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1. Calalang vs. Williams et. al. G.R.

No. 47800 December 2, 1940

Calalang vs. Williams et. al. G.R.
No. 47800 December 2,
Petitioner, v. A. D. Williams, as
Chairman of the National Traffic
Commission; Vicente Fragante, as
Director of Public Works; Sergio
Bayan, as Acting Secretary of Public
Works and Communications;
Eulogio Rodriguez, as Mayor of the
City of Manila; and Juan
Dominguez, as Acting Chief of
Police of Manila,
Respondents.]Facts: The National
Traffic Commission, one of the
respondent-entities, with A.D.
Williams as the chairman,
recommended to Vicente Fragante,
the Director of Public Works and
Sergio Bayan, the Acting Secretary
of Public Works and
Communications that animal-drawn
vehicles be prohibited from passing
along the designated roads at
certain times in a resolution on July
17, 1940. The next day, the
chairman of the NTC recommended
the adoption of the measure
proposed in the resolution to the
Director of Public Works in
pursuance of Commonwealth Act
No. 548, which authorized the
Director of Public Works to
promulgate rules and regulations for
the use and control of traffic on
national roads. The case was
brought before the Supreme Court
as a question of constitutionality of
Commonwealth Act No. 548 (C.A.
No. 548) was raised by Maximo
Calalang, who prayed for the writ of
prohibition of said act. The
petitioner, Calalang, contended that
the said Commonwealth Act was
unconstitutional because it
constitutes an undue delegation of
legislative power. He further
contended that the rules and
regulations promulgated by the
respondents pursuant to the
provisions of C.A. No. 548 constitute
an unlawful interference with
legitimate business or trade and
abridge the right to personal liberty
and freedom of locomotion. Finally,
he alleged that the rules and
regulations complained of infringe
upon the constitutional precept
regarding the promotion of social
justice to insure the well-being and
economic security of all the people.
ISSUE: Whether or not C.A. No.
548 infringes upon the constitutional
precept regarding the promotion of
social justice to insure the well-being
and economic security of all the
Ruling: The Supreme Court denied
the writ for prohibition.Ratio
Decidendi: The creation of C.A. No.
548 aimed “to promote safe transit
upon, and avoid obstructions on,
roads and streets designated as
national roads by acts of the
National Assembly or by executive
orders of the President of the
Philippines” and to close them
temporarily to any or all classes of
traffic “whenever the condition of the
road or the traffic thereon makes
such action necessary or advisable
in the public convenience and
interest.” In this case, the Act is
constitutional and observes social
justice on the principle of salus
populi est suprema lex. Social
justice, as the Supreme Court
defined, is the promotion of the
welfare of all the people, the
adoption by the Government of
measures calculated to insure
economic stability of all the
competent elements of society,
through the maintenance of a proper
economic and social equilibrium in
the interrelations of the members of
the community, constitutionally,
through the adoption of measures
legally justifiable, or extra-
constitutionally, through the
exercise of powers underlying the
existence of all governments on the
principle of salus populi est suprema
lex. It must be founded therefore on
the recognition of the necessity of
interdependence among all units of
society, and the protection offered
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

2. Alalayan vs. National Power

Corporation (1968)
3. Agabon vs. NLRC (2004)


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,
1992 until February 23, 1999 when they
were dismissed for abandonment of
work. Thus, Petitioners then filed a
complaint for illegal dismissal and
payment of money claims

Petitioners also claim that private

respondent did not comply with the twin
requirements of notice and hearing.
Private respondent, on the other hand,
maintained that petitioners were not
dismissed but had abandoned their work.

Issue: WON petitioners were illegally



Accordingly, 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.
Abandonment is the deliberate and
unjustified refusal of an employee to
resume his employment. It is a form of
neglect of duty, hence, a just cause for
termination of employment by the

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

For termination of employment based on

just causes as defined in Article 282 of
the Code:

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;

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.

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.

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. Thus, it should be
held liable for non-compliance with the
procedural requirements of due process.

Petition denied. CA affirmed with


4. Philippine Airlines vs. NLRC (1993)

On March 15, 1985, the Philippine
Airlines, Inc. (PAL) completely revised its
1966 Code of Discipline. The Code was
circulated among the employees and
was immediately implemented, and
some employees were forthwith
subjected to the disciplinary measures
embodied therein.

on August 20, 1985, the Philippine

Airlines Employees Association (PALEA)
filed a complaint before the National
Labor Relations Commission (NLRC) for
unfair labor practice with the following
remarks: “ULP with arbitrary
implementation of PAL’s Code of
Discipline without notice and prior
discussion with Union by Management”.
In its position paper, PALEA contended
that PAL, by its unilateral implementation
of the Code, was guilty of unfair labor
practice, specifically Paragraphs E and G
of Article 249 and Article 253 of the Labor
Code. PALEA alleged that copies of the
Code had been circulated in limited
numbers; that being penal in nature the
Code must conform with the
requirements of sufficient publication,
and that the Code was arbitrary,
oppressive, and prejudicial to the rights
of the employees. It prayed that
implementation of the Code be held in
abeyance; that PAL should discuss the
substance of the Code with PALEA; that
employees dismissed under the Code be
reinstated and their cases subjected to
further hearing; and that PAL be declared
guilty of unfair labor practice and be
ordered to pay damages.

PAL filed a motion to dismiss the

complaint, asserting its prerogative as an
employer to prescibe rules and
regulations regarding employess’
conduct in carrying out their duties and
functions, and alleging that by
implementing the Code, it had not
violated the collective bargaining
agreement (CBA) or any provision of the
Labor Code.

Labor Arbiter Isabel P. Ortiguerra

handling the case called the parties to a
conference but they failed to appear at
the scheduled date. Interpreting such
failure as a waiver of the parties’ right to
present evidence, the labor arbiter
considered the case submitted for
decision. On November 7, 1986, a
decision was rendered finding no bad
faith on the part of PAL in adopting the
Code and ruling that no unfair labor
practice had been committed. However,
the arbiter held that PAL was “not totally
fault free” considering that while the
issuance of rules and regulations
governing the conduct of employees is a
“legitimate management prerogative”
such rules and regulations must meet the
test of “reasonableness, propriety and
PAL appealed to the NLRC. On August
19, 1988, the NLRC through
Commissioner Encarnacion, with
Presiding Commissioner Bonto-Perez
and Commissioner Maglaya concurring,
found no evidence of unfair labor practice
committed by PAL and affirmed the
dismissal of PALEA’s charge.

PAL then filed the instant petition for

certiorari charging public respondents
with grave abuse of discretion

whether management may be compelled
to share with the union or its employees
its prerogative of formulating a code of

Indeed, it was only on March 2, 1989,
with the approval of Republic Act No.
6715, amending Article 211 of the Labor
Code, that the law explicitly considered it
a State policy “(t)o ensure the
participation of workers in decision and
policy-making processes affecting the
rights, duties and welfare.” However,
even in the absence of said clear
provision of law, the exercise of
management prerogatives was never
considered boundless.

San Miguel Brewery vs Ople: So long as

a company’s management prerogatives
are exercised in good faith for the
advancement of the employer’s interest
and not for the purpose of defeating or
circumventing the rights of the
employees under special laws or under
valid agreements, this Court will uphold

UST vs NLRC: All this points to the

conclusion that the exercise of
managerial prerogatives is not unlimited.
It is circumscribed by limitations found in
law, a collective bargaining agreement,
or the general principles of fair play and

a line must be drawn between

management prerogatives regarding
business operations per se and those
which affect the rights of the employees.
In treating the latter, management should
see to it that its employees are at least
properly informed of its decisions or
modes action. PAL asserts that all its
employees have been furnished copies
of the Code. Public respondents found to
the contrary, which finding, to say the
least is entitled to great respect.

the collective bargaining agreement may

not be interpreted as cession of
employees’ rights to participate in the
deliberation of matters which may affect
their rights and the formulation of policies
relative thereto. And one such mater is
the formulation of a code of discipline.

industrial peace cannot be achieved if the

employees are denied their just
participation in the discussion of matters
affecting their rights. Thus, even before
Article 211 of the labor Code (P.D. 442)
was amended by Republic Act No. 6715,
it was already declared a policy of the
State, “(d) To promote the enlightenment
of workers concerning their rights and
obligations . . . as employees.” This was,
of course, amplified by Republic Act No
6715 when it decreed the “participation of
workers in decision and policy making
processes affecting their rights, duties
and welfare.” PAL’s position that it cannot
be saddled with the “obligation” of
sharing management prerogatives as
during the formulation of the Code,
Republic Act No. 6715 had not yet been
enacted (Petitioner’s Memorandum, p.
44; Rollo, p. 212), cannot thus be
sustained. While such “obligation” was
not yet founded in law when the Code
was formulated, the attainment of a
harmonious labor-management
relationship and the then already existing
state policy of enlightening workers
concerning their rights as employees
demand no less than the observance of
transparency in managerial moves
affecting employees’ rights.

GRN 127598 JANUARY 27, 1999

The court directed the parties to execute
a CBA incorporating the terms among
which are the following modifications
among others: Wages: PhP 1,900 for
1995-1996; Retroactivity: December 28,
1996-Dec. 1999, etc. Dissatisfied, some
members of the union filed a motion for
intervention/reconsideration. Petitioner
warns that is the wage increase of
Php2,000.00 per month as ordered is
allowed, it would pass the cost covering
such increase to the consumers through
an increase rate of electricity. On the
retroactivity of the CBA arbitral award,
the parties reckon the period as when
retroaction shall commence.
Whether or not retroactivity of arbitral
awards shall commence at such time as
granted by Secretary.

In St. Luke’s Medical vs Torres, a
deadlock developed during CBA
negotiations between management
unions. The Secretary assumed
jurisdiction and ordered the retroaction of
the CBA to the date of expiration of the
previous CBS. The Court ratiocinated
thus: In the absence of a specific
provision of law prohibiting retroactive of
the effectivity of arbitral awards issued by
the Secretary pursuant to article 263(g)
of the Labor Code, public respondent is
deemed vested with the plenary and
discretionary powers to determine the
effectivity thereof.
In general, a CBA negotiated within six
months after the expiration of the existing
CBA retroacts to the day immediately
following such date and if agreed
thereafter, the effectivity depends on the
agreement of the parties. On the other
hand, the law is silent as to the
retroactivity of a CBA arbitral award or
that granted not by virtue of the mutual
agreement of the parties but by
intervention of the government. In the
absence of a CBA, the Secretary’s
determination of the date of retroactivity
as part of his discretionary powers over
arbitral awards shall control.
Wherefore, the arbitral award shall
retroact from December 1, 1995 to
November 30, 1997; and the award of
wage is increased from Php1,900 to

6. PAL Employees Savings and Loan

Association Inc. vs. NLRC (1996)
7. Innodata Philippines Inc. vs. Quijada-
Lopez (2006)

Facts: Innodata Philippines, Inc., is

engaged in the encoding/data
conversion business. It employs
encoders, indexers, formatters,
programmers, quality/quantity staff, and
others, to maintain its business and do
the job orders of its clients.

Estrella G. Natividad and Jocelyn L.

Quejada were employed as formatters by
Innodata Philippines, Inc. They [worked]
from March 4, 1997, until their separation
on March 3, 1998. They believed that
their job was necessary and desirable to
the usual business of the company which
is data processing/conversion and that
their employment is regular pursuant to
Article 280 of the Labor Code,they filed a
complaint for illegal dismissal and for
damages as well as for attorney’s fees
against Innodata Phils., Incorporated.

Innodata contended that their

employment contracts expired, having a
fixed period of one (1) year. Since the
period expired, their employment was
likewise terminated applying the ruling in
the Brent School case.

Labor Arbiter Donato G. Quinto rendered

a judgment in favor of complainants
holding complainants Estella G.
Natividad and Jocelyn Quejada to have
been illegally dismissed by Innodata
Philippines Incorporated and Innodata
Processing Corporation and ordering
reinstatement to their former position
without loss of seniority rights, or to a
substantially equivalent position, and to
pay them jointly and severally,
backwages computed from the time they
were illegally dismissed on March 3,
1998 up to the date of this decision in the
amount of P112,535.28 EACH, or in the
total amount of P225,070.56 for the two
of them; and further ordered to pay them
attorney’s fees in the amount equivalent
to 10% of their respective awards.

Innodata appealed to NLRC which

reversed and set aside the Labor
Arbiter’s decision declaring that the
contract was for a fixed term and
therefore, the dismissal at the end of their
one year term agreed upon was valid. An
MR was filed but was denied.
The CA ruled that respondents were
regular employees in accordance with
Section 280 of the Labor Code. It said
that the fixed-term contract prepared by
petitioner was a crude attempt to
circumvent respondents’ right to security
of tenure.

The disputed contract reads, as follows:


The EMPLOYER hereby employs,

engages and hires the EMPLOYEE, and
the EMPLOYEE hereby accepts such
appointment as FORMATTER effective
March 04, 1997 to March 03, 1998, a
period of one (1) year.

x x x x x x x x x

7.1 This Contract shall automatically

terminate on March 03, 1998 without
need of notice or demand.

x x x x x x x x x

7.4 The EMPLOYEE acknowledges that

the EMPLOYER entered into this
Contract upon his express
representation that he/she is qualified
and possesses the skills necessary and
desirable for the position indicated
herein. Thus, the EMPLOYER is hereby
granted the right to pre-terminate this
Contract within the first three (3) months
of its duration upon failure of the
EMPLOYEE to meet and pass the
qualifications and standards set by the
EMPLOYER and made known to the
EMPLOYEE prior to execution hereof.
Failure of the EMPLOYER to exercise its
right hereunder shall be without prejudice
to the automatic termination of the
EMPLOYEE’s employment upon the
expiration of this Contract or cancellation
thereof for other causes provided herein
and by law.”

The contract provided two periods. Aside

from the fixed one-year term set in
paragraph 1, paragraph 7.4 provides for
a three-month period during which
petitioner has the right to pre-terminate
the employment for the “failure of the
employees to meet and pass the
qualifications and standards set by the
employer and made known to the
employee prior to” their employment. In
effect, the paragraph 7.4 is a
probationary period.

Innodata claims that it was constrained

by the nature of its business to enter into
fixed-term employment contracts with
employees assigned to job orders. It
relies on the availability of job orders or
undertakings from its clients. Thus, the
continuity of work cannot be ascertained.

Hence, this petition.

ISSUE: whether the alleged fixed-term

employment contracts are valid.

HELD: No, Innodata’s contract of

employment failed to comply with the
standards set by law and by this Court. “
A contract of employment is impressed
with public interest. For this reason,
provisions of applicable statutes are
deemed written into the contract. Hence,
the “parties are not at liberty to insulate
themselves and their relationships from
the impact of labor laws and regulations
by simply contracting with each other.”
Moreover, in case of doubt, the terms of
a contract should be construed in favor of

RATIO: The applicable laws are Article

1700 of the Civil Code which declares:

“Art. 1700. The relations between capital

and labor are not merely contractual.
They are so impressed with public
interest that labor contracts must yield to
the common good. Therefore, such
contracts are subject to the special laws
on labor unions, collective bargaining,
strikes and lockouts, closed shop,
wages, working conditions, hours of labor
and similar subjects.”

And Section 280 of the Labor Code.

DISPOSITIVE: Petition is DENIED, and

the assailed Decision and Resolution are
AFFIRMED. Costs against petitioner.

8. Cirtek Employees Labor-Union-FFW

vs. Cirtek Electronics (2010


This resolves the motion for

reconsideration and supplemental
motion for reconsideration filed by
respondent, Cirtek Electronics, Inc., of
the Court’s Decision dated November 15,

Respondent-movant maintains that the

Secretary of Labor cannot insist on a
ruling beyond the compromise
agreement entered into by the parties;
and that, as early as February 5, 2010,
petitioner Union had already filed with the
Department of Labor and Employment
(DOLE) a resolution of disaffiliation from
the Federation of Free Workers resulting
in the latter’s lack of personality to
represent the workers in the present

Issue: WON petitioner lost its personality

to represent the workers because of its
disaffiliation from the Federation of Free


The issue of disaffiliation is an intra-union

dispute which must be resolved in a
different forum in an action at the
instance of either or both the FFW and
the Union or a rival labor organization,
not the employer.

Indeed, as respondent-movant itself

argues, a local union may disaffiliate at
any time from its mother federation,
absent any showing that the same is
prohibited under its constitution or rule.
Such, however, does not result in it losing
its legal personality altogether. Verily,
Anglo-KMU v. Samahan Ng Mga
Manggagawang Nagkakaisa Sa Manila
Bay Spinning Mills At J.P. Coats

A local labor union is a separate and

distinct unit primarily designed to secure
and maintain an equality of bargaining
power between the employer and their
employee-members. A local union does
not owe its existence to the federation
with which it is affiliated. It is a separate
and distinct voluntary association owing
its creation to the will of its members. The
mere act of affiliation does not divest the
local union of its own personality, neither
does it give the mother federation the
license to act independently of the local
union. It only gives rise to a contract of
agency where the former acts in
representation of the latter. (emphasis
and underscoring supplied)

MR denied.

9. Misamis Oriental II Electric Service

Cooperative vs. Virgilio Cagalawan


In labor cases, strict adherence with the

technical rules is not required. 1 This
liberal policy, however, should still
conform with the rudiments of equitable
principles of law. For instance, belated
submission of evidence may only be
allowed if the delay is adequately justified
and the evidence is clearly material to
establish the party's cause. 2 TAcSaC
By this Petition for Review on Certiorari,
3 petitioner Misamis Oriental II Electric
Service Cooperative (MORESCO II)
assails the Decision 4 dated July 26,
2005 of the Court of Appeals (CA) in CA-
G.R. SP No. 84991, which reversed and
set aside the Resolutions dated February
27, 2004 5 and April 26, 2004 6 of the
National Labor Relations Commission
(NLRC), and thereby reinstated the
Labor Arbiter's Decision 7 dated
September 30, 2003 pronouncing
respondent Virgilio M. Cagalawan
(Cagalawan) to have been constructively
dismissed from employment. Also
assailed is the CA Resolution 8 dated
September 6, 2006 which denied
MORESCO II's Motion for
Reconsideration and granted
Cagalawan's Partial Motion for
Factual Antecedents
On September 1, 1993, MORESCO II, a
rural electric cooperative, hired
Cagalawan as a Disconnection Lineman
on a probationary basis. On March 1,
1994 Cagalawan was appointed to the
same post this time on a permanent
basis. 9 On July 17, 2001, he was
designated as Acting Head of the
disconnection crew in Area III sub-office
of MORESCO II in Balingasag, Misamis
Oriental (Balingasag sub-office). 10 In a
Memorandum 11 dated May 9, 2002,
MORESCO II General Manager Amado
B. Ke-e (Ke-e) transferred Cagalawan to
Area I sub-office in Gingoog City,
Misamis Oriental (Gingoog sub-office) as
a member of the disconnection crew.
Said memorandum stated that the
transfer was done "in the exigency of the
In a letter 12 dated May 15, 2002,
Cagalawan assailed his transfer claiming
he was effectively demoted from his
position as head of the disconnection
crew to a mere member thereof. He also
averred that his transfer to the Gingoog
sub-office is inconvenient and prejudicial
to him as it would entail additional travel
expenses to and from work. He likewise
sought clarification on what kind of
exigency exists as to justify his transfer
and why he was the one chosen to be
In a Memorandum 13 dated May 16,
2002, Ke-e explained that Cagalawan's
transfer was not a demotion since he was
holding the position of Disconnection
Head only by mere designation and not
by appointment. Ke-e did not, however,
state the basis of the transfer but instead
advised Cagalawan to just comply with
the order and not to question
management's legitimate prerogative to
reassign him.
In reply, Cagalawan claimed that he was
transferred because he executed an
Affidavit 14 in support of his co-employee
Jessie Rances, who filed an illegal
dismissal case against MORESCO II. 15
He emphasized though that his action
was not an act of disloyalty to
MORESCO II, contrary to what was
being accused of him. Nonetheless,
Cagalawan still reported for work at
Gingoog sub-office on May 27, 2002 but
reserved his right to contest the legality
of such transfer. 16 EDcIAC
Meanwhile and in view of Cagalawan's
transfer, Ke-e issued an order 17
recalling the former's previous
designation as Acting Head of the
disconnection crew of the Balingasag
Cagalawan eventually stopped reporting
for work. On July 1, 2002, he filed a
Complaint for constructive dismissal
before the Arbitration branch of the
NLRC against MORESCO II and its
officers, Ke-e and Danilo Subrado
(Subrado), in their capacities as General
Manager and Board Chairman,
Proceedings before the Labor Arbiter
When the Labor Arbiter, in an Order 18
dated September 13, 2002, directed the
parties to submit their respective verified
position papers, only Cagalawan
complied.19 He alleged that his transfer
was unnecessary and was made only in
retaliation for his having executed an
affidavit in favor of a co-worker and
against MORESCO II. In support of his
contention, Cagalawan submitted a
certification 20 executed by the Head of
the disconnection crew of the Gingoog
sub-office, Teodoro Ortiz (Ortiz),
attesting that the said sub-office was not
undermanned. In fact, when Cagalawan
stopped working, no other employee was
transferred or hired in his stead, a proof
that there were enough disconnection
crew members in Gingoog sub-office
who can very well handle the assigned
tasks. Moreover, Cagalawan claimed
that his transfer constituted a demotion
from his position as Acting Head of the
disconnection crew which he had
occupied for almost 10 months. As such,
he should be considered regular in that
position and entitled to its corresponding
Cagalawan further alleged that his
transfer from Balingasag to Gingoog sub-
office was tantamount to illegal
constructive dismissal for being
prejudicial and inconvenient as he had to
spend an additional amount of P197.00
21 a day, leaving him nothing of his
salary. He therefore had no choice but to
stop working.
Aside from reinstatement and
backwages, Cagalawan sought to
recover damages and attorney's fees
because to him, his transfer was effected
in a wanton, fraudulent, oppressive or
malevolent manner. Apart from
MORESCO II, he averred that Ke-e and
Subrado should also be held personally
liable for damages since the two were
guilty of bad faith in effecting his transfer.
He believed that Subrado had a hand in
his arbitrary transfer considering that he
is the son-in-law of Subrado's opponent
in the recent election for directorship in
the electric cooperative. In fact, Subrado
even asked a certain Cleopatra Moreno
Manuel to file a baseless complaint
against him as borne out by the
declaration of Bob Abao in an affidavit.
22 aTcIEH
In view of MORESCO II's failure to file a
position paper, Cagalawan filed a Motion
23 for the issuance of an order to declare
the case submitted for decision. This was
granted in an Order 24 dated March 14,
On September 30, 2003, the Labor
Arbiter rendered aDecision 25 declaring
that Cagalawan's transfer constituted
illegal constructive dismissal. Aside from
finding merit in Cagalawan's
uncontroverted allegation that the
transfer became grossly inconvenient for
him, the Labor Arbiter found no sufficient
reason for his transfer and that the same
was calculated to rid him of his
employment, impelled by a vindictive
motive after he executed an Affidavit in
favor of a colleague and against

Thus, the Labor Arbiter ordered

Cagalawan's reinstatement to the
position of Collector and awarded him
backwages from the date of his transfer
on May 16, 2002 up to his actual
reinstatement. However, the Labor
Arbiter denied his prayer for
regularization as head of the
disconnection crew since the period of
six months which he claimed as sufficient
to acquire regular status applies only to
probationary employment. Hence, the
fact that he was acting as head of the
disconnection crew for 10 months did not
entitle him to such position on a
permanent basis. Moreover, the decision
to promote him to the said position
should only come from the management.
With respect to damages, the Labor
Arbiter found Ke-e to have acted
capriciously in effecting the transfer,
hence, he awarded moral and exemplary
damages to Cagalawan. Attorney's fees
was likewise adjudged in his favor.
The dispositive portion of the Decision
WHEREFORE, premises considered,
judgment is rendered declaring the
transfer of complainant as tantamount to
constructive dismissal and ordering
respondent[s] to reinstate complainant to
his position as collector in Balingasag,
Misamis Oriental without loss of seniority
rights and to pay complainant the
2.Exemplary damages-P10,000.00
3.Moral damages-P20,000.00
4.Attorney's fee 10%-P21,909.60
Proceedings before the National Labor
Relations Commission
MORESCO II and Cagalawan both
appealed the Labor Arbiter's Decision.
In its Memorandum on Appeal, 27
MORESCO II invoked the liberal
application of the rules and prayed for the
NLRC to admit its evidence on appeal.
MORESCO II denied that Cagalawan's
transfer was done in retaliation for
executing an affidavit in favor of a co-
worker. MORESCO II explained that the
transfer was in response to the request of
the area manager in Gingoog sub-office
for additional personnel in his assigned
area. To substantiate this, it submitted a
letter 28 dated May 8, 2002 from
Gingoog sub-office Area Manager, Engr.
Ronel B. Canada (Engr. Canada),
addressed to Ke-e. In said letter, Engr.
Canada requested for two additional
disconnection linemen in order to attain
the collection quota allocated in his area.
MORESCO II then averred that as
against this letter of Engr. Canada who is
a managerial employee, the certification
issued by Ortiz should be considered as
incompetent since the latter is a mere
disconnection crew.
Moreover, Cagalawan's claim of
additional expenses brought about by his
transfer, specifically for meal and
transportation, deserves no appreciation
at all since he would still incur these
expenses regardless of his place of
assignment and also considering that he
was provided with a rented motorcycle
with fuel and oil allowance.
Also, MORESCO II intimated that it has
no intention of removing Cagalawan from
its employ especially since his father-in-
law was its previous Board Member. In
fact, it was Cagalawan himself who
committed an act of insubordination
when he abandoned his job.
In his Reply 29 to MORESCO II's
Memorandum of Appeal, Cagalawan
averred that the latter cannot present any
evidence for the first time on appeal
without giving any valid reason for its
failure to submit its evidence before the
Labor Arbiter as provided under the
NLRC rules. Further, the evidence
sought to be presented by MORESCO II
is not newly discovered evidence as to
warrant its admission on appeal. In
particular, he claimed that the May 8,
2002 letter of Engr. Canada should have
been submitted at the earliest
opportunity, that is, before the Labor
Arbiter. MORESCO II's failure to present
the same at such time thus raises
suspicion that the document was merely
fabricated for the purpose of appeal.
Moreover, Cagalawan claimed that if
there was indeed a request from the Area
Manager of Gingoog sub-office for
additional personnel as required by the
exigency of the service, such reason
should have been mentioned in Ke-e's
May 16, 2002 Memorandum. In this way,
the transfer would appear to have a
reasonable basis at the outset. However,
no such mention was made precisely
because the transfer was without any
valid reason.
Anent Cagalawan's partial appeal, 30 he
prayed that the decision be modified in
that he should be reinstated as
Disconnection Lineman and not as
The NLRC, through a Resolution 31
dated February 27, 2004, set aside and
vacated the Decision of the Labor Arbiter
and dismissed Cagalawan's complaint
against MORESCO II. The NLRC
admitted MORESCO II's evidence even
if submitted only on appeal in the interest
of substantial justice. It then found said
evidence credible in showing that
Cagalawan's transfer to Gingoog sub-
office was required in the exigency of the
cooperative's business interest. It also
ruled that the transfer did not entail a
demotion in rank and diminution of pay
as to constitute constructive dismissal
and thus upheld the right of MORESCO
II to transfer Cagalawan in the exercise
of its sound business judgment.
Cagalawan filed a Motion for
Reconsideration 32 but the same was
denied by the NLRC in a Resolution 33
dated April 26, 2004. ESHcTD
Proceedings before the Court of Appeals
Cagalawan thus filed a Petition for
Certiorari 34 with the CA. In a Decision
35 dated July 26, 2005, the CA found the
NLRC to have gravely abused its
discretion in admitting MORESCO II's
evidence, citing Section 3, Rule V of the
NLRC Rules of Procedure 36 which
prohibits the parties from making new
allegations or cause of action not
included in the complaint or position
paper, affidavits and other documents. It
held that what MORESCO II presented
on appeal was not just an additional
evidence but its entire evidence after the
Labor Arbiter rendered a Decision
adverse to it. To the CA, MORESCO II's
belated submission of evidence despite
the opportunities given it cannot be
countenanced as such practice "defeats
speedy administration of justice" and
"smacks of unfairness."
The dispositive portion of the CA
Decision reads:
IN VIEW THEREOF, the petition is
GRANTED. The Decision of the Labor
Arbiter is reinstated with the modification
that if reinstatement of petitioner is not
feasible, he should be paid separation
pay in accordance with law.
MORESCO II filed a Motion for
Reconsideration 38 insisting that it may
present evidence for the first time on
appeal as the NLRC is not precluded
from admitting the same because
technical rules are not binding in labor
cases. Besides, of paramount
importance is the opportunity of the other
party to rebut or comment on the appeal,
which in this case, was afforded to
Cagalawan, for his part, filed a Partial
Motion for Reconsideration, 39 seeking
modification of the Decision by ordering
his reinstatement to the position of
Disconnection Lineman instead of
Collector. ACcaET
In a Resolution 40 dated September 6,
2006, the CA maintained its ruling that
MORESCO II's unexplained failure to
present evidence or submit a position
paper before the Labor Arbiter for almost
12 months from receipt of Cagalawan's
position paper is intolerable and cannot
be permitted. Hence, it denied its Motion
for Reconsideration. With respect to
Cagalawan's motion, the same was
granted by the CA, viz.:
Anent petitioner's Partial Motion for
Reconsideration, We find the same
meritorious. The records of this case
reveal that prior to his constructive
dismissal, petitioner was a Disconnection
Lineman, not a Collector, assigned at
Balingasag, Misamis Oriental. Hence,
We modify the dispositive portion of Our
July 26, 2005 Decision, to read:
'IN VIEW THEREOF, the petition is
GRANTED. The Decision of the Labor
Arbiter is reinstated with modification that
petitioner be reinstated to his position as
Disconnection Lineman in Balingasag,
Misamis Oriental with further
modification that if reinstatement of
petitioner is not feasible, he should be
paid separation pay in accordance with
law.' 41 (Emphasis in the original.)
MORESCO II thus filed this petition
raising the following issues:
(1)Was the respondent constructively
dismissed by the petitioner?
(2)Did the Court of Appeals err in
reversing the NLRC? 42
MORESCO II insists that Cagalawan's
transfer was necessary in order to attain
the collection quota of the Gingoog sub-
office. It contests the credibility of Ortiz's
certification which stated that there was
no need for additional personnel in the
Gingoog sub-office. According to it, Ortiz
is not a managerial employee but merely
a disconnection crew who is not
competent to make declarations in
relation to MORESCO II's business
needs. It likewise refutes Cagalawan's
claim of incurring additional expenses
due to his transfer which caused him
inconvenience. In sum, it claims that
Cagalawan was not constructively
dismissed but instead had voluntarily
abandoned his job. SCEDAI
MORESCO II avers that the CA's ruling
is not in accordance with jurisprudence
on the matter of admitting evidence on
appeal in labor cases. It submits that the
NLRC is correct in accepting its evidence
submitted for the first time on appeal in
line with the basic precepts of equity and
fairness. The NLRC also correctly ruled
in its favor after properly appreciating its
evidence which had been rebutted and
contradicted by Cagalawan.
Our Ruling
The petition has no merit.
MORESCO II's belated submission of
evidence cannot be permitted.
Labor tribunals, such as the NLRC, are
not precluded from receiving evidence
submitted on appeal as technical rules
are not binding in cases submitted before
them.43 However, any delay in the
submission of evidence should be
adequately explained and should
adequately prove the allegations sought
to be proven. 44
In the present case, MORESCO II did not
cite any reason why it had failed to file its
position paper or present its cause before
the Labor Arbiter despite sufficient notice
and time given to do so. Only after an
adverse decision was rendered did it
present its defense and rebut the
evidence of Cagalawan by alleging that
his transfer was made in response to the
letter-request of the area manager of the
Gingoog sub-office asking for additional
personnel to meet its collection quota. To
our mind, however, the belated
submission of the said letter-request
without any valid explanation casts doubt
on its credibility, specially so when the
same is not a newly discovered
evidence. For one, the letter-request was
dated May 8, 2002 or a day before the
memorandum for Cagalawan's transfer
was issued. MORESCO II could have
easily presented the letter in the
proceedings before the Labor Arbiter for
serious examination. Why it was not
presented at the earliest opportunity is a
serious question which lends credence to
Cagalawan's theory that it may have just
been fabricated for the purpose of
It should also be recalled that after
Cagalawan received the memorandum
for his transfer to the Gingoog sub-office,
he immediately questioned the basis
thereof through a letter addressed to Ke-
e. If at that time there was already a
letter-request from the Gingoog area
manager, Ke-e could have easily referred
to or specified this in his subsequent
memorandum of May 16, 2002 which
served as his response to Cagalawan's
queries about the transfer. However, the
said memorandum was silent in this
respect. Nevertheless, Cagalawan, for
his part, faithfully complied with the
transfer order but with the reservation to
contest its validity precisely because he
was not adequately informed of its real
basis. aDcHIS
The rule is that it is within the ambit of the
employer's prerogative to transfer an
employee for valid reasons and
according to the requirement of its
business, provided that the transfer does
not result in demotion in rank or
diminution of salary, benefits and other
privileges. 45 This Court has always
considered the management's
prerogative to transfer its employees in
pursuit of its legitimate interests. But this
prerogative should be exercised without
grave abuse of discretion and with due
regard to the basic elements of justice
and fair play, such that if there is a
showing that the transfer was
unnecessary or inconvenient and
prejudicial to the employee, it cannot be
upheld. 46
Here, while we find that the transfer of
Cagalawan neither entails any demotion
in rank since he did not have tenurial
security over the position of head of the
disconnection crew, nor result to
diminution in pay as this was not
sufficiently proven by him, MORESCO
II's evidence is nevertheless not enough
to show that said transfer was required
by the exigency of the electric
cooperative's business interest. Simply
stated, the evidence sought to be
admitted by MORESCO II is not
substantial to prove that there was a
genuine business urgency that
necessitated the transfer.
Notably, the only evidence adduced by
MORESCO II to support the legitimacy of
the transfer was the letter-request of
Engr. Canada. However, this piece of
evidence cannot in itself sufficiently
establish that the Gingoog sub-office was
indeed suffering from losses due to
collection deficiency so as to justify the
assignment of additional personnel in the
area. Engr. Canada's letter is nothing
more than a mere request for additional
personnel to augment the number of
disconnection crew assigned in the area.
While it mentioned that the area's
collection efficiency should be improved
and that there is a shortage of personnel
therein, it is, standing alone, self-serving
and thus cannot be considered as
competent evidence to prove the
accuracy of the allegations therein.
MORESCO II could have at least
presented financial documents or any
other concrete documentary evidence
showing that the collection quota of the
Gingoog sub-office has not been met or
could not be reached. It should have also
submitted such other documents which
would show the lack of sufficient
personnel in the area. Unfortunately, the
area manager's letter provides no more
than bare allegations which deserve not
even the slightest credit.
When there is doubt between the
evidence submitted by the employer and
that submitted by the employee, the
scales of justice must be tilted in favor of
the employee. 47 This is consistent with
the rule that an employer's cause could
only succeed on the strength of its own
evidence and not on the weakness of the
employee's evidence. 48 Thus,
MORESCO II cannot rely on the
weakness of Ortiz's certification in order
to give more credit to its own evidence.
Self-serving and unsubstantiated
declarations are not sufficient where the
quantum of evidence required to
establish a fact is substantial evidence,
described as more than a mere scintilla.
49 "The evidence must be real and
substantial, and not merely apparent." 50
MORESCO II has miserably failed to
discharge the onus of proving the validity
of Cagalawan's transfer. TAaEIc
Clearly, not only was the delay in the
submission of MORESCO II's evidence
not explained, there was also failure on
its part to sufficiently support its
allegation that the transfer of Cagalawan
was for a legitimate purpose. This being
the case, MORESCO II's plea that its
evidence be admitted in the interest of
justice does not deserve any merit.
Ke-e and Subrado, as corporate officers,
could not be held personally liable for
Cagalawan's monetary awards.
In the Decision of the Labor Arbiter, the
manager of MORESCO II was held to
have acted in an arbitrary manner in
effecting Cagalawan's transfer such that
moral and exemplary damages were
awarded in the latter's favor. However,
the said Decision did not touch on the
issue of bad faith on the part of
MORESCO II's officers, namely, Ke-e
and Subrado. Consequently, no
pronouncement was made as to whether
the two are also personally liable for
Cagalawan's money claims arising from
his constructive dismissal.
Still, we hold that Ke-e and Subrado
cannot be held personally liable for
Cagalawan's money claims.
"[B]ad faith does not simply connote bad
judgment or negligence; it imputes a
dishonest purpose or some moral
obliquity and conscious doing of a wrong;
a breach of sworn duty through some
motive or intent or ill will; it partakes of the
nature of fraud." 51 Here, although we
agree with the Labor Arbiter that Ke-e
acted in an arbitrary manner in effecting
Cagalawan's transfer, the same, absent
any showing of some dishonest or
wrongful purpose, does not amount to
bad faith. Suffice it to say that bad faith
must be established clearly and
convincingly as the same is never
presumed. 52 Similarly, no bad faith can
be presumed from the fact that Subrado
was the opponent of Cagalawan's father-
in-law in the election for directorship in
the cooperative. Cagalawan's claim that
this was one of the reasons why he was
transferred is a mere allegation without
proof. Neither does Subrado's alleged
instruction to file a complaint against
Cagalawan bolster the latter's claim that
the former had malicious intention
against him. As the Chairman of the
Board of Directors of MORESCO II,
Subrado has the duty and obligation to
act upon complaints of its clients. On the
contrary, the Court finds that Subrado
had no participation whatsoever in
Cagalawan's illegal dismissal; hence, the
imputation of bad faith against him is
untenable. ACTIHa
WHEREFORE, the petition is DENIED.
The Decision dated July 26, 2005 of the
Court of Appeals in CA-G.R. SP No.
84991 and its Resolution dated
September 6, 2006, are AFFIRMED.

10. Pp vs. Vera Reyes, 67 Phil. 190

Subject: Labor Standards

Doctrine: Police Power (Basis of
State’s power to intervene)
The defendant was charged with a
violation of Act No. 2549, as amended by
Acts Nos. 3085 and 3958 The
information alleged that from September
9 to October 28, 1936, and for the some
time after, the accused, in his capacity as
president and general manager of the
Consolidated Mines, having engaged the
services of Severa Velasco de Vera as
stenographer, at an agreed salary of P35
a month willfully and illegally refused to
pay the salary of said stenographer
corresponding to the above-mentioned
period of time, which was long due and
payable, in spite of her repeated
The accused interposed a demurrer on
the ground that the facts alleged in the
information do not constitute any offense,
and that even if they did, the laws
penalizing it are unconstitutional.
After the hearing, the court sustained the
demurrer, declaring unconstitutional the
last part of section 1 of Act No. 2549 as
last amended by Act No. 3958, which
considers as an offense the facts alleged
in the information, for the reason that it
violates the constitutional prohibition
against imprisonment for debt, and
dismissed the case, with costs de oficio.

In this appeal the Solicitor-General

contends that the court erred in declaring
Act No. 3958 unconstitutional.
ISSUE: Whether the said constitutional
provision is unconstitutional.
No. The last part of section 1 considers
as illegal the refusal of an employer to
pay, when he can do so, the salaries of
his employees or laborers on the fifteenth
or last day of every month or on Saturday
of every week, with only two days
extension, and the nonpayment of the
salary within the periods specified is
considered as a violation of the law.
The same Act exempts from criminal
responsibility the employer who, having
failed to pay the salary, should prove
satisfactorily that it was impossible to
make such payment.
The court held that this provision is null
because it violates the provision of
section 1 (12), Article III, of the
Constitution, which provides that no
person shall be imprisoned for debt.
We do not believe that this constitutional
provision has been correctly applied in
this case. A close perusal of the last part
of section 1 of Act No. 2549, as amended
by section 1 of Act No. 3958, will show
that its language refers only to the
employer who, being able to make
payment, shall abstain or refuse to do so,
without justification and to the prejudice
of the laborer or employee. An employer
so circumstanced is not unlike a person
who defrauds another, by refusing to pay
his just debt. In both cases the deceit or
fraud is the essential element constituting
the offense. The first case is a violation of
Act No. 3958, and the second isestafa
punished by the Revised Penal Code. In
either case the offender cannot certainly
invoke the constitutional prohibition
against imprisonment for debt.
Another doctrine:
Police power is the power inherent in a
government to enact laws, within
constitutional limits, to promote the order,
safety, health, morals, and general
welfare of society. (12 C. J., p. 904.) In
the exercise of this power the Legislature
has ample authority to approve the
disputed portion of Act No. 3958 which
punishes the employer who, being able
to do so, refuses to pay the salaries of his
laborers or employers in the specified
periods of time.
Undoubtedly, one of the purposes of the
law is to suppress possible abuses on the
part of employers who hire laborers or
employees without paying them the
salaries agreed upon for their services,
thus causing them financial difficulties.
Without this law, the laborers and
employees who earn meager salaries
would be compelled to institute civil
actions which, in the majority of cases,
would cost them more than that which
they would receive in case of a decision
in their favor.