G.R. No.
L-48494 February 5, 1990 considered Brent School's report as an application for clearance to terminate
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office
of the President, and DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar 1 is whether or not the
provisions of the Labor Code, 2 as amended,3 have anathematized "fixed
period employment" or employment for a term.
The root of the controversy at bar is an employment contract in virtue of
which Doroteo R. Alegre was engaged as athletic director by Brent School,
Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific
term for its existence, five (5) years, i.e., from July 18, 1971, the date of
execution of the agreement, to July 17, 1976. Subsequent subsidiary
agreements dated March 15, 1973, August 28, 1973, and September 14,
1974 reiterated the same terms and conditions, including the expiry date, as
those contained in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated period, or more
precisely on April 20,1976, Alegre was given a copy of the report filed by
Brent School with the Department of Labor advising of the termination of his
services effective on July 16, 1976. The stated ground for the termination
was "completion of contract, expiration of the definite period of employment."
And a month or so later, on May 26, 1976, Alegre accepted the amount of
P3,177.71, and signed a receipt therefor containing the phrase, "in full
payment of services for the period May 16, to July 17, 1976 as full payment
of contract."
However, at the investigation conducted by a Labor Conciliator of said report
of termination of his services, Alegre protested the announced termination of
his employment. He argued that although his contract did stipulate that the
same would terminate on July 17, 1976, since his services were necessary
and desirable in the usual business of his employer, and his employment had
lasted for five years, he had acquired the status of a regular employee and
could not be removed except for valid cause. 6 The Regional Director
employment (not a report of termination), and accepting the recommendation
of the Labor Conciliator, refused to give such clearance and instead required
the reinstatement of Alegre, as a "permanent employee," to his former
position without loss of seniority rights and with full back wages. The Director
pronounced "the ground relied upon by the respondent (Brent) in terminating
the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442,"
and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the
Bureau of Private Schools. 7
Brent School filed a motion for reconsideration. The Regional Director denied
the motion and forwarded the case to the Secretary of Labor for review. 8 The
latter sustained the Regional Director. 9 Brent appealed to the Office of the
President. Again it was rebuffed. That Office dismissed its appeal for lack of
merit and affirmed the Labor Secretary's decision, ruling that Alegre was a
permanent employee who could not be dismissed except for just cause, and
expiration of the employment contract was not one of the just causes
provided in the Labor Code for termination of services. 10
The School is now before this Court in a last attempt at vindication. That it
will get here.
The employment contract between Brent School and Alegre was executed
on July 18, 1971, at a time when the Labor Code of the Philippines (P.D.
442) had not yet been promulgated. Indeed, the Code did not come into
effect until November 1, 1974, some three years after the perfection of the
employment contract, and rights and obligations thereunder had arisen and
been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt
whatever about the validity of term employment. It was impliedly but
nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute provided that—
In cases of employment, without a definite period, in a
commercial, industrial, or agricultural establishment or
enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just
cause in the case of an employee by serving written notice
on the employer at least one month in advance, or in the
case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every
year of service of the employee, whichever is longer, a
fraction of at least six months being considered as one whole
year.
 The employer, upon whom no such notice was served in
case of termination of employment without just cause, may
hold the employee liable for damages.
The employee, upon whom no such notice was served in
case of termination of employment without just cause, shall
be entitled to compensation from the date of termination of
his employment in an amount equivalent to his salaries or
wages corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term
employment. RA 1787 also enumerated what it considered to be just causes
for terminating an employment without a definite period, either by the
employer or by the employee without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment
without a fixed period, and also implicitly acknowledged the propriety of
employment with a fixed period. Its Article 302 provided that —
In cases in which the contract of employment does not have
a fixed period, any of the parties may terminate it, notifying
the other thereof one month in advance.
The factor or shop clerk shall have a right, in this case, to the
salary corresponding to said month.
The salary for the month directed to be given by the said Article 302
of the Code of Commerce to the factor or shop clerk, was known as
the mesada (from mes, Spanish for "month"). When Article 302
(together with many other provisions of the Code of Commerce) was
repealed by the Civil Code of the Philippines, Republic Act No. 1052
was enacted avowedly for the precise purpose of reinstating
the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18,
1949 and became effective on August 30,1950, itself deals with obligations
with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of
labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII,
respectively, of Book IV. No prohibition against term-or fixed-period
employment is contained in any of its articles or is otherwise deducible
therefrom.
It is plain then that when the employment contract was signed between Brent
School and Alegre on July 18, 1971, it was perfectly legitimate for them to
include in it a stipulation fixing the duration thereof Stipulations for a term
were explicitly recognized as valid by this Court, for instance, in Biboso
v. Victorias Milling Co., Inc., promulgated on March 31,
1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on
December 29, 1983. 14 The Thompson case involved an executive who had
been engaged for a fixed period of three (3) years. Biboso involved teachers
in a private school as regards whom, the following pronouncement was
made:
What is decisive is that petitioners (teachers) were well
aware an the time that their tenure was for a limited duration.
Upon its termination, both parties to the employment
relationship were free to renew it or to let it lapse. (p. 254)
Under American law 15 the principle is the same. "Where a contract specifies
the period of its duration, it terminates on the expiration of such period." 16 "A
contract of employment for a definite period terminates by its own terms at
the end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period employment
contracts under the Labor Code (Presidential Decree No. 442), which went
into effect on November 1, 1974. The Code contained explicit references
to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment
began to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally
stated that the "termination of employment of probationary employees
and those employed WITH A FIXED PERIOD shall be subject to such
regulations as the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of the employee to be
secured in their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate
"an employment without a definite period."
And Article 319 undertook to define "employment without a fixed period" in
the following manner: 18
An employment shall be deemed to be without a definite
period for purposes of this Chapter where the employee has
been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for
a specific project or undertaking the completion or
termination of which has been determined at the time of the
 engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is
for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or
not a voluntary agreement on a fixed term or period would be valid where the
employee "has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer." The
definition seems a non sequitur. From the premise — that the duties of an
employee entail "activities which are usually necessary or desirable in the
usual business or trade of the employer the" — conclusion does not
necessarily follow that the employer and employee should be forbidden to
stipulate any period of time for the performance of those activities. There is
nothing essentially contradictory between a definite period of an employment
contract and the nature of the employee's duties set down in that contract as
being "usually necessary or desirable in the usual business or trade of the
employer." The concept of the employee's duties as being "usually necessary
or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, the
decisive determinant in term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the
parties for the commencement and termination of their employment
relationship, a day certain being understood to be "that which must
necessarily come, although it may not be known
when." 19 Seasonalemployment, and employment for a particular project are
merely instances employment in which a period, where not expressly set
down, necessarily implied.
Of course, the term — period has a definite and settled signification. It
means, "Length of existence; duration. A point of time marking a termination
as of a cause or an activity; an end, a limit, a bound; conclusion; termination.
A series of years, months or days in which something is completed. A time of
definite length. . . . the period from one fixed date to another fixed date . .
." 20 It connotes a "space of time which has an influence on an obligation as a
result of a juridical act, and either suspends its demandableness or produces
its extinguishment." 21 It should be apparent that this settled and familiar
notion of a period, in the context of a contract of employment, takes no
account at all of the nature of the duties of the employee; it has absolutely no
relevance to the character of his duties as being "usually necessary or
desirable to the usual business of the employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite
period" and "regular" employment were amended by Presidential Decree No.
850, effective December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was
altered by eliminating the reference to persons "employed with a fixed
period," and was renumbered (becoming Article 271). The article 22 now
reads:
. . . Probationary employment.—Probationary employment
shall not exceed six months from the date the employee
started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an
employee who has been engaged in a probationary basis
may be terminated for a just cause or when he fails to qualify
as a regular employee in accordance with reasonable
standards made known by the employer to the employee at
the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a
regular employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
period," supra) by (a) deleting mention of employment with a fixed or definite
period, (b) adding a general exclusion clause declaring irrelevant written or
oral agreements "to the contrary," and (c) making the provision treat
exclusively of "regular" and "casual" employment. As revised, said article,
renumbered 270, 23 now reads:
. . . Regular and Casual Employment.—The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be employed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to he casual if it is not
covered by the preceding paragraph: provided,that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
 The first paragraph is identical to Article 319 except that, as just
mentioned, a clause has been added, to wit: "The provisions of
written agreement to the contrary notwithstanding and regardless of
the oral agreements of the parties . . ." The clause would appear to
be addressed inter alia to agreements fixing a definite period for
employment. There is withal no clear indication of the intent to deny
validity to employment for a definite period. Indeed, not only is the
concept of regular employment not essentially inconsistent with
employment for a fixed term, as above pointed out, Article 272 of the
Labor Code, as amended by said PD 850, still impliedly
acknowledged the propriety of term employment: it listed the "just
causes" for which "an employer may terminate employment without a
definite period," thus giving rise to the inference that if the
employment be with a definite period, there need be no just cause for
termination thereof if the ground be precisely the expiration of the
term agreed upon by the parties for the duration of such
employment.
Still later, however, said Article 272 (formerly Article 321) was further
amended by Batas Pambansa Bilang 130, 24 to eliminate altogether
reference to employment without a definite period. As lastly amended, the
opening lines of the article (renumbered 283), now pertinently read: "An
employer may terminate an employment for any of the following just causes:
. . . " BP 130 thus completed the elimination of every reference in the Labor
Code, express or implied, to employment with a fixed or definite period or
term.
It is in the light of the foregoing description of the development of the
provisions of the Labor Code bearing on term or fixed-period employment
that the question posed in the opening paragraph of this opinion should now
be addressed. Is it then the legislative intention to outlaw stipulations in
employment contracts laying down a definite period therefor? Are such
stipulations in essence contrary to public policy and should not on this
account be accorded legitimacy?
On the one hand, there is the gradual and progressive elimination of
references to term or fixed-period employment in the Labor Code, and the
specific statement of the rule 25 that—
. . . Regular and Casual Employment.— The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be employed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: provided,that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
There is, on the other hand, the Civil Code, which has always recognized,
and continues to recognize, the validity and propriety of contracts and
obligations with a fixed or definite period, and imposes no restraints on the
freedom of the parties to fix the duration of a contract, whatever its object, be
it specie, goods or services, except the general admonition against
stipulations contrary to law, morals, good customs, public order or public
policy. 26 Under the Civil Code, therefore, and as a general proposition, fixed-
term employment contracts are not limited, as they are under the present
Labor Code, to those by nature seasonal or for specific projects with pre-
determined dates of completion; they also include those to which the parties
by free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contracts which may be
neither for seasonal work nor for specific projects, but to which a fixed term is
an essential and natural appurtenance: overseas employment contracts, for
one, to which, whatever the nature of the engagement, the concept of regular
employment will all that it implies does not appear ever to have been applied,
Article 280 of the Labor Code not withstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by practice or
tradition rotated among the faculty members, and where fixed terms are a
necessity, without which no reasonable rotation would be possible. Similarly,
despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister
of Labor 27 implicitly recognize that certain company officials may be elected
for what would amount to fixed periods, at the expiration of which they would
have to stand down, in providing that these officials," . . . may lose their jobs
as president, executive vice-president or vice-president, etc. because the
stockholders or the board of directors for one reason or another did not re-
elect them."
There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down
or disregarded as contrary to public policy, morals, etc. But where no such
intent to circumvent the law is shown, or stated otherwise, where the reason
for the law does not exist, e.g., where it is indeed the employee himself who
insists upon a period or where the nature of the engagement is such that,
without being seasonal or for a specific project, a definite date of termination
is a sine qua non, would an agreement fixing a period be essentially evil or
illicit, therefore anathema? Would such an agreement come within the scope
of Article 280 which admittedly was enacted "to prevent the circumvention of
the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article
280 of the Labor Code, under a narrow and literal interpretation, not only fails
to exhaust the gamut of employment contracts to which the lack of a fixed
period would be an anomaly, but would also appear to restrict, without
reasonable distinctions, the right of an employee to freely stipulate with his
employer the duration of his engagement, it logically follows that such a
literal interpretation should be eschewed or avoided. The law must be given
a reasonable interpretation, to preclude absurdity in its application. Outlawing
the whole concept of term employment and subverting to boot the principle of
freedom of contract to remedy the evil of employer's using it as a means to
prevent their employees from obtaining security of tenure is like cutting off
the nose to spite the face or, more relevantly, curing a headache by lopping
off the head.
It is a salutary principle in statutory construction that there
exists a valid presumption that undesirable consequences
were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is
favored, which will avoid all objecionable mischievous,
undefensible, wrongful, evil and injurious consequences. 28
Nothing is better settled than that courts are not to give
words a meaning which would lead to absurd or
unreasonable consequences. That s a principle that does
back to In re Allen decided oil October 27, 1903, where it
was held that a literal interpretation is to be rejected if it
would be unjust or lead to absurd results. That is a strong
argument against its adoption. The words of Justice Laurel
are particularly apt. Thus: "The fact that the construction
placed upon the statute by the appellants would lead to an
absurdity is another argument for rejecting it. . . ." 29
. . . We have, here, then a case where the true intent of the
law is clear that calls for the application of the cardinal rule of
statutory construction that such intent of spirit must prevail
over the letter thereof, for whatever is within the spirit of a
statute is within the statute, since adherence to the letter
would result in absurdity, injustice and contradictions and
would defeat the plain and vital purpose of the statute. 30
Accordingly, and since the entire purpose behind the development of
legislation culminating in the present Article 280 of the Labor Code clearly
appears to have been, as already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should
be construed to refer to the substantive evil that the Code itself has singled
out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment
was agreed upon knowingly and voluntarily by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law would be
made to apply to purposes other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its effects and apt to lead to
absurd and unintended consequences.
Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of
an agreed period of employment as still good rule—a rule reaffirmed in the
recent case of Escudero vs. Office of the President (G.R. No. 57822, April
26, 1989) where, in the fairly analogous case of a teacher being served by
her school a notice of termination following the expiration of the last of three
successive fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses
sight of the fact that her employment was probationary,
contractual in nature, and one with a definitive period. At the
expiration of the period stipulated in the contract, her
appointment was deemed terminated and the letter informing
her of the non-renewal of her contract is not a condition
sine qua non before Reyes may be deemed to have ceased
in the employ of petitioner UST. The notice is a mere
reminder that Reyes' contract of employment was due to
expire and that the contract would no longer be renewed. It
is not a letter of termination. The interpretation that the notice
is only a reminder is consistent with the court's finding
in Labajo supra. ...32
Paraphrasing Escudero, respondent Alegre's employment was terminated
upon the expiration of his last contract with Brent School on July 16, 1976
without the necessity of any notice. The advance written advice given the
Department of Labor with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of termination, nor an
application for clearance to terminate which needed the approval of the
Department of Labor to make the termination of his services effective. In any
case, such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is
REVERSED and SET ASIDE. Respondent Alegre's contract of employment
with Brent School having lawfully terminated with and by reason of the
expiration of the agreed term of period thereof, he is declared not entitled to
reinstatement and the other relief awarded and confirmed on appeal in the
proceedings below. No pronouncement as to costs.
SO ORDERED.
G.R. No. 120969 January 22, 1998
ALEJANDRO MARAGUINOT, JR. and PAULINO
ENERO, Petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I.
RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FIMS, Respondents.
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the
Rules of Court, petitioners seek to annul the 10 February 1995
Decision 1 of the National Labor Relations Commission (hereafter
NLRC), and its 6 April 1995 Resolution 2 denying the motion to
reconsider the former in NLRC-NCR-CA No. 006195-94. The
decision reversed that of the Labor Arbiter in NLRC-NCR-Case No.
00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was
employed by private respondents on 18 July 1989 as part of the
filming crew with a salary of P375.00 per week. About four months
later, he was designated Assistant Electrician with a weekly salary
of P400.00, which was increased to P450.00 in May 1990. In June
1991, he was promoted to the rank of Electrician with a weekly
salary of P475.00, which was increased to P539.00 in September
1991.
Petitioner Paulino Enero, on his part, claims that private
respondents employed him in June 1990 as a member of the
shooting crew with a weekly salary of P375.00, which was
increased to P425.00 in May 1991, then to P475.00 on 21
December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging
movie equipment in the shooting area as instructed by the
cameraman, returning the equipment to Viva Films' warehouse,
assisting in the "fixing" of the lighting system, and performing
other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their
supervisors, Mrs. Alejandria Cesario, to facilitate their request that
private respondents adjust their salary in accordance with the
minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their
salary only if they signed a blank employment contract. As
petitioners refused to sign, private respondents forced Enero to go
on leave in June 1992, then refused to take him back when he
reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but
was returned on 22 June 1992. He was again asked to sign a blank
employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. 5 Petitioners
thus sued for illegal dismissal 6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films
(hereafter VIVA) is the trade name of Viva Productions, Inc., and
that it is primarily engaged in the distribution and exhibition of
movies - but not in the business of making movies; in the same
vein, private respondent Vic del Rosario is merely an executive
producer, i.e., the financier who invests a certain sum of money for
the production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called
"producers" - also referred to as "associate producers" 8 - to
"produce" or make movies for private respondents; and contend
that petitioners are project employees of the association producers
who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private
respondents.
Private respondents further contend that it was the associate
producer of the film "Mahirap Maging Pogi," who hired petitioner
Maraguinot. The movie shot from 2 July up to 22 July 1992, and it
was only then that Maraguinot was released upon payment of his
last salary, as his services were no longer needed. Anent petitioner
Enero, he was hired for the movie entitled "Sigaw ng Puso," later
re-tired "Narito and Puso." He went on vacation on 8 June 1992,
and by the time he reported for work on 20 July 1992, shooting for
the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter found
as follows:
On the first issue, this Office rules that complainants are the
employees of the respondents. The producer cannot be considered
as an independent contractor but should be considered only as a
labor-only contractor and as such, acts as a mere agent of the real
employer, the herein respondent. Respondents even failed to name
and specify who are the producers. Also, it is an admitted fact that
the complainants received their salaries from the respondents. The
case cited by the respondents, Rosario Brothers, Inc. v. Ople, 131
SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are
necessary and essential to the business of the respondents, that of
movie-making. Complainant Maraguinot worked as an electrician
while complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993,
decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that
complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their
former positions without loss [of] seniority rights and pay their
backwages starting July 21, 1992 to December 31, 1993
temporarily computed in the amount of P38,000.00 for complainant
Paulino Enero and P46,000.00 for complainant Alejandro
Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to
ten (10%) and/or P8,400.00 on top of the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-
CA No. 006195-94). In its decision 12 of 10 February 1995, the
NLRC found the following circumstances of petitioners' work
"clearly established:"
1. Complainants [petitioners herein] were hired for specific movie
projects and their employment was co-terminus with each movie
project the completion/termination of which are pre-determined,
such fact being made known to complainants at the time of their
engagement.
xxx xxx xxx
2 Each shooting unit works on one movie project at a time. And the
work of the shooting units, which work independently from each
other, are not continuous in nature but depends on the availability
of movie projects.
3. As a consequence of the non-continuous work of the shooting
units, the total working hours logged by complainants in a month
show extreme variations. . . For instance, complainant Maraguinot
worked for only 1.45 hours in June 1991 but logged a total
of 183.25 hours in January 1992. Complainant Enero logged a total
of only 31.57 hours in September 1991 but worked
for 183.35 hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of
complainants on a daily basis. Complainant Maraguinot was
supposed to report on 05 August 1991 but reported only on 30
August 1991, or a gap of 25 days. Complainant Enero worked on
10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants'
work explain the lump sum payment for complainants' services for
each movie project. Hence, complainants were paid a standard
weekly salary regardless of the number of working days and hours
they logged in. Otherwise, if the principle of "no work no pay" was
strictly applied, complainants' earnings for certain weeks would be
very negligible.
6. Respondents also alleged that complainants were not prohibited
from working with such movie companies like Regal, Seiko and FPJ
Productions whenever they are not working for the independent
movie producers engaged by respondents . . . This allegation was
never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that
these circumstances, taken together, indicated that complainants
(herein petitioners) were "project employees."
After their motion for reconsideration was denied by the NLRC in its
Resolution 13 of 6 April 1995, petitioners filed the instant petition,
claiming that the NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in: (1) finding that
petitioners were project employees; (2) ruling that petitioners were
not illegally dismissed; and (3) reversing the decision of the Labor
Arbiter.
To support their claim that they were regular (and not project)
employees of private respondents, petitioners cited their
performance of activities that were necessary or desirable in the
usual trade or business of private respondents and added that their
work was continuous, i.e., after one project was completed they
were assigned to another project. Petitioners thus considered
themselves part of a work pool from which private respondents
drew workers for assignment to different projects. Petitioners
lamented that there was no basis for the NLRC's conclusion that
they were project employees, while the associate producers were
independent contractors; and thus reasoned that as regular
employees, their dismissal was illegal since the same was premised
on a "false cause," namely, the completion of a project, which was
not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress
that their evidence supports the view that petitioners are project
employees; point to petitioners' irregular work load and work
schedule; emphasize the NLRC's finding that petitioners never
controverted the allegation that they were not prohibited from
working with other movie companies; and ask that the facts be
viewed in the context of the peculiar characteristics of the movie
industry.
The Office of the Solicitor General (OSG) is convinced that this
petition is improper since petitioners raise questions of fact,
particularly, the NLRC's finding that petitioners were project
employees, a finding supported by substantial evidence; and
submits that petitioners' reliance on Article 280 of the Labor Code
to support their contention that they should be deemed regular
employees is misplaced, as said section "merely distinguishes
between two types of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an
employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they
were hired not for one project, but for a series of projects, they
should be deemed regular employees. Citing Mamansag
v. NLRC, 14 the OSG asserts that what matters is that there was a
time-frame for each movie project made known to petitioners at
the time of their hiring. In closing, the OSG disagrees with
petitioners' claim that the NLRC's classification of the movie
producers as independent contractors had no basis in fact and in
law, since, on the contrary, the NLRC "took pains in explaining its
basis" for its decision.
As regards the propriety of this action, which the Office of the
Solicitor General takes issue with, we rule that a special civil action
for certiorari under Rule 65 of the Rules of Court is the proper
remedy for one who complains that the NLRC acted in total
disregard of evidence material to or decisive of the
controversy. 15 In the instant case, petitioners allege that the
NLRC's conclusions have no basis in fact and in law, hence the
petition may not be dismissed on procedural or jurisdictional
grounds.
The judicious resolution of this case hinges upon, first, the
determination of whether an employer-employee relationship
existed between petitioners and private respondents or any one of
private respondents. If there was none, then this petition has no
merit; conversely, if the relationship existed, then petitioners could
have been unjustly dismissed.
A related question is whether private respondents are engaged in
the business of making motion pictures. Del Rosario is necessarily
engaged in such business as he finances the production of movies.
VIVA, on the other hand, alleges that it does not "make" movies,
but merely distributes and exhibits motion pictures. There being no
further proof to this effect, we cannot rely on this self-serving
denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is
engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that
petitioners are project employees of associate producers who, in
turn, act as independent contractors. It is settled that the
contracting out of labor is allowed only in case of job contracting.
Section 8, Rule VIII, Book III of the Omnibus Rules Implementing
the Labor Code describes permissible job contracting in this wise:
Sec. 8. Job contracting. - There is job contracting permissible
under the Code if the following conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the
results thereof; and
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they
must then be engaged in the business of making motion pictures.
As such, and to be a job contractor under the preceding
description, associate producers must have tools, equipment,
machinery, work premises, and other materials necessary to make
motion pictures. However, the associate producers here have none
of these. Private respondents' evidence reveals that the movie-
making equipment are supplied to the producers and owned by
VIVA. These include generators, 16 cables and wooden
platforms, 17cameras and "shooting equipment;" 18 in fact, VIVA
likewise owns the trucks used to transport the equipment. 19 It is
thus clear that the associate producer merely leases the equipment
from VIVA. 20Indeed, private respondents' Formal Offer of
Documentary Evidence stated one of the purposes of Exhibit "148"
as:
To prove further that the independent Producers rented Shooting
Unit No. 2 from Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the
different independent Producers who rented Shooting Unit No. 3
with a fixed budget and time-frame of at least 30 shooting days or
45 days whichever comes first. 22
Private respondent further narrated that VIVA's generators broke
down during petitioners' last movie project, which forced the
associate producer concerned to rent generators, equipment and
crew from another company. 23 This only shows that the associate
producer did not have substantial capital nor investment in the
form of tools, equipment and other materials necessary for making
a movie. Private respondents in effect admit that their producers,
especially petitioners' last producer, are not engaged in permissible
job contracting.
If private respondents insist that the associate producers are labor
contractors, then these producers can only be "labor-only"
contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor. - . . .
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to
the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule VIII,
Book III of the Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. - (a) Any person who undertakes to
supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials;
and
(2) The workers recruited and placed by such person are
performing activities which are directly related to the principal
business or operations of the employer in which workers are
habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the
person or entity engaged in the same a mere agent or intermediary
of the direct employer. But even by the preceding standards, the
associate producers of VIVA cannot be considered labor-only
contractors as they did not supply, recruit nor hire the workers. In
the instant case, it was Juanita Cesario, Shooting Unit Supervisor
and an employee of VIVA, who recruited crew members from an
"available group of free-lance workers which includes the
complainants Maraguinot and Enero." 24 And in their Memorandum,
private respondents declared that the associate producer "hires the
services of . . . 6) camera crew which includes (a) cameraman; (b)
the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the
associate producers did not supply the workers required by the
movie project.
The relationship between VIVA and its producers or associate
producers seems to be that of agency, 26 as the latter make movies
on behalf of VIVA, whose business is to "make" movies. As such,
the employment relationship between petitioners and producers is
actually one between petitioners and VIVA, with the latter being
the direct employer.
The employer-employee relationship between petitioners and VIVA
can further be established by the "control test." While four
elements are usually considered in determining the existence of an
employment relationship, namely: (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 of the
employee's conduct, the most important element is the employer's
control of the employee's conduct, not only as to the result of the
work to be done but also as to the means and methods to
accomplish the same. 27 These four elements are present here. In
their position paper submitted to the Labor Arbiter, private
respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is
given by the company, for as long as the ultimate finish[ed]
product is acceptable to the company . . .
The ensure that qualify films are produced by the PRODUCER who
is an independent contractor, the company likewise employs a
Supervising PRODUCER, a Project accountant and a Shooting unit
supervisor. The Company's Supervising PRODUCER is Mr. Eric
Cuatico, the Project accountant varies from time to time, and the
Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the
company and of the Executive Producer to monitor the progress of
the PRODUCER's work accomplishment. He is there usually in the
field doing the rounds of inspection to see if there is any problem
that the PRODUCER is encountering and to assist in threshing out
the same so that the film project will be finished on schedule. He
supervises about 3 to 7 movie projects simultaneously [at] any
given time by coordinating with each film "PRODUCER". The Project
Accountant on the other hand assists the PRODUCER in monitoring
the actual expenses incurred because the company wants to insure that members of the shooting crew except the driver are project
that any additional budget requested by the PRODUCER is really employees of the Independent Producers" 29 reads as follows:
justified and warranted especially when there is a change of
original plans to suit the tast[e] of the company on how a certain VIVA PRODUCTIONS, INC.
scene must be presented to make the film more interesting and 16 Sct. Albano St.
more commercially viable. (emphasis supplied). Diliman, Quezon City

VIVA's control is evident in its mandate that the end result must be
a "quality film acceptable to the company." The means and
methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be
justified; certain scenes are subject to change to suit the taste of
the company; and the Supervising Producer, the "eyes and ears" of
VIVA and del Rosario, intervenes in the movie-making process by
assisting the associate producer in solving problems encountered in
making the film.
It may not be validly argued then that petitioners are actually
subject to the movie director's control, and not VIVA's direction.
The director merely instructs petitioners on how to better comply
with VIVA's requirements to ensure that a quality film is completed
within schedule and without exceeding the budget. At bottom, the
director is akin to a supervisor who merely oversees the activities
of rank-and-file employees with control ultimately resting on the
employer.
PEDRO NICOLAS Date: June 15, 1992
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project
entitled "MANAMBIT". This appointment shall be effective upon the
commencement of the said project and shall continue to be
effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly
compensation of P812.50.
During the term of this appointment you shall comply with the
duties and responsibilities of your position as well as observe the
rules and regulations promulgated by your superiors and by Top
Management.

Moreover, appointment slips 28

issued to all crew members state: Very truly yours,

During the term of this appointment you shall comply with the (an illegible signature)
duties and responsibilities of your position as well as observe the
rules and regulations promulgated by your superiors and by Top CONFORME:
Management.
_________________
The words "supervisors" and "Top Management" can only refer to
the "supervisors" and "Top Management" of VIVA. By commanding Name of appointee
crew members to observe the rules and regulations promulgated
by VIVA, the appointment slips only emphasize VIVA's control over Signed in the presence of:
petitioners.
___________________
Aside from control, the element of selection and engagement is
likewise present in the instant case and exercised by VIVA. A Notably, nowhere in the appointment slip does it appear that it was
sample appointment slip offered by private respondents "to prove the producer or associate producer who hired the crew members;
moreover, it is VIVA's corporate name which appears on the
FILM DATE DATE ASSOCIATE
heading of the appointment slip. What likewise tells against VIVA is
STARTED COMPLETED PRODUCER
that it paid petitioners' salaries as evidenced by vouchers,
containing VIVA's letterhead, for that purpose. 30

All the circumstances indicate an employment relationship between LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG
petitioners and VIVA alone, thus the inevitable conclusion is that
petitioners are employees only of VIVA.
PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL
The next issue is whether petitioners were illegally dismissed.
ROCKY & ROLLY 2/13/90 3/29/90 M. ONG
Private respondents contend that petitioners were project
employees whose employment was automatically terminated with
the completion of their respective projects. Petitioners assert that PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL
they were regular employees who were illegally dismissed.
ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG
It may not be ignored, however, that private respondents expressly
admitted that petitioners were part of a work pool; 31 and, while NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING
petitioners were initially hired possibly as project employees, they
had attained the status of regular employees in view if VIVA's BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL
conduct.
BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL
A project employee or a member of a work pool may acquire the
status of a regular employee when the following concur: HINUKAY KO NA ANG LIBINGAN 9/6/90 10/20/90 JUN CHING
MO
1) There is a continuous rehiring of project employees even after
cessation of a project; 32 and MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA

2) The tasks performed by the alleged "project employee" are vital,

M. SINO KA MAN (2nd contract) 12/9/90 1/22/91 SANDY S
necessary and indispensable to the usual business or trade of the
employer. 33 NOEL JUICO 1/29/91 3/14/90 JUN CHING

However, the length of time during which the employee was NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING
continuously re-hired is not controlling, but merely serves as a
badge of regular employment. 34
ROBIN GOOD 5/7/91 6/20/91 M. ONG

In the instant case, the evidence on record shows that petitioner

UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING
Enero was employed for a total of two (2) years and engaged in at
least eighteen (18) projects, while petitioner Maraguinot was
KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.
employed for some three (3) years and worked on at least twenty-
three (23) projects. 35
Moreover, as petitioners' tasks involved,
among other chores, the loading, unloading and DARNA 10/4/91 11/18/91 E. MANUEL
ARNA (addl. 1/2) 11/20/91 12/12/91 HUMANAP KA NG PANGET
E. MANUEL 1/20/91 3/5/91 EDITH MANUEL

H. PANGET(2nd contract) 3/10/91 4/23/91 E. MANUEL

AGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT
B. MANALAC (2nd contract) 5/22/91 7/5/91 M. ONG
. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG

IRAM NA MUKHA 3/15/92 4/29/92 M. ONG PITONG GAMOL 8/30/91 10/13/91 M. ONG

P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG

IRAM (2nd contract) 5/1/92 6/14/92 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
AHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA
ALABANG GIRLS (1/2 contract) 3/4/92 3/26/92 M. ONG

IGAW NG PUSO 7/1/92 8/4/92 M. ONG BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT

UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT

IGAW (addl. 1/2) 8/15/92 9/5/92 M. ONG
UTOL (addl. 1/2 contract) 5/7/92 5/29/92 B. GRIMALT
GAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA

MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG

While Maraguinot was a member of Shooting Unit III, which made
the following movies (Annex "4-A" of Respondents' Position Paper;
OR, 29): arranging of movie equipment in the shooting area as instructed by
the cameramen, returning the equipment to the Viva Films'
LM DATE DATE ASSOCIATE warehouse, and assisting in the "fixing" of the lighting system, it
STARTED COMPLETED PRODUCER may not be gainsaid that these tasks were vital, necessary and
indispensable to the usual business or trade of the employer. As
UMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING regards the underscored phrase, it has been held that this is
TRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA ascertained by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its
SAK (2nd contract) 3/14/90 4/27/90 JUN CHING entirety. 36
KABAYO (Addl 1/2 contract) 4/21/90 5/13/90 RUTH GRUTA
A recent pronouncement of this Court anent project or work pool
ADBOY 6/15/90 7/29/90 EDITH MANUEL employees who had attained the status of regular employees
proves most instructive:
ADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL

NAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA The denial by petitioners of the existence of a work pool in the
company because their projects were not continuous is amply
B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA belied by petitioners themselves who admit that: . . .
B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
A work pool may exist although the workers in the pool do not
OYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall
be available when called to report of a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be
applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.
Clearly, the continuous rehiring of the same set of employees
within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various
projects.
In a final attempt to convince the Court that private respondents
were indeed project employees, petitioners point out that the
workers were not regularly maintained in the payroll and were free
to offer their services to other companies when there were no on-
going projects. This argument however cannot defeat the workers'
status of regularity. We apply by analogy the vase of Industrial-
Commercial-Agricultural Workers Organization v. CIR [16 SCRA
526, 567-568 (1966)] which deals with regular seasonal
employees. There we held: . . .
Truly, the cessation of construction activities at the end of every
project is a foreseeable suspension of work. Of course, no
compensation can be demanded from the employer because the
stoppage of operations at the end of a project and before the start
of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the
employment relation is not severed by merely being
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)]
The employees are, strictly speaking, not separated from services
but merely on leave of absence without pay until they are
reemployed. Thus we cannot affirm the argument that non-
payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project
employment. 37 (emphasis supplied)
While Lao admittedly involved the construction industry, to which
Policy Instruction No. 20/Department Order No. 19 38 regarding
work pools specifically applies, there seems to be no impediment to
applying the underlying principles to industries other than the
construction industry. 39Neither may it be argued that a substantial
distinction exists between the projects undertaken in the
construction industry and the motion picture industry. On the
contrary, the raison d' etre of both industries concern projects with
a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly
burdens an employer by imposing a duty to re-hire a project
employee even after completion of the project for which he was
hired. The import of this decision is not to impose a positive and
sweeping obligation upon the employer to re-hire project
employees. What this decision merely accomplishes is a judicial
recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool
employees who perform tasks necessary or desirable to the
employer's usual business or trade. Let it not be said that this
decision "coddles" labor, for as Lao has ruled, project or work pool
employees who have gained the status of regular employees are
subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not
receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall
be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be
applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the
constitutional policy of strengthening the labor sector, 40 but, we
stress, not at the expense of management. Lest it be
misunderstood, this ruling does not mean that simply because an
employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee.
All that we hold today is that once a project or work pool employee
has been: (1) continuously, as opposed to intermittently, re-hired
by the same employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of the Labor
Code and jurisprudence. To rule otherwise would allow
circumvention of labor laws in industries not falling within the
ambit of Policy Instruction No. 20/Department Order No. 19, hence
allowing the prevention of acquisition of tenurial security by project
or work pool employees who have already gained the status of
regular employees by the employer's conduct.
In closing then, as petitioners had already gained the status of
regular employees, their dismissal was unwarranted, for the cause
invoked by private respondents for petitioners' dismissal, viz.:
completion of project, was not, as to them, a valid cause for
dismissal under Article 282 of the Labor Code. As such, petitioners
are now entitled to back wages and reinstatement, without loss of
seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of
work" and "no pay" between the end of one project and the start of
a new one, in computing petitioners' back wages, the amounts
corresponding to what could have been earned during the periods
from the date petitioners were dismissed until their reinstatement
when petitioners' respective Shooting Units were not undertaking
any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when
Republic Act No. 6715 was already in effect. Pursuant to Section 34
thereof which amended Section 279 of the Labor Code of the
Philippines and Bustamante v. NLRC, 42 petitioners are entitled to
receive full back wages from the date of their dismissal up to the
time of their reinstatement, without deducting whatever earnings
derived elsewhere during the period of illegal dismissal, subject
however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed
decision of the National Labor Relations Commission in NLRC NCR
CA No. 006195-94 dated 01 February 1995, as well as its
Resolution dated 6 April 1995, are hereby ANNULLED and SET
ASIDE for having been rendered with grave abuse of discretion,
and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-
03994-92 is REINSTATED, subject, however, to the modification
above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 164315 July 3, 2009
ALCATEL PHILIPPINES, INC., and YOLANDA DELOS
REYES, Petitioners,
vs.
RENE R. RELOS, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 31 March 2004 Decision2 and
14 June 2004 Resolution3 of the Court of Appeals in CA-G.R. SP No. 75965.
In its 31 March 2004 Decision, the Court of Appeals set aside the 20
February 2002 Decision4 of the National Labor Relations Commission
(NLRC) and reinstated the 24 September 1998 Decision5 of the Labor Arbiter
which declared respondent Rene R. Relos (respondent) a regular employee
of petitioner Alcatel Philippines, Inc. (Alcatel). In its 14 June 2004 Resolution,
the Court of Appeals denied the motion for reconsideration of Alcatel and
petitioner Yolanda Delos Reyes (petitioner Delos Reyes).
The Facts
Alcatel is a domestic corporation primarily engaged in the business of
installation and supply of telecommunications equipment. Petitioner Delos
Reyes was a former Administrative Officer of Alcatel.
On 4 January 1988, Alcatel offered respondent "temporary employment as
Estimator/Draftsman – Civil Works to assist in the preparation of manholes
and conduit design for the proposal preparation for PLDT X-5 project for the
period 4 January 1988 to 28 February 1988."6 On 1 March 1988, Alcatel
again offered respondent "temporary employment as Estimator/Draftsman to
assist in the PLDT’s X-4 IOT project for the period 1 March 1988 to 30 April
1988."7
Subsequently, Alcatel undertook the PLDT 1342 project (project) which
involved the installation of microwave antennas and towers in Eastern
Visayas and Eastern Mindanao for the Philippine Long Distance Company.
On 1 February 1991, Alcatel offered respondent "temporary employment as
Civil Works Inspector, to assist in the implementation of the PLDT 1342
Project, for the period 1 February 1991 to 31 March 1991."8 Upon the
expiration of his contract, respondent was again offered temporary
employment this time as Civil Works Engineer from 1 April 1991 to 30
September 1991.9 Respondent was offered temporary employment in the
same capacity five more times from 1 October 1991 to 31 July 1992.10 Then,
on 1 August 1992, Alcatel hired respondent as "project employee for the
PLDT 1342 project to work as Civil Engineer from the period of 1 August
1992 to 31 July 1993."11 Alcatel renewed respondent’s contract twice from 1
August 1993 to 31 December 1993.12 In a letter dated 22 December
1993,13 Alcatel informed respondent that the civil works portion of the project
was near completion; however, the remaining works encountered certain
delays and had not been completed as scheduled. Alcatel then extended
respondent’s employment for another three months or until 31 March 1994.
Thereafter, Alcatel employed respondent as a Site Inspector until 31
December 1995.14
On 11 December 1995, Alcatel informed respondent that the project would
be completed on 31 December 1995 and that his contract with Alcatel would
expire on the same day.15 Alcatel asked respondent to settle all his
accountabilities with the company and advised him that he would be called if
it has future projects that require his expertise.
In March 1997, respondent filed a complaint for illegal dismissal, separation
pay, unpaid wages, unpaid overtime pay, damages, and attorney’s fees
against Alcatel. Respondent alleged that he was a regular employee of
Alcatel and that he was dismissed during the existence of the project.
In its 24 September 1998 Decision, the Labor Arbiter declared that
respondent was a regular employee of Alcatel. The Labor Arbiter also ruled
that respondent was illegally dismissed and, therefore, entitled to back
wages. The Labor Arbiter’s Decision provides:
WHEREFORE, premises considered, judgment is hereby rendered, finding
that [sic] complainant to be a regular employee and finding further that [sic]
complainant to have been illegally dismissed from employment and ordering
respondents, jointly and severally, to pay complainant the following:
1. Backwages from the time he was illegally dismissed until his
actual reinstatement in the amount of THREE HUNDRED FORTY
EIGHT THOUSAND PESOS (₱348,000.00). The award of
backwages shall be re-computed once this decision has become
final;
2. Money claims in the total amount of FOURTEEN THOUSAND
TWO HUNDRED FORTY PESOS (₱14,240.00);
3. Attorney’s fees of ten (10%) percent of the total monetary award.
SO ORDERED.16
Alcatel appealed to the NLRC.
In its 20 February 2002 Decision, the NLRC reversed the Labor Arbiter’s
Decision and dismissed respondent’s complaint for illegal dismissal. The
NLRC declared that respondent was a project employee and that respondent
was not illegally dismissed but that his employment contract expired.
Respondent filed a motion for reconsideration. In its 19 December 2002
Order,17 the NLRC denied respondent’s motion.
Respondent appealed to the Court of Appeals.
In its 31 March 2004 Decision, the Court of Appeals set aside the NLRC’s
Decision and reinstated the Labor Arbiter’s Decision.
Alcatel filed a motion for reconsideration. In its 14 June 2004 Resolution, the
Court of Appeals denied Alcatel’s motion.
Hence, this petition.
The Ruling of the Labor Arbiter
The Labor Arbiter declared that, since respondent was repeatedly hired by
Alcatel, respondent performed functions that were necessary and desirable
in the usual business or trade of Alcatel. The Labor Arbiter concluded that
respondent belonged to the "work pool of non-project employees" of Alcatel.
As to the project, the Labor Arbiter noted that respondent’s employment
contracts did not specify the project’s completion date. The Labor Arbiter said
that a short extension of respondent’s employment contract was believable,
but an extension up to 1995, when respondent was originally engaged only
from 1 February to 31 March 1991, was unbelievable. The Labor Arbiter also
said that Alcatel’s unsubstantiated claim, that the project was merely
extended for "unavoidable causes," was absurd. The Labor Arbiter
concluded that there was really no fixed duration of the project and that
Alcatel used the periods of employment as a facade to show that respondent
was only a project employee.
The Ruling of the NLRC
The NLRC set aside the Labor Arbiter’s ruling and declared that respondent
was a project employee. The NLRC said respondent was assigned to carry
out a specific project or undertaking and the duration of his services was
always stated in his employment contracts. The NLRC also pointed out that,
by the nature of Alcatel’s business, respondent would remain a project
employee regardless of the number of projects for which he had been
employed. Since respondent was a project employee, the NLRC said he was
not illegally dismissed, but that his dismissal was brought about by the
expiration of his employment contract.
The Ruling of the Court of Appeals
The Court of Appeals set aside the NLRC’s decision and reinstated the Labor
Arbiter’s ruling. The Court of Appeals declared that respondent was a regular
employee of Alcatel because (1) respondent was assigned to positions and
performed tasks that were necessary to the main line and business
operations of Alcatel; (2) respondent was repeatedly hired and contracted,
continuously and for prolonged periods, with his employment contracts
renewed each time they fell due; and (3) Alcatel did not report the termination
of the projects with the nearest public employment office. The Court of
Appeals also said that, although respondent’s employment contracts
specified that he was being engaged for a specific period, there was no clear
provision on the actual scope of the project for which respondent was
engaged or the actual length of time that the project was going to last. The
Court of Appeals concluded that Alcatel imposed the periods of employment
to preclude respondent from acquiring tenurial security.
The Issues
Alcatel raises the following issues:
1. Whether respondent was a regular employee or a project
employee; and
2. Whether respondent was illegally dismissed.
The Ruling of the Court
The petition is meritorious.
Alcatel argues that respondent was a project employee because he worked
on distinct projects with the terms of engagement and the specific project
made known to him at the time of the engagement. Alcatel clarifies that
respondent’s employment was coterminous with the project for which he was
hired and, therefore, respondent was not illegally dismissed but was validly
dismissed upon the expiration of the term of his project employment. Alcatel
explains that its business relies mainly on the projects it enters into and thus,
it is constrained to hire project employees to meet the demands of specific
projects.
On the other hand, respondent insists that he is a regular employee because
he was assigned by Alcatel on its various projects since 4 January 1988
performing functions desirable or necessary to Alcatel’s business.
Respondent adds that his employment contracts were renewed successively
by Alcatel for seven years. Respondent contends that, even assuming that
he was a project employee, he became a regular employee because he was
re-hired every termination of his employment contract and he performed
functions necessary to Alcatel’s business. Respondent also claims that he
was illegally dismissed because he was dismissed during the existence of
the project.
The principal test for determining whether a particular employee is a project
employee or a regular employee is whether the project employee was
assigned to carry out a specific project or undertaking, the duration and
scope of which were specified at the time the employee is engaged for the
project.18 "Project" may refer to a particular job or undertaking that is within
the regular or usual business of the employer, but which is distinct and
separate and identifiable as such from the undertakings of the company.
Such job or undertaking begins and ends at determined or determinable
times.191avvphi1
In our review of respondent’s employment contracts, we are convinced that
respondent was a project employee. The specific projects for which
respondent was hired and the periods of employment were specified in his
employment contracts. The services he rendered, the duration and scope of
each employment are clear indications that respondent was hired as a
project employee.
We do not agree with respondent that he became a regular employee
because he was continuously rehired by Alcatel every termination of his
contract. In Maraguinot, Jr. v. NLRC,20 we said:
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:
1) There is a continuous rehiring of project employees even
after the cessation of a project; and
2) The tasks performed by the alleged "project employee" are vital,
necessary and indispensable to the usual business or trade of the
employer.21 (Emphasis ours)
While respondent performed tasks that were clearly vital, necessary and
indispensable to the usual business or trade of Alcatel, respondent was not
continuously rehired by Alcatel after the cessation of every project. Records
show that respondent was hired by Alcatel from 1988 to 1995 for three
projects, namely the PLDT X-5 project, the PLDT X-4 IOT project and the
PLDT 1342 project. On 30 April 1988, upon the expiration of respondent’s
contract for the PLDT X-4 IOT project, Alcatel did not rehire respondent until
1 February 1991, or after a lapse of 33 months, for the PLDT 1342 project.
Alcatel’s continuous rehiring of respondent in various capacities from
February 1991 to December 1995 was done entirely within the framework of
one and the same project ― the PLDT 1342 project. This did not make
respondent a regular employee of Alcatel as respondent was not
continuously rehired after the cessation of a project. Respondent remained a
project employee of Alcatel working on the PLDT 1342 project.
The employment of a project employee ends on the date specified in the
employment contract. Therefore, respondent was not illegally dismissed but
his employment terminated upon the expiration of his employment contract.
Here, Alcatel employed respondent as a Site Inspector until 31 December
1995.
WHEREFORE, we GRANT the petition. We SET ASIDE the 31 March 2004
Decision and 14 June 2004 Resolution of the Court of Appeals
and REINSTATE the 20 February 2002 Decision and 19 December 2002
Order of the National Labor Relations Commission.
SO ORDERED.
G.R. No. 192571 July 23, 2013
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE,
EDWIN D. FEIST, MARIA OLIVIA T. YABUTMISA, TERESITA C.
BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated
December 10,2009 and Resolution3 dated June 9, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 101045 which pronounced that the National
Labor Relations Commission (NLRC) did not gravely abuse its discretion
when it ruled that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally
dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott)
caused the publication in a major broadsheet newspaper of its need for a
Medical and Regulatory Affairs Manager (Regulatory Affairs Manager) who
would: (a) be responsible for drug safety surveillance operations, staffing,
and budget; (b) lead the development and implementation of standard
operating procedures/policies for drug safety surveillance and vigilance; and
(c) act as the primary interface with internal and external customers
regarding safety operations and queries.4 Alcaraz - who was then a
Regulatory Affairs and Information Manager at Aventis Pasteur Philippines,
Incorporated (another pharmaceutical company like Abbott) – showed
interest and submitted her application on October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned
position which was an item under the company’s Hospira Affiliate Local
Surveillance Unit (ALSU) department.6 In Abbott’s offer sheet.7 it was stated
that Alcaraz was to be employed on a probationary basis.8 Later that day,
she accepted the said offer and received an electronic mail (e-mail) from
Abbott’s Recruitment Officer, petitioner Teresita C. Bernardo (Bernardo),
confirming the same. Attached to Bernardo’s e-mail were Abbott’s
organizational chart and a job description of Alcaraz’s work.9
On February 12, 2005, Alcaraz signed an employment contract which stated,
inter alia, that she was to be placed on probation for a period of six (6)
months beginning February 15, 2005 to August 14, 2005. The said contract
was also signed by Abbott’s General Manager, petitioner Edwin Feist
(Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are
hereby appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and
regulations of the company, as well as those, which may be hereinafter
promulgated.
Unless renewed, probationary appointment expires on the date indicated
subject to earlier termination by the Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify
your conformity below and return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar
(Almazar), Hospira’s Country Transition Manager, briefed her on her duties
and responsibilities as Regulatory Affairs Manager, stating that: (a) she will
handle the staff of Hospira ALSU and will directly report to Almazar on
matters regarding Hopira’s local operations, operational budget, and
performance evaluation of the Hospira ALSU Staff who are on probationary
status; (b) she must implement Abbott’s Code of Good Corporate Conduct
(Code of Conduct), office policies on human resources and finance, and
ensure that Abbott will hire people who are fit in the organizational discipline;
(c) petitioner Kelly Walsh (Walsh), Manager of the Literature Drug
Surveillance Drug Safety of Hospira, will be her immediate supervisor; (d)
she should always coordinate with Abbott’s human resource officers in the
management and discipline of the staff; (e) Hospira ALSU will spin off from
Abbott in early 2006 and will be officially incorporated and known as Hospira,
Philippines. In the interim, Hospira ALSU operations will still be under
Abbott’s management, excluding the technical aspects of the operations
which is under the control and supervision of Walsh; and (f) the processing of
information and/or raw material data subject of Hospira ALSU operations will
be strictly confined and controlled under the computer system and network
being maintained and operated from the United States. For this purpose, all
those involved in Hospira ALSU are required to use two identification cards:
one, to identify them as Abbott’s employees and another, to identify them as
Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s
Human Resources (HR) Director, sent Alcaraz an e-mail which contained an
explanation of the procedure for evaluating the performance of probationary
employees and further indicated that Abbott had only one evaluation system
for all of its employees. Alcaraz was also given copies of Abbott’s Code of
Conduct and Probationary Performance Standards and Evaluation (PPSE)
and Performance Excellence Orientation Modules (Performance Modules)
which she had to apply in line with her task of evaluating the Hospira ALSU
staff.12
Abbott’s PPSE procedure mandates that the job performance of a
probationary employee should be formally reviewed and discussed with the
employee at least twice: first on the third month and second on the fifth
month from the date of employment. The necessary Performance
Improvement Plan should also be made during the third-month review in
case of a gap between the employee’s performance and the standards set.
These performance standards should be discussed in detail with the
employee within the first two (2) weeks on the job. It was equally required
that a signed copy of the PPSE form must be submitted to Abbott’s Human
Resources Department (HRD) and shall serve as documentation of the
employee’s performance during his/her probationary period. This shall form
the basis for recommending the confirmation or termination of the
probationary employment.13
During the course of her employment, Alcaraz noticed that some of the staff
had disciplinary problems. Thus, she would reprimand them for their
unprofessional behavior such as non-observance of the dress code,
moonlighting, and disrespect of Abbott officers. However, Alcaraz’s method
of management was considered by Walsh to be "too strict."14 Alcaraz
approached Misa to discuss these concerns and was told to "lie low" and let
Walsh handle the matter. Misa even assured her that Abbott’s HRD would
support her in all her management decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting
immediate action on the staff’s performance evaluation as their probationary
periods were about to end. This Alcaraz eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible
(Terrible), Abbott’s former HR Director, to discuss certain issues regarding
staff performance standards. In the course thereof, Alcaraz accidentally saw
a printed copy of an e-mail sent by Walsh to some staff members which
essentially contained queries regarding the former’s job performance.
Alcaraz asked if Walsh’s action was the normal process of evaluation.
Terrible said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible
where she was informed that she failed to meet the regularization standards
for the position of Regulatory Affairs Manager.18 Thereafter, Walsh and
Terrible requested Alcaraz to tender her resignation, else they be forced to
terminate her services. She was also told that, regardless of her choice, she
should no longer report for work and was asked to surrender her office
identification cards. She requested to be given one week to decide on the
same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales
(Gonzales), that she would be on leave for that day. However, Gonzales told
her that Walsh and Terrible already announced to the whole Hospira ALSU
staff that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to
Alcaraz a letter stating that her services had been terminated effective May
19, 2005.21 The letter detailed the reasons for Alcaraz’s termination –
particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to
gain the trust of her staff and to build an effective rapport with them; (c) failed
to train her staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article review which
were necessary for the proper performance of her duties.22 On May 27, 2005,
Alcaraz received another copy of the said termination letter via registered
mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus,
filed a complaint for illegal dismissal and damages against Abbott and its
officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and Feist.24 She
claimed that she should have already been considered as a regular and not a
probationary employee given Abbott’s failure to inform her of the reasonable
standards for her regularization upon her engagement as required under
Article 29525 of the Labor Code. In this relation, she contended that while her
employment contract stated that she was to be engaged on a probationary
status, the same did not indicate the standards on which her regularization
would be based.26 She further averred that the individual petitioners
maliciously connived to illegally dismiss her when: (a) they threatened her
with termination; (b) she was ordered not to enter company premises even if
she was still an employee thereof; and (c) they publicly announced that she
already resigned in order to humiliate her.27
On the contrary, petitioners maintained that Alcaraz was validly terminated
from her probationary employment given her failure to satisfy the prescribed
standards for her regularization which were made known to her at the time of
her engagement.28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint
for lack of merit.
The LA rejected Alcaraz’s argument that she was not informed of the
reasonable standards to qualify as a regular employee considering her
admissions that she was briefed by Almazar on her work during her pre-
employment orientation meeting30 and that she received copies of Abbott’s
Code of Conduct and Performance Modules which were used for evaluating
all types of Abbott employees.31 As Alcaraz was unable to meet the
standards set by Abbott as per her performance evaluation, the LA ruled that
the termination of her probationary employment was justified.32 Lastly, the LA
found that there was no evidence to conclude that Abbott’s officers and
employees acted in bad faith in terminating Alcaraz’s employment.33
Displeased with the LA’s ruling, Alcaraz filed an appeal with the National
Labor Relations Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision,34 annulling and
setting aside the LA’s ruling, the dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is
hereby reversed, annulled and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to
have committed illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to
her former position without loss of seniority rights immediately upon
receipt hereof;
 3. To jointly and severally pay complainant backwages computed
from 16 May 2005 until finality of this decision. As of the date hereof
the backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00
b. 13th month pay - 110,000.00
TOTAL PhP 1,760,000.00
4. Respondents are ordered to pay complainant moral damages of
₱50,000.00 and exemplary damages of ₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of 10% of the
total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no
evidence showing that Alcaraz had been apprised of her probationary status
and the requirements which she should have complied with in order to be a
regular employee.36 It held that Alcaraz’s receipt of her job description and
Abbott’s Code of Conduct and Performance Modules was not equivalent to
her being actually informed of the performance standards upon which she
should have been evaluated on.37 It further observed that Abbott did not
comply with its own standard operating procedure in evaluating probationary
employees.38 The NLRC was also not convinced that Alcaraz was terminated
for a valid cause given that petitioners’ allegation of Alcaraz’s "poor
performance" remained unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC
in a Resolution dated July 31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for
Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction, docketed as CA G.R. SP No. 101045 (First CA Petition), alleging
grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was
illegally dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution
of the NLRC’s Decision before the LA, which petitioners strongly opposed.
The LA denied the said motion in an Order dated July 8, 2008 which was,
however, eventually reversed on appeal by the NLRC.42 Due to the
foregoing, petitioners filed another Petition for Certiorari with the CA,
docketed as CA G.R. SP No. 111318 (Second CA Petition), assailing the
propriety of the execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December
10, 2009, affirmed the ruling of the NLRC and held that the latter did not
commit any grave abuse of discretion in finding that Alcaraz was illegally
dismissed.
It observed that Alcaraz was not apprised at the start of her employment of
the reasonable standards under which she could qualify as a regular
employee.45 This was based on its examination of the employment contract
which showed that the same did not contain any standard of performance or
any stipulation that Alcaraz shall undergo a performance evaluation before
she could qualify as a regular employee.46 It also found that Abbott was
unable to prove that there was any reasonable ground to terminate Alcaraz’s
employment.47 Abbott moved for the reconsideration of the aforementioned
ruling which was, however, denied by the CA in a Resolution48 dated June 9,
2010.
The CA likewise denied the Second CA Petition in a Resolution dated May
18, 2010 (May 18, 2010 Resolution) and ruled that the NLRC was correct in
upholding the execution of the NLRC Decision.49 Thus, petitioners filed a
motion for reconsideration.
While the petitioners’ motion for reconsideration of the CA’s May 18, 2010
Resolution was pending, Alcaraz again moved for the issuance of a writ of
execution before the LA. On June 7, 2010, petitioners received the LA’s
order granting Alcaraz’s motion for execution which they in turn appealed to
the NLRC – through a Memorandum of Appeal dated June 16, 2010 (June
16, 2010 Memorandum of Appeal ) – on the ground that the implementation
of the LA’s order would render its motion for reconsideration moot and
academic.50
Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010
Resolution in the Second CA Petition was denied via a Resolution dated
October 4, 2010.51 This attained finality on January 10, 2011 for petitioners’
failure to timely appeal the same.52 Hence, as it stands, only the issues in the
First CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges
that petitioners were guilty of forum shopping when they filed the Second CA
Petition pending the resolution of their motion for reconsideration of the CA’s
December 10, 2009 Decision i.e., the decision in the First CA Petition. 53 She
also contends that petitioners have not complied with the certification
requirement under Section 5, Rule 7 of the Rules of Court when they failed to
disclose in the instant petition the filing of the June 16, 2010 Memorandum of
Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Court’s resolution: (a) whether
or not petitioners are guilty of forum shopping and have violated the
certification requirement under Section 5, Rule 7 of the Rules of Court; (b)
whether or not Alcaraz was sufficiently informed of the reasonable standards
to qualify her as a regular employee; (c) whether or not Alcaraz was validly
terminated from her employment; and (d) whether or not the individual
petitioners herein are liable.
The Court’s Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition against forum
shopping is different from a violation of the certification requirement under
Section 5, Rule 7 of the Rules of Court. In Sps. Ong v. CA,55 the Court
explained that:
x x x The distinction between the prohibition against forum shopping and the
certification requirement should by now be too elementary to be
misunderstood. To reiterate, compliance with the certification against forum
shopping is separate from and independent of the avoidance of the act of
forum shopping itself. There is a difference in the treatment between failure
to comply with the certification requirement and violation of the prohibition
against forum shopping not only in terms of imposable sanctions but also in
the manner of enforcing them. The former constitutes sufficient cause for the
dismissal without prejudice to the filing of the complaint or initiatory pleading
upon motion and after hearing, while the latter is a ground for summary
dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits
involving the same parties, either simultaneously or successively, to secure a
favorable judgment. It exists where the elements of litis pendentia are
present, namely: (a) identity of parties, or at least such parties who represent
the same interests in both actions; (b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (c) the identity
with respect to the two preceding particulars in the two (2) cases is such that
any judgment that may be rendered in the pending case, regardless of which
party is successful, would amount to res judicata in the other case.57
In this case, records show that, except for the element of identity of parties,
the elements of forum shopping do not exist. Evidently, the First CA Petition
was instituted to question the ruling of the NLRC that Alcaraz was illegally
dismissed. On the other hand, the Second CA Petition pertains to the
propriety of the enforcement of the judgment award pending the resolution of
the First CA Petition and the finality of the decision in the labor dispute
between Alcaraz and the petitioners. Based on the foregoing, a judgment in
the Second CA Petition will not constitute res judicata insofar as the First CA
Petition is concerned. Thus, considering that the two petitions clearly cover
different subject matters and causes of action, there exists no forum
shopping.
As to the second, Alcaraz further imputes that the petitioners violated the
certification requirement under Section 5, Rule 7 of the Rules of Court58 by
not disclosing the fact that it filed the June 16, 2010 Memorandum of Appeal
before the NLRC in the instant petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a
plaintiff who files a case should provide a complete statement of the present
status of any pending case if the latter involves the same issues as the one
that was filed. If there is no such similar pending case, Section 5(a) of the
same rule provides that the plaintiff is obliged to declare under oath that to
the best of his knowledge, no such other action or claim is pending.
Records show that the issues raised in the instant petition and those in the
June 16, 2010 Memorandum of Appeal filed with the NLRC likewise cover
different subject matters and causes of action. In this case, the validity of
Alcaraz’s dismissal is at issue whereas in the said Memorandum of Appeal,
the propriety of the issuance of a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the
present petition the filing of their June 16, 2010 Memorandum of Appeal with
the NLRC. In any event, considering that the issue on the propriety of the
issuance of a writ of execution had been resolved in the Second CA Petition
– which in fact had already attained finality – the matter of disclosing the
June 16, 2010 Memorandum of Appeal is now moot and academic.
Having settled the foregoing procedural matter, the Court now proceeds to
resolve the substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure.
However, in cases of probationary employment, aside from just or authorized
causes of termination, an additional ground is provided under Article 295 of
the Labor Code, i.e., the probationary employee may also be terminated for
failure to qualify as a regular employee in accordance with the reasonable
standards made known by the employer to the employee at the time of the
engagement.59 Thus, the services of an employee who has been engaged on
probationary basis may be terminated for any of the following: (a) a just or (b)
an authorized cause; and (c) when he fails to qualify as a regular employee
in accordance with reasonable standards prescribed by the employer. 60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of
the Labor Code provides that if the employer fails to inform the probationary
employee of the reasonable standards upon which the regularization would
be based on at the time of the engagement, then the said employee shall be
deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall make known
to the employee the standards under which he will qualify as a regular
employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is made to comply with two (2) requirements
when dealing with a probationary employee: first, the employer must
communicate the regularization standards to the probationary employee; and
second, the employer must make such communication at the time of the
probationary employee’s engagement. If the employer fails to comply with
either, the employee is deemed as a regular and not a probationary
employee.
Keeping with these rules, an employer is deemed to have made known the
standards that would qualify a probationary employee to be a regular
employee when it has exerted reasonable efforts to apprise the employee of
what he is expected to do or accomplish during the trial period of probation.
This goes without saying that the employee is sufficiently made aware of his
probationary status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature,
for instance, in the case of maids, cooks, drivers, or messengers. 61 Also, in
Aberdeen Court, Inc. v. Agustin,62 it has been held that the rule on notifying a
probationary employee of the standards of regularization should not be used
to exculpate an employee who acts in a manner contrary to basic knowledge
and common sense in regard to which there is no need to spell out a policy
or standard to be met. In the same light, an employee’s failure to perform the
duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employee’s non-
regularization.
In this case, petitioners contend that Alcaraz was terminated because she
failed to qualify as a regular employee according to Abbott’s standards which
were made known to her at the time of her engagement. Contrarily, Alcaraz
claims that Abbott never apprised her of these standards and thus, maintains
that she is a regular and not a mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed
complied with the above-stated requirements. This conclusion is largely
impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and
responsibilities as Regulatory Affairs Manager prior to, during the time of her
engagement, and the incipient stages of her employment. On this score, the
Court finds it apt to detail not only the incidents which point out to the efforts
made by Abbott but also those circumstances which would show that Alcaraz
was well-apprised of her employer’s expectations that would, in turn,
determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major
broadsheet newspaper of its need for a Regulatory Affairs Manager,
indicating therein the job description for as well as the duties and
responsibilities attendant to the aforesaid position; this prompted
Alcaraz to submit her application to Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that
Alcaraz was to be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract
which specifically stated, inter alia, that she was to be placed on
probation for a period of six (6) months beginning February 15, 2005
to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer,
Bernardo sent her copies of Abbott’s organizational structure and her
job description through e-mail;
 (e) Alcaraz was made to undergo a pre-employment orientation
where Almazar informed her that she had to implement Abbott’s
Code of Conduct and office policies on human resources and finance
and that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of
her orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and
Performance Modules from Misa who explained to her the procedure
for evaluating the performance of probationary employees; she was
further notified that Abbott had only one evaluation system for all of
its employees; and
(h) Moreover, Alcaraz had previously worked for another
pharmaceutical company and had admitted to have an "extensive
training and background" to acquire the necessary skills for her job. 63
Considering the totality of the above-stated circumstances, it cannot,
therefore, be doubted that Alcaraz was well-aware that her regularization
would depend on her ability and capacity to fulfill the requirements of her
position as Regulatory Affairs Manager and that her failure to perform such
would give Abbott a valid cause to terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the adequate
performance of one’s duties is, by and of itself, an inherent and implied
standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped into
technical indicators in every case. In this regard, it must be observed that the
assessment of adequate duty performance is in the nature of a management
prerogative which when reasonably exercised – as Abbott did in this case –
should be respected. This is especially true of a managerial employee like
Alcaraz who was tasked with the vital responsibility of handling the personnel
and important matters of her department.
In fine, the Court rules that Alcaraz’s status as a probationary employee and
her consequent dismissal must stand. Consequently, in holding that Alcaraz
was illegally dismissed due to her status as a regular and not a probationary
employee, the Court finds that the NLRC committed a grave abuse of
discretion.
To elucidate, records show that the NLRC based its decision on the premise
that Alcaraz’s receipt of her job description and Abbott’s Code of Conduct
and Performance Modules was not equivalent to being actually informed of
the performance standards upon which she should have been evaluated
on.64 It, however, overlooked the legal implication of the other attendant
circumstances as detailed herein which should have warranted a contrary
finding that Alcaraz was indeed a probationary and not a regular employee –
more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would
lead to her non-regularization and eventually, her termination.
Accordingly, by affirming the NLRC’s pronouncement which is tainted with
grave abuse of discretion, the CA committed a reversible error which,
perforce, necessitates the reversal of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee;
the usual two-notice rule does not govern.65 Section 2, Rule I, Book VI of the
Implementing Rules of the Labor Code states that "if the termination is
brought about by the x x x failure of an employee to meet the standards of
the employer in case of probationary employment, it shall be sufficient that a
written notice is served the employee, within a reasonable time from the
effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated
May 19, 2005 which she received on May 23, 2005 and again on May 27,
2005. Stated therein were the reasons for her termination, i.e., that after
proper evaluation, Abbott determined that she failed to meet the reasonable
standards for her regularization considering her lack of time and people
management and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs Manager.66 Undeniably,
this written notice sufficiently meets the criteria set forth above, thereby
legitimizing the cause and manner of Alcaraz’s dismissal as a probationary
employee under the parameters set by the Labor Code.67
D. Employer’s violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate
Alcaraz’s employment and Abbott’s compliance with the Labor Code
termination procedure, it is readily apparent that Abbott breached its
contractual obligation to Alcaraz when it failed to abide by its own procedure
in evaluating the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract
between the employer and employee. In Parts Depot, Inc. v. Beiswenger,68 it
has been held that:
Employer statements of policy . . . can give rise to contractual rights in
employees without evidence that the parties mutually agreed that the policy
statements would create contractual rights in the employee, and, hence,
although the statement of policy is signed by neither party, can be unilaterally
amended by the employer without notice to the employee, and contains no
reference to a specific employee, his job description or compensation, and
although no reference was made to the policy statement in pre-employment
interviews and the employee does not learn of its existence until after his
hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel. Once
an employer establishes an express personnel policy and the employee
continues to work while the policy remains in effect, the policy is deemed an
implied contract for so long as it remains in effect. If the employer unilaterally
changes the policy, the terms of the implied contract are also thereby
changed.1âwphi1 (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies create an obligation
on the part of both the employee and the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia, that the
job performance of a probationary employee should be formally reviewed
and discussed with the employee at least twice: first on the third month and
second on the fifth month from the date of employment. Abbott is also
required to come up with a Performance Improvement Plan during the third
month review to bridge the gap between the employee’s performance and
the standards set, if any.69 In addition, a signed copy of the PPSE form
should be submitted to Abbott’s HRD as the same would serve as basis for
recommending the confirmation or termination of the probationary
employment.70
In this case, it is apparent that Abbott failed to follow the above-stated
procedure in evaluating Alcaraz. For one, there lies a hiatus of evidence that
a signed copy of Alcaraz’s PPSE form was submitted to the HRD. It was not
even shown that a PPSE form was completed to formally assess her
performance. Neither was the performance evaluation discussed with her
during the third and fifth months of her employment. Nor did Abbott come up
with the necessary Performance Improvement Plan to properly gauge
Alcaraz’s performance with the set company standards.
While it is Abbott’s management prerogative to promulgate its own company
rules and even subsequently amend them, this right equally demands that
when it does create its own policies and thereafter notify its employee of the
same, it accords upon itself the obligation to faithfully implement them.
Indeed, a contrary interpretation would entail a disharmonious relationship in
the work place for the laborer should never be mired by the uncertainty of
flimsy rules in which the latter’s labor rights and duties would, to some extent,
depend.
In this light, while there lies due cause to terminate Alcaraz’s probationary
employment for her failure to meet the standards required for her
regularization, and while it must be further pointed out that Abbott had
satisfied its statutory duty to serve a written notice of termination, the fact that
it violated its own company procedure renders the termination of Alcaraz’s
employment procedurally infirm, warranting the payment of nominal
damages. A further exposition is apropos.
Case law has settled that an employer who terminates an employee for a
valid cause but does so through invalid procedure is liable to pay the latter
nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the
dismissal is for a just cause, the lack of statutory due process should not
nullify the dismissal, or render it illegal, or ineffectual. However, the employer
should indemnify the employee for the violation of his statutory rights.72 Thus,
in Agabon, the employer was ordered to pay the employee nominal damages
in the amount of ₱30,000.00.73
Proceeding from the same ratio, the Court modified Agabon in the case of
Jaka Food Processing Corporation v. Pacot (Jaka)74 where it created a
distinction between procedurally defective dismissals due to a just cause, on
one hand, and those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article
282 of the Labor Code (now Article 296) but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; if the dismissal is based on an authorized cause
under Article 283 (now Article 297) but the employer failed to comply with the
notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer’s exercise of his management
prerogative.75 Hence, in Jaka, where the employee was dismissed for an
authorized cause of retrenchment76 – as contradistinguished from the
employee in Agabon who was dismissed for a just cause of neglect of
duty77 – the Court ordered the employer to pay the employee nominal
damages at the higher amount of ₱50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the
necessity to deter employers from future violations of the statutory due
process rights of employees.78 In similar regard, the Court deems it proper to
apply the same principle to the case at bar for the reason that an employer’s
contractual breach of its own company procedure – albeit not statutory in
source – has the parallel effect of violating the laborer’s rights. Suffice it to
state, the contract is the law between the parties and thus, breaches of the
same impel recompense to vindicate a right that has been violated.
Consequently, while the Court is wont to uphold the dismissal of Alcaraz
because a valid cause exists, the payment of nominal damages on account
of Abbott’s contractual breach is warranted in accordance with Article 2221 of
the Civil Code.79
Anent the proper amount of damages to be awarded, the Court observes that
Alcaraz’s dismissal proceeded from her failure to comply with the standards
required for her regularization. As such, it is undeniable that the dismissal
process was, in effect, initiated by an act imputable to the employee, akin to
dismissals due to just causes under Article 296 of the Labor Code.
Therefore, the Court deems it appropriate to fix the amount of nominal
damages at the amount of ₱30,000.00, consistent with its rulings in both
Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees
or officers attaches only when: (a) they assent to a patently unlawful act of
the corporation, or when they are guilty of bad faith or gross negligence in
directing its affairs, or when there is a conflict of interest resulting in damages
to the corporation, its stockholders or other persons; (b) they consent to the
issuance of watered down stocks or when, having knowledge of such
issuance, do not forthwith file with the corporate secretary their written
objection; (c) they agree to hold themselves personally and solidarily liable
with the corporation; or (d) they are made by specific provision of law
personally answerable for their corporate action.80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith
with regard to the supposed crude manner by which her probationary
employment was terminated and thus, should be held liable together with
Abbott. In the same vein, she further attributes the loss of some of her
remaining belongings to them.81
Alcaraz’s contention fails to persuade.
A judicious perusal of the records show that other than her unfounded
assertions on the matter, there is no evidence to support the fact that the
individual petitioners herein, in their capacity as Abbott’s officers and
employees, acted in bad faith or were motivated by ill will in terminating
Alcaraz’s services. The fact that Alcaraz was made to resign and not allowed
to enter the workplace does not necessarily indicate bad faith on Abbott’s
part since a sufficient ground existed for the latter to actually proceed with
her termination. On the alleged loss of her personal belongings, records are
bereft of any showing that the same could be attributed to Abbott or any of its
officers. It is a well-settled rule that bad faith cannot be presumed and he
who alleges bad faith has the onus of proving it. All told, since Alcaraz failed
to prove any malicious act on the part of Abbott or any of its officers, the
Court finds the award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10,
2009 and Resolution dated June 9, 2010 of the Court of Appeals in CA-G.R.
SP No. 101045 are hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
MODIFICATION that petitioner Abbott Laboratories, Philippines be
ORDERED to pay respondent Pearlie Ann F. Alcaraz nominal damages in
the amount of ₱30,000.00 on account of its breach of its own company
procedure.
SO ORDERED.
G.R. No. 79869 September 5, 1991
FORTUNATO MERCADO, SR., ROSA MERCADO, FORTUNATO
MERCADO, JR., ANTONIO MERCADO, JOSE CABRAL, LUCIA
MERCADO, ASUNCION GUEVARA, ANITA MERCADO, MARINA
MERCADO, JULIANA CABRAL, GUADALUPE PAGUIO, BRIGIDA
ALCANTARA, EMERLITA MERCADO, ROMEO GUEVARA, ROMEO
MERCADO and LEON SANTILLAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION;
LABOR ARBITER LUCIANO AQUINO, RAB-III; AURORA L. CRUZ;
SPOUSES FRANCISCO DE BORJA and LETICIA DE BORJA; and STO.
NIÑO REALTY, INCORPORATED, respondents.
Servillano S. Santillan for petitioners.
Luis R. Mauricio for private respondents.
PADILLA, J.:
Assailed in this petition for certiorari is the decision * of the respondent
national Labor Relations Commission (NLRC) dated 8 August 1984 which
affirmed the decision of respondent Labor Arbiter Luciano P. Aquino with the
slight modification of deleting the award of financial assistance to petitioners,
and the resolution of the respondent NLRC dated 17 August 1987, denying
petitioners' motion for reconsideration.
This petition originated from a complaint for illegal dismissal, underpayment
of wages, non-payment of overtime pay, holiday pay, service incentive leave
benefits, emergency cost of living allowances and 13th month pay, filed by
above-named petitioners against private respondents Aurora L. Cruz,
Francisco Borja, Leticia C. Borja and Sto. Niño Realty Incorporated, with
Regional Arbitration Branch No. III, National Labor Relations Commission in
San Fernando, Pampanga.1
Petitioners alleged in their complaint that they were agricultural workers
utilized by private respondents in all the agricultural phases of work on the 7
1/2 hectares of ace land and 10 hectares of sugar land owned by the latter;
that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private
respondents since 1949, Fortunato Mercado, Jr. and Antonio Mercado since
1972 and the rest of the petitioners since 1960 up to April 1979, when they
were all allegedly dismissed from their employment; and that, during the
period of their employment, petitioners received the following daily wages:
From 1962-1963 — P1.50
1963-1965 — P2.00
1965-1967 — P3.00
1967-1970 — P4.00
1970-1973 — P5.00
1973-1975 — P5.00
1975-1978 — P6.00
1978-1979 — P7.00
Private respondent Aurora Cruz in her answer to petitioners' complaint
denied that said petitioners were her regular employees and instead averred
that she engaged their services, through Spouses Fortunato Mercado, Sr.
and Rosa Mercado, their "mandarols", that is, persons who take charge in
supplying the number of workers needed by owners of various farms, but
only to do a particular phase of agricultural work necessary in rice production
and/or sugar cane production, after which they would be free to render
services to other farm owners who need their services.2
The other private respondents denied having any relationship whatsoever
with the petitioners and state that they were merely registered owners of the
land in question included as corespondents in this case.3
The dispute in this case revolves around the issue of whether or not
petitioners are regular and permanent farm workers and therefore entitled to
the benefits which they pray for. And corollary to this, whether or not said
petitioners were illegally dismissed by private respondents.
Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private
respondents and held that petitioners were not regular and permanent
workers of the private respondents, for the nature of the terms and conditions
of their hiring reveal that they were required to perform phases of agricultural
work for a definite period of time after which their services would be available
to any other farm owner.4 Respondent Labor Arbiter deemed petitioners'
contention of working twelve (12) hours a day the whole year round in the
farm, an exaggeration, for the reason that the planting of lice and sugar cane
does not entail a whole year as reported in the findings of the Chief of the
NLRC Special Task Force.5 Even the sworn statement of one of the
petitioners, Fortunato Mercado, Jr., the son of spouses Fortunato Mercado,
Sr. and Rosa Mercado, indubitably show that said petitioners were hired only
as casuals, on an "on and off" basis, thus, it was within the prerogative of
private respondent Aurora Cruz either to take in the petitioners to do further
work or not after any single phase of agricultural work had been completed
by them.6
Respondent Labor Arbiter was also of the opinion that the real cause which
triggered the filing of the complaint by the petitioners who are related to one
another, either by consanguinity or affinity, was the filing of a criminal
complaint for theft against Reynaldo Mercado, son of spouses Fortunate
Mercado, Sr. and Rosa Mercado, for they even asked the help of Jesus
David, Zone Chairman of the locality to talk to private respondent, Aurora
Cruz regarding said criminal case.7 In his affidavit, Jesus David stated under
oath that petitioners were never regularly employed by private respondent
Aurora Cruz but were, on-and-off hired to work and render services when
needed, thus adding further support to the conclusion that petitioners were
not regular and permanent employees of private respondent Aurora Cruz.8
Respondent Labor Arbiter further held that only money claims from years
1976-1977, 1977-1978 and 1978-1979 may be properly considered since all
the other money claims have prescribed for having accrued beyond the three
(3) year period prescribed by law.9 On grounds of equity, however,
respondent Labor Arbiter awarded petitioners financial assistance by private
respondent Aurora Cruz, in the amount of Ten Thousand Pesos
(P10,000.00) to be equitably divided among an the petitioners except
petitioner Fortunato Mercado, Jr. who had manifested his disinterest in the
further prosecution of his complaint against private respondent. 10
Both parties filed their appeal with the National Labor Relations Commissions
(NLRC). Petitioners questioned respondent Labor Arbiter's finding that they
were not regular and permanent employees of private respondent Aurora
Cruz while private respondents questioned the award of financial assistance
granted by respondent Labor Arbiter.
The NLRC ruled in favor of private respondents affirming the decision of the
respondent Labor Arbiter, with the modification of the deletion of the award
for financial assistance to petitioners. The dispositive portion of the decision
of the NLRC reads:
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino
dated March 3, 1983 is hereby modified in that the award of
P10,000.00 financial assistance should be deleted. The said
Decision is affirmed in all other aspects.
SO ORDERED.11
Petitioners filed a motion for reconsideration of the Decision of the Third
Division of the NLRC dated 8 August 1984; however, the NLRC denied tills
motion in a resolution dated 17 August 1987.12
In the present Petition for certiorari, petitioners seek the reversal of the
above-mentioned rulings. Petitioners contend that respondent Labor Arbiter
and respondent NLRC erred when both ruled that petitioners are not regular
and permanent employees of private respondents based on the terms and
conditions of their hiring, for said findings are contrary to the provisions of
Article 280 of the Labor Code.13 They submit that petitioners' employment,
even assuming said employment were seasonal, continued for so many
years such that, by express provision of Article 280 of the Labor Code as
amended, petitioners have become regular and permanent employees.14
Moreover, they argue that Policy Instruction No. 1215 of the Department of
Labor and Employment clearly lends support to this contention, when it
states:
PD 830 has defined the concept of regular and casual employment.
What determines regularity or casualness is not the employment
contract, written or otherwise, but the nature of the job. If the job is
usually necessary or desirable to the main business of the employer,
then employment is regular. If not, then the employment is casual.
Employment for a definite period which exceeds one (1) year shall be
considered re for the duration of the definite period.
This concept of re and casual employment is designed to put an end
to casual employment in regular jobs which has been abused by
many employers to prevent so-called casuals from enjoying the
benefits of regular employees or to prevent casuals from joining
unions.
This new concept should be strictly enforced to give meaning to the
constitutional guarantee of employment tenure.16
Tested under the laws invoked, petitioners submit that it would be unjust, if
not unlawful, to consider them as casual workers since they have been doing
all phases of agricultural work for so many years, activities which are
undeniably necessary, desirable and indispensable in the rice and sugar
cane production business of the private respondents.17
In the Comment filed by private respondents, they submit that the decision of
the Labor Arbiter, as aimed by respondent NLRC, that petitioners were only
hired as casuals, is based on solid evidence presented by the parties and
also by the Chief of the Special Task Force of the NLRC Regional Office and,
therefore, in accordance with the rule on findings of fact of administrative
agencies, the decision should be given great weight.18 Furthermore, they
contend that the arguments used by petitioners in questioning the decision of
the Labor Arbiter were based on matters which were not offered as evidence
in the case heard before the regional office of the then Ministry of Labor but
rather in the case before the Social Security Commission, also between the
same parties.19
Public respondent NLRC filed a separate comment prepared by the Solicitor
General. It submits that it has long been settled that findings of fact of
administrative agencies if supported by substantial evidence are entitled to
great weight.20 Moreover, it argues that petitioners cannot be deemed to be
permanent and regular employees since they fall under the exception stated
in Article 280 of the Labor Code, which reads:
The provisions of written agreements to the contrary notwithstanding
and regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee
 or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.21(emphasis
supplied)
The Court resolved to give due course to the petition and required the parties
to submit their respective memoranda after which the case was deemed
submitted for decision.
The petition is not impressed with merit.
The invariable rule set by the Court in reviewing administrative decisions of
the Executive Branch of the Government is that the findings of fact made
therein are respected, so long as they are supported by substantial evidence,
even if not overwhelming or preponderant;22 that it is not for the reviewing
court to weigh the conflicting evidence, determine the credibility of the
witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of the evidence;23 that the
administrative decision in matters within the executive's jurisdiction can only
be set aside upon proof of gross abuse of discretion, fraud, or error of law. 24
The questioned decision of the Labor Arbiter reads:
Focusing the spotlight of judicious scrutiny on the evidence on record
and the arguments of both parties, it is our well-discerned opinion
that the petitioners are not regular and permanent workers of the
respondents. The very nature of the terms and conditions of their
hiring reveal that the petitioners were required to perform p of cultural
work for a definite period, after which their services are available to
any farm owner. We cannot share the arguments of the petitioners
that they worked continuously the whole year round for twelve hours
a day. This, we feel, is an exaggeration which does not deserve any
serious consideration inasmuch as the plan of rice and sugar cane
does not entail a whole year operation, the area in question being
comparatively small. It is noteworthy that the findings of the Chief of
the Special Task Force of the Regional Office are similar to this.
In fact, the sworn statement of one of the petitioners Fortunato
Mercado, Jr., the son of spouses Fortunato Mercado, Sr. and Rosa
Mercado, indubitably shows that said petitioners were only hired as
casuals, on-and-off basis. With this kind of relationship between the
petitioners and the respondent Aurora Cruz, we feel that there is no
basis in law upon which the claims of the petitioners should be
sustained, more specially their complaint for illegal dismissal. It is
within the prerogative of respondent Aurora Cruz either to take in the
petitioners to do further work or not after any single phase of
agricultural work has been completed by them. We are of the opinion
that the real cause which triggered the filing of this complaint by the
petitioners who are related to one another, either by consanguinity or
affinity was due to the filing of a criminal complaint by the respondent
Aurora Cruz against Reynaldo Mercado, son of spouses Fortunato
Mercado, Sr. and Rosa Mercado. In April 1979, according to Jesus
David, Zone Chairman of the locality where the petitioners and
respondent reside, petitioner Fortunato Mercado, Sr. asked for help
regarding the case of his son, Reynaldo, to talk with respondent
Aurora Cruz and the said Zone Chairman also stated under oath that
the petitioners were never regularly employed by respondent Aurora
Cruz but were on-and-off hired to work to render services when
needed.25
A careful examination of the foregoing statements reveals that the findings of
the Labor Arbiter in the case are ably supported by evidence. There is,
therefore, no circumstance that would warrant a reversal of the questioned
decision of the Labor Arbiter as affirmed by the National Labor Relations
Commission.
The contention of petitioners that the second paragraph of Article 280 of the
Labor Code should have been applied in their case presents an opportunity
to clarify the afore-mentioned provision of law.
Article 280 of the Labor Code reads in full:
Article 280. Regular and Casual Employment. — The provisions of
written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That, any employee who has
rendered at least one year of service whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such actually exists.
The first paragraph answers the question of who are employees. It states
that, regardless of any written or oral agreement to the contrary, an
employee is deemed regular where he is engaged in necessary or desirable
activities in the usual business or trade of the employer, except for project
employees.
A project employee has been defined to be one whose employment has
been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the
employee, or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season26 as in the
present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all
other employees who do not fan under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year of
service regardless of the fact that such service may be continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of Art.
280 is applicable to their case and that the Labor Arbiter should have
considered them regular by virtue of said proviso. The contention is without
merit.
The general rule is that the office of a proviso is to qualify or modify only the
phrase immediately preceding it or restrain or limit the generality of the
clause that it immediately follows.27 Thus, it has been held that a proviso is to
be construed with reference to the immediately preceding part of the
provision to which it is attached, and not to the statute itself or to other
sections thereof.28 The only exception to this rule is where the clear
legislative intent is to restrain or qualify not only the phrase immediately
preceding it (the proviso) but also earlier provisions of the statute or even the
statute itself as a whole.29
Policy Instruction No. 12 of the Department of Labor and Employment
discloses that the concept of regular and casual employees was designed to
put an end to casual employment in regular jobs, which has been abused by
many employers to prevent called casuals from enjoying the benefits of
regular employees or to prevent casuals from joining unions. The same
instructions show that the proviso in the second paragraph of Art. 280 was
not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or industrial.
What it seeks to eliminate are abuses of employers against their employees
and not, as petitioners would have us believe, to prevent small-scale
businesses from engaging in legitimate methods to realize profit. Hence, the
proviso is applicable only to the employees who are deemed "casuals" but
not to the "project" employees nor the regular employees treated in
paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct
term, seasonal employees, their employment legally ends upon completion of
the project or the season. The termination of their employment cannot and
should not constitute an illegal dismissal.30
WHEREFORE, the petition is DISMISSED. The decision of the National
Labor Relations Commission affirming that of the Labor Arbiter, under
review, is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 163512 February 28, 2007
DAISY B. TIU, Petitioner
vs.
PLATINUM PLANS PHIL., INC., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated January 20, 2004 of the
Court of Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4,
2004 denying reconsideration. The Court of Appeals had affirmed the
decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig
City, Branch 261, in an action for damages, ordering petitioner to pay
respondent ₱100,000 as liquidated damages.
The relevant facts are as follows:
Respondent Platinum Plans Philippines, Inc. is a domestic corporation
engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu
was its Division Marketing Director.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-
President and Territorial Operations Head in charge of its Hongkong and
Asean operations. The parties executed a contract of employment valid for
five years.4
On September 16, 1995, petitioner stopped reporting for work. In November
1995, she became the Vice-President for Sales of Professional Pension
Plans, Inc., a corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of
Pasig City, Branch 261. Respondent alleged, among others, that petitioner’s
employment with Professional Pension Plans, Inc. violated the non-
involvement clause in her contract of employment, to wit:
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes
that during his/her engagement with EMPLOYER and in case of separation
from the Company, whether voluntary or for cause, he/she shall not, for the
next TWO (2) years thereafter, engage in or be involved with any
corporation, association or entity, whether directly or indirectly, engaged in
the same business or belonging to the same pre-need industry as the
EMPLOYER. Any breach of the foregoing provision shall render the
EMPLOYEE liable to the EMPLOYER in the amount of One Hundred
Thousand Pesos (P100,000.00) for and as liquidated damages.5
Respondent thus prayed for ₱100,000 as compensatory damages; ₱200,000
as moral damages; ₱100,000 as exemplary damages; and 25% of the total
amount due plus ₱1,000 per counsel’s court appearance, as attorney’s fees.
Petitioner countered that the non-involvement clause was unenforceable for
being against public order or public policy: First, the restraint imposed was
much greater than what was necessary to afford respondent a fair and
reasonable protection. Petitioner contended that the transfer to a rival
company was an accepted practice in the pre-need industry. Since the
products sold by the companies were more or less the same, there was
nothing peculiar or unique to protect. Second, respondent did not invest in
petitioner’s training or improvement. At the time petitioner was recruited, she
already possessed the knowledge and expertise required in the pre-need
industry and respondent benefited tremendously from it. Third, a strict
application of the non-involvement clause would amount to a deprivation of
petitioner’s right to engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial court ruled
that a contract in restraint of trade is valid provided that there is a limitation
upon either time or place. In the case of the pre-need industry, the trial court
found the two-year restriction to be valid and reasonable. The dispositive
portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay the following:
1. the amount of One Hundred Thousand Pesos (P100,000.00) for
and as damages, for the breach of the non-involvement provision
(Item No. 8) of the contract of employment;
2. costs of suit.
There being no sufficient evidence presented to sustain the grant of
attorney’s fees, the Court deems it proper not to award any.
SO ORDERED.6
On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned
that petitioner entered into the contract on her own will and volition. Thus,
she bound herself to fulfill not only what was expressly stipulated in the
contract, but also all its consequences that were not against good faith,
usage, and law. The appellate court also ruled that the stipulation prohibiting
non-employment for two years was valid and enforceable considering the
nature of respondent’s business.
Petitioner moved for reconsideration but was denied. Hence, this appeal by
certiorari where petitioner alleges that the Court of Appeals erred when:
A.
… [IT SUSTAINED] THE VALIDITY OF THE NON-INVOLVEMENT CLAUSE
IN PETITIONER’S CONTRACT CONSIDERING THAT THE PERIOD FIXED
THEREIN IS VOID FOR BEING OFFENSIVE TO PUBLIC POLICY
B.
… [IT SUSTAINED] THE AWARD OF LIQUIDATED DAMAGES
CONSIDERING THAT IT BEING IN THE NATURE OF A PENALTY THE
SAME IS EXCESSIVE, INIQUITOUS OR UNCONSCIONABLE7
Plainly stated, the core issue is whether the non-involvement clause is valid.
Petitioner avers that the non-involvement clause is offensive to public policy
since the restraint imposed is much greater than what is necessary to afford
respondent a fair and reasonable protection. She adds that since the
products sold in the pre-need industry are more or less the same, the
transfer to a rival company is acceptable. Petitioner also points out that
respondent did not invest in her training or improvement. At the time she
joined respondent, she already had the knowledge and expertise required in
the pre-need industry. Finally, petitioner argues that a strict application of the
non-involvement clause would deprive her of the right to engage in the only
work she knows.
Respondent counters that the validity of a non-involvement clause has been
sustained by the Supreme Court in a long line of cases. It contends that the
inclusion of the two-year non-involvement clause in petitioner’s contract of
employment was reasonable and needed since her job gave her access to
the company’s confidential marketing strategies. Respondent adds that the
non-involvement clause merely enjoined her from engaging in pre-need
business akin to respondent’s within two years from petitioner’s separation
from respondent. She had not been prohibited from marketing other service
plans.
As early as 1916, we already had the occasion to discuss the validity of a
non-involvement clause. In Ferrazzini v. Gsell,8 we said that such clause was
unreasonable restraint of trade and therefore against public policy.
In Ferrazzini, the employee was prohibited from engaging in any business or
occupation in the Philippines for a period of five years after the termination of
his employment contract and must first get the written permission of his
employer if he were to do so. The Court ruled that while the stipulation was
indeed limited as to time and space, it was not limited as to trade. Such
prohibition, in effect, forces an employee to leave the Philippines to work
should his employer refuse to give a written permission.
In G. Martini, Ltd. v. Glaiserman,9 we also declared a similar stipulation as
void for being an unreasonable restraint of trade. There, the employee was
prohibited from engaging in any business similar to that of his employer for a
period of one year. Since the employee was employed only in connection
with the purchase and export of abaca, among the many businesses of the
employer, the Court considered the restraint too broad since it effectively
prevented the employee from working in any other business similar to his
employer even if his employment was limited only to one of its multifarious
business activities.
However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as
legal, reasonable, and not contrary to public policy. In the said case, the
employee was restricted from opening, owning or having any connection with
any other drugstore within a radius of four miles from the employer’s place of
business during the time the employer was operating his drugstore. We said
that a contract in restraint of trade is valid provided there is a limitation upon
either time or place and the restraint upon one party is not greater than the
protection the other party requires.
Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement
clause in accordance with Article 130612 of the Civil Code. While the
complainant in that case was an independent agent and not an employee,
she was prohibited for one year from engaging directly or indirectly in
activities of other companies that compete with the business of her principal.
We noted therein that the restriction did not prohibit the agent from engaging
in any other business, or from being connected with any other company, for
as long as the business or company did not compete with the principal’s
business. Further, the prohibition applied only for one year after the
termination of the agent’s contract and was therefore a reasonable restriction
designed to prevent acts prejudicial to the employer.
Conformably then with the aforementioned pronouncements, a non-
involvement clause is not necessarily void for being in restraint of trade as
long as there are reasonable limitations as to time, trade, and place.
In this case, the non-involvement clause has a time limit: two years from the
time petitioner’s employment with respondent ends. It is also limited as to
trade, since it only prohibits petitioner from engaging in any pre-need
business akin to respondent’s.1awphi1.net
More significantly, since petitioner was the Senior Assistant Vice-President
and Territorial Operations Head in charge of respondent’s Hongkong and
Asean operations, she had been privy to confidential and highly sensitive
marketing strategies of respondent’s business. To allow her to engage in a
rival business soon after she leaves would make respondent’s trade secrets
vulnerable especially in a highly competitive marketing environment. In sum,
we find the non-involvement clause not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to
respondent.13
In any event, Article 1306 of the Civil Code provides that parties to a contract
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.
Article 115914 of the same Code also provides that obligations arising from
contracts have the force of law between the contracting parties and should
be complied with in good faith. Courts cannot stipulate for the parties nor
amend their agreement where the same does not contravene law, morals,
good customs, public order or public policy, for to do so would be to alter the
real intent of the parties, and would run contrary to the function of the courts
to give force and effect thereto.15 Not being contrary to public policy, the non-
involvement clause, which petitioner and respondent freely agreed upon, has
the force of law between them, and thus, should be complied with in good
faith.16
Thus, as held by the trial court and the Court of Appeals, petitioner is bound
to pay respondent ₱100,000 as liquidated damages. While we have equitably
reduced liquidated damages in certain cases,17 we cannot do so in this case,
since it appears that even from the start, petitioner had not shown the least
intention to fulfill the non-involvement clause in good faith.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
January 20, 2004, and the Resolution dated May 4, 2004, of the Court of
Appeals in CA-G.R. CV No. 74972, are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 163269 April 19, 2006
ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court
of Appeals (CA) in CA-G.R. CV No. 52235 as well as its Resolution2 denying
the Motion for Partial Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1,
1977.3 He was initially employed as an Audit Clerk, then as Credit
Investigator, Senior Clerk, Assistant Accountant, and Assistant Manager.
Prior to his retirement, he became the Manager of the Credit Investigation
and Appraisal Division of the Consumer’s Banking Group. In the meantime,
Rivera and his brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its
employees: (a) the Ordinary Retirement Program (ORP), under which an
employee would receive 85% of his monthly basic salary multiplied by the
number of years in service; and (b) the Special Retirement Program (SRP),
under which a retiring employee would receive 250% of the gross monthly
salary multiplied by the number of years in service.4 Since Rivera was only
45 years old, he was not qualified for retirement under the ORP. Under the
SRP, he was entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite,
Rivera applied for retirement under the SRP. Solidbank approved the
application and Rivera was entitled to receive the net amount
of P963,619.28. This amount included his performance incentive award
(PIA), and his unearned medical, dental and optical allowances in the
amount of P1,666.67, minus his total accountabilities to Solidbank amounting
to P106,973.00.6 Rivera received the amount and confirmed his separation
from Solidbank on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated Release,
Waiver and Quitclaim, which was notarized on March 1, 1995.8 Rivera
acknowledged receipt of the net proceeds of his separation and retirement
benefits and promised that "[he] would not, at any time, in any manner
whatsoever, directly or indirectly engage in any unlawful activity prejudicial to
the interest of Solidbank, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their successors-
in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any
kind."9
Aside from acknowledging that he had no cause of action against Solidbank
or its affiliate companies, Rivera agreed that the bank may bring any action
to seek an award for damages resulting from his breach of the Release,
Waiver and Quitclaim, and that such award would include the return of
whatever sums paid to him by virtue of his retirement under the
SRP.10 Rivera was likewise required to sign an undated Undertaking as a
supplement to the Release, Waiver and Quitclaim in favor of Solidbank in
which he declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his separation
pay in accordance with the SRP. In this Undertaking, he promised that "[he]
will not seek employment with a competitor bank or financial institution within
one (1) year from February 28, 1995, and that any breach of the Undertaking
or the provisions of the Release, Waiver and Quitclaim would entitle
Solidbank to a cause of action against him before the appropriate courts of
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking was not
notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed
Rivera as Manager of its Credit Investigation and Appraisal Division of its
Consumers’ Banking Group.12 Upon discovering this, Solidbank First Vice-
President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a
letter dated May 18, 1995, informing Rivera that he had violated the
Undertaking. She likewise demanded the return of all the monetary benefits
he received in consideration of the SRP within five (5) days from receipt;
otherwise, appropriate legal action would be taken against him.13
When Rivera refused to return the amount demanded within the given period,
Solidbank filed a complaint for Sum of Money with Prayer for Writ of
Preliminary Attachment14 before the Regional Trial Court (RTC) of Manila on
June 26, 1995. Solidbank, as plaintiff, alleged therein that in accepting
employment with a competitor bank for the same position he held in
Solidbank before his retirement, Rivera violated his Undertaking under the
SRP. Considering that Rivera accepted employment with Equitable barely
three months after executing the Undertaking, it was clear that he had no
intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount
of P963,619.28 plus interests therein, and attorney’s fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond
in such amount as this Honorable Court may fix, a writ of preliminary
attachment be forthwith issued against the properties of the
defendant as satisfaction of any judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff
the following sums: NINE HUNDRED SIXTY-THREE THOUSAND
SIX HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28)
PESOS, Philippine Currency, as of 23 May 1995, plus legal interest
of 12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for
every appearance by way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises. 15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa
and a copy of the Release, Waiver and Quitclaim and Undertaking which
Rivera executed.16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of
Rivera’s properties not exempt from execution. Thus, the Sheriff levied on a
parcel of land owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted
that he received the net amount of P963,619.28 as separation pay. However,
the employment ban provision in the Undertaking was never conveyed to him
until he was made to sign it on February 28, 1995. He emphasized that, prior
to said date, Solidbank never disclosed any condition to the retirement
scheme, nor did it impose such employment ban on the bank officers and
employees who had previously availed of the SRP. He alleged that the
undertaking not to "seek employment with any competitor bank or financial
institution within one (1) year from February 28, 1995" was void for being
contrary to the Constitution, the law and public policy, that it was
unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman,
and violative of his human rights. He further claimed that the Undertaking
was a contract of adhesion because it was prepared solely by Solidbank
without his participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary
Judgment, alleging therein that Rivera raised no genuine issue as to any
material fact in his Answer except as to the amount of damages. It prayed
that the RTC render summary judgment against Rivera. Solidbank alleged
that whether or not the employment ban provision contained in the
Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It
insisted that Rivera signed the Undertaking voluntarily and for valuable
consideration; and under the Release, Waiver and Quitclaim, he was obliged
to return the P963,619.28 upon accepting employment from a competitor
bank within the one-year proscribed period. Solidbank appended to its
motion the Affidavit of Villarosa, where she declared that Rivera was
employed by Equitable on May 1, 1995 for the same position he held before
his retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of
the parties as well as Villarosa’s Affidavit, there are genuine issues as to
material facts which call for the presentation of evidence. He averred that
there was a need for the parties to adduce evidence to prove that he did not
sign the Undertaking voluntarily. He claimed that he would not have been
allowed to avail of the SRP if he had not signed it, and consequently, his
retirement benefits would not have been paid. This was what Ed Nallas,
Solidbank Assistant Vice-President for HRD and Personnel, told him when
he received his check on February 28, 1995. Senior Vice-President Henry
Valdez, his superior in the Consumers’ Banking Group, also did not mention
that he would have to sign such Undertaking which contained the assailed
provision. Thus, he had no choice but to sign it. He insisted that the question
of whether he violated the Undertaking is a genuine issue of fact which called
for the presentation of evidence during the hearing on the merits of the case.
He also asserted that he could not cause injury or prejudice to Solidbank’s
interest since he never acquired any sensitive or delicate information which
could prejudice the bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had
been faithful to the provisions of the Release, Waiver and Quitclaim, and the
Undertaking, and had not committed any act or done or said anything to
cause injury to Solidbank.18
Rivera appended to his Opposition his Counter-Affidavit in which he
reiterated that he had to sign the Undertaking containing the employment
ban provision, otherwise his availment of the SRP would not push through.
There was no truth to the bank’s allegation that, "in exchange for receiving
the larger amount of P1,045,258.95 under the SRP, instead of the very much
smaller amount of P224,875.81 under the ORP, he agreed that he will not
seek employment in a competitor bank or financial institution within one year
from February 28, 1995." It was the bank which conceived the SRP to
streamline its organization and all he did was accept it. He stressed that the
decision whether to allow him to avail of the SRP belonged solely to
Solidbank. He also pointed out that the employment ban provision in the
Undertaking was not a consideration for his availment of the SRP, and that if
he did not avail of the retirement program, he would have continued working
for Solidbank for at least 15 more years, earning more than what he received
under the SRP. He alleged that he intended to go full time into the poultry
business, but after about two months, found out that, contrary to his
expectations, the business did not provide income sufficient to support his
family. Being the breadwinner, he was then forced to look for a job, and
considering his training and experience as a former bank employee, the job
with Equitable was all he could find. He insisted that he had remained faithful
to Solidbank and would continue to do so despite the case against him, the
attachment of his family home, and the resulting mental anguish, torture and
expense it has caused them.19
In his Supplemental Opposition, Rivera stressed that, being a former bank
employee, it was the only kind of work he knew. The ban was, in fact,
practically absolute since it applied to all financial institutions for one year
from February 28, 1995. He pointed out that he could not work in any other
company because he did not have the qualifications, especially considering
his age. Moreover, after one year from February 28, 1995, he would no
longer have any marketable skill, because by then, it would have been
rendered obsolete by non-use and rapid technological advances. He insisted
that the ban was not necessary to protect the interest of Solidbank, as, in the
first place, he had no access to any "secret" information which, if revealed
would be prejudicial to Solidbank’s interest. In any case, he was not one to
reveal whatever knowledge or information he may have acquired during his
employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking
from the 1995 SRP is purely a management prerogative. It was not for Rivera
to question and decry the bank’s policy to protect itself from unfair
competition and disclosure of its trade secrets. The substantial monetary
windfall given the retiring officers was meant to tide them over the one-year
period of hiatus, and did not prevent them from engaging in any kind of
business or bar them from being employed except with competitor
banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary
Judgment.22 The fallo of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of
plaintiff and against defendant ordering the latter to pay to plaintiff bank the
amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of
May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they
are directed to meet again and sit down to find out how they can finally end
this rift and litigation, all in the name of equity, for after all, defendant had
worked for the bank for some 18 years.23
The trial court declared that there was no genuine issue as to a matter of fact
in the case since Rivera voluntarily executed the Release, Waiver and
Quitclaim, and the Undertaking. He had a choice not to retire, but opted to do
so under the SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was
not unreasonable. To allow Rivera to be excused from his undertakings in
said deed and, at the same time, benefit therefrom would be to allow him to
enrich himself at the expense of Solidbank. The RTC ruled that Rivera had to
return the P963,619.28 he received from Solidbank, plus interest of 12% per
annum from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on
June 14, 2002 partially granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed
from is AFFIRMED with the modification that the attachment and levy upon
the family home covered by TCT No. 51621 of the Register of Deeds, Las
Piñas, Metro Manila, is hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact
except as to the amount of damages. It ratiocinated that the agreement
between Rivera and Solidbank was the law between them, and that the
interpretation of the stipulations therein could not be left upon the whims of
Rivera. According to the CA, Rivera never denied signing the Release,
Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the
proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his
pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job with
Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or
fraud in its execution. Having executed the said deed and thereafter
receiving the benefits under the SRP, he is deemed to have waived the right
to assail the same, hence, is estopped from insisting or retaining the said
amount of P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s family home
was void, and, pursuant to the mandate of Article 155, in relation to Article
153 of the Family Code, must be discharged.
Hence, this recourse to the Court.
Petitioner avers that –
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF
THE SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT
CONSIDERING THE EXISTENCE OF GENUINE ISSUES AS TO
MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF
EVIDENCE IN A TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON
HEREIN PETITIONER NULL AND VOID FOR BEING UNREASONABLE
AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR
CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S
DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE
AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST
OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING
THE PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER
TO PAY SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL
FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue
in their pleadings, affidavits, and documents, that is, whether the employment
ban incorporated in the Undertaking which petitioner executed upon his
retirement is unreasonable, oppressive, hence, contrary to public policy; and
(2) whether petitioner is liable to respondent for the restitution
of P963,619.28 representing his retirement benefits, and interest thereon at
12% per annum as of May 23, 1995 until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the
parties, and the documents and affidavits appended thereto, genuine issues
as to matters of fact were raised therein. He insists that the resolution of the
issue of whether the employment ban is unreasonable requires the
presentation of evidence on the circumstances which led to respondent
bank’s offer of the SRP and ORP, and petitioner’s eventual acceptance and
signing of the Undertaking on March 1, 1995. There is likewise a need to
adduce evidence on whether the employment ban is necessary to protect
respondent’s interest, and whether it is an undue restraint on petitioner’s
constitutional right to earn a living to support his family. He further insists that
respondent is burdened to prove that it sustained damage or injury by reason
of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision
that respondent is automatically entitled to the restitution of the P963,619.28.
Petitioner points out that all the deeds provide is that, in case of breach
thereof, respondent is entitled to protection before the appropriate courts of
law.
On the second issue, petitioner avers that the prohibition incorporated in the
Release, Waiver and Quitclaim barring him as retiree from engaging directly
or indirectly in any unlawful activity and disclosing any information
concerning the business of respondent bank, as well as the employment ban
contained in the Undertaking he executed, are oppressive, unreasonable,
cruel and inhuman because of its overbreath. He reiterates that it is against
public policy, an unreasonable restraint of trade, because it prohibits him to
work for one year in the Philippines, ultimately preventing him from
supporting his family. He points out that a breadwinner in a family of four
minor daughters who are all studying, with a wife who does not work, one
would have a very difficult time meeting the financial obligations even with a
steady, regular-paying job. He insists that the Undertaking deprives him of
the means to support his family, and ultimately, his children’s chance for a
good education and future. He reiterates that the returns in his poultry
business fell short of his expectations, and unfortunately, the business was
totally destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondent’s management prerogative does
not give it a license to entice its employees to retire at a very young age and
prohibit them from seeking employment in a so-called competitor bank or
financial institution, thus prevent them from working and supporting their
families (considering that banking is the only kind of work they know).
Petitioner avers that "management’s prerogative must be without abuse of
discretion. A line must be drawn between management prerogative regarding
business operations per se and those which affect the rights of the
employees. In treating its employees, management should see to it that its
employees are at least properly informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was
his retirement benefit which he earned after serving the bank for 18 years. It
was not a mere gift or gratuity given by respondent bank, without the latter
giving up something of value in return. On the contrary, respondent bank
received "valuable consideration," that is, petitioner quit his job at the
relatively young age of 45, thus enabling respondent to effect its
reorganization plan and forego the salary, benefits, bonuses, and promotions
he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to
a cause of action against him before the appropriate courts of law if he had
violated the employment ban. He avers that respondent must prove its
entitlement to the P963,619.28. The Undertaking contains no provision that
he would have to return the amount he received under the SRP; much less
does it provide that he would have to pay 12% interest per annum on said
amount. On the other hand, the Release, Waiver and Quitclaim does not
contain the provision prohibiting him from being employed with any
competitor bank or financial institution within one year from February 28,
1995. Petitioner insists that he acted in good faith when he received his
retirement benefits; hence, he cannot be punished by being ordered to return
the sum of P963,619.28 which was given to him for and in consideration of
his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per
annum on his retirement pay of P963,619.28 from May 23, 1995, as it is
improper and oppressive to him and his family. As of July 3, 2002, the
interest alone would amount to P822,609.67, thus doubling the amount to be
returned to respondent bank under the decision of the RTC and the CA. The
imposition of interest has no basis because the Release, Waiver and
Quitclaim, and the Undertaking do not provide for payment of interest. The
deeds only state that breach thereof would entitle respondent to bring an
action to seek damages, to include the return of the amount that may have
been paid to petitioner by virtue thereof. On the other hand, any breach of
the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.
Besides, the amount received by petitioner was not a loan and, therefore,
should not earn interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment
with another bank within one year from February 28, 1995 because he
needed to earn a living to support his family and finance his children’s
education. Hence, the imposition of interest, which is a penalty, is
unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is
the law between it and petitioner. As such, the latter could not assail the
deed after receiving the retirement benefit under the SRP. As gleaned from
the averments in his petition, petitioner admitted that he executed the
Undertaking after having been informed of the nature and consequences of
his refusal to sign the same, i.e., he would not be able to receive the
retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of
obligations voluntarily entered into simply because their contracts turned out
to be disastrous deeds. Citing the ruling of this Court in Eastern Shipping
Lines, Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged
to pay 12% per annum interest of the P963,619.28 from judicial or
extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained
damages, including the amount thereof, and that neither the Release, Waiver
and Quitclaim nor the Undertaking obliged him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. – A party seeking to recover
upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary judgment
in his favor upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be served at
least ten (10) days before the time specified for the hearing. The adverse
party may serve opposing affidavits, depositions, or admissions at least three
(3) days before the hearing. After the hearing, the judgment sought shall be
rendered forthwith if the pleadings, supporting affidavits, depositions, and
admissions on file, show that, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two
requisites: (a) there must be no genuine issue as to any material fact, except
for the amount of damages; and (b) the party presenting the motion for
summary judgment must be entitled to a judgment as a matter of
law.27 Where, on the basis of the pleadings of a moving party, including
documents appended thereto, no genuine issue as to a material fact exists,
the burden to produce a genuine issue shifts to the opposing party. If the
opposing party fails, the moving party is entitled to a summary judgment. 28
A genuine issue is an issue of fact which requires the presentation of
evidence as distinguished from an issue which is a sham, fictitious, contrived
or a false claim. The trial court can determine a genuine issue on the basis of
the pleadings, admissions, documents, affidavits or counteraffidavits
submitted by the parties. When the facts as pleaded appear uncontested or
undisputed, then there is no real or genuine issue or question as to any fact
and summary judgment called for. On the other hand, where the facts
pleaded by the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial.29 The evidence on record must be
viewed in light most favorable to the party opposing the motion who must be
given the benefit of all favorable inferences as can reasonably be drawn from
the evidence.30
Courts must be critical of the papers presented by the moving party and not
of the papers/documents in opposition thereto.31 Conclusory assertions are
insufficient to raise an issue of material fact.32 A party cannot create a
genuine dispute of material fact through mere speculations or compilation of
differences.33 He may not create an issue of fact through bald assertions,
unsupported contentions and conclusory statements.34 He must do more
than rely upon allegations but must come forward with specific facts in
support of a claim. Where the factual context makes his claim implausible, he
must come forward with more persuasive evidence demonstrating a genuine
issue for trial.35
Where there are no disputed material facts, the determination of whether a
party breached a contract is a question of law and is appropriate for
summary judgment.36 When interpreting an ambiguous contract with extrinsic
evidence, summary judgment is proper so long as the extrinsic evidence
presented to the court supports only one of the conflicting
interpretations.37 Where reasonable men could differ as to the contentions
shown from the evidence, summary judgment might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of
Appeals resolved the issue of whether a summary judgment is proper in a
breach of contract action involving the interpretation of such contract, and
ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the
contract’s terms are clear, or (b) the evidence supports only one construction
of the controverted provision, notwithstanding some ambiguity. x x x If the
court finds no ambiguity, it should proceed to interpret the contract – and it
may do so at the summary judgment stage. If, however, the court discerns an
ambiguity, the next step – involving an examination of extrinsic evidence –
becomes essential. x x x Summary judgment may be appropriate even if
ambiguity lurks as long as the extrinsic evidence presented to the court
supports only one of the conflicting interpretations.39
In this case, there is no dispute between the parties that, in consideration for
his availment of the SRP, petitioner executed the Release, Waiver and
Quitclaim, and the Undertaking as supplement thereto, and that he received
retirement pay amounting to P963,619.28 from respondent. On May 1, 1995,
within the one-year ban and without prior knowledge of respondent, petitioner
was employed by Equitable as Manager of its Credit Investigation and
Appraisal Division, Consumers’ Banking Group. Despite demands, petitioner
failed to return the P963,619.28 to respondent on the latter’s allegation that
he had breached the one-year ban by accepting employment from Equitable,
which according to respondent was a competitor bank.
We agree with petitioner’s contention that the issue as to whether the post-
retirement competitive employment ban incorporated in the Undertaking is
against public policy is a genuine issue of fact, requiring the parties to
present evidence to support their respective claims.
As gleaned from the records, petitioner made two undertakings. The first is
incorporated in the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly
engage in any unlawful activity prejudicial to the interest of the BANK, its
parent, affiliate or subsidiary companies, their stockholders, officers,
directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or
operation, its plans, processes or data of any kind.40
The second undertaking is incorporated in the Undertaking following
petitioner’s execution of the Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of
Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will
not seek employment with any competitor bank or financial institution within
one (1) year from February 28, 1995.41
In the Release, Waiver and Quitclaim, petitioner declared that respondent
may bring "an action for damages which may include, but not limited to the
return of whatever sums he may have received from respondent under said
deed if he breaks his undertaking therein."42 On the other hand, petitioner
declared in the Undertaking that "any breach on his part of said Undertaking
or the terms and conditions of the Release, Waiver and Quitclaim will entitle
respondent to a cause of action against [petitioner] for protection before the
appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs,
public order or public policy. The freedom of contract is both a constitutional
and statutory right.44 A contract is the law between the parties and courts
have no choice but to enforce such contract as long as it is not contrary to
law, morals, good customs and against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the
effects of an unwise, foolish or disastrous contract, entered into with full
awareness of what he was doing and entered into and carried out in good
faith. Such a contract will not be discarded even if there was a mistake of law
or fact. Courts have no jurisdiction to look into the wisdom of the contract
entered into by and between the parties or to render a decision different
therefrom. They have no power to relieve parties from obligation voluntarily
assailed, simply because their contracts turned out to be disastrous deals. 45
On the other hand, retirement plans, in light of the constitutional mandate of
affording full protection to labor, must be liberally construed in favor of the
employee, it being the general rule that pension or retirement plans
formulated by the employer are to be construed against it.46 Retirement
benefits, after all, are intended to help the employee enjoy the remaining
years of his life, releasing him from the burden of worrying for his financial
support, and are a form of reward for being loyal to the employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries
and in the United States and the Philippines:
By "public policy," as defined by the courts in the United States and England,
is intended that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against
the public good, which may be termed the "policy of the law," or "public policy
in relation to the administration of the law." (Words & Phrases Judicially
Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under
which freedom of contract or private dealing is restricted by law for the good
of the public. (Id., Id.) In determining whether a contract is contrary to public
policy the nature of the subject matter determines the source from which
such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P.
Ry. Co., 62 Fed. 904, 906.)
The foregoing is sufficient to show that there is no difference in principle
between the public policy (orden publico) in the two jurisdictions (the United
States and the Philippine Islands) as determined by the Constitution, laws,
and judicial decisions.49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for
subsistence or profit. Anderson’s Dictionary of Law gives the following
definition: "Generally equivalent to occupation, employment, or business,
whether manual or mercantile; any occupation, employment or business
carried on for profit, gain, or livelihood, not in the liberal arts or in the learned
professions." In Abbott’s Law Dictionary, the word is defined as "an
occupation, employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following: "The
business which a person has learnt, and which he carries on for subsistence
or profit; occupation; particularly employment, whether manual or mercantile,
as distinguished from the liberal arts or the learned professions and
agriculture." Bouvier limits the meaning to commerce and traffic, and the
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to
adopt and apply the broader meaning given by the lexicographers. 50
In the present case, the trial court ruled that the prohibition against petitioner
accepting employment with a competitor bank or financial institution within
one year from February 28, 1995 is not unreasonable. The appellate court
held that petitioner was estopped from assailing the post-retirement
competitive employment ban because of his admission that he signed the
Undertaking and had already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple reason that
it rendered summary judgment and thereby foreclosed the presentation of
evidence by the parties to prove whether the restrictive covenant is
reasonable or not. Moreover, on the face of the Undertaking, the post-
retirement competitive employment ban is unreasonable because it has no
geographical limits; respondent is barred from accepting any kind of
employment in any competitive bank within the proscribed period. Although
the period of one year may appear reasonable, the matter of whether the
restriction is reasonable or unreasonable cannot be ascertained with finality
solely from the terms and conditions of the Undertaking, or even in tandem
with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from
respondent. However, petitioner is not proscribed, by waiver or estoppel,
from assailing the post-retirement competitive employment ban since under
Article 1409 of the New Civil Code, those contracts whose cause, object or
purpose is contrary to law, morals, good customs, public order or public
policy are inexistent or void from the beginning. Estoppel cannot give validity
to an act that is prohibited by law or one that is against public policy.51
Respondent, as employer, is burdened to establish that a restrictive covenant
barring an employee from accepting a competitive employment after
retirement or resignation is not an unreasonable or oppressive, or in undue
or unreasonable restraint of trade, thus, unenforceable for being repugnant to
public policy. As the Court stated in Ferrazzini v. Gsell, 52 cases involving
contracts in restraint of trade are to be judged according to their
circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a
contract in restraint of trade is void as against public policy. One is, the injury
to the public by being deprived of the restricted party’s industry; and the other
is, the injury to the party himself by being precluded from pursuing his
occupation, and thus being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated
the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint
upon one party is not greater than protection to the other party requires, the
contract may be sustained. The question is, whether, under the particular
circumstances of the case and the nature of the particular contract involved
in it, the contract is, or is not, unreasonable.53
In cases where an employee assails a contract containing a provision
prohibiting him or her from accepting competitive employment as against
public policy, the employer has to adduce evidence to prove that the
restriction is reasonable and not greater than necessary to protect the
employer’s legitimate business interests.54 The restraint may not be unduly
harsh or oppressive in curtailing the employee’s legitimate efforts to earn a
livelihood and must be reasonable in light of sound public policy.55
Courts should carefully scrutinize all contracts limiting a man’s natural right to
follow any trade or profession anywhere he pleases and in any lawful
manner. But it is just as important to protect the enjoyment of an
establishment in trade or profession, which its employer has built up by his
own honest application to every day duty and the faithful performance of the
tasks which every day imposes upon the ordinary man. What one creates by
his own labor is his. Public policy does not intend that another than the
producer shall reap the fruits of labor; rather, it gives to him who labors the
right by every legitimate means to protect the fruits of his labor and secure
the enjoyment of them to himself.56 Freedom to contract must not be
unreasonably abridged. Neither must the right to protect by reasonable
restrictions that which a man by industry, skill and good judgment has built
up, be denied.57
The Court reiterates that the determination of reasonableness is made on the
particular facts and circumstances of each case.58 In Esmerson Electric Co.
v. Rogers,59 it was held that the question of reasonableness of a restraint
requires a thorough consideration of surrounding circumstances, including
the subject matter of the contract, the purpose to be served, the
determination of the parties, the extent of the restraint and the specialization
of the business of the employer. The court has to consider whether its
enforcement will be injurious to the public or cause undue hardships to the
employee, and whether the restraint imposed is greater than necessary to
protect the employer. Thus, the court must have before it evidence relating to
the legitimate interests of the employer which might be protected in terms of
time, space and the types of activity proscribed. 60
Consideration must be given to the employee’s right to earn a living and to
his ability to determine with certainty the area within which his employment
ban is restituted. A provision on territorial limitation is necessary to guide an
employee of what constitutes as violation of a restrictive covenant and
whether the geographic scope is co-extensive with that in which the
employer is doing business. In considering a territorial restriction, the facts
and circumstances surrounding the case must be considered.61
Thus, in determining whether the contract is reasonable or not, the trial court
should consider the following factors: (a) whether the covenant protects a
legitimate business interest of the employer; (b) whether the covenant
creates an undue burden on the employee; (c) whether the covenant is
injurious to the public welfare; (d) whether the time and territorial limitations
contained in the covenant are reasonable; and (e) whether the restraint is
reasonable from the standpoint of public policy.62
Not to be ignored is the fact that the banking business is so impressed with
public interest where the trust and interest of the public in general is of
paramount importance such that the appropriate standard of diligence must
be very high, if not the highest degree of diligence.63
We are not impervious of the distinction between restrictive covenants
barring an employee to accept a post-employment competitive employment
or restraint on trade in employment contracts and restraints on post-
retirement competitive employment in pension and retirement plans either
incorporated in employment contracts or in collective bargaining agreements
between the employer and the union of employees, or separate from said
contracts or collective bargaining agreements which provide that an
employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the
employer. The strong weight of authority is that forfeitures for engaging in
subsequent competitive employment included in pension and retirement
plans are valid even though unrestricted in time or geography. The raison
d’etre is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction
between restraints on competitive employment in employment contracts and
in pension plans. The strong weight of authority holds that forfeitures for
engaging in subsequent competitive employment, included in pension
retirement plans, are valid, even though unrestricted in time or geography.
The reasoning behind this conclusion is that the forfeiture, unlike the restraint
included in the employment contract, is not a prohibition on the employee’s
engaging in competitive work but is merely a denial of the right to participate
in the retirement plan if he does so engage. A leading case on this point is
Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a
forfeiture provision similar to that here, the Court said:
"A restriction in the contract which does not preclude the employee from
engaging in competitive activity, but simply provides for the loss of rights or
privileges if he does so is not in restraint of trade." (emphasis added) 65
A post-retirement competitive employment restriction is designed to protect
the employer against competition by former employees who may retire and
obtain retirement or pension benefits and, at the same time, engage in
competitive employment.66
We have reviewed the Undertaking which respondent impelled petitioner to
sign, and find that in case of failure to comply with the promise not to accept
competitive employment within one year from February 28, 1995, respondent
will have a cause of action against petitioner for "protection in the courts of
law." The words "cause of action for protection in the courts of law" are so
broad and comprehensive, that they may also include a cause of action for
prohibitory and mandatory injunction against petitioner, specific performance
plus damages, or a damage suit (for actual, moral and/or exemplary
damages), all inclusive of the restitution of the P963,619.28 which petitioner
received from respondent. The Undertaking and the Release, Waiver and
Quitclaim do not provide for the automatic forfeiture of the benefits petitioner
received under the SRP upon his breach of said deeds. Thus, the post-
retirement competitive employment ban incorporated in the Undertaking of
respondent does not, on its face, appear to be of the same class or genre as
that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded
for breach of contracts. Actual damages are primarily intended to simply
make good or replace the loss covered by said breach.67 They cannot be
presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the
amount thereof.68 In determining the amount of actual damages, the Court
cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable
regarding the actual amount of losses.69 The benefit to be derived from a
contract which one of the parties has absolutely failed to perform is of
necessity to some extent a matter of speculation of the injured party.
On the assumption that the competitive employment ban in the Undertaking
is valid, petitioner is not automatically entitled to return the P963,619.28 he
received from respondent. To reiterate, the terms of the Undertaking clearly
state that any breach by petitioner of his promise would entitle respondent to
a cause of action for protection in the courts of law; as such, restitution of
the P963,619.28 will not follow as a matter of course. Respondent is still
burdened to prove its entitlement to the aforesaid amount by producing
the best evidence of which its case is susceptible.70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE.
Let this case be REMANDED to the Regional Trial Court of Manila for further
proceedings conformably with this decision of the Court.
SO ORDERED.
G.R. No. 164774 April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN
CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E.
ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the
employer banning spouses from working in the same company violates the
rights of the employee under the Constitution and the Labor Code or is a
valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of
Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the
decision of the National Labor Relations Commission (NLRC) which affirmed
the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in
trading – principally of paper products. Josephine Ongsitco is its Manager of
the Personnel and Administration Department while Sebastian Chua is its
Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol
(Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all
regular employees of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma
Dayrit, also an employee of the company, whom he married on June 27,
1998. Prior to the marriage, Ongsitco advised the couple that should they
decide to get married, one of them should resign pursuant to a company
policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she
has [a] relative, up to [the] 3rd degree of relationship, already
employed by the company.
2. In case of two of our employees (both singles [sic], one male and
another female) developed a friendly relationship during the course
of their employment and then decided to get married, one of them
should resign to preserve the policy stated above. 3
Simbol resigned on June 20, 1998 pursuant to the company policy. 4
Comia was hired by the company on February 5, 1997. She met Howard
Comia, a co-employee, whom she married on June 1, 2000. Ongsitco
likewise reminded them that pursuant to company policy, one must resign
should they decide to get married. Comia resigned on June 30, 2000. 5
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a
co-worker. Petitioners stated that Zuñiga, a married man, got Estrella
pregnant. The company allegedly could have terminated her services due to
immorality but she opted to resign on December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They
stated therein that they have no money and property accountabilities in the
company and that they release the latter of any claim or demand of whatever
nature.7
Respondents offer a different version of their dismissal. Simbol and Comia
allege that they did not resign voluntarily; they were compelled to resign in
view of an illegal company policy. As to respondent Estrella, she alleges that
she had a relationship with co-worker Zuñiga who misrepresented himself as
a married but separated man. After he got her pregnant, she discovered that
he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to
recuperate for twenty-one (21) days. She returned to work on December 21,
1999 but she found out that her name was on-hold at the gate. She was
denied entry. She was directed to proceed to the personnel office where one
of the staff handed her a memorandum. The memorandum stated that she
was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has
not been given a chance to explain. The management asked her to write an
explanation. However, after submission of the explanation, she was
nonetheless dismissed by the company. Due to her urgent need for money,
she later submitted a letter of resignation in exchange for her thirteenth
month pay.8
Respondents later filed a complaint for unfair labor practice, constructive
dismissal, separation pay and attorney’s fees. They averred that the
aforementioned company policy is illegal and contravenes Article 136 of the
Labor Code. They also contended that they were dismissed due to their 2. x x x respondents’ resignations were far from voluntary.14
union membership.
We affirm.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the
complaint for lack of merit, viz.: The 1987 Constitution15 states our policy towards the protection of labor
under the following provisions, viz.:
[T]his company policy was decreed pursuant to what the respondent
corporation perceived as management prerogative. This management Article II, Section 18. The State affirms labor as a primary social economic
prerogative is quite broad and encompassing for it covers hiring, work force. It shall protect the rights of workers and promote their welfare.
assignment, working method, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations,
xxx
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and Article XIII, Sec. 3. The State shall afford full protection to labor, local and
judgment all the aspects of employment.9 (Citations omitted.) overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.
On appeal to the NLRC, the Commission affirmed the decision of the Labor
Arbiter on January 11, 2002. 10 It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
Respondents filed a Motion for Reconsideration but was denied by the NLRC
tenure, humane conditions of work, and a living wage. They shall also
in a Resolution11 dated August 8, 2002. They appealed to respondent
participate in policy and decision-making processes affecting their rights and
court via Petition for Certiorari.
benefits as may be provided by law.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed
The State shall promote the principle of shared responsibility between
the NLRC decision, viz.:
workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns on
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of investments, and to expansion and growth.
the National Labor Relations Commission is hereby REVERSED and SET
ASIDE and a new one is entered as follows:
The Civil Code likewise protects labor with the following provisions:

(1) Declaring illegal, the petitioners’ dismissal from employment and Art. 1700. The relation between capital and labor are not merely contractual.
ordering private respondents to reinstate petitioners to their former
They are so impressed with public interest that labor contracts must yield to
positions without loss of seniority rights with full backwages from the
the common good. Therefore, such contracts are subject to the special laws
time of their dismissal until actual reinstatement; and
on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.
(2) Ordering private respondents to pay petitioners attorney’s fees
amounting to 10% of the award and the cost of this suit.13
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer.
On appeal to this Court, petitioners contend that the Court of Appeals erred
in holding that: The Labor Code is the most comprehensive piece of legislation protecting
labor. The case at bar involves Article 136 of the Labor Code which provides:
1. x x x the subject 1995 policy/regulation is violative of the
constitutional rights towards marriage and the family of employees
Art. 136. It shall be unlawful for an employer to require as a condition of
and of Article 136 of the Labor Code; and
employment or continuation of employment that a woman employee shall not
get married, or to stipulate expressly or tacitly that upon getting married a
woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision.
Petitioners allege that its policy "may appear to be contrary to Article 136 of
the Labor Code" but it assumes a new meaning if read together with the first
paragraph of the rule. The rule does not require the woman employee to
resign. The employee spouses have the right to choose who between them
should resign. Further, they are free to marry persons other than co-
employees. Hence, it is not the marital status of the employee, per se, that is
being discriminated. It is only intended to carry out its no-employment-for-
relatives-within-the-third-degree-policy which is within the ambit of the
prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working
in the same company takes the nature of an anti-nepotism employment
policy. Companies adopt these policies to prevent the hiring of unqualified
persons based on their status as a relative, rather than upon their
ability.17 These policies focus upon the potential employment problems
arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting
employment policies specifically prohibiting spouses from working for the
same company. We note that two types of employment policies involve
spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same
company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes20 in the United States
prohibiting marital discrimination. Some state courts21 have been confronted
with the issue of whether no-spouse policies violate their laws prohibiting
both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States,
complainants utilize two theories of employment discrimination:
the disparate treatment and the disparate impact. Under the disparate
treatment analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an
employee of a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the employer
from hiring wives of male employees, but not husbands of female employees,
is discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must
prove that a facially neutral policy has a disproportionate effect on a
particular class. For example, although most employment policies do not
expressly indicate which spouse will be required to transfer or leave the
company, the policy often disproportionately affects one sex.23
The state courts’ rulings on the issue depend on their interpretation of the
scope of marital status discrimination within the meaning of their respective
civil rights acts. Though they agree that the term "marital status"
encompasses discrimination based on a person's status as either married,
single, divorced, or widowed, they are divided on whether the term has
a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's
status as married, single, divorced, or widowed reason that if the legislature
intended a broader definition it would have either chosen different language
or specified its intent. They hold that the relevant inquiry is if one is married
rather than to whom one is married. They construe marital status
discrimination to include only whether a person is single, married, divorced,
or widowed and not the "identity, occupation, and place of employment of
one's spouse." These courts have upheld the questioned policies and ruled
that they did not violate the marital status discrimination provision of their
respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse.
They strike down the no-spouse employment policies based on the broad
legislative intent of the state statute. They reason that the no-spouse
employment policy violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without regard to the
actual effect on the individual's qualifications or work performance.27 These
courts also find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the
general perception that spouses in the same workplace might adversely
affect the business.28 They hold that the absence of such a bona fide
occupational qualification29 invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the same
office.30 Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital
status and there is no better available or acceptable policy which would
better accomplish the business purpose, an employer may not discriminate
against an employee based on the identity of the employee’s spouse.31 This
is known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification
justifies an employer’s no-spouse rule, the exception is interpreted strictly
and narrowly by these state courts. There must be a compelling business
necessity for which no alternative exists other than the discriminatory
practice.32 To justify a bona fide occupational qualification, the employer
must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a
factual basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our
jurisdiction. We employ the standard of reasonableness of the company
policy which is parallel to the bona fide occupational qualification
requirement. In the recent case of Duncan Association of Detailman-
PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we
passed on the validity of the policy of a pharmaceutical company prohibiting its
employees from marrying employees of any competitor company. We held that
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors. We
considered the prohibition against personal or marital relationships with employees
of competitor companies upon Glaxo’s employees reasonable under the
circumstances because relationships of that nature might compromise the interests of
Glaxo. In laying down the assailed company policy, we recognized that Glaxo only
aims to protect its interests against the possibility that a competitor company will
gain access to its secrets and procedures.35
The requirement that a company policy must be reasonable under the
circumstances to qualify as a valid exercise of management prerogative was
also at issue in the 1997 case of Philippine Telegraph and Telephone
Company v. NLRC.36 In said case, the employee was dismissed in violation
of petitioner’s policy of disqualifying from work any woman worker who
contracts marriage. We held that the company policy violates the right
against discrimination afforded all women workers under Article 136 of the
Labor Code, but established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be
justified as a "bona fide occupational qualification," or BFOQ, where the
particular requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of spreading work in
the workplace. A requirement of that nature would be valid provided it reflects
an inherent quality reasonably necessary for satisfactory job
performance.37(Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of
reasonableness must be clearly established to uphold the questioned
employment policy. The employer has the burden to prove the existence of a
reasonable business necessity. The burden was successfully discharged in
Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two
(2) or more of its employees related between the third degree by affinity
and/or consanguinity"38 is lame. That the second paragraph was meant to
give teeth to the first paragraph of the questioned rule39 is evidently not the
valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a
co-employee. Petitioners failed to show how the marriage of Simbol, then a
Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither
did petitioners explain how this detriment will happen in the case of Wilfreda
Comia, then a Production Helper in the Selecting Department, who married
Howard Comia, then a helper in the cutter-machine. The policy is premised
on the mere fear that employees married to each other will be less efficient. If
we uphold the questioned rule without valid justification, the employer can
create policies based on an unproven presumption of a perceived danger at
the expense of an employee’s right to security of tenure.
Petitioners contend that their policy will apply only when one employee
marries a co-employee, but they are free to marry persons other than co-
employees. The questioned policy may not facially violate Article 136 of the
Labor Code but it creates a disproportionate effect and under the disparate
impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The
failure of petitioners to prove a legitimate business concern in imposing the
questioned policy cannot prejudice the employee’s right to be free from
arbitrary discrimination based upon stereotypes of married persons working
together in one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in
our jurisdiction cannot benefit the petitioners. The protection given to labor in
our jurisdiction is vast and extensive that we cannot prudently draw
inferences from the legislature’s silence41 that married persons are not
protected under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present undisputed
proof of a reasonable business necessity, we rule that the questioned policy
is an invalid exercise of management prerogative. Corollarily, the issue as to
whether respondents Simbol and Comia resigned voluntarily has become
moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling
on the singular fact that her resignation letter was written in her own
handwriting. Both ruled that her resignation was voluntary and thus valid. The
respondent court failed to categorically rule whether Estrella voluntarily
resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella claims that she was pressured to submit a resignation letter because
she was in dire need of money. We examined the records of the case and
find Estrella’s contention to be more in accord with the evidence. While
findings of fact by administrative tribunals like the NLRC are generally given
not only respect but, at times, finality, this rule admits of exceptions, 42 as in
the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was
dismissed due to her alleged immoral conduct. At first, she did not want to
sign the termination papers but she was forced to tender her resignation
letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because
she got impregnated by a married man and she could not stand being looked
upon or talked about as immoral43 is incredulous. If she really wanted to
avoid embarrassment and humiliation, she would not have gone back to work
at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is
compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a
complaint for illegal dismissal. Given the lack of sufficient evidence on the
part of petitioners that the resignation was voluntary, Estrella’s dismissal is
declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP
No. 73477 dated August 3, 2004 is AFFIRMED.1avvphil.net
SO ORDERED.
G.R. No. 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
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 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 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)
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 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:
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
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:
(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.
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 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.
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
"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. 162994. September 19, 2005]
DUNCAN ASSOCIATION vs. GLAXO
SECOND DIVISION
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court
dated SEP 19 2005.
G.R. No. 162994 (Duncan Association Of Detailman-PTGWO and
Pedro A. Tecson vs. Glaxo Wellcome Philippines, Inc.)
For resolution is a Motion for Reconsideration dated 8 October 2004,
filed by petitioners who seek the reversal of the
Court's Resolution1 dated 17 September 2004 denying the
instant Petition for Review.
A brief recapitulation of the facts is in order. Petitioner Pedro Tecson
("Tecson") was employed in 1995 by respondent Glaxo Wellcome
Philippines, Inc. ("Glaxo") as a medical representative. He was
assigned to market Glaxo's products in the Camarines Sur-
Camarines Norte sales area. Upon his employment, Tecson signed
an employment contract, wherein he agreed, among others, to study
and abide by existing company rules; to disclose to management
any existing or future relationship by consanguinity or affinity with
co-employees or employees of competing drug companies; and if
management found that such relationship posed a possible conflict
of interest, to resign from the company.
Nonetheless, Tecson became romantically involved with Bettsy, an
employee of a rival pharmaceutical firm Astra Pharmaceuticals
("Astra"). The two eventually married in September of 1998. The
relationship, including the subsequent marriage, was cause for
consternation to Glaxo. On January 1999, Tecson's superiors
informed him that his marriage to Bettsy had given rise to a conflict
of interest. Negotiations ensued, with Tecson adverting to his wife's
possible resignation from Astra, and Glaxo making it known that they
preferred to retain his services owing to his good performance. Yet
no resolution came to pass. In September 1999, Tecson applied for
a transfer to Glaxo's milk division, but his application was denied in
view of Glaxo's "least-movement-possible" policy. Then in November
1999, Glaxo transferred Tecson to the Butuan City-Surigao City-
Agusan del Sur sales area. Tecson asked Glaxo to reconsider its
decision, but his request was denied.
The matter was then brought to the Glaxo Grievance Committee,
and subsequently to a voluntary arbitrator. On 15 November 2000,
the National Conciliation and Mediation Board (NCMB) rendered
its Decision declaring as valid Glaxo's policy on relationships
between its employees and persons employed with competitor
companies, and affirming Glaxo's right to transfer Tecson to another
sales territory. This Decision was assailed by petitioners before the
Court of Appeals and this Court, but for naught.
The present Motion for Reconsideration advances four main
arguments: that the Court erroneously relied on a conjectural
presumption that Tecson's relationship might compromise the
interest of the company or allow a competitor to gain access to
Glaxo's secrets and procedures; that Glaxo's policy regarding the
marriage of its employees to employees of rival companies is
contrary to public policy, morals and good customs; that Glaxo
violated its own policy which authorized the transfer of the subject
employee to another department when it denied Tecson's application
to transfer to the milk division; and that Tecson was constructively
dismissed when he was transferred to the Butuan City-Surigao City-
Agusan del Sur sales area.
One of the central anchors of the assailed Resolution was the holding
that Glaxo's policy on marriage did not violate the equal protection
clause of the Constitution,2 as the constitutional guarantee does not
encompass discriminatory behavior engaged by private
individuals.3 Petitioners do not challenge this holding of the Court,
and we see no reason to revisit this issue.
But before we engage in a renewed discussion on the validity of
Glaxo's policy itself, we should examine the claim that Tecson was
constructively dismissed. After all, assuming that the policy itself
were declared invalid, a finding nonetheless that Tecson was not
constructively dismissed would still render this petition futile. The
Court has ruled Tecson was not actually dismissed, and the Motion
for Reconsideration adduces no substantial reasons why this holding
should be reversed.
The Resolution cited Abbott Laboratories (Phils.), Inc. v.
NLRC4 wherein the Court upheld the prerogative of a drug company
to reassign a medical representative under its employ to a new
territory. In the same vein, the Court has consistently affirmed as a
valid prerogative of the employer the reasonable reassignment or
transfer of an employee. As held in Philippine Japan Active Carbon
Corp. v. NLRC:5
It is the employer's prerogative, based on its assessment and
perception of its employees' qualifications, aptitudes, and
competence, to move them around in the various areas of its
business operations in order to ascertain where they will function
with maximum benefit to the company. An employee's right to
security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change
his assignment or transfer him where he will be most useful. When
his transfer is not unreasonable, nor inconvenient, nor prejudicial to
him, and it does not involve a demotion in rank or a diminution of
his salaries, benefits, and other privileges, the employee may not
complain that it amounts to a constructive dismissal.6
In Philippine Telegraph and Telephone Corp. v. Laplana,7 the Court
again upheld the prerogative of management to reassign an
employee to a different locality, despite the "personal inconvenience
or hardship that will be caused to the employee by reason of the
transfer."
Tecson was not relieved of his employment with Glaxo. Neither was
he transferred to a different position of lower rank or remuneration.
The alleged constructive dismissal pertained to his transfer to Butuan
from Naga City, a reassignment that would fall within the ambit of
management's prerogative to transfer employees.
Petitioners, in their Motion for Reconsideration, purport that
constructive dismissal was proved by the allegation that Tecson's
commissions for January and February were withheld from him, and
that he was forced to surrender his sales paraphernalia. Yet the
veracity of these factual allegations were not acknowledged by either
the voluntary arbitrator or the Court of Appeals. This Court, which is
not a trier of facts, could not very well at this late stage reverse the
established factual conclusions on the basis of mere allegations
which have not been previously substantiated but which in fact have
been consistently rebutted by the respondents.8
In case of a constructive dismissal, the employer has the burden of
proving that the transfer and demotion of an employee are for valid
and legitimate grounds, i.e., that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges and other
benefits.9 In this case, Glaxo did not opt to terminate or demote
Tecson, but transferred him to a sales region that included the
respective home provinces of himself and his wife, and offered
monetary assistance to shoulder his family's relocation.10.
Certainly, the choice of location was not selected with petty malice
aforethought, but even designed for the easier palatability of the
employee.
The fact that the employee may be displaced from established roots
by reason of the transfer is not sufficient to deny the valid
management prerogative to transfer its employees. Tecson himself
had acknowledged this prerogative when he signed the contract of
employment which expressly agreed "to be assigned any work or
work station for such periods as may be determined by the company
and whenever the operations require such assignment."
This finding that Tecson was not actually dismissed is determinative
of this case, especially considering that his transfer by Glaxo from
Naga to Butuan would have been a valid exercise of an employer's
prerogative, whether or not the company policy on marriage
subsists. Nonetheless, it would be specious to assume that Tecson's
transfer had nothing to do with his marriage to an employee from a
rival drug company. Moreover, questions on the validity, if not
appropriateness of Glaxo's policy itself, has attracted comment on
the various triers of this case, as well as the public at large.
May an employer impose conditions, restrictions or consequences on
an employee by reason of the latter's choice to marry or choice of
spouse? The answer would really all depend on the particular
circumstances in each case.
The governing legal framework should be established. Under Article
136 of the Labor Code, it is illegal for an employer to prohibit a
female employee from getting married or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee
merely by reason of her marriage. This provision addresses a
concern, particularly gender discrimination, with no direct relevance
to this case. Nonetheless, it can be invoked by a female employee
who finds herself prohibited by her employer from contracting
marriage, or otherwise dismissed or discriminated upon by reason of
her marriage, and the employer faces the unenviable burden of
establishing the inapplicability of Article 136.11
Of more general application is Article 282 of the Labor Code, which
governs the termination by employers for "just causes." Had Tecson
been actually terminated in this case, Article 282 would have
necessarily found application, since Articles 282 to 284 stand as the
only basis in law for the valid termination of an employee by an
employer.12
Under Article 282, the employer may dismiss the employee for any
of the following causes: (a) serious misconduct or willful
disobedience by the employee of the lawful order of his employer or
representative in connection with his work; (b) gross and habitual
neglect by the employee of his duties; (c) fraud or willful breach by
the employee of the trust reposed in him by his employer or duly
authorized representative; (d) commission of a crime or offense
against the person of his employer or any immediate member of his
family or his duly authorized representative; and (e) other causes
analogous to the foregoing. Assuming that there is a company policy
allowing the dismissal, constructive13 or otherwise, of an employee
by reason of the employee's marriage or choice of spouse, such
policy alone cannot justify the dismissal. The employer will have to
establish not only the existence of the policy, but the presence of
any of the grounds enumerated in Article 282. Our Constitution and
Labor Code guarantee an employee's security of tenure. For regular
employees as defined under the Labor Code, security of tenure is
assured by the prohibition against termination except for the causes
enumerated under Articles 282 to 284.
Thus, the validity of a company policy on marriage such as that
maintained by Glaxo would not necessarily be determinative of the
question of whether an employee who violated such policy may be
terminated. Still, there may be instances wherein the validity of the
policy, whether standing by itself or as incorporated into an
employment contract, would be the decisive factor. Such may arise
if for example, the employee is sought to be dismissed on the ground
of loss of confidence,14 and such loss of confidence developed due
to the marriage to an employee from a rival company. In such cases
wherein it is necessary to pass judgment on the employer's policy
itself, the following points should be considered.
Both the Constitution and our body of statutory laws accord special
status and protection to the contract of marriage. Our Constitution
recognizes that "marriage, as an inviolable social institution, is the
foundation of the family, and shall be protected by the State,"15 and
our Family Code acknowledges that marriage is "a special contract
of permanent union ... an inviolable social institution whose nature,
consequences and incidents are governed by law."16 It may be
debatable whether these provisions, by themselves, may be the
source of operative and executory rights, but at the very least, they
establish a pervasive public policy that frowns upon acts that
encumber any person's freedom to marry.
Moreover, if such encumbrance is contained in an employment
contract, the stipulation can be declared void under Article 1409(1)
of the Civil Code, which provides that a contract whose cause, object
or purpose is contrary to law, morals, good customs, public order or
public policy is inexistent and void from the beginning.17 The
standard is of great utility, as it allows a measure of relief for persons
laboring under private contractual obligations that, while
insusceptible to the traditional constitutional challenge under the Bill
of Rights, nonetheless stand as onerous to the obligor and noxious
to our general body of laws.
Still, it would be injudicious, if not irresponsible, to judicially enforce
a universal position that disencumbers marriage from adverse
consequences, if the encumbrance stands to protect third persons
inevitably affected by an act of marital union. For much as we may
want to see and regard marriage in a vestal state, it may be a source
of negativity for third persons, and not just the jilted. This is
apparent even on the most visceral level, as anybody who dislikes
an immediate family member's choice of bride or groom can attest
to. The statutory protections accorded to marriage do not translate
to a legal compulsion on people to favor another person's choice in
spouse.
The thesis is harmless enough if the consequence of such
disapproval extends merely into the personal sphere and not the
legal. Yet, such as in this case, the consequences may be economic
as well. For example, an aunt who voluntarily extends regular
financial benefits to a nephew may refuse to continue the doleout by
reason of the relative's marriage or choice of wife. In such a case,
the nephew would have no cause of action to compel his aunt to
continue the remuneration, even if the aunt's reasons for disliking
the new wife are noxious, such as bigotry. The invocation of the
inviolability of marriage or its protection under law will not suffice to
legally compel the aunt to extend her largesse to her nephew, for
this act of charity arises solely from private volition. The State may
protect marriage, but it cannot compel private persons to give away
money out of their pockets to the bride and groom.
If the prohibitions or restrictions are contained in a private
employment policy or contract, the norms that would govern their
review are such as those contained in the Labor Code, and to an
extent, the "public policy" clauses of the Civil Code.18 However, the
sanctity of the marital vow should not be the only relevant
consideration at hand. The considerations which may have impelled
the employer to impose such conditions on the employee's absolute
right to marry warrant examination as well.
We can surmise that if the restrictions or conditions on the
employee's right to marry bear no relevance to any interests that
the employer should be concerned with, then they should be voided
if they are of obligatory import. In that regard, it is difficult to foresee
an instance wherein an absolute prohibition on any marriage
imposed on the employees may be sanctioned.19 Even if the
prohibition is premised on the belief that a married employee would
be able to devote less time to the job, whatever causal economic
concerns hardly outweigh the right of an individual to get married.
Employees this day and age have long transcended the yoke of
serfdom and absolute fealty to master and the expense of the marital
bind.
If the prohibition or restriction pertains to the choice of spouse,
rather than the choice to marry at all, there should be an
examination of the rationale behind the constraint. Again, if the
restrictions or conditions bear no relevance to any interests that the
employer should be concerned with, then they should not be upheld.
Restrictions that are nothing more than the enforcement of personal
biases, such as prohibitions on marrying members of a particular
race or ethnic group, may be struck down.
Nonetheless, while generalities may be sufficient to strike down the
most obnoxious of prohibitions, those restrictions that are geared
towards maintaining valid economic concerns of the employer have
to be assessed on a case to case basis. Our fundamental law respects
the right of enterprises to adopt and enforce such a policy to protect
its right to reasonable returns on investments and to expansion and
growth.20
If the rationale in question relates to a consideration so vital to the
interests of the employer as to warrant legal protection, it should
then be determined whether the means employed by the employer
are reasonable enough as to allow a measure of balance between
these key interests of the employer and the fundamental right of the
employee to marry.
Let us pay particular attention to Glaxo's policy. As noted in
the Resolution, Glaxo belongs to the highly competitive
pharmaceutical industry. The competitive nature of the business is
further highlighted by the fact that pharmaceutical drugs are
indispensable to modern society, and that the rival companies tend
to produce drugs of like effect but marketed under respective brand
names. Thus, within the pharmaceutical industry, the hazard of
industrial espionage looms largely, more so than most other
competitive industries. To that end, Glaxo is entitled to guard its
trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors,
concomitant to its right to protect its own economic interests.
This in mind, it is but reasonable for Glaxo to be cautious about the
social interaction of its employees with those of companies which it
directly competes with. If the employee goes as far as sharing hearth
and home with the employee of the rival company, there is greater
cause of concern on the part of Glaxo. The fear may not so much
arise from the possibility of willful betrayal by its employees of trade
secrets, but from the myriad opportunities in the course of shared
lives that one may inadvertently divulge to the spouse confidential
information that the rival drug company may benefit from. After all,
the employer has no control over pillow talk. Neither could it be
expected that the employee maintain a higher fidelity to the
employer than to the spouse.
It may be so, as petitioners argue, much of the fear is hypothetical
in nature. Yet Glaxo, as with any other industry, is allowed to take
reasonable steps in order to prevent potential damage from
becoming actual, especially if the economic consequences are
substantial. Glaxo is hardly a small-scale industry, and the
pharmaceutical business seldom characterized by old-fashioned
rectitude.
Still, these concerns aside, the steps that Glaxo may employ to avoid
the undue divulgence of its trade secrets should be within reason. If
termination is to be considered as an option, it should be only as a
final resort, if there is no other way to avoid the conflict of interest.
In this case, Glaxo's assailed policy does not call for automatic
termination, providing as it does a process that allows for all the
opportunities for a mutually agreeable solution. Per the Employee
Handbook, "every effort shall be made, together by management
and the employee, to arrive at a solution within six (6) months,
either by transfer to another department in a non-counter checking
position, or by career preparation toward outside employment after
Glaxo Wellcome. Employees must be prepared for possible
resignation within six (6) months, if no other solution is feasible."21
This procedure is extremely reasonable under the circumstances,
and we have no problems in upholding its validity. As noted in
the Resolution: "[i]n any event, from the wordings of the contractual
provision and the policy in its employee handbook, it is clear that
Glaxo does not impose an absolute prohibition against relationships
between its employees and those of competitor companies. Its
employees are free to cultivate relationships with and marry persons
of their own choosing."22 It recognizes the concern arising from the
possible conflict of interest, yet dissuades the enforcement of a
hasty, unilateral solution. It appears from the record of this case that
such a procedure was adopted in good faith by both parties. Tecson
may find fault with the fact that Glaxo refused his request for
transfer to the milk division, a step which, if resorted to, may have
resolved the perceived conflict of interest. Yet the procedure
involved allows the transfer only if mutually agreed upon, and
besides, employees cannot generally compel the employer to
transfer them from one division to another, this being a management
prerogative.
And finally, if no mutual resolution is arrived at, termination and
voluntary resignation remain as viable options. Neither obtained in
this case, and we have already ruled that the transfer was valid and
did not constitute constructive dismissal. If Glaxo, or any employer
with a similarly drawn-out procedure, were to ultimately resort to
termination, the burden would still fall upon it to establish that such
termination is in accordance with the just causes as provided in
Article 282 of the Labor Code. Without such linkage, the termination
would be invalid.
The fact that there was no actual termination in this case obviates
the need for us to further apply Article 282 or the jurisprudential
rules on illegal termination to this case.
Still, should Glaxo retain the said policy, and another employee trek
the same trail as Tecson did, it cannot be foreordained that the Court
would similarly rule for Glaxo and against the said employee. As
repeatedly emphasized, it all depends on the particular
circumstances of each case. And ultimately, if dismissal, constructive
or otherwise, is resorted to, the standards for termination set by the
Labor Code must still be complied with.
WHEREFORE, petitioner's Motion for Reconsideration is DENIED
WITH FINALITY.
G.R. No. 158693 November 17, 2004
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of
National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the
business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board
and cornice installers on January 2, 19922 until February 23, 1999 when they
were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision
declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the
complainants illegal. Accordingly, respondent is hereby ordered to
pay them their backwages up to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one
(1) month for every year of service from date of hiring up to
November 29, 1999.
Respondent is further ordered to pay the complainants their holiday
pay and service incentive leave pay for the years 1996, 1997 and
1998 as well as their premium pay for holidays and rest days and
Virgilio Agabon's 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND
SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for
Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND
EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos
for Virgilio Agabon, as per attached computation of Julieta C.
Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages
and separation pay. The other money claims awarded by the Labor Arbiter
were also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for
certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was
not illegal because they had abandoned their employment but ordered the
payment of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations
Commission is REVERSED only insofar as it dismissed petitioner's
money claims. Private respondents are ordered to pay petitioners
holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as
well as their service incentive leave pay for said years, and to pay
the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in
the amount of P2,150.00.
 SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were
illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent
refused to give them assignments unless they agreed to work on
a "pakyaw" basis when they reported for duty on February 23, 1999. They did
not agree on this arrangement because it would mean losing benefits as
Social Security System (SSS) members. Petitioners also claim that private
respondent did not comply with the twin requirements of notice and hearing. 8
Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work.9 In fact, private respondent sent
two letters to the last known addresses of the petitioners advising them to
report for work. Private respondent's manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the
new assignment at Pacific Plaza Towers involving 40,000 square meters of
cornice installation work. However, petitioners did not report for work
because they had subcontracted to perform installation work for another
company. Petitioners also demanded for an increase in their wage to
P280.00 per day. When this was not granted, petitioners stopped reporting
for work and filed the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC
are accorded not only respect but even finality if the findings are supported
by substantial evidence. This is especially so when such findings were
affirmed by the Court of Appeals.11 However, if the factual findings of the
NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing
court may delve into the records and examine for itself the questioned
findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled
that petitioners' dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the
opportunity to be heard and to defend himself.13 Article 282 of the Labor
Code enumerates the just causes for termination by the employer: (a)
serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection with the
employee's work; (b) gross and habitual neglect by the employee of his
duties; (c) fraud or willful breach by the employee of the trust reposed in him
by his employer or his duly authorized representative; (d) commission of a
crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.14 It is a form of neglect of duty, hence, a just cause
for termination of employment by the employer.15 For a valid finding of
abandonment, these two factors should be present: (1) the failure to report
for work or absence without valid or justifiable reason; and (2) a clear
intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it
may be deduced that the employees has no more intention to work. The
intent to discontinue the employment must be shown by clear proof that it
was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted
for an installation work for another company. Subcontracting for another
company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this.
In January 1996, they did not report for work because they were working for
another company. Private respondent at that time warned petitioners that
they would be dismissed if this happened again. Petitioners disregarded the
warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in
determining the penalty that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately
absented from work without leave or permission from his employer, for the
purpose of looking for a job elsewhere, is considered to have abandoned his
job. We should apply that rule with more reason here where petitioners were
absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of
notice and hearing in the termination of employment. On the other hand, the
law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good
conduct19 and loyalty. The employer may not be compelled to continue to
employ such persons whose continuance in the service will patently be
inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we
now determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I,
Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of
termination of employment, the following standards of due process
shall be substantially observed:
I. For termination of employment based on just causes as defined in
Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned,
with the assistance of counsel if the employee so desires, is given
opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice of termination served on the employee indicating
that upon due consideration of all the circumstances, grounds have
been established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable
to the employee while dismissals based on authorized causes involve
grounds under the Labor Code which allow the employer to terminate
employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust,
separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a
hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss;
and (2) if the dismissal is based on authorized causes under Articles
283 and 284, the employer must give the employee and the Department
of Labor and Employment written notices 30 days prior to the effectivity
of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284,
and due process was observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is without just or
authorized cause and there was no due process; and (4) the dismissal is for
just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual
reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal
should be upheld because it was established that the petitioners abandoned
their jobs to work for another company. Private respondent, however, did not
follow the notice requirements and instead argued that sending notices to the
last known addresses would have been useless because they did not reside
there anymore. Unfortunately for the private respondent, this is not a
valid excuse because the law mandates the twin notice requirements to
the employee's last known address.21 Thus, it should be held liable for
non-compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate
and timely to clarify the various rulings on employment termination in the light
of Serrano v. National Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,23 we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and
hearing, was not entitled to reinstatement and backwages because the
dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and
caused trouble during office hours, defying superiors who tried to pacify him.
We concluded that reinstating the employee and awarding backwages "may
encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent for
just cause should be maintained. He has no right to return to his
former employment.
However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation
before causing his dismissal. The rule is explicit as above discussed.
The dismissal of an employee must be for just or authorized cause
and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation as
required by law before dismissing petitioner from employment.
Considering the circumstances of this case petitioner must indemnify
the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the
omission committed by the employer.25
The rule thus evolved: where the employer had a valid reason to
dismiss an employee but did not follow the due process requirement,
the dismissal may be upheld but the employer will be penalized to pay
an indemnity to the employee. This became known as the Wenphil or
Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was
changed. We held that the violation by the employer of the notice
requirement in termination for just or authorized causes was not a denial of
due process that will nullify the termination. However, the dismissal is
ineffectual and the employer must pay full backwages from the time of
termination until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was
the significant number of cases involving dismissals without requisite notices.
We concluded that the imposition of penalty by way of damages for violation
of the notice requirement was not serving as a deterrent. Hence, we now
required payment of full backwages from the time of dismissal until the time
the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay
later" by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full
meaning of Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. – In cases of regular employment, the
employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified
or authorized causes provided by law. Payment of backwages and other
benefits, including reinstatement, is justified only if the employee was unjustly
dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which
elicited strong dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the
Constitution embodies a system of rights based on moral principles so
deeply imbedded in the traditions and feelings of our people as to be deemed
fundamental to a civilized society as conceived by our entire history. Due
process is that which comports with the deepest notions of what is fair and
right and just.26 It is a constitutional restraint on the legislative as well as on
the executive and judicial powers of the government provided by the Bill of
Rights.
Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in
the Implementing Rules of P.D. 442, as amended, otherwise known as the
Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by
Department Order Nos. 9 and 10.27 Breaches of these due
process requirements violate the Labor Code. Therefore statutory due
process should be differentiated from failure to comply with constitutional due
process.
Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after
notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was
for a just and valid cause but the employee was not accorded due process.
The dismissal was upheld by the Court but the employer was sanctioned.
The sanction should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the omission committed
by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if
the employee was not given due process, the failure did not operate to
eradicate the just causes for dismissal. The dismissal being for just
cause, albeitwithout due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services,
Inc. v. National Labor Relations Commission,30 which opinion he reiterated
in Serrano, stated:
C. Where there is just cause for dismissal but due process has not
been properly observed by an employer, it would not be right to order
either the reinstatement of the dismissed employee or the payment
of backwages to him. In failing, however, to comply with the
procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It
might be pointed out that the notice to be given and the hearing to be
conducted generally constitute the two-part due process requirement
of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain
situations where to undertake the above steps would be no more
than a useless formality and where, accordingly, it would not be
imprudent to apply the res ipsa loquitur rule and award, in lieu of
separation pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the
law on employment termination, we believe that in cases involving dismissals
for cause but without observance of the twin requirements of notice and
hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing
sanctions on the employer. Such sanctions, however, must be stiffer than
that imposed in Wenphil. By doing so, this Court would be able to achieve a
fair result by dispensing justice not just to employees, but to employers as
well.
The unfairness of declaring illegal or ineffectual dismissals for valid or
authorized causes but not complying with statutory due process may have
far-reaching consequences.
This would encourage frivolous suits, where even the most notorious
violators of company policy are rewarded by invoking due process. This also
creates absurd situations where there is a just or authorized cause for
dismissal but a procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or threatens the lives
of his co-employees or has become a criminal, who has fled and cannot be
found, or where serious business losses demand that operations be ceased
in less than a month. Invalidating the dismissal would not serve public
interest. It could also discourage investments that can generate employment
in the local economy.
The constitutional policy to provide full protection to labor is not meant to be
a sword to oppress employers. The commitment of this Court to the cause of
labor does not prevent us from sustaining the employer when it is in the right,
as in this case.32 Certainly, an employer should not be compelled to pay
employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who
is admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the rights
of the laborer authorizes neither oppression nor self-destruction of the
employer.33
It must be stressed that in the present case, the petitioners committed a
grave offense, i.e., abandonment, which, if the requirements of due process
were complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should
not be protected by the Social Justice Clause of the Constitution. Social
justice, as the term suggests, should be used only to correct an injustice. As
the eminent Justice Jose P. Laurel observed, social justice must be founded
on the recognition of the necessity of interdependence among diverse units
of a society and of the protection that should be equally and evenly extended
to all groups as a combined force in our social and economic life, consistent
with the fundamental and paramount objective of the state of promoting the
health, comfort, and quiet of all persons, and of bringing about "the greatest
good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach
to labor-management relations and dispense justice with an even hand in
every case:
We have repeatedly stressed that social justice – or any justice for
that matter – is for the deserving, whether he be a millionaire in his
mansion or a pauper in his hovel. It is true that, in case of reasonable
doubt, we are to tilt the balance in favor of the poor to whom the
Constitution fittingly extends its sympathy and compassion. But
never is it justified to give preference to the poor simply because they
are poor, or reject the rich simply because they are rich, for justice
must always be served for the poor and the rich alike, according to
the mandate of the law.35
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided
in favor of labor, as management has rights that should be fully respected
and enforced by this Court. As interdependent and indispensable partners in
nation-building, labor and management need each other to foster productivity
and economic growth; hence, the need to weigh and balance the rights and
welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of "dismiss now, pay later," which we sought to deter
in the Serrano ruling. The sanction should be in the nature of indemnification
or penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process.
The Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employee's one month salary. This
indemnity is intended not to penalize the employer but to vindicate or
recognize the employee's right to statutory due process which was violated
by the employer.39
The violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion
of the court, taking into account the relevant circumstances.40 Considering
the prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it
failed to pay petitioners' holiday pay, service incentive leave pay and 13th
month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims.
Private respondent is liable for petitioners' holiday pay, service incentive
leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it.
Even where the employee must allege non-payment, the general rule is that
the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is 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.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay
and service incentive leave pay, it could have easily presented documentary
proofs of such monetary benefits to disprove the claims of the petitioners. But
it did not, except with respect to the 13th month pay wherein it presented
cash vouchers showing payments of the benefit in the years
disputed.42 Allegations by private respondent that it does not operate during
holidays and that it allows its employees 10 days leave with pay, other than
being self-serving, do not constitute proof of payment. Consequently, it failed
to discharge the onus probandi thereby making it liable for such claims to the
petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner No costs.
Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional SO ORDERED.
income in the form of the 13th month pay to employees not already receiving
the same43 so as "to further protect the level of real wages from the ravages
G.R. No. 74246 January 26, 1989
of world-wide inflation."44 Clearly, as additional income, the 13th month pay is
included in the definition of wage under Article 97(f) of the Labor Code, to wit:
MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners,
vs.
(f) "Wage" paid to any employee shall mean the remuneration or HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of
earnings, however designated, capable of being expressed in terms Ministry of Labor and Employment judgment, and JOAQUIN A.
of money whether fixed or ascertained on a time, task, piece , or DEQUILA, respondents.
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 Cruz, Agabin, Atienza & Alday for petitioners.
rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or The Solicitor General of public respondent.
other facilities customarily furnished by the employer to the
employee…" Norberto M. Alensuela, Sr. for private respondent.

from which an employer is prohibited under Article 113 45 of the same Code
from making any deductions without the employee's knowledge and consent.
In the instant case, private respondent failed to show that the deduction of NARVASA, J.:
the SSS loan and the value of the shoes from petitioner Virgilio Agabon's
13th month pay was authorized by the latter. The lack of authority to deduct
There is no dispute about the facts in this case, and the only question for the
is further bolstered by the fact that petitioner Virgilio Agabon included the
Court is whether or not, Article 282 of the Labor Code notwithstanding,
same as one of his money claims against private respondent.
probationary employment may validly be extended beyond the prescribed
six-month period by agreement of the employer and the employee.
The Court of Appeals properly reinstated the monetary claims awarded by
the Labor Arbiter ordering the private respondent to pay each of the
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation
petitioners holiday pay for four regular holidays from 1996 to 1998, in the
by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a
amount of P6,520.00, service incentive leave pay for the same period in the
general utility worker on January 10, 1979. Upon the expiration of the
amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month
probationary period of six months, Dequila was informed by his employer that
pay for 1998 in the amount of P2,150.00.
his work had proved unsatisfactory and had failed to meet the required
standards. To give him a chance to improve his performance and qualify for
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision regular employment, instead of dispensing with his service then and there,
of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, with his written consent Mariwasa extended his probation period for another
finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and three months from July 10 to October 9, 1979. His performance, however,
ordering private respondent to pay each of the petitioners holiday pay for four did not improve and on that account Mariwasa terminated his employment at
regular holidays from 1996 to 1998, in the amount of P6,520.00, service the end of the extended period. 1
incentive leave pay for the same period in the amount of P3,255.00 and the
balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its
P2,150.00 is AFFIRMED with the MODIFICATION that private respondent
Vice-President for Administration, Angel T. Dazo, a complaint for illegal
Riviera Home Improvements, Inc. is further ORDERED to pay each of the
dismissal and violation of Presidential Decrees Nos. 928 and 1389.2 His
petitioners the amount of P30,000.00 as nominal damages for non-
complaint was dismissed after hearing by Director Francisco L. Estrella,
compliance with statutory due process.
Director of the Ministry's National Capital Region, who ruled that the
termination of Dequila's employment was in the circumstances justified and
rejected his money claims for insufficiency of evidence. 3 On appeal to the
Office of the Minister, however, said disposition was reversed. Respondent
Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a
regular employee at the time of his dismissal, therefore, could not have been
lawfully dismissed for failure to meet company standards as a probationary
worker. He was ordered reinstated to his former position without loss of
seniority and with full back wages from the date of his dismissal until actually
reinstated. 4 This last order appears later to have been amended so as to
direct payment of Dequila's back wages from the date of his dismissal to
December 20, 1982 only. 5
Mariwasa and Dazo, now petitioners, thereafter be sought this Court to
review Hon. Leogardo's decision on certiorari and prohibition, urging its
reversal for having been rendered with grave abuse of discretion and/or
without or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all
underscore the fact that the threshold issue here is, as first above stated, the
legal one of whether employer and employee may by agreement extend the
probationary period of employment beyond the six months prescribed in Art.
282 of the Labor Code, which provides that:
Art. 282. Probationary Employment. — Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee
who is allowed to work after probationary period shall be
considered a regular employee.'
The Court agrees with the Solicitor General, who takes the same position as
the petitioners, that such an extension may lawfully be covenanted,
notwithstanding the seemingly restrictive language of the cited
provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating
longer probationary periods as constituting lawful exceptions to the statutory
prescription limiting such periods to six months, when it upheld as valid an
employment contract between an employer and two of its employees that
provided for an eigthteen-month probation period. This Court there held:
'It is petitioners' submission that probationary employment
cannot exceed six (6) months, the only exception being
apprenticeship and learnership agreements as provided in
the Labor Code; that the Policy Instruction of the Minister of
Labor and Employment nor any agreement of the parties
could prevail over this mandatory requirement of the law;
that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-
guaranteed security of tenure of workers; and that the law
does not allow any discretion on the part of the Minister of
Labor and Employment to extend the probationary period for
a longer period except in the aforecited instances. Finally,
petitioners maintain that since they are regular employees,
they can only be removed or dismissed for any of the just
and valid causes enumerated under Article 283. of the Labor
Code.
We reject petitioners' contentions. They have no basis in
law.
Generally, the probationary period of employment is limited
to six (6) months. The exception to this general rule is when
the parties to an employment contract may agree otherwise,
such as when the same is established by company policy or
when the same is required by the nature of work to be
performed by the employee. In the latter case, there is
recognition of the exercise of managerial prerogatives in
requiring a longer period of probationary employment, such
as in the present case where the probationary period was set
for eighteen (18) months, i.e. from May, 1980 to October,
1981 inclusive, especially where the employee must learn a
particular kind of work such as selling, or when the job
requires certain qualifications, skills experience or training.
xxx
We therefore, hold and rule that the probationary
employment of petitioners set to eighteen (18) months is
legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of
discretion in ruling accordingly.
The single difference between Buiser and the present case: that in the former
involved an eighteen-month probationary period stipulated in the original
contract of employment, whereas the latter refers to an extension agreed
upon at or prior to the expiration of the statutory six-month period, is hardly
such as to warrant or even suggest a different ruling here. In both cases the
parties' agreements in fact resulted in extensions of the period prescribed by
law. That in this case the inability of the probationer to make the grade
became apparent only at or about the end of the six-month period, hence an
extension could not have been pre-arranged as was done in Buiserassumes
no adverse significance, given the lack, as pointed out by the Solicitor
General, of any indication that the extension to which Dequila gave his
agreement was a mere stratagem of petitioners to avoid the legal
consequences of a probationary period satisfactorily completed.
For aught that appears of record, the extension of Dequila's probation
was ex gratia, an act of liberality on the part of his employer affording him a
second chance to make good after having initially failed to prove his worth as
an employee. Such an act cannot now unjustly be turned against said
employer's account to compel it to keep on its payroll one who could not
perform according to its work standards. The law, surely, was never meant to
produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in
effect waived any benefit attaching to the completion of said period if he still
failed to make the grade during the period of extension. The Court finds
nothing in the law which by any fair interpretation prohibits such a waiver.
And no public policy protecting the employee and the security of his tenure is
served by prescribing voluntary agreements which, by reasonably extending
the period of probation, actually improve and further a probationary
employee's prospects of demonstrating his fitness for regular employment.
Having reached the foregoing conclusions, the Court finds it unnecessary to
consider and pass upon the additional issue raised in the Supplemental
Petition 8 that the back wages adjudged in favor of private respondent
Dequila were erroneously computed.
WHEREFORE, the petition is granted. The orders of the public respondent
complained of are reversed and set aside. Private respondent's complaint
against petitioners for illegal dismissal and violation of Presidential Decrees
928 and 1389 is dismissed for lack of merit, without pronouncement as to
costs.
SO ORDERED.
TERMINATION AUTHORIZED OR JUST CAUSES
G.R. No. L-63316 July 31, 1984
ILUMINADA VER BUISER, MA. CECILIA RILLOACUÑA and MA.
MERCEDES P. INTENGAN, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of
the Ministry of Labor & Employment, and GENERAL TELEPHONE
DIRECTORY, CO., respondents.
Jimenez, Apolo & Leynes Law Office for petitioners.
The Solicitor General for respondent Deputy Minister.
Abad, Legayada & Associates for private respondent.
GUERRERO, J.:
This is a petition for certiorari seeking to set aside the Order of the Deputy
Minister of Labor and Employment, affirming the Order of the Regional
Director, National Capital Region, in Case No. NCR-STF-5-2851-81, which
dismissed the petitioners' complainant for alleged illegal dismissal and
unpaid commission.
Petitioners were employed by the private respondent GENERAL
TELEPHONE DIRECTORY COMPANY as sales representatives and
charged with the duty of soliciting advertisements for inclusion in a telephone
directory.
The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P.
Intengan entered into an "Employment Contract (on Probationary Status)" on
May 26, 1980 with private respondent, a corporation engaged in the business
of publication and circulation of the directory of the Philippine Long Distance
Telephone Company. Petitioner Ma. Cecilia Rillo-Acuna entered into the
same employment contract on June 11, 1980 with the private respondent.
Among others, the "Employment Contract (On Probationary Status)" included
the following common provisions:
l. The company hereby employs the employee as telephone
representative on a probationary status for a period of
eighteen (18) months, i.e. from May 1980 to October 1981,
inclusive. It is understood that darung the probationary
 period of employment, the Employee may be terminated at
the pleasure of the company without the necessity of giving
notice of termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the
telephone sales representative's job is such that the
company would be able to determine his true character,
conduct and selling capabilities only after the publication of
the directory, and that it takes about eighteen (18) months
before his worth as a telephone saw representative can be
fully evaluated inasmuch as the advertisement solicited by
him for a particular year are published in the directory only
the following year.
Corollary to this, the private respondent prescribed sales quotas to be
accomplished or met by the petitioners. Failing to meet their respective sales
quotas, the petitioners were dismissed from the service by the private
respondent. The records show that the private respondent terminated the
services of petitioners Iluminada Ver Buiser and Cecilia Rillo-Acuna on May
14, 1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for their
failure to meet their sales quotas.
Thus, on May 27, 1981, petitioners filed with the National Capital Region,
Ministry of Labor and Employment, a complaint for illegal dismissal with
claims for backwages, earned commissions and other benefits, docketed as
Case No. NCR-STF-5-2851-81.
The Regional Director of said ministry, in an Order dated September 21,
1982, dismissed the complaints of the petitioners, except the claim for
allowances which private respondent was ordered to pay. A reconsideration
of the Order was sought by the petitioners in a motion filed on September 30,
1982. This motion, however, was treated as an appeal to the Minister of
Labor.
On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor
issued an Order dated January 7, 1983, affirming the Regional Director's
Order dated September 21, 1982, wherein it ruled that the petitioners have
not attained permanent status since private respondent was justified in
requiring a longer period of probation, and that the termination of petitioners'
services was valid since the latter failed to meet their sales quotas.
Hence, this petition for certiorari on the alleged ground that public respondent
committed grave abuse of discretion amounting to lack of jurisdiction.
Specifically, petitioners submit that:
1. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that the
probationary employment of petitioners herein is eighteen (18) months
instead of the mandated six (6) months under the Labor Code, and in
consequently further ruling that petitioners are not entitled to security of
tenure while under said probation for 18 months.
2. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that petitioners
were dismissed for a just and valid cause.
3. The Hon. Regional Director and the Hon. Deputy Minister committed grave
abuse of discretion amounting to lack of jurisdiction in ruling that petitioners
are not entitled to the commissions they have earned and accrued during
their period of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having
served the respondent company continuously for over six (6) months, they
have become automatically regular employees notwithstanding an
agreement to the contrary. Articles 281-282 read thus:
Art. 282. Probationary Employment. — Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it iscCovered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee
who is allowed to work after a probationary period shall be
considered a regular employee. (As amended by PD 850).
Art. 281. Regular and Casual Employment. — The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreements of the
parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been determined at
the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and
the employment is for the duration of the season.
 An employment shall be deemed to be casual if it is not
covered by the preceeding paragraph. Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists. (As amended by PD 850).
It is petitioners' submission that probationary employment cannot exceed six
(6) months, the only exception being apprenticeship and learnership
agreements as provided in the Labor Code; that the Policy Instruction of the
Minister of Labor and Employment nor any agreement of the parties could
prevail over this mandatory requirement of the law; that this six months
prescription of the Labor Code was mandated to give further efficacy to the
constitutionally-guaranteed security of tenure of workers; and that the law
does not allow any discretion on the part of the Minister of Labor and
Employment to extend the probationary period for a longer period except in
the aforecited instances. Finally, petitioners maintain that since they are
regular employees, they can only be removed or dismissed for any of the just
and valid causes enumerated under Article 283 of the Labor Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6) months.
The exception to this general rule is When the parties to an employment
contract may agree otherwise, such as when the same is established by
company policy or when the same is required by the nature of work to be
performed by the employee. In the latter case, there is recognition of the
exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the
probationary period was set for eighteen (18) months, i.e. from May, 1980 to
October, 1981 inclusive, especially where the employee must learn a
particular kind of work such as selling, or when the job requires certain
qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has
clarified any and all doubts on the period of probationary employment. It
states as follows:
Probationary Employment has been the subject of
misunderstanding in some quarter. Some people believe six
(6) months is the probationary period in all cases. On the
other hand employs who have already served the
probationary period are sometimes required to serve again
on probation.
Under the Labor Code, six (6) months is the general
probationary period ' but the probationary period is actually
the period needed to determine fitness for the job. This
period, for lack of a better measurement is deemed to be the
period needed to learn the job.
The purpose of this policy is to protect the worker at the
same time enable the employer to make a meaningful
employee selection. This purpose should be kept in mind in
enforcing this provision of the Code. This issuance shall take
effect immediately.
In the case at bar, it is shown that private respondent Company needs at
least eighteen (18) months to determine the character and selling capabilities
of the petitioners as sales representatives. The Company is engaged in
advertisement and publication in the Yellow Pages of the PLDT Telephone
Directories. Publication of solicited ads are only made a year after the sale
has been made and only then win the company be able to evaluate the
efficiency, conduct, and selling ability of its sales representatives, the
evaluation being based on the published ads. Moreover, an eighteen month
probationary period is recognized by the Labor Union in the private
respondent company, which is Article V of the Collective Bargaining
Agreement, ... thus:
Probationary Period — New employees hired for regular or
permanent shall undergo a probationary or trial period of six
(6) months, except in the cases of telephone or sales
representatives where the probationary period shall be
eighteen (I 8) months.
And as indicated earlier, the very contracts of employment signed and
acquiesced to by the petitioners specifically indicate that "the company
hereby employs the employee as telephone sales representative on a
probationary status for a period of eighteen (18) months, i.e. from May 1980
to October 1981, inclusive. This stipulation is not contrary to law, morals and
public policy.
We, therefore, hold and rule that the probationary employment of petitioners
set to eighteen (18) months is legal and valid and that the Regional Director
and the Deputy Minister of Labor and Employment committed no abuse of
discretion in ruling accordingly.
On the second assignment of error that public respondent committed grave
abuse of discretion in ruling that petitioners were dismissed for a just and
valid cause, this is not the first time that this issue has been raised before
this Court. Earlier, in the case of "Arthur Golez vs. The National Labor
Relations Commission and General Telephone Directory Co. "G.R. No. L-
64459, July 25, 1983, the petition for certiorari which raised the same issue
against the herein private respondent was dismissed by this Court for lack of
merit.
The practice of a company in laying off workers because they failed to make
the work quota has been recognized in this jurisdiction. (Philippine American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In
the case at bar, the petitioners' failure to meet the sales quota assigned to
each of them constitute a just cause of their dismissal, regardless of the
permanent or probationary status of their employment. Failure to observe
prescribed standards of work, or to fulfill reasonable work assignments due
to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by
failing to complete the same within the alloted reasonable period, or by
producing unsatisfactory results. This management prerogative of requiring
standards availed of so long as they are exercised in good faith for the
advancement of the employer's interest.
Petitioners anchor their claim for commission pay on the Collective
Bargaining Agreement (CBA) of September 1981, in support of their third
assignment of error. Petitioners cannot avail of this agreement since their
services had been terminated in May, 1981, at a time when the CBA of
September, 1981 was not yet in existence.
In fine, there is nothing in the records to show any abuse or misuse of power
properly vested in the respondent Deputy Minister of Labor and Employment.
For certiorari to lie, "there must be capricious, arbitrary and whimsical
exercise of power, the very antithesis of the judicial prerogative inaccordance
with centuries of both civil and common law traditions." (Panaligan vs. Adolfo,
67 SCRA 176, 180). The "abuse of discretion must be grave and patent, and
it must be shown that the discretion was exercised arbitrarily or despotically."
(Palma and Ignacio vs. Q. & S., Inc., et al., 17 SCRA 97, 100; Philippine
Virginia Tobacco Administration vs. Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 74246 January 26, 1989
MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of
Ministry of Labor and Employment judgment, and JOAQUIN A.
DEQUILA, respondents.
Cruz, Agabin, Atienza & Alday for petitioners.
The Solicitor General of public respondent.
Norberto M. Alensuela, Sr. for private respondent.
NARVASA, J.:
There is no dispute about the facts in this case, and the only question for the
Court is whether or not, Article 282 of the Labor Code notwithstanding,
probationary employment may validly be extended beyond the prescribed
six-month period by agreement of the employer and the employee.
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation
by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a
general utility worker on January 10, 1979. Upon the expiration of the
probationary period of six months, Dequila was informed by his employer that
his work had proved unsatisfactory and had failed to meet the required
standards. To give him a chance to improve his performance and qualify for
regular employment, instead of dispensing with his service then and there,
with his written consent Mariwasa extended his probation period for another
three months from July 10 to October 9, 1979. His performance, however,
did not improve and on that account Mariwasa terminated his employment at
the end of the extended period. 1
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its
Vice-President for Administration, Angel T. Dazo, a complaint for illegal
dismissal and violation of Presidential Decrees Nos. 928 and 1389. 2 His
complaint was dismissed after hearing by Director Francisco L. Estrella,
Director of the Ministry's National Capital Region, who ruled that the
termination of Dequila's employment was in the circumstances justified and
rejected his money claims for insufficiency of evidence. 3 On appeal to the
Office of the Minister, however, said disposition was reversed. Respondent
Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a
regular employee at the time of his dismissal, therefore, could not have been
lawfully dismissed for failure to meet company standards as a probationary
worker. He was ordered reinstated to his former position without loss of
seniority and with full back wages from the date of his dismissal until actually
reinstated. 4 This last order appears later to have been amended so as to
direct payment of Dequila's back wages from the date of his dismissal to
December 20, 1982 only. 5
Mariwasa and Dazo, now petitioners, thereafter be sought this Court to
review Hon. Leogardo's decision on certiorari and prohibition, urging its
reversal for having been rendered with grave abuse of discretion and/or
without or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all
underscore the fact that the threshold issue here is, as first above stated, the
legal one of whether employer and employee may by agreement extend the
probationary period of employment beyond the six months prescribed in Art.
282 of the Labor Code, which provides that:
Art. 282. Probationary Employment. — Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee
who is allowed to work after probationary period shall be
considered a regular employee.'
The Court agrees with the Solicitor General, who takes the same position as
the petitioners, that such an extension may lawfully be covenanted,
notwithstanding the seemingly restrictive language of the cited
provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating
longer probationary periods as constituting lawful exceptions to the statutory
prescription limiting such periods to six months, when it upheld as valid an
employment contract between an employer and two of its employees that
provided for an eigthteen-month probation period. This Court there held:
'It is petitioners' submission that probationary employment
cannot exceed six (6) months, the only exception being
apprenticeship and learnership agreements as provided in
the Labor Code; that the Policy Instruction of the Minister of
Labor and Employment nor any agreement of the parties
could prevail over this mandatory requirement of the law;
that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-
guaranteed security of tenure of workers; and that the law
does not allow any discretion on the part of the Minister of
Labor and Employment to extend the probationary period for
a longer period except in the aforecited instances. Finally,
petitioners maintain that since they are regular employees,
they can only be removed or dismissed for any of the just
and valid causes enumerated under Article 283. of the Labor
Code.
We reject petitioners' contentions. They have no basis in
law.
Generally, the probationary period of employment is limited
to six (6) months. The exception to this general rule is when
the parties to an employment contract may agree otherwise,
such as when the same is established by company policy or
when the same is required by the nature of work to be
performed by the employee. In the latter case, there is
recognition of the exercise of managerial prerogatives in
requiring a longer period of probationary employment, such
as in the present case where the probationary period was set
for eighteen (18) months, i.e. from May, 1980 to October,
1981 inclusive, especially where the employee must learn a
particular kind of work such as selling, or when the job
requires certain qualifications, skills experience or training.
xxx
We therefore, hold and rule that the probationary
employment of petitioners set to eighteen (18) months is
legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of
discretion in ruling accordingly.
The single difference between Buiser and the present case: that in the former
involved an eighteen-month probationary period stipulated in the original
contract of employment, whereas the latter refers to an extension agreed
upon at or prior to the expiration of the statutory six-month period, is hardly
such as to warrant or even suggest a different ruling here. In both cases the
parties' agreements in fact resulted in extensions of the period prescribed by
law. That in this case the inability of the probationer to make the grade
became apparent only at or about the end of the six-month period, hence an
extension could not have been pre-arranged as was done in Buiserassumes
no adverse significance, given the lack, as pointed out by the Solicitor
General, of any indication that the extension to which Dequila gave his
agreement was a mere stratagem of petitioners to avoid the legal
consequences of a probationary period satisfactorily completed.
For aught that appears of record, the extension of Dequila's probation
was ex gratia, an act of liberality on the part of his employer affording him a
second chance to make good after having initially failed to prove his worth as
an employee. Such an act cannot now unjustly be turned against said
employer's account to compel it to keep on its payroll one who could not
perform according to its work standards. The law, surely, was never meant to
produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in
effect waived any benefit attaching to the completion of said period if he still
failed to make the grade during the period of extension. The Court finds
nothing in the law which by any fair interpretation prohibits such a waiver.
And no public policy protecting the employee and the security of his tenure is
served by prescribing voluntary agreements which, by reasonably extending
the period of probation, actually improve and further a probationary
employee's prospects of demonstrating his fitness for regular employment.
Having reached the foregoing conclusions, the Court finds it unnecessary to
consider and pass upon the additional issue raised in the Supplemental
Petition 8 that the back wages adjudged in favor of private respondent
Dequila were erroneously computed.
WHEREFORE, the petition is granted. The orders of the public respondent
complained of are reversed and set aside. Private respondent's complaint
against petitioners for illegal dismissal and violation of Presidential Decrees
928 and 1389 is dismissed for lack of merit, without pronouncement as to
costs.
SO ORDERED.
BALLES, ROMEO BELARMINO, ELISEO CODILLA, ELEUTERIO
BENITEZ, ELPIDIO CASINILLO, FERNANDO ABLONG,
PRUDENCIO SACRISTAN, RODOLFO BRIONES, PRIMITIVO
CALIXTO, ANDRES FERNANDO, ANGEL AVENIDO, FELIX
GUIPITACIO, TARACIO ABILLA, ANTONIO PATINO,
ANTONIO HELEN, NERIO CANOY, VICENTE FRANCISCO,
TEOFILO TURA, ANTONIO LEDESMA, MARCELINO HIPOLITO,
BENJAMIN FLORES, PABLO LASCOTA, WILFREDO CANTAY,
GENARO DELIVERIO, MARCIANO PIOQUINTO, FEDERICK
JIMENEZ, VICENTE SM LIM, LUIS TUBIL, ANGEL SUMAYO,
SALVADOR SALCEDO, RIGOBERTO UTOD, FELICIANO
SALONA, GERONIMO CANETE, MAXIMO AQUILLON, LARRY
TURCO, SR., PORFERIO GARADO, PERFECTO CUEVAS,
FELICIANO, JUANILLO, ROBERTO TUCAY, SR., and NICOLAS
AMONES, JR., Petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, PEFTOK INTEGRATED SERVICES, INC.,
TEODOLFO E. SANTOS, and/or UP-NDC BASILAN
PLANTATIONS, INC., Respondents.
PANGANIBAN, J.:
As a just and valid cause for dismissal, willful disobedience involves
the violation of a rule, order or instruction which is (1) reasonable
and lawful, (2) sufficiently known to the employee, and (3)
connected with the duties which the employee has been engaged
to discharge. Abandonment, on the other hand, requires a showing
that an employee (1) deliberately and unjustly refuses to resume
his work and (2) has no intention to return to it.
The Case
The Court reiterates these principles in resolving this petition
for certiorari under Rule 65 of the Rules of Court assailing the
Resolutions dated September 22, 1993 and December 16, 1993,
which were promulgated by the National Labor Relations
Commission 1 in NLRC Case No. RAB 09-08-00235-91.
Petitioners filed at the Regional Arbitration Branch No. 09 in
Zamboanga City a Complaint. against private respondents for
illegal termination by way of constructive dismissal. After
conciliation proceedings failed to settle the matter, the parties were
ordered to submit their respective position papers. On February 17,
1992, Labor Arbiter Rhett Julius J. Plagata rendered a Decision in
favor of petitioners: 2
WHEREFORE, in view of the foregoing considerations, judgment is
hereby rendered in the above-entitled case:
(1) Declaring the [petitioners'] dismissal to be illegal for being
without just cause;
(2) Ordering PEFTOK Integrated Security Services, Inc., through its
president or other duly authorized corporate officer, to pay the
[petitioners] the following awards in the following sums:
Constancio Silagan Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses ----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Gaspar Montejo

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Joneri Escobin Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Rolando Caballes

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Rodolfo Rojas Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Romeo Belarmino

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Federico Laguyo Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Eliseo Codilla Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Prudencio Sacristin

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Eleuterio Benitez Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Rodolfo Briones

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Elidio Casinillo Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Primitivo Calixto

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Fernando Ablong Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Andres Fernando Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Antonio Patino

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Angel Avenido Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Antonio Helen

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Felix Guipitacio Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Nerio Canoy

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Taracio Abilla Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Vicente Francisco Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Benjamin Flores

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Teofilo Tura Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Pablo Lascota

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Antonio Ledesma Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Wilfredo Cantay

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Marcelino Hipolito Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Genaro Deliverio Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Luis Tubil

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Marciano Pioquinto Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Angel Jumayo

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Federico Jimenez Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Attorney's Fees 1,000.00 Salvador Salcedo

& Litigation Expenses ----- Backwages P17,088.00

Total P38,024.00 Separation Pay 19,936.00

Vicente SM Lim Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 19,936.00 Total P38,024.00

Rigiberto Utod Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 18,369.60 Total P36,172.80

Attorney's Fees 1,000.00 Larry Turco, Sr.

& Litigation Expenses ----- Backwages P17,088.00

Total P36,457.60 Separation Pay 17,913.92

Feliciano Salona Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 18,369.60 Total P36,001.92

Attorney's Fees 1,000.00 Porferio Garado

& Litigation Expenses ----- Backwages P17,088.00

Total P36,457.60 Separation Pay 17,088.00

Geronimo Canete Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 18,369.60 Total P35,176.00

Attorney's Fees 1,000.00 Perfecto Cuevas

& Litigation Expenses ----- Backwages P17,088.00

Total P36,457.60 Separation Pay 17,088.00

Maximo Aquillon Attorney's Fees 1,000.00

Backwages P17,088.00 & Litigation Expenses -----

Separation Pay 18,084.80 Total P35,176.00

Feliciano Juanillo WHEREFORE, the contested decision is hereby VACATED and SET
ASIDE. In its stead, judgment is rendered declaring the dismissal
Backwages P17,088.00 of complainants valid for being with just cause and after due
process.
Separation Pay 15,037.44
Respondent Commission further denied reconsideration in its
Attorney's Fees 1,000.00 Resolution promulgated December 16, 1993: 4

& Litigation Expenses ----- WHEREFORE, premises considered, the instant motion for
consideration is hereby denied for lack of merit.
Total P33,125.44
Hence, this recourse. 5
Roberto Tucoy, Sr.
The Facts
Backwages P17,088.00
In its Resolution dated September 22, 1993, Respondent NLRC
relates the factual background of this case as follows: 6
Separation Pay 14,724.16

Respondent PEFTOK Integrated Services, Inc., (PISI for short), is a

Attorney's Fees 1,000.00
duly licensed watchman and protective agency while respondent
UP-NDC Basilan Plantations, Inc. is a corporation duly organized in
& Litigation Expenses ----- accordance with law, and the owner/possessor of lands principally
planted to rubber, coconut, citrus, coffee, and other fruit trees in
Total P32,812.16 Lamitan, Province of Basilan. Respondent Teodolfo E. Santos is the
general manager of PISI.
Nicolas Ramones, Jr.
That complainants are bona fide members of the Basilan Security
Backwages P17,088.00 Force Association hired by PISI in Sta. Clara, Lamitan, Basilan, to
work as guards in UP-NDC Basilan Plantations, Inc. premises, for
Separation Pay 14,240.00 the purpose of guarding and protecting plantation property and
installations from theft, pilferage, robbery, trespass and other
Attorney's Fees 1,000.00 unlawful acts by strangers or third persons, and plantation
employees, pursuant to an agreement between PISI and UP-NDC
& Litigation Expenses ----- Basilan Plantations, Inc. dated May 17, 1989[.] The complainants,
residents of Sta. Clara, Lamitan, Basilan, are heads of families,
hired by PISI as security guards in and for plantation premises of
Total P32,328.00
UP-NDC Basilan Plantations, Inc. They were hired on different
dates, with the individual dates of their employment being as
On appeal, Respondent Commission reversed the labor arbiter. The follows:
dispositive portion of the assailed Resolution, promulgated
September 22, 1993, reads: 3
Constancio Silagan, Joneri Escorbin, Rodolfo Rojas, Federico
Laguyo, Gaspar Montejo, Rolando Cabales, Romeo Belarmino,
Eliseo Codilla, Eleuterio Benitez, Elidio Casinillo, Fernando Ablong,
Prudencio Sacristin, Rodolfo Briones, Primitivo Calixto, Andres
Fernando, Angel Avenido, Felix Guipitacio, Teracio Abilla, Antonio
Patino, Antonio Helen, Nerio Canoy, Vicente Francisco, Teofilo Tura,
Antonio Ledesma, Marcelino Hipolito, Benjamin Flores, Pablo
Lascota, Wilfredo Cantay, Genaro Deliverio, Marciano Pioquinto,
Federico Jimenez Vicente SM Lim, Luis Tubil, and Angel Jumayo,
and Salvador Salcedo, all employed on November 19, 1984;
Rigoberto Utod, Feliciano Salona, and Geronimo Canete on January
18, 1985; Maximo Aguillon, on February 22, 1985; Larry Turco Sr.
on March 16, 1985; Porferio Garado on 15 August 1985; Feliciano
Juanillo on March 18, 1986; Roberto Tucoy, Sr. on April 26, Nicolas
Ramones, Jr. on July 29, 1986 (Complainants' Position Paper,
Annex A).
In 1988, some of the complainants, namely: Gene Engracia,
Andres Fernandez, Rolando C. Caballes, Larry Turco, Fernando E.
Ablong, Sr. Constancio Silagan, Winifredo N. Obedencia, Federick
Laguyo, Primitivo Calixto, Felix C. Guipitacio and Claudio Calixto
were dismissed by PISI for insoburdination [sic] and grave
misconduct, as a result of their refusal to ring the bell in the
evening of May 25, 1988 while on duty in the premises of the
plantation, but were later reinstated in an agreement forged
between the parties at the initiative of Congressman Alvin Dans of
Basilan Province.
On June 1, 1990, respondent UP-NDC Basilan Plantations, Inc.
ordered the reduction of the contracted guards assigned in the
plantation from seventy (70) to sixty-seven (67), in a letter
addressed by Mr. Roman R. Yap to PISI[.]
And again in a letter dated January 22, 1991 sent to Col.
Raymundo C. Sobrevega, President of PISI, by Hector A. Quesada,
President of UP-NDC Basilan Plantations, Inc., PISI was advised to
reduce further the guards from sixty-seven (67) to only ten, (10), .
. . a reduction [of] fifty-seven (57) guards.
Subsequently, thereafter, PISI issued Office Memorandum No. 4
dated February 6, 1991 placing the fifty-nine (59) affected guards
under reserved or floating status effective February 1, 1991,
subject to be posted or assigned upon notice.
On February 12, 1991, PISI issued Office Order No. 5 amending
Office Order No. 4 by deleting therefrom the names of S/G Calixto
Florentino Paddit and Sergio Quimpo.
Subsequently, on April 8, 1991, the guards placed on reserved or
floating status were instructed by registered letter to report to PISI
Head Office at Rm. 405, Sunrise Condominium, Ortigas Avenue,
Greenhills, San Juan, Metro Manila, for posting to PISI clients
within the Metro-Manila area not later than April 30, 1991.
That complainants did not reply nor answer the letter sent them,
prompting PISI to reinstate by way of another letter dated May 2,
1991, its order to complainants to report to PISI Head Office for
posting, and to explain their failure to report as previously
instructed.
Still failing to receive a reply nor answer from the complainants
despite receipt of said letters, PISI once more sent individual
letters to complainants on May 29, 1991 ordering them to explain
why no disciplinary action shall be taken against them for failing to
comply with PISI's Order, at the same time, reiterating its previous
Order for complainants to report to PISI Head Office for posting.
Despite all these, Complainants, for reasons known only to them,
did not bother even sending a courtesy reply nor answer to PISI.
Neither did they comply with the reiterated Order to report to their
Head Office for posting. They did not also explain why they were
unable to so comply with the Order.
Thus, on June 28, 1991, PISI wrote complainants individual letters
that by reason of their failure to respond to or to comply with
PISI's letters dated April 8, May 2, and May 29, 1991, and by their
failure to report to PISI Head Office for posting, as ordered, they
were dismissed on ground of insubordination or willful disobedience
to lawful orders of their employer.
Late in the day however, on July 1, 1991, complainants wrote PISI
General Manager, Teodolfo Santos, saying they had no intention to
abandon their employment, nor to defy fair, reasonable and lawful
orders. In the same letter, they acknowledged receipt of all PISI's
letters to them dated April 8 and May 2, 1991.
After having been terminated, and during the arbitral proceedings
below, complainants belatedly justified their inability to comply
with PISI's Order to report to Head Office in Metro-Manila for
posting, saying: they are residents of Basilan, have families of their
own in Basilan, have never traveled beyond Visayas and Mindanao,
not provided by PISI with fare money as they cannot, on their own,
finance their travel from Basilan to Manila; that to comply with
PISI's Order to report to Head Office for posting under said
circumstances was absurd, to say the least. Complainants
therefore, charged PISI with bad faith in issuing said Order. That in
truth, complainants said they were constructively dismissed by
PISI. For which reason, complainants prayed that the Labor Arbiter
declare their dismissal as illegal and consequently they should be
paid separation pay (in lieu of reinstatement), backwages, moral
and exemplary damages, attorney's fees and litigation costs.
The Labor Arbiter in deciding this case posed the following issues,
namely:
a) Whether or not complainants were indeed illegally dismissed,
and corollarily, whether or not they are entitled to backwages and
separation pay; and
b) Whether or not complainants are entitled to moral and
exemplary damage's attorney's fees and cost of litigation.
The Labor Arbiter noted that S/G Winifredo Obedencia and Ignacio
Antonio did not sign the complaint. They should therefore be
deemed not to have filed their complaints and their names should
be deleted as party-complainants in the instant case.
With respect to PISI's Order for complainants to report to their
head office in Manila, the Arbiter held that this is not a reasonable
order considering that complainants are residents of Basilan, have
families in Basilan, have never been assigned beyond Mindanao or
Visayas, were not provided with fare money. Neither were they
assured of compensation similar to what they used to receive in
Basilan, nor of continued posting while in Manila. That their
transfer would surely entail great inconvenience to complainants
and their families. Hence, the validity of their transfer could not be
sustained. Therefore, complainants charged that their refusal to
report to the head office was justified. Consequently, their
dismissal was illegal.
The Arbiter, however, found that the procedure for termination of
employment had been complied with by respondent PISI. But
finding complainants illegally dismissed, the Arbiter held that they
are entitled to backwages set at six (6) months pay corresponding
to the maximum period a security guard may be placed on floating
status, computed on the basis of their latest salary of P2,848.00.
That since complainants opted for separation pay instead of
reinstatement considering that their positions in Basilan are
probably no longer existing, complainants instead [were] awarded
by the Arbiter separation pay at one (1) month pay for every year
of service based on their latest salary at the time they were
illegally dismissed.
Complainants['] claims for moral and exemplary damages were
denied for lack of factual and legal basis. However, the sum of
P1,000 for each complainant was awarded as attorney's fees and
litigation costs.
And finally, the Labor Arbiter absolved respondent UP-NDC Basilan
Plantations, Inc. from joint and several liability on the monetary
awards, noting that joint and several liability of an indirect
employer is limited only to non-payment of labor standards
benefits mandated by the Labor Code. The monetary awards in the
instant case, being in the nature of labor relations benefits, the
same was, thus, ordered as sole liability of respondent PISI.
Ruling of Respondent NLRC
As earlier stated, Respondent NLRC reversed the labor arbiter's
Decision, holding that private respondent had no choice but to
place petitioners and other security guards on floating status for
lack of clients to which they could be immediately reassigned. The
directive to report to Manila for posting was issued, because
private respondent knew that it could place petitioners on reserve
status for only six months. Petitioners' refusal to comply with said
Order and their "wanton disregard of the order to explain their
inability to . . . comply and obey lawful orders from their employer"
constituted the "proximate cause for their dismissal." The fact that
petitioners had some reasonable objections to the directive to
report to Manila did not mitigate their insubordination, because
petitioners raised them only during the arbitral proceedings.
Under these circumstances, according to Respondent Commission,
private respondent had "no option left but to charge them with
insubordination and willful disobedience to lawful orders of their
employer." In according due process to petitioners, private
respondent gave them ample time to explain why no disciplinary
measures should be taken against them, but petitioners still
refused to comply. Hence, private respondent was justified in
dismissing petitioners.
Not only did petitioners' insubordination constitute willful
disobedience; it also partook of abandonment. Thus, petitioners
are not entitled to the payment of back wages and separation pay
or reinstatement.
Assignment of Errors
In their Memorandum before us, petitioners impute the following
errors to Respondent Commission: 7
I lawful orders given in connection with their work. PISI reduced its
The NLRC acted with grave abuse of discretion in ruling that
petitioners committed willful disobedience of lawful orders of their
employer.
II
The NLRC acted with grave abuse of discretion in ruling that
petitioners abandoned their work.
III
The NLRC acted with grave abuse of discretion in reversing the
finding of the labor arbiter that petitioners were illegally dismissed
by way of constructive dismissal.
IV
The NLRC acted with grave abuse of discretion in denying recovery
of back wages, separation pay, damages, and attorney's fees in
favor of petitioners.
V
The NLRC acted with grave abuse of discretion in denying
petitioners' motion for reconsideration.
It is undisputed that due process was observed in the dismissal of
petitioners. Hence, the only remaining issues are: (1) whether
petitioners' dismissal was for a valid and just cause; and (2)
whether they are entitled to separation pay, back wages and
damages.
The Court's Ruling
The petition is meritorious.
First Issue: No Just Cause
The solicitor general maintains that petitioners' conduct amounted
to clear insubordination and constituted willful disobedience to
work force in UP-NDC premises as a result of the inclusion of the
latter's plantation in the government's agrarian reform program.
He argues that PISI diligently notified petitioners for three
consecutive times to report to its head office for posting, but
petitioners "wantonly refused receipt of the letters and abjectly
failed to comply with . . . [the] directive under letters dated April 8,
May 2 and May 29, 1991."
We disagree. While it is true that petitioners failed to report to
Manila and to respond to private respondent's letters, this is not
the end-all and be-all of the matter.
One of the fundamental duties of an employee is to obey all
reasonable rules, orders and instructions of the employer.
Disobedience, to be a just cause for termination, must be willful or
intentional, willfulness being characterized by a wrongful and
perverse mental attitude rendering the employee's act inconsistent
with proper subordination. A willful or intentional disobedience of
such rule, order or instruction justifies dismissal only where such
rule, order or instructions is (1) reasonable and lawful, (2)
sufficiently known to the employee, and (3) connected with the
duties which the employee has been engaged to discharge. 8 The
assailed Resolution of Respondent Commission and the arguments
of the solicitor general failed to prove these requisites.
On the other hand, petitioners negated the solicitor general's
stance, contending that the instruction to report to the Manila
office was "inconvenient, unreasonable and prejudicial," as they
were not given transportation money or, more important, any
assurance that work would be available to them once they reached
Manila. They were not even furnished a copy of the so-called Office
Memorandum No. 4 dated February 6, 1991, which placed them
under "floating status." Thus, they aver that their failure to report
to the Manila office was not characterized by a "wrongful and
perverse [mental] attitude." They also assert that they have
families which they could not just leave behind.
The reasonableness and lawfulness of a rule, order or instruction
depend on the circumstances availing in each case.
Reasonableness pertains to the kind or character of directives and
commands and to the manner in which they are made. 9 In this
case, the order to report to the Manila office fails to meet this
standard.
First, it was grossly inconvenient for petitioners, who were
residents and heads of families residing in Basilan, to commute to
Manila. In Yuco Chemical Industries, Inc. vs. Ministry of Labor and
Employment,10 the transfer to Manila of two workers, who were
also studying in Tarlac, was held to be grossly inconvenient. The
distance to Manila from Basilan is considerably greater than that
from Tarlac. Such transfer would have necessarily entailed
separation of the petitioners from their families.
Second, petitioners were not provided with funds to defray their
transportation and living expenses. Petitioners, not unknown to
their employer, earned only P1,500 to P2,500 a month before they
were placed on reserve status, after which they remained jobless.
Furthermore, being residents of Basilan, petitioners would have
required living arrangements in Manila which, in turn, would have
entailed additional expenses on their part.
Third, private respondent argues that it sent transportation money
to petitioners. However, the recipients of such funds are not parties
in this case. Moreover, the alleged transportation allowance was
given only after petitioners had already been terminated from
service. The letter 11 purportedly granting transportation allowance
to other security guards was dated August 12, 1991, which was
after petitioners had been dismissed June 28, 1991. 12
Fourth, no reason was given by private respondent company
explaining why it had failed to inform petitioners of their specific
security assignments prior to their departure from Basilan. If
indeed the postings were to be made in Basilan, there would have
been no necessity for petitioners to report to Manila and no
justification for respondent's insistence on their compliance with its
directive. Since private respondent did not provide transportation
and living allowances, and since, in the first place, petitioners could
have been easily informed of their new assignments right there in
Basilan, there was no reason for petitioners to travel all the way to
Manila.
Traversing these contentions, Respondent Commission gave this
statement in its challenged Resolution:13
Unfortunately, however, for the [petitioners], they kept all these
reasons only to themselves. They did not bother communicating
these objections to their employer, respondent PISI. They chose to
remain silent, went to the extent of even refusing to acknowledge
receipt of the letters and directives sent to them dated April 8, May
2, and May 29, 1991, although they admit having received the
same. It was already late in the day when complainants raised said
objections after they had been dismissed, and only during the
arbitral proceedings below.
Under the circumstances, it was indeed difficult for respondent PISI
to know [petitioners'] predicament considering that they did not
even bother replying to all the directives sent them. . . .
In contrast, private respondent granted to other similarly situated
security guards a second chance to explain their failure to respond,
an opportunity it denied petitioners. This fact demonstrates that
petitioners' dismissal was not commensurate to their
insubordination which, we reiterate, was neither willful nor
intentional. Respondent Commission also held in its assailed
Resolution: "[H]ad their objections been seasonably raised to
respondent PISI, they would have been just and reasonable. Their
only fault lies in not raising said objections on time before their
dismissal." Even private respondent agency said in its
memorandum: "If such order appears to be unreasonable or
inconvenient to the petitioners at least management should have
been informed why the guards cannot comply with such orders, so
some remedial means could have been worked out." These
ratiocinations are pointless. Private respondent very well knew that
petitioners were not receiving any salary while they were on
floating status and, thus, also knew that they would hardly be able
to comply with the directive to report to Manila. In any event,
dismissal was too harsh a penalty for an infraction which appears,
under the circumstances, to be excusable. 14
The right to transfer employees from one office to another -
provided there is no demotion in rank or diminution of salary,
benefits and other privileges - is judicially recognized as a
prerogative inherent in the employer's right to effectively control
and manage the enterprise. But this principle is not at issue here.
The issue is whether petitioners' alleged disobedience constituted a
just and valid cause to dismiss them.
It is obvious to us that the dismissal was effected with mala fides,
as it was intended to punish petitioners for their refusal to heed
their employer's unreasonable directive. Respondent Commission
therefore committed grave abuse of discretion in holding that
petitioners were dismissed for a just cause.
Abandonment of Work
Respondent Commission avers in its impugned Resolution:
"[Petitioners] are likewise guilty of 'quitting' without just cause
under Article 285 of the Labor Code, as amended. Hence, they are
clearly not entitled to any affirmative reliefs under the law. They
are 'estopped' from asserting claims against their employer, PISI."
Agreeing with Respondent Commission, the solicitor general posits
that petitioners "clearly abandoned their work without valid cause."
This contention is untenable. Abandonment, as a just and valid
cause for dismissal, requires a deliberate, unjustified refusal of an
employee to resume his work, coupled with a clear absence of any
intention of returning to his work. 15 No evidence was presented to
establish that petitioners relinquished their jobs. Denying they
abandoned their work, petitioners contend that it was private
respondent agency which deserted them by failing to communicate
with them for over two months, from February 1, 1991 to April 8,
1991, and that the directive to make them report to Manila was
only a ruse to terminate their services. Although a letter 16 dated
September 13, 1991 and signed by a certain Jose E. Fernandez
declined the offer to work outside Basilan despite the receipt of
transportation allowance, such letter cannot be attributed to
petitioners because Fernandez did not represent any of them. That
petitioners did not pray for reinstatement in their pleadings is not
proof of abandonment. In fact, petitioners' contention is that
private respondent effected constructive dismissal, which is
incompatible with abandonment. 17
No Constructive Dismissal
For presuming that they were constructively dismissed, petitioners
are likewise in error. Constructive discharge is an involuntary
resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in
rank and/or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the
employee. 18 In this particular case, petitioners were not
constructively dismissed; they were actually dismissed without just
and valid cause.
Second Issue: Separation Pay and Back Wages
The normal consequences of illegal dismissal are reinstatement and
payment of back wages. 19 These remedies give life to the workers'
constitutional right to security of tenure. 20
Separation pay is generally not awarded except in instances where
reinstatement is no longer feasible or appropriate, as in this case.
As a substitute for immediate and continued reemployment,
separation pay is meant to provide the employee the "wherewithal
during the period that he is looking for another employment." 21
In this particular case, private respondent alleges that there is no
assignment in Basilan or Zamboanga available to petitioners.
Transfer to another post outside said areas would have only given
rise to the same problems as those entailed by the original
directive. Reinstatement presupposes that the previous position
from which the employee had been removed still exists, or there is
an unfilled position of a similar nature, more or less, as the one
previously occupied by the employee. 22 If no such position is
available, reinstatement becomes a legal impossibility. The law
cannot exact compliance with what is impossible.
The award of attorney's fees in the sum of one thousand pesos is
reasonable and in accord with Art. 2208 of the Civil
Code. 23 However, no moral and exemplary damages can be
granted for lack of factual basis.24
In sum, we hold that the labor arbiter was correct in awarding
separation pay, back wages and attorney's fees.
WHEREFORE, the petition is hereby GRANTED. The assailed
Decision is REVERSED and SET ASIDE. The labor arbiter's Decision,
dated February 17, 1992, is REINSTATED. No costs.
SO ORDERED.
G.R. No. 170928 September 11, 2007
VICENTE S. ALMARIO, Petitioner,
vs.
PHILIPPINE AIRLINES, INC., Respondent.
DECISION
CARPIO MORALES, J.:
On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by
respondent, Philippine Airlines, Inc. (PAL), as a Boeing 747 Systems
Engineer.
On April 28, 1995, Almario, then about 39 years of age 1 and a Boeing 737
(B-737) First Officer at PAL, successfully bid for the higher position of Airbus
300 (A-300) First Officer.2 Since said higher position required additional
training, he underwent, at PAL’s expense, more than five months of training
consisting of ground schooling in Manila and flight simulation in Melbourne,
Australia.3
After completing the training course, Almario served as A-300 First Officer of
PAL, but after eight months of service as such or on September 16, 1996, he
tendered his resignation, for "personal reasons," effective October 15, 1996.4
On September 27, 1996, PAL’s Vice President for Flight Operations sent
Almario a letter, the pertinent portions of which read:
xxxx
2. Our records show that you have been trained by the Company as A300
First Officer starting on 04 September 1995 and have completed said training
on 08 February 1996. As you are aware the Company invested heavily on
your professional training in the estimated amount of PHP786,713.00 on the
basis that you continue to serve the Company for a definite period of time
which is approximately three (3) years or thirty-six (36) months.
3. In view of the foregoing, we urge you to reconsider your proposed
resignation otherwise you will be required to reimburse the Company an
amount equivalent to the cost of your professional training and the damaged
[sic] caused to the Company.5 (Emphasis and underscoring supplied)
Despite receipt of the letter, Almario pushed through with his resignation.
By letter of October 9, 1996, Almario’s counsel sought PAL’s explanation
behind its September 27, 1996 letter considering that Almario "did not sign
anything regarding any reimbursement."6 PAL did not reply, prompting
Almario’s counsel to send two letters dated January 6, 1997 and February
10, 1997 following-up PAL’s reply, as well as the release of Almario’s
clearances which he needed to avail of his benefits.7
On February 11, 1997, PAL filed a Complaint8 against Almario before the
Makati Regional Trial Court (RTC), for reimbursement of ₱851,107 worth of
training costs, attorney’s fees equivalent to 20% of the said amount, and
costs of litigation. PAL invoked the existence of an innominate contract of do
ut facias (I give that you may do) with Almario in that by spending for his
training, he would render service to it until the costs of training were
recovered in at least three (3) years.9 Almario having resigned before the 3-
year period, PAL prayed that he should be ordered to reimburse the costs for
his training.
In his Answer with Special and Affirmative Defenses and Compulsory
Counterclaims,10 Almario denied the existence of any agreement with PAL
that he would have to render service to it for three years after his training
failing which he would reimburse the training costs. He pointed out that the
1991-1994 Collective Bargaining Agreement (CBA) between PAL and the
Airline Pilot’s Association of the Philippines (ALPAP), of which he was a
member,11 carried no such agreement.
Almario thus prayed for the award of actual damages on account of PAL’s
withholding of the necessary clearances which he needed in order to obtain
his lawful benefits, and moral and exemplary damages for malicious
prosecution and unjust harassment.12
PAL, in its Reply to Defendant’s Answer and Answer to
Counterclaim,13 argued as follows:
The right of PAL to be reimbursed for training expenses is based on Article
XXIII, Section 1 of the 1991-1994 Collective Bargaining Agreement (CBA, for
brevity) and which was taken from the decision of the Secretary of Labor.
[The Secretary of Labor] ruled that a pilot should remain in the position where
he is upon reaching the age of fifty-seven (57), irrespective of whether or not
he has previously qualified in the Company’s turbo-jet operations. The
rationale behind this is that a pilot who will be compulsorily retired at age
sixty (60) should no longer be burdened with training for a new position.
Thus, Article XXIII, Section 1 of the CBA provide[s]:
"Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots
who are less than fifty-seven (57) years of age provided they have previously
qualified in any company’s turbo-jet aircraft shall be permitted to occupy any
position in the company’s turbo-jet fleet.
The reason why pilots who are 57 years of age are no longer qualified to bid
for a higher position is because they have only three (3) years left before the
mandatory retirement age [of 60] and to send them to training at that age,
PAL would no longer be able to recover whatever training expenses it will
have to incur.
Simply put, the foregoing provision clearly and unequivocally recognizes the
prohibitive training cost principle such that it will take a period of at least
three (3) years before PAL could recover from the training expenses it
incurred.14(Emphasis and underscoring supplied)
By Decision15 of October 25, 2000, Branch 147 of the Makati RTC, finding no
provision in the CBA between PAL and ALPAP stipulating that a pilot who
underwent a training course for the position of A-300 First Officer must serve
PAL for at least three years failing which he should reimburse the training
expenses, rendered judgment in favor of Almario.
The trial court denied Almario’s claim for moral damages, however.16 It
denied too Almario’s claim for the monetary equivalent of his family trip pass
benefits (worth US$49,824), it holding that the same had been forfeited as he
did not avail of them within one year from the date of his separation.
Thus the trial court disposed:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment
in favor of defendant Vicente Almario and against the plaintiff:
1- Dismissing the plaintiff’s complaint;
2- Ordering the plaintiff to pay the defendant:
a- the amount of ₱312,425.00 as actual damages with legal
interest from the filing of the counterclaim;
b- the amount of ₱500,000.00 as exemplary damages;
c- the amount of ₱150,000.00 as attorney’s fees;
d- the costs of the suit.
SO ORDERED.17
On appeal by both parties,18 the Court of Appeals, by Decision19 dated March
31, 2005, reversed the trial court’s decision. It found Almario liable under the
CBA between PAL and ALPAP and, in any event, under Article 22 of the Civil
Code. Thus it disposed:
WHEREFORE, the appealed Decision is REVERSED and SET ASIDE. In
lieu thereof, a new judgment is hereby ENTERED, as follows: (a) Appellee
Vicente Almario is hereby ordered to pay appellant Philippine Airlines, Inc.
the sum of Five Hundred Fifty Nine Thousand, Seven Hundred [T]hirty Nine
& 9/100 Pesos (₱559, 739.90) with six percent (6%) interest as above-
computed; and (b) the award of exemplary damages and attorney’s fees in
favor of appellee is hereby DELETED.20 (Emphasis in the original;
underscoring supplied)
His Motion for Reconsideration21 having been denied,22 Almario filed the
instant Petition for Certiorari [sic] (Under Rule 45),23 raising the following
issues:
A. Whether the Court of Appeals committed reversible error
in interpreting the Collective Bargaining Agreement between
Philippine Airlines, Inc. (PAL) and the Airline Pilots Association of the
 Philippines (ALPAP) as an ordinary civil law contract applying
ordinary contract law principles which is contrary to the ruling of the
Supreme Court in Samahang Manggagawa sa Top Form
Manufacturing-United Workers of the Philippines (SMTFM-UWP) v.
NLRC and, therefore, erroneously reading into the CBA a clause that
was not agreed to during the negotiation and not expressly stated in
the CBA;
B. Whether the Court of Appeals committed reversible error
in holding that Article 22 of the Civil Code can be applied to recover
training costs which were never agreed to nor included as
reimbursable expenses under the CBA;
C. Whether the availing by petitioner of a required training is a legal
ground justifying the entitlement to a benefit and therefore, negating
claims of unjust enrichment;
D. Whether the failure of private respondent to honor and provide the
Family Trip Pass Benefit in the equivalent amount of US$ 49,824.00
which petitioner and his family were not able to avail of within the one
(1) year from date of separation due to the actions of PAL amounts
to unjust enrichment;
E. Whether or not respondent is liable for malicious
prosecution[.]24 (Underscoring supplied)
Almario insists on the absence of any written contract or explicit provision in
the CBA obliging him to reimburse the costs incurred by PAL for his training.
And he argues:
[T]here can be no unjust enrichment because petitioner was entitled to the
benefit of training when his bid was accepted, and x x x PAL did not suffer
any injury because the failure to include a reimbursement provision in the
CBA was freely entered into by the negotiating parties;
xxxx
It is not disputed that the petitioner merely entered a bid for a higher position,
and that when he was accepted based on seniority and qualification, the
position was awarded to him. It is also not disputed that petitioner [had] not
asked, requested, or demanded for the training. It came when his bid was
accepted by PAL;
Because the training was provided when the bid was accepted, the
acceptance of the bid was the basis and legal ground for the training;
Therefore, since there is a legal ground for the entitlement of the training,
contrary to the ruling of the Court of Appeals, there can be no unjust
enrichment;25 (Underscoring supplied)
The petition fails.
As reflected in the above-enumerated issues raised by Almario, he cites the
case of Samahang Manggagawa sa Top Form Manufacturing-United
Workers of the Philippines (SMTFM-UWP) v. NLRC26 (Manggagawa) in
support of his claim that the appellate court erred in interpreting the CBA as
an ordinary civil law contract and in reading into it "a clause that was not
agreed to during the negotiation and not expressly stated in the CBA."
On the contrary, the ruling in Manggagawa supports PAL’s position. Thus
this Court held:
The CBA is the law between the contracting parties – the collective
bargaining representative and the employer-company. Compliance with a
CBA is mandated by the expressed policy to give protection to labor. In the
same vein, CBA provisions should be "construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve." This is founded on the
dictum that a CBA is not an ordinary contract but one impressed with public
interest. It goes without saying, however, that only provisions embodied in
the CBA should be so interpreted and complied with. Where a proposal
raised by a contracting party does not find print in the CBA, it is not a part
thereof and the proponent has no claim whatsoever to its
implementation.27 (Emphasis and underscoring supplied)
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines,
Inc.," the Secretary of the Department of Labor and Employment (DOLE),
passing on the failure of PAL and ALPAP to agree on the terms and
conditions for the renewal of their CBA which expired on December 31, 1987
and construing Section 1 of Article XXIII of the 1985-1987 CBA, held:
xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:
Pilots fifty-five (55) years of age or over who have not previously qualified in
any Company turbo-jet aircraft shall not be permitted to bid into the
Company’s turbo-jet operations. Pilots fifty-five (55) years of age or over who
have previously qualified in the company’s turbo-jet operations may be by-
passed at Company option, however, any such pilot shall be paid the by-
pass pay effective upon the date a junior pilot starts to occupy the bidded
position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots who
reach the age of fifty-five (55) years and over without having previously
qualified in any Company turbo-jet aircraft shall not be permitted to occupy
any position in the Company’s turbo-jet fleet. Pilots fifty-four (54) years of age
and over are ineligible for promotion to any position in Group I. Pilots
reaching the age of fifty-five (55) shall be frozen in the position they currently
occupy at that time and shall be ineligible for any further movement to any
other positions.
PAL’s contention is basically premised on prohibitive training costs. The
return on this investment in the form of the pilot promoted is allegedly five (5)
years. Considering the pilot’s age, the chances of full recovery [are] asserted
to be quite slim.
ALPAP opposed the proposal and argued that the training cost is offset by
the pilot’s maturity, expertise and experience.
By way of compromise, we rule that a pilot should remain in the position
where he is upon reaching age fifty-seven (57), irrespective of whether or not
he has previously qualified in the Company’s turbo-jet operations. The
rationale behind this is that a pilot who will be compulsorily retired at age
sixty (60) should no longer be burdened with training for a new position. But if
a pilot is only at age fifty-five (55), and promotional positions are available, he
should still be considered and promoted if qualified, provided he has
previously qualified in any company turbo-jet aircraft. In the latter case,
the prohibitive training costs are more than offset by the maturity, expertise,
and experience of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots
fifty-five (55) [sic] years of age provided they have previously qualified in any
company turbo-jet aircraft shall be permitted to occupy any position in the
company’s turbo-jet fleet.28 (Emphasis and underscoring supplied)
The above-quoted provision of Section 1 of Article XXIII of the 1985-1987
CBA, as construed by the DOLE Secretary, was substantially incorporated in
the 1991-1994 CBA between PAL and ALPAP29 as follows:
Pilots fifty-seven (57) years of age shall be frozen in their position. Pilots who
are less than fifty-seven (57) years of age provided they have previously
qualified in any company’s turbo-jet aircraft shall be permitted to occupy any
position in the company’s turbo-jet fleet.30
The same section of Article XXIII of the 1991-1994 CBA was reproduced in
the 1994-2000 CBA.31
Arturo Gabanton, PAL’s Senior Vice President for Flight Operations,
testifying on PAL’s "policy or practice" on underwriting the training costs of its
pilots at the time Almario was trained, with the "expectation" of benefiting
therefrom "in order to recover the cost of training," explained:
Atty. Parinas:
Q: At the time the defendant was accepted for training as A300 First Officer,
would you know what was the governing policy or practice of Philippine
Airlines that was being employed regarding the training cost[s] for the pilots?
Witness:
A: The company has to spend for the training of the pilots and after that
the company expecting that services will be rendered in order to recover the
cost[s] of training.
Atty. Parinas:
Q: You stated that the pilot must serve the company after completing the
training, for how long after completing the training?
Witness:
A: At least for three (3) years.
Atty. Parinas:
Q: What is your basis in saying that a pilot must serve the company after
completing the training?
Witness:
A: That is embodied in the Collective Bargaining Agreement between
Philippine Airlines and the Airline Pilot Association of the Philippines.32
 xxxx
Atty. Parinas:
Q: Can you point to the provision in this agreement relating to the three (3)
year period you stated a while ago?
NOTE: Witness going over the document shown to him by counsel.
Witness:
A: It is on page 99 of the Collective Bargaining Agreement, Article 23,
Miscellaneous.
Atty. Parinas: I would like to manifest that this provision pointed out by the
witness is already marked as Exhibit B-1by the plaintiff.
xxxx
[Atty. Parinas]
Q: Mr. witness, Exhibit B-1 states in part that "Pilots, 57 years of age shall be
frozen in their position. Pilots who are less than 57 years of age provided
they have been previously qualified in any company’s Turbo-Jet Aircraft shall
be permitted to occupy any position in the company’s Turbo-jet Fleet", why
do you say this is the basis for the three (3) year period within which a pilot
must render service to the company after completing the training?
[Witness]
A: The reason why 57 years old is placed here in the Collective Bargaining
Agreement [is that] it is expected that you serve the position for three (3)
years because the retirement age is at 60, therefore, if you are past 57 years
old, it will fall short of the three (3) years recovery period for the company. So
it was established that [anyone] past 57 years old will not be allowed to train
for another position.33 (Emphasis and underscoring supplied)
It bears noting that when Almario took the training course, he was about 39
years old, 21 years away from the retirement age of 60. Hence, with the
maturity, expertise, and experience he gained from the training course, he
was expected to serve PAL for at least three years to offset "the prohibitive
costs" thereof.
The pertinent provision of the CBA and its rationale aside, contrary to
Almario’s claim, Article 22 of the Civil Code which reads:
Art. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to
him,
applies.
This provision on unjust enrichment recognizes the principle that one may
not enrich himself at the expense of another. An authority on Civil
Law34 writes on the subject, viz:
Enrichment of the defendant consists in every patrimonial, physical, or moral
advantage, so long as it is appreciable in money. It may consist of some
positive pecuniary value incorporated into the patrimony of the defendant,
such as: (1) the enjoyment of a thing belonging to the plaintiff; (2) the
benefits from service rendered by the plaintiff to the defendant; (3) the
acquisition of a right, whether real or personal; (4) the increase of value of
property of the defendant; (5) the improvement of a right of the defendant,
such as the acquisition of a right of preference; (6) the recognition of the
existence of a right in the defendant; and (7) the improvement of the
conditions of life of the defendant.
xxxx
The enrichment of the defendant must have a correlative prejudice,
disadvantage, or injury to the plaintiff.1âwphi1 This prejudice may consist,
not only of the loss of property or the deprivation of its enjoyment, but also of
non-payment of compensation for a prestation or service rendered to the
defendant without intent to donate on the part of the plaintiff, or the failure to
acquire something which the latter would have obtained. The injury to the
plaintiff, however, need not be the cause of the enrichment of the
defendant. It is enough that there be some relation between them, that the
enrichment of the defendant would not have been produced had it not been
for the fact from which the injury to the plaintiff is derived. (Underscoring
supplied)35
Admittedly, PAL invested for the training of Almario to enable him to acquire
a higher level of skill, proficiency, or technical competence so that he could
efficiently discharge the position of A-300 First Officer. Given that, PAL
expected to recover the training costs by availing of Almario’s services for at
least three years. The expectation of PAL was not fully realized, however,
due to Almario’s resignation after only eight months of service following the
completion of his training course. He cannot, therefore, refuse to reimburse Quasha, Asperilla, Ancheta, Valmonte, Peña & Marcos Law Office for
the costs of training without violating the principle of unjust petitioner.
enrichment.1âwphi1
The Solicitor General for respondent NLRC.
Following the computation by the appellate court which was arrived at by
offsetting the respective claims of the parties, viz: Sycip, Salazar, Feliciano, Hernandez & Castillo Law Office for private
respondent.
Training Cost P851,107.00

Less: Appellee's corresponding 8 months

Service after training [P850,107.00
divided by 36 months (3 years)
= P23,640.86 x 8 months]
Equals
GUERRERO, J.:
189,126.88 This is a petition for review seeking to set aside the decision of the National
Labor Relations Commission in NLRC Case No. RB-4220 reversing the
award made by the Labor Arbiter ordering petitioner's reinstatement by
P661,980.12 private respondent Northwest Airlines, Inc. with full backwages and other
benefits decreed by law.

Less: Accrued Benefits 102,240.22 The antecedent facts of this case are as follows:

Net Reimbursable Amount or Petitioner Helmut Dosch an American citizen, married to a Filipina, was the
P559,739.9036
Appellee's Outstanding Account resident Manager of Northwest Airlines, Inc. (Northwest, for short) in the
*****************
Philippines. He has to his credit eleven (11) years of continuous service with
the company, including nine (9) years as Northwest Manager with station at
Almario must pay PAL the sum of ₱559,739.90, to bear the legal interest rate Manila. On August 18, 1975 he received an inter-office communication from
of 6% per annum from the filing of PAL’s complaint on February 11, 1997 R.C. Jenkins, Northwest's Vice President for Orient Region based in Tokyo,
until the finality of this decision. promoting him to the position of Director of International Sales and
transferring him to Northwest's General Office in Minneapolis, U.S.A.,
effective the same day. The full text of the inter-office communication is
In light of the foregoing discussions on the main issue, the Court finds it
reproduced below:
unnecessary to dwell on the other issues raised by Almario. Suffice it to state
that the appellate court’s disposition thereof is, as its decision reflects, well-
taken. NORTHWEST ORIENT Interoffice Communication

WHEREFORE, the petition is DENIED and the decision appealed from To: H. Dosch Manager-Philippines
is AFFIRMED. From: Vice-President, Orient Region
Subject: Transfer
Date: August 18,1975
G.R. No. L-51182 July 5, 1983
Location: Tokyo
HELMUT DOSCH, petitioner,
Dear Helmut:
vs.
NATIONAL LABOR RELATIONS COMMISSION and NORTHWEST
AIRLINES, INC., respondents. You have completed nine (9) years of service in the Orient,
and in accordance with usual practice, it is now the
Company's intention to transfer you to the General Office in
Minneapolis to broaden your experience base considering
that your assignment in the Philippines has continued for
several years longer than is normal for our overseas
managers.

The Company feels that there is need for an executive with

your experience to fill the position of Director of International
Sales reporting directly to the Vice President for Sales. The
Company has therefore decided to promote and transfer you
to this position effective today, August 18, 1975. Your
monthly compensation will be upgraded and the proper
payroll adjustment will be made in due course effective
today.

To implement the foregoing decision of the Company and in

order to effect a smooth turnover, Mr. L.J. Gilbert, Jr. shall,
effective today, August 18, 1975, take over your functions
and responsibilities as Manager.

You are expected to report to your new assignment on

September 15, 1975. You shall, however, be afforded
sufficient time, which in this case shall not extend beyond
September 15, 1975, within which to wind up your affairs in
the Philippines. During this transition period, you will be on
vacation leave for ten (10) days and thereafter on travel and
relocation status with pay. Please see that the Company
house you presently occupy will be made available to your
successor by September 10, 1975.
Petitioner, acknowledging receipt of the above memo of August 18, 1975,
expressed appreciation for the promotion and at the same time regretted that
"for personal reasons and reasons involving my family, I am unable to accept
a transfer from the Philippines" in his letter dated August 28, 1975 which
reads:
R. C. JENKINS — V.P., O.R. August 28, 1975

We wish you success in your new assignment. H. DOSCH

TRANSFER V
e
r
This is to acknowledge receipt of your memo of August 18,
1975, on theysubject.
t
r
While I sincerely appreciate the company's confidence in my
abilities as aumanager, which reflects itself in my promotion
l of Director of International Sales, I regret that
to the position
y
at this time, for personal reasons and reasons involving my
y
family, I am unable to accept a transfer from the Philippines.
o
u
I would, therefore,
r prefer to remain in my position of
Manager-Philippines until such time that my services in that
capacity are no longer required by Northwest Airlines.
 (
S
g
d
.
)
H
.
Telegrams wereD also sent by petitioner to Mr. Nightingale,
O
Director for Finance and to Mr. Jenkins, clearly stating
S
petitioner's desire to remain as Manager-Philippines of
Northwest. C
H
On September 9, 1975, the Vice-President for the Orient
Petitioner tried to resume his duties as Manager, through a Region of Northwest advised petitioner that "in view of the
memorandum to the Manila Staff which reads: foregoing, your status as an employee of the company
ceased on the close of business on August 31, 1975" and
"the company therefore considers your letter of August 28,
MANILA STAFF Sept. 4, 1975 1975, to be a resignation without notice."

H. DOSCH MNL On September 16, 1975, Northwest filed a Report on

RESUMPTION OF DUTIES Letter No. 454/75
It gives me great pleasure to announce that I advised Mr.
Jenkins by letter dated August 28, 1975, that, for personal
reasons, I have declined to accept the promotion to the
position of Director of International Sales at the General
Office.
Accordingly, upon return to work from an authorized vacation
of ten working days, I am resuming my duties and
responsibilities as Manager-Philippines effective today,
September 4, 1975.
I know you will join me in thanking Mr. L.J. Gilbert for taking
my place as Acting Manager-Philippines during my absence
from the office.
Resignation of Managerial Employee (Form No. 74-3,
Revised September 1974), i.e., Helmut Dosch before
Regional Office No. IV (Manila) Department of Labor, copy
thereof furnished petitioner.
The Report was contested by the petitioner and the parties
were conciliated by Regional Office No. IV, Manila but failed
to agree on a settlement. The case was thus certified to the
Executive Labor Arbiter, National Labor Relations
Commission, for compulsory arbitration, in the following wise
and manner:
Pursuant to P. D. 442, as amended, and its implementing
rules and regulations (I) have the honor to transmit
complaint-Case No. R04- 10-(illegible)
COMPLAINANT/S HELMUT DOSCH

Address: c/o Atty. A.D.

(
Valmonte
S
g Don Pable Bldg.
d 114 Amorsolo St., Makati
Rizal
.
)
RESPONDENT/S NORTHWEST AIRLINES, INC.

Address: 1020 Roxas Blvd., Manila

and hereby certifies the following issue(s) for arbitration:

1. Illegal dismissal.

2. x x x

3. x x x

4. x x x

5. x x x

The following issue(s) have been settled-

1. x x x
February 3, 1976.

2. x x x
After hearing, Labor Arbiter Sofronio A. Ona rendered the
decision dated December 29, 1976, the dispositive portion of
3. x x x which reads:

4. x x x IN VIEW OF THE FOREGOING, respondent Northwest

Airlines, Inc. of 1020 Roxas Boulevard, Manila is hereby
Attached herewith is the record of the case consisting of directed to reinstate complainant Helmut Dosch of Makati,
THIRTY ONE (31) pages Rizal c/o Atty. A. D. Valmonte, Don Pablo Building, 114
Amorsolo Street, to his former position with full backwages
without deduction
O whatsoever from the time his salary was
withheld by the
r respondent until actual reinstatement,
without loss iof seniority rights and other benefits recognized
by law, including
g attorney's fees equivalent to 10% of the
total monetaryi benefits the petitioner may recover, to take
effect 10 daysn from receipt of this Decision.
a
SO ORDERED. l
S
i
Manila, Philippines, December 29, 1976.
g
n
Respondent Northwest appealed from the Labor Arbiter's decision to the
e
National Labor Relations Commission (hereinafter referred to as NLRC)
assigning the following errors: (a) the Labor Arbiter erred in not holding that
petitioner had "resigned" from his employment; (b) assuming arguendo that
petitioner "did not resign," the Labor Arbiter erred in not holding that
petitioner could be dismissed for failure/refusal to comply with the valid
transfer order and for the employer's loss of trust and confidence of his
employee; (c) the Labor Arbiter erred in impliedly holding that prior clearance
was required to effect the termination of petitioner, a managerial employee;
and (d) Labor Arbiter erred in awarding reinstatement, backwages, and
attorney's fees.
Petitioner filed his Reply to the appeal, supporting the findings of the Labor
Arbiter and furthermore questioned the propriety of raising for the first time
on appeal the issue whether or not petitioner's refusal to comply with the
transfer order constitutes a just and sufficient cause to dismiss him.
The decision en banc of the NLRC reversed the Labor Arbiter's decision and
dismissed the case for lack of merit, holding that:
The hiring, firing, transfer, demotion and promotion of
employees has been traditionally Identified as a
management prerogative. This is a function associated with
the employer's inherent right to control and manage
effectively its enterprise. The free will of management to
conduct its own business affairs to achieve its purpose
cannot be denied. This exercise finds support not only in
actual management practice but has become a part of our
jurisprudence in labor relations law where, in a number of
cases brought before the Supreme Court, the highest
tribunal ruled in one of these cases (Roldan vs. Cebu
Portland Cement Co., C.A. G.R. No. 24276-R, May 20, 1960,
citing Gregorio Araneta Employees Union vs, Roldan, G.R.
No. L-6843, July 20, 1955; Philippine Steel Metal Workers
Union vs. CIR, G.R. No. L-3587, Dec. 11, 1951), pertinent
portion of the decision reads as follows:
... Questions affecting the direction and management of
personnel are matters which the management itself must
resolve. Thus the Court has steadfastly held that the
determination of the qualifications and fitness of workers for
hiring and firing, promotion or reassignment on rotation
system, are the exclusive prerogatives of management. The
management has also the right to discharge employees
when there is need to reduce personnel because of the
precarious condition of the enterprise or as a result of that
closing of a section therein' (Morabe, The Law on Dismissal,
1962 ed., p. 55 citing Pampanga Bus Co., Inc. v. Employees
Association of the Pampanga Bus Co., Inc., Case No. 17-V,
Decision, August 10, 1946).
xxx xxx xxx
In the light of all the foregoing, We find that petitioner's
transfer and promotion is a valid exercise of management's
prerogative. It is our view, therefore, that respondent's
decision to consider him resigned from his job after he
defined management's order to transfer and promote him to
a new position at the general office at Minnesota, U.S.A. is
justified and warranted. x x x."
Petitioner now comes to Us for review of the decision.
With respect to the procedural error allegedly committed by the respondent
Commission in taking cognizance of an issue raised for the first time on
appeal that of petitioner's alleged insubordination for refusing to comply with
the transfer order for him to assume the position of Director of International
Sales at Minneapolis, U.S.A., which said Commission sustained and ruled in
favor of Northwest, reversing the Labor Arbiter's decision, the records
disclose that Northwest's theory from the inception of the case to the
rendition of the Labor Arbiter's decision was that petitioner was not
dismissed, fired or terminated but that he resigned from Northwest. This is
plain from Northwest's verified " Report on Resignation of Managerial
Employee" in DOL Form No. 74-3 filed on September 16, 1975 with Regional
Office No. IV, Department of Labor, wherein Northwest stated that the
termination of employment of "Helmut Dosch, Manager-Philippines" was due
to "resignation". Petitioner contested this report claiming that he never
resigned from the company. In its " Position Paper" dated March 10, 1976
before Regional Branch No. IV, Northwest emphasized that any issue other
than resignation of petitioner is irrelevant, thus: "As allegations relative to
termination are immaterial in this case, petitioner has no basis to claim that
'there is no legitimate ground upon which Northwest Airlines, Inc. could have
terminated the services of Mr. Dosch' or that petitioner's resignation was 'a
circumvention of the law.' In truth petitioner caused his own dissociation from
respondent."
We agree with the Labor Arbiter that "(i)n view of the overwhelming evidence
to the effect that petitioner did not resign or relinquish his position as
Manager-Philippines, this Body is without any alternative, but to declare the
sole reason relied upon by respondent- resignation (Exh. 'Q') as baseless
and devoid of truth." Indeed, the letter dated August 28, 1975 sent by
petitioner to R.C. Jenkins cannot be considered as a resignation as petitioner
indicated therein clearly that he preferred to remain as Manager-Philippines
of Northwest.
Realizing that its "resignation" theory was weak and flimsy, Northwest
abandoned it and contended for the first time that petitioner was guilty of
insubordination when he refused to comply with the transfer order. This
change of theory on appeal is improper; it is offensive to the basic rules of
fair play and justice and violative of petitioner's constitutional right to due
process of law. Appellate courts may not entertain questions of law or fact
not raised in the lower courts (Sec. 18, Rule 46, Revised Rules of Court), for
that would constitute a change of theory not permissible on appeal (Toribio
vs. Decasa, 55 Phil. 461).
It is undoubtedly the law, that, where a cause has been tried
upon the theory that the pleadings are at issue, or that a
particular issue is made by the pleadings, or where an issue
is tacitly accepted by all parties as properly presented for
trial and as the only issue, the appellate court will proceed
upon the same theory. (Lizarraga Hermanos vs. Yap Tico,
24 Phil. Rep. 504; Molina vs. Somes, 24 Phil. Rep., 45.) it
would be unjust and oppressive for the appellate court to
adopt a theory at variance with that on which the case was
presented to and tried by the lower court. It would surprise
the parties, to take them unaware and off their guard, and
would in effect, deprive them of their day in court.
(Limpangco Sons vs. Yangco Steamship Co., 34 Phil. 597,
605-609).
Since "resignation" was the particular cause alleged by Northwest in
terminating petitioner's employment, Northwest is restricted to the ground
specified and may not invoke any other cause for the discharge. (56 CJS p.
452, citing Georgia Coast and P.R. Co. vs. McFarland, 64 S.E. 897,132 Ga
639; 56 CJS p. 435, citing Vicknair vs. Southside Plantation Co., 10 La. App.
Orleans 43; Warner vs. Fabacher, 6 La. App. Orleans, 87).
As indicated earlier, Northwest on appeal to NLRC changed its stand and
claimed that petitioner was guilty of insubordination" when he refused to
comply with the transfer order made by Vice President Jenkins dated August
18, 1975. And for such act of insubordination, Northwest claimed it lost
confidence in the petitioner.
We must, however, rightly treat the Jenkins letter as directing the promotion
of the petitioner from his position as Philippine manager to Director of
International Sales in Minneapolis, U.S.A. It is not merely a transfer order
alone but as the Solicitor General correctly observes, "it is more in the nature
of a promotion that a transfer, the latter being merely incidental to such
promotion." The inter-office communication of Vice President Jenkins is
captioned "Transfer" but it is basically and essentially a promotion for the
nature of an instrument is characterized not by the title given to it but by its
body and contents. (Cf. Shell Co. vs. Firemen's Insurance Co. of Newark,
100 Phil. 757; Borromeo vs. Court of Appeals, L-22962, Sept. 28, 1972;
American Rubber co. vs. Collector of Internal Revenue, L-25965, June 29,
1975). The communication informed the petitioner that effective August 18,
1975, he was to be promoted to the position of Director of International
Sales, and his compensation would be upgraded and the payroll accordingly
adjusted. Petitioner was, therefore, advanced to a higher position and rank
and his salary was increased and that is a promotion. (People ex. rel.
Campbell vs. Partridge, 85 N.Y.S. 833, 899 App. Div. 497; State ex rel.
Wolcott vs. Celebrezze, 49 N.E. 2d 948, 141 Ohio St. 627, Vol. 34 Words
and Phrases, pp. 564, 565). It has been held that promotion denotes a scalar
ascent of an officer or an employee to another position, higher either in rank
or salary. (Millares vs. Subido, 20 SCRA 954).
In the Millares case above, the Supreme Court, speaking thru Acting Chief
Justice J.B.L. Reyes, distinguished between transfer and promotion as
follows:
A transfer is a movement from one position to another of
equivalent rank, level or salary, without break in the service.
Promotion, on the other hand, is the advancement from one
position to another with an increase in duties and
responsibilities as authorized by law, and usually
accompanied by an increase in salary, Whereas, promotion
denotes a scalar ascent of a senior officer or employee to
another position, higher either in rank or salary, transfer
refers to lateral movement from one position to another, of
equivalent rank, level or salary. (p. 962)
There is no law that compels an employee to accept a promotion, as a
promotion is in the nature of a gift or a reward, which a person has a right to
refuse. When petitioner refused to accept his promotion to Director of
International Sales, he was exercising a right and he cannot be punished for
it as qui jure suo utitur neminem laedit. He who uses his own legal right
injures no one.
It cannot be said that petitioner's refusal to obey the transfer order was
contumacious. For one, petitioner's refusal was justified in that the position of
Director of International Sales had been non-existent since 1965 and was
inexistent at the time of petitioner's promotion thereto on August 18, 1975,
which fact is shown by Northwest's Manual Policies and Procedures (Exhibit
"X") and admitted by Northwest's witness, Richardson Sells, in his testimony.
Northwest has not even attempted to deny the non- existence of the position.
Assuming for the sake of argument that the communication or letter of Mr.
Jenkins was basically a transfer, under the particular and peculiar facts
obtaining in the case at bar, petitioner's inability or his refusal to be
transferred was not a valid cause for dismissal.
While it may be true that the right to transfer or reassign an employee is an
employer's exclusive right and the prerogative of management, such right is
not absolute. The right of an employer to freely select or discharge his
employee is limited by the paramount police power (Phil. Air Lines, Inc. vs.
Phil. Airlines Employees Association, L-24626, June 28, 1974, 57 SCRA
489) for the relations between capital and labor are not merely contractual
but impressed with public interest (Article 1700, New Civil Code). And neither
capital nor labor shall act oppressively against each other (Article 1701, New
Civil Code).
There can be no dispute that the constitutional guarantee of security of
tenure mandated under Section 9, Article 2, 1973 Constitution applies to all
employees and laborers, whether in the government service or in the private
sector. The fact that petitioner is a managerial employee does not by itself
exclude him from the protection of the constitutional guarantee of security of
tenure. Even a manager in a private concern has the right to be secure in his
position, to decline a promotion where, although the promotion carries an
increase in his salary and rank but results in his transfer to a new place of
assignment or station and away from his family. Such an order constitutes
removal without just cause and is illegal. Nor can the removal be justified on
the ground of loss of confidence as now claimed by private respondent
Northwest, insisting as it does that by petitioner's alleged contumacious
refusal to obey the transfer order, said petitioner was guilty of
insubordination.
We cannot agree to Northwest's submission that petitioner was guilty of
disobedience and insubordination which respondent Commission sustained.
The only piece of evidence on which Northwest bases the charge of
contumacious refusal is petitioner's letter dated August 28, 1975 to R. C.
Jenkins wherein petitioner acknowledged receipt of the former's
memorandum dated August 18, 1975, appreciated his promotion to Director
of International Sales but at the same time regretted " that at this time for
personal reasons and reasons of my family, I am unable to accept the
transfer from the Philippines" and thereafter expressed his preference to
remain in his position, saying. " I would, therefore, prefer to remain in my
position of Manager-Philippines until such time that my services in that
capacity are no longer required by Northwest Airlines." From this evidence,
We cannot discern even the slightest hint of defiance, much less imply
insubordination on the part of petitioner.
Neither is the other ground alleged by Northwest in dismissing petitioner
which is loss of confidence, supported by evidence. On the contrary, the fact
that Northwest wanted to promote petitioner to Director of International Sales
as "the Company feels there is need for an executive of (his) experience to
fill the position of Director of International Sales" as well as its Manifestation
dated March 23, 1976 that Northwest "offered to rehire petitioner as Director
of International Sales with office at Minneapolis, U.S.A." clearly indicate that
Northwest had full confidence in petitioner. And so We hold and rule that
respondent Commission committed grave abuse of discretion in sustaining
the dismissal of petitioner on the ground of insubordination and loss of
confidence.
Indeed, the outright dismissal of petitioner from his position as Manager-
Philippines of Northwest Airlines is much too severe, considering the length
of service that petitioner has rendered for eleven (11) fruitful and loyal years,
a strong and vital factor that must be taken into account in labor law
determinations which this Court, speaking thru Chief Justice Fernando
in Meracap vs. International Ceramics Manufacturing Co., Inc., L-48235-36,
July 30, 1979, 92 SCRA 412 emphasized should not only be secundum
rationem but also secundum caritatem, to wit:
It would imply at the very least that where a penalty less
punitive would suffice, whatever missteps may be committed
by labor ought not to be visited with a consequence so
severe. It is not only because of the law's concern for the
workingman. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on
those dependent on the wage-earner. The misery and pain
attendant on the loss of jobs then could be avoided if there
be acceptance of the view that under all the circumstances
of this case, petitioners should not be deprived of their
means of livelihood. Nor is this to condone what had been
done by them. For all this to condone what had been done
by them. For all this while, since private respondent
considered them separated from the service, they had not
been paid. For the strictly juridical standpoint, it cannot be
too strongly stressed, to follow Davis in his masterly work,
Discretionary Justice, that where a decision may be made to
rest on informed judgment rather than rigid rules, all the
equities of the case must be accorded their due weight.
Finally, labor law determinations, to quote from Bultmann,
should be not only secundum rationem but also secundum
 caritatem. (This excerpt was cited in Almira vs B.F. Goodrich
Philippines, Inc., 58 SCRA 120,131.)
The trend of recent decisions of this Court as pointed out by Chief Justice
Fernando in the recent case of Johnny Bustillos us. Amado Inciong and
Cummins Diesel Sales and Service Corporation of the Philippines, G.R.
1,45396, January 27, 1983 has been "to vitalize the constitutional mandate of
security of tenure as an aspect of the protection accorded labor. For its
forceful and authoritative weight, We quote lengthily the careful and clear
review of Our decisions as follows:
1. Meracap v. International Ceramics Mfg- Co., Inc. explains
why the appeal should be disposed in that manner. Thus: 'In
a number of decisions, Philippine Air Lines, Inc. v. Philippine
Airlines Employees Association, Almira v. B.F. Goodrich
Philippines, Central Textile Mills v. National Labor Relations
Commission, and Genconsu Free Workers Union v.
Inciong, this Court has sought to vitalize the constitutional
mandate of security of tenure as an aspect of the protection
accorded labor.' We do so again in this case.
2. The decision reached not only by a labor arbitrator who
heard the case but also by the National Labor Relations
Commission was the reinstatement of petitioner with back
pay. The challenged order reversed it. Thus: 'In effect,
complainant has no involvement in the alleged pilferage.
However, since complainant no longer enjoys the trust and
confidence reposed upon him by respondent as a Service
Supervisor, and hence, a managerial employee, respondent
has every right to terminate him. Since the termination is not
for a justifiable cause, complainant is entitled to separation
pay.' No case has gone that far. Moreover, the ruling
in Central Textile Mills, Inc. v. National Relations
Commission is squarely in point. Thus: 'The weakness of the
petition to repeat, is thus indisputable. Petitioner,
(management) however, would try to impart a semblance of
plausibility by alleging that even on the assumption that no
theft was committed, still there was loss of confidence
sufficient to cause his dismissal In the Philippine Airlines
decision referred to, the accusation that theft was committed
by the employee was likewise not borne out by the evidence.
To justify a dismissal, management relied on the allegation
that there was breach of trust, a ground analogous to loss of
confidence. The Court of Industrial Relations did not agree.
Neither did this Court. Reinstatement was ordered. So it
must be in this case.' The above ruling is reinforced by a
case decided last December 15, 1982, Justice de Castro
speaking for the Court in Acda v. Minister of Labor. Thus:
'The findings of the Labor Arbiter on this point, as upheld by
the National Labor Relations Commission, are quite clear,
and We find no reversible error therein the same being
substantiated by evidence of record, aside from the fact that
said findings had already attained the character of finality by
the non-perfection of a proper appeal.' The opinion goes on
to state: 'With the charges against petitioner found to be
unsubstantiated, We are left with no other alternative but to
hold that the so-called 'loss of confidence' is without basis
and may not be successfully invoked as ground for dismissal
which requires some basis therefor, such ground never
having been intended to afford an occasion for abuse by the
employer of its prerogative, as it can easily be subject to
abuse because of its subjective nature, to dismiss
employees in contravention with the 'protection of labor'
clause of the Constitution. It is this Constitutional guaranty
that accords even to employees employed on a probationary
basis the protection that their services may be terminated
only for a just cause or when authorized by existing laws, or
when he fails to qualify as a regular employee in accordance
with reasonable standards prescribed by the employer.'
3. There is likewise this excerpt from Meracap which calls for
the reversal of the assailed order of the Secretary of Labor.
Thus: 'In this suit for certiorari to review the dismissal of an
appeal from a decision of the then Acting Secretary of Labor
Amado G. Inciong by respondent Ronaldo Zamora,
Presidential Assistant on Legal Affairs, ordering the
dismissal of petitioner Faustino Meracap, the relevance of
such a provision becomes apparent. It was alleged by
petitioner that while the termination of his services was
based on his unauthorized absences, the real reason was
due to his union activities. Respondent Zamora ruled
otherwise. Such a finding of fact must be accorded
deference. Nonetheless, considering that petitioner Meracap
has been in the employ of the International Ceramics
Manufacturing Company, Inc. for eighteen years, it would
appear that the punishment was much too severe. Dismissal
was not warranted. Suspension would suffice. To that extent,
certiorari lies.' Dismissal as pointed out in the latest case in
point, decided fourteen days after Acda, in
the ponencia of Justice Melencio- Herrera in Visperas v.
Inciong, 'is too harsh a penalty. A penalty less punitive
should have been proper.' In this case, upon mere suspicion,
 later found to be unsubstantiated, he was immediately
suspended. A two-year suspension would have sufficed, not
the loss of his job. The length of service was accorded due
consideration in decisions of this Tribunal ordering
reinstatement, twenty years in De Leon v. National Labor
Relations Commission and Reyes v. Philippine Duplicators
and twenty-two years in Union of Supervisors v. Secretary of
Labor. Here he was in the service for eleven years when
suspended.
Accordingly, We must emphasize here the long and faithful years of service
that petitioner had rendered to respondent company, eleven good years, nine
of which as Manager with station at Manila. It is plainly abusive of the
company and oppressive to the petitioner that the latter is peremptorily
dismissed on the shallow claim of " resignation without notice," and thereafter
converted to alleged loss of confidence. This unjustified dismissal of the
petitioner calls for Our specific ruling in the cited case of De Leon vs.
National Labor Relations Commission, 100 SCRA 691, 700, wherein the
Court speaking through Justice De Castro said:
While a Managerial employee may be dismissed merely on
the ground of loss of confidence the matter of determining
whether the cause for dismissing an employee is justified on
ground of loss of confidence, cannot be left entirely to the
employer. Impartial tribunals do not rely only on the
statement made by employer that there is 'loss of
confidence' unless duly proved or sufficiently substantiated.
We find no reason to disturb the findings of the Labor Arbiter
that the charges against petitioner were not fully
substantiated, and 'there can be no valid reason for said loss
of confidence. ...
So must this Court re-enforce the constitutional protection afforded labor and
assure the right of workers to security of tenure. Justice and equity call for
petitioner's reinstatement. It should be so not only secundum rationem but
also secundum caritatem.
One last point. We reject the holding of the respondent Commission that
petitioner's act in accepting from the respondent airline several pay checks
relative to his pension fund and the cash value representing an adjustment in
the peso amount of his dollar base by reason of currency fluctuation
constitutes an admission if not a conformity, of his lawful separation from
office on August 31, 1975. It appears indubitably that the several pay checks
mentioned by respondent NLRC were only refunds of petitioner's contribution
to the pension fund of respondent airline. The money refunded was
petitioner's own money, that which he personally contributed to the
retirement plan. If petitioner accepted the cash value representing the
adjustment in the peso amount of petitioner's dollar base, the money was
legitimately and legally due to the petitioner; they are not benefits or
privileges granted by the airline to the dismissed petitioner. There can be no
estoppel against petitioner's acceptance of the refund of monies legitimately
his own, nor a waiver of his right to question the termination of his services.
(Urgelio vs. Osmeña, Jr., 10 SCRA 253). Even employees who receive their
separation pay are not barred from contesting the legality of their dismissal.
The acceptance of those benefits would not amount to estoppel as held in
the leading case of Mercury Drug Company vs. CIR as aptly cited in the
decision of the Labor Arbiter. (De Leon vs. NLRC, 100 SCRA 691).
In Cariño vs. Agricultural Credit and Cooperative Financing
Administration, 18 SCRA 183, the rationale of the Court's ruling rejecting the
argument that acceptance of separation pay and terminal leave benefits by
the employees illegally dismissed by their employer constitutes estoppel, is
stated thus, which We re-echo as follows:
Acceptance of those benefits would not amount to estoppel
The reason is plain. Employer and employee, obviously, do
not stand on the same footing. The employer drove the
employee to the wall The latter must have to get hold of
money. Because, out of job, he had to face the harsh
necessities of life. He thus found himself in no position to
resist money proferred. His, then, is a case of adherence,
not of choice. One thing sure, however, is that petitioner did
not relent on their claim. They pressed it. They are deemed
not to have waived any of their rights. Renuntiatio non
praesumitur.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the
National Labor Relations Commission in Case No. RB-4220 is hereby
REVERSED and SET ASIDE, and the decision of the Labor Arbiter dated
December 29, 1976 in RB-IV-4220-76 ordering petitioner's reinstatement to
his former position with full backwages for three (3) years without loss of
seniority rights and other benefits recognized by law, including attorney's
fees equivalent to 10% of the total monetary benefits which the petitioner
may recover, is hereby REINSTATED. Costs against the respondent
Northwest.
Petition granted.
SO ORDERED.
[G.R. No. 129843. September 14, 1999]
BLUE DAIRY CORPORATION and/or EDISON T. AVIGUETERO
and PEDRO G. MIGUEL, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION and ELVIRA R.
RECALDE, Respondents.
DECISION
BELLOSILLO, J.:
BLUE DAIRY CORPORATION, engaged in the processing of dairy
and chocolate products, juices and vegetables, hired on 14 May
1994 private respondent Elvira R. Recalde as a food technologist in
its laboratory with the following specific functions: microanalysis of
toppings and syrup, onions and garlic, and liquid mixes (soft serve
and milk shake); physical and chemical analysis of liquid mixes,
including raw materials for toppings and syrup and its inspection;
routine computation for liquid mixes and supervision while
weighing the materials; performing chlorine test for lettuce, red
onion, white onion and green pepper; preparation of forms for
toppings and syrup; sensory evaluation of toppings and syrup;
product development (assistant); and, preparation of food coloring
for orange syrup production.1cräläwvirtualibräry
On 22 May 1994, a Sunday, Recalde reported for work but claimed
that she was not given her premium pay.
On 21 October 1994 Recalde accompanied Production Manager
Editha N. Nicolas in conducting a sensory evaluation of vanilla
syrup in one of the outlets of a client. While on their way back to
the office a post fell on the company vehicle they were riding due
to a raging typhoon damaging the vehicle's windshield and side
mirror.
On 3 December 1994 Recalde was transferred from the laboratory
to the vegetable processing section where she cored lettuce,
minced and repacked garlic and performed similar work, and was
restricted from entering the laboratory. She was unhappy. She
considered her new job humiliating and menial. On 14 December
1994 she stopped reporting for work. The following day she sent a
letter to petitioner Edison T. Aviguetero, the President and
Chairman of the Board of Director of Blue Dairy Corporation,
reading -
I would like to inform you that I will no longer report for work
because of your drastic and oppressive action. And besides, I have
already filed a case against BLUE DAIRY CORPORATION and/or
EDISON T. AVIGUETERO, PEDRO G. MIGUEL x x x x2
On 16 December 1994 Recalde filed a complaint against petitioner
Blue Dairy Corporation, Edison T. Aviguetero and Pedro G.
Miguel3 for constructive dismissal and non-payment of premium
pay. She also claimed overtime pay as well as moral and
exemplary damages plus attorneys fees.
Petitioners contended that Recalde was given a less sensitive
assignment outside of the laboratory on account of her dishonesty
which resulted in loss of trust and confidence. They seriously took
into account the result of the investigation concerning the 21
October incident that Recalde was actually scouting for a new
residence using company vehicle without prior permission from the
General Manager and during office hours, in violation of par. IV,
subpars. B and G, of the company's General Rules and Regulations.
Petitioners accorded credence to the narrations of Rolando V.
Flores, driver of the damaged vehicle, to that effect which act of
dishonesty could even have merited dismissal from employment
had they adhered simply to jurisprudential rule but took into
account instead the spirit of the approaching Christmas season.
The Labor Arbiter was convinced that petitioners were guilty of
constructive dismissal as he found the justification for Recaldes
transfer unreasonable: first, the unofficial trip on the way back to
the office on 21 October was undertaken through the bidding of the
Production Manager; second, loss of trust and confidence must
necessarily occur in the performance of duties; and third, the new
position of Recalde was too humiliating and demeaning. The Labor
Arbiter also found that petitioners failed to grant premium pay to
Recalde for her work performed on 22 May 1994, a Sunday.
On 31 October 1996 petitioners were thus ordered to reinstate
Recalde to her former position as food technologist assisting in the
quality assurance processes of the company and performing
laboratory work without loss of seniority rights and privileges, with
full back wages as well as to grant her premium pay, initially
computed thus -
Back Wages:
12/14/94 - 12/30/96 = 24.53 mos.
P183.33 x 30 days x 24.53 mos. - - - - - - - P134,912.54
Premium Pay for Rest Day:
(May 22, 1994): P183.33 x 30% = P55.00 - - - 55.00
___________
TOTAL AWARD: - - - - - - - - - - - - - - - - - P134,967.54
The other claims were dismissed for lack of
merit.4cräläwvirtualibräry
On 30 April 1997 public respondent National Labor Relations
Commission (NLRC) affirmed the ruling.5 On 19 June 1997
reconsideration was denied.6cräläwvirtualibräry
Petitioners insist that the transfer of Recalde from the laboratory to
the vegetable processing section was effected in the exercise of
management prerogative. It did not amount to a constructive
dismissal as Recalde erroneously maintained. Moreover, petitioners
submit that the coring of lettuce together with the other production
jobs connected therewith is one of the most important aspects of
the corporations existence; in fact, those assigned to the vegetable
processing section are mostly professionals like teachers, computer
secretaries and forestry graduates.
No grave abuse of discretion was committed by the NLRC. Indeed,
it is the prerogative of management to transfer an employee from
one office to another within the business establishment based on
its assessment and perception of the employees qualifications,
aptitudes and competence, and in order to ascertain where he can
function with maximum benefit to the company.7 This is a privilege
inherent in the employers right to control and manage his
enterprise effectively. The freedom of management to conduct its
business operations to achieve its purpose cannot be
denied.8cräläwvirtualibräry
But, like other rights, there are limits thereto. The managerial
prerogative to transfer personnel must be exercised without grave
abuse of discretion, bearing in mind the basic elements of justice
and fair play. Having the right should not be confused with the
manner in which that right is exercised. Thus, it cannot be used as
a subterfuge by the employer to rid himself of an undesirable
worker.9 In particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of
his salaries, privileges and other benefits.10 Should the employer
fail to overcome this burden of proof, the employees transfer shall
be tantamount to constructive dismissal, which has been defined as
a quitting because continued employment is rendered impossible,
unreasonable or unlikely; as an offer involving a demotion in rank
and diminution in pay.11 Likewise, constructive dismissal exists
when an act of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee leaving him
with no option but to forego with his continued
employment.12cräläwvirtualibräry
In the present case, petitioners failed to justify Recaldes transfer
from the position of food technologist in the laboratory to a worker
in the vegetable processing section. We recall that what triggered
Recaldes transfer was the 21 October incident where she was
found to have allegedly utilized company vehicle in looking for a
new residence during office hours without permission from
management. In petitioners view, she was dishonest such that they
lost their trust and confidence in her. Yet, it does not appear that
Recalde was provided an opportunity to refute the reason for the
transfer. Petitioners merely relied on the narrations of the company
driver. Nor was Recalde notified in advance of her impending
transfer which was, as we shall elucidate later, a demotion in rank.
In Gaco v. NLRC13 we noted -
While due process required by law is applied in dismissals, the
same is also applicable to demotions as demotions likewise affect
the employment of a worker whose right to continued employment,
under the same terms and conditions, is also protected by law.
Moreover, considering that demotion is, like dismissal, also a
punitive action, the employee being demoted should, as in cases of
dismissals, be given a chance to contest the same.
Further, petitioners overstretched the effect of Recaldes claimed
wrongdoing. We have ruled that breach of trust and confidence as
a ground for dismissalfrom employment must be related to the
performance of the duties of the employee such as would show him
to be thereby unfit to continue working for the employer. 14 By
analogy, breach of trust and confidence as a ground
for reassignment must be related to the performance of the duties
of the employee such as would show him to be thereby unfit to
discharge the same task. Clearly, the act of dishonesty imputed to
Recalde has no bearing at all to her work in the laboratory.
Further still, granting that Recalde was proved guilty of dishonesty,
the companys General Rules and Regulations provide the
corresponding sanctions therefor. Recalde appears to have no prior
record of infractions. For "leaving post temporarily without
permission during working hours" committed for the first time,
"warning" is imposable, whereas for "unauthorized use of any
company vehicle" committed for the first time, the commensurate
penalty is "15 days suspension."15 Although petitioners invoked the
pertinent provisions of the rules and regulations which Recalde
allegedly violated, for reasons known only to them, they
disregarded those sanctions. Instead, they gave her a less
sensitive assignment outside of the laboratory as they claimed that
had they adhered to the rules she would have been dismissed
outright for her dishonesty in the unauthorized use of company
property. Then too is their claim that they were moved by
compassion on account of the then approaching Christmas season.
Commendable as this "compassionate" gesture may seem,
nevertheless, petitioners failed to realize that it was not relief from
dismissal which they provided to Recalde when they assigned her
to the vegetable processing section but discomfiture.
We find insignificant the submission of petitioners that "the coring
of lettuce together with the other production jobs connected
therewith is one of the most important aspects of the corporations
existence" and that "those assigned to the vegetable processing
section are mostly professionals like teachers, computer secretaries
and forestry graduates." Rather, the focus should be on the
comparison between the nature of Recaldes work in the laboratory
and in the vegetable processing section. As food technologist in the
laboratory, she occupied a highly technical position requiring use of
her mental faculty. As a worker in the vegetable processing
section, she performed mere mechanical work. It was virtually a
transfer from a position of dignity to a servile or menial job.16 We
agree with the observation of the Office of the Solicitor General
that the radical change in Recaldes nature of work unquestionably
resulted in, as rightly perceived by her, a demeaning and
humiliating work condition. The transfer was a demotion in rank,
beyond doubt.
Another aspect of comparison is the workplaces themselves.
Petitioners admitted in their answer to Recaldes complaint that -
Respondents Laboratory is the most expensive area, on a per-
square-meter basis, in the companys premises. It is here where
the quality of the companys products is tested and assured. Since
these products are food items ingested by the consuming public,
this Laboratory becomes several folds critical. Hence, only highly
trusted authorized personnel are allowed access to this place.17
In other words, the laboratory is the place where the quality of the
totality of petitioners' products such as dairy, juices, chocolates
and vegetables is tested. On the other hand, the vegetable
processing section, as the name implies, involves processing of
vegetables alone. Definitely, a transfer from a workplace where
only highly trusted authorized personnel are allowed access to a
workplace that is not as critical is another reason enough for
Recalde to howl a protest.
We reiterate that the NLRC did not commit grave abuse of
discretion in affirming the ruling of the Labor Arbiter that
petitioners are guilty of constructive dismissal. Recalde is entitled
to reinstatement as food technologist without loss of seniority
rights and privileges and with full back wages, as directed by the
Labor Arbiter. We clarify however that conformably with Art. 279 of
the Labor Code, as amended by Sec. 34 of RA 6715, to be included
in the computation of back wages are the illegally dismissed
employees allowances and other benefits or their monetary
equivalent.
WHEREFORE, the petition is DISMISSED. The Decision of public
respondent National Labor Relations Commission finding that
private respondent Elvira R. Recalde was constructively dismissed
from employment and entitled to premium pay is AFFIRMED.
Petitioners Blue Dairy Corporation, Edison T. Aviguetero and Pedro
G. Miguel are ordered to reinstate private respondent Recalde as
food technologist in the laboratory without loss of seniority rights
and privileges and with full back wages inclusive of allowances and
other benefits or their monetary equivalent to be computed from
her dismissal on 14 December 1994 up to actual reinstatement,
and to grant her premium pay of P55.00 for work performed on 22
May 1994, a Sunday. Costs against petitioners.
SO ORDERED.
G.R. No. 178083
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE
PHILIPPINES (FASAP), Petitioner
vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF
APPEALS, Respondents
IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO.
178083 - FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF
THE PHILIPPINES (F ASAP) vs. PHILIPPINE AIRLINES, INC., ETAL.
RESOLUTION
BERSAMIN, J.:
In determining the validity of a retrenchment, judicial notice may be taken of
the financial losses incurred by an employer undergoing corporate
rehabilitation. In such a case, the presentation of audited financial statements
may not be necessary to establish that the employer is suffering from severe
financial losses.
Before the Court are the following matters for resolution, namely:
(a) Motion for Reconsideration of the Resolution of October 2, 2009
and Second Motion for Reconsideration of the Decision of July 22,
2008 filed by respondents Philippine Airlines, Inc. (PAL) and Patria
Chiong;1 and
(b) Motion for Reconsideration [Re: The Honorable Court’s
Resolution dated 13 March 2012 ]2 of petitioner Flight Attendants and
Stewards Association of the Philippines (FASAP).
Antecedents
To provide a fitting backgrounder for this resolution, we first lay down the
procedural antecedents.
Resolving the appeal of F ASAP, the Third Division of the
Court3 promulgated its decision on July 22, 2008 reversing the decision
promulgated on August 23, 2006 by the Court of Appeals (CA) and entering
a new one finding PAL guilty of unlawful retrenchment, 4 disposing:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of
the Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which
affirmed the Decision of the NLRC setting aside the Labor Arbiter's findings
of illegal retrenchment and its Resolution of May 29, 2007 denying the
motion for reconsideration, are REVERSED and SET ASIDE and a new one
is rendered:
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;
2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel
who were covered by the retrenchment and demotion scheme of June 15,
1998 made effective on July 15, 1998, without loss of seniority rights and
other privileges, and to pay them full backwages, inclusive of allowances and
other monetary benefits computed from the time of their separation up to the
time of their actual reinstatement, provided that with respect to those who
had received their respective separation pay, the amounts of payments shall
be deducted from their backwages. Where reinstatement is no longer
feasible because the positions previously held no longer exist, respondent
Corporation shall pay backwages plus, in lieu of reinstatement, separation
pay equal to one (1) month pay for every year of service;
3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to ten
percent (10%) of the total monetary award.
Costs against respondent PAL.
SO ORDERED. 5
The Third Division thereby differed from the decision of the Court of Appeals
(CA), which had pronounced in its appealed decision promulgated on August
23, 20066 that the remaining issue between the parties concerned the
manner by which PAL had carried out the retrenchment program.7 Instead,
the Third Division disbelieved the veracity of PAL’s claim of severe financial
losses, and concluded that PAL had not established its severe financial
losses because of its non-presentation of audited financial statements. It
further concluded that PAL had implemented the retrenchment program in
bad faith, and had not used fair and reasonable criteria in selecting the
employees to be retrenched.
After PAL filed its Motion for Reconsideration, 8 the Court, upon motion,9 held
oral arguments on the following issues:
I Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of
WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED
II
WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES
BEFORE IMPLEMENTING ITS RETRENCHMENT PROGRAM
III
WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN
IMPLEMENTING THE RETRECHMENT PROGRAM
IV
WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY
EXECUTED
Upon conclusion of the oral arguments, the Court directed the parties to
explore a possible settlement and to submit their respective
memoranda.10 Unfortunately, the parties did not reach any settlement; hence,
the Court, through the Special Third Division,11 resolved the issues on the
merits through the resolution of October 2, 2009 denying PAL’s motion for
reconsideration,12 thus:
WHEREFORE, for lack of merit, the Motion for Reconsideration is
hereby DENIED with FINALITY. The assailed Decision dated July 22, 2008
is AFFIRMED with MODIFICATION in that the award of attorney's fees and
expenses of litigation is reduced to ₱2,000,000.00. The case is
hereby REMANDED to the Labor Arbiter solely for the purpose of computing
the exact amount of the award pursuant to the guidelines herein stated.
No further pleadings will be entertained.
SO ORDERED.13
The Special Third Division was unconvinced by PAL’s change of theory in
urging the June 1998 Association of Airline Pilots of the Philippines (ALP AP)
pilots' strike as the reason behind the immediate retrenchment; and observed
that the strike was a temporary occurrence that did not require the immediate
and sweeping retrenchment of around 1,400 cabin crew.
October 2, 2009 and Second Motion for Reconsideration of the Decision of
July 22, 2008.14
On October 5, 2009, the writer of the resolution of October 2, 2009, Justice
Consuelo Ynares-Santiago, compulsorily retired from the Judiciary. Pursuant
to A.M. No. 99-8-09-SC,15 G.R. No. 178083 was then raffled to Justice
Presbitero J. Velasco, Jr., a Member of the newly-constituted regular Third
Division.16 Upon the Court's subsequent reorganization,17 G.R. No. 178083
was transferred to the First Division where Justice Velasco, Jr. was
meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited himself
from the case due to personal reasons.18 Pursuant to SC Administrative
Circular No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo
D. Brion, whose membership in the Second Division resulted in the transfer
of G.R. No. 178083 to said Division.19
On September 7, 2011, the Second Division denied with finality
PAL’s Second Motion for Reconsideration of the Decision of July 22, 2008.20
Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel,
sent a series of letters inquiring into the propriety of the successive transfers
of G.R. No. 178083.21 His letters were docketed as A.M. No. 11- 10-1-SC.
On October 4, 2011, the Court En Banc issued a resolution:22 (a) assuming
jurisdiction over G.R. No. 178083; (b)recalling the September 7, 2011
resolution of the Second Division; and (c) ordering the re-raffle of G.R. No.
178083 to a new Member-in-Charge.
Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the
issues raised against the recall of the resolution of September 7, 2011, the
Court En Banc promulgated its resolution in A.M. No. 11-10-1-SC on March
13, 2012,23 in which it summarized the intricate developments involving G.R.
No. 178083, viz.:
To summarize all the developments that brought about the present dispute--
expressed in a format that can more readily be appreciated in terms of the
Court en bane's ruling to recall the September 7, 2011 ruling - the F ASAP
case, as it developed, was attended by special and unusual circumstances
that saw:
 (a) the confluence of the successive retirement of three
Justices (in a Division of five Justices) who actually
participated in the assailed Decision and Resolution;
(b) the change in the governing rules-from the A.M.s to the
IRSC regime-which transpired during the pendency of the
case;
(c) the occurrence of a series of inhibitions in the course of
the case (Justices Ruben Reyes, Leonardo-De Castro,
Corona, Velasco, and Carpio), and the absences of Justices
Sereno and Reyes at the critical time, requiring their
replacement; notably, Justices Corona, Carpio, Velasco and
Leonardo-De Castro are the four most senior Members of
the Court;
(d) the three re-organizations of the divisions, which all took
place during the pendency of the case, necessitating the
transfer of the case from the Third Division, to the First, then
to the Second Division;
(e) the unusual timing of Atty. Mendoza’s letters, made after
the ruling Division had issued its Resolution of September 7,
2011, but before the parties received their copies of the said
Resolution; and
(t) finally, the time constraint that intervened, brought about
by the parties’ receipt on September 19, 2011 of the Special
Division’s Resolution of September 7, 2011, and the
consequent running of the period for finality computed from
this latter date; and the Resolution would have lapsed to
finality after October 4, 2011, had it not been recalled by that
date.
All these developments, in no small measure, contributed in their own
peculiar way to the confusing situations that attended the September 7, 2011
Resolution, resulting in the recall of this Resolution by the Court en banc.24
In the same resolution of March 13, 2012, the Court En Banc directed the re-
raffle of G.R. No. 178083 to the remaining Justices of the former Special
Third Division who participated in resolving the issues pursuant to Section 7,
Rule 2 of the Internal Rules of the Supreme Court, explaining:
On deeper consideration, the majority now firmly holds the view that Section
7, Rule 2 of the IRSC should have prevailed in considering the raffle and
assignment of cases after the 2nd MR was accepted, as advocated by some
Members within the ruling Division, as against the general rule on inhibition
under Section 3, Rule 8. The underlying constitutional reason, of course, is
the requirement of Section 4(3), Article VIII of the Constitution already
referred to above.
The general rule on statutory interpretation is that apparently conflicting
provisions should be reconciled and harmonized, as a statute must be so
construed as to harmonize and give effect to all its provisions whenever
possible. Only after the failure at this attempt at reconciliation should one
provision be considered the applicable provision as against the other.
Applying these rules by reconciling the two provisions under
consideration, Section 3, Rule 8 of the IRSC should be read as the
general rule applicable to the inhibition of a Member-in-Charge. This
general rule should, however, yield where the inhibition occurs at the
late stage of the case when a decision or signed resolution is assailed
through an MR. At that point, when the situation calls for the review of the
merits of the decision or the signed resolution made by a ponente (or writer
of the assailed ruling), Section 3, Rule 8 no longer applies and must yield
to Section 7, Rule 2 of the IRSC which contemplates a situation when
the ponente is no longer available, and calls for the referral of the case
for raffle among the remaining Members of the Division who acted on
the decision or on the signed resolution. This latter provision should
rightly apply as it gives those who intimately know the facts and merits of the
case, through their previous participation and deliberations, the chance to
take a look at the decision or resolution produced with their participation.
To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition,
but it must yield to the more specific Section 7, Rule 2 of the IRSC where the
obtaining situation is for the review on the merits of an already issued
decision or resolution and the ponente or writer is no longer available to act
on the matter. On this basis, the ponente, on the merits of the case on
review, should be chosen from the remaining participating Justices, namely,
Justices Peralta and Bersamin.25
This last resolution impelled F ASAP to file the Motion for Reconsideration
[Re: The Honorable Court’s Resolution dated 13 March 2012], praying that
the September 7, 2011 resolution in G.R. No. 178083 be reinstated.26
We directed the consolidation of G.R. No. 178083 and A.M. No. 11- 10-1-SC
on April 17, 2012.27
Issues
PAL manifests that the Motion for Reconsideration of the Resolution of
October 2, 2009 and Second Motion for Reconsideration of the Decision of
July 22, 2008 is its first motion for reconsideration vis-a-vis the October 2,
2009 resolution, and its second as to the July 22, 2008 decision. It states
therein that because the Court did not address the issues raised in its
previous motion for reconsideration, it is re-submitting the same, viz.:
I PAL describes the Court's conclusion that it was not suffering from
xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO
THE FOLLOWING COMPELLING EVIDENCE AND CIRCUMSTANCES
CLEARLY SHOWING PALS; DIRE FINANCIAL CONDITION AT THE TIME
OF THE RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S
FINANCIAL LOSSES; (B) THE UNANIMOUS FINDINGS OF THE
SECURITIES AND EXCHANGE COMMISSION (SEC), THE LABOR
ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION (NLRC)
AND THE COURT OF APPEALS CONFIRMING PAL'S FINANCIAL CRISIS;
(C) PREVIOUS CASES DECIDED BY THE HONORABLE COURT
RECOGNIZING PAL'S DIRE FINANCIAL STATE; AND (D) PAL BEING
PLACED BY THE SEC UNDER SUSPENSION OF PAYMENTS AND
CORPORATE REHABILITATION AND RECEIVERSHIP
II
xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S
CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH [IN] ITS
PREROGATIVE TO RETRENCH EMPLOYEES
III
THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND
REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE
RETRENCHED IS CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON
RECORD AND THE FINDINGS OF THE NLRC AND THE COURT OF
APPEALS28
PAL insists that FASAP, while admitting PAL’s serious financial condition,
only questioned before the Labor Arbiter the alleged unfair and unreasonable
measures in retrenching the employees;29 that F ASAP categorically
manifested before the NLRC, the CA and this Court that PAL’s financial
situation was not the issue but rather the manner of terminating the 1,400
cabin crew; that the Court's disregard of FASAP's categorical admissions
was contrary to the dictates of fair play;30 that considering that the Labor
Arbiter, the NLRC and the CA unanimously found PAL to have experienced
financial losses, the Court should have accorded such unanimous findings
with respect and finality;31 that its being placed under suspension of
payments and corporate rehabilitation and receivership already sufficiently
indicated its grave financial condition;32 and that the Court should have also
taken judicial notice of the suspension of payments and monetary claims filed
against PAL that had reached and had been consequently resolved by the
Court.33
tremendous financial losses because it was on the road to recovery a year
after the retrenchment as a mere obiter dictum that was relevant only in
rehabilitation proceedings; that whether or not its supposed "stand-alone"
rehabilitation indicated its ability to recover on its own was a technical issue
that the SEC was tasked to determine in the rehabilitation proceedings; that
at any rate, the supposed track to recovery in 1999 and the capital infusion of
$200,000,000.00 did not disprove the enormous losses it was sustaining;
that, on the contrary, the capital infusion accented the severe financial losses
suffered because the capital infusion was a condition precedent to the
approval of the amended and restated rehabilitation plan by the Securities
and Exchange Commission (SEC) with the conformity of PAL's creditors; and
that PAL took nine years to exit from rehabilitation.34
As regards the implementation of the retrenchment program in good faith,
PAL argues that it exercised sound management prerogatives and business
judgment despite its critical financial condition; that it did not act in due haste
in terminating the services of the affected employees considering that
FASAP was being consulted thereon as early as February 17, 1998; that it
abandoned "Plan 14" due to intervening events, and instead proceeded to
implement "Plan 22" which led to the recall/rehire of some of the retrenched
employees;35 and that in selecting the employees to be retrenched, it
adopted a fair and reasonable criteria pursuant to the collective bargaining
agreement (CBA) where performance efficiency ratings and inverse seniority
were basic considerations.36
With reference to the Court's resolution of October 2, 2009, PAL maintains
that:
I
PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF
PAL'S LABOR FORCE OF ABOUT 5,000 EMPLOYEES, INCLUDING THE
1,423 FASAP MEMBERS, WAS THE RESULT OF A CONFLUENCE OF
EVENTS, THE EXPANSION OF PAL’S FLEET, THE ASIAN FINANCIAL
CRISIS OF 1997, AND ITS CONSEQUENCES ON PAL'S OPERATIONS,
AND THE PILOT’S STRIKE OF JUNE 1998, AND THAT PAL SURVIVED
BECAUSE OF THE IMPLEMENTATION OF ITS REHABILITATION PLAN
(LATER "AMENDED AND RESTATED REHABILITATION PLAN") WHICH
INCLUDED AMONG ITS COMPONENT ELEMENTS, THE REDUCTION OF
LABOR FORCE
II
THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION
OF THE NUMBER OF CABIN CREW IN ACCORD WITH ITS ENTRY INTO
REHABILITATION AND THE CONSEQUENT TERMINATION OF
EMPLOYMENT OF CABIN CREW PERSONNEL AS A VALID EXERCISE
OF MANAGEMENT PREROGATIVE
III
PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS
FINANCIAL LOSSES, SO AS TO JUSTIFY THE ENTRY INTO
REHABILITATION AND THE CONSEQUENT REDUCTION OF CABIN
CREW PERSONNEL
IV
THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO
SUFFICIENT BASIS FOR PAL TO IMPLEMENT THE RETRENCHMENT OF
CABIN CREW PERSONNEL
V FASAP stresses that the October 4, 2011 resolution recalling the September
UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF
LESS DRASTIC COST-CUTTING MEASURES WAS NO LONGER
POSSIBLE AND SHOULD NOT BE REQUIRED FOR A VALID
RETRENCHMENT; IN ANY EVENT, PAL HAD IMPLEMENTED LESS
DRASTIC COST-CUTTING MEASURES BEFORE IMPLEMENTING THE
DOWNSIZING PROGRAM
VI
QUITCLAIMS WERE VALIDLY EXECUTED37
PAL contends that the October 2, 2009 resolution focused on an entirely new
basis - that of PAL’s supposed change in theory. It denies having changed its
theory, however, and maintains that the reduction of its workforce had
resulted from a confluence of several events, like the flight expansion; the
1997 Asian financial crisis; and the ALP AP pilots’ strike.38 PAL explains that
when the pilots struck in June 1998, it had to decide quickly as it was then
facing closure in 18 days due to serious financial hemorrhage; hence, the
strike came as the final blow.
PAL posits that its business decision to downsize was far from being a hasty,
knee-jerk reaction; that the reduction of cabin crew personnel was an integral
part of its corporate rehabilitation, and, such being a management decision,
the Court could not supplant the decision with its own judgment’ and that the
inaccurate depiction of the strike as a temporary disturbance was lamentable
in light of its imminent financial collapse due to the concerted action.39
PAL submits that the Court’s declaration that PAL failed to prove its financial
losses and to explore less drastic cost-cutting measures did not at all jibe
with the totality of the circumstances and evidence presented; that the
consistent findings of the Labor Arbiter, the NLRC, the CA and even the
SEC, acknowledging its serious financial difficulties could not be ignored or
disregarded; and that the challenged rulings of the Court conflicted with the
pronouncements made in Garcia v. Philippine Airlines, Inc. 40 and related
cases41 that acknowledged PAL’s grave financial distress.
In its comment,42 FASAP counters that a second motion for reconsideration
was a prohibited pleading; that PAL failed to prove that it had complied with
the requirements for a valid retrenchment by not submitting its audited
financial statements; that PAL had immediately terminated the employees
without prior resort to less drastic measures; and that PAL did not observe
any criteria in selecting the employees to be retrenched.
7, 2011 decision was void for failure to comply with Section 14, Article VIII of
the 1987 Constitution; that the participation of Chief Justice Renato C.
Corona who later on inhibited from G.R. No. 178083 had further voided the
proceedings; that the 1987 Constitution did not require that a case should be
raffled to the Members of the Division who had previously decided it; and that
there was no error in raffling the case to Justice Brion, or, even granting that
there was error, such error was merely procedural.
The issues are restated as follows:
Procedural
I
IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10- 1-SC
(RECALLING THE SEPTEMBER 7, 2011 RESOLUTION) VOID FOR FAIL
URE TO COMPLY WITH SECTION 14, RULE VIII OF THE 1987
CONSTITUTION?
 II
MAY THE COURT ENTERTAIN THE SECOND MOTION FOR
RECONSIDERATION FILED BY THE RESPONDENT PAL?
Substantive
I was a valid issuance of the Court
DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL?
A in recalling the September 7, 2011 resolution of the Second Division.
DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT
INCURRED SERIOUS FINANCIAL LOSSES WHICH JUSTIFIED THE
DOWNSIZING OF ITS CABIN CREW?
B
DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE
RETRENCHMENT PROGRAM?
C
DID PAL COMPLY WITH SECTION 112 OF THE PALF ASAP CBA IN
SELECTING THE EMPLOYEES TO BE RETRENCHED?
III
ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT
PROGRAM, DID THE RETRENCHED EMPLOYEES SIGN VALID
QUITCLAIMS?
Ruling of the Court
After a thorough review of the records and all previous dispositions,
we GRANT the Motion for Reconsideration of the Resolution of October 2,
2009 and Second Motion for Reconsideration of the Decision of July 22,
2008 filed by PAL and Chiong; and DENY the Motion for Reconsideration
[Re: The Honorable Court’s Resolution dated 13 March 2012]43 of FASAP.
Accordingly, we REVERSE the July 22, 2008 decision and the October 2,
2009 resolution; and AFFIRM the decision promulgated on August 23, 2006
by the CA.
I
The resolution of October 4, 2011
The petitioner urges the Court to declare as void the October 4, 2011
resolution promulgated in A.M. No. 11-10-1-SC for not citing any legal basis
The urging of the petitioner is gravely flawed and mistaken.
The requirement for the Court to state the legal and factual basis for its
decisions is found in Section 14, Article VIII of the 1987 Constitution, which
reads:
Section 14. No decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is based.
The constitutional provision clearly indicates that it contemplates only a
decision, which is the judgment or order that adjudicates on the merits of a
case. This is clear from the text and tenor of Section 1, Rule 36 of the Rules
of Court, the rule that implements the constitutional provision, to wit:
Section 1. Rendition of judgments and final orders. A judgment or final
order determining the merits of the case shall be in writing personally and
directly prepared by the judge, stating clearly and distinctly the facts and
the law on which it is based, signed by him, and filed with the clerk of
court.
The October 4, 2011 resolution did not adjudicate on the merits of G.R. No.
178083. We explicitly stated so in the resolution of March 13, 2012. What we
thereby did was instead to exercise the Court's inherent power to recall
orders and resolutions before they attain finality. In so doing, the Court only
exercised prudence in order to ensure that the Second Division was vested
with the appropriate legal competence in accordance with and under the
Court's prevailing internal rules to review and resolve the pending motion for
reconsideration. We rationalized the exercise thusly:
As the narration in this Resolution shows, the Court acted on its own
pursuant to its power to recall its own orders and resolutions before
their finality. The October 4, 2011 Resolution was issued to determine
the propriety of the September 7, 2011 Resolution given the facts that
came to light after the ruling Division's examination of the records. To
point out the obvious, the recall was not a ruling on the merits and did
not constitute the reversal of the substantive issues already decided
upon by the Court in the FASAP case in its previously issued Decision
(of July 22, 2008) and Resolution (of October 2, 2009). In short, the
October 4, 2011 Resolution was not meant and was never intended to favor
either party, but to simply remove any doubt about the validity of the ruling
Division's action on the case. The case, in the ruling Division's view, could be
brought to the Court en banc since it is one of "sufficient importance"; at the
very least, it involves the interpretation of conflicting provisions of the IRSC
with potential jurisdictional implications.
At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would
definitively settle the unresolved legal questions among themselves. The only
matter legally certain was the looming finality of the September 7, 2011
Resolution if it would not be immediately recalled by the Court en banc
by October 4, 2011. No unanimity among the Members of the ruling Division
could be gathered on the unresolved legal questions; thus, they concluded
that the matter is best determined by the Court en banc as it potentially
involved questions of jurisdiction and interpretation of conflicting provisions of
the IRSC. To the extent of the recommended recall, the ruling Division was
unanimous and the Members communicated this intent to the Chief Justice in
clear and unequivocal terms.44 (Bold underscoring for emphasis)
It should further be clear from the same March 13, 2012 resolution that the
factual considerations for issuing the recall order were intentionally omitted
therefrom in obeisance to the prohibition against public disclosure of the
internal deliberations of the Court.45
Still, F ASAP assails the impropriety of the recall of the September 7, 2011
resolution. It contends that the raffle of G.R. No. 178083 to the Second
Division had not been erroneous but in "full and complete consonance with
Section 4(3) Article VIII of the Constitution;"46 and that any error thereby
committed was only procedural, and thus a mere "harmless error" that did not
invalidate the prior rulings made in G.R. No. 178083.47
The contention of F ASAP lacks substance and persuasion.
The Court carefully expounded in the March 13, 2012 resolution on the
resulting jurisdictional conflict that arose from the raffling of G.R. No. 178083
resulting from the successive retirements and inhibitions by several Justices
who at one time or another had been assigned to take part in the case. The
Court likewise highlighted the importance of referring the case to
the remaining Members who had actually participated in the deliberations, for
not only did such participating Justices intimately know the facts and merits
of the parties' arguments but doing so would give to such Justices the
opportunity to review their decision or resolution in which they had taken part.
As it turned out, only Justice Diosdado M. Peralta and Justice Lucas P.
Bersamin were the remaining Members of the Special Third Division, and the
task of being in charge procedurally fell on either of them.48 As such, it is
fallacious for FASAP to still insist that the previous raffle had complied with
Section 4(3), Article VIII of the 1987 Constitution just because the Members
of the Division actually took part in the deliberations.
FASAP is further wrong to insist on the application of the harmless error rule.
The rule is embodied in Section 6, Rule 51 of the Rules of Court, which
states:
Section 6. Harmless error. No error in either the admission or the exclusion
of evidence and no error or defect in any ruling or order or in anything done
or omitted by the trial court or by any of the parties is ground for granting a
new trial or for setting aside, modifying, or otherwise disturbing a judgment or
order, unless refusal to take such action appears to the court inconsistent
with substantial justice. The court at every stage of the proceedings must
disregard any error or defect which does not affect the substantial rights of
the parties.
The harmless error rule obtains during review of the things done by either the
trial court or by any of the parties themselves in the course of trial, and any
error thereby found does not affect the substantial rights or even the merits of
the case. The Court has had occasions to apply the rule in the correction of a
misspelled name due to clerical error;49 the signing of the decedents' names
in the notice of appeal by the heirs;50 the trial court's treatment of the
testimony of the party as an adverse witness during cross-examination by his
own counsel;51 and the failure of the trial court to give the plaintiffs the
opportunity to orally argue against a motion.52 All of the errors extant in the
mentioned situations did not have the effect of altering the dispositions
rendered by the respective trial courts. Evidently, therefore, the rule had no
appropriate application herein.
The Court sees no justification for the urging of FASAP that the participation
of the late Chief Justice Corona voided the recall order. The urging derives
from FASAP’s failure to distinguish the role of the Chief Justice as the
Presiding Officer of the Banc. In this regard, we advert to the March 13, 2012
resolution, where the Court made the following observation:
A final point that needs to be fully clarified at this juncture, in light of the
allegations of the Dissent is the role of the Chief Justice in the recall of the
September 7, 2011 Resolution. As can be seen from the xxx narration,
the Chief Justice acted only on the recommendation of the ruling
Division, since he had inhibited himself from participation in the case
long before. The confusion on this matter could have been brought
about by the Chief Justice's role as the Presiding Officer ofthe Court en
banc (particularly in its meeting of October 4, 2011), and the fact that
the four most senior Justices of the Court (namely, Justices Corona,
Carpio, Velasco and Leonardo-De Castro) inhibited from participating in
the case. In the absence of any clear personal malicious participation, it
is neither correct nor proper to hold the Chief Justice personally
accountable for the collegial ruling of the Court en banc.53 (Bold
underscoring supplied for emphasis)
To reiterate, the Court, whether sitting En Banc or in Division, acts as a
collegial body. By virtue of the collegiality, the Chief Justice alone cannot
promulgate or issue any decisions or orders. In Complaint of Mr. Aurelio
Jndencia Arrienda Against SC Justices Puna, Kapunan, Pardo,
YnaresSantiago, 54 the Court has elucidated on the collegial nature of the
Court in relation to the role of the Chief Justice, viz.:
The complainant’s vituperation against the Chief Justice on account of what
he perceived was the latter's refusal "to take a direct positive and favorable
action" on his letters of appeal overstepped the limits of proper conduct. It
betrayed his lack of understanding of a fundamental principle in our system
of laws. Although the Chief Justice is primus inter pares, he cannot legally
decide a case on his own because of the Court's nature as a collegial body.
Neither can the Chief Justice, by himself, overturn the decision of the Court,
whether of a division or the en banc.
There is only one Supreme Court from whose decisions all other courts are
required to take their bearings.While most of the Court's work is performed
by its three divisions, the Court remains one court-single, unitary, complete
and supreme. Flowing from this is the fact that, while individual justices may
dissent or only partially concur, when the Court states what the law is, it
speaks with only one voice. Any doctrine or principle of law laid down by the
court may be modified or reversed only by the Court en banc.55
Lastly, any lingering doubt on the validity of the recall order should be
dispelled by the fact that the Court upheld its issuance of the order through
the March 13, 2012 resolution, whereby the Court disposed:
WHEREFORE, premises considered, we hereby confirm that the Court en
bane has assumed jurisdiction over the resolution of the merits of the
motions for reconsideration of Philippine Airlines, Inc., addressing our
July 22, 2008 Decision and October 2, 2009 Resolution; and that the
September 7, 2011 ruling of the Second Division has been effectively
recalled. This case should now be raffled either to Justice Lucas P.
Bersamin or Justice Diosdado M. Peralta (the remaining members of the
case) as Member-in-Charge in resolving the merits of these motions.
xxxx
The Flight Attendants and Stewards Association of the Philippines’
Motion for Reconsideration of October 17, 2011 is hereby denied; the
recall of the September 7, 2011 Resolution was made by the Court on
its own before the ruling’s finality pursuant to the Court’s power of
control over its orders and resolutions. Thus, no due process issue
ever arose.
SO ORDERED.
II
PAL's Second Motion for Reconsideration
| of the Decision of July 22, 2008
| could be allowed in the higher interest of justice
FASAP asserts that PAL’s Second Motion for Reconsideration of the
Decision of July 22, 2008 was a prohibited pleading; and that the July 22,
2008 decision was not anymore subject to reconsideration due to its having
already attained finality.
FASAP’s assertions are unwarranted.
With the Court’s resolution of January 20, 2010 granting PAL’s motion for
leave to file a second motion for reconsideration,56 PAL's Second Motion for
Reconsideration of the Decision of July 22, 2008 could no longer be
challenged as a prohibited pleading. It is already settled that the granting of
the motion for leave to file and admit a second motion for reconsideration
authorizes the filing of the second motion for reconsideration.57 Thereby, the
second motion for reconsideration is no longer a prohibited pleading, and the
Court cannot deny it on such basis alone.58
Nonetheless, we should stress that the rule prohibiting the filing of a second
motion for reconsideration is by no means absolute. Although Section 2, Rule
52 of the Rules of Court disallows the filing of a second motion for
reconsideration,59 the Internal Rules of the Supreme Court (IRSC) allows an
exception, to wit:
Section 3. Second motion for reconsideration. - The Court shall not entertain
a second motion for reconsideration, and any exception to this rule can
only be granted in the higher interest of justice by the Court en
bane upon a vote of at least two-thirds of its actual membership. There
is reconsideration "in the higher interest of justice" when the assailed
decision is not only legally erroneous, but is likewise patently unjust and
potentially capable of causing unwarranted and irremediable injury or
damage to the parties. A second motion for reconsideration can only be
entertained before the ruling sought to be reconsidered becomes final
by operation of law or by the Court's declaration.
In the Division, a vote of three Members shall be required to elevate a
second motion for reconsideration to the Court en banc.
The conditions that must concur in order for the Court to entertain a second
motion for reconsideration are the following, namely:
1. The motion should satisfactorily explain why granting the same
would be in the higher interest of justice;
2. The motion must be made before the ruling sought to be
reconsidered attains finality;
3. If the ruling sought to be reconsidered was rendered by the Court
through one of its Divisions, at least three members of the Division
should vote to elevate the case to the Court En Banc; and
4. The favorable vote of at least two-thirds of the Court En
Bane’s actual membership must be mustered for the second motion
for reconsideration to be granted.60
Under the IRSC, a second motion for reconsideration may be allowed to
prosper upon a showing by the movant that a reconsideration of the previous
ruling is necessary in the higher interest of justice. There is higher interest of
justice when the assailed decision is not only legally erroneous, but is
likewise patently unjust and potentially capable of causing unwarranted and
irremediable injury or damage to the parties.61
PAL maintains that the July 22, 2008 decision contravened prevailing
jurisprudence62 that had recognized its precarious financial condition;63 that
the decision focused on PAL’s inability to prove its financial losses due to its
failure to submit audited financial statements; that the decision ignored the
common findings on the serious financial losses suffered by PAL made by
the Labor Arbiter, the NLRC, the CA and even the SEC;64 and that the
decision and the subsequent resolution denying PAL’s motion for
reconsideration would negate whatever financial progress it had achieved
during its rehabilitation.65
These arguments of PAL sufficed to show that the assailed decision
contravened settled jurisprudence on PAL’s precarious financial condition. It
cannot be gainsaid that there were other businesses undergoing
rehabilitation that would also be bound or negatively affected by the July 22,
2008 decision. This was the higher interest of justice that the Court sought to
address, which the dissent by Justice Leonen is adamant not to
accept.66 Hence, we deemed it just and prudent to allow PAL’s Second
Motion for Reconsideration of the Decision of July 22, 2008.
It is timely to note, too, that the July 22, 2008 decision did not yet attain
finality. The October 4, 2011 resolution recalled the September 7, 2011
resolution denying PAL’s first motion for reconsideration. Consequently, the
July 22, 2008 decision did not attain finality.
The dissent by Justice Leonen nonetheless proposes a contrary view- that
both the July 22, 2008 decision and the October 2, 2009 resolution had
become final on November 4, 2009 upon the lapse of 15 days following
PAL’s receipt of a copy of the resolution. To him, the grant of leave to PAL to
file the second motion for reconsideration only meant that the motion was no
longer prohibited but it did not stay the running of the reglementary period of
15 days. He submits that the Court’s grant of the motion for leave to file the
second motion for reconsideration did not stop the October 2, 2009
resolution from becoming final because a judgment becomes final by
operation of law, not by judicial declaration.67
The proposition of the dissent is unacceptable.
In granting the motion for leave to file the second motion for reconsideration,
the Court could not have intended to deceive the movants by allowing them
to revel in some hollow victory. The proposition manifestly contravened the
basic tenets of justice and fairness.
As we see it, the dissent must have inadvertently ignored the procedural
effect that a second motion for reconsideration based on an allowable
ground suspended the running of the period for appeal from the date of the
filing of the motion until such time that the same was acted upon and
granted.68 Correspondingly, granting the motion for leave to file a second
motion for reconsideration has the effect of preventing the challenged
decision from attaining finality. This is the reason why the second motion for
reconsideration should present extraordinarily persuasive reasons. Indeed,
allowing pro forma motions would indefinitely avoid the assailed judgment
from attaining finality.69
By granting PAL’s motion for leave to file a second motion for
reconsideration, the Court effectively averted the July 22, 2008 decision and
the October 2, 2009 resolution from attaining finality. Worthy of reiteration,
too, is that the March 13, 2012 resolution expressly recalled the September
7, 2011 resolution.
Given the foregoing, the conclusion stated in the dissent that the Banc was
divested of the jurisdiction to entertain the second motion for reconsideration
for being a "third motion for reconsideration;"70 and the unfair remark in the
dissent that "[t]he basis of the supposed residual power of the Court En Banc
to, take on its own, take cognizance of Division cases is therefore
suspect"71 are immediately rejected as absolutely legally and factually
unfounded.
To start with, there was no "third motion for reconsideration" to speak of. The
September 11, 2011 resolution denying PAL’s second motion for
reconsideration had been recalled by the October 4, 2011 resolution. Hence,
PAL’s motion for reconsideration remained unresolved, negating the
assertion of the dissent that the Court was resolving the second motion for
reconsideration "for the second time."72
Also, the dissent takes issue against our having assumed jurisdiction over
G.R. No. 178083 despite the clear reference made in the October 4, 2011
resolution to Sections 3(m) and (n), Rule 2 of the IRSC. Relying largely on
the Court's construction of Section 4(3), Article VIII of the 1987 Constitution
in Fortich v. Corona,73 the dissent opines that the Banc could not act as an
appellate court in relation to the decisions of the Division;74 and that
the Banc could not take cognizance of any case in the Divisions except upon
a prior consulta from the ruling Division pursuant to Section 3(m), in relation
to Section 3(1), Rule 2 of the IRSC.75
The Court disagrees with the dissent’s narrow view respecting the residual
powers of the Banc.
Fortich v. Corona, which has expounded on the authority of the Banc to
accept cases from the Divisions, is still the prevailing jurisprudence regarding
the construction of Section 4(3), Article VIII of the 1987 Constitution.
However, Fortich v. Corona does not apply herein. It is notable that Fortich v.
Corona sprung from the results of the voting on the motion for
reconsideration filed by the Sumilao Farmers. The vote ended in an equally
divided Division ("two-two"). From there, the Sumilao Farmers sought to
elevate the matter to the Banc based on Section 4(3), Article VIII because
the required three-member majority vote was not reached. However, the
factual milieu in Fortich v. Coronais not on all fours with that in this case.
In the March 13, 2012 resolution, the Court recounted the exigencies that
had prompted the Banc to take cognizance of the matter, to wit:
On September 28, 2011, the Letters dated September 13 and 20, 2011 of
Atty. Mendoza to Atty. Vidal (asking that his inquiry be referred to the
relevant Division Members who took part on the September 7, 2011
Resolution) were "NOTED" by the regular Second Division. The Members of
the ruling Division also met to consider the queries posed by Atty. Mendoza.
Justice Brion met with the Members of the ruling Division (composed of
Justices Brion, Peralta, Perez, Bersamin, and Mendoza), rather than with the
regular Second Division (composed of Justices Carpio, Brion, Perez, and
Sereno), as the former were the active participants in the September 7, 2011
Resolution.
In these meetings, some of the Members of the ruling Division saw the
problems pointed out above, some of which indicated that the ruling Division
might have had no authority to rule on the case. Specifically, their
discussions centered on the application of A.M. No. 99-8-09-SC for the
incidents that transpired prior to the effectivity of the IRSC, and on the
conflicting rules under the IRSC - - Section 3, Rule 8 on the effects of
inhibition and Section 7, Rule 2 on the resolution of MRs.
A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be
made among the other Members of the san1e Division who participated in
rendering the decision or resolution and who concurred therein, which should
now apply because the ruling on the case is no longer final after the case
had been opened for review on the merits. In other words, after acceptance
by the Third Division, through Justice Velasco, of the 2nd MR, there should
have been a referral to raffle because the excepting qualification that the
Clerk of Court cited no longer applied; what was being reviewed were the
merits of the case and the review should be by the same Justices who had
originally issued the original Decision and the subsequent Resolution, or by
whoever of these Justices are still left in the Court, pursuant to the same
A.M. No. 99-8-09- SC.
On the other hand, the raffle to Justice Brion was made by applying AC No.
84-2007 that had been superseded by Section 3, Rule 8 of the IRSC. Even
the use of this IRSC provision, however, would not solve the problem, as its
use still raised the question of the provision that should really apply in the
resolution of the MR: should it be Section 3, Rule 8 on the inhibition of a
Member-in-Charge, or Section 7, Rule 2 of the IRSC on the inhibition of
the ponente when an MR of a decision and a signed resolution was filed. xxx
xxx xxx xxx
A comparison of these two provisions shows the semantic sources of the
seeming conflict: Section 7, Rule 2 refers to a situation where
the ponente has retired, is no longer a Member of the Court, is disqualified,
or has inhibited himself from acting on the case; while Section 3, Rule 8
generally refers to the inhibition of a Member-in-Charge who does not need
to be the writer of the decision or resolution under review.
Significantly, Section 7, Rule 2 expressly uses the word ponente (not
Member-in-Charge) and refers to a specific situation where the ponente (or
the writer of the Decision or the Resolution) is no longer with the Court or is
otherwise unavailable to review the decision or resolution he or she wrote.
Section 3, Rule 8, on the other hand, expressly uses the term Member-in-
Charge and generally refers to his or her inhibition, without reference to the
stage of the proceeding when the inhibition is made.
Under Section 7, Rule 2, the case should have been re-raffled and assigned
to anyone of Justices Nachura (who did not retire until June 13, 2011),
Peralta, or Bersamin, either (1) after the acceptance of the 2nd MR (because
the original rulings were no longer final); or (2) after Justice Velasco's
inhibition because the same condition existed, i.e., the need for a review by
the same Justices who rendered the decision or resolution. As previously
mentioned, Justice Nachura participated in both the original Decision and the
subsequent Resolution, and all three Justices were the remaining Members
who voted on the October 2, 2009 Resolution. On the other hand, if Section
3, Rule 8 were to be solely applied after Justice Velasco' s inhibition, the
Clerk of Court would be correct in her assessment and the raffle to Justice
Brion, as a Member outside of Justice Velasco’s Division, was correct.
These were the legal considerations that largely confronted the ruling
Division in late September 2011 when it deliberated on what to do with Atty.
Mendoza’s letters.
The propriety of and grounds for
the recall of the September 7,
2011 Resolution
Most unfortunately, the above unresolved questions were even further
compounded in the course of the deliberations of the Members of the ruling
Division when they were informed that the parties received the ruling on
September 19, 2011, and this ruling would lapse to finality after the 15th day,
or after October 4, 2011.
Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice
Corona and recommended, as a prudent move, that the September 7, 2011
Resolution be recalled at the very latest on October 4, 2011, and that the
case be referred to the Court en bane for a ruling on the questions Atty.
Mendoza asked. The consequence, of course, of a failure to recall their ruling
was for that Resolution to lapse to finality. After finality, any recall for lack of
jurisdiction of the ruling Division might not be understood by the parties and
could lead to a charge of flip-flopping against the Court. The basis for the
referral is Section 3(n), Rule 2 of the IRSC, which provides:
RULE 2.
OPERATING STRUCTURES
Section 3. Court en bane matters and eases.-The Court en bane shall act on
the following matters and cases:
xxxx
(n) cases that the Court en bane deems of sufficient importance to merit its
attention[.]"
Ruling positively, the Court en bane duly issued its disputed October 4, 2011
Resolution recalling the September 7, 2011 Resolution and ordering the re-
raffle of the case to a new Member-in-Charge. Later in the day, the Court
received PAL's Motion to Vacate (the September 7, 2011 ruling) dated
October 3, 2011. This was followed by FASAP's MR dated October 17, 2011
addressing the Court Resolution of October 4, 2011. The F ASAP MR mainly
invoked the violation of its right to due process as the recall arose from the
Court’s ex parte consideration of mere letters from one of the counsels of the
parties.
As the narration in this Resolution shows, the Court acted on its own
pursuant to its power to recall its own orders and resolutions before their
finality. The October 4, 2011 Resolution was issued to determine the
propriety of the September 7, 2011 Resolution given the facts that came to
light after the ruling Division’s examination of the records. To point out the
obvious, the recall was not a ruling on the merits and did not constitute the
reversal of the substantive issues already decided upon by the Court in the F
ASAP case in its previously issued Decision (of July 22, 2008) and
Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution
was not meant and was never intended to favor either party, but to simply
remove any doubt about the validity of the ruling Division's action on the
case. The case, in the ruling Division's view, could be brought to the Court en
banc since it is one of "sufficient importance"; at the very least, it involves the
interpretation of conflicting provisions of the IRSC with potential jurisdictional
implications.
At the time the Members of the ruling Division went to the Chief Justice to
recommend a recall, there was no clear indication of how they would
definitively settle the unresolved legal questions among themselves. The only
matter legally certain was the looming finality of the September 7, 2011
Resolution if it would not be immediately recalled by the Court en bane by
October 4, 2011. No unanimity among the Members of the ruling Division
could be gathered on the unresolved legal questions; thus, they concluded
that the matter is best determined by the Court en bane as it potentially
involved questions of jurisdiction and interpretation of conflicting provisions of
the IRSC. To the extent of the recommended recall, the ruling Division was
unanimous and the Members communicated this intent to the Chief Justice in
clear and unequivocal terms.76 (Bold scoring supplied for emphasis)
It is well to stress that the Banc could not have assumed jurisdiction were it
not for the initiative of Justice Arturo V. Brion who consulted the Members of
the ruling Division as well as Chief Justice Corona regarding the jurisdictional
implications of the successive retirements, transfers, and inhibitions by the
Members of the ruling Division. This move by Justice Brion led to the referral
of the case to the Banc in accordance with Section 3(1), Rule 2 of the IRSC
that provided, among others, that any Member of the Division could request
the Court En Banc to take cognizance of cases that fell under paragraph (m).
This referral by the ruling Division became the basis for the Banc to issue its
October 4, 2011 resolution.
For sure, the Banc, by assuming jurisdiction over the case, did not seek to
act as appellate body in relation to the acts of the ruling Division, contrary to
the dissent's position.77 The Bane's recall of the resolution of September 7,
2011 should not be so characterized, considering that the Banc did not
thereby rule on the merits of the case, and did not thereby reverse the July
22, 2008 decision and the October 2, 2009 resolution. The referral of the
case to the Banc was done to address the conflict among the provisions of
the IRSC that had potential jurisdictional implications on the ruling made by
the Second Division.
At any rate, PAL constantly raised in its motions for reconsideration that the
ruling Division had seriously erred not only in ignoring the consistent findings
about its precarious financial situation by the Labor Arbiter, the NLRC, the
CA and the SEC, but also in disregarding the pronouncements by the Court
of its serious fiscal condition. To be clear, because the serious challenge by
PAL against the ruling of the Third Division was anchored on the Third
Division’s having ignored or reversed settled doctrines or principles of law,
only the Banc could assume jurisdiction and decide to either affirm, reverse
or modify the earlier decision. The rationale for this arrangement has been
expressed in Lu v. Lu Ym78 thuswise:
It is argued that the assailed Resolutions in the present cases have already
become final, since a second motion for reconsideration is prohibited except
for extraordinarily persuasive reasons and only upon express leave first
obtained; and that once a judgment attains finality, it thereby becomes
immutable and unalterable, however unjust the result of error may appear.
The contention, however, misses an important point. The doctrine
of immutability of decisions applies only to final and executory decisions.
Since the present cases may involve a modification or reversal of a Court-
ordained doctrine or principle, the judgment rendered by the Special Third
Division may be considered unconstitutional, hence, it can never become
final. It finds mooring in the deliberations of the framers of the Constitution:
On proposed Section 3(4), Commissioner Natividad asked what the effect
would be of a decision that violates the proviso that "no doctrine or principle
of law laid down by the court in a decision rendered en bane or in division
may be modified or reversed except by the court en bane." The answer given
was that such a decision would be invalid. Following up, Father Bernas
asked whether the decision, if not challenged, could become final and
binding at least on the parties. Romulo answered that, since such a
decision would be in excess of jurisdiction, the decision on the case
could be reopened anytime. (emphasis and underscoring supplied)
A decision rendered by a Division of this Court in violation of this
constitutional provision would be in excess of jurisdiction and, therefore,
invalid. Any entry of judgment may thus be said to be "inefficacious" since the
decision is void for being unconstitutional.
While it is true that the Court en bane exercises no appellate jurisdiction over
its Divisions, Justice Minerva Gonzaga-Reyes opined in Firestone and
concededly recognized that "[t]he only constraint is that any doctrine or
principle of law laid down by the Court, either rendered en bane or in division,
may be overturned or reversed only by the Court sitting en banc."
That a judgment must become final at some definite point at the risk of
occasional error cannot be appreciated in a case that embroils not only a
general allegation of "occasional error" but also a serious accusation of a
violation of the Constitution, viz., that doctrines or principles of law were
modified or reversed by the Court's Special Third Division August 4, 2009
Resolution.
The law allows a determination at first impression that a doctrine or principle
laid down by the court en bane or in division may be modified or reversed in
a case which would warrant a referral to the Court En Banc. The use of the
word "may" instead of "shall" connotes probability, not certainty, of
modification or reversal of a doctrine, as may be deemed by the Court.
Ultimately, it is the entire Court which shall decide on the acceptance of the
referral and, if so, "to reconcile any seeming conflict, to reverse or modify an
earlier decision, and to declare the Court's doctrine."
The Court has the power and prerogative to suspend its own rules and to
exempt a case from their operation if and when justice requires it, as in the
present circumstance where movant filed a motion for leave after the prompt
submission of a second motion for reconsideration but, nonetheless, still
within15 days from receipt of the last assailed resolution.79
Lastly, the dissent proposes that a unanimous vote is required to grant
PAL’s Second Motion for Reconsideration of the Decision of July 22,
2008.80 The dissent justifies the proposal by stating that "[a] unanimous court
would debate and deliberate more fully compared with a non-unanimous
court. "81
The radical proposal of the dissent is bereft of legal moorings. Neither the
1987 Constitution nor the IRSC demands such unanimous vote. Under
Section 4(2), Article VIII of the 1987 Constitution, decisions by the Banc shall
be attained by a "concurrence of a majority of the Members who actually took
part in the deliberations on the issues in the case and voted thereon." As a
collegial body, therefore, the Court votes after deliberating on the case, and
only a majority vote is required,82 unless the 1987 Constitution specifies
otherwise. In all the deliberations by the Court, dissenting and concurring
opinions are welcome, they being seen as sound manifestations of "the
license of individual Justices or groups of Justices to separate themselves
from "the Court’s" adjudication of the case before them,"83 thus:
[C]oncurring and dissenting opinions serve functions quite consistent with a
collegial understanding of the Court. Internally within the Court itself---dissent
promotes and improves deliberation and judgment. Arguments on either side
of a disagreement test the strength of their rivals and demand attention and
response. The opportunity for challenge and response afforded by the
publication of dissenting and concurring opinions is a close and sympathetic
neighbor of the obligation of reasoned justification.
Externally for lower courts, the parties, and interested bystanders-concurring
and dissenting opinions are important guides to the dynamic "meaning" of a
decision by the Court. From a collegial perspective, dissenting and
concurring opinions offer grounds for understanding how individual Justices,
entirely faithful to their Court's product, will interpret that product. The
meaning each Justice brings to the product of her Court will inevitably be
shaped by elements of value and judgment she brings to the interpretive
endeavor; her dissent from the Court's conclusions in the case in question is
likely to be dense with insight into these aspects of her judicial persona. 84
III
PAL implemented a valid retrenchment program
Retrenchment or downsizing is a mode of terminating employment initiated
by the employer through no fault of the employee and without prejudice to
the latter, resorted to by management during periods of business recession,
industrial depression or seasonal fluctuations or during lulls over shortage of
materials. It is a reduction in manpower, a measure utilized by an employer
to minimize business losses incurred in the operation of its business. 85
Anent retrenchment, Article 29886 of the Labor Code provides as follows:
Article 298. Closure of Establishment and Reduction of Personnel. - The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment
or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be 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 considered
one (1) whole year.
Accordingly, the employer may resort to retrenchment in order to avert
serious business losses. To justify such retrenchment, the following
conditions must be present, namely:
1. The retrenchment must be reasonably necessary and likely to
prevent business losses;
2. The losses, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or, if only expected, are
reasonably imminent;
 3. The expected or actual losses must be proved by sufficient and
convincing evidence;
4. The retrenchment must be in good faith for the advancement of its
interest and not to defeat or circumvent the employees' right to
security of tenure; and
5. There must be fair and reasonable criteria m ascertaining who
would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.87
Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial
losses because it did not submit its audited financial statements as evidence;
(2) observe good faith in implementing the retrenchment program; and (3)
apply a fair and reasonable criteria in selecting who would be terminated.
Upon a critical review of the records, we are convinced that PAL had met all
the standards in effecting a valid retrenchment.
A These foregoing averments of F ASAP were echoed in its reply90 and
PAL’s serious financial losses were duly established
PAL was discharged of the
| burden to prove serious
| financial losses in view of
| F ASAP's admission
PAL laments the unfair and unjust conclusion reached in the July 22, 2008
decision to the effect that it had not proved its financial losses due to its non-
submission of audited financial statements. It points out that the matter of
financial losses had not been raised as an issue before the Labor Arbiter, the
NLRC, the CA, and even in the petition in G.R. No. 178083 in view of
FASAP’s admission of PAL having sustained serious losses; and that PAL’s
having been placed under rehabilitation sufficiently indicated the financial
distress that it was suffering.
It is quite notable that the matter of PAL’s financial distress had originated
from the complaint filed by F ASAP whereby it raised the sole issue
of "Whether or not respondents committed Unfair Labor Practice."88 F ASAP
believed that PAL, in terminating the 1,400 cabin crew members, had
violated Section 23, Article VII and Section 31, Article IX of the 1995- 2000 P
AL-FASAP CBA. Interestingly, FASAP averred in its position paper therein
that it was not opposed to the retrenchment program because it understood
PAL’s financial troubles; and that it was only questioning the manner and
lack of standard in carrying out the retrenchment, thus:
At the outset, it must be pointed out that complainant was never opposed to
the retrenchment program itself, as it understands respondent PAL’s financial
troubles. In fact, complainant religiously cooperated with respondents in their
quest for a workable solution to the company-threatening problem. Attached
herewith as Annexes "A" to "D" are the minutes of its meetings with
respondent PAL’s representatives showing complainant's active participation
in the deliberations on the issue.
What complainant vehemently objects to are the manner and the lack of
criteria or standard by which the retrenchment program was implemented or
carried out, despite the fact that there are available criteria or standard that
respondents could have utilized or relied on in reducing its workforce. In
adopting a retrenchment program that was fashioned after the evil prejudices
and personal biases of respondent Patria Chiong, respondent PAL grossly
violated at least two important provisions of its CBA with complainant - Article
VII, Section 23 and Article IX, Sections 31and 32. 89
memorandum91 submitted to the Labor Arbiter.
Evidently, FASAP’s express recognition of PAL’s grave financial situation
meant that such situation no longer needed to be proved, the same having
become a judicial admission92 in the context of the issues between the
parties. As a rule, indeed, admissions made by parties in the pleadings, or in
the course of the trial or other proceedings in the same case are conclusive,
and do not require further evidence to prove them.93 By FASAP’s admission
of PAL’s severe financial woes, PAL was relieved of its burden to prove its
dire financial condition to justify the retrenchment. Thusly, PAL should not be
taken to task for the non-submission of its audited financial statements in the
early part of the proceedings inasmuch as the non-submission had been
rendered irrelevant.
Yet, the July 22, 2008 decision ignored the judicial admission and unfairly
focused on the lack of evidence of PAL’s financial losses. The Special Third
Division should have realized that PAL had been discharged of its duty to
prove its precarious fiscal situation in the face of FASAP’s admission of such
situation. Indeed, PAL did not have to submit the audited financial statements
because its being in financial distress was not in issue at all.
Nonetheless, the dissent still insists that PAL should be faulted for failing to
prove its substantial business losses, and even referred to several decisions
of the Court94 wherein the employers had purportedly established their
serious business losses as a requirement for a valid retrenchment.
Unfortunately, the cases cited by the dissent obviously had no application
herein because they originated from either simple complaints of illegal
retrenchment, or unfair labor practice, or additional separation pay. 95
LVN Pictures originated from a complaint for unfair labor practice (ULP)
based on Republic Act No. 874 (Industrial Peace Act). The allegations in the
complaint concerned interference, discrimination and refusal to bargain
collectively. The Court pronounced therein that the employer (L VN Pictures)
did not resort to ULP because it was able to justify its termination, closure
and eventual refusal to bargain collectively through the financial statements
showing that it continually incurred serious financial losses. Notably, the
Court did not interfere with the closure and instead recognized LVN’s
management prerogative to close its business and dismiss its employees.
North Davao Mining was a peculiar case, arising from a complaint for
additional separation pay, among others. The Court therein held that
separation pay was not required if the reason for the termination was due to
serious business losses. It clarified that Article 283 (now Art. 298) governed
payment of separation benefits in case of closure of business not due to
serious business losses. When the reason for the closure was serious
business losses, the employer shall not be required to grant separation pay
to the terminated employees.
In Manatad, the complaint for illegal dismissal was based on the allegation
that the retrenchment program was illegal because the employer was gaining
profits. Hence, the core issue revolved around the existence (or absence) of
grave financial losses that would justify retrenchment.
In the cited cases, the employers had to establish that they were incurring
serious business losses because it was the very issue, if not intricately
related to the main issue presented in the original complaints. In contrast, the
sole issue herein as presented by F ASAP to the Labor Arbiter was the
"manner of retrenchment," not the basis for retrenchment. F ASAP itself, in
representation of the retrenched employees, had admitted in its position
paper, as well as in its reply and memorandum submitted to the Labor Arbiter
the fact of serious financial losses hounding PAL. In reality, PAL was not
remiss by not proving serious business losses. FASAP’s admission of PAL’s
financial distress already established the latter's precarious financial state.
Judicial notice could be taken
of the financial losses
incurred; the presentation of
audited financial statements
was not required in such
circumstances
The July 22, 2008 decision recognized that PAL underwent corporate
rehabilitation. In seeming inconsistency, however, the Special Third Division
refused to accept that PAL had incurred serious financial losses, observing
thusly:
The audited financial statements should be presented before the Labor
Arbiter who is in the position to evaluate evidence. They may not be
submitted belatedly with the Court of Appeals, because the admission of
evidence is outside the sphere of the appellate court's certiorari jurisdiction.
Neither can this Court admit in evidence audited financial statements, or
make a ruling on the question of whether the employer incurred substantial
losses justifying retrenchment on the basis thereof, as this Court is not a trier
of facts. Even so, this Court may not be compelled to accept the contents of
said documents blindly and without thinking.
xxxx
In the instant case, 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.
Likewise, the fact that PAL underwent corporate rehabilitation does not
automatically justify the retrenchment of its cabin crew
personnel.96 (Emphasis supplied)
Indeed, that a company undergoes rehabilitation sufficiently indicates its
fragile financial condition. lt is rather unfortunate that when PAL petitioned for
rehabilitation the term "corporate rehabilitation" still had no clear definition.
Presidential Decree No. 902-A,97 the law then applicable, only set the
remedy.98 Section 6(c) and (d) of P.D. No. 902-A gave an insight into the
precarious state of a distressed corporation requiring the appointment of a
receiver or the creation of a management committee, viz.:
xxxx
c) To appoint one or more receivers of the property, real and personal, which
is the subject of the action pending before the Commission in accordance
with the pertinent provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants
and/or protect the interest of the investing public and
creditors: Provided, however, That the Commission may, in appropriate
cases, appoint a rehabilitation receiver of corporations, partnerships or other
associations not supervised or regulated by other government agencies who
shall have, in addition to the powers of a regular receiver under the
provisions of the Rules of Court, such functions and powers as are provided
for in the succeeding paragraph d) hereof: Provided, further, That the
Commission may appoint a rehabilitation receiver of corporations,
partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon
request of the government agency concerned: Provided, finally, That upon
appointment of a management committee, rehabilitation receiver, board
or body, pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly.
d) To create and appoint a management committee, board, or body upon
petition or moto propio to undertake the management of corporations,
partnerships or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger
of dissipation, loss, wastage or destruction of assets or other
properties of paralyzation of business operations of such corporations
or entities which may be prejudicial to the interest of minority
stockholders, parties-litigants or the general public: Provided, further,
That the Commission may create or appoint a management committee,
board or body to undertake the management of corporations, partnerships or
other associations supervised or regulated by other government agencies,
such as banks and insurance companies, upon request of the government
agency concerned.
The management committee or rehabilitation receiver, board or body shall
have the power to take custody of, and control over, all the existing assets
and property of such entities under management; to evaluate the existing
assets and liabilities, earnings and operations of such corporations,
partnerships or other associations; to determine the best way to salvage
and protect the interest of the investors and creditors; to study, review
and evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It
shall report and be responsible to the Commission until dissolved by order of
the Commission: Provided, however, That the Commission may; on the basis
of the findings and recommendation of the management committee, or
rehabilitation receiver, board or body, or on its own findings; determine that
the continuance in business of such corporation or entity would not be
feasible or profitable nor work to the best interest of the stockholders,
parties-litigants, creditors, or the general public, order the dissolution
of such corporation entity and its remaining assets liquidated
accordingly.The management committee or rehabilitation receiver, board or
body may overrule or revoke the actions of the previous management and
board of directors of the entity or entities under management notwithstanding
any provision of law, articles of incorporation or by-laws to the contrary.
The management committee, or rehabilitation receiver, board or body shall
not be subject to any action, claim or demand for, or in connection with, any
act done or omitted to be done by it in good faith in the exercise of its
functions, or in connection with the exercise of its power herein conferred.
(Bold underscoring supplied for emphasis)
After having been placed under corporate rehabilitation and its rehabilitation
plan having been approved by the SEC on June 23, 2008, PAL’s dire
financial predicament could not be doubted. Incidentally, the SEC’s order of
approval came a week after PAL had sent out notices of termination to the
affected employees. It is thus difficult to ignore the fact that PAL had then
been experiencing difficulty in meeting its financial obligations long before its
rehabilitation.
Moreover, the fact that airline operations were capital intensive but earnings
were volatile because of their vulnerability to economic recession, among
others.99 The Asian financial crisis in 1997 had wrought havoc among the
Asian air carriers, PAL included.100 The peculiarities existing in the airline
business made it easier to believe that at the time of the Asian financial
crisis, PAL incurred liabilities amounting to ₱90,642,933,919.00, which were
way beyond the value of its assets that then only stood at ₱85,109,075,35l.
Also, the Court cannot be blind and indifferent to current events affecting the
society101 and the country’s economy,102 but must take them into serious
consideration in its adjudication of pending cases. In that regard, Section 2,
Rule 129 of the Rules of Court recognizes that the courts have discretionary
authority to take judicial notice of matters that are of public knowledge, or are
capable of unquestionable demonstration, or ought to be known to judges
because of their judicial functions.103 The principle is based on convenience
and expediency in securing and introducing evidence on matters that are not
ordinarily capable of dispute and are not bona fidedisputed.104
Indeed, the Labor Arbiter properly took cognizance of PAL’s substantial
financial losses during the Asian financial crisis of 1997.105 On its part, the
NLRC recognized the grave financial distress of PAL based on its ongoing
rehabilitation/receivership.106 The CA likewise found that PAL had
implemented a retrenchment program to counter its tremendous business
losses that the strikes of the pilot's union had aggravated.107 Such
recognitions could not be justly ignored or denied, especially after PAL's
financial and operational difficulties had attracted so much public attention
that even President Estrada had to intervene in order to save PAL as the
country’s flag carrier.108
The Special Third Division also observed that PAL had submitted a "stand-
alone" rehabilitation program that was viewed as an acknowledgment that it
could "undertake recovery on its own and that it possessed enough
resources to weather the financial storm." The observation was unfounded
considering that PAL -had been constrained to submit the "stand-alone"
rehabilitation plan on December 7, 1998 because of the lack of a strategic
partner.109
We emphasize, too, that the presentation of the audited financial statements
should not the sole means by Which to establish the employer's serious
financial losses. The presentation of audited financial statements, although
convenient in proving the unilateral claim of financial losses, is not required
for all cases of retrenchment. The evidence required for each case of
retrenchment really depends on the particular circumstances obtaining. The
Court has cogently opined in that regard:
That petitioners were not able to present financial statements for years prior
to 2005 should not be automatically taken against them. Petitioner BEMI was
organized and registered as a corporation in 2004 and started business
operations in 2005 only. While financial statements for previous years
may be material in establishing the financial trend for an employer,
these are not indispensable in all cases of retrenchment. The evidence
required for each case of retrenchment will still depend on its particular
circumstances. In fact, in Revidad v. National Labor Relations
Commission, the Court declared that "proof of actual financial losses
incurred by the company is not a condition sine qua non for
retrenchment," and retrenchment may be undertaken by the employer
to prevent even future losses:
In its ordinary connotation, the phrase "to prevent losses" means that
retrenchment or termination of the services of some employees is authorized
to be undertaken by the employer sometime before the anticipated losses
are actually sustained or realized. It is not, in other words, the intention of the
lawmaker to compel the employer to stay his hand and keep all his
employees until after losses shall have in fact materialized. If such an intent
were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to
another.110(Bold underscoring supplied for emphasis)
In short, to require a distressed corporation placed under rehabilitation or
receivership to still submit its audited financial statements may become
unnecessary or superfluous.
Under P.D. No. 902-A, the SEC was empowered during rehabilitation
proceedings to thoroughly review the corporate and financial documents
submitted by PAL. Hence, by the time when the SEC ordered PAL’s
rehabilitation, suspension of payments and receivership, the SEC had
already ascertained PAL’s serious financial condition, and the clear and
imminent danger of its losing its corporate assets. To require PAL in the
proceedings below to still prove its financial losses would only trivialize the
SEC’s order and proceedings. That would be unfortunate because we should
not ignore that the SEC was then the competent authority to determine
whether or not a corporation experienced serious financial losses. Hence, the
SEC's order - presented as evidence in the proceedings below - sufficiently
established PAL’s grave financial status.
Finally, PAL argues that the Special Third Division should not have deviated
from the pronouncements made in Garcia v. Philippine Airlines, Inc.,
Philippine Airlines, Inc. v. Kurangking, Philippine Airlines v. Court of Appeals,
Philippine Airlines v. Zamora, Philippine Airlines v. PALEA, and Philippine
Airlines v. National Labor Relations Commission, all of which judicially
recognized PAL’s dire financial condition.
The argument of PAL is valid and tenable.
Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement
pending appeal because PAL had been placed under corporate
rehabilitation, explaining that 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 by the employer, viz.:
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 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.111
In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals,
Philippine Airlines v. PALEA and Philippine Airlines v. National Labor
Relations Commission, the Court uniformly upheld the suspension of
monetary claims against PAL because of the SEC’s order placing it under
receivership. The Court emphasized the need to suspend the payment of the
claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring
and rehabilitation. Philippine Airlines v. Zamorareiterated this rule and
deferred to the prior judicial notice taken by the Court in suspending the
monetary claims of illegally dismissed employees.112
Through these rulings, the Court consistently recognized PAL’s financial
troubles while undergoing rehabilitation and suspension of payments.
Considering that the ruling related to conditions and circumstances that had
occurred during the same period as those obtaining in G.R. No. 178083, the
Court cannot take a different view.
It is also proper to indicate that the Court decided the other cases long before
the promulgation of the assailed July 22, 2008 decision. Hence, the Special
Third Division should not have regarded the financial losses as an issue that
still required determination. Instead, it should have just simply taken judicial
notice of the serious financial losses being suffered by PAL.113 To still rule
that PAL still did not prove such losses certainly conflicted with the
antecedent judicial pronouncements about PAL’s dire financial state.
As such, we cannot fathom the insistence by the dissent that the Court had
not taken judicial notice but merely "recognized" that PAL was under
corporate rehabilitation. Judicial notice is the cognizance of certain facts that
judges may properly take and act on without proof because they already
know them. It is the manner of recognizing and acknowledging facts that no
longer need to be proved in court. In other words, when the Court
"recognizes" a fact, it inevitably takes judicial notice of it.
For sure, it would not have been the first time that the Court would have
taken judicial notice of the findings of the SEC and of antecedent
jurisprudence recognizing the fact of rehabilitation by the employer. The
Court did so in the 2002 case of Clarion Printing House, Inc. v. National
Labor Relations Commission, 114 to wit:
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A)
("REORGANIZATION OF THE SECURITIES AND EXCHANGE
COMMISSION WITH ADDITIONAL POWERS AND PLACING SAID
AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE OFFICE
OF THE PRESIDENT"), as amended, read:
SEC. 5. In addition to the regulatory and adjudicative functions of THE
SECURITIES AND EXCHANGE COMMISSION over corporations,
partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:
xxx xxx xxx
(d) Petitions of corporations, partnerships or associations declared in
the state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover all
debts but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation, partnership,
association has no sufficient assets to cover its liabilities, but is under
the management of a Rehabilitation Receiver or Management
Committee created pursuant to this Decree.
SEC. 6. In order to effectively exercise such jurisdiction, the Commission
shall possess the following powers:
xxx xxx xxx
(c) To appoint one or more receivers of the property, real and personal,
which is the subject of the action pending before the Commission in
accordance with the provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants
and/or protect the interest of the investing public and creditors:
Provided, however, That the Commission may in
appropriate cases, appoint a rehabilitation receiver of corporations,
partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to powers of the
regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph
(d) hereof: ...
(d) To create and appoint a management committee, board or body upon
petition or motupropio to undertake the management of corporations,
partnership or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger
of dissipation,· loss, wastage or destruction of assets or other
properties or paralization of business operations of such corporations
or entities which may be prejudicial to the interest of minority
stockholders, parties-litigants of the general public: ... (Emphasis and
underscoring supplied).
From the above-quoted provisions of P.D. No. 902-A, as amended, the
appointment of a receiver or management committee by the SEC
presupposes a finding that, inter alia, a company possesses sufficient
property to cover all its debts but "foresees the impossibility of meeting them
when they respectively fall due" and "there is imminent danger of dissipation,
loss, wastage or destruction of assets of other properties or paralization of
business operations."
That the SEC, mandated by law to have regulatory functions over
corporations, partnerships or associations, appointed an interim receiver for
the EYCO Group of Companies on its petition in light of, as quoted above,
the therein enumerated "factors beyond the control and anticipation of the
management" rendering it unable to meet its obligation as they fall due, and
thus resulting to "complications and problems ... to arise that would impair
and affect [its] operations ... " shows that CLARION, together with the other
member-companies of the EYCO Group of Companies, was suffering
business reverses justifying, among other things, the retrenchment of its
employees.
This Court in fact takes judicial notice of the Decision of the Court of Appeals
dated June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp.,
Nikolite Industrial Corp., et al. [including CLARION], otherwise known as the
EYCO Group of Companies v. Philippine National Bank, Solidbank
Corporation, et al., collectively known and referred as the 'Consortium of
Creditor Banks,"' which was elevated to this Court via Petition
for Certiorari and docketed as G.R. No. 145977, but which petition this Court
dismissed by Resolution dated May 3, 2005:
Considering the joint manifestation and motion to dismiss of petitioners and
respondents dated February 24, 2003, stating that the parties have reached
a final and comprehensive settlement of all the claims and counterclaims
subject matter of the case and accordingly, agreed to the dismissal of the
petition for certiorari, the Court Resolved to DISMISS the petition
for certiorari (Underscoring supplied).
The parties in G.R. No. 145977 having sought, and this Court having
granted, the dismissal of the appeal of the therein petitioners including
CLARION, the CA decision which affirmed in toto the September 14, 1999
Order of the SEC, the dispositive portion of which SEC Order reads:
WHEREFORE, premises considered, the appeal is as it is hereby, granted
and the Order dated 18 December 1998 is set aside. The Petition to be
Declared in State of Suspension of payments is hereby disapproved and the
SAC Plan terminated. Consequently, all committee, conservator/receivers
created pursuant to said Order are dissolved and discharged and all acts and
orders issued therein are vacated.
The Commission, likewise, orders the liquidation and dissolution of the
appellee corporations.The case is hereby remanded to the hearing panel
below for that purpose.
xxx xxx x x x (Emphasis and underscoring supplied),
has now become final and executory. Ergo, the SEC's disapproval of the
EYCO Group of Companies' "Petition for the Declaration of Suspension of
Payment ... " and the order for the liquidation and dissolution of these
companies including CLARION, must be deemed to have been unassailed.
That judicial notice can be taken of the above-said case of Nikon Industrial
Corp. et al. v. PNB et al.,there should be no doubt.
As provided in Section 1, Rule 129 of the Rules of Court:
SECTION 1. Judicial notice, when mandatory. - A court shall take judicial
notice, without the introduction of evidence, of the existence and territorial
extent of states, their political history, forms of government and symbols of
nationality, the law of nations, the admiralty and maritime courts of the world
and their seals, the political constitution and history of the Philippines,
the official acts of thelegislative, executive and judicial departments of the
Philippines, the laws of nature, the measure of time, and the geographical
divisions. (Emphasis and underscoring supplied)
which Mr. Justice Edgardo L. Paras interpreted as follows:
A court will take judicial notice of its own acts and records in the same
case, of facts established in prior proceedings in the same case, of the
authenticity of its own records of another case between the same parties, of
the files of related cases in the same court, and of public records on file
in the same court. In addition judicial notice will be taken of the record,
pleadings or judgment of a case in another court between the same parties
or involving one of the same parties, as well as of the record of another case
between different parties in the same court. Judicial notice will also be taken
of court personnel. (Emphasis and underscoring supplied)
In fine, CLARION's claim that at the time it terminated Miclat it was
experiencing business reverses gains more light from the SEC's disapproval
of the EYCO Group of Companies' petition to be declared in state of
suspension of payment, filed before Miclat’stermination, and of the SEC’s
consequent order for the group of companies’ dissolution and liquidation. 115
At any rate, even assuming that serious business losses had not been
proved by PAL, it would still be justified under Article 298 of the Labor
Code to retrench employees to prevent the occurrence of losses or its
closing of the business, provided that the projected losses were not
merely de minimis, but substantial, serious, actual, and real, or, if only
expected, were reasonably imminent as perceived objectively and in good
faith by the employer.116 In the latter case, proof of actual financial losses
incurred by the employer would not be a condition sine qua non for
retrenchment,117 viz.:
Third, contrary to petitioner’s asseverations, proof of actual financial losses
incurred by the company is not a condition sine qua non for retrenchment.
Retrenchment is one of the economic grounds to dismiss employees, which
is resorted to by an employer primarily to avoid or minimize business losses.
The law recognize this under Article 283 of the Labor Code x x x
xxxx
In its ordinary connotation, the phrase "to prevent losses" means that
retrenchment or termination of the services of some employees is authorized
to be undertaken by the employer sometime before the anticipated losses
are actually sustained or realized. It is not, in other words, the intention of the
lawmaker to compel the employer to stay his hand and keep all his
employees until after losses shall have in fact materialized. If such an intent
were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to
another.
At the other end of the spectrum, it seems equally clear that not every
asserted possibility of loss is sufficient legal warrant for the reduction of
personnel. In the nature of things, the possibility of incurring the losses is
constantly present, in greater or lesser degree, in the carrying on of business
operations, since some, indeed many, of the factors which impact upon the
profitability or viability of such operations may be substantially outside the
control of the employer.
On the bases of these consideration, it follows that the employer bears the
burden to prove his allegation of economic or business reverses with clear
and satisfactory evidence, it being in the nature of an affirmative defense. As
earlier discussed, we are fully persuaded that the private respondent has
been and is besieged by a continuing downtrend in both its business
operations and financial resources, thus amply justifying its resort to drastic
cuts in personnel and costs.118
B
PAL retrenched in good faith
The employer is burdened to observe good faith in implementing a
retrenchment program. Good faith on its part exists when the retrenchment is
intended for the advancement of its interest and is not for the purpose of
defeating or circumventing the rights of the employee under special laws or
under valid agreements.119
The July 22, 2008 decision branded the recall of the retrenched employees
and the implementation of "Plan 22" instead of "Plan 14" as badges of bad
faith on the part of PAL. On the other hand, the October 2, 2009 resolution
condemned PAL for changing its theory by attributing the cause of the
retrenchment to the ALP AP pilots’ strike.
PAL refutes the adverse observations, and maintains that its position was
clear and consistent - that the reduction of its labor force was an act of
survival and a less drastic measure as compared to total closure and
liquidation that would have otherwise resulted; that downsizing had been an
option to address its financial losses since 1997;120that the reduction of
personnel was necessary as an integral part of the means to ensure the
success of its corporate rehabilitation plan to restructure its business; 121 and
that the downsizing of its labor force was a sound business decision
undertaken after an assessment of its financial situation and the remedies
available to it.122
A hard look at the records now impels the reconsideration of the July 22,
2008 decision and the resolution of October 2, 2009.
PAL could not have been motivated by ill will or bad faith when it decided to
terminate FASAP’s affected members. On the contrary, good faith could be
justly inferred from PAL’s conduct before, during and after the
implementation of the retrenchment plan.
Notable in this respect was PAL’s candor towards FASAP regarding its plan
to implement the retrenchment program. This impression is gathered from
PAL’s letter dated February 11, 1998 inviting FASAP to a meeting to discuss
the matter, thus:
Roberto D. Anduiza
President
Flight Attendants’ and Stewards' Association of the Philippines (FASAP)
xxxx
Mr. Anduiza:
Due to critical business losses and in view of severe financial reverses,
Philippine Airlines must undertake drastic measures to strive at survival. In
order to meet maturing obligations amidst the present regional crisis, the
Company will implement major cost-cutting measures in its fleet plan,
operating budget, routes and frequencies. These moves include the closure
of stations, downsizing of operations and reducing the workforce through
layoff/retrenchment or retirement.
In this connection, the Company would like to meet with the Flight
Attendants' and Stewards’ Association of the Philippines (FASAP) to discuss
the implementation of the lay-off/retrenchment or retirement of F ASAP-
covered employees. The meeting shall be at the Allied Bank Center (81h
Floor-Board Room) on February 12, 1998 at 4:00 p.m.
This letter serves as notice in compliance with Article 283 of the Labor Code,
as amended and DOLE Orders Nos[.] 9 and 10, Series of 1997.
Very truly yours,
(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer123
The records also show that the parties met on several occasions 124 to
explore cost-cutting measures, including the implementation of the
retrenchment program. PAL likewise manifested that the retrenchment plan
was temporarily shelved while it implemented other measures (like
termination of probationary cabin attendant, and work-
rotations).125 Obviously, the dissent missed this part as it stuck to the belief
that PAL did not implement other cost-cutting measures prior to
retrenchment.126
Given PAL’s dire financial predicament, it becomes understandable that PAL
was constrained to finally implement the retrenchment program when the
ALPAP pilots strike crippled a major part of PAL’s operations.127 In Rivera v.
Espiritu, 128 we observed that said strike wrought "serious losses to the
financially beleaguered flag carrier;" that "PAL’s financial situation went from
bad to worse;" and that "[f]aced with bankruptcy, PAL adopted a
rehabilitation plan and downsized its labor force by more than one-
third." Such observations sufficed to show that retrenchment became a last
resort, and was not the rash and impulsive decision that F ASAP would make
it out to be now.
As between maintaining the number of its flight crew and PAL’s survival, it
was reasonable for PAL to choose the latter alternative. This Court cannot
legitimately force PAL as a distressed employer to maintain its manpower
despite its dire financial condition. To be sure, the right of PAL as the
employer to reasonable returns on its investments and to expansion and
growth is also enshrined in the 1987 Constitution.129 Thus, although labor is
entitled to the right to security of tenure, the State will not interfere with the
employer's valid exercise of its management prerogative.
Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation
Receiver and Approval of a Rehabilitation Plan with the SEC on June 19,
1998, before the retrenchment became effective.130 PAL likewise manifested
that:
x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted by
PAL in pursuance of its corporate rehabilitation, and which obtained the joint
approval of PAL’s creditors and the SEC, had as a primary component, the
downsizing of PAL’s labor force by at least 5,000, including the 1,400
flight attendants. As conceptualized by a team of industry experts, the
cutting down of operations and the consequent reduction of work force,
along with the restructuring of debts with significant "haircuts" and the
capital infusion of Mr. Lucio Tan amounting to US$200 million, were the
key components of PAL's rehabilitation. The Interim Rehabilitation
Receiver was replaced by a Permanent Rehabilitation Receiver on June 7,
1999.131 (Bold underscoring supplies for emphasis)
Being under a rehabilitation program, PAL had no choice but to implement
the measures contained in the program, including that of reducing its
manpower. Far from being an impulsive decision to defeat its employees’
right to security of tenure, retrenchment resulted from a meticulous plan
primarily aimed to resuscitate PAL’s operations.
Good faith could also be inferred from PAL’s compliance with the basic
requirements under- Article 298 of the Labor Code prior to laying-off its
affected employees. Notably, the notice of termination addressed to the
Department of Labor and Employment (DOLE) identified the reasons behind
the massive termination, as well as the measures PAL had undertaken to
prevent the situation, to wit:
June 15, 1998
HON. MAXIMO B. LIM
THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR
Dear Sir:
This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing
a retrenchment program one (1) month from notice hereof in order to prevent
bankruptcy.
PAL is forced to take this action because of continuous losses it has
suffered over the years which losses were aggravated by the PALEA
strike in October 1996, peso depreciation, Asian currency crisis,
causing a serious drop in our yield and the collapse of passenger
traffic in the region. Specifically, PAL suffered a net loss of ₱2.18 Billion
during the fiscal year 1995-1996, ₱2.50 Billion during the fiscal year
1996-1997 and ₱8.08 Billion for the period starting April 1, 1997 to
March 31, 1998.
These uncontrolled heavy losses have left PAL with no recourse but to
reduce its fleet and its flight frequencies both in the domestic and
international sectors to ensure its survival.
In an effort to avoid a reduction of personnel, PAL has resorted to other
measures, such as freeze on all hiring, no salary increase for
managerial and confidential staff (even for promotions), reduction of
salaries of senior management personnel, freeze on staff movements,
pre-termination of temporary staff contracts and negotiations with
foreign investors. But all these measures failed to avert the continued
losses.
Finally, all the efforts of PAL to preserve the employment of its
personnel were shattered by the illegal strike of its pilots which has
cause irreparable damage to the company's cash flow. Consequently,
the company is now no longer able to meet its maturing obligations and
is not about to go into default in all its major loans. It is presently under
threat of receiving a barrage of suits from its creditors who will go after
the assets of the corporation.
Under the circumstances, PAL is left with no recourse but to reduce its fleet
and its flight frequencies both in the domestic and international sectors to
ensure its survival. Consequently, a reduction of personnel is inevitable.
All affected employees in the attached list will be given the corresponding
benefits which they may be entitled to.
Very truly yours,
(Sgd)
JOSE ANTONIO GARCIA
President & Chief Operating Officer132
As regards the observation made in the decision of July 22, 2008 to the
effect that the recall of the flight crew members indicated bad faith, we hold
to the contrary.
PAL explained how the recall process had materialized, as follows:
During this time, the Company was slowly but steadily recovering. Its
finances were improving and additional planes were flying. Because of the
Company's steady recovery, necessity dictated more employees to man and
service the additional planes and flights. Thus, instead of taking in new hires,
the Company first offered employment to employees who were previously
retrenched. A recall/rehire plan was initiated.
The recall/rehire plan was a success. A majority of retrenched employees
were recalled/rehired and went back to work including the members of
petitioner union. In the process of recall/rehire, many employees who could
not be recalled for various reasons (such as, among others, being unfit for
the job or the employee simply did not want to work for the Company
anymore) decided to accept separation benefits and executed, willingly and
voluntarily, valid quitclaims. Those who received separation packages
included a good number of the members of the petitioner union.133
Contrary to the statement in the dissent that the implementation of Plan 22
instead of Plan 14 indicated bad faith,134PAL reasonably demonstrated that
the recall was devoid of bad faith or of an attempt on its part to circumvent its
affected employees’ right to security of tenure. Far from being tainted with
bad faith, the recall signified PAL’s reluctance to part with the retrenched
employees. Indeed, the prevailing unfavorable conditions had only compelled
it to implement the retrenchment.
The rehiring of previously retrenched employees should not invalidate a
retrenchment program, the rehiring being an exercise of the employer's right
to continue its business. Thus, we pointed out in one case:
We likewise cannot sustain petitioners' argument that their dismissal was
illegal on the basis that Lapanday did not actually cease its operation, or that
they have rehired some of the dismissed employees and even hired new set
of employees to replace the retrenched employees.
The law acknowledges the right of every business entity to reduce its
workforce if such measure is made necessary or compelled by economic
factors that would otherwise endanger its stability or existence. In exercising
its right to retrench employees, the firm may choose to close all, or a part of,
its business to avoid further losses or mitigate expenses. In Caffco
International Limited v. Office of the Minister-Ministry of Labor and
Employment, the Court has aptly observed that -
Business enterprises today are faced with the pressures of economic
recession, stiff competition, and labor unrest. Thus, businessmen are always
pressured to adopt certain changes and programs in order to enhance their
profits and protect their investments. Such changes may take various forms.
Management may even choose to close a branch, a department, a plant, or a
shop.
In the same manner, when Lapanday continued its business operation and
eventually hired some of its retrenched employees and new employees, it
was merely exercising its right to continue its business. The fact that
Lapanday chose to continue its business does not automatically make the
retrenchment illegal. We reiterate that in retrenchment, the goal is to prevent
impending losses or further business reversals - it therefore does not require
that there is an actual closure of the business. Thus, when the employer
satisfactorily proved economic or business losses with sufficient supporting
evidence and have complied with the requirements mandated under the law
to justify retrenchment, as in this case, it cannot be said that the subsequent
acts of the employer to rehire the retrenched employees or to hire new
employees constitute bad faith. It could have been different if from the
beginning the retrenchment was illegal and the employer subsequently hired
new employees or rehired some of the previously dismissed employees
because that would have constituted bad faith. Consequently, when
Lapanday continued its operation, it was merely exercising its prerogative to
streamline its operations, and to rehire or hire only those who are qualified to
replace the services rendered by the retrenched employees in order to effect
more economic and efficient methods of production and to forestall business
losses. The rehiring or reemployment of retrenched employees does not
necessarily negate the presence or imminence of losses which prompted
Lapanday to retrench.
In spite of overwhelming support granted by the social justice provisions of
our Constitution in favor of labor, the fundan1ental law itself guarantees,
even during the process of tilting the scales of social justice towards workers
and employees, "the right of enterprises to reasonable returns of investment
and to expansion and growth." To hold otherwise would not only be
oppressive and inhuman, but also counter-productive and ultimately
subversive of the nation's thrust towards a resurgence in our economy which
would ultimately benefit the majority of our people. Where appropriate and
where conditions are in accord with law and jurisprudence, the Court has
authorized valid reductions in the workforce to forestall business losses, the
hemorrhaging of capital, or even to recognize an obvious reduction in the
volume of business which has rendered certain employees redundant.135
Conselquently, we cannot pass judgment on the motive behind PAL's
initiative to implement "Plan 22" instead of "Plan 14." The prerogative thereon
belonged to the management alone due to its being in the best position to
assess its own financial situation and operate its own business. Even the
Court has no power to interfere with such exercise of the prerogative.
C
PAL used fair and reasonable criteria in selecting the
employees to be retrenched pursuant to the CBA
The July 22, 2008 decision agreed with the holding by the CA that PAL was
not obligated to consult with F ASAP on the standards to be used in
evaluating the performance of its employees. Nonetheless, PAL was found to
be unfair and unreasonable in selecting the employees to be retrenched by
doing away with the concept of seniority, loyalty, and past efficiency by solely
relying on the employees' 1997 performance rating; and that the
retrenchment of employees due to "other reasons," without any details or
specifications, was not allowed and had no basis in fact and in law. 136
PAL contends that it used fair and reasonable criteria in accord with Sections
23, 30 and 112 of the 1995-2000 CBA;137 that the NLRC’s use of the phrase
"other reasons" referred to the varied grounds (i.e. excess sick leaves,
previous service of suspension orders, passenger complains, tardiness, etc.)
employed in conjunction with seniority in selecting the employees to be
terminated;138 that the CBA did not require reference to performance rating of
the previous years, but to the use of an efficiency rating for a single
year;139 and that it adopted both efficiency rating and inverse seniority as
criteria in the selection pursuant to Section 112 of the CBA. 140
PAL’s contentions are meritorious.
In selecting the employees to be dismissed, the employer is required to
adopt fair and reasonable criteria, taking into consideration factors
like: (a) preferred status; (b) efficiency; and (c) seniority, among
others.141 The requirement of fair and reasonable criteria is imposed on the
employer to preclude the occurrence of arbitrary selection of employees to
be retrenched. Absent any showing of bad faith, the choice of who should be
retrenched must be conceded to the employer for as long as a basis for the
retrenchment exists.142
We have found arbitrariness in terminating the employee under the guise of a
retrenchment program wherein the employer discarded the criteria it adopted
in terminating a particular employee;143 when the termination discriminated
the employees on account of their union membership without regard to their
years of service;144 the timing of the retrenchment was made a day before
the employee may be regularized;145 when the employer disregarded
altogether the factor of seniority and choosing to retain the newly hired
employees;146 that termination only followed the previous retrenchment of
two non-regular employees;147 and when there is no appraisal or criteria
applied in the selection.148
On the other hand, we have considered as valid the retrenchment of the
employee based on work efficiency,149 or poor performance;150 or the
margins of contribution of the consultants to the income of the company; 151 or
absenteeism, or record of disciplinary action, or efficiency and work
attitude;152 or when the employer exerted efforts to solicit the employees'
participation in reviewing the criteria to be used in selecting the workers to be
laid off.153
In fine, the Court will only strike down the retrenchment of an employee as
capricious, whimsical, arbitrary, and prejudicial in the absence of a clear-cut
and uniform guideline followed by the employer in selecting him or her from
the work pool. Following this standard, PAL validly implemented its
retrenchment program.
PAL resorted to both efficiency rating and inverse seniority in selecting the
employees to be subject of termination. As the NLRC keenly pointed out, the
"ICCD Masterank 1997 Ratings - Seniority Listing" submitted by PAL
sufficiently established the criteria for the selection of the employees to be
laid off. To insist on seniority as the sole basis for the selection would be
unwarranted, it appearing that the applicable CBA did not establish such
limitation. This counters the statement in the dissent that the retrenchment
program was based on unreasonable standards without regard to service,
seniority, 1oya1ty and performance.154
In this connection, we adopt the following cogent observations by the CA on
the matter for being fully in accord with law and jurisprudence:
FASAP insists that several CBA provisions have been violated by the
retrenchment. They are the provisions on seniority, performance appraisal,
reduction in personnel and downgrading and pem1anent OCARs. Seniority
and performance stand out because these were the main considerations of
PAL in selecting workers to be retrenched. Under the CBA, seniority is
defined "to mean a measure of a regular Cabin Attendant’s claim in relation
to other regular Cabin Attendants holding similar positions, to preferential
consideration whatever the Company exercises its right to promote to a
higher paying position of lay-off of any Cabin Attendant." Seniority,
however, is not the sole determinant of retention. This is clear under
Article XIII on performance appraisal of the CBA provisions.
Under the CBA, several factors are likewise taken into consideration
like performance and professionalism in addition to the seniority factor.
However, the criteria for performance and professionalism are not
indicated in the CBA but are to be formulated by PAL in consultation
with FASAP. Where there is retrenchment, cabin attendants who fail to
attain at least 85% of the established criteria shall be demoted
progressively. Domestic cabin attendants, the occupants of lowest rung
of the organizational hierarchy, are to be retrenched once they fail to
meet the required percentage.
We have painstakingly examined the records and We find no indication
that these provisions have been grossly disregarded as to taint the
retrenchment with illegality. PAL relied on specific categories of
criteria, such as merit awards, physical appearance, attendance
and checkrides,to guide its selection of employees to be removed. We
do not find anything legally objectionable in the adoption of the
foregoing norms. On the contrary, these norms are most relevant to the
nature of a cabin attendant's work.
However, the contention of FASAP that these criteria required its prior
conformity before adoption is not supported by Section 30, Article VIII
of the CBA. Note should be taken that this provision only mandates
PAL to "meet and consult" the Association (FASAP) in the formulation
of the Performance and Professionalism Appraisal System." By the
ordinary import of this provision, PAL is only required to confer with
FASAP; it is not at all required to forge an addendum to the CBA, which
will concretize the appraisal system as basis for retrenchment or
retention.155
To require PAL to further limit its criteria would be inconsistent with
jurisprudence and the principle of fairness. Instead, we hold that for as long
as PAL followed a rational criteria defined or set by the CBA and existing
laws and jurisprudence in determining who should be included in the
retrenchment program., it sufficiently met the standards of fain1ess and
reason in its implementation of its retrenchment program.
D
The retrenched employees signed valid quitclaims
The July 22, 2008 decision struck down as illegal the quitclaims executed by
the retrenched employees because of the mistaken conclusion that the
retrenchment had been unlawfully executed.
We reverse.
In EDI Staffbuilders International, Inc. v. National Labor Relations
Commission, 156 we laid down the basic contents of valid and effective
quitclaims and waivers, to wit:
In order to prevent disputes on the validity and enforceability of quitclaims
and waivers of employees under Philippine laws, said agreements should
contain the following:
1. A fixedamount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding
amounts, which the employees arc giving up in consideration of the
fixed compromise amount;
3. A statement that the employer has dearly explained to the employee
in English, Filipino, or in the dialect known to the employees - that by
signing the waiver or quitclaim, they are forfeiting or relinquishing their right
to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document
voluntarily, and had fully understood the contents of the document and
that their consent was freely given without any threat, violence, duress,
intimidation, or undue influence exerted on their person.157 (Bold supplied for
emphasis)
The release and quitclaim signed by the affected employees substantially
satisfied the aforestated requirements. The consideration was clearly
indicated in the document in the English language, including the benefits that
the employees would be relinquishing in exchange for the amounts to be
received. There is no question that the employees who had occupied the
position of flight crew knew and understood the English language. Hence,
they fully comprehended the terms used in the release and quitclaim that
they signed.
Indeed, not all quitclaims are per se invalid or against public
policy.1a\^/phi1 A quitclaim is invalid or contrary to public policy only: (1)
where there is clear proof that the waiver was wrangled from an
unsuspecting or gullible person; or (2) where the terms of settlement are
unconscionable on their face.158 Based on these standards, we uphold the
release and quitclaims signed by the retrenched employees herein.
WHEREFORE, the Court:
(a) GRANTS the Motion for Reconsideration of the Resolution of
October 2, 2009 and Second Motion for Reconsideration of the
Decision of July 22, 2008 filed by the respondents Philippine Airlines,
Inc. and Patria Chiong;
(b) DENIES the Motion for Reconsideration (Re: The Honorable
Court's Resolution dated March 13, 2012)filed by the petitioner Flight
Attendants and Stewards Association of the Philippines;
(c) SETSASIDE the decision dated July 22, 2008 and resolution
dated October 2, 2009; and
(d) AFFIRMS the decision of the Court of Appeals dated August 23,
2006.
No pronouncement on costs of still.
SO ORDERED.
G.R. No. 163512 February 28, 2007
DAISY B. TIU, Petitioner
vs.
PLATINUM PLANS PHIL., INC., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated January 20, 2004 of the
Court of Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4,
2004 denying reconsideration. The Court of Appeals had affirmed the
decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig
City, Branch 261, in an action for damages, ordering petitioner to pay
respondent ₱100,000 as liquidated damages.
The relevant facts are as follows:
Respondent Platinum Plans Philippines, Inc. is a domestic corporation
engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu
was its Division Marketing Director.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-
President and Territorial Operations Head in charge of its Hongkong and
Asean operations. The parties executed a contract of employment valid for
five years.4
On September 16, 1995, petitioner stopped reporting for work. In November
1995, she became the Vice-President for Sales of Professional Pension
Plans, Inc., a corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of
Pasig City, Branch 261. Respondent alleged, among others, that petitioner’s
employment with Professional Pension Plans, Inc. violated the non-
involvement clause in her contract of employment, to wit:
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes
that during his/her engagement with EMPLOYER and in case of separation
from the Company, whether voluntary or for cause, he/she shall not, for the
next TWO (2) years thereafter, engage in or be involved with any
corporation, association or entity, whether directly or indirectly, engaged in
the same business or belonging to the same pre-need industry as the
EMPLOYER. Any breach of the foregoing provision shall render the
EMPLOYEE liable to the EMPLOYER in the amount of One Hundred
Thousand Pesos (P100,000.00) for and as liquidated damages.5
Respondent thus prayed for ₱100,000 as compensatory damages; ₱200,000
as moral damages; ₱100,000 as exemplary damages; and 25% of the total
amount due plus ₱1,000 per counsel’s court appearance, as attorney’s fees.
Petitioner countered that the non-involvement clause was unenforceable for
being against public order or public policy: First, the restraint imposed was
much greater than what was necessary to afford respondent a fair and
reasonable protection. Petitioner contended that the transfer to a rival
company was an accepted practice in the pre-need industry. Since the
products sold by the companies were more or less the same, there was
nothing peculiar or unique to protect. Second, respondent did not invest in
petitioner’s training or improvement. At the time petitioner was recruited, she
already possessed the knowledge and expertise required in the pre-need
industry and respondent benefited tremendously from it. Third, a strict
application of the non-involvement clause would amount to a deprivation of
petitioner’s right to engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial court ruled
that a contract in restraint of trade is valid provided that there is a limitation
upon either time or place. In the case of the pre-need industry, the trial court
found the two-year restriction to be valid and reasonable. The dispositive
portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay the following:
1. the amount of One Hundred Thousand Pesos (P100,000.00) for
and as damages, for the breach of the non-involvement provision
(Item No. 8) of the contract of employment;
2. costs of suit.
There being no sufficient evidence presented to sustain the grant of
attorney’s fees, the Court deems it proper not to award any.
SO ORDERED.6
On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned
that petitioner entered into the contract on her own will and volition. Thus,
she bound herself to fulfill not only what was expressly stipulated in the
contract, but also all its consequences that were not against good faith,
usage, and law. The appellate court also ruled that the stipulation prohibiting
non-employment for two years was valid and enforceable considering the
nature of respondent’s business.
Petitioner moved for reconsideration but was denied. Hence, this appeal by
certiorari where petitioner alleges that the Court of Appeals erred when:
A.
… [IT SUSTAINED] THE VALIDITY OF THE NON-INVOLVEMENT CLAUSE
IN PETITIONER’S CONTRACT CONSIDERING THAT THE PERIOD FIXED
THEREIN IS VOID FOR BEING OFFENSIVE TO PUBLIC POLICY
B.
… [IT SUSTAINED] THE AWARD OF LIQUIDATED DAMAGES
CONSIDERING THAT IT BEING IN THE NATURE OF A PENALTY THE
SAME IS EXCESSIVE, INIQUITOUS OR UNCONSCIONABLE7
Plainly stated, the core issue is whether the non-involvement clause is valid.
Petitioner avers that the non-involvement clause is offensive to public policy
since the restraint imposed is much greater than what is necessary to afford
respondent a fair and reasonable protection. She adds that since the
products sold in the pre-need industry are more or less the same, the
transfer to a rival company is acceptable. Petitioner also points out that
respondent did not invest in her training or improvement. At the time she
joined respondent, she already had the knowledge and expertise required in
the pre-need industry. Finally, petitioner argues that a strict application of the
non-involvement clause would deprive her of the right to engage in the only
work she knows.
Respondent counters that the validity of a non-involvement clause has been
sustained by the Supreme Court in a long line of cases. It contends that the
inclusion of the two-year non-involvement clause in petitioner’s contract of
employment was reasonable and needed since her job gave her access to
the company’s confidential marketing strategies. Respondent adds that the
non-involvement clause merely enjoined her from engaging in pre-need
business akin to respondent’s within two years from petitioner’s separation
from respondent. She had not been prohibited from marketing other service
plans.
As early as 1916, we already had the occasion to discuss the validity of a
non-involvement clause. In Ferrazzini v. Gsell,8 we said that such clause was
unreasonable restraint of trade and therefore against public policy.
In Ferrazzini, the employee was prohibited from engaging in any business or
occupation in the Philippines for a period of five years after the termination of
his employment contract and must first get the written permission of his
employer if he were to do so. The Court ruled that while the stipulation was
indeed limited as to time and space, it was not limited as to trade. Such
prohibition, in effect, forces an employee to leave the Philippines to work
should his employer refuse to give a written permission.
In G. Martini, Ltd. v. Glaiserman,9 we also declared a similar stipulation as
void for being an unreasonable restraint of trade. There, the employee was
prohibited from engaging in any business similar to that of his employer for a
period of one year. Since the employee was employed only in connection
with the purchase and export of abaca, among the many businesses of the
employer, the Court considered the restraint too broad since it effectively
prevented the employee from working in any other business similar to his
employer even if his employment was limited only to one of its multifarious
business activities.
However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as
legal, reasonable, and not contrary to public policy. In the said case, the
employee was restricted from opening, owning or having any connection with
any other drugstore within a radius of four miles from the employer’s place of
business during the time the employer was operating his drugstore. We said
that a contract in restraint of trade is valid provided there is a limitation upon
either time or place and the restraint upon one party is not greater than the
protection the other party requires.
Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement
clause in accordance with Article 130612 of the Civil Code. While the
complainant in that case was an independent agent and not an employee,
she was prohibited for one year from engaging directly or indirectly in
activities of other companies that compete with the business of her principal.
We noted therein that the restriction did not prohibit the agent from engaging
in any other business, or from being connected with any other company, for
as long as the business or company did not compete with the principal’s
business. Further, the prohibition applied only for one year after the
termination of the agent’s contract and was therefore a reasonable restriction
designed to prevent acts prejudicial to the employer.
Conformably then with the aforementioned pronouncements, a non-
involvement clause is not necessarily void for being in restraint of trade as
long as there are reasonable limitations as to time, trade, and place.
In this case, the non-involvement clause has a time limit: two years from the
time petitioner’s employment with respondent ends. It is also limited as to
trade, since it only prohibits petitioner from engaging in any pre-need
business akin to respondent’s.1awphi1.net
More significantly, since petitioner was the Senior Assistant Vice-President
and Territorial Operations Head in charge of respondent’s Hongkong and
Asean operations, she had been privy to confidential and highly sensitive
marketing strategies of respondent’s business. To allow her to engage in a
rival business soon after she leaves would make respondent’s trade secrets
vulnerable especially in a highly competitive marketing environment. In sum,
we find the non-involvement clause not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to
respondent.13
In any event, Article 1306 of the Civil Code provides that parties to a contract
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.
Article 115914 of the same Code also provides that obligations arising from
contracts have the force of law between the contracting parties and should
be complied with in good faith. Courts cannot stipulate for the parties nor
amend their agreement where the same does not contravene law, morals,
good customs, public order or public policy, for to do so would be to alter the
real intent of the parties, and would run contrary to the function of the courts
to give force and effect thereto.15 Not being contrary to public policy, the non-
involvement clause, which petitioner and respondent freely agreed upon, has
the force of law between them, and thus, should be complied with in good
faith.16
Thus, as held by the trial court and the Court of Appeals, petitioner is bound
to pay respondent ₱100,000 as liquidated damages. While we have equitably
reduced liquidated damages in certain cases,17 we cannot do so in this case,
since it appears that even from the start, petitioner had not shown the least
intention to fulfill the non-involvement clause in good faith.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
January 20, 2004, and the Resolution dated May 4, 2004, of the Court of
Appeals in CA-G.R. CV No. 74972, are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 163269 April 19, 2006
ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court
of Appeals (CA) in CA-G.R. CV No. 52235 as well as its Resolution2 denying
the Motion for Partial Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1,
1977.3 He was initially employed as an Audit Clerk, then as Credit
Investigator, Senior Clerk, Assistant Accountant, and Assistant Manager.
Prior to his retirement, he became the Manager of the Credit Investigation
and Appraisal Division of the Consumer’s Banking Group. In the meantime,
Rivera and his brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its
employees: (a) the Ordinary Retirement Program (ORP), under which an
employee would receive 85% of his monthly basic salary multiplied by the
number of years in service; and (b) the Special Retirement Program (SRP),
under which a retiring employee would receive 250% of the gross monthly
salary multiplied by the number of years in service.4 Since Rivera was only
45 years old, he was not qualified for retirement under the ORP. Under the
SRP, he was entitled to receive P1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite,
Rivera applied for retirement under the SRP. Solidbank approved the
application and Rivera was entitled to receive the net amount
of P963,619.28. This amount included his performance incentive award
(PIA), and his unearned medical, dental and optical allowances in the
amount of P1,666.67, minus his total accountabilities to Solidbank amounting
to P106,973.00.6 Rivera received the amount and confirmed his separation
from Solidbank on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated Release,
Waiver and Quitclaim, which was notarized on March 1, 1995.8 Rivera
acknowledged receipt of the net proceeds of his separation and retirement
benefits and promised that "[he] would not, at any time, in any manner
whatsoever, directly or indirectly engage in any unlawful activity prejudicial to
the interest of Solidbank, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their successors-
in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any
kind."9
Aside from acknowledging that he had no cause of action against Solidbank
or its affiliate companies, Rivera agreed that the bank may bring any action
to seek an award for damages resulting from his breach of the Release,
Waiver and Quitclaim, and that such award would include the return of
whatever sums paid to him by virtue of his retirement under the
SRP.10 Rivera was likewise required to sign an undated Undertaking as a
supplement to the Release, Waiver and Quitclaim in favor of Solidbank in
which he declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his separation
pay in accordance with the SRP. In this Undertaking, he promised that "[he]
will not seek employment with a competitor bank or financial institution within
one (1) year from February 28, 1995, and that any breach of the Undertaking
or the provisions of the Release, Waiver and Quitclaim would entitle
Solidbank to a cause of action against him before the appropriate courts of
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking was not
notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed
Rivera as Manager of its Credit Investigation and Appraisal Division of its
Consumers’ Banking Group.12 Upon discovering this, Solidbank First Vice-
President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a
letter dated May 18, 1995, informing Rivera that he had violated the
Undertaking. She likewise demanded the return of all the monetary benefits
he received in consideration of the SRP within five (5) days from receipt;
otherwise, appropriate legal action would be taken against him.13
When Rivera refused to return the amount demanded within the given period,
Solidbank filed a complaint for Sum of Money with Prayer for Writ of
Preliminary Attachment14 before the Regional Trial Court (RTC) of Manila on
June 26, 1995. Solidbank, as plaintiff, alleged therein that in accepting
employment with a competitor bank for the same position he held in
Solidbank before his retirement, Rivera violated his Undertaking under the
SRP. Considering that Rivera accepted employment with Equitable barely
three months after executing the Undertaking, it was clear that he had no
intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount
of P963,619.28 plus interests therein, and attorney’s fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond
in such amount as this Honorable Court may fix, a writ of preliminary
attachment be forthwith issued against the properties of the
defendant as satisfaction of any judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff
the following sums: NINE HUNDRED SIXTY-THREE THOUSAND
SIX HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28)
PESOS, Philippine Currency, as of 23 May 1995, plus legal interest
of 12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for
every appearance by way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises. 15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa
and a copy of the Release, Waiver and Quitclaim and Undertaking which
Rivera executed.16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of
Rivera’s properties not exempt from execution. Thus, the Sheriff levied on a
parcel of land owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted
that he received the net amount of P963,619.28 as separation pay. However,
the employment ban provision in the Undertaking was never conveyed to him
until he was made to sign it on February 28, 1995. He emphasized that, prior
to said date, Solidbank never disclosed any condition to the retirement
scheme, nor did it impose such employment ban on the bank officers and
employees who had previously availed of the SRP. He alleged that the
undertaking not to "seek employment with any competitor bank or financial
institution within one (1) year from February 28, 1995" was void for being
contrary to the Constitution, the law and public policy, that it was
unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman,
and violative of his human rights. He further claimed that the Undertaking
was a contract of adhesion because it was prepared solely by Solidbank
without his participation; considering his moral and economic disadvantage, it
must be liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary
Judgment, alleging therein that Rivera raised no genuine issue as to any
material fact in his Answer except as to the amount of damages. It prayed
that the RTC render summary judgment against Rivera. Solidbank alleged
that whether or not the employment ban provision contained in the
Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It
insisted that Rivera signed the Undertaking voluntarily and for valuable
consideration; and under the Release, Waiver and Quitclaim, he was obliged
to return the P963,619.28 upon accepting employment from a competitor
bank within the one-year proscribed period. Solidbank appended to its
motion the Affidavit of Villarosa, where she declared that Rivera was
employed by Equitable on May 1, 1995 for the same position he held before
his retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of
the parties as well as Villarosa’s Affidavit, there are genuine issues as to
material facts which call for the presentation of evidence. He averred that
there was a need for the parties to adduce evidence to prove that he did not
sign the Undertaking voluntarily. He claimed that he would not have been
allowed to avail of the SRP if he had not signed it, and consequently, his
retirement benefits would not have been paid. This was what Ed Nallas,
Solidbank Assistant Vice-President for HRD and Personnel, told him when
he received his check on February 28, 1995. Senior Vice-President Henry
Valdez, his superior in the Consumers’ Banking Group, also did not mention
that he would have to sign such Undertaking which contained the assailed
provision. Thus, he had no choice but to sign it. He insisted that the question
of whether he violated the Undertaking is a genuine issue of fact which called
for the presentation of evidence during the hearing on the merits of the case.
He also asserted that he could not cause injury or prejudice to Solidbank’s
interest since he never acquired any sensitive or delicate information which
could prejudice the bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had
been faithful to the provisions of the Release, Waiver and Quitclaim, and the
Undertaking, and had not committed any act or done or said anything to
cause injury to Solidbank.18
Rivera appended to his Opposition his Counter-Affidavit in which he
reiterated that he had to sign the Undertaking containing the employment
ban provision, otherwise his availment of the SRP would not push through.
There was no truth to the bank’s allegation that, "in exchange for receiving
the larger amount of P1,045,258.95 under the SRP, instead of the very much
smaller amount of P224,875.81 under the ORP, he agreed that he will not
seek employment in a competitor bank or financial institution within one year
from February 28, 1995." It was the bank which conceived the SRP to
streamline its organization and all he did was accept it. He stressed that the
decision whether to allow him to avail of the SRP belonged solely to
Solidbank. He also pointed out that the employment ban provision in the
Undertaking was not a consideration for his availment of the SRP, and that if
he did not avail of the retirement program, he would have continued working
for Solidbank for at least 15 more years, earning more than what he received
under the SRP. He alleged that he intended to go full time into the poultry
business, but after about two months, found out that, contrary to his
expectations, the business did not provide income sufficient to support his
family. Being the breadwinner, he was then forced to look for a job, and
considering his training and experience as a former bank employee, the job
with Equitable was all he could find. He insisted that he had remained faithful
to Solidbank and would continue to do so despite the case against him, the
attachment of his family home, and the resulting mental anguish, torture and
expense it has caused them.19
In his Supplemental Opposition, Rivera stressed that, being a former bank
employee, it was the only kind of work he knew. The ban was, in fact,
practically absolute since it applied to all financial institutions for one year
from February 28, 1995. He pointed out that he could not work in any other
company because he did not have the qualifications, especially considering
his age. Moreover, after one year from February 28, 1995, he would no
longer have any marketable skill, because by then, it would have been
rendered obsolete by non-use and rapid technological advances. He insisted
that the ban was not necessary to protect the interest of Solidbank, as, in the
first place, he had no access to any "secret" information which, if revealed
would be prejudicial to Solidbank’s interest. In any case, he was not one to
reveal whatever knowledge or information he may have acquired during his
employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking
from the 1995 SRP is purely a management prerogative. It was not for Rivera
to question and decry the bank’s policy to protect itself from unfair
competition and disclosure of its trade secrets. The substantial monetary
windfall given the retiring officers was meant to tide them over the one-year
period of hiatus, and did not prevent them from engaging in any kind of
business or bar them from being employed except with competitor
banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary
Judgment.22 The fallo of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of
plaintiff and against defendant ordering the latter to pay to plaintiff bank the
amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of
May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they
are directed to meet again and sit down to find out how they can finally end
this rift and litigation, all in the name of equity, for after all, defendant had
worked for the bank for some 18 years.23
The trial court declared that there was no genuine issue as to a matter of fact
in the case since Rivera voluntarily executed the Release, Waiver and
Quitclaim, and the Undertaking. He had a choice not to retire, but opted to do
so under the SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was
not unreasonable. To allow Rivera to be excused from his undertakings in
said deed and, at the same time, benefit therefrom would be to allow him to
enrich himself at the expense of Solidbank. The RTC ruled that Rivera had to
return the P963,619.28 he received from Solidbank, plus interest of 12% per
annum from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on
June 14, 2002 partially granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed
from is AFFIRMED with the modification that the attachment and levy upon
the family home covered by TCT No. 51621 of the Register of Deeds, Las
Piñas, Metro Manila, is hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact
except as to the amount of damages. It ratiocinated that the agreement
between Rivera and Solidbank was the law between them, and that the
interpretation of the stipulations therein could not be left upon the whims of
Rivera. According to the CA, Rivera never denied signing the Release,
Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the
proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his
pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job with
Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or
fraud in its execution. Having executed the said deed and thereafter
receiving the benefits under the SRP, he is deemed to have waived the right
to assail the same, hence, is estopped from insisting or retaining the said
amount of P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s family home
was void, and, pursuant to the mandate of Article 155, in relation to Article
153 of the Family Code, must be discharged.
Hence, this recourse to the Court.
Petitioner avers that –
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF
THE SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT
CONSIDERING THE EXISTENCE OF GENUINE ISSUES AS TO
MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF
EVIDENCE IN A TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON
HEREIN PETITIONER NULL AND VOID FOR BEING UNREASONABLE
AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR
CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S
DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE
AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST
OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING
THE PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER
TO PAY SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL
FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue
in their pleadings, affidavits, and documents, that is, whether the employment
ban incorporated in the Undertaking which petitioner executed upon his
retirement is unreasonable, oppressive, hence, contrary to public policy; and
(2) whether petitioner is liable to respondent for the restitution
of P963,619.28 representing his retirement benefits, and interest thereon at
12% per annum as of May 23, 1995 until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the
parties, and the documents and affidavits appended thereto, genuine issues
as to matters of fact were raised therein. He insists that the resolution of the
issue of whether the employment ban is unreasonable requires the
presentation of evidence on the circumstances which led to respondent
bank’s offer of the SRP and ORP, and petitioner’s eventual acceptance and
signing of the Undertaking on March 1, 1995. There is likewise a need to
adduce evidence on whether the employment ban is necessary to protect
respondent’s interest, and whether it is an undue restraint on petitioner’s
constitutional right to earn a living to support his family. He further insists that
respondent is burdened to prove that it sustained damage or injury by reason
of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision
that respondent is automatically entitled to the restitution of the P963,619.28.
Petitioner points out that all the deeds provide is that, in case of breach
thereof, respondent is entitled to protection before the appropriate courts of
law.
On the second issue, petitioner avers that the prohibition incorporated in the
Release, Waiver and Quitclaim barring him as retiree from engaging directly
or indirectly in any unlawful activity and disclosing any information
concerning the business of respondent bank, as well as the employment ban
contained in the Undertaking he executed, are oppressive, unreasonable,
cruel and inhuman because of its overbreath. He reiterates that it is against
public policy, an unreasonable restraint of trade, because it prohibits him to
work for one year in the Philippines, ultimately preventing him from
supporting his family. He points out that a breadwinner in a family of four
minor daughters who are all studying, with a wife who does not work, one
would have a very difficult time meeting the financial obligations even with a
steady, regular-paying job. He insists that the Undertaking deprives him of
the means to support his family, and ultimately, his children’s chance for a
good education and future. He reiterates that the returns in his poultry
business fell short of his expectations, and unfortunately, the business was
totally destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondent’s management prerogative does
not give it a license to entice its employees to retire at a very young age and
prohibit them from seeking employment in a so-called competitor bank or
financial institution, thus prevent them from working and supporting their
families (considering that banking is the only kind of work they know).
Petitioner avers that "management’s prerogative must be without abuse of
discretion. A line must be drawn between management prerogative regarding
business operations per se and those which affect the rights of the
employees. In treating its employees, management should see to it that its
employees are at least properly informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was
his retirement benefit which he earned after serving the bank for 18 years. It
was not a mere gift or gratuity given by respondent bank, without the latter
giving up something of value in return. On the contrary, respondent bank
received "valuable consideration," that is, petitioner quit his job at the
relatively young age of 45, thus enabling respondent to effect its
reorganization plan and forego the salary, benefits, bonuses, and promotions
he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to
a cause of action against him before the appropriate courts of law if he had
violated the employment ban. He avers that respondent must prove its
entitlement to the P963,619.28. The Undertaking contains no provision that
he would have to return the amount he received under the SRP; much less
does it provide that he would have to pay 12% interest per annum on said
amount. On the other hand, the Release, Waiver and Quitclaim does not
contain the provision prohibiting him from being employed with any
competitor bank or financial institution within one year from February 28,
1995. Petitioner insists that he acted in good faith when he received his
retirement benefits; hence, he cannot be punished by being ordered to return
the sum of P963,619.28 which was given to him for and in consideration of
his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per
annum on his retirement pay of P963,619.28 from May 23, 1995, as it is
improper and oppressive to him and his family. As of July 3, 2002, the
interest alone would amount to P822,609.67, thus doubling the amount to be
returned to respondent bank under the decision of the RTC and the CA. The
imposition of interest has no basis because the Release, Waiver and
Quitclaim, and the Undertaking do not provide for payment of interest. The
deeds only state that breach thereof would entitle respondent to bring an
action to seek damages, to include the return of the amount that may have
been paid to petitioner by virtue thereof. On the other hand, any breach of
the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.
Besides, the amount received by petitioner was not a loan and, therefore,
should not earn interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment
with another bank within one year from February 28, 1995 because he
needed to earn a living to support his family and finance his children’s
education. Hence, the imposition of interest, which is a penalty, is
unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is
the law between it and petitioner. As such, the latter could not assail the
deed after receiving the retirement benefit under the SRP. As gleaned from
the averments in his petition, petitioner admitted that he executed the
Undertaking after having been informed of the nature and consequences of
his refusal to sign the same, i.e., he would not be able to receive the
retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of
obligations voluntarily entered into simply because their contracts turned out
to be disastrous deeds. Citing the ruling of this Court in Eastern Shipping
Lines, Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged
to pay 12% per annum interest of the P963,619.28 from judicial or
extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained
damages, including the amount thereof, and that neither the Release, Waiver
and Quitclaim nor the Undertaking obliged him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. – A party seeking to recover
upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
may, at any time after the pleading in answer thereto has been served, move
with supporting affidavits, depositions or admissions for a summary judgment
in his favor upon all or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be served at
least ten (10) days before the time specified for the hearing. The adverse
party may serve opposing affidavits, depositions, or admissions at least three
(3) days before the hearing. After the hearing, the judgment sought shall be
rendered forthwith if the pleadings, supporting affidavits, depositions, and
admissions on file, show that, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two
requisites: (a) there must be no genuine issue as to any material fact, except
for the amount of damages; and (b) the party presenting the motion for
summary judgment must be entitled to a judgment as a matter of
law.27 Where, on the basis of the pleadings of a moving party, including
documents appended thereto, no genuine issue as to a material fact exists,
the burden to produce a genuine issue shifts to the opposing party. If the
opposing party fails, the moving party is entitled to a summary judgment. 28
A genuine issue is an issue of fact which requires the presentation of
evidence as distinguished from an issue which is a sham, fictitious, contrived
or a false claim. The trial court can determine a genuine issue on the basis of
the pleadings, admissions, documents, affidavits or counteraffidavits
submitted by the parties. When the facts as pleaded appear uncontested or
undisputed, then there is no real or genuine issue or question as to any fact
and summary judgment called for. On the other hand, where the facts
pleaded by the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial.29 The evidence on record must be
viewed in light most favorable to the party opposing the motion who must be
given the benefit of all favorable inferences as can reasonably be drawn from
the evidence.30
Courts must be critical of the papers presented by the moving party and not
of the papers/documents in opposition thereto.31 Conclusory assertions are
insufficient to raise an issue of material fact.32 A party cannot create a
genuine dispute of material fact through mere speculations or compilation of
differences.33 He may not create an issue of fact through bald assertions,
unsupported contentions and conclusory statements.34 He must do more
than rely upon allegations but must come forward with specific facts in
support of a claim. Where the factual context makes his claim implausible, he
must come forward with more persuasive evidence demonstrating a genuine
issue for trial.35
Where there are no disputed material facts, the determination of whether a
party breached a contract is a question of law and is appropriate for
summary judgment.36 When interpreting an ambiguous contract with extrinsic
evidence, summary judgment is proper so long as the extrinsic evidence
presented to the court supports only one of the conflicting
interpretations.37 Where reasonable men could differ as to the contentions
shown from the evidence, summary judgment might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of
Appeals resolved the issue of whether a summary judgment is proper in a
breach of contract action involving the interpretation of such contract, and
ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the
contract’s terms are clear, or (b) the evidence supports only one construction
of the controverted provision, notwithstanding some ambiguity. x x x If the
court finds no ambiguity, it should proceed to interpret the contract – and it
may do so at the summary judgment stage. If, however, the court discerns an
ambiguity, the next step – involving an examination of extrinsic evidence –
becomes essential. x x x Summary judgment may be appropriate even if
ambiguity lurks as long as the extrinsic evidence presented to the court
supports only one of the conflicting interpretations.39
In this case, there is no dispute between the parties that, in consideration for
his availment of the SRP, petitioner executed the Release, Waiver and
Quitclaim, and the Undertaking as supplement thereto, and that he received
retirement pay amounting to P963,619.28 from respondent. On May 1, 1995,
within the one-year ban and without prior knowledge of respondent, petitioner
was employed by Equitable as Manager of its Credit Investigation and
Appraisal Division, Consumers’ Banking Group. Despite demands, petitioner
failed to return the P963,619.28 to respondent on the latter’s allegation that
he had breached the one-year ban by accepting employment from Equitable,
which according to respondent was a competitor bank.
We agree with petitioner’s contention that the issue as to whether the post-
retirement competitive employment ban incorporated in the Undertaking is
against public policy is a genuine issue of fact, requiring the parties to
present evidence to support their respective claims.
As gleaned from the records, petitioner made two undertakings. The first is
incorporated in the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly
engage in any unlawful activity prejudicial to the interest of the BANK, its
parent, affiliate or subsidiary companies, their stockholders, officers,
directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or
operation, its plans, processes or data of any kind.40
The second undertaking is incorporated in the Undertaking following
petitioner’s execution of the Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of
Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will
not seek employment with any competitor bank or financial institution within
one (1) year from February 28, 1995.41
In the Release, Waiver and Quitclaim, petitioner declared that respondent
may bring "an action for damages which may include, but not limited to the
return of whatever sums he may have received from respondent under said
deed if he breaks his undertaking therein."42 On the other hand, petitioner
declared in the Undertaking that "any breach on his part of said Undertaking
or the terms and conditions of the Release, Waiver and Quitclaim will entitle
respondent to a cause of action against [petitioner] for protection before the
appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs,
public order or public policy. The freedom of contract is both a constitutional
and statutory right.44 A contract is the law between the parties and courts
have no choice but to enforce such contract as long as it is not contrary to
law, morals, good customs and against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the
effects of an unwise, foolish or disastrous contract, entered into with full
awareness of what he was doing and entered into and carried out in good
faith. Such a contract will not be discarded even if there was a mistake of law
or fact. Courts have no jurisdiction to look into the wisdom of the contract
entered into by and between the parties or to render a decision different
therefrom. They have no power to relieve parties from obligation voluntarily
assailed, simply because their contracts turned out to be disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of
affording full protection to labor, must be liberally construed in favor of the
employee, it being the general rule that pension or retirement plans
formulated by the employer are to be construed against it.46 Retirement
benefits, after all, are intended to help the employee enjoy the remaining
years of his life, releasing him from the burden of worrying for his financial
support, and are a form of reward for being loyal to the employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries
and in the United States and the Philippines:
By "public policy," as defined by the courts in the United States and England,
is intended that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against
the public good, which may be termed the "policy of the law," or "public policy
in relation to the administration of the law." (Words & Phrases Judicially
Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under
which freedom of contract or private dealing is restricted by law for the good
of the public. (Id., Id.) In determining whether a contract is contrary to public
policy the nature of the subject matter determines the source from which
such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P.
Ry. Co., 62 Fed. 904, 906.)
The foregoing is sufficient to show that there is no difference in principle
between the public policy (orden publico) in the two jurisdictions (the United
States and the Philippine Islands) as determined by the Constitution, laws,
and judicial decisions.49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for
subsistence or profit. Anderson’s Dictionary of Law gives the following
definition: "Generally equivalent to occupation, employment, or business,
whether manual or mercantile; any occupation, employment or business
carried on for profit, gain, or livelihood, not in the liberal arts or in the learned
professions." In Abbott’s Law Dictionary, the word is defined as "an
occupation, employment or business carried on for gain or profit." Among the
definitions given in the Encyclopaedic Dictionary is the following: "The
business which a person has learnt, and which he carries on for subsistence
or profit; occupation; particularly employment, whether manual or mercantile,
as distinguished from the liberal arts or the learned professions and
agriculture." Bouvier limits the meaning to commerce and traffic, and the
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to
adopt and apply the broader meaning given by the lexicographers.50
In the present case, the trial court ruled that the prohibition against petitioner
accepting employment with a competitor bank or financial institution within
one year from February 28, 1995 is not unreasonable. The appellate court
held that petitioner was estopped from assailing the post-retirement
competitive employment ban because of his admission that he signed the
Undertaking and had already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple reason that
it rendered summary judgment and thereby foreclosed the presentation of
evidence by the parties to prove whether the restrictive covenant is
reasonable or not. Moreover, on the face of the Undertaking, the post-
retirement competitive employment ban is unreasonable because it has no
geographical limits; respondent is barred from accepting any kind of
employment in any competitive bank within the proscribed period. Although
the period of one year may appear reasonable, the matter of whether the
restriction is reasonable or unreasonable cannot be ascertained with finality
solely from the terms and conditions of the Undertaking, or even in tandem
with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from
respondent. However, petitioner is not proscribed, by waiver or estoppel,
from assailing the post-retirement competitive employment ban since under
Article 1409 of the New Civil Code, those contracts whose cause, object or
purpose is contrary to law, morals, good customs, public order or public
policy are inexistent or void from the beginning. Estoppel cannot give validity
to an act that is prohibited by law or one that is against public policy. 51
Respondent, as employer, is burdened to establish that a restrictive covenant
barring an employee from accepting a competitive employment after
retirement or resignation is not an unreasonable or oppressive, or in undue
or unreasonable restraint of trade, thus, unenforceable for being repugnant to
public policy. As the Court stated in Ferrazzini v. Gsell,52 cases involving
contracts in restraint of trade are to be judged according to their
circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a
contract in restraint of trade is void as against public policy. One is, the injury
to the public by being deprived of the restricted party’s industry; and the other
is, the injury to the party himself by being precluded from pursuing his
occupation, and thus being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated
the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint
upon one party is not greater than protection to the other party requires, the
contract may be sustained. The question is, whether, under the particular
circumstances of the case and the nature of the particular contract involved
in it, the contract is, or is not, unreasonable.53
In cases where an employee assails a contract containing a provision
prohibiting him or her from accepting competitive employment as against
public policy, the employer has to adduce evidence to prove that the
restriction is reasonable and not greater than necessary to protect the
employer’s legitimate business interests.54 The restraint may not be unduly
harsh or oppressive in curtailing the employee’s legitimate efforts to earn a
livelihood and must be reasonable in light of sound public policy.55
Courts should carefully scrutinize all contracts limiting a man’s natural right to
follow any trade or profession anywhere he pleases and in any lawful
manner. But it is just as important to protect the enjoyment of an
establishment in trade or profession, which its employer has built up by his
own honest application to every day duty and the faithful performance of the
tasks which every day imposes upon the ordinary man. What one creates by
his own labor is his. Public policy does not intend that another than the
producer shall reap the fruits of labor; rather, it gives to him who labors the
right by every legitimate means to protect the fruits of his labor and secure
the enjoyment of them to himself.56 Freedom to contract must not be
unreasonably abridged. Neither must the right to protect by reasonable
restrictions that which a man by industry, skill and good judgment has built
up, be denied.57
The Court reiterates that the determination of reasonableness is made on the
particular facts and circumstances of each case. 58 In Esmerson Electric Co.
v. Rogers,59 it was held that the question of reasonableness of a restraint
requires a thorough consideration of surrounding circumstances, including
the subject matter of the contract, the purpose to be served, the
determination of the parties, the extent of the restraint and the specialization
of the business of the employer. The court has to consider whether its
enforcement will be injurious to the public or cause undue hardships to the
employee, and whether the restraint imposed is greater than necessary to
protect the employer. Thus, the court must have before it evidence relating to
the legitimate interests of the employer which might be protected in terms of
time, space and the types of activity proscribed. 60
Consideration must be given to the employee’s right to earn a living and to
his ability to determine with certainty the area within which his employment
ban is restituted. A provision on territorial limitation is necessary to guide an
employee of what constitutes as violation of a restrictive covenant and
whether the geographic scope is co-extensive with that in which the
employer is doing business. In considering a territorial restriction, the facts
and circumstances surrounding the case must be considered.61
Thus, in determining whether the contract is reasonable or not, the trial court
should consider the following factors: (a) whether the covenant protects a
legitimate business interest of the employer; (b) whether the covenant
creates an undue burden on the employee; (c) whether the covenant is
injurious to the public welfare; (d) whether the time and territorial limitations
contained in the covenant are reasonable; and (e) whether the restraint is
reasonable from the standpoint of public policy.62
Not to be ignored is the fact that the banking business is so impressed with
public interest where the trust and interest of the public in general is of
paramount importance such that the appropriate standard of diligence must
be very high, if not the highest degree of diligence.63
We are not impervious of the distinction between restrictive covenants
barring an employee to accept a post-employment competitive employment
or restraint on trade in employment contracts and restraints on post-
retirement competitive employment in pension and retirement plans either
incorporated in employment contracts or in collective bargaining agreements
between the employer and the union of employees, or separate from said
contracts or collective bargaining agreements which provide that an
employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the
employer. The strong weight of authority is that forfeitures for engaging in
subsequent competitive employment included in pension and retirement
plans are valid even though unrestricted in time or geography. The raison
d’etre is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction
between restraints on competitive employment in employment contracts and
in pension plans. The strong weight of authority holds that forfeitures for
engaging in subsequent competitive employment, included in pension
retirement plans, are valid, even though unrestricted in time or geography.
The reasoning behind this conclusion is that the forfeiture, unlike the restraint
included in the employment contract, is not a prohibition on the employee’s
engaging in competitive work but is merely a denial of the right to participate
in the retirement plan if he does so engage. A leading case on this point is
Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a
forfeiture provision similar to that here, the Court said:
"A restriction in the contract which does not preclude the employee from
engaging in competitive activity, but simply provides for the loss of rights or
privileges if he does so is not in restraint of trade." (emphasis added) 65
A post-retirement competitive employment restriction is designed to protect
the employer against competition by former employees who may retire and
obtain retirement or pension benefits and, at the same time, engage in
competitive employment.66
We have reviewed the Undertaking which respondent impelled petitioner to
sign, and find that in case of failure to comply with the promise not to accept
competitive employment within one year from February 28, 1995, respondent
will have a cause of action against petitioner for "protection in the courts of
law." The words "cause of action for protection in the courts of law" are so
broad and comprehensive, that they may also include a cause of action for
prohibitory and mandatory injunction against petitioner, specific performance
plus damages, or a damage suit (for actual, moral and/or exemplary
damages), all inclusive of the restitution of the P963,619.28 which petitioner
received from respondent. The Undertaking and the Release, Waiver and
Quitclaim do not provide for the automatic forfeiture of the benefits petitioner
received under the SRP upon his breach of said deeds. Thus, the post-
retirement competitive employment ban incorporated in the Undertaking of
respondent does not, on its face, appear to be of the same class or genre as
that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded
for breach of contracts. Actual damages are primarily intended to simply
make good or replace the loss covered by said breach.67 They cannot be
presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the
amount thereof.68 In determining the amount of actual damages, the Court
cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable
regarding the actual amount of losses.69 The benefit to be derived from a
contract which one of the parties has absolutely failed to perform is of
necessity to some extent a matter of speculation of the injured party.
On the assumption that the competitive employment ban in the Undertaking
is valid, petitioner is not automatically entitled to return the P963,619.28 he
received from respondent. To reiterate, the terms of the Undertaking clearly
state that any breach by petitioner of his promise would entitle respondent to
a cause of action for protection in the courts of law; as such, restitution of
the P963,619.28 will not follow as a matter of course. Respondent is still
burdened to prove its entitlement to the aforesaid amount by producing the
best evidence of which its case is susceptible.70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE.
Let this case be REMANDED to the Regional Trial Court of Manila for further
proceedings conformably with this decision of the Court.
SO ORDERED.
G.R. No. 175485 July 27, 2011
CASIMIRO DEVELOPMENT CORPORATION, Petitioner,
vs.
RENATO L. MATEO, Respondent.
DECISION
BERSAMIN, J.:
The focus of this appeal is the faith that should be accorded to the Torrens
title that the seller holds at the time of the sale.
In its decision promulgated on August 31, 2006,1 the Court of Appeals (CA)
declared that the respondent and his three brothers were the rightful owners
of the land in litis, and directed the Office of the Register of Deeds of Las
Piñas City to cancel the transfer certificate of title (TCT) registered under the
name of petitioner Casimiro Development Corporation (CDC) and to issue in
its place another TCT in favor of the respondent and his three brothers.
Thereby, the CA reversed the judgment of the Regional Trial Court (RTC)
rendered on May 9, 2000 (dismissing the respondent’s complaint for quieting
of title and reconveyance upon a finding that CDC had been a buyer in good
faith of the land in litis and that the respondent’s suit had already been time-
barred).
Aggrieved, CDC brought its petition for review on certiorari.
Antecedents
The subject of this case is a registered parcel of land (property) with an area
of 6,693 square meters, more or less, located in Barrio Pulang Lupa, Las
Piñas City, that was originally owned by Isaias Lara,2 the respondent’s
maternal grandfather. Upon the death of Isaias Lara in 1930, the property
passed on to his children, namely: Miguela, Perfecta and Felicidad, and a
grandson, Rosauro (son of Perfecta who had predeceased Isaias in 1920). In
1962, the co-heirs effected the transfer of the full and exclusive ownership to
Felicidad (whose married surname was Lara-Mateo) under an agreement
denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman.
Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato,
Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-
Mateo family, a deed of sale covering the property was executed in favor of
Laura, who, in 1967, applied for land registration. After the application was
granted, Original Certificate of Title (OCT) No. 6386 was issued in Laura’s
sole name.
In due course, the property now covered by OCT No. 6386 was used as
collateral to secure a succession of loans. The first loan was obtained from
Bacoor Rural Bank (Bacoor Bank). To repay the loan to Bacoor Bank and
secure the release of the mortgage, Laura borrowed funds from Parmenas
Perez (Perez), who, however, required that the title be meanwhile transferred
to his name. Thus, OCT No. 6386 was cancelled and Transfer Certificate of
Title (TCT) No. 438959 was issued in the name of Perez. Subsequently,
Laura recovered the property by repaying the obligation with the proceeds of
another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of
TCT No. 438595, and in the issuance of TCT No. S-91595 in Laura’s name.
She later executed a deed of sale in favor of Pe, leading to the issuance of
TCT No. S-91738 in the name of Pe, who in turn constituted a mortgage on
the property in favor of China Banking Corporation (China Bank) as security
for a loan. In the end, China Bank foreclosed the mortgage, and consolidated
its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT
No. (99527) T-11749-A was issued in the name of China Bank.
In 1988, CDC and China Bank negotiated and eventually came to terms on
the purchase of the property, with China Bank executing a deed of
conditional sale for the purpose. On March 4, 1993, CDC and China Bank
executed a deed of absolute sale over the property. Resultantly, on March
29, 1993, CDC was issued TCT No. T-34640 in its own name.
In the meanwhile, on February 28, 1991, Felicidad died intestate.
On June 6, 1991, CDC brought an action for unlawful detainer in the
Metropolitan Trial Court (MeTC) in Las Piñas City against the respondent’s
siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other
occupants of the property. Therein, the defendants maintained that the MeTC
did not have jurisdiction over the action because the land was classified as
agricultural; that the jurisdiction belonged to the Department of Agrarian
Reform Adjudication Board (DARAB); that they had been in continuous and
open possession of the land even before World War II and had presumed
themselves entitled to a government grant of the land; and that CDC’s title
was invalid, considering that the land had been registered before its being
declared alienable.3
On October 19, 1992, the MeTC ruled in favor of CDC, viz:
The Court, after careful consideration of the facts and the laws applicable to
this case[,] hereby resolves:
1. On the issue of jurisdiction.
The defendants alleged that the land in question is an agricultural
land by presenting a Tax Declaration Certificate classifying the land
as "FISHPOND." The classification of the land in a tax declaration
certificate as a "fishpond" merely refers to the use of the land in
question for the purpose of real property taxation. This alone would
not be sufficient to bring the land in question under the operation of
the Comprehensive Agrarian Reform Law.
2. On the issue of open and adverse possession by the defendants.
It should be noted that the subject land is covered by a Transfer
Certificate of Title in the name of plaintiffs’ predecessor-in-interest
China Banking Corporation. Certificates of Title under the Torrens
System is indefeasible and imprescriptible. As between two persons
claiming possession, one having a [T]orrens title and the other has
none, the former has a better right.
3. On the issue of the nullity of the Certificate of Title.
The defense of the defendants that the subject property was a forest
land when the same was originally registered in 1967 and hence, the
registration is void[,] is not for this Court to decide[,] for lack of
jurisdiction. The certificate of title over the property must be
respected by this Court until it has been nullified by a competent
Court.
WHEREFORE, premises considered, judgment is hereby rendered in favor
of the plaintiff[,] ordering the defendants
1. [sic] and all persons claiming right[s] under it to vacate the subject
premises located at Pulang Lupa I, Las Piñas, Metro Manila and
surrender the possession of the same to herein plaintiff;
2. to pay the plaintiff reasonable compensation for the use and
occupation of the subject premises hereby fixed at (₱100.00) one
hundred pesos a month starting November 22, 1990 (the time when
the demand letter to vacate was given) until defendants actually
vacate the property;
No pronouncement as to costs and attorney’s fees.
SO ORDERED.4
The decision of the MeTC was assailed in the RTC via petition for certiorari
and prohibition. The RTC resolved against CDC, and held that the MeTC had
acted without jurisdiction because the land, being a fishpond, was
agricultural; hence, the dispute was within the exclusive jurisdiction of the
DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform
Law of 1988).5
CDC appealed to the CA, which, on January 25, 1996, found in favor of
CDC, declaring that the MeTC had jurisdiction. As a result, the CA reinstated
the decision of the MeTC.6
On appeal (G.R. No. 128392), the Court affirmed the CA’s decision in favor
of CDC, ruling thusly:
WHEREFORE, the petition is DENIED and the Court of Appeals’ Decision
and Resolution in CA- G.R. SP No. 34039, dated January 25, 1996 and
February 21, 1997 respectively, are AFFIRMED. No costs.
SO ORDERED.7
The decision in G.R. No. 128392 became final.
Nonetheless, on June 29, 1994, the respondent brought an action for
quieting of title, reconveyance of four-fifths of the land, and damages against
CDC and Laura in the RTC in Las Piñas City entitled Renato L. Mateo v.
Casimiro Development Corporation and Laura Mateo de Castro. In
paragraph 4 of his complaint, he stated that he was "bringing this action to
quiet title on behalf of himself and of his three (3) brothers – Cesar,
Leonardo, and Candido, Jr., all surnamed MATEO – in his capacity as one of
the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality
of Las Piñas, Metro Manila."
On May 9, 2001, the RTC held in favor of CDC, disposing:
WHEREFORE, and by strong preponderance of evidence, judgment is
hereby rendered in favor of the defendant Casimiro Development
Corporation and against the plaintiff Renato L. Mateo by (1) Dismissing the
complaint, and upholding the validity and indefeasibility of Transfer
Certificate of Title No. T-34640 in the name of Casimiro Development
Corporation; (2) Ordering the plaintiff Renato Mateo to pay defendant
Casimiro Development Corporation the sum of [a] ₱200,000.00 as
compensatory damages; [b] ₱200,000.00 as attorney’s fees; and [c] to pay
the costs.
SO ORDERED.8
On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on
August 31, 2006, reversing the RTC and declaring CDC to be not a buyer in
good faith due to its being charged with notice of the defects and flaws of the
title at the time it acquired the property from China Bank, and decreeing:
WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional
Trial Court, Las Piñas City in Civil Case No. 94-2045 is hereby REVERSED
and SET ASIDE and a new one rendered:
(1) Declaring appellant Renato Mateo and his brothers and co-
owners Cesar, Candido, Jr., and Leonardo, all surnamed Mateo as
well as his sister, Laura Mateo de Castro as the rightful owners of the
parcel of land, subject of this case; and
(2) Ordering the Register of Deeds of Las Piñas City, Metro-Manila to
cancel Transfer Certificate of Title No. T-34640 under the name of
appellee Casimiro Development Corporation, and that a new one be
issued in favor of the appellant and his co-heirs and siblings,
mentioned above as co-owners pro indiviso of the said parcel.
(3) No pronouncement as to cost.
SO ORDERED.9
The CA denied CDC’s motion for reconsideration.
Hence, this appeal, in which CDC urges that the CA committed serious
errors of law,10 as follows:
(A) xxx in failing to rule that the decree of registration over the
Subject Property is incontrovertible and no longer open to review or
attack after the lapse of one (1) year from entry of such decree of
registration in favor of Laura Mateo de Castro.
(B) xxx in failing to rule that the present action is likewise barred by
res judicata.
(C) xxx in failing to rule that the instant action for quieting of title and
reconveyance under PD No. 1529 cannot prosper because the
Subject Property had already been conveyed and transferred to third
parties who claimed adverse title for themselves.
(D) xxx in failing to rule that the action of respondent for "quieting of
title, reconveyance and damages" is barred by laches.
(E) xxx in ruling that the Subject Property must be reconveyed to
respondent because petitioner Casimiro Development Corporation is
not a "purchaser in good faith."
CDC argues that it was a buyer in good faith; and that the CA did not rule on
matters that fortified its title in the property, namely: (a) the incontrovertibility
of the title of Laura; (b) the action being barred by laches and res judicata;
and (c) the property having been conveyed to third parties who had then
claimed adverse title.
The respondent counters that CDC acquired the property from China Bank in
bad faith, because it had actual knowledge of the possession of the property
by the respondent and his siblings; that CDC did not actually accept delivery
of the possession of the property from China Bank; and that CDC ignored the
failure of China Bank to warrant its title.
Ruling
We grant the petition.
1.
Indefeasibility of title in the name of Laura
As basis for recovering the possession of the property, the respondent has
assailed the title of Laura.
We cannot sustain the respondent.
There is no doubt that the land in question, although once a part of the public
domain, has already been placed under the Torrens system of land
registration. The Government is required under the Torrens system of
registration to issue an official certificate of title to attest to the fact that the
person named in the certificate is the owner of the property therein
described, subject to such liens and encumbrances as thereon noted or what
the law warrants or reserves.11 The objective is to obviate possible conflicts
of title by giving the public the right to rely upon the face of the Torrens
certificate and to dispense, as a rule, with the necessity of inquiring further.
The Torrens system gives the registered owner complete peace of mind, in
order that he will be secured in his ownership as long as he has not
voluntarily disposed of any right over the covered land. 12
The Government has adopted the Torrens system due to its being the most
effective measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. If a
person purchases a piece of land on the assurance that the seller’s title
thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all, which will not only be unfair to him as the
purchaser, but will also erode public confidence in the system and will force
land transactions to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further consequence
will be that land conflicts can be even more abrasive, if not even violent. The
Government, recognizing the worthy purposes of the Torrens system, should
be the first to accept the validity of titles issued thereunder once the
conditions laid down by the law are satisfied.13
Yet, registration under the Torrens system, not being a mode of acquiring
ownership, does not create or vest title.14The Torrens certificate of title is
merely an evidence of ownership or title in the particular property described
therein.15 In that sense, the issuance of the certificate of title to a particular
person does not preclude the possibility that persons not named in the
certificate may be co-owners of the real property therein described with the
person named therein, or that the registered owner may be holding the
property in trust for another person.16
Nonetheless, it is essential that title registered under the Torrens system
becomes indefeasible and incontrovertible.17
The land in question has been covered by a Torrens certificate of title (OCT
No. 6386 in the name of Laura, and its derivative certificates) before CDC
became the registered owner by purchase from China Bank. In all that time,
neither the respondent nor his siblings opposed the transactions causing the
various transfers. In fact, the respondent admitted in his complaint that the
registration of the land in the name of Laura alone had been with the
knowledge and upon the agreement of the entire Lara-Mateo family. It is
unthinkable, therefore, that the respondent, fully aware of the exclusive
registration in her sister Laura’s name, allowed more than 20 years to pass
before asserting his claim of ownership for the first time through this case in
mid-1994. Making it worse for him is that he did so only after CDC had
commenced the ejectment case against his own siblings.
Worthy of mention is that Candido, Jr., Leonardo, and Cesar’s defense in the
ejectment case brought by CDC against them was not predicated on a claim
of their ownership of the property, but on their being agricultural lessees or
tenants of CDC. Even that defense was ultimately rejected by this Court by
observing in G.R. No. 128392 as follows:
With regard to the first element, the petitioners have tried to prove that they
are tenants or agricultural lessees of the respondent corporation, CDC, by
showing that the land was originally owned by their grandfather, Isaias Lara,
who gave them permission to work the land, and that CDC is merely a
successor-in-interest of their grandfather. It must be noted that the petitioners
failed to adequately prove their grandfather’s ownership of the land. They
merely showed six tax declarations. It has been held by this Court that, as
against a transfer certificate of title, tax declarations or receipts are not
adequate proofs of ownership. Granting arguendo that the land was really
owned by the petitioners’ grandfather, petitioners did not even attempt to
show how the land went from the patrimony of their grandfather to that of
CDC. Furthermore, petitioners did not prove, but relied on mere allegation,
that they indeed had an agreement with their grandfather to use the land.
As for the third element, there is apparently no consent between the parties.
Petitioners were unable to show any proof of consent from CDC to work the
land. For the sake of argument, if petitioners were able to prove that their
grandfather owned the land, they nonetheless failed to show any proof of
consent from their grandfather to work the land. Since the third element was
not proven, the fourth element cannot be present since there can be no
purpose to a relationship to which the parties have not consented.18
The respondent’s attack against the title of CDC is likewise anchored on his
assertion that the only purpose for having OCT No. 6386 issued in the sole
name of Laura was for Laura to hold the title in trust for their mother. This
assertion cannot stand, however, inasmuch as Laura’s title had long ago
become indefeasible.
Moreover, the respondent’s suit is exposed as being, in reality, a collateral
attack on the title in the name of Laura, and for that reason should not
prosper. Registration of land under the Torrens System, aside from
perfecting the title and rendering it indefeasible after the lapse of the period
allowed by law, also renders the title immune from collateral attack. 19 A
collateral attack occurs when, in another action to obtain a different relief and
as an incident of the present action, an attack is made against the judgment
granting the title. This manner of attack is to be distinguished from a direct
attack against a judgment granting the title, through an action whose main
objective is to annul, set aside, or enjoin the enforcement of such judgment if
not yet implemented, or to seek recovery if the property titled under the
judgment had been disposed of.20
2.
CDC was an innocent purchaser for value
The CA found that CDC acquired the property in bad faith because CDC had
knowledge of defects in the title of China Bank, including the adverse
possession of the respondent’s siblings and the supposed failure of China
Bank to warrant its title by inserting an as-is, where-is clause in its contract of
sale with CDC.
The CA plainly erred in so finding against CDC.
To start with, one who deals with property registered under the Torrens
system need not go beyond the certificate of title, but only has to rely on the
certificate of title.21 He is charged with notice only of such burdens and
claims as are annotated on the title.22 The pertinent law on the matter of
burdens and claims is Section 44 of the Property Registration
Decree,23 which provides:
Section 44. Statutory liens affecting title. — Every registered owner receiving
a certificate of title in pursuance of a decree of registration, and every
subsequent purchaser of registered land taking a certificate of title for value
and in good faith, shall hold the same free from all encumbrances except
those noted on said certificate and any of the following encumbrances which
may be subsisting, namely:
First. Liens, claims or rights arising or existing under the laws and
Constitution of the Philippines which are not by law required to appear of
record in the Registry of Deeds in order to be valid against subsequent
purchasers or encumbrances of record.
Second. Unpaid real estate taxes levied and assessed within two years
immediately preceding the acquisition of any right over the land by an
innocent purchaser for value, without prejudice to the right of the government
to collect taxes payable before that period from the delinquent taxpayer
alone.
Third. Any public highway or private way established or recognized by law, or
any government irrigation canal or lateral thereof, if the certificate of title does
not state that the boundaries of such highway or irrigation canal or lateral
thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by
virtue of, or pursuant to, Presidential Decree No. 27 or any other law or
regulations on agrarian reform.
In short, considering that China Bank’s TCT No. 99527 was a clean title, that
is, it was free from any lien or encumbrance, CDC had the right to rely, when
it purchased the property, solely upon the face of the certificate of title in the
name of China Bank.24
The CA’s ascribing of bad faith to CDC based on its knowledge of the
adverse possession of the respondent’s siblings at the time it acquired the
property from China Bank was absolutely unfounded and unwarranted. That
possession did not translate to an adverse claim of ownership that should
have put CDC on actual notice of a defect or flaw in the China Bank’s title, for
the respondent’s siblings themselves, far from asserting ownership in their
own right, even characterized their possession only as that of mere
agricultural tenants. Under no law was possession grounded on tenancy a
status that might create a defect or inflict a flaw in the title of the owner.
Consequently, due to his own admission in his complaint that the
respondent’s own possession was not any different from that of his siblings,
there was really nothing – factually or legally speaking – that ought to have
alerted CDC or, for that matter, China Bank and its predecessors-in-interest,
about any defect or flaw in the title.
The vendee’s notice of a defect or flaw in the title of the vendor, in order for it
to amount to bad faith, should encompass facts and circumstances that
would impel a reasonably cautious person to make further inquiry into the
vendor’s title,25 or facts and circumstances that would induce a reasonably
prudent man to inquire into the status of the title of the property in
litigation.26 In other words, the presence of anything that excites or arouses
suspicion should then prompt the vendee to look beyond the certificate and
to investigate the title of the vendor appearing on the face of said
certificate.27
And, secondly, the CA grossly erred in construing the as-is, where-is clause
contained in the deed of sale between CDC (as vendee) and China Bank (as
vendor) as proof or manifestation of any bad faith on the part of CDC. On the
contrary, the as-is, where-is clause did not affect the title of China Bank
because it related only to the physical condition of the property upon its
purchase by CDC. The clause only placed on CDC the burden of having the
occupants removed from the property. In a sale made on an as-is, where-is
basis, the buyer agrees to take possession of the things sold "in the condition
where they are found and from the place where they are located," because
the phrase as-is, where-is pertains solely "to the physical condition of the
thing sold, not to its legal situation" and is "merely descriptive of the state of
the thing sold" without altering the seller’s responsibility to deliver the
property sold to the buyer.28
What the foregoing circumstances ineluctably indicate is that CDC, having
paid the full and fair price of the land, was an innocent purchaser for value,
for, according to Sandoval v. Court of Appeals:29
A purchaser in good faith is one who buys property of another, without notice
that some other person has a right to, or interest in, such property and pays a
full and fair price for the same, at the time of such purchase, or before he has
notice of the claim or interest of some other persons in the property. He buys
the property with the belief that the person from whom he receives the thing
was the owner and could convey title to the property. A purchaser cannot
close his eyes to facts which should put a reasonable man on his guard and
still claim he acted in good faith.
WHEREFORE, we grant the petition for review on certiorari; set aside the
decision of the Court of Appeals in CA-GR. CV No. 71696; dismiss the
complaint in Civil Case No. 94-2045; and declare Transfer Certificate of Title
No. T-34640 in the name of Casimiro Development Corporation valid and
subsisting.
The respondent shall pay the costs of suit.
SO ORDERED.
G.R. No. 82511 March 3, 1992
GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and IMELDA
SALAZAR, respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
Gerardo S. Alansalon for private respondent.
ROMERO, J.:
For private respondent Imelda L. Salazar, it would seem that her close
association with Delfin Saldivar would mean the loss of her job. In May 1982,
private respondent was employed by Globe-Mackay Cable and Radio
Corporation (GMCR) as general systems analyst. Also employed by
petitioner as manager for technical operations' support was Delfin Saldivar
with whom private respondent was allegedly very close.
Sometime in 1984, petitioner GMCR, prompted by reports that company
equipment and spare parts worth thousands of dollars under the custody of
Saldivar were missing, caused the investigation of the latter's activities. The
report dated September 25, 1984 prepared by the company's internal auditor,
Mr. Agustin Maramara, indicated that Saldivar had entered into a partnership
styled Concave Commercial and Industrial Company with Richard A.
Yambao, owner and manager of Elecon Engineering Services (Elecon), a
supplier of petitioner often recommended by Saldivar. The report also
disclosed that Saldivar had taken petitioner's missing Fedders airconditioning
unit for his own personal use without authorization and also connived with
Yambao to defraud petitioner of its property. The airconditioner was
recovered only after petitioner GMCR filed an action for replevin against
Saldivar.1
It likewise appeared in the course of Maramara's investigation that Imelda
Salazar violated company reglations by involving herself in transactions
conflicting with the company's interests. Evidence showed that she signed as
a witness to the articles of partnership between Yambao and Saldivar. It also
appeared that she had full knowledge of the loss and whereabouts of the
Fedders airconditioner but failed to inform her employer.
Consequently, in a letter dated October 8, 1984, petitioner company placed
private respondent Salazar under preventive suspension for one (1) month,
effective October 9, 1984, thus giving her thirty (30) days within which to,
explain her side. But instead of submitting an explanations three (3) days
later or on October 12, 1984 private respondent filed a complaint against
petitioner for illegal suspension, which she subsequently amended to include
illegal dismissal, vacation and sick leave benefits, 13th month pay and
damages, after petitioner notified her in writing that effective November 8,
1984, she was considered dismissed "in view of (her) inability to refute and
disprove these findings. 2
After due hearing, the Labor Arbiter in a decision dated July 16, 1985,
ordered petitioner company to reinstate private respondent to her former or
equivalent position and to pay her full backwages and other benefits she
would have received were it not for the illegal dismissal. Petitioner was also
ordered to pay private respondent moral damages of P50,000.00. 3
On appeal, public respondent National Labor Relations, Commission in the
questioned resolution dated December 29, 1987 affirmed the aforesaid
decision with respect to the reinstatement of private respondent but limited
the backwages to a period of two (2) years and deleted the award for moral
damages. 4
Hence, this petition assailing the Labor Tribunal for having committed grave
abuse of discretion in holding that the suspension and subsequent dismissal
of private respondent were illegal and in ordering her reinstatement with two
(2) years' backwages.
On the matter of preventive suspension, we find for petitioner GMCR.
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's
acts in conflict with his position as technical operations manager,
necessitated immediate and decisive action on any employee closely,
associated with Saldivar. The suspension of Salazar was further impelled by
th.e discovery of the missing Fedders airconditioning unit inside the
apartment private respondent shared with Saldivar. Under such
circumstances, preventive suspension was the proper remedial recourse
available to the company pending Salazar's investigation. By itself,
preventive suspension does, not signify that the company has adjudged the
employee guilty of the charges she was asked to answer and explain. Such
disciplinary measure is resorted to for the protection of the company's
property pending investigation any alleged malfeasance or misfeasance
committed by the employee.5
Thus, it is not correct to conclude that petitioner GMCR had violated
Salazar's right to due process when she was promptly suspended. If at all,
the fault, lay with private respondent when she ignored petitioner's
memorandum of October 8, 1984 "giving her ample opportunity to present
(her) side to the Management." Instead, she went directly to the Labor
Department and filed her complaint for illegal suspension without giving her
employer a chance to evaluate her side of the controversy.
But while we agree with the propriety of Salazar's preventive suspension, we
hold that her eventual separation from employment was not for cause.
What is the remedy in law to rectify an unlawful dismissal so as to "make
whole" the victim who has not merely lost her job which, under settled
Jurisprudence, is a property right of which a person is not to be deprived
without due process, but also the compensation that should have accrued to
her during the period when she was unemployed?
Art. 279 of the Labor Code, as amended, provides:
Security of Tenure. — In cases of regular employment, the
employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual
reinstatement. 6 (Emphasis supplied)
Corollary thereto are the following provisions of the Implementing Rules and
Regulations of the Labor Code:
Sec. 2. Security of Tenure. — In cases of regular
employments, the employer shall not terminate the services
of an employee except for a just cause as provided in the
Labor Code or when authorized by existing laws.
Sec. 3. Reinstatement. — An employee who is unjustly
dismissed from work shall by entitled to reinstatement
without loss of seniority rights and to
backwages."7 (Emphasis supplied)
Before proceeding any furthers, it needs must be recalled that the present
Constitution has gone further than the 1973 Charter in guaranteeing vital
social and economic rights to marginalized groups of society, including labor.
Given the pro-poor orientation of several articulate Commissioners of the
Constitutional Commission of 1986, it was not surprising that a whole new
Article emerged on Social Justice and Human Rights designed, among other
things, to "protect and enhance the right of all the people to human dignity,
reduce social, economic and political inequalities, and remove cultural
inequities by equitably diffusing wealth and political power for the common
good." 8 Proof of the priority accorded to labor is that it leads the other areas
of concern in the Article on Social Justice, viz., Labor ranks ahead of such
topics as Agrarian and Natural Resources Reform, Urban Land Roform and
Housing, Health, Women, Role and Rights of Poople's Organizations and
Human Rights.9
The opening paragraphs on Labor states
The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits is may be
provided by law.10(Emphasis supplied)
Compare this with the sole.provision on Labor in the 1973 Constitution under
the Article an Declaration of Principles and State Policies that provides:
Sec. 9. The state shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate
the relations between workers and employers. The State
shall ensure the rights of workers to self-organization,
collective baegaining, security of tenure, and just and
humane conditions of work. The State may provide for
compulsory arbitration. 11
To be sure, both Charters recognize "security of tenure" as one of the rights
of labor which the State is mandated to protect. But there is no gainsaying
the fact that the intent of the framers of the present Constitution was to give
primacy to the rights of labor and afford the sector "full protection," at least
greater protection than heretofore accorded them, regardless of the
geographical location of the workers and whether they are organized or not.
It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
substantially contributed to the present formulation of the protection to labor
provision and proposed that the same be incorporated in the Article on Social
Justice and not just in the Article on Declaration of Principles and State
Policies "in the light of the special importance that we are giving now to social
justice and the necessity of emphasizing the scope and role of social justice
in national development." 12
If we have taken pains to delve into the background of the labor provisions in
our Constitution and the Labor Code, it is but to stress that the right of an
employee not to be dismissed from his job except for a just or authorized
cause provided by law has assumed greater importance under the 1987
Constitution with the singular prominence labor enjoys under the article on
Social Justice. And this transcendent policy has been translated into law in
the Labor Code. Under its terms, where a case of unlawful or unauthorized
dismissal has been proved by the aggrieved employee, or on the other hand,
the employer whose duty it is to prove the lawfulness or justness of his act of
dismissal has failed to do so, then the remedies provided in Article 279
should find, application. Consonant with this liberalized stance vis-a-vis labor,
the legislature even went further by enacting Republic Act No. 6715 which
took effect on March 2, 1989 that amended said Article to remove any
possible ambiguity that jurisprudence may have generated which watered
down the constitutional intent to grant to labor "full protection." 13
To go back to the instant case, there being no evidence to show an
authorized, much less a legal, cause for the dismissal of private respondent,
she had every right, not only to be entitled to reinstatement, but ay well, to
full backwages." 14
The intendment of the law in prescribing the twin remedies of reinstatement
and payment of backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for the dictionary meaning of
the word "reinstate" is "to restore to a state, conditione positions etc. from
which one had been removed"15 and in the latter, to give her back the income
lost during the period of unemployment. Both remedies, looking to the past,
would perforce make her "whole."
Sadly, the avowed intent of the law has at times been thwarted when
reinstatement has not been forthcoming and the hapless dismissed
employee finds himself on the outside looking in.
Over time, the following reasons have been advanced by the Court for
denying reinstatement under the facts of the case and the law applicable
thereto; that reinstatement can no longer be effected in view of the long
passage of time (22 years of litigation) or because of the realities of the
situation; 16 or that it would be "inimical to the employer's interest; " 17 or that
reinstatement may no longer be feasible; 18 or, that it will not serve the best
interests of the parties involved; 19 or that the company would be prejudiced
by the workers' continued employment; 20 or that it will not serve any prudent
purpose as when supervening facts have transpired which make execution
on that score unjust or inequitable 21 or, to an increasing extent, due to the
resultant atmosphere of "antipathy and antagonism" or "strained relations" or
"irretrievable estrangement" between the employer and the employee. 22
In lieu of reinstatement, the Court has variously ordered the payment of
backwages and separation pay 23 or solely separation pay. 24
In the case at bar, the law is on the side of private respondent. In the first
place the wording of the Labor Code is clear and unambiguous: "An
employee who is unjustly dismissed from work shall be entitled to
reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof
statutory construction, if a statute is clears plain and free from ambiguity, it
must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legis derived from the
maxim index animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by, the legislature in a statute
correctly express its intent or will and preclude the court from construing it
differently. 26 The legislature is presumed to know the meaning of the words,
to:have used words advisedly, and to have expressed its intent by the use of
such words as are found in the statute.27 Verba legis non est recedendum, or
from the words of a statute there should be no departure. Neither does the
provision admit of any qualification. If in the wisdom of the Court, there may
be a ground or grounds for non-application of the above-cited provision, this
should be by way of exception, such as when the reinstatement may be
inadmissible due to ensuing strained relations between the employer and the
employee.
In such cases, it should be proved that the employee concerned occupies a
position where he enjoys the trust and confidence of his employer; and that it
is likely that if reinstated, an atmosphere of antipathy and antagonism may
be generated as to adversely affect the efficiency and productivity of the
employee concerned.
A few examples, will suffice to illustrate the Court's application of the above
principles: where the employee is a Vice-President for Marketing and as
such, enjoys the full trust and confidence of top management; 28 or is the
Officer-In-Charge of the extension office of the bank where he works; 29 or is
an organizer of a union who was in a position to sabotage the union's efforts
to organize the workers in commercial and industrial establishments; 30 or is
a warehouseman of a non-profit organization whose primary purpose is to
facilitate and maximize voluntary gifts. by foreign individuals and
organizations to the Philippines; 31 or is a manager of its Energy Equipment
Sales. 32
Obviously, the principle of "strained relations" cannot be applied
indiscriminately. Otherwisey reinstatement can never be possible simply
because some hostility is invariably engendered between the parties as a
result of litigation. That is human nature. 33
Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise an employee who shall assert his right could
be easily separated from the service, by merely paying his separation pay on
the pretext that his relationship with his employer had already become
strained. 34
Here, it has not been proved that the position of private respondent as
systems analyst is one that may be characterized as a position of trust and
confidence such that if reinstated, it may well lead to strained relations
between employer and employee. Hence, this does not constitute an
exception to the general rule mandating reinstatement for an employee who
has been unlawfully dismissed.
On the other hand, has she betrayed any confidence reposed in her by
engaging in transactions that may have created conflict of interest situations?
Petitioner GMCR points out that as a matter of company policy, it prohibits its
employees from involving themselves with any company that has business
dealings with GMCR. Consequently, when private respondent Salazar signed
as a witness to the partnership papers of Concave (a supplier of Ultra which
in turn is also a supplier of GMCR), she was deemed to have placed. herself
in an untenable position as far as petitioner was concerned.
However, on close scrutiny, we agree with public respondent that such a
circumstance did not create a conflict of interests situation. As a systems
analyst, Salazar was very far removed from operations involving the
procurement of supplies. Salazar's duties revolved around the development
of systems and analysis of designs on a continuing basis. In other words,
Salazar did not occupy a position of trust relative to the approval and
purchase of supplies and company assets.
In the instant case, petitioner has predicated its dismissal of Salazar on loss
of confidence. As we have held countless times, while loss of confidence or
breach of trust is a valid ground for terminations it must rest an some basis
which must be convincingly established. 35 An employee who not be
dismissed on mere presumptions and suppositions. Petitioner's allegation
that since Salazar and Saldivar lived together in the same apartment, it
"presumed reasonably that complainant's sympathy would be with Saldivar"
and its averment that Saldivar's investigation although unverified, was
probably true, do not pass this Court's test. 36 While we should not condone
the acts of disloyalty of an employee, neither should we dismiss him on the
basis of suspicion derived from speculative inferences.
To rely on the Maramara report as a basis for Salazar's dismissal would be
most inequitous because the bulk of the findings centered principally oh her
friend's alleged thievery and anomalous transactions as technical operations'
support manager. Said report merely insinuated that in view of Salazar's
special relationship with Saldivar, Salazar might have had direct knowledge
of Saldivar's questionable activities. Direct evidence implicating private
respondent is wanting from the records.
It is also worth emphasizing that the Maramara report came out after Saldivar
had already resigned from GMCR on May 31, 1984. Since Saldivar did not
have the opportunity to refute management's findings, the report remained
obviously one-sided. Since the main evidence obtained by petitioner dealt
principally on the alleged culpability of Saldivar, without his having had a
chance to voice his side in view of his prior resignation, stringent examination
should have been carried out to ascertain whether or not there existed
independent legal grounds to hold Salatar answerable as well and, thereby,
justify her dismissal. Finding none, from the records, we find her to have
been unlawfully dismissed.
WHEREFORE, the assailed resolution of public respondent National Labor
Relations Commission dated December 29, 1987 is hereby AFFIRMED.
Petitioner GMCR is ordered to REINSTATE private respondent Imelda
Salazar and to pay her backwages equivalent to her salary for a period of
two (2) years only.
This decision is immediately executory.
G.R. No. 149793. April 15, 2005
WACK WACK GOLF & COUNTRY CLUB, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARTINA G. CAGASAN,
CARMENCITA F. DOMINGUEZ, and BUSINESS STAFFING AND
MANAGEMENT, INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review of the Resolution1 of the Court of Appeals (CA) in
CA-G.R. SP No. 63658, dismissing the petition for certiorari before it for
being insufficient in form and the subsequent resolution denying the motion
for reconsideration thereof.
The undisputed antecedent facts are as follows:
On November 29, 1996, a fire destroyed a large portion of the main
clubhouse of the Wack Wack Golf and Country Club (Wack Wack), including
its kitchen. In view of the reconstruction of the whole clubhouse complex,
Wack Wack filed a notice with the Department of Labor and Employment
(DOLE) on April 14, 1997 that it was going to suspend the operations of the
Food and Beverage (F & B) Department one (1) month thereafter. Notices to
54 employees (out of a complement of 85 employees in the department)
were also sent out, informing them that they need not report for work
anymore after April 14, 1997 but that they would still be paid their salaries up
to May 14, 1997. They were further told that they would be informed once full
operations in Wack Wack resume.
The Wack Wack Golf Employees Union branded the suspension of
operations of the F & B Department as arbitrary, discriminatory and
constitutive of union-busting, so they filed a notice of strike with the DOLE’s
National Conciliation and Mediation Board (NCMB). Several meetings
between the officers of Wack Wack and the Union, headed by its President,
Crisanto Baluyot, Sr., and assisted by its counsel, Atty. Pedro T. De Quiroz,
were held until the parties entered into an amicable settlement. An
Agreement2 was forged whereby a special separation benefit/retirement
package for interested Wack Wack employees, especially those in the F & B
Department was offered. The terms and conditions thereof reads as follows:
1. The UNION and the affected employees of F & B who are members of the
UNION hereby agree to accept the special separation benefit package
agreed upon between the CLUB management on the one hand, and the
UNION officers and the UNION lawyer on the other, in the amount equivalent
to one-and-one-half months salary for every year of service, regardless of the
number of years of service rendered. That, in addition, said employees shall
also receive the other benefits due them, namely, the cash equivalent of
unused vacation and sick leave credits, proportionate 13th month pay; and
other benefits, if any, computed without premium;
2. That the affected F & B employees who have already signified intention to
be separated from the service under the special separation benefit package
shall receive their separation pay as soon as possible;
3. That the same package shall, likewise, be made available to other
employees who are members of the bargaining unit and who may or may not
be affected by future similar suspensions of operations. The UNION re-
affirms and recognizes that it is the sole prerogative of the management of
the Club to suspend part or all of its operations as may be necessitated by
the exigencies of the situation and the general welfare of its membership.
The closure of the West Course, which is scheduled for conversion to an All-
Weather Championship golf course, is cited as an example. It is, however,
agreed that if a sufficient number of employees, other than F & B employees,
would apply for availment of the package within the next two months, the
Club may no longer go through the process of formally notifying the
Department of Labor. The processing and handling of benefits for these other
employees shall be done over a transition period within one year;
4. All qualified employees who may have been separated from the service
under the above package shall be considered under a priority basis for
employment by concessionaires and/or contractors, and even by the Club
upon full resumption of operations, upon the recommendation of the UNION.
The Club may even persuade an employee-applicant for availment under the
package to remain on his/her job, or be assigned to another position. 3
Respondent Carmencita F. Dominguez, who was then working in the
Administrative Department of Wack Wack, was the first to avail of the special
separation package.4 Computed at 1½ months for every year of service
pursuant to the Agreement, her separation pay amounted to ₱91,116.84,
while economic benefits amounted to ₱6,327.53.5 On September 18, 1997,
Dominguez signed a Release and Quitclaim 6 in favor of Wack Wack.
Respondent Martina B. Cagasan was Wack Wack’s Personnel Officer who,
likewise, volunteered to avail of the separation package.7 On September 30,
1997, she received from Wack Wack the amount of ₱469,495.66 as
separation pay and other economic benefits amounting to ₱17,010.50.8 A
Release and Quitclaim 9 was signed on September 30, 1997.
The last one to avail of the separation package was Crisanto Baluyot, Sr.
who, in a Letter10 dated January 16, 1998 addressed to Mr. Bienvenido Juan,
Administrative Manager of Wack Wack, signified his willingness to avail of
the said early retirement package. The total amount of ₱688,290.3011 was
received and the Release and Quitclaim 12signed on May 14, 1998.
On October 15, 1997, Wack Wack entered into a Management
Contract13 with Business Staffing and Management, Inc. (BSMI), a
corporation engaged in the business as Management Service Consultant
undertaking and managing for a fee projects which are specialized and
technical in character like marketing, promotions, merchandising, financial
management, operation management and the like.14 BSMI was to provide
management services for Wack Wack in the following operational areas:
1. Golf operations management;
2. Management and maintenance of building facilities;
3 .Management of food and beverage operation;
4. Management of materials and procurement functions;
5. To provide and undertake administrative and support services for the
[said] projects.15
Pursuant to the Agreement, the retired employees of Wack Wack by reason
of their experience were given priority by BSMI in hiring. On October 21,
1997, respondents Cagasan and Dominguez filed their respective
applications16for employment with BSMI. They were eventually hired by
BSMI to their former positions in Wack Wack as project employees and were
issued probationary contracts.17
Aside from BSMI, Wack Wack also engaged several contractors which were
assigned in various operating functions of the club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90 workers are
designated as locker attendants, golf bag attendants, nurses, messengers,
technical support engineer, golf director, agriculturist, utilities and gardeners;
2. Marvel Manpower Agency - whose 19 employees are designated as
sweepers, locker attendants, drive range attendant, telephone operator,
workers and secretaries;
3 City Service Corporation – contractor for janitorial services for the whole
club;
4. Microstar Business and Management Services, Inc. whose 15 employees
are designated in the Finance and Accounting departments.18
Due to these various management service contracts, BSMI undertook an
organizational analysis and manpower evaluation to determine its efficacy,
and to streamline its operations. In the course of its assessment, BSMI saw
that the positions of Cagasan and Dominguez were redundant. In the case of
respondent Cagasan, her tasks as personnel officer were likewise being
taken cared of by the different management service contractors; on the other
hand, Dominguez’s work as telephone operator was taken over by the
personnel of the accounting department. Thus, in separate Letters 19 dated
February 27, 1998, the services of Dominguez and Cagasan were
terminated. With respect to Baluyot, he applied for the position of Chief
Porter on May 12, 1998. The position, however, was among those
recommended to be abolished by the BSMI, so he was offered the position of
Caddie Master Aide with a starting salary of ₱5,500.00 a month. Baluyot
declined the offer. Pending Wack Wack’s approval of the proposed abolition
of the position of Chief Porter, Baluyot was temporarily accepted to the
position with a monthly salary of ₱12,000.00. In July 1998, Baluyot decided
not to accept the position of Caddie Master Aide; thus, BSMI continued with
its plan to abolish the said position of Chief Porter and Baluyot was
dismissed from the service.
Thereafter, the three (3) employees filed their respective complaints with the
National Labor Relations Commission (NLRC) for illegal dismissal and
damages against Wack Wack and BSMI.
The complainants averred that they were dismissed without cause. They
accepted the separation package upon the assurance that they would be
given their former work and assignments once the Food and Beverage
Department of Wack Wack resumes its operations. On the other hand, the
respondents therein alleged that the dismissal of the complainants were
made pursuant to a study and evaluation of the different jobs and positions
and found them to be redundant.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the
dismissal of Dominguez and Cagasan was for a valid and authorized cause,
and dismissed their complaints.
The position of personnel manager occupied by Martina Cagasan was
redundated as it is allegedly not necessary, because her functions will be
taken over [by] the field superintendent and the company’s personnel and
operations manager. The work of Carmencita Dominguez on the other hand
as telephone operator will be taken over by the accounting department
personnel. Such move really are intended to streamline operations. While
admittedly, they are still necessary in the operations of Wack Wack, their
jobs can be assigned to some other personnel, who will be performing dual
functions and does save Wack Wack money. This is feasible on account of
the fact that they are functions pertaining to administrative work. 21
As to Baluyot, however, the Labor Arbiter found that while the position of
chief porter had been abolished, the caddie master aide had been created.
Their functions were one and the same. The porters, upon instructions from
the chief porter, are the ones who bring down the golf bags of the players
from the vehicle. The caddie master receives them and counts the number of
clubs inside the golf set. After the game, the same procedure is repeated
before the golf sets are loaded once more into the vehicle.22 The Labor
Arbiter found that the dismissal of Baluyot as Chief Porter was unjustified and
can not be considered redundant in the case at bar. It was a means resorted
to in order to unduly sever Baluyot’s relationship with BSMI without justifiable
cause. The Labor Arbiter therefore found Baluyot’s dismissal to be illegal.
The dispositive portion of the decision reads as follows:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered
dismissing the complaints of Carmencita F. Dominguez and Martina
Cagasan for lack of merit. Finding Crisanto Baluyot’s dismissal to be illegal.
Consequently, he should immediately be reinstated to his former position as
Chief Porter or Caddie Master, and paid his backwages which, as of
December 31, 1999, has accumulated in the sum of ₱180,000.00 by BSMI.
All other claims are dismissed for lack of merit.23
Since Baluyot no longer appealed the decision, complainants Dominguez
and Cagasan filed a Partial Appeal on the ground of prima facie abuse of
discretion on the part of the Labor Arbiter and serious errors in his findings of
facts and law. Their claims were anchored on the Agreement between the
Union and management, that they were promised to be rehired upon the full
resumption of operations of Wack Wack. They asserted that Wack Wack and
BSMI should not avoid responsibility to their employment, by conniving with
each other to render useless and meaningless the Agreement.
BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed
grave abuse of discretion in finding Baluyot’s dismissal to be illegal, when in
fact his position as Chief Porter was abolished pursuant to a bona
fidereorganization of Wack Wack. It was not motivated by factors other than
the promotion of the interest and welfare of the company.
On September 27, 2000, the NLRC rendered its Decision24 ordering Wack
Wack to reinstate Carmencita F. Dominguez and Martina Cagasan to their
positions in respondent Wack Wack Golf & Country Club with full backwages
and other benefits from the date of their dismissal until actually reinstated. It
anchored its ruling on the Agreement dated June 16, 1997 reached between
the Union and Wack Wack, particularly Section 425 thereof. The NLRC
directed Wack Wack to reinstate the respondents and pay their backwages
since "Business Staffing and Management, Inc. (BSMI) is a contractor who
[merely] supplies workers to respondent Wack Wack. It has nothing to do
with the grievance of the complainants with their employer, respondent Wack
Wack."
Wack Wack and BSMI filed a motion for reconsideration which was denied in
the Resolution26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition for certiorari
with the Court of Appeals, docketed as CA-G.R. SP No. 63658 alleging the
following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF
DUE PROCESS IN HOLDING THAT RESPONDENTS CAGASAN AND
DOMINGUEZ HAVE REGAINED THEIR JOBS OR EMPLOYMENT
PURSUANT TO THE AGREEMENT BETWEEN PETITIONER AND WACK
WACK GOLF EMPLOYEES UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF
DUE PROCESS IN RULING THAT RESPONDENT BSMI IS NOT AN
INDEPENDENT CONTRACTOR BUT A MERE SUPPLIER OF WORKERS
TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF
DUE PROCESS IN HOLDING PETITIONER LIABLE FOR THE
REINSTATEMENT OF RESPONDENTS CAGASAN AND DOMINGUEZ
AND FOR THE PAYMENT OF THEIR SUPPOSED BACKWAGES DESPITE
THE ABSENCE OF EMPLOYER-EMPLOYEE RELATION BETWEEN
THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own
petition for certiorari with the CA, docketed as CA-G.R. SP No. 63553.28 A
perusal of the petition which is attached to the records reveal that BSMI
ascribes grave abuse of discretion on the part of the NLRC in ruling that: (a)
the private respondents have regained their employment pursuant to the
Agreement between Wack Wack and the Wack Wack Golf Employees Union;
(b) the dismissal of private respondents was made pursuant to the
petitioner’s exercise of its management prerogatives; and (c) the petitioner
(BSMI) is liable for the reinstatement of private respondents and the payment
of their backwages.29
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the
ground that the petitioner therein failed to attach an Affidavit of Service as
required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure.
Moreover, the verification and certification against forum shopping was
insufficient for having been executed by the general manager who claimed to
be the duly-authorized representative of the petitioner, but did not show any
proof of authority, i.e., a board resolution, to the effect.
A motion for reconsideration was, consequently, filed appending thereto the
requisite documents of proof of authority. It asserted that in the interest of
substantial justice, the CA should decide the case on its merits.
BSMI filed a Comment30 to the Motion for Reconsideration of the petitioner,
also urging the CA to set aside technicalities and to consider the legal issues
involved: (a) whether or not there is a guaranty of employment in favor of the
complainants under the Agreement between the petitioner and the Union; (b)
whether or not the termination of the employment of the complainants, based
on redundancy, is legal and valid; and (c) who are the parties liable for the
reinstatement of the complainants and the payment of backwages. It further
added that it shares the view of the petitioner, that the assailed resolutions of
the NLRC are tainted with legal infirmities. For this reason, it was also
constrained to file its own petition for certiorari with the CA, docketed as CA-
G.R. SP No. 63553 pending with the Special Fourth Division, just to stress
that there is no guaranty of perpetual employment in favor of the
complainants.
On August 31, 2001, the CA denied petitioner’s motion for reconsideration.
The petitioner is now before the Court, assailing the twin resolutions of the
CA. It points out that BSMI has filed its petition for certiorari before the CA
one day late and yet, the Special Fourth Division admitted the petition in the
interest of substantial justice, and directed the respondents to file a comment
thereon;31 whereas, in the instant case, the mere lack of proof of authority of
Wack Wack’s General Manager to sign the certificate of non-forum shopping
was considered fatal by the CA’s Twelfth Division. It further asserts that its
petition for certiorari is meritorious, considering that the NLRC committed
grave abuse of discretion in ordering Wack Wack to reinstate the
respondents Cagasan and Dominguez, and to pay their backwages when
indubitable evidence shows that the said respondents were no longer
employees of Wack Wack when they filed their complaints with the Labor
Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the
authority of the general manager to sue on behalf of the corporation and to
sign the requisite verification and certification of non-forum shopping. The
general manager is also one person who is in the best position to know the
state of affairs of the corporation. It was also error for the CA not to admit the
requisite proof of authority when in the Novelty case, the Court ruled that the
subsequent submission of the requisite documents constituted substantial
compliance with procedural rules. There is ample jurisprudence holding that
the subsequent and substantial compliance of an appellant may call for the
relaxation of the rules of procedure in the interest of justice.33 While it is true
that rules of procedure are intended to promote rather than frustrate the ends
of justice, and while the swift unclogging of court dockets is a laudable
objective, it nevertheless must not be met at the expense of substantial
justice.34 It was, therefore, reversible error for the CA to have dismissed the
petition for certiorari before it. The ordinary recourse for us to take is to
remand the case to the CA for proper disposition on the merits; however,
considering that the records are now before us, we deem it necessary to
resolve the instant case in order to ensure harmony in the rulings and
expediency.
Indeed, the merits of the case constitute special or compelling reasons for us
to overlook the technical rules in this case. With the dismissal of its petition
for certiorari before the CA, the petitioner by virtue of the NLRC decision is
compelled to reinstate respondents Cagasan and Dominguez and pay their
full backwages from the time of their dismissal until actual reinstatement
when the attendant circumstances, however, show that the respondents had
no cause of action against the petitioner for illegal dismissal and damages.
It must be recalled that said respondents availed of the special separation
package offered by the petitioner. This special separation package was
thought of and agreed by the two parties (Wack Wack and the Union) after a
series of discussions and negotiations to avert any labor unrest due to the
closure of Wack Wack.35 Priority was given to the employees of the F & B
Department, but was, likewise, offered to the other employees who may wish
to avail of the separation package due to the reconstruction of Wack Wack.
Respondents do not belong to the F & B Department and yet, on their own
volition opted to avail of the special separation package. The applications
which were similarly worded read as follows:
TO : WACK WACK GOLF & COUNTRY CLUB
BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees’ Union have
reached an agreement on a special separation benefit package equivalent to
one-and-one-half months salary for every year of service, regardless of the
number of years of service, for employees who have been affected and may
be affected by ongoing as well as forthcoming Club renovation, construction
and related activities and reportedly even for those who may not be affected
but wish to avail of an early retirement under the above package
arrangement, I hereby register my desire to be separated from the Club and
receive the benefits under the above stated package.36
Thereafter, the respondents signed their respective release and quitclaims
after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully
comprehend and realize the consequences of their acts. Herein respondents
are not unlettered persons who need special protection. They held
responsible positions in the petitioner-employer, so they presumably
understood the contents of the documents they signed. There is no showing
that the execution thereof was tainted with deceit or coercion. Further, the
respondents were paid hefty amounts of separation pay indicating that their
separation from the company was for a valuable consideration. Where the
person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as being a valid and binding
undertaking.37 As in contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve to be
respected.38
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply
because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul
the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing,
and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. … 40
When the respondents voluntarily signed their quitclaims and accepted the
separation package offered by the petitioner, they, thenceforth, already
ceased to be employees of the petitioner. Nowhere does it appear in the
Agreement that the petitioner assured the respondents of continuous
employment in Wack Wack. Qualified employees were given priority in being
hired by its concessionaires and/or contractors such as BSMI when it entered
into a management contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI is an
independent contractor or a labor-only contractor. The NLRC posits that
BSMI is merely a supplier of workers or a labor-only contractor; hence, the
petitioner remains to be the principal employer of the respondents and liable
for their reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is one who
undertakes "job contracting," i.e., a person who: (a) carries on an
independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof;
and (b) has substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials which are necessary in the
conduct of the business. Jurisprudential holdings are to the effect that in
determining the existence of an independent contractor relationship, several
factors may be considered, such as, but not necessarily confined to, whether
or not the contractor is carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work;
the control and supervision of the work to another; the employer’s power with
respect to the hiring, firing, and payment of the contractor’s workers; the
control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.41
There is indubitable evidence showing that BSMI is an independent
contractor, engaged in the management of projects, business operations,
functions, jobs and other kinds of business ventures, and has sufficient
capital and resources to undertake its principal business. It had provided
management services to various industrial and commercial business
establishments. Its Articles of Incorporation proves its sufficient capitalization.
In December 1993, Labor Secretary Bienvenido Laguesma, in the case of In
re Petition for Certification Election Among the Regular Rank-and-File
Employees Workers of Byron-Jackson (BJ) Services International
Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services
Employees Chapter,42 recognized BSMI as an independent contractor. As a
legitimate job contractor, there can be no doubt as to the existence of an
employer-employee relationship between the contractor and the workers.43
BSMI admitted that it employed the respondents, giving the said retired
employees some degree of priority merely because of their work experience
with the petitioner, and in order to have a smooth transition of operations.44 In
accordance with its own recruitment policies, the respondents were made to
sign applications for employment, accepting the condition that they were
hired by BSMI as probationary employees only. Not being contrary to law,
morals, good custom, public policy and public order, these employment
contracts, which the parties are bound are considered valid. Unfortunately,
after a study and evaluation of its personnel organization, BSMI was impelled
to terminate the services of the respondents on the ground of redundancy.
This right to hire and fire is another element of the employer-employee
relationship45 which actually existed between the respondents and BSMI, and
not with Wack Wack.
There being no employer-employee relationship between the petitioner and
respondents Cagasan and Dominguez, the latter have no cause of action for
illegal dismissal and damages against the petitioner. Consequently, the
petitioner cannot be validly ordered to reinstate the respondents and pay
them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of
Appeals and the NLRC are SET ASIDE and REVERSED. The complaints of
respondents Cagasan and Dominguez are DISMISSED. No costs.
SO ORDERED.
G.R. No. 202996 June 18, 2014
MARLO A. DEOFERIO, Petitioner,
vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE
WENTLING, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioner Marlo A.
Deoferio to challenge the February 24, 2012 decision2 and the August 2,
2012 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 115708.
The Factual Antecedents
On February 1, 1996, respondent Intel Technology Philippines, Inc.
(Intel)employed Deoferio as a product quality and reliability engineer with a
monthly salary of ₱9,000.00. In July2001, Intel assigned him to the United
States as a validation engineer for an agreed period of two years and with a
monthly salary of US$3,000.00. On January 27, 2002, Deoferio was
repatriated to the Philippines after being confined at Providence St. Vincent
Medical Center for major depression with psychosis.4 In the Philippines, he
worked as a product engineer with a monthly salary of ₱23,000.00.5
Deoferio underwent a series of medical and psychiatric treatment at Intel’s
expense after his confinement in the United States. In 2002, Dr. Elizabeth
Rondain of Makati Medical Center diagnosed him to be suffering from mood
disorder, major depression, and auditory hallucination. 6 He was also referred
to Dr. Norieta Balderrama, Intel’s forensic psychologist, and to a certain Dr.
Cynthia Leynes who both confirmed his mental condition.7 On August 8,
2005, Dr. Paul Lee, a consultant psychiatrist of the Philippine General
Hospital, concluded that Deoferio was suffering from schizophrenia. After
several consultations, Dr. Lee issued a psychiatric report dated January
17,2006 concluding and stating that Deoferio’s psychotic symptoms are not
curable within a period of six months and "will negatively affect his work and
social relation with his co-worker[s]."8 Pursuant to these findings, Intel issued
Deoferio a notice of termination on March 10, 2006.9
Deoferio responded to his termination of employment by filing a complaint for
illegal dismissal with prayer for money claims against respondents Intel and
Mike Wentling (respondents). He denied that he ever had mental illness and
insisted that he satisfactorily performed his duties as a product engineer. He
argued that Intel violated his statutory right to procedural due process when it
summarily issued a notice of termination. He further claimed that he was
entitled to a salary differential equivalent to the pre-terminated period of his
assignment in the United States minus the base pay that he had already
received. Deoferio also prayed for backwages, separation pay, moral and
exemplary damages, as well as attorney’s fees.10
In defense, the respondents argued that Deoferio’s dismissal was based on
Dr. Lee’s certification that: (1) his schizophrenia was not curable within a
period of six months even with proper medical treatment; and (2) his
continued employment would be prejudicial to his and to the other
employees’ health.11 The respondents also insisted that Deoferio’s presence
at Intel’s premises would pose an actual harm to his co-employees as shown
by his previous acts. On May 8, 2003, Deoferio emailed an Intel employee
with this message: "All soul’s day back to work Monday WW45.1." On
January 18, 2005, he cut the mouse cables, stepped on the keyboards, and
disarranged the desks of his co-employees.12 The respondents also
highlighted that Deoferio incurred numerous absences from work due to his
mental condition, specifically, from January 31, 2002 until February 28,
2002,13 from August 2002 until September 2002,14 and from May 2003 until
July 2003.15 Deoferio also took an administrative leave with pay from January
2005 until December 2005.16
The respondents further asserted that the twin-notice requirement in
dismissals does not apply to terminations under Article 284 of the Labor
Code.17 They emphasized that the Labor Code’s implementing rules (IRR)
only requires a competent public health authority’s certification to effectively
terminate the services of an employee.18They insisted that Deoferio’s
separation and retirement payments for ₱247,517.35 were offset by his
company car loan which amounted to ₱448,132.43.19 He was likewise not
entitled to moral and exemplary damages, as well as attorney’s fees,
because the respondents faithfully relied on Dr. Lee’s certification that he
was not fit to work as a product engineer.20
The Labor Arbitration Ruling
In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that Deoferio
had been validly dismissed. The LA gave weight to Dr. Lee’s certification that
Deoferio had been suffering from schizophrenia and was not fit for
employment. The evidence on record shows that Deoferio’s continued
employment at Intel would pose a threat to the health of his co-employees.
The LA further held that the Labor Code and its IRR do not require the
employer to comply with the twin-notice requirement in dismissals due to
disease. The LA also found unmeritorious Deoferio’s money claims against
Intel.22
On appeal by Deoferio, the National Labor Relations Commission (NLRC)
wholly affirmed the LA’s ruling.23 The NLRC also denied24 Deoferio’s motion
for reconsideration,25 prompting him to seek relief from the CA through a
petition for certiorari under Rule 65 of the Rules of Court.
The CA’s Ruling
On February 24, 2012, the CA affirmed the NLRC decision. It agreed with the
lower tribunals’ findings that Deoferio was suffering from schizophrenia and
that his continued employment at Intel would be prejudicial to his health and
to those of his co-employees. It ruled that the only procedural requirement
under the IRR is the certification by a competent public health authority on
the non-curability of the disease within a period of six months even with
proper medical treatment. It also concurred with the lower tribunals that Intel
was justified in not paying Deoferio separation pay as required by Article 284
of the Labor Code because this obligation had already been offset by the
matured car loan that Deoferio owed Intel.26
Deoferio filed the present petition after the CA denied his motion for
reconsideration.27
The Petition
In the present petition before the Court, Deoferio argues that the uniform
finding that he was suffering from schizophrenia is belied by his subsequent
employment at Maxim Philippines Operating Corp. and Philips
Semiconductors Corp., which both offered him higher compensations. He
also asserts that the Labor Code does not exempt the employer from
complying with the twin-notice requirement in terminations due to disease.28
The Respondents’ Position
In their Comment,29 the respondents posit that the petition raises purely
questions of fact which a petition for review on certiorari does not allow. They
submit that Deoferio’s arguments have been fully passed upon and found
unmeritorious by the lower tribunals and by the CA. They additionally argue
that Deoferio’s subsequent employment in other corporations is irrelevant in
determining the validity of his dismissal; the law merely requires the non-
curability of the disease within a period of six months even with proper
medical treatment.
The respondents also maintain that Deoferio’s claim for salary differential is
already barred by prescription under Article 291 of the Labor Code.30 Even
assuming that the claim for salary differential has been timely filed, the
respondents assert that the parties expressly agreed in the International
Assignment Relocation Agreement that "the assignment length is only an
estimate and not a guarantee of employment for any particular length of
time."31Moreover, his assignment in the United States was merely temporary
and did not change his salary base, an amount which he already received.
The Issues
This case presents to us the following issues:
(1) Whether Deoferio was suffering from schizophrenia and whether
his continued employment was prejudicial to his health, as well as to
the health of his co-employees;
(2) Whether the twin-notice requirement in dismissals applies to
terminations due to disease; and
As part of the second issue, the following issues are raised:
(a) Whether Deoferio is entitled to nominal damages for violation of
his right to statutory procedural due process; and
(b) Whether the respondents are solidarily liable to Deoferio for
nominal damages.
(3) Whether Deoferio is entitled to salary differential, backwages,
separation pay, moral and exemplary damages, as well as attorney’s
fees.
The Court’s Ruling
We find the petition partly meritorious.
Intel had an authorized cause to dismiss Deoferio from employment
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. Thus, in
termination cases, the law places the burden of proof upon the employer to
show by substantial evidence that the termination was for a lawful cause and
in the manner required by law.
In concrete terms, these qualifications embody the due process requirement
in labor cases - substantive and procedural due process. Substantive due
process means that the termination must be based on just and/or authorized
causes of dismissal. On the other hand, procedural due process requires the
employer to effect the dismissal in a manner specified in the Labor Code and
its IRR.32
The present case involves termination due to disease – an authorized cause
for dismissal under Article 284 of the Labor Code. As substantive
requirements, the Labor Code and its IRR33 require the presence of the
following elements:
(1) An employer has been found to be suffering from any disease.
(2) His continued employment is prohibited by law or prejudicial to
his health, as well as to the health of his co-employees.
(3) A competent public health authority certifies that the disease is of
such nature or at such a stage that it cannot be cured within a period
of six months even with proper medical treatment. With respect to
the first and second elements, the Court liberally construed the
phrase "prejudicial to his health as well as to the health of his co-
employees" to mean "prejudicial to his health or to the health of his
co-employees." We did not limit the scope of this phrase to
contagious diseases for the reason that this phrase is preceded by
the phrase "any disease" under Article 284 of the Labor Code, to wit:
Art. 284. Disease as ground for termination. – An employer may terminate
the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month
salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1)
whole year. [underscores, italics and emphases ours]
Consistent with this construction, we applied this provision in resolving illegal
dismissal cases due to non-contagious diseases such as stroke, heart attack,
osteoarthritis, and eye cataract, among others. In Baby Bus, Inc. v. Minister
of Labor,34 we upheld the labor arbitration’s finding that Jacinto Mangalino’s
continued employment – after he suffered several strokes – would be
prejudicial to his health. In Duterte v. Kingswood Trading Co., Inc.,35 we
recognized the applicability of Article 284 of the Labor Code to heart attacks.
In that case, we held that the employer- company’s failure to present a
certification from a public health authority rendered Roque Duterte’s
termination due to a heart attack illegal. We also applied this provision in Sy
v. Court of Appeals36 to determine whether Jaime Sahot was illegally
dismissed dueto various ailments such as presleyopia, hypertensive
retinopathy, osteoarthritis, and heart enlargement, among others. In Manly
Express, Inc. v. Payong, Jr.,37 we ruled that the employer-company’s non-
presentment of a certification from a public health authority with respect to
Romualdo Payong Jr.’s eye cataract was fatal to its defense.
The third element substantiates the contention that the employee has indeed
been suffering from a disease that: (1) is prejudicial to his health as well as to
the health of his co-employees; and (2) cannot be cured within a period of six
months even with proper medical treatment. Without the medical certificate,
there can be no authorized cause for the employee’s dismissal. The absence
of this element thus renders the dismissal void and illegal.
Simply stated, this requirement is not merely a procedural requirement, but a
substantive one.1âwphi1 The certification from a competent public health
authority is precisely the substantial evidence required by law to prove the
existence of the disease itself, its non-curability within a period of six months
even with proper medical treatment, and the prejudice that it would cause to
the health of the sick employee and to those of his co-employees.
In the current case, we agree with the CA that Dr. Lee’s psychiatric report
substantially proves that Deoferio was suffering from schizophrenia, that his
disease was not curable within a period of six months even with proper
medical treatment, and that his continued employment would be prejudicial to
his mental health. This conclusion is further substantiated by the unusual and
bizarre acts that Deoferio committed while at Intel’s employ.
The twin-notice requirement applies
to terminations under Article 284 of
the Labor Code
The Labor Code and its IRR are silent on the procedural due process
required in terminations due to disease. Despite the seeming gap in the law,
Section 2, Rule 1, Book VI of the IRR expressly states that the employee
should be afforded procedural due process in all cases of dismissals. 38
In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong,
Jr.,40 promulgated in 2003 and 2005, respectively, the Court finally
pronounced the rule that the employer must furnish the employee two written
notices in terminations due to disease, namely: (1) the notice to apprise the
employee of the ground for which his dismissal is sought; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has
been given reasonable opportunity to answer and to be heard on his
defense. These rulings reinforce the State policy of protecting the workers
from being terminated without cause and without affording them the
opportunity to explain their side of the controversy.
From these perspectives, the CA erred in not finding that the NLRC gravely
abused its discretion when it ruled that the twin-notice requirement does not
apply to Article 284 of the Labor Code. This conclusion is totally devoid of
any legal basis; its ruling is wholly unsupported by law and jurisprudence. In
other words, the NLRC’s unprecedented, whimsical and arbitrary ruling,
which the CA erroneously affirmed, amounted to a jurisdictional error.
Deoferio is entitled to nominal
damages for violation of his right to
statutory procedural due process
Intel’s violation of Deoferio’s right to statutory procedural due process
warrants the payment of indemnity in the form of nominal damages. In Jaka
Food Processing Corp. v. Pacot,41 we distinguished between terminations
based on Article 282 of the Labor Code42 and dismissals under Article 283 of
the Labor Code.43 We then pegged the nominal damages at ₱30,000.00 if
the dismissal is based on a just cause but the employer failed to comply with
the twin-notice requirement. On the other hand, we fixed the nominal
damages at ₱50,000.00 if the dismissal is due to an authorized cause under
Article 283 of the Labor Code but the employer failed to comply with the
notice requirement. The reason is that dismissals for just cause imply that the
employee has committed a violation against the employer, while terminations
under Article 283 of the Labor Code are initiated by the employer in the
exercise of his management prerogative.
With respect to Article 284 of the Labor Code, terminations due to disease do
not entail any wrongdoing on the part of the employee. It also does not purely
involve the employer’s willful and voluntary exercise of management
prerogative – a function associated with the employer's inherent right to
control and effectively manage its enterprise.44 Rather, terminations due to
disease are occasioned by matters generally beyond the worker and the
employer's control.
In fixing the amount of nominal damages whose determination is addressed
to our sound discretion, the Court should take into account several factors
surrounding the case, such as: (1) the employer’s financial, medical, and/or
moral assistance to the sick employee; (2) the flexibility and leeway that the
employer allowed the sick employee in performing his duties while attending
to his medical needs; (3) the employer’s grant of other termination benefits in
favor of the employee; and (4) whether there was a bona fide attempt on the
part of the employer to comply with the twin-notice requirement as opposed
to giving no notice at all.
We award Deoferio the sum of ₱30,000.00 as nominal damages for violation
of his statutory right to procedural due process. In so ruling, we take into
account Intel’s faithful compliance with Article 284 of the Labor Code and
Section 8, Rule 1, Book 6 of the IRR. We also note that Deoferio’s separation
pay equivalent to one-half month salary for every year of service45 was
validly offset by his matured car loan. Under Article 1278 of the Civil Code, in
relation to Article 1706 of the Civil Code46 and Article 113(c) of the Labor
Code,47 compensation shall take place when two persons are creditors and
debtors of each other in their own right. We likewise consider the fact that
Intel exhibited real concern to Deoferio when it financed his medical
expenses for more than four years. Furthermore, prior to his termination, Intel
liberally allowed Deoferio to take lengthy leave of absences to allow him to
attend to his medical needs.
Deoferio is not entitled to salary
differential, backwages, separation
pay, moral and exemplary damages,
as well as attorney's fees
Deoferio's claim for salary differential is already barred by prescription. Under
Article 291 of the Labor Code, all money claims arising from employer-
employee relations shall be filed within three years from the time the cause of
action accrued. In the current case, more than four years have elapsed from
the pre-termination of his assignment to the United States until the filing of
his complaint against the respondents. We thus see no point in further
discussing this matter. His claim for backwages, separation pay, moral and
exemplary damages, as well as attorney's fees must also necessarily fail as
a consequence of our finding that his dismissal was for an authorized cause
and that the respondents acted in good faith when they terminated his
services.
WHEREFORE, premises considered, we partially grant the petition; the
assailed February 24, 2012 decision and the August 2, 2012 resolution of the
Court of Appeals stand but respondent Intel Technology Philippines, Inc. is
ordered to pay petitioner Marlo A. Deoferio nominal damages in the amount
of ₱30,000.00. We totally deny the petition with respect to respondent Mike
Wending.
SO ORDERED.

Wentling is not personally liable for

the satisfaction of nominal damages
in favor of Deoferio

Intel shall be solely liable to Deoferio for the satisfaction of nominal damages.
Wentling, as a corporate officer, cannot be held liable for acts done in his
official capacity because a corporation, by legal fiction, has a personality
separate and distinct from its officers, stockholders, and members. There is
also no ground for piercing the veil of corporate fiction because Wentling
acted in good faith and merely relied on Dr. Lee’s psychiatric report in
carrying out the dismissal.48