil’s insistence not to pay the respondent’s remaining

177
backwages under its erroneous reasoning that this was the effect of the NLRC’s order to Wenphil to pay separation
pay in lieu of reinstatement.

We emphasize that the basis for the payment of backwages is different from that of the award of separation pay.
Separation pay is granted where reinstatement is no longer advisable because of strained relations between the
employee and the employer. Backwages represent compensation that should have been earned but were not
collected because of the unjust dismissal. The basis for computing separation pay is usually the length of the
employee’s past service, while that for backwages is the actual period when the employee was unlawfully
prevented from working.51

Had Wenphil really wanted to put a stop to the running of the period for the payment of the respondents’
backwages, then it should have immediately complied with the NLRC’s order to award the employees their
separation pay in lieu of reinstatement. This action would have immediately severed the employer-employee
relationship. However, the records are bereft of any evidence that Wenphil actually paid the respondents’
separation pay. Thus, the employer-employee relationship between Wenphil and the respondents never ceased
and the employment status remained pending and uncertain until the CA actually rendered its decision that the
respondents had not been illegally dismissed. In the context of the parties’ agreement, it was only at this point that
the payment of backwages should have stopped.

A compromise agreement should not be contrary to law, morals, good customs and public policy.

While it is true that a compromise agreement is binding between the parties and becomes the law between
them,52 it is also a rule that to be valid, a compromise agreement must not be contrary to law, morals, good
customs and public policy.53

In the present case, the parties’ compromise agreement simply provided that Wenphil’s obligation to pay the
respondents’ backwages shall end the moment the NLRC modifies, amends or reverses the illegal dismissal
decision of LA Bartolabac. On its face, there is nothing invalid with such stipulation. Indeed, had the NLRC reversed
the LA, the obligation to pay backwages would have stopped. The NLRC, however, did not decree a reversal of the
finding of illegal dismissal. In fact, it affirmed the illegal dismissal conclusion, confining itself merely to a
modification of the consequences of the illegal dismissal – from reinstatement to the payment of separation pay.

This "modification" of course we cannot accept; the option under the legal policy is solely limited to a ruling that
the respondents had not been illegally dismissed. Otherwise, we would be violating the Labor Code’s policy
entitling illegally dismissed employees to their right to backwages even during the period of appeal. As we held in
the case of Garcia v. Philippine Airlines:54

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed
on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter's order of
reinstatement is immediately executory and the employer has to either re-admit them to work under the same
terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to
exercise the options in the alternative, employer must pay the employee’s salaries. [emphasis ours]

This ruling embodies a principle and policy of the law that cannot be watered down by any lesser agreement
except perhaps when backwages are already earned entitlements that the employee chooses to surrender for a
valuable consideration (and even then, the consideration must at least be equitable). This legal policy emphasizes,
too, the rule that separation pay cannot be a substitute for backwages but only for reinstatement. The award of
separation pay is not inconsistent with the payment of backwages. Thus, until a higher court’s or tribunal’s reversal
of the finding that an employee had been illegally dismissed, the employee would be entitled to receive his
reinstatement salary or backwages during the period of appeal until such reversal. This is in line with the Labor

178
Code’s policy that an order of reinstatement, which can either be actual or through the payroll, is immediately
executory and is not affected by the period of appeal.

Period for Computation of Backwages

The records show that the inconsistency between the labor arbitration rulings and the CA’s ruling was on the
period for the computation of such backwages and not on whether the respondents were still entitled to such
backwages during the period of appeal until the reversal of the finding of illegal dismissal.

According to the LA, whose ruling the NLRC affirmed, the period for computation should be from February 15,
2002 until November 8, 2002 since the NLRC’s decision which affirmed the LA’s finding of illegal dismissal became
final and executory on November 8, 2002. The LA started the counting of the period on February 15, 2002 since
that was the day when Wenphil last paid the respondents’ backwages.

On the other hand, the CA, in setting aside the NLRC’s rulings, relied on the case of Pfizer v. Velasco where we
ruled that the backwages of the dismissed employee should be granted during the period of appeal until reversal
by a higher court. Since the first CA decision which found that the respondents had not been illegally dismissed
was promulgated on August 27, 2003, then the reversal by the higher court was effectively made on August 27,
2003.

As against this view, the respondents argued that the period for payment of their backwages should end on
February 14, 2007 since the SC decision in G.R. No. 162447 which affirmed the CA’s findings that the respondents
had not been legally dismissed became final and executory on February 15, 2007.

Among these views, the commanding one is the rule in Pfizer, which merely echoes the rulings we made in the
cases of Roquero v. Philippine Airlines55 and Garcia v. Philippine Airlines56 that the period for computing the
backwages due to the respondents during the period of appeal should end on the date that a higher court reversed
the labor arbitration ruling of illegal dismissal. In this case, the higher court which first reversed the NLRC’s ruling
was not the SC but rather the CA. In this light, the CA was correct when it found that that the period of
computation should end on August 27, 2003. The date when the SC’s decision became final and executory need
not matter as the rule in Roquero, Garcia and Pfizer merely referred to the date of reversal, not the date of the
ultimate finality of such reversal.

As a last minor detail, we do not agree with the CA that the date of computation should start on February 15,
2002. Rather, it should be on February 16, 2002. The respondents themselves admitted in their motion for
computation and issuance of writ of execution that the last date when they were paid their backwages was on
February 15, 2002. To start the computation on the same date would result to a duplication of wages for this day;
thus, computation should start on the following date - February 16, 2002.

WHEREFORE, in light of these considerations, we hereby DENY the petition. The Court of Appeals' decision dated
August 31, 2012 and resolution dated June 20, 2013, which annulled and set aside the March 26, 2010 decision
and September 15, 2010 resolution of the NLRC, are hereby AFFIRMED with MODIFICATION. The period for the
computation of backwages of respondents Almer R. Abing and Anabelle M. Tuazon should be from February 16,
2002 until August 27, 2003, when the Court of Appeals promulgated its decision reversing the NLRC' s finding of
illegal dismissal. No costs.

SO ORDERED.

[G.R. No. 126322. January 16, 2002]

179
YUPANGCO COTTON MILLS, INC., petitioner, vs. COURT OF APPEALS, HON. URBANO C. VICTORIO, SR., Presiding
Judge, RTC Branch 50, Manila, RODRIGO SY MENDOZA, SAMAHANG MANGGAGAWA NG ARTEX (SAMAR-
ANGLO) represented by its Local President RUSTICO CORTEZ, and WESTERN GUARANTY
CORPORATION, respondents.

DECISION
PARDO, J.:

The Case

The case is a petition for review on certiorari of the decision of the Court of Appeals[1] dismissing the petition
ruling that petitioner was guilty of forum shopping and that the proper remedy was appeal in due course, not
certiorari or mandamus.
In its decision, the Court of Appeals sustained the trial courts ruling that the remedies granted under Section
17, Rule 39 of the Rules of Court are not available to the petitioner because the Manual of Instructions for Sheriffs
of the NLRC does not include the remedy of an independent action by the owner to establish his right to his property.

The Facts

The facts, as found by the Court of Appeals, are as follows:

From the records before us and by petitioners own allegations and admission, it has taken the following actions in
connection with its claim that a sheriff of the National Labor Relations Commission erroneously and unlawfully
levied upon certain properties which it claims as its own.

1. It filed a notice of third-party claim with the Labor Arbiter on May 4, 1995.

2. It filed an Affidavit of Adverse Claim with the National Labor Relations Commission (NLRC) on July 4, 1995, which
was dismissed on August 30, 1995, by the Labor Arbiter.

3. It filed a petition for certiorari and prohibition with the Regional Trial Court of Manila, Branch 49, docketed as
Civil Case No. 95-75628 on October 6, 1995. The Regional Trial Court dismissed the case on October 11, 1995 for
lack of merit.

4. It appealed to the NLRC the order of the Labor Arbiter dated August 13, 1995 which dismissed the appeal for
lack of merit on December 8, 1995.

5. It filed an original petition for mandatory injunction with the NLRC on November 16, 1995. This was docketed as
Case No. NLRC-NCR-IC. 0000602-95. This case is still pending with that Commission.

6. It filed a complaint in the Regional Trial Court in Manila which was docketed as Civil Case No. 95-76395. The
dismissal of this case by public respondent triggered the filing of the instant petition.

In all of the foregoing actions, petitioner raised a common issue, which is that it is the owner of the properties
located in the compound and buildings of Artex Development Corporation, which were erroneously levied upon by

180
the sheriff of the NLRC as a consequence of the decision rendered by the said Commission in a labor case docketed
as NLRC-NCR Case No. 00-05-02960-90.[2]

On March 29, 1996, the Court of Appeals promulgated a decision[3] dismissing the petition on the ground of
forum shopping and that petitioners remedy was to seek relief from this Court.
On April 18, 1996, petitioner filed with the Court of Appeals a motion for reconsideration of the
decision.[4] Petitioner argued that the filing of a complaint for accion reinvindicatoria with the Regional Trial Court
was proper because it is a remedy specifically granted to an owner (whose properties were subjected to a writ of
execution to enforce a decision rendered in a labor dispute in which it was not a party) by Section 17 (now 16), Rule
39, Revised Rules of Court and by the doctrines laid down in Sy v. Discaya,[5] Santos v. Bayhon[6] and Manliguez v.
Court of Appeals.[7]
In addition, petitioner argued that the reliefs sought and the issues involved in the complaint for recovery of
property and damages filed with the Regional Trial Court of Manila, presided over by respondent judge, were entirely
distinct and separate from the reliefs sought and the issues involved in the proceedings before the Labor Arbiter and
the NLRC. Besides, petitioner pointed out that neither the NLRC nor the Labor Arbiter is empowered to adjudicate
matters involving ownership of properties.
On August 27, 1996, the Court of Appeals denied petitioners motion for reconsideration.[8]
Hence, this appeal.[9]

The Issues

The issues raised are (1) whether the Court of Appeals erred in ruling that petitioner was guilty of forum
shopping, and (2) whether the Court of Appeals erred in dismissing the petitioners accion reinvindicatoria on the
ground of lack of jurisdiction of the trial court.

The Courts Ruling

On the first issue raised, we rule that there was no forum shopping.
In Golangco v. Court of Appeals,[10] we held:

What is truly important to consider in determining whether forum shopping exists or not is the vexation caused
the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or grant the same or substantially the same reliefs, in the process creating possibility
of conflicting decisions being rendered by the different for a upon the same issues.

xxx xxx xxx

There is no forum-shopping where two different orders were questioned, two distinct causes of action and issues
were raised, and two objectives were sought. (Underscoring ours)

In the case at bar, there was no identity of parties, rights and causes of action and reliefs sought.
The case before the NLRC where Labor Arbiter Reyes issued a writ of execution on the property of petitioner
was a labor dispute between Artex and Samar-Anglo. Petitioner was not a party to the case. The only issue petitioner

181
raised before the NLRC was whether or not the writ of execution issued by the labor arbiter could be satisfied against
the property of petitioner, not a party to the labor case.
On the other hand, the accion reinvindicatoria filed by petitioner in the trial court was to recover the property
illegally levied upon and sold at auction. Hence, the causes of action in these cases were different.
The rule is that for forum-shopping to exist both actions must involve the same transactions, the same
circumstances. The actions must also raise identical causes of action, subject matter and issues.[11]
In Chemphil Export & Import Corporation v. Court of Appeals,[12] we ruled that:

Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of
seeking another (and possible) opinion in another forum (other than by appeal or the special civil action of
certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the
supposition that one or the other would make a favorable disposition.

On the second issue, a third party whose property has been levied upon by a sheriff to enforce a decision
against a judgment debtor is afforded with several alternative remedies to protect its interests. The third party may
avail himself of alternative remedies cumulatively, and one will not preclude the third party from availing himself of
the other alternative remedies in the event he failed in the remedy first availed of.
Thus, a third party may avail himself of the following alternative remedies:
a) File a third party claim with the sheriff of the Labor Arbiter, and
b) If the third party claim is denied, the third party may appeal the denial to the NLRC.[13]
Even if a third party claim was denied, a third party may still file a proper action with a competent court to
recover ownership of the property illegally seized by the sheriff. This finds support in Section 17 (now 16), Rule 39,
Revised Rules of Court, to wit:

SEC. 17 (now 16). Proceedings where property claimed by third person. -If property claimed by any other person
than the judgment debtor or his agent, and such person makes an affidavit of his title thereto or right to the
possession thereof, stating the grounds of such right or title, and serve the same upon the officer making the levy,
and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such
judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a
sum not greater than the value of the property levied on. In case of disagreement as to such value, the same shall
be determined by the court issuing the writ of execution.

The officer is not liable for damages, for the taking or keeping of the property, to any third-party claimant unless
a claim is made by the latter and unless an action for damages is brought by him against the officer within one
hundred twenty (120) days from the date of the filing of the bond. But nothing herein contained shall prevent such
claimant or any third person from vindicating his claim to the property by any proper action.

When the party in whose favor the writ of execution runs, is the Republic of the Philippines, or any officer duly
representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for
damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the
actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be
appropriated for the purpose. (Underscoring ours)

In Sy v. Discaya,[14] we ruled that:

The right of a third-party claimant to file an independent action to vindicate his claim of ownership over the
properties seized is reserved by Section 17 (now 16), Rule 39 of the Rules of Court, x x x:

182
xxxxxxxxx

As held in the case of Ong v. Tating, et. al., construing the aforecited rule, a third person whose property was
seized by a sheriff to answer for the obligation of a judgment debtor may invoke the supervisory power of the
court which authorized such execution. Upon due application by the third person and after summary hearing, the
court may command that the property be released from the mistaken levy and restored to the rightful owner or
possessor. What said court do in these instances, however, is limited to a determination of whether the sheriff has
acted rightly or wrongly in the performance of his duties in the execution of judgment, more specifically, if he has
indeed taken hold of property not belonging to the judgment debtor. The court does not and cannot pass upon
the question of title to the property, with any character of finality. It can treat of the matter only insofar as may be
necessary to decide if the sheriff has acted correctly or not. It can require the sheriff to restore the property to the
claimants possession if warranted by the evidence. However, if the claimants proof do not persuade the court of
the validity of his title or right of possession thereto, the claim will be denied.

Independent of the above-stated recourse, a third-party claimant may also avail of the remedy known as terceria,
provided in Section 17 (now 16), Rule 39, by serving on the officer making the levy an affidavit of his title and a
copy thereof upon the judgment creditor. The officer shall not be bound to keep the property, unless such
judgment creditor or his agent, on demand of the officer, indemnifies the officer against such claim by a bond in a
sum not greater than the value of the property levied on. An action for damages may be brought against the
sheriff within one hundred twenty (120) days from the filing of the bond.

The aforesaid remedies are nevertheless without prejudice to any proper action that a third-party claimant may
deem suitable to vindicate his claim to the property. Such a proper action is, obviously, entirely distinct from that
explicitly prescribed in Section 17 of Rule 39, which is an action for damages brought by a third-party claimant
against the officer within one hundred twenty (120) days from the date of the filing of the bond for the taking or
keeping of the property subject of the terceria.

Quite obviously, too, this proper action would have for its object the recovery of ownership or possession of the
property seized by the sheriff, as well as damages resulting from the allegedly wrongful seizure and detention
thereof despite the third-party claim; and it may be brought against the sheriff and such other parties as may be
alleged to have colluded with him in the supposedly wrongful execution proceedings, such as the judgment
creditor himself. Such proper action, as above pointed out, is and should be an entirely separate and distinct action
from that in which execution has issued, if instituted by a stranger to the latter suit.

The remedies above mentioned are cumulative and may be resorted to by a third-party claimant independent of
or separately from and without need of availing of the others. If a third-party claimant opted to file a proper
action to vindicate his claim of ownership, he must institute an action, distinct and separate from that in which the
judgment is being enforced, with the court of competent jurisdiction even before or without need of filing a claim
in the court which issued the writ, the latter not being a condition sine qua non for the former. In such proper
action, the validity and sufficiency of the title of the third-party claimant will be resolved and a writ of preliminary
injunction against the sheriff may be issued. (Emphasis and underscoring ours)

In light of the above, the filing of a third party claim with the Labor Arbiter and the NLRC did not preclude the
petitioner from filing a subsequent action for recovery of property and damages with the Regional Trial Court. And,
the institution of such complaint will not make petitioner guilty of forum shopping.[15]
In Santos v. Bayhon,[16] wherein Labor Arbiter Ceferina Diosana rendered a decision in NLRC NCR Case No. 1-
313-85 in favor of Kamapi, the NLRC affirmed the decision. Thereafter, Kamapi obtained a writ of execution against
the properties of Poly-Plastic Products or Anthony Ching. However, respondent Priscilla Carrera filed a third-party
claim alleging that Anthony Ching had sold the property to her. Nevertheless, upon posting by the judgment creditor
of an indemnity bond, the NLRC Sheriff proceeded with the public auction sale. Consequently, respondent Carrera
filed with Regional Trial Court, Manila an action to recover the levied property and obtained a temporary restraining

183
order against Labor Arbiter Diosana and the NLRC Sheriff from issuing a certificate of sale over the levied
property. Eventually, Labor Arbiter Santos issued an order allowing the execution to proceed against the property
of Poly-Plastic Products. Also, Labor Arbiter Santos and the NLRC Sheriff filed a motion to dismiss the civil case
instituted by respondent Carrera on the ground that the Regional Trial Court did not have jurisdiction over the labor
case. The trial court issued an order enjoining the enforcement of the writ of execution over the properties
claimed by respondent Carrera pending the determination of the validity of the sale made in her favor by the
judgment debtor Poly-Plastic Products and Anthony Ching.
In dismissing the petition for certiorari filed by Labor Arbiter Santos, we ruled that:

x x x. The power of the NLRC to execute its judgments extends only to properties unquestionably belonging to the
judgment debtor (Special Servicing Corp. v. Centro La Paz, 121 SCRA 748).

The general rule that no court has the power to interfere by injunction with the judgments or decrees of another
court with concurrent or coordinate jurisdiction possessing equal power to grant injunctive relief, applies only
when no third-party claimant is involved (Traders Royal Bank v. Intermediate Appellate Court, 133 SCRA 141
[1984]). When a third-party, or a stranger to the action, asserts a claim over the property levied upon, the claimant
may vindicate his claim by an independent action in the proper civil court which may stop the execution of the
judgment on property not belonging to the judgment debtor. (Underscoring ours)

In Consolidated Bank and Trust Corp. v. Court of Appeals, 193 SCRA 158 [1991], we ruled that:

The well-settled doctrine is that a proper levy is indispensable to a valid sale on execution. A
sale unless preceded by a valid levy is void. Therefore, since there was no sufficient levy on the execution in
question, the private respondent did not take any title to the properties sold thereunder x x x.

A person other than the judgment debtor who claims ownership or right over the levied properties is not
precluded, however, from taking other legal remedies. (Underscoring ours)

Jurisprudence is likewise replete with rulings that since the third-party claimant is not one of the parties to the
action, he could not, strictly speaking, appeal from the order denying his claim, but should file a separate
reinvindicatory action against the execution creditor or the purchaser of the property after the sale at public auction,
or a complaint for damages against the bond filed by the judgment creditor in favor of the sheriff.[17]
And in Lorenzana v. Cayetano,[18] we ruled that:

The rights of a third-party claimant should not be decided in the action where the third-party claim has been
presented, but in a separate action to be instituted by the third person. The appeal that should be interposed if the
term appeal may properly be employed, is a separate reinvindicatory action against the execution creditor or the
purchaser of the property after the sale at public auction, or complaint for damages to be charged against the
bond filed by the judgment creditor in favor of the sheriff. Such reinvindicatory action is reserved to the third-party
claimant.

A separate civil action for recovery of ownership of the property would not constitute interference with the
powers or processes of the Arbiter and the NLRC which rendered the judgment to enforce and execute upon the
levied properties. The property levied upon being that of a stranger is not subject to levy. Thus, a separate action for
recovery, upon a claim and prima-facie showing of ownership by the petitioner, cannot be considered as
interference.

The Fallo

184
WHEREFORE, the Court REVERSES the decision of the Court of Appeals and the resolution denying
reconsideration.[19] In lieu thereof, the Court renders judgment ANNULLING the sale on execution of the subject
property conducted by NLRC Sheriff Anam Timbayan in favor of respondent SAMAR-ANGLO and the subsequent sale
of the same to Rodrigo Sy Mendoza.The Court declares the petitioner to be the rightful owner of the property
involved and remands the case to the trial court to determine the liability of respondents SAMAR-ANGLO, Rodrigo
Sy Mendoza, and WESTERN GUARANTY CORPORATION to pay actual damages that petitioner claimed.
Costs against respondents, except the Court of Appeals.
SO ORDERED.

G.R. No. 211145, October 14, 2015

SAMAHAN NG MANGGAGAWA SA HANJIN SHIPYARD REP. BY ITS PRESIDENT, ALFIE


ALIPIO, Petitioner, v. BUREAU OF LABOR RELATIONS, HANJIN HEAVY INDUSTRIES AND CONSTRUCTION CO., LTD.
(HHIC-PHIL.), Respondents.

DECISION

MENDOZA, J.:

The right to self-organization is not limited to unionism. Workers may also form or join an association for mutual
aid and protection and for other legitimate purposes.

This is a petition for review on certiorari seeking to reverse and set aside the July 4, 2013 Decision1 and the January
28, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 123397, which reversed the November 28,
2011 Resolution3 of the Bureau of Labor Relations (BLR) and reinstated the April 20, 2010 Decision4 of the
Department of Labor and Employment (DOLE) Regional Director, cancelling the registration of Samahan ng
Manggagawa sa Hanjin Shipyard (Samahan) as a worker's association under Article 243 (now Article 249) of the
Labor Code.

The Facts

On February 16, 2010, Samahan, through its authorized representative, Alfie F. Alipio, filed an application for
registration5 of its name "Samahan ng Mga Manggagawa sa Hanjin Shipyard" with the DOLE. Attached to the
application were the list of names of the association's officers and members, signatures of the attendees of the
February 7, 2010 meeting, copies of their Constitution and By-laws. The application stated that the association had
a total of 120 members.

On February 26, 2010, the DOLE Regional Office No. 3, City of San Fernando, Pampanga (DOLE-Pampanga), issued
the corresponding certificate of registration6 in favor of Samahan.

On March 15, 2010, respondent Hanjin Heavy Industries and Construction Co., Ltd. Philippines (Hanjin), with
offices at Greenbeach 1, Renondo Peninsula, Sitio Agustin, Barangay Cawag, Subic Bay Freeport Zone, filed a
petition7 with DOLE-Pampanga praying for the cancellation of registration of Samahan's association on the ground
that its members did not fall under any of the types of workers enumerated in the second sentence of Article 243
(now 249).

Hanjin opined that only ambulant, intermittent, itinerant, rural workers, self-employed, and those without definite
employers may form a workers' association. It further posited that one third (1/3) of the members of the
association had definite employers and the continued existence and registration of the association would prejudice
the company's goodwill.

185
On March 18, 2010, Hanjin filed a supplemental petition,8 adding the alternative ground that Samahan committed
a misrepresentation in connection with the list of members and/or voters who took part in the ratification of their
constitution and by-laws in its application for registration. Hanjin claimed that Samahan made it appear that its
members were all qualified to become members of the workers' association.

On March 26, 2010, DOLE-Pampanga called for a conference, wherein Samahan requested for a 10-day period to
file a responsive pleading. No pleading, however, was submitted. Instead, Samahan filed a motion to dismiss on
April 14, 2010.9

The Ruling of the DOLE Regional Director

On April 20, 2010, DOLE Regional Director Ernesto Bihis ruled in favor of Hanjin. He found that the preamble, as
stated in the Constitution and By-Laws of Samahan, was an admission on its part that all of its members were
employees of Hanjin, to wit:
KAMI, ang mga Manggagawa sa HANJIN Shipyard (SAMAHAN) ay naglalayong na isulong ang pagpapabuti ng
kondisyon sa paggawa at katiyakan sa hanapbuhay sa pamamagitan ng patuloy na pagpapaunlad ng kasanayan
ng para sa mga kasapi nito. Naniniwala na sa pamamagitan ng aming mga angking lakas, kaalaman at kasanayan
ay anting maitataguyod at makapag-aambag sa kaunlaran ng isang lipunan. Na mararating at makakamit ang
antas ng pagkilala, pagdakila at pagpapahalaga sa mga tulad naming mga manggagawa.

x x x10
The same claim was made by Samahan in its motion to dismiss, but it failed to adduce evidence that the remaining
63 members were also employees of Hanjin. Its admission bolstered Hanjin's claim that Samahan committed
misrepresentation in its application for registration as it made an express representation that all of its members
were employees of the former. Having a definite employer, these 57 members should have formed a labor union
for collective bargaining.11 The dispositive portion of the decision of the Dole Regional Director, reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. Consequently, the Certificate of Registration
as Legitimate Workers Association (LWA) issued to the SAMAHAN NG MGA MANGGAGAWA SA HANJIN SHIPYARD
(SAMAHAN) with Registration Numbers R0300-1002-WA-009 dated February 26, 2010 is hereby CANCELLED, and
said association is dropped from the roster of labor organizations of this Office.

SO DECIDED.12
The Ruling of the Bureau of Labor Relations

Aggrieved, Samahan filed an appeal13 before the BLR, arguing that Hanjin had no right to petition for the
cancellation of its registration. Samahan pointed out that the words "Hanjin Shipyard," as used in its application for
registration, referred to a workplace and not as employer or company. It explained that when a shipyard was put
up in Subic, Zambales, it became known as Hanjin Shipyard. Further, the remaining 63 members signed the Sama-
Samang Pagpapatunay which stated that they were either working or had worked at Hanjin. Thus, the alleged
misrepresentation committed by Samahan had no leg to stand on.14

In its Comment to the Appeal,15 Hanjin averred that it was a party-in-interest. It reiterated that Samahan
committed misrepresentation in its application for registration before DOLE Pampanga. While Samahan insisted
that the remaining 63 members were either working, or had at least worked in Hanjin, only 10 attested to such
fact, thus, leaving its 53 members without any workplace to claim.

On September 6, 2010, the BLR granted Samahan's appeal and reversed the ruling of the Regional Director. It
stated that the law clearly afforded the right to self-organization to all workers including those without definite
employers.16 As an expression of the right to self-organization, industrial, commercial and self-employed workers
could form a workers' association if they so desired but subject to the limitation that it was only for mutual aid and
protection.17 Nowhere could it be found that to form a workers' association was prohibited or that the exercise of
a workers' right to self-organization was limited to collective bargaining.18

186
The BLR was of the opinion that there was no misrepresentation on the part of Samahan. The phrase, "KAMI, ang
mga Manggagawa sa Hanjin Shipyard" if translated, would be: "We, the workers at Hanjin Shipyard." The use of
the preposition "at" instead of "of " would indicate that "Hanjin Shipyard" was intended to describe a
place.19 Should Hanjin feel that the use of its name had affected the goodwill of the company, the remedy was not
to seek the cancellation of the association's registration. At most, the use by Samahan of the name "Hanjin
Shipyard" would only warrant a change in the name of the association.20 Thus, the dispositive portion of the BLR
decision reads:
WHEREFORE, the appeal is hereby GRANTED. The Order of DOLE Region III Director Ernesto C. Bihis dated 20 April
2010 is REVERSED and SET ASIDE.

Accordingly, Samahan ng mga Manggagawa sa Hanjin Shipyard shall remain in the roster of legitimate workers'
association.21
On October 14, 2010, Hanjin filed its motion for reconsideration.22

In its Resolution,23 dated November 28, 2011, the BLR affirmed its September 6, 2010 Decision, but directed
Samahan to remove the words "Hanjin Shipyard" from its name. The BLR explained that the Labor Code had no
provision on the use of trade or business name in the naming of a worker's association, such matters being
governed by the Corporation Code. According to the BLR, the most equitable relief that would strike a balance
between the contending interests of Samahan and Hanjin was to direct Samahan to drop the name "Hanjin
Shipyard" without delisting it from the roster of legitimate labor organizations. The fallo reads:
WHEREFORE, premises considered, our Decision dated 6 September 2010 is hereby AFFIRMED with a DIRECTIVE
for SAMAHAN to remove "HANJIN SHIPYARD" from its name.

SO RESOLVED.24
Unsatisfied, Samahan filed a petition for certiorari25 under Rule 65 before the CA, docketed as CA-G.R. SP No.
123397.

In its March 21, 2012 Resolution,26 the CA dismissed the petition because of Samahan's failure to file a motion for
reconsideration of the assailed November 28, 2011 Resolution.

On April 17, 2012, Samahan filed its motion for reconsideration27 and on July 18, 2012, Hanjin filed its
comment28 to oppose the same. On October 22, 2012, the CA issued a resolution granting Samahan's motion for
reconsideration and reinstating the petition. Hanjin was directed to file a comment five (5) days from receipt of
notice.29

On December 12, 2012, Hanjin filed its comment on the petition,30 arguing that to require Samahan to change its
name was not tantamount to interfering with the workers' right to self-organization.31 Thus, it prayed, among
others, for the dismissal of the petition for Samahan's failure to file the required motion for reconsideration.32

On January 17, 2013, Samahan filed its reply.33

On March 22, 2013, Hanjin filed its memorandum.34

The Ruling of the Court of Appeals

On July 4, 2013, the CA rendered its decision, holding that the registration of Samahan as a legitimate workers'
association was contrary to the provisions of Article 243 of the Labor Code.35 It stressed that only 57 out of the 120
members were actually working in Hanjin while the phrase in the preamble of Samahan's Constitution and By-laws,
"KAMI, ang mga Manggagawa sa Hanjin Shipyard" created an impression that all its members were employees of
HHIC. Such unqualified manifestation which was used in its application for registration, was a clear proof of
misrepresentation which warranted the cancellation of Samahan's registration.

It also stated that the members of Samahan could not register it as a legitimate worker's association because the

187
place where Hanjin's industry was located was not a rural area. Neither was there any evidence to show that the
members of the association were ambulant, intermittent or itinerant workers.36

At any rate, the CA was of the view that dropping the words "Hanjin Shipyard" from the association name would
not prejudice or impair its right to self-organization because it could adopt other appropriate names. The
dispositive portion reads:
WHEREFORE, the petition is DISMISSED and the BLR's directive, ordering that the words "Hanjin Shipyard" be
removed from petitioner association's name, is AFFIRMED. The Decision dated April 20, 2010 of the DOLE Regional
Director in Case No. R0300-1003-CP-001, which ordered the cancellation of petitioner association's registration is
REINSTATED.

SO ORDERED.37
Hence, this petition, raising the following
ISSUES

I. THE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT SAMAHAN CANNOT FORM A WORKERS'
ASSOCIATION OF EMPLOYEES IN HANJIN AND INSTEAD SHOULD HAVE FORMED A UNION, HENCE THEIR
REGISTRATION AS A WORKERS' ASSOCIATION SHOULD BE CANCELLED.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE REMOVAL/DELETION OF THE WORD "HANJIN"
IN THE NAME OF THE UNION BY REASON OF THE COMPANY'S PROPERTY RIGHT OVER THE COMPANY NAME
"HANJIN."38
Samahan argues that the right to form a workers' association is not exclusive to intermittent, ambulant and
itinerant workers. While the Labor Code allows the workers "to form, join or assist labor organizations of their own
choosing" for the purpose of collective bargaining, it does not prohibit them from forming a labor organization
simply for purposes of mutual aid and protection. All members of Samahan have one common place of work,
Hanjin Shipyard. Thus, there is no reason why they cannot use "Hanjin Shipyard" in their name.39

Hanjin counters that Samahan failed to adduce sufficient basis that all its members were employees of Hanjin or its
legitimate contractors, and that the use of the name "Hanjin Shipyard" would create an impression that all its
members were employess of HHIC.40

Samahan reiterates its stand that workers with a definite employer can organize any association for purposes of
mutual aid and protection. Inherent in the workers' right to self-organization is its right to name its own
organization. Samahan referred "Hanjin Shipyard" as their common place of work. Therefore, they may adopt the
same in their association's name.41

The Court's Ruling

The petition is partly meritorious.

Right to self-organization includes right to form a union, workers' association and labor management councils

More often than not, the right to self-organization connotes unionism. Workers, however, can also form and join a
workers' association as well as labor-management councils (LMC). Expressed in the highest law of the land is the
right of all workers to self-organization. Section 3, Article XIII of the 1987 Constitution states:
Section 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. xxx

188
[Emphasis Supplied]
And Section 8, Article III of the 1987 Constitution also states:
Section 8. The right of the people, including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not be abridged.
In relation thereto, Article 3 of the Labor Code provides:
Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed and regulate the relations between workers and
employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work.

[Emphasis Supplied]
As Article 246 (now 252) of the Labor Code provides, the right to self-organization includes the right to form, join
or assist labor organizations for the purpose of collective bargaining through representatives of their own choosing
and to engage in lawful concerted activities for the same purpose for their mutual aid and protection. This is in line
with the policy of the State to foster the free and voluntary organization of a strong and united labor movement as
well as to make sure that workers participate in policy and decision-making processes affecting their rights, duties
and welfare.42

The right to form a union or association or to self-organization comprehends two notions, to wit: (a) the liberty or
freedom, that is, the absence of restraint which guarantees that the employee may act for himself without being
prevented by law; and (b) the power, by virtue of which an employee may, as he pleases, join or refrain from
joining an association.43

In view of the revered right of every worker to self-organization, the law expressly allows and even encourages the
formation of labor organizations. A labor organization is defined as "any union or association of employees which
exists in whole or in part for the purpose of collective bargaining or of dealing with employers concerning terms
and conditions of employment."44 A labor organization has two broad rights: (1) to bargain collectively and (2) to
deal with the employer concerning terms and conditions of employment. To bargain collectively is a right given to
a union once it registers itself with the DOLE. Dealing with the employer, on the other hand, is a generic
description of interaction between employer and employees concerning grievances, wages, work hours and other
terms and conditions of employment, even if the employees' group is not registered with the DOLE.45

A union refers to any labor organization in the private sector organized for collective bargaining and for other
legitimate purpose,46 while a workers' association is an organization of workers formed for the mutual aid and
protection of its members or for any legitimate purpose other than collective bargaining.47

Many associations or groups of employees, or even combinations of only several persons, may qualify as a labor
organization yet fall short of constituting a labor union. While every labor union is a labor organization, not every
labor organization is a labor union. The difference is one of organization, composition and operation.48

Collective bargaining is just one of the forms of employee participation. Despite so much interest in and the
promotion of collective bargaining, it is incorrect to say that it is the device and no other, which secures industrial
democracy. It is equally misleading to say that collective bargaining is the end-goal of employee representation.
Rather, the real aim is employee participation in whatever form it may appear, bargaining or no bargaining, union
or no union.49 Any labor organization which may or may not be a union may deal with the employer. This explains
why a workers' association or organization does not always have to be a labor union and why employer-employee
collective interactions are not always collective bargaining.50

To further strengthen employee participation, Article 255 (now 261)51 of the Labor Code mandates that workers
shall have the right to participate in policy and decision-making processes of the establishment where they are
employed insofar as said processes will directly affect their rights, benefits and welfare. For this purpose, workers
and employers may form LMCs.

189
A cursory reading of the law demonstrates that a common element between unionism and the formation of LMCs
is the existence of an employer-employee relationship. Where neither party is an employer nor an employee of the
other, no duty to bargain collectively would exist.52 In the same manner, expressed in Article 255 (now 261) is the
requirement that such workers be employed in the establishment before they can participate in policy and
decision making processes.

In contrast, the existence of employer-employee relationship is not mandatory in the formation of workers'
association. What the law simply requires is that the members of the workers' association, at the very least, share
the same interest. The very definition of a workers' association speaks of "mutual aid and protection."

Right to choose whether to form or join a union or workers' association belongs to workers themselves

In the case at bench, the Court cannot sanction the opinion of the CA that Samahan should have formed a union
for purposes of collective bargaining instead of a workers' association because the choice belonged to it. The right
to form or join a labor organization necessarily includes the right to refuse or refrain from exercising the said right.
It is self-evident that just as no one should be denied the exercise of a right granted by law, so also, no one should
be compelled to exercise such a conferred right.53 Also inherent in the right to self-organization is the right to
choose whether to form a union for purposes of collective bargaining or a workers' association for purposes of
providing mutual aid and protection.

The right to self-organization, however, is subject to certain limitations as provided by law. For instance, the Labor
Code specifically disallows managerial employees from joining, assisting or forming any labor union. Meanwhile,
supervisory employees, while eligible for membership in labor organizations, are proscribed from joining the
collective bargaining unit of the rank and file employees.54 Even government employees have the right to self-
organization. It is not, however, regarded as existing or available for purposes of collective bargaining, but simply
for the furtherance and protection of their interests.55

Hanjin posits that the members of Samahan have definite employers, hence, they should have formed a union
instead of a workers' association. The Court disagrees. There is no provision in the Labor Code that states that
employees with definite employers may form, join or assist unions only.

The Court cannot subscribe either to Hanjin's position that Samahan's members cannot form the association
because they are not covered by the second sentence of Article 243 (now 249), to wit:
Article 243. Coverage and employees' right to self-organization. All persons employed in commercial, industrial
and agricultural enterprises and in religious, charitable, medical, or educational institutions, whether operating for
profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own
choosing for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form labor organizations for their mutual
aid and protection. (As amended by Batas Pambansa Bilang 70, May 1, 1980)

[Emphasis Supplied]
Further, Article 243 should be read together with Rule 2 of Department Order (D.O.) No. 40-03, Series of 2003,
which provides:
RULE II

COVERAGE OF THE RIGHT TO SELF-ORGANIZATION

Section 1. Policy. - It is the policy of the State to promote the free and responsible exercise of the right to self-
organization through the establishment of a simplified mechanism for the speedy registration of labor unions and
workers associations, determination of representation status and resolution of inter/intra-union and other related
labor relations disputes. Only legitimate or registered labor unions shall have the right to represent their members
for collective bargaining and other purposes. Workers' associations shall have the right to represent their members
for purposes other than collective bargaining.

190
Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial, industrial
and agricultural enterprises, including employees of government owned or controlled corporations without
original charters established under the Corporation Code, as well as employees of religious, charitable, medical or
educational institutions whether operating for profit or not, shall have the right to self-organization and to form,
join or assist labor unions for purposes of collective bargaining: provided, however, that supervisory employees
shall not be eligible for membership in a labor union of the rank-and-file employees but may form, join or assist
separate labor unions of their own. Managerial employees shall not be eligible to form, join or assist any labor
unions for purposes of collective bargaining. Alien employees with valid working permits issued by the Department
may exercise the right to self-organization and join or assist labor unions for purposes of collective bargaining if
they are nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definite period or not, shall beginning on the
first day of his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers and those
without any definite employers may form labor organizations for their mutual aid and protection and other
legitimate purposes except collective bargaining.

[Emphases Supplied]
Clearly, there is nothing in the foregoing implementing rules which provides that workers, with definite employers,
cannot form or join a workers' association for mutual aid and protection. Section 2 thereof even broadens the
coverage of workers who can form or join a workers' association. Thus, the Court agrees with Samahan's argument
that the right to form a workers' association is not exclusive to ambulant, intermittent and itinerant workers. The
option to form or join a union or a workers' association lies with the workers themselves, and whether they have
definite employers or not.

No misrepresentation on the part of Samahan to warrant cancellation of registration

In this case, Samahan's registration was cancelled not because its members were prohibited from forming a
workers' association but because they allegedly committed misrepresentation for using the phrase, "KAMI, ang
mga Manggagawa sa HAN JIN Shipyard."

Misrepresentation, as a ground for the cancellation of registration of a labor organization, is committed "in
connection with the adoption, or ratification of the constitution and by-laws or amendments thereto, the minutes
of ratification, the list of members who took part in the ratification of the constitution and by-laws or amendments
thereto, and those in connection with the election of officers, minutes of the election of officers, and the list of
voters, xxx."56

In Takata Corporation v. Bureau of Relations,57 the DOLE Regional Director granted the petition for the cancellation
of certificate of registration of Samahang Lakas Manggagawa sa Takata (Salamat) after finding that the employees
who attended the organizational meeting fell short of the 20% union registration requirement. The BLR, however,
reversed the ruling of the DOLE Regional Director, stating that petitioner Takata Corporation (Takata) failed to
prove deliberate and malicious misrepresentation on the part of respondent Salamat. Although Takata claimed
that in the list of members, there was an employee whose name appeared twice and another was merely a project
employee, such facts were not considered misrepresentations in the absence of showing that the respondent
deliberately did so for the purpose of increasing their union membership. The Court ruled in favor of Salamat.

In S.S. Ventures International v. S.S. Ventures Labor Union,58 the petition for cancellation of certificate of
registration was denied. The Court wrote:
If the union's application is infected by falsification and like serious irregularities, especially those appearing on
the face of the application and its attachments, a union should be denied recognition as a legitimate labor

191
organization. Prescinding from these considerations, the issuance to the Union of Certificate of Registration No.
RO300-00-02-UR-0003 necessarily implies that its application for registration and the supporting documents
thereof are prima facie free from any vitiating irregularities. Another factor which militates against the veracity of
the allegations in the Sinumpaang Petisyon is the lack of particularities on how, when and where respondent
union perpetrated the alleged fraud on each member. Such details are crucial for in the proceedings for
cancellation of union registration on the ground of fraud or misrepresentation, what needs to be established is
that the specific act or omission of the union deprived the complaining employees-members of their right to
choose.

[Emphases Supplied]
Based on the foregoing, the Court concludes that misrepresentation, to be a ground for the cancellation of the
certificate of registration, must be done maliciously and deliberately. Further, the mistakes appearing in the
application or attachments must be grave or refer to significant matters. The details as to how the alleged fraud
was committed must also be indubitably shown.

The records of this case reveal no deliberate or malicious intent to commit misrepresentation on the part of
Samahan. The use of such words "KAMI, ang mga Manggagawa sa HANJIN Shipyard" in the preamble of the
constitution and by-laws did not constitute misrepresentation so as to warrant the cancellation of Samahan's
certificate of registration. Hanjin failed to indicate how this phrase constitutes a malicious and deliberate
misrepresentation. Neither was there any showing that the alleged misrepresentation was serious in character.
Misrepresentation is a devious charge that cannot simply be entertained by mere surmises and conjectures.

Even granting arguendo that Samahan's members misrepresented themselves as employees or workers of Hanjin,
said misrepresentation does not relate to the adoption or ratification of its constitution and by-laws or to the
election of its officers.

Removal of the word "Hanjin Shipyard" from the association's name, however, does not infringe on Samahan's
right to self-organization

Nevertheless, the Court agrees with the BLR that "Hanjin Shipyard" must be removed in the name of the
association. A legitimate workers' association refers to an association of workers organized for mutual aid and
protection of its members or for any legitimate purpose other than collective bargaining registered with the
DOLE.59 Having been granted a certificate of registration, Samahan's association is now recognized by law as a
legitimate workers' association.

According to Samahan, inherent in the workers' right to self-organization is its right to name its own organization.
It seems to equate the dropping of words "Hanjin Shipyard" from its name as a restraint in its exercise of the right
to self-organization. Hanjin, on the other hand, invokes that "Hanjin Shipyard" is a registered trade name and,
thus, it is within their right to prohibit its use.

As there is no provision under our labor laws which speak of the use of name by a workers' association, the Court
refers to the Corporation Code, which governs the names of juridical persons. Section 18 thereof provides:
No corporate name may be allowed by the Securities and Exchange Commission if the proposed name
is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already
protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of incorporation under the amended name.

[Emphases Supplied]
The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical
or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or
"patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have
occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of
difficulties of administration and supervision over corporations.60

192
For the same reason, it would be misleading for the members of Samahan to use "Hanjin Shipyard" in its name as it
could give the wrong impression that all of its members are employed by Hanjin.

Further, Section 9, Rule IV of D.O. No. 40-03, Series of 2003 explicitly states:
The change of name of a labor organization shall not affect its legal personality. All the rights and obligations of a
labor organization under its old name shall continue to be exercised by the labor organization under its new name.
Thus, in the directive of the BLR removing the words "Hanjin Shipyard," no abridgement of Samahan's right to self-
organization was committed.

WHEREFORE, the petition is PARTIALLY GRANTED. The July 4, 2013 Decision and the January 28, 2014 Resolution
of the Court of Appeals are hereby REVERSED and SET ASIDE. The September 6, 2010 Resolution of the Bureau of
Labor Relations, as modified by its November 28, 2011 Resolution, is REINSTATED.

SO ORDERED.chanroblesvirtuallawlibrary

G.R. No. 214805

MARIANITO PADILLA and ALFREDO JAVALUYAS, Petitioners


vs.
UNIVERSAL ROBINA CORPORATION, represented by its Senior Vice President, JOHNSON ROBERT GO,
Respondents

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 22, 2014 Decision2 of the Court of Appeals (CA) in CA-G.R CV
No. 93260 reversing and setting aside the December 13, 2008 Decision3 of the Regional Trial Court (RTC) of Gapan
City, Branch 36, in Civil Case No. 1495 for damages and injunction with preliminary injunction. TI1e trial court
declared the obligations of petitioners Marianito Padilla (Padilla) and Alfredo Javaluyas (Javaluyas) to respondent
Universal Robina Corporation (URC) extinguished, ordered the release of the real estate mortgages executed by
petitioners in favor of URC, and made permanent the Writ of Preliminary Injunction enjoining the extrajudicial
foreclosure of petitioners' mortgaged properties.

Factual Antecedents

This case stemmed from a Complaint4 for Damages filed by several poultry Farmers, namely Eduardo
Pineda,Simplicio Ortiz Luis, Jose Bantigue, Azucena Vergara, Eduardo Guingon and herein petitioners
(complainants) against URC on May 26, 1995, before the RTC of Gapan City, Branch 36.

The facts, as culled from the records of the case, are as follows:

For various years, URC, a corporation engaged in the manufacture and sale of various agro-industrial products,
sold/supplied on credit day-old chicks and poultry feeds to complainants who, in turn, provided the labor, poultry
houses, electricity and water facilities to care and grow these chicks until they are ready for harvest after 50 days,
more or less. URC had the option of buying from complainants the full-grown broiler chickens that met the target
harvest weight at an agreed price per kilo. Liquidation was made within 15 days after the harvest by setting off the
price of the full grown broiler chickens with the amount of purchases made by complainants on credit. Thus, if the
purchases on credit were greater than the value of the chickens harvested, complainants paid the balance to URC,
but if it were otherwise, complainants received their respective paybacks or earnings.

193
Documents entitled Continuing Credit Accommodation with Real Estate Mortgage (CCAREM)5 were executed by
the parties whereby URC agreed to extend a continuous credit accommodation in favor of each complainant, for
the latter's purchases of day-old chicks, poultry feeds, and other agricultural products from the former, while each
complainant put up a real estate mortgage. The relevant terms and conditions of the CCAREM are as follows:

xxxx

I. AS TO CREDIT ACCOMMODATION -

1. It is agreed upon by the parties that all purchases will be paid not later than sixty (60) days from the
date of every purchase. Any purchase not paid or settled within the said period will automatically make all
subsequent purchases due and payable even before their due dates.

2. The MORTGAGOR and/or PRINCIPAL will be considered in default if they fail to pay their obligation
upon maturity with or without demand and it is agreed that a certified statement by the COMP
ANYMORTGAGEE, as to the amount due from the MORTGAGOR and/or PRINCIPAL will be accepted by the
latter as conclusive evidence of their obligation.

3. The obligation of the MORTGAGOR and/or PRINCIPAL in case of their default shall earn an interest at
the rate of 16% per annum until fully paid.

4. The parties agree and stipulate that ownership in the thing purchase[d] will not be transferred to the
MORTGAGOR and/or PRINClPAL until they have fully paid the price.

5. In case the thing purchased should be lost, damaged or destroyed without the fault of the COMP ANY-
MORTGAGEE, or by reason of fortuitous events or force majeure - like death of day-old chicks or chickens
by reason of any sickness, disease, "peste or NCD," theft, robbery, typhoon, fire, flood and others - the
risk of loss shall be borne by the MORTGAGOR and/or PRINCIPAL and their liability to pay their obligation
to COMPANY-MORTGAGEE is not extinguished. The MORTGAGOR and/or PRINCIPAL are still obligated to
pay the day-old chicks, poultry feeds and other products purchased from the COMPANY-MORTGAGEE.

x x x x6

The business relationship between URC and complainants continued for years and the CCAREMS were renewed
yearly. However, sometime in the year 1993, complainants informed URC of the stunting or slow growth and high
mortality rate of the chickens. They claimed that URC supplied them with low quality feeds with high aflatoxin
content and class B or junior day-old chicks. Meanwhile, the stunted chickens that failed to meet the standard
target weight for harvest were rejected by URC and were condemned (beheaded). As a result, complainants
incurred outstanding obligations. URC made several demands for complainants to settle their unpaid obligations
under the CCAREMs,7 but they refused to pay. Hence, on June 25, 1995, URC filed an application for extra judicial
foreclosure of the real estate mortgages on complainants' respective properties under the CCAREMs.

Proceedings before the Regional Trial Court

On May 26, 1995, complainants filed a Complaint8 for damages, docketed as Civil Case No. 1495, with the RTC of
Gapan City, Branch 36, against URC. The complainants claimed that they incurred losses and sustained damages
from the stunting/slow growth of the chickens as a result of the low quality feeds with high aflatoxin content and
class B or junior day-old chicks supplied by URC in evident bad faith. Since the stunting and eventual
condemnation/death of the chickens was due to URC's fault, complainants claimed that their obligation to pay URC
was extinguished. Complainants thereafter filed an Amended Complaint9 to include, as a nominal party defendant,
Notary Public Olivia V. Jacoba (Notary Public Jacoba), and, as additional cause of action, the issuance of an ex-parte

194
restraining order and a preliminary injunction prohibiting Notary Public Jacoba from selling their real properties at
the scheduled public auction for the extrajudicial foreclosure of the real estate mortgages, claiming that Notary
Public Jacoba had no authority to issue the Notices of Auction Sale10 for lack of a notarial commission.

In its Answer Ad Cautela, 11 URC alleged that complainants had no cause of action; that the terms and conditions of
its agreement with complainants were clearly indicated in the CCAREMs duly signed by them; that it was
compelled, under the CCAREM, to foreclose extrajudicially the properties mortgaged when complainants defaulted
in their payment; that it never ordered the condemnation of the defective chickens; that the cause of the chicks'
stunted growth was complainants' lack of care in the growing of the chicks; and that it supplied the complainants
with feeds of good quality. In its Amended Answer,12 URC further claimed that the venue of complainants' case
was improperly laid.

On July 14, 1995, the RTC issued an Order13 restraining URC from selling the real properties of complainants. After
the hearing on the prayer for preliminary injunction, the RTC, in its Order dated January 18, 1998,14 issued a Writ
of Preliminary Injunction prohibiting the extrajudicial foreclosure of complainants' real properties mortgaged
under the CCAREMs upon complainants' filing of an injunction bond. A motion for reconsideration was filed by URC
questioning the legal basis of the Writ of Preliminary Injunction, but was, however, denied by the RTC in an Order
dated October 7, 1998.15 Both the January 18, 1998 and October 7, 1998 Orders of the RTC were affirmed by the
CA upon appeal by URC, which became final on July 27, 2001.16

Meanwhile, complainants, except petitioners, withdrew their complaints and opted to settle their respective
outstanding obligations with URC under the CCAREMs. They recanted their previous allegation that the stunting
growth of the chicks was due to URC's fault and instead attributed the same to local pestilence and oversight on
their part in the care of the chicks.17 Petitioners, on the other hand, insisted on URC's fault, hence, trial proceeded
only with respect to them.

During the hearing, petitioners testified that they were contract growers of URC by virtue of CCAREMs signed by
them;18 that as per their agreement with URC, they would take care and grow the chicks supplied by URC for more
or less forty-five (45) to fifty (50) days;19 that sometime in May 1993, they noticed that the chicks, which they
described as "small and runts" and "maliit at bansot," were not growing normally;20 that they reported the matter
to URC which prompted the latter to send a representative who later told them that the cause of the stunting
growth of the chickens was the purported defective feeds supplied by URC;21 and that URC decided to
condemn/discard those chickens that did not satisfy the standard target weight for harvest.22 Petitioners added
that since the slow growth of the chicks was caused by URC's fault, their obligation was extinguished.23

URC, on the other hand, presented as witness William Lim (Lim) who testified that he was the National Sales
Manager of URC, and as such, was responsible for the monitoring of sales activities and delivery of chicks and
poultry feeds to the company's customers.24 He testified that URC entered into continuing credit accommodation
contracts with complainants, by virtue of CCAREMs,25 wherein URC, under a buy back arrangement, would sell on
credit chicks to complainants, who, in turn, would grow the chicks according to their own management without
URC' s intervention. URC would thereafter offer to buy back the full-grown broiler chickens at an agreed price.26 In
1993, URC was compelled to investigate several complaints regarding the slow growth of the chickens, which
investigation revealed that the cause of the stunted growth was some viral infection causing respiratory problems
among the chickens and not due to defective feeds as falsely alleged by complainants.27 Lim denied that the feeds
supplied by URC were defective since it passed quality control28 or that URC ordered the condemnation of the
chickens, explaining that only complainants, as owner thereof, can dispose of the same.29 Since URC only harvested
those chickens that met the standard weight and since the value of the full grown ones was not enough to pay for
the amount of chicks and poultry feeds purchased from URC, complainants incurred outstanding obligations
prompting URC to initiate foreclosure proceedings when complainants refused to pay on demand.30

Checker, Live Broiler Chicken Checker, and Materials Coordinator.31 According to Del Pilar, he attended a meeting
called by the management of URC wherein it was discussed that the cause of the stunted growth was the poultry

195
feeds supplied by URC. During that meeting, URC also ordered the condemnation of the stunted chickens.32 On
cross-examination, he stated that he was ordered by Lim to witness the condemnation and in the process,
prepared/issued the corresponding condemnation reports.33

On December 13, 2008, the trial court rendered a Decision,34 the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is rendered:

a) declaring the obligations of Alfredo Javaluyas and Marianito Padilla to Universal Robina Corporation
under the latter's statements of account both dated 03 January 1997, in the amount of Php624,872.04
and Php727,317.59 respectively, extinguished;

b) making the Writ of Preliminary Injunction, enjoining the URC to desist from foreclosing extrajudicially
the properties mortgaged by Alfredo Javaluyas and Marianito Padilla permanent;

c) ordering defendant Universal Robina Corporation:

1) to release the real estate mortgages executed by Alfredo Javaluyas and Marianito Padilla in its
favor;

2) to pay the sum of Php50,000.00 as attorney's fee; and

[3] to pay the cost of suit.

SO ORDERED.35

In declaring petitioners' contractual obligation with URC as extinguished, the trial court found the CCAREMs as
unconscionable and against public policy for being a contract of adhesion which contained terms that were heavily
weighed in favor of URC. It held that what the parties entered into was actually a growing agreement whereby
petitioners, as contract growers, took care and grew the broiler chicks supplied by URC which retained ownership
of the chicks. The delivery of the chicks to petitioners did not transfer its ownership to them nor make the
relationship of the parties one of a buy back arrangement considering that the contract growers had no right to
sell the broiler chickens to others except to URC and that URC controlled the operation and growing of the chicks
by exclusively supplying poultry feeds and agricultural products, as well as by giving orders of condemnation. As
the owner of the broiler chicks/chickens, URC should bear the loss. At the same time, the trial court found
petitioners not guilty of negligence in the care of the chicks as to hold them liable for the loss. Since neither of the
parties was shown to be at fault by preponderance of evidence, the RTC held that each had to bear their respective
losses and accordingly was not entitled to damages against each other.

Proceedings before the Court of Appeals

URC appealed to the CA, assailing the trial court ruling that it entered into a growing agreement with petitioners;
that it retained ownership of the broiler chickens; that the CCAREMs were unconscionable and against public
policy; and that the obligations of petitioners were extinguished. It also claimed that the trial court erred in
ordering the release of the real estate mortgages executed by petitioners; in making permanent the writ of
injunction; and in ordering it to pay attorney's fees and the cost of suit.

On April 22, 2014, the CA rendered a Decision36 granting URC's appeal. The CA held that petitioners' acquiescence
to the terms and provisions of the CCAREMs made it a binding agreement between the parties that should govern
and delineate their respective rights and obligations. Under the CCAREM, URC shall only be accountable if the loss,
damage, or destruction of the subject livestock was due to its fault, which, in this case, was not proven. In ruling in

196
favor of URC, the CA held that there was no credible evidence, except mere self-serving claims, that URC supplied
contaminated poultry feeds which affected the growth of the broiler chicks. No veterinarians or nutritionists were
presented to prove petitioners' claims. The CA therefore ruled that petitioners should bear the loss of the broiler
chickens and are liable to pay URC their outstanding obligations plus interest and attorney's fees in accordance
with the provisions of the CCAREM.

The CA struck down for being improper the foreclosure sale made at the instance of Notary Public Jacoba who
lacked the necessary notarial commission. However, in recognizing URC's right to avail of the remedy of
foreclosure as provided under the CCAREM, the CA lifted the permanent injunction issued by the trial court to
allow URC to initiate other foreclosure proceedings against the mortgaged properties of petitioners.

The CA further denied URC's claim for exemplary damages since there was no showing that petitioners exhibited
bad faith in dealing with URC.

The dispositive portion of the Decision reads:

WHEREFORE, the Appeal is GRANTED. The Decision dated 13 December 2008 of Branch 36, Regional Trial Court
(RTC) of Gapan City is hereby REVERSED and SET ASIDE.

ACCORDINGLY, this Court hereby:

1. DECLARES plaintiff-appellee Marianito Padilla liable to pay defendant-appellant Universal Robina


Corporation the following amounts: (a) ₱368,009.10 as principal; (b) ₱213,844.97 as interest; and (c)
₱l45,463.52 as attorney's fee;

2. DECLARES plaintiff-appellee Alfredo Javaluyas liable to pay defendant-appellant Universal Robina


Corporation the following amounts: a) ₱272,069.26 in principal; (b) ₱213,844.9737 as interest; and (c)
₱l45,463.5238 as attorney's fee;

3. LIFTS the Permanent Injunction issued by Branch 36, Regional Trial Court (RTC) of Gapan City on the
Foreclosure of plaintiffs-appellees' Real Estate Mortgage. However, the foreclosure sale of TCT Nos, NT-
186419, P-108280, and NT-191940; and TCT No. 196756 made with the participation of Notary Public
Olivia-Velasco Jacoba is declared VOID and of NO EFFECT;

4. DENIES defendant-appellant's claim for exemplary damages for lack of merit.

SO ORDERED.39

Petitioners filed a Motion for Reconsideration40 of the CA Decision, arguing that they have proven by
preponderance of evidence that the cause of the stunted growth of the broiler chickens was the low-quality
poultry feeds supplied by URC. They averred that Del Pilar's testimony as regards the admission by URC of its fault
in supplying defective feeds, as well as the failure of respondent URC's lone witness to deny this admission, were
enough evidence to prove their cause. This motion for reconsideration was, however, denied by the CA in its
Resolution41 of September 17, 2014.

Issue

Hence, this present Petition on the sole ground that:

THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LOSS, DAMAGE OR DESTRUCTION OF THE
SUBJECT LIVESTOCKS WAS NOT DUE TO URC'S F AULT.42

197
Petitioners aver that the testimony of Del Pilar, a disinterested witness, on what actually transpired during a
meeting conducted by URC when the latter, through Lim, admitted that the stunted growth of the broiler chicks
was due to the poultry feeds it supplied, should be given weight and credence. Not having been denied by Lim
when he was presented as witness, this positive testimony and admission deserves great weight to establish the
fault or negligence of URC. Hence, their obligation was already extinguished due to URC's admission of fault.

Our Ruling

The Petition is unmeritorious.

At the outset, it must be stated that the CCAREMs executed and signed by the parties govern their rights and
obligations considering that the validity of its provisions was not assailed by petitioners.

The threshold issue is whether or not there is sufficient evidence to establish URC's fault or negligence for the
defective/stunted growth of the broiler chickens as would extinguish petitioners' obligation under the CCAREM.
Paragraph 5 of the CCAREM provides that:

In case the thing purchased should be lost, damaged or destroyed without the fault of the COMP ANY-
MORTGAGEE, or by reason of fortuitous events or force majeure - like death of day-old chicks or chickens by
reason of any sickness, disease, "peste or NCD," theft, robbery, typhoon, fire, flood and others -the risk of loss shall
be borne by the MORTGAGOR and/or PRINCIPAL and their liability to pay their obligation to COMP ANY-
MORTGAGEE is not extinguished. The MORTGAGOR and/or PRINCIPAL are still obligated to pay the day-old chicks,
poultry feeds and other products purchased from the COMPANY-MORTGAGEE.43

Based on the foregoing, URC is accountable only if the loss, damage, or destruction of the broiler chickens was due
to its fault, otherwise, petitioners should bear the loss and their obligation to pay the day-old chicks and poultry
feeds purchased from URC is not extinguished.

"[I]t is basic rule in civil cases that the party making the allegations has the burden of proving them by a
preponderance of evidence.1âwphi1 The parties must rely on the strength of their own evidence and not upon the
weakness of the defense offered by their opponent."44 The Court finds that petitioners failed to prove by
preponderance of evidence their claims against URC as to extinguish their obligation under the contract.

It bears stressing that both the RTC and the CA found no evidence of fault or negligence on the part of URC. The CA
affirmed the finding of the trial court that there was no basis to the allegation that the stunted growth of the
broiler chickens was caused by the purported low-quality poultry feeds supplied by URC. Suffice it to say that
factual findings of the trial court, when adopted by the CA, are binding and conclusive on this Court.45 Besides, this
Court has already ruled that the finding of negligence is a question of fact which it cannot look into as the Court is
not a trier of facts.46

In any event, the Court finds no compelling reason to deviate from the finding of the lower courts inasmuch as it is
supported by the evidence and records of the case. It was held, in the case of Nutrimix Feeds Corporation v. Court
of Appeals, 47 that the manufacturer or seller of animal feeds cannot be held liable for any damage allegedly
caused by the product in the absence of proof that the product was defective. The defect of the product requires
evidence that there was no tampering with, or changing of the animal feeds.48 The Court explained that "[i]n the
sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the purpose
which both parties contemplated."49

In this case, URC maintains that it is unlikely that it supplied its customers with defective poultry feeds because if it
were, it would not have passed quality control.50 Further, there is evidence showing the possibility of tampering
with the poultry feeds in the hands of the poultry farmers. On cross-examination, Lim testified in this manner:

198
Court:

Q. So, there was no instance where the growers ever bought feeds from other sources?

A. There [were] instances [when] they bought other ingredients from other source[ s ], sir.

Q. I am asking you feeds not ingredients.

A. It is added to the feeds, sir, so it becomes part of the feeds.

Court:

In this case, did you find [that] the plaintiff added ingredients to the feeds?

A There [were] instances, sir.

Court:

Did you personally see that they mix[ ed] or add[ ed] some ingredients to the feeds that you suppl[ied]?

A Yes, sir.

Court:

Where is your proof?

A I saw it personally, sir.51

In light of the ruling in Nutrimix, it is incumbent on petitioners to establish the liability of URC on the basis of
breach of implied warranty. No evidence, however, was adduced. They even failed to dispute Lim's testimony that
the feeds passed quality control and of the possibility that other ingredients from other sources were mixed to the
feeds. As correctly observed by the CA, there was nothing in the records, except self-serving claims, which proves
that URC delivered low-quality feeds tainted with high aflatoxin and other harmful components. There were no
veterinarians/nutritionists or any other credible evidence presented by petitioners to confirm that the poultry
feeds supplied by URC were contaminated or affected the growth of the broiler chicks. The documentary evidence
proffered by petitioners, to wit: 1) Notices of Auction Sale52 of the properties mortgaged under the CCAREMs, 2)
Certifications53 of the Clerks of Court of RTC Gapan and Cabanatuan City stating that Notary Public Jacoba had no
notarial commission, and 3) Condemnation Mortality Rate Reports54 showing the number of disposed/condemned
broiler chickens, do not prove any liability on URC of its alleged supply of defective feeds.

Petitioners, however, insist that the cause of the stunted growth of the broiler chicks was the defective poultry
feeds supplied by URC, and that URC caused the condemnation of the chickens, based on the alleged admission
made by Lim during a meeting called by the URC management. In addition, they aver that Lim never denied this
purported admission when he was presented in court.

The Court is not persuaded.

For one, nowhere in the testimonies of Del Pilar was it categorically stated that Lim admitted that URC delivered
defective feeds. While he testified that it was Lim who ordered the condemnation of the stunted chickens,55 it was

199
the Satellite Farm Manager of URC's Satellite Poultry Farm (not Lim) who discussed the problems regarding the
feeds. The testimony of Del Pilar is summarized as follows:

Court:

Q As a Live Broiler Checker for a long time, do you know what could have caused this stunted growing of the
chickens of these Contract Growers?

A What was discussed in the Office is regarding the feeds, sir.

Q Who discussed the problem regarding the feeds?

A The Satellite Farm Manager, sir. And [the feeds] was the subject matter, the Satellite Manager of [Universal
Robina Corporation] [who] also [had] a poultry, and when they used other brand of feeds[,] the chicken [grew], sir.

Q What are these Satellites?

A [Universal Robina Corporation] rented empty poultry and they put their chickens there, sir.

Q In other words, this Satellite Poultry [was] practically managed by Universal Robina Corporation?

A Yes, sir.

Q And this Satellite Poultry [also] suffered stunted growing of their chicken?

A Yes, sir.

Q And it was discussed in the Office that the one problem that caused the stunted growth was the feeds?

A Yes, sir.

Q How did it happen that you were present during that discussion?

A There was a meeting called by the management and I was included there in the meeting, and the condemnation
[of the chickens] was ordered, sir.

Q Now, they discussed about the problem [of] the stunted growth, you said the problem is the feeds, do you know
what feeds they are referring [to]?

A The Robina feeds, sir.

Q The same feeds provided by the Universal Robina Corporation to the Contract Growers?

A Yes, sir.56

xxxx

Cross-Examination

200
Atty. A. Garcia:

Q Mr. witness, you mentioned that you knew that the problem is the feeds because you heard it being discussed in
the company, is that correct?

A Yes, sir.

Q Were you able to confirm it?

A Yes, sir.

Q How did you confirm it, Mr. witness?

A I talked with the farm manager, sir. They used other feeds for the chicken and the chickens grew well, sir.

Q So, in other words, Mr. witness, you were not able to witness this because it was only told to you?

A Yes, sir.

Q In other words, Mr. witness, since you were not able to see the chickens, you were not able to confirm it?

A Yes, sir.57

Lim was URC's Sales Manager and Del Pilar was clearly not referring to him but to URC's Satellite Farm Manager.
This alleged admission on the part of URC's Satellite Farm Manager as revealed by Del Pilar, however, is undeniably
hearsay because it was not based on the witness' personal knowledge but on the knowledge of some other person
who was never presented on the witness stand.58 Parenthetically, Del Pilar's testimony regarding the Satellite Farm
Manager's admission can be admitted merely for the purpose of establishing such utterance but not to establish its
truth.59 Hence, Del Pilar's testimony did not sufficiently establish the truth of the claim that the feeds supplied by
URC were defective, which could have affected the growth of the broiler chickens.

In fine, petitioners failed to prove by preponderance of evidence the fault or negligence of URC. For this reason,
petitioners can be held liable for their unsettled obligations under the CCAREMs they executed in favor of URC.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Decision of the Court of Appeals dated
April 22, 2014 in CA-G.R. CV No. 93260 is AFFIRMED.

SO ORDERED.

GR. NO. 218454, December 01, 2016

PENINSULA EMPLOYEES UNION (PEU),* Petitioner, v. MICHAEL B. ESQUIVEL

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari 1 assailing the Decision2 dated February 9, 2015 and the
Resolution3 dated May 21, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 124566, which annulled and set
aside the Order4 dated March 6, 2012 (March 6, 2012 Order) of the Office of the Secretary (OSEC) of the

201
Department of Labor and Employment (DOLE) in OS-AJ-0024-07 declaring petitioner Peninsula Employees Union
(PEU) National Union of Workers in Hotel Restaurants and Allied Industries (NUWHRAIN)5 entitled to collect the
amount of two percent (2%) agency fees from The Peninsula Manila Hotel Labor Union (TPMHLU), the former
collective bargaining agent,6 and the non-affiliated employees (NAE;7 collectively, non-PEU members), herein
represented by respondents Michael B. Esquivel, Domingo G. Mabutas, Randell V. Afan, et al. (respondents),
retroactively from July 2010.chanroblesvirtuallawlibrary

The Facts

On December 13, 2007, PEU's Board of Directors passed Local Board Resolution No. 12, series of
20078authorizing (a) the affiliation of PEU with NUWHRAIN, and the direct membership of its individual members
thereto; (b) the compliance with all the requirements therefor; and (c) the Local President to sign the affiliation
agreement with NUWHRAIN upon acceptance of such affiliation.9 On the same day, the said act was submitted to
the general membership, and was duly ratified by 223 PEU members.10

Beginning January 1, 2009, PEU-NUWHRAIN sought to increase the union dues/agency fees from one percent (1%)
to two percent (2%) of the rank and file employees' monthly salaries, brought about by PEU's affiliation with
NUWHRAIN, which supposedly requires its affiliates to remit to it two percent (2%) of their monthly salaries.11

Meanwhile, in a Decision12 dated October 10, 2008 (October 10, 2008 Decision), the OSEC resolved the collective
bargaining deadlock between PEU-NUWHRAIN and The Peninsula Manila Hotel (Hotel), ordering the parties to
execute a collective bargaining agreement (CBA) incorporating the dispositions therein (arbitral award).13 The
parties have yet to actually sign a CBA but have, for the most part, implemented the arbitral award.14

In March 2009, PEU-NUWHRAIN requested15 the OSEC for Administrative Intervention for Dispute
Avoidance16 (AIDA) pursuant to DOLE Circular No. 1, series of 200617 in relation to the issue, among others, of its
entitlement to collect increased agency fees from the non-PEU members,18 which was docketed as OSEC-AIDA-03-
001-09.19

The non-PEU members objected to the assessment of increased agency fees arguing that: (a) the new CBA is
unenforceable since no written CBA has been formally signed and executed by PEU-NUWHRAIN and the
Hotel; (b) the 2% agency fee is exorbitant and unreasonable; and (c) PEU-NUWHRAIN failed to comply with the
mandatory requirements for such increase.20

The OSEC's Ruling

In a Decision21 dated June 2, 2010 (June 2, 2010 Decision), the OSEC upheld PEU-NUWHRAIN's right to collect
agency fees from the non-PEU members in accordance with Article 4, Section 2 of the expired CBA, which was
declared to be in full force and effect pursuant to the October 10, 2008 Decision, but only at the rate of one
percent (1%),22 and denied its bid to increase the agency fees to two percent (2%) for failure to show that its
general membership approved the same, noting that: (a) the October 28, 2008 General Membership
Resolution23 (GMR) submitted in support of the claimed increase dealt with the approval of the payment of
attorney's fees from the CBA backwages, without reference to any approval of the increase in union dues;
and (b) the minutes24 of its October 28, 2008 general membership meeting (October 28, 2008 minutes) merely
stated that there was a need to update the individual check-off authorization to implement the two percent (2%)
union dues, but was silent as to any deliberation and formal approval thereof.25 The OSEC pointed out that the
only direct proof presented for the claimed increase in union dues was the PEU President's application for union
membership with PEU-NUWHRAIN26 dated October 29, 2008, together with his Individual Check-Off
Authorization27 purportedly dated May 11, 2008, which precedes such application and, thus, cannot be given
credence.28

202
Dissatisfied, PEU-NUWHRAIN moved for reconsideration,29 attaching thereto copies of: (a) the July 1, 2010
GMR30 confirming and affirming the alleged approval of the deduction of two percent (2%) union dues from the
members' monthly basic salaries; (b) the individual check-off authorizations31 dated November 26 and 27, 2008
from three (3) members authorizing the deduction of two percent (2%) union dues from their monthly basic
salaries; and (c) payslips32 of some PEU-NUWHRAIN members purportedly showing the deduction of two percent
(2%) union dues from their monthly basic pay beginning January 2009.

On March 6, 2012, the OSEC issued an Order33 partially granting PEU-NUWHRAIN's motion for reconsideration, and
declaring it entitled to collect two percent (2%) agency fees from the non-PEU members beginning July 2010 since
the GMR showing approval for the increase of the union dues from one percent (1%) to two percent (2%) was only
procured at that time.34

Unperturbed, respondents filed a petition for certiorari35 with the CA, docketed as CA-GR. SP No. 124566, alleging
that the OSEC committed grave abuse of discretion amounting to lack or excess of jurisdiction in allowing PEU-
NUWHRAIN to collection increased agency fees despite non-compliance with the legal requirements therefor.36

The CA Ruling

In a Decision37 dated February 9, 2015, the CA set aside the OSEC's March 6, 2012 Order, and reinstated the June 2,
2010 Decision.38 It ruled that PEU-NUWHRAIN failed to prove compliance with the requisites for a valid check-off
since the October 28, 2008 minutes do not show that the increase in union dues was duly approved by its general
membership. It also found the July 1, 2010 GMR suspicious considering that it surfaced only after PEU received the
OSEC's June 2, 2010 Decision disallowing the collection of increased agency fees.39

PEU-NUWHRAIN moved for reconsideration,40 which was, however, denied in a Resolution41 dated May 21, 2015;
hence, the present petition.chanroblesvirtuallawlibrary

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA committed reversible error in ruling that
PEU-NUWHRAIN had no right to collect the increased agency fees.chanroblesvirtuallawlibrary

The Court's Ruling

The petition lacks merit.

The recognized collective bargaining union which successfully negotiated the CBA with the employer is given the
right to collect a reasonable fee called "agency fee" from non-union members who are employees of the
appropriate bargaining unit, in an amount equivalent to the dues and other fees paid by union members, in case
they accept the benefits under the CBA.42 While the collection of agency fees is recognized by Article
25943 (formerly Article 248) of the Labor Code, as amended, the legal basis of the union's right to agency fees is
neither contractual nor statutory, but quasi-contractual, deriving from the established principle that non-union
employees may not unjustly enrich themselves by benefiting from employment conditions negotiated by the
bargaining union.44

In the present case, PEU-NUWHRAIN's right to collect agency fees is not disputed. However, the rate of agency
fees it seeks to collect from the non-PEU members is contested, considering its failure to comply with the
requirements for a valid increase of union dues, rendering the collection of