B. The Labor Code of the Philippines. employer to show that the dismissal is for a just cause.
how that the dismissal is for a just cause. In the case at bar, PHYVITA failed to adduce
3. Construction in favor of labor
G.R. No. 202086. June 21, 2017.
NORMAN PANALIGAN, IRENEO VILLAJIN, and GABRIEL PENILLA, petitioners, vs.
PHYVITA ENTERPRISES CORPORATION, respondent.
Labor Law; Termination of Employment; Misconduct; Serious Misconduct; For misconduct or
improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the
performance of the employee’s duties; and (c) it must show that the employee has become unfit to
continue working for the employer.—In Maula v. Ximex Delivery Express, Inc., 816 SCRA 1 (2017), this
Court reiterated previous pronouncements on the nature of serious misconduct as a just cause to
terminate an employee according to the Labor Code. To quote: Misconduct is improper or wrong
conduct; it is the transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. The
misconduct, to be serious within the meaning of the Labor Code, must be of such a grave and
aggravated character and not merely trivial or unimportant. Thus, for misconduct or improper behavior
to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the performance of the
employee’s duties; and (c) it must show that the employee has become unfit to continue working for the
employer.
Same; Same; Loss of Trust and Confidence; Loss of trust and confidence to be a valid cause for
dismissal must be work-related such as would show the employee concerned to be unfit to continue
working for the employer and it must be based on a willful breach of trust and founded on clearly
established facts.—Loss of trust and confidence, as a just cause for termination of employment, is
premised on the fact that an employee concerned holds a position where greater trust is placed by
management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this
trust is the essence of the offense for which an employee is penalized. Loss of trust and confidence to
be a valid cause for dismissal must be work-related such as would show the employee concerned to be
unfit to continue working for the employer and it must be based on a willful breach of trust and founded
on clearly established facts. Such breach is willful if it is done intentionally, knowingly, and purposely,
without justifiable excuse as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently. The loss of trust and confidence must spring from the voluntary or willful act of the
employee, or by reason of some blameworthy act or omission on the part of the employee. Willful
breach of trust, as just cause for the termination of employment, is founded on the fact that the
employee concerned: (1) holds a position of trust and confidence, i.e., managerial personnel or those
vested with powers and prerogatives to lay down management policies and/or to hire, transfer,
suspend, layoff, recall, discharge, assign or discipline employees; or (2) is routinely charged with the
care and custody of the employer’s money or property, i.e., cashiers, auditors, property custodians, or
those who, in normal and routine exercise of their functions, regularly handle significant amounts of
money or property. In any of these situations, it is the employee’s breach of the trust that his or her
position holds which results in the employer’s loss of confidence.
Same; Same; Same; Guidelines in Terminating Employees on the Ground of Loss of Trust and
Confidence.—For an employer to validly dismiss an employee on the ground of loss of trust and
confidence under Article 282(c) of the Labor Code, the employer must observe the following guidelines:
1) loss of confidence should not be simulated; 2) it should not be used as subterfuge for causes which
are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and 4) it must be genuine, not a mere afterthought to justify earlier action
taken in bad faith. More importantly, it must be based on a willful breach of trust and founded on clearly
established facts.
Same; Same; Burden of Proof; In termination cases, the burden of proof rests on the employer to
show that the dismissal is for a just cause.—In termination cases, the burden of proof rests on the
substantial evidence that would clearly demonstrate that PANALIGAN, et al., have committed serious
misconduct or have performed actions that would warrant the loss of trust and confidence reposed
upon them by their employer. Contrary to the findings of the Court of Appeals and the Labor Arbiter, no
substantial evidence supports the allegation of theft leveled by PHYVITA against PANALIGAN, et al. —
the said criminal act being the underlying reason for the dismissal of the latter from being employees of
the former.
Remedial Law; Evidence; Disputable Presumptions; The application of the disputable presumption
that a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and
doer of the whole act is limited to cases where such possession is either unexplained or that the
proffered explanation is rendered implausible in view of independent evidence inconsistent thereto.—
PHYVITA argues that, being in possession of stolen items, PANALIGAN, et al., are presumed to have
stolen the same unless contradicted or overcome by other evidence as mandated by Rule 131, Section
3(j) of the Revised Rules on Evidence, to wit: SEC. 3. Disputable presumptions.—The following
presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other
evidence: x x x x (j) That a person found in possession of a thing taken in the doing of a recent wrongful
act is the taker and the doer of the whole act; otherwise, that things which a person possesses, or
exercises acts of ownership over, are owned by him[.] We have held that the application of the
disputable presumption that a person found in possession of a thing taken in the doing of a recent
wrongful act is the taker and doer of the whole act is limited to cases where such possession is either
unexplained or that the proffered explanation is rendered implausible in view of independent evidence
inconsistent thereto. In the present case, petitioners’ possession of the questioned payroll sheets was
explained by the sworn affidavit of former PHYVITA employee Allan Grasparil (Grasparil) who freely
admitted that he was the source of the documents which he allegedly received from Enriquez.
Significantly, PHYVITA proffered no counter-statement from Enriquez specifically refuting Grasparil’s
narrative.
Same; Same; Labor Law; It is settled doctrine that if doubts exist between the evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the latter.—It is worth
noting that Grasparil was also one of the original complainants in the labor case filed against PHYVITA
by PANALIGAN, et al., but later withdrew from the same after entering into a compromise agreement
with PHYVITA not unlike Garcia and Kasing. Therefore, we have a situation wherein three similarly
situated individuals have divergent and conflicting claims over the important issue of who was the
source of the questioned payroll sheets with Grasparil openly admitting the same and Garcia and
Kasing pointing to PANALIGAN, et al., based solely on hearsay evidence. At the very least, this
circumstance casts doubt upon the evidence so far presented by both parties. With this development,
we are compelled to uphold the case for PANALIGAN, et al., since it is settled doctrine that if doubts
exist between the evidence presented by the employer and the employee, the scales of justice must be
tilted in favor of the latter.
Labor Law; Termination of Employment; Retaliatory Measures; Panaligan, et al.’s termination of
employment may have been indeed a retaliatory measure designed to coerce them into withdrawing
their complaint for underpayment of wages and nonpayment of other labor standard benefits.—Taking
into consideration the fact that the DOLE-NCR conducted an inspection of the respondent’s premises
on April 13, 2005 as a result of the labor complaint filed by PANALIGAN, et al., on April 4, 2005 and
PANALIGAN, et al., were implicated in the alleged January 25, 2005 theft incident only thereafter, a
reasonable inference can be made that PANALIGAN, et al.’s, termination of employment may have
been indeed a retaliatory measure designed to coerce them into withdrawing their complaint for
underpayment of wages and nonpayment of other labor standard benefits. Such an act is proscribed by
Article 118 of the Labor Code which states: Art. 118. Retaliatory Measures.—It shall be unlawful for an
employer to refuse to pay or reduce the wages and benefits, discharge or in any manner discriminate
against any employee who has filed any complaint or instituted any proceeding under this title or has
testified or is about to testify in such proceedings.
 Same; Same; Loss of Trust and Confidence; Jurisprudence states that the job of a room boy  or
chambermaid in a hotel is clearly of such a nature as to require a substantial amount of trust and
confidence on the part of the employer.—There is no question that PANALIGAN, et al., occupied
positions that are reposed with trust and confidence. Jurisprudence states that the job of a room boy or
chambermaid in a hotel is clearly of such a nature as to require a substantial amount of trust and
confidence on the part of the employer. There is merit as well in PHYVITA’s assertion that the dismissal
of its criminal complaint does not necessarily exonerate PANALIGAN, et al., from a charge of loss of
trust and confidence. However, even with the lower burden of proof in labor cases, there is a dearth of
substantial evidence to support a finding that PANALIGAN, et al., were indeed guilty of a willful breach
of their employer’s trust. We are constrained to conclude that there is no just and valid cause to
terminate the employment of PANALIGAN, et al., for loss of trust and confidence or even for serious
misconduct.
LEONARDO-DE CASTRO, J.:
Before this Court is a petition for review on certiorari  pursuant to Rule 45 of the 1997
Rules of Civil Procedure seeking to reverse and set aside the Court of Appeals
Decision dated November 24, 2011 and Resolution dated May 29, 2012 in CA-G.R. SP No.
111653, entitled "Phyvita Enterprises Corporation v. National Labor Relations Commission,
Norman Panaligan, lreneo Villajin, Gabriel Penilla." The former issuance reversed and set
aside the Decision dated June 9, 2009 as well as the Resolution dated September 25, 2009
of the National Labor Relations Commission (NLRC) which essentially ruled that petitioners
Norman Panaligan, lreneo Villajin and Gabriel Penilla (PANALIGAN, et al.)  were illegally
dismissed from their employment by respondent Phyvita Enterprises Corporation (PHYVIT
A) and were entitled to various monetary awards. The Court of Appeals, thus, reinstated the
Labor Arbiter's July 31, 2007 Decision which dismissed the complaint for illegal dismissal
but held that petitioners were entitled to payment of salary differential. The May 29, 2012
Court of Appeals Resolution, on the other hand, denied for lack of merit PANALIGAN, et
al.  's, motion for reconsideration.
We restate the salient facts as narrated in the assailed November 24, 2011 Court of
Appeals Decision here:
Petitioner Phyvita Enterprises Corporation x x x [respondent herein] is a domestic
corporation organized and existing under the [sic] Philippine laws engaged in the business
of health club massage parlor, spa and other related services under the name and style of
Starfleet Reflex Zone ("Starfleet").
Private respondents [petitioners herein] Norman Panaligan ("Panaligan"), Ireneo Villajin
("Villajin") and Gabriel Penilla ("Penilla") x x x were the employees of Phyvita assigned as
Roomboys at Starfleet. Panaligan was hired last 1 March 2002. Villajin was hired last 22
October 2002 and Penilla was hired on 22 October 2002.
Sometime [on] 25 January 2005, the Finance Assistant of Phyvita for Starfleet Girly
Enriquez ("Enriquez") discovered that the amount of One Hundred Eighty Thousand Pesos
(Php180,000.00) representing their sales for 22nd, 23rd and 24th of January 2005 [was]
missing including receipts, payrolls, credit card receipts and sales invoices. She
immediately reported the same to her immediate superior Jorge Rafols ("Jorge Rafols"). As
such, they searched for the missing documents and cash. However, their search remained
futile.
On 26 January 2005, Jorge Rafols and Enriquez reported the incident to their Vice
President for Operations Henry Ting ("Henry Ting").
As advised by Phyvita's Legal Officer Maria Joy Ting ("Joy Ting"), they reported the
alleged theft incident to the Parafiaque City Police Station to conduct an investigation.
However, the Parafiaque Police were not able to gather sufficient information that would
lead them as to who committed said theft. Being unsuccessful, the said police investigation
was merely entered into the police blotter.
On 4 April 2005, while the police investigation was pending, [Petitioners] together with
other employees, namely, Terio Arroyo ("Arroyo"), Nilo Mangco ("Mangco"), Bruce
Maranquez ("Maranquez"), Michael Lachica ("Lachica"), Allan Grasparil ("Grasparil"), Allan
Rose ("Rose"), Angelo Bemales ("Bemales"), Roberto Reyes ("Reyes"), Rommel Garcia
("Garcia"), Jay Ar Kasing ("Kasing"), Manuel Marquez ("Marquez") and Amel Pullan
("Pullan") filed a complaint before the Department of Labor and Employment (DOLE)-
National Capital Region (NCR) against Starfleet docketed as NCR 00-0504-IS-002. Their
complaint was based on the alleged underpayment of wages, nonpayment of legal/special
holiday, five (5)-day service incentive leave pay, night shift differential pay, no pay slip,
signing of blank payroll, withheld salary due to non-signing of blank payroll.
Acting on the said complaint, on 13 April 2005, an inspection was conducted by the
DOLE-NCR through its Labor and Employment Officers Augusto Gwyne C. Lasay and
Edgar B. Bumanglag.
In the interim, on 28 April 2005, individual Office Memoranda were issued by Starfleet's
Assistant Operations Manager Jerry Rafols ("Jerry Rafols") against [Petitioners] directing
them to explain in writing why no disciplinary action shall be imposed against them for
alleged violation of Class Dl.14 of Starfleet's rules and regulation[s], particularly any act of
dishonesty, whether the company has incurred loss or not[,] more specifically their alleged
involvement in a theft wherein important documents and papers including cash were lost
which happened last 25 January 2005 at [Phyvita]'s establishment. [Petitioners] were,
likewise, placed on preventive suspension pending the investigation of the said alleged theft
they committed. They were even asked to report at Phyvita on the 3rd, 9th and 10th of May
2005, respectively. Upon personal service of the said Office Memoranda, the said
employees refused to receive the same.
Acting on the said Office Memoranda, only Panaligan submitted his handwritten
explanation which merely stated "wala ako kinalaman sa ibinibintang [ sakin]."
Come the scheduled administrative hearing dates, [Petitioners] failed to attend the
same. As such, Human Resource Department Manager of Phyvita Leonor Terible issued
Office Memoranda against the same employees recommending them to participate in the
administrative proceedings that Phyvita will conduct.
Having failed to participate in the investigation proceedings conducted by Phyvita,
Memoranda dated 26 May 2005 were issued against [Petitioners] informing them that they
are terminated from their employment on the ground that they violated the company's rules
and regulation[ s] by stealing company documents and cash. They were also informed that
such termination is without prejudice to the filing of criminal charges against them.
 On 17 June 2005, Arroyo, Mangco, Maranquez, Lachica and Grasparil agreed to settle
their claims, in the complaint filed before the DOLE-NCR, by way of Quitclaim and Releases
duly executed before Senior Labor and Employment Officer Marilou D. Tumanguil
On 28 June 2005, Phyvita, as represented by Enriquez, filed a criminal complaint for
theft against [Petitioners] including Marquez, Lorenzo, Devanadero and Rose before the
Office of the City Prosecutor of Parañaque.
On 31 July 2005, by virtue of the aforesaid Quitclaim and Releases, the said complaint
before the DOLE-NCR, in so far as the [Petitioners], Rose, Bernales, Reyes, Garcia,
Kasing, Marquez and Pullan are concerned, was endorsed to the NCR Arbitration Branch of
the NLRC for proper proceedings.
On 30 September 2005, the criminal complaint was dismissed by 3rd Assistant City
Prosecutor Antonietta Pablo-Medina there being no sufficient evidence submitted by the
parties to warrant the finding of the crime of theft against aforesaid employees.
On 14 November 2006, [Petitioners] filed the complaint with the NLRC alleging, inter
alia, illegal dismissal and payment of separation pay.
On 9 January 2007, they amended their complaint claiming for reinstatement and
payment of full backwages, instead of their previous claim for separation pay. The case was
docketed as NLRC NCR 00-11-09431-06.
Conciliation failed, thus, the parties submitted their respective Position Papers and
Reply.
In their Position Paper and Reply, the [Petitioners] argue that, as room boys of
Starfleet, they were required to report for work from 10 am to 7 pm as morning shift, 6 pm to
3 am as evening shift and 8 pm to 5 am as closing shift. They were also required to work six
(6) days a week, including holidays, without any overtime pay, holiday pay, premium pay for
holiday and rest day and service incentive leave pay. For their salary, they were only
receiving a basic monthly salary of Php3,600.00 or Php l38.00 per day. Being underpaid of
their basic salary, their 13th month pay were likewise underpaid. They were also not given
their pro-rated 13th month pay after their illegal dismissal last 2005. They also claim that
Starfleet requires their employees to sign blank payroll sheets before their salaries are
given to them. They also assert that their termination was a mere retaliatory measure on the
part of Starfleet because they have filed a complaint before the DOLE and refused to
amicably settle the same. They claim that to unjustly accuse them of stealing would be a
violation of Article 118 of the Labor Code. Their dismissal was, likewise, in violation of the
requirements provided by law and jurisprudence to validly terminate them. The charge of
theft against them was baseless. In fact, the said criminal complaint against them was
dismissed by the City Prosecutor for the simple reason that there was no direct, solid or
concrete proof directing them to the commission of theft. Starfleet also has no basis to
terminate them on the ground of loss of trust and confidence since said ground for dismissal
was without any basis or proof.
Starfleet, Jorge Rafols and [Joy] Ting, on the other hand, stated in their Position Paper
and Reply that [Petitioners] got involved in the theft of important office documents and other
valuable items on 25 January 2005. They were given an opportunity to explain themselves
through Memoranda but they refused to receive and acknowledge the same. They also did
not appear during the administrative investigations. They claim that [Petitioners'] dismissal
were legal under Article 282 of the Labor Code since the commission of theft is a serious
misconduct and an act which gives rise to fraud or willful breach by the employee of the
trust reposed in him by his employer or duly authorized representative. Thus, it is a
sufficient ground to justify their dismissal. The dismissal of the criminal complaint against
[Petitioners] is immaterial since they were still validly dismissed based on breach of trust.
They even alleged that the filing of the instant labor complaint was a mere afterthought. In
support of their claim that the employees were paid according to the mandated wage and
benefits, they presented copies of their payroll sheets. On the alleged double bookkeeping,
Starfleet countered the said allegation by stating that said blank payroll sheets does not
prove anything primarily because they were not signed by the manager nor the payroll
officer and does not contain any data. These blank payroll sheets were even the subject of
the crime of theft which Starfleet filed against [Petitioners]. The fact that the blank payroll
sheets are in their possession establishes the fact that they unquestionably committed the
crime of theft.
Labor Arbiter Jose G. De Vera declared in his Decision dated July 31, 2007 that P
ANALIGAN, et al.,  were legally terminated from employment on the ground of loss of trust
and confidence. The dispositive portion of said judgment reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered ordering the respondents to pay the complainants the sum of ₱29,000.00
each, or the aggregate sum of ₱87,000.00 as salary differential.
All other claims, including the charge of illegal dismissal are dismissed for lack of merit.
Upon appeal by PANALIGAN, et al.,  the aforementioned ruling was reversed and set
aside by the NLRC in its Decision dated June 9, 2009. The NLRC arrived at the conclusion
that PANALIGAN, et al., were illegally dismissed from employment, thus, ordering the
following:
ACCORDINGLY, the appealed Decision is hereby REVERSED and SET ASIDE
and a new one is ENTERED declaring complainants to be illegally terminated whereby
respondent-appellees Starfleet Reflex Zone/Jorge Rafols and [Joy] Ting liable to pay
complainants their separation pay in the amount of Php 69,524.00, Php69,524.00 and
Php 69,524.00 and; back wages in the amount of Php 473,425.17, Php473,425. l 7 and
Php473,425.17, respectively. Further, respondents are ordered to pay complainants
their salary differentials in the amount of Php48,251.84, Php48,251.84 and
Php48,251.84, respectively. And, the amount of Php6,000.00, Php6,000.00 and
Php6,000.00, representing their respective unpaid salaries for the period of April 1-28,
2005.
The NLRC subsequently denied PHYVITA's motion for reconsideration through a
Resolution dated September 25, 2009.
Thus, PHYVIT A elevated this case to the Court of Appeals. The appellate court
reversed the NLRC issuances and reinstated the July 31, 2007 Decision of the Labor
Arbiter, to wit:
WHEREFORE, the instant petition is hereby GRANTED. The assailed Decision dated
09 June 2009 and Resolution 25 September 2009 issued by the National Labor
Relations Commission are REVERSED and SET ASIDE. The Decision dated 31 July
2007 of Labor Arbiter Jose G. De Vera is hereby REINSTATED.
A motion for reconsideration filed by PANALIGAN, et al., was denied for lack of merit
by the Court of Appeals in its Resolution dated May 29, 2012.
 Hence, PANALIGAN, et al., filed the present petition with this Court relying on the
following grounds in support of the same:
I.
WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED AN ERROR
OF LAW IN REVERSING THE JUDGMENT AWARD FOR SALARY DIFFERENTIALS
AND UNPAID SALARIES WHEN THE BASIS FOR THE SAME WAS NOT EVEN
DISCUSSED IN ITS DECISION.
II.
WITH UTMOST DEFERENCE, THE COURT OF APPEALS COMMITTED AN
ERROR OF LAW IN HOLDING THAT RESPONDENT HAD SUBSTANTIALLY
PROVEN THE LEGALITY OF PETITIONERS' DISMISSAL DUE TO SERIOUS
MISCONDUCT DESPITE THE LACK OF CONVINCING EVIDENCE SHOWING THEIR
INVOLVEMENT IN THE ALLEGED INCIDENT OF THEFT AND THE LACK OF
CONCRETE PROOF THAT THE PAYROLLS WERE PART OF THE STOLEN ITEMS.
III.
WITH UTMOST DEFERENCE, THE COURT OF APPEALS COMMITTED AN
ERROR OF LAW IN HOLDING THAT RESPONDENT HAD SUBSTANTIALLY
PROVEN THE LEGALITY OF PETITIONERS' DISMISSAL DUE TO LOSS OF TRUST
AND CONFIDENCE DESPITE THE FACT THAT IT IS SIMULA TED, USED AS A
SUBTERFUGE FOR ILLEGAL ACTION, ARBITRARILY ASSERTED AND A MERE
AFTERTHOUGHT.
PANALIGAN, et al.,  argued that the assailed November 24, 2011 Decision of the Court
of Appeals failed to state any factual, legal and equitable justification why the NLRC's
monetary awards for salary differential and unpaid salaries were also set aside. They
likewise asserted that theft, as the basis of their purported serious misconduct, was not
established by evidence since, according to them, the ruling of the Court of Appeals failed
to state how the alleged theft was committed by them and what evidence can be found on
record to support such finding. Lastly, they maintained that the alleged theft was utilized by
PHYVIT A as a subterfuge to justify their dismissal without adequate cause. They
characterized the criminal complaint against them as a retaliatory action by PHYVIT A for
their refusal to settle and withdraw the complaint they filed with the Department of Labor
and Employment - National Capital Region Office (DOLE-NCR) for underpayment of wages
and nonpayment of other labor standard benefits.
On the other hand, PHYVIT A claimed that the Court of Appeals correctly ruled that
there were just causes to dismiss PANALIGAN, et al.,  from their employment; namely,
serious misconduct and loss of trust and confidence. PHYVIT A contended that, despite the
dismissal by the Office of the City Prosecutor of Parafiaque of the criminal complaint for
theft against PANALIGAN, et al., on the ground of lack of probable cause, there was
substantial evidence to support a valid dismissal from employment as ruled by the Court of
Appeals. PHYVITA maintained that PANALIGAN, et al.'s possession of stolen payroll slips
is sufficient to justify the termination of PANALIGAN, et al.
After an assiduous evaluation of the parties' submissions, we find the petition
meritorious.
The fundamental question that needs to be resolved in this case is whether or not there
exists just and valid cause for the termination of PANALIGAN, et al.'s,  employment by
PHYVITA. A review of the conflicting findings on this matter by the Labor Arbiter and the
Court of Appeals, on one hand, and the NLRC, on the other, yields the conclusion that the
allegations of serious misconduct and loss of trust and confidence against PAN ALI GAN, et
al.,  cannot be upheld.
The applicable provision of law to this case is Article 297 of the Labor Code, as
amended, which states:
ARTICLE 297. Termination by Employer. - An employer may terminate an employment
for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders 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 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. (Emphases supplied.)
In Maula v. Ximex Delivery Express, Inc, this Court reiterated previous
pronouncements on the nature of serious misconduct as a just cause to terminate an
employee according to the Labor Code. To quote:
Misconduct is improper or wrong conduct; it is the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. The misconduct, to be serious
within the meaning of the Labor Code, must be of such a grave and aggravated
character and not merely trivial or unimportant. Thus, for misconduct or improper
behavior to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the
performance of the employee's duties; and (c) it must show that the employee has
become unfit to continue working for the employer.
On the other hand, loss of trust and confidence, as a just cause for termination of
employment, is premised on the fact that an employee concerned holds a position where
greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected. The betrayal of this trust is the essence of the offense for which
an employee is penalized. Loss of trust and confidence to be a valid cause for dismissal
must be work related such as would show the employee concerned to be unfit to continue
working for the employer and it must be based on a willful breach of trust and founded on
clearly established facts. Such breach is willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. The loss of trust and confidence must spring from
the voluntary or willful act of the employee, or by reason of some blameworthy act or
omission on the part of the employee.
Willful breach of trust, as just cause for the termination of employment, is founded on
the fact that the employee concerned: (1) holds a position of trust and
confidence, i.e., managerial personnel or those vested with powers and prerogatives to lay
down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees; or (2) is routinely charged with the care and custody of the
employer's money or property, i.e.,  cashiers, auditors, property custodians, or those who, in
normal and routine exercise of their functions, regularly handle significant amounts of
money or property. In any of these situations, it is the employee's breach of the trust that his
or her position holds which results in the employer's loss of confidence.
For an employer to validly dismiss an employee on the ground of loss of trust and
confidence under Article 282(c) of the Labor Code, the employer must observe the following
guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as
subterfuge for causes which are improper, illegal or unjustified; 3) it may not be arbitrarily
asserted in the face of overwhelming evidence to the contrary; and 4) it must be genuine,
not a mere afterthought to justify earlier action taken in bad faith. More importantly, it must
be based on a willful breach of trust and founded on clearly established facts.
Thus, in order to dismiss an employee on the ground of loss of trust and confidence,
the employee must be guilty of an actual and willful breach of duty duly supported by
substantial evidence. Substantial evidence is that amount of evidence which a reasonable
mind might accept as adequate to support a conclusion.
In termination cases, the burden of proof rests on the employer to show that the
dismissal is for a just cause. In the case at bar, PHYVITA failed to adduce substantial
evidence that would clearly demonstrate that PANALIGAN, et al.,  have committed serious
misconduct or have performed actions that would warrant the loss of trust and confidence
reposed upon them by their employer. Contrary to the findings of the Court of Appeals and
the Labor Arbiter, no substantial evidence supports the allegation of theft leveled by
PHYVITA against PANALIGAN, et al. - the said criminal act being the underlying reason for
the dismissal of the latter from being employees of the former.
The records of this case clearly indicate that no direct evidence was presented to link
PAN ALI GAN, et al.,  to the theft that they allegedly committed. In fact, the questioned
payroll sheets that PANALIGAN, et al.,  attached to the labor complaint they filed before the
DOLE-NCR are the only concrete proof that PHYVITA used to support its allegation.
However, the said documents were not specifically enumerated as among the stolen items
in the police report of the alleged incident of theft, while a previous incident report20 merely
stated that "several copies of payroll" were taken. PHYVIT A first claimed that these payroll
sheets allegedly stolen from Enriquez's safekeeping were the same ones in
PANALIGAN, et al.  's, possession when its employee, Jesse Pangilinan (Pangilinan),
executed an affidavit to that effect right after attending a preliminary hearing of the labor
case initiated by PANALIGAN, et al. Pangilinan's statement was supported by the joint
affidavit made by Rommel Garcia (Garcia) and JayR Kasing (Kasing) who were also in
PHYVITA's employ.
The problem with Pangilinan's statement is that it is self-serving since it favors his
employer which is involved in a labor dispute with PANALIGAN, et al.,  and it does not show
criminal liability since it only establishes PANALIGAN, et al.'s, possession of the questioned
payroll sheets but not the fact that they themselves stole the same.
Furthermore, Pangilinan's statement is inconsistent with the other facts on record.
According to Pangilinan's affidavit, he only knew that the questioned payroll sheets were in
the possession of PANALIGAN, et al.,  when they presented the same during the May 29,
2005 DOLE-NCR hearing. The aforementioned date is crucial to this case because the
month before, or on April 28, 2005, PANALIGAN, et al., were preventively suspended from
work by PHYVIT A and given written notices to explain in writing within twenty-four (24)
hours why they should not face disciplinary sanction for their alleged involvement in the
January 25, 2005 incident of theft. Due to their non-appearance at the scheduled in-house
investigation and conference, P ANALIGAN, et al., were then served individual notices
dated May 26, 2005, that they were terminated from PHYVITA's employ for their alleged
participation in the theft. Thereafter, sometime in June 2005, Garcia and Kasing purportedly
came forward and pointed to PAN ALI GAN, et al., as among the perpetrators of the alleged
theft. Considering the said chronology of events, there was no clear ground for PHYVIT A to
preventively suspend and later terminate the services of PANALIGAN, et al.,  when the
company's actions predated the bases for doing so - the discovery of the questioned payroll
sheets by Pangilinan allegedly on May 29, 2005 as stated in his affidavit and the revelations
of Garcia and Kasing allegedly made sometime in June 2005. Alternatively stated,
respondent company had charged and terminated PAN ALI GAN, et al., before it had even
obtained its supposed "proof'' of their misdeed.
To be sure, the joint affidavit of Garcia and Kasing deserves scant consideration
because it contains statements which are hearsay. They merely claimed that another
employee, Amel Pullan, told them that PANALIGAN, et al., were part of the group that stole
the questioned payroll sheets from the Executive Office. Evidently, they did not have
personal knowledge of the alleged theft. Furthermore, their claim was flatly denied by
PANALIGAN, et al.  It is likewise interesting to note that Garcia and Kasing were former co-
complainants of PANALIGAN, et al., in the labor case at issue but later withdrew from
pursuing it after entering into a compromise agreement with PHYVITA along with six other
complainants. Premises considered, their statements cannot be fully relied upon because it
is highly probable that the same may have been secured in exchange for some
consideration.
Similarly, the complaint-affidavit of Girly Enriquez (PHYVITA's Finance Assistant) and
the affidavit of Jorge Rafols (PHYVITA's Operations Manager) rely heavily on the assertions
made by Pangilinan, Garcia and Kasing in order for said affiants to arrive at their conclusion
that PANALIGAN, et al., were responsible for the incident of theft. They did not personally
witness the commission of the alleged theft by PANALIGAN, et al. In fact, none of
PHYVITA's witnesses did as Pangilinan merely provided doubtful circumstantial evidence
and Garcia and Kasing put forward corroborating testimony that is undoubtedly hearsay and
not of their personal knowledge. Given these circumstances, these affidavits executed by
PHYVITA's officers cannot be given probative weight.
PHYVIT A argues that, being in possession of stolen items, P ANALIGAN, et al.,  are
presumed to have stolen the same unless contradicted or overcome by other evidence as
mandated by Rule 131, Section 30) of the Revised Rules on Evidence, to wit:
SEC. 3. Disputable presumptions. - The following presumptions are satisfactory if
uncontradicted, but may be contradicted and overcome by other evidence:
xxxx
(j) That a person found in possession of a thing taken in the doing of a recent wrongful
act is the taker and the doer of the whole act; otherwise, that things which a person
possesses, or exercises acts of ownership over, are owned by him[.]
We have held that the application of the disputable presumption that a person found in
possession of a thing taken in the doing of a recent wrongful act is the taker and doer of the
whole act is limited to cases where such possession is either unexplained or that the
proffered explanation is rendered implausible in view of independent evidence inconsistent
thereto. In the present case, petitioners' possession of the questioned payroll sheets was
explained by the sworn affidavit of former PHYVITA employee Allan Grasparil (Grasparil)
who freely admitted that he was the source of the documents which he allegedly received
from Enriquez. Significantly, PHYVIT A proffered no counterstatement from Enriquez
specifically refuting Grasparil's narrative.
 The June 9, 2009 Decision of the NLRC made use of Grasparil's testimony to support
its finding that no substantial evidence was shown to prove that P ANALIGAN, et al., were
guilty of theft and that they were illegally dismissed from employment, explaining thus:
Notably, a former employee of respondent-appellees by the name of Mr. Allan Grasparil
explained that a co-employee, Ms. Girly Enriquez, approached him on January 25, 2005
and required him to sign a payroll sheet. Further, he was also directed to let his other
co-workers to sign the same and to thereafter return it to her. However, he failed to
return the said document. That when they filed a complaint before the DOLE he
allegedly remembered the payroll sheet and they used it as evidence (p. 120, record).
Remarkably, this crucial statement of Mr. Grasparil was not disputed by respondents-
appellees. Hence, deemed admitted pursuant to Section 32, Rule 130 of the Revised
Rules on Evidence, to wit:
An act or declaration made in the presence and within the hearing or observation of a
party who does or says nothing when the act or declaration is such as naturally to call
for action or comment if not true, and when proper and rossible for him to do so, may be
given in evidence against him.  of loss of trust and confidence. However, even with the lower burden of proof in labor cases,
In Fernandez v. Newfield Staff Solutions, lnc., we reiterated our previous ruling
in Solas v. Power & Telephone Supply Phils., Inc. that this manner of silence constitutes an
admission that fortifies the truth of the employee's narration.
It is worth noting that Grasparil was also one of the original complainants in the labor
case filed against PHYVITA by PANALIGAN, et al.,  but later withdrew from the same after
entering into a compromise agreement with PHYVIT A not unlike Garcia and Kasing.
Therefore, we have a situation wherein three similarly situated individuals have divergent
and conflicting claims over the important issue of who was the source of the questioned
payroll sheets with Grasparil openly admitting the same and Garcia and Kasing pointing to
PANALIGAN, et al.,  based solely on hearsay evidence. At the very least, this circumstance
casts doubt upon the evidence so far presented by both parties. With this development, we
are compelled to uphold the case for PANALIGAN, et al., since it is settled doctrine that if
doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter.  the NLRC both found that PANALIGAN, et al.'s, wages were underpaid based on the
Grasparil also stated in his affidavit that aside from monetary consideration, his
compromise agreement with the company included a mutual desistance from the cases
they filed against each other. PHYVITA allegedly proceeded with the prosecution of the
case against those who did not enter into a compromise with it. We quote the relevant
portion of Grasparil's affidavit here:
(3) Ukol po sa nasabing kaso sa nasabing ahensiya ng gobyemo [Department of
Labor], ako po ay napilitang makipagkasundo sa aming employer upang iurong ang
aking reklamo laban sa kanila at sa pangakong hindi nila ako idadawit sa kasong
isinampa nila sa mga trabahador na nagreklamo laban sa kanila;
(4) Sa ganito pong sitwasyon ay binigyan nila ako ng halagang ₱15,000.00 bilang
kabayaran sa aking separation pay at pag-uurong ng kasong [sic] sa DEPARTMENT
OF LABOR;
(5) Tinupad naman po nila ang kanilang pangako at hindi nila ako idinawit sa kaso na
kanilang isinampa sa aking mga kasama sa trabaho, subalit itinuloy po nila ang kaso
laban sa aking mga kasamahang hindi nakipagkasundo o nakipag-ayos sa kanila[.]
Taking into consideration the fact that the DOLE-NCR conducted an inspection of the
respondent's premises on April 13, 2005 as a result of the labor complaint filed by PAN ALI
GAN, et al.,  on April 4, 2005 and PANALIGAN, et al., were implicated in the alleged
January 25, 2005 theft incident only thereafter, a reasonable inference can be made that
PANALIGAN, et al.'s, termination of employment may have been indeed a retaliatory
measure designed to coerce them into withdrawing their complaint for underpayment of
wages and nonpayment of other labor standard benefits. Such an act is proscribed by
Article 118 of the Labor Code which states:
Art. 118. Retaliatory Measures - It shall be unlawful for an employer to refuse to pay or
reduce the wages and benefits, discharge or in any manner discriminate against any
employee who has filed any complaint or instituted any proceeding under this title or has
testified or is about to testify in such proceedings.
There is no question that PANALIGAN, et al.,  occupied positions that are reposed with
trust and confidence. Jurisprudence states that the job of a roomboy or chambermaid in a
hotel is clearly of such a nature as to require a substantial amount of trust and confidence
on the part of the employer There is merit as well in PHYVITA's assertion that the dismissal
of its criminal complaint does not necessarily exonerate PANALIGAN, et al.,  from a charge
there is a dearth of substantial evidence to support a finding that PANALIGAN, et al., were
indeed guilty of a willful breach of their employer's trust. We are constrained to conclude
that there is no just and valid cause to terminate the employment of PANALIGAN, et al., for
loss of trust and confidence or even for serious misconduct.
Therefore, we uphold the NLRC in finding that PANALIGAN, et al.,  were illegally
dismissed from employment by PHYVIT A and, thus, are entitled to separation pay, in lieu
of reinstatement, and full backwages. Given the obviously strained relations between the
parties and the length of time that PANALIGAN, et al., have been separated from their
employment in PHYVIT A, we agree with the NLRC that the doctrine of strained relations
must apply wherein the payment of separation pay is considered an acceptable alternative
to reinstatement when the latter option is no longer desirable or viable. 
Finally, we find no reason to disturb the NLRC's ruling regarding the award of salary
differentials and unpaid salaries for April 2005 to PANALIGAN, et al.  The Labor Arbiter and
documents on record; they only differed in the period or the number of months. We agree
with the NLRC that PHYVITA should be liable for PANALIGAN, et al.'s,  claims for underpaid
salaries that had not yet prescribed at the time of the filing of the complaint. Moreover, it is
settled even in labor cases that "one who pleads payment has the burden of proving it.
Even where the plaintiff must allege nonpayment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove nonpayment. " In
another case, we upheld the NLRC' s ruling that the burden of proof rests on the employer
to show that it has not committed any violation of labor standard laws, in particular the full
payment of the legally mandated wages. If PHYVITA had truly paid PANALIGAN, et
al.,  their correct wages, it had every opportunity to produce all relevant payrolls and
documents in the proceedings below instead of merely submitting incomplete documents
relating to February 2005 salaries, 13th month pay and service incentive leave.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
the Resolution dated May 29, 2012 of the Court of Appeals in CA-G.R. SP No. 111653 are
hereby REVERSED and SET ASIDE. The Decision dated June 9, 2009 and the Resolution
dated September 25, 2009 of the National Labor Relations Commission in NLRCLAC Case
No. 09-002564-07 and NLRC-NCR Case No. 00-11-09431-06 are hereby REINSTATED.
SO ORDERED.
G.R. Nos. 178382-83.  September 23, 2015

CONTINENTAL MICRONESIA, INC., petitioner, vs. JOSEPH BASSO, respondent.
Civil Law; Conflict of Laws; In Hasegawa v. Kitamura, 538 SCRA 261 (2007), the Supreme Court
(SC) stated that in the judicial resolution of conflict-of-laws problems, three (3) consecutive phases are
involved: jurisdiction, choice of law, and recognition and enforcement of judgments.—In Hasegawa v.
Kitamura, 538 SCRA 261 (2007), we stated that in the judicial resolution of conflict-of-laws problems,
three consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of
judgments. In resolving the conflicts problem, courts should ask the following questions: 1. Under the
law, do I have jurisdiction over the subject matter and the parties to this case? 2. If the answer is yes, is
this a convenient forum to the parties, in light of the facts? 3. If the answer is yes, what is the conflicts
rule for this particular problem? 4. If the conflicts rule points to a foreign law, has said law been properly
pleaded and proved by the one invoking it? 5. If so, is the application or enforcement of the foreign law
in the forum one of the basic exceptions to the application of foreign law? In short, is there any strong
policy or vital interest of the forum that is at stake in this case and which should preclude the
application of foreign law?
Remedial Law; Civil Procedure; Jurisdiction; Jurisdiction over the subject matter is conferred by
the Constitution or by law and by the material allegations in the complaint, regardless of whether or not
the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.—Jurisdiction is
defined as the power and authority of the courts to hear, try and decide cases. Jurisdiction over the
subject matter is conferred by the Constitution or by law and by the material allegations in the
complaint, regardless of whether or not the plaintiff is entitled to recover all or some of the claims or
reliefs sought therein. It cannot be acquired through a waiver or enlarged by the omission of the parties
or conferred by the acquiescence of the court. That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not automatically
preclude our labor tribunals from exercising jurisdiction to hear and try this case.
Mercantile Law; Corporations; Foreign Corporations; The purpose of the law in requiring that
foreign corporations doing business in the country be licensed to do so, is to subject the foreign
corporations to the jurisdiction of our courts.—As regards jurisdiction over the parties, we agree with
the Court of Appeals that the Labor Arbiter acquired jurisdiction over the person of Basso,
notwithstanding his citizenship, when he filed his complaint against CMI. On the other hand, jurisdiction
over the person of CMI was acquired through the coercive process of service of summons. We note
that CMI never denied that it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign corporation, CMI is licensed to do
business in the Philippines and has a local business address here. The purpose of the law in requiring
that foreign corporations doing business in the country be licensed to do so, is to subject the foreign
corporations to the jurisdiction of our courts.
Civil Law; Conflict of Laws; Doctrine of Forum Non Conveniens; Under the doctrine of forum non
conveniens, a Philippine court in a conflict-of-laws case may assume jurisdiction if it chooses to do so.
—Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case may assume
jurisdiction if it chooses to do so, provided, that the following requisites are met: (1) that the Philippine
Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position
to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is
likely to have power to enforce its decision. All these requisites are present here. Basso may
conveniently resort to our labor tribunals as he and CMI had physical presence in the Philippines during
the duration of the trial. CMI has a Philippine branch, while Basso, before his death, was residing here.
Thus, it could be reasonably expected that no extraordinary measures were needed for the parties to
make arrangements in advocating their respective cases.
Same; Same; The choice-of-law issue in a conflict-of-laws case seeks to answer the following
important questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two (2) or more states; and (2) to what extent should the chosen legal
system regulate the situation.—The choice-of-law issue in a conflict-of-laws case seeks to answer the
following important questions:  (1) What legal system should control a given situation where some of
the significant facts occurred in two or more states; and (2) to what extent should the chosen legal
system regulate the situation. These questions are entirely different from the question of jurisdiction
that only seeks to answer whether the courts of a state where the case is initiated have jurisdiction to
enter a judgment. As such, the power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law.
Same; Same; In Saudi Arabian Airlines v. Court of Appeals, 297 SCRA 469 (1998), the Supreme
Court (SC) emphasized that an essential element of conflict rules is the indication of a “test” or
“connecting factor” or “point of contact.”—In Saudi Arabian Airlines v. Court of Appeals, 297 SCRA 469
(1998), we emphasized that an essential element of conflict rules is the indication of a “test” or
“connecting factor” or “point of contact.” Choice-of-law rules invariably consist of a factual relationship
(such as property right, contract claim) and a connecting fact or point of contact, such as the situs of
the res, the place of celebration, the place of performance, or the place of wrongdoing. Pursuant to
Saudi Arabian Airlines, we hold that the “test factors,” “points of contact” or “connecting factors” in this
case are the following: (1) The nationality, domicile or residence of Basso; (2) The seat of CMI; (3) The
place where the employment contract has been made, the locus actus; (4) The place where the act is
intended to come into effect, e.g., the place of performance of contractual duties; (5) The intention of
the contracting parties as to the law that should govern their agreement, the lex loci intentionis; and (6)
The place where judicial or administrative proceedings are instituted or done.
Remedial Law; Evidence; Foreign Law; Processual Presumption; If the foreign law is not properly
pleaded or proved, the presumption of identity or similarity of the foreign law to our own laws, otherwise
known as processual presumption, applies.—The rule is that there is no judicial notice of any foreign
law. As any other fact, it must be alleged and proved. If the foreign law is not properly pleaded or
proved, the presumption of identity or similarity of the foreign law to our own laws, otherwise known as
processual presumption, applies. Here, US law may have been properly pleaded but it was not proved
in the labor tribunals.
Labor Law; Managerial Employees; Security of Tenure; Managerial employees enjoy security of
tenure and the right of the management to dismiss must be balanced against the managerial
employee’s right to security of tenure, which is not one of the guaranties he gives up.—It is of no
moment that Basso was a managerial employee of CMI. Managerial employees enjoy security of tenure
and the right of the management to dismiss must be balanced against the managerial employee’s right
to security of tenure, which is not one of the guaranties he gives up.
Same; Termination of Employment; Loss of Trust and Confidence; Guidelines in Dismissing an
Employee on the Ground of Loss of Trust and Confidence.—In Apo Cement Corporation v. Baptisma,
674 SCRA 162 (2012), we ruled that for an employer to validly dismiss an employee on the ground of
loss of trust and confidence under Article 282(c) of the Labor Code, the employer must observe the
following guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as
subterfuge for causes which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in
the face of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere afterthought
to justify earlier action taken in bad faith. More importantly, it must be based on a willful breach of trust
and founded on clearly established facts.
Same; Same; Illegal Dismissal; Reinstatement; Backwages; Under Article 279 of the Labor Code,
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 up to the
time of actual reinstatement.—Under Article 279 of the Labor Code, 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 up to the time of actual
reinstatement.
 Same; Same; Same; Same; Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages.—Where reinstatement is no longer
viable as an option, separation pay equivalent to one (1) month salary for every year of service should
be awarded as an alternative. The payment of separation pay is in addition to payment of backwages.
In the case of Basso, reinstatement is no longer possible since he has already passed away. Thus,
Basso’s separation pay with full backwages shall be paid to his heirs.
JARDELEZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision dated May 23, 2006 and Resolution dated June 19, 2007 of the Court
of Appeals in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281.
These assailed Decision and Resolution set aside the Decision dated November 28, 2003
of the National Labor Relations Commission (NLRC) declaring Joseph Basso's (Basso)
dismissal illegal, and ordering the payment of separation pay as alternative to reinstatement
and full backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and
existing under the laws of and domiciled in the United States of America (US). It is licensed
to do business in the Philippines. Basso, a US citizen, resided in the Philippines prior to his
death.
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing Director-
Asia of Continental Airlines, Inc. (Continental), offered Basso the position of General
Manager of the Philippine Branch of Continental. Basso accepted the offer.7
It was not until much later that Mr. Braden, who had since returned to the US, sent
Basso the employment contract dated February 1, 1991, which Mr. Braden had already
signed. Basso then signed the employment contract and returned it to Mr. Braden as
instructed.
On November 7, 1992, CMI took over the Philippine operations of Continental, with
Basso retaining his position as General Manager.
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz),
who was then CMI’s Vice President of Marketing and Sales, informing Basso that he has
agreed to work in CMI as a consultant on an "as needed basis" effective February 1, 1996
to July 31, 1996. The letter also informed Basso that: (1) he will not receive any monetary
compensation but will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the payment of
housing lease for 12 months.
On January 11, 1996, Basso wrote a counterproposal to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed to
Ms. Marty Woodward (Ms. Woodward) of CMI’s Human Resources Department inquiring
about the status of his employment. On the same day, Ms. Woodward responded that
pursuant to the employment contract dated February 1, 1991, Basso could be terminated at
will upon a thirty-day notice. This notice was allegedly the letter Basso received from Mr.
Schulz on December 20, 1995. Ms. Woodward also reminded Basso of the telephone
conversation between him, Mr. Schulz and Ms. Woodward on December 19, 1995, where
they informed him of the company’s decision to relieve him as General Manager. Basso,
instead, was offered the position of consultant to CMI. Ms. Woodward also informed Basso
that CMI rejected his counter-proposal and, thus, terminated his employment effective
January 31, 1996. CMI offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him Basso filed a Complaint for
Illegal Dismissal with Moral and Exemplary Damages against CMI on December 19,
1996. Alleging the presence of foreign elements, CMI filed a Motion to Dismiss dated
February 10, 1997 on the ground of lack of jurisdiction over the person of CMI and the
subject matter of the controversy. In an Order dated August 27, 1997, the Labor Arbiter
granted the Motion to Dismiss. Applying the doctrine of lex loci contractus, the Labor Arbiter
held that the terms and provisions of the employment contract show that the parties did not
intend to apply our Labor Code (Presidential Decree No. 442). The Labor Arbiter also held
that no employer-employee relationship existed between Basso and the branch office of
CMI in the Philippines, but between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of
certain facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether the
principle of lex loci contractus or lex loci celebrationis should apply has to be further
threshed out.
Labor Arbiter’s Ruling
Labor Arbiter Madjayran H. Ajan in his Decision dated September 24, 1999 dismissed
the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was executed in the
US "since the letter-offer was under the Texas letterhead and the acceptance of
Complainant was returned there." Thus, applying the doctrine of lex loci celebrationis, US
laws apply. Also, applying lex loci contractus, the Labor Arbiter ruled that the parties did not
intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine
laws were not written into it. More specifically, the Philippine law on taxes and the Labor
Code were not intended by the parties to apply, otherwise Par. 7 on the payment by
Complainant U.S. Federal and Home State income taxes, and Pars. 22/23 on
termination by 30-day prior notice, will not be there. The contract was prepared in
contemplation of Texas or U.S. laws where Par. 7 is required and Pars. 22/23 is
allowed.
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust and
loss of confidence.
The Labor Arbiter, however, found CMI to have voluntarily submitted to his office’s
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of the
case, and sought affirmative relief through a motion to dismiss.
NLRC’s Ruling
On appeal, the NLRC Third Division promulgated its Decision dated November 28,
2003, the decretal portion of which reads:
 WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure to
comply with the due notice requirement. The other claims are dismissed.
SO ORDERED.
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has
no jurisdiction over the controversy. It ruled that the Labor Arbiter acquired jurisdiction over
the case when CMI voluntarily submitted to his office’s jurisdiction by presenting evidence,
advancing arguments in support of the legality of its acts, and praying for reliefs on the
merits of the case.
On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for
just and valid causes on the ground of breach of trust and loss of confidence. The NLRC
ruled that under the applicable rules on loss of trust and confidence of a managerial
employee, such as Basso, mere existence of a basis for believing that such employee has
breached the trust of his employer suffices. However, the NLRC found that CMI denied
Basso the required due process notice in his dismissal.
Both CMI and Basso filed their respective Motions for Reconsideration dated January
15, 2004 and January 8, 2004. Both motions were dismissed in separate Resolutions dated
March 15, 2004 and February 27, 2004, respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals
docketed as CA-G.R. SP No. 83938. Basso imputed grave abuse of discretion on the part
of the NLRC in ruling that he was validly dismissed. CMI filed its own Petition for Certiorari
dated May 13, 2004 docketed as CA-G.R. SP No. 84281, alleging that the NLRC gravely
abused its discretion when it assumed jurisdiction over the person of CMI and the subject
matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two
cases and ordered the parties to file their respective Memoranda.
The Court of Appeal’s Decision
The Court of Appeals promulgated the now assailed Decision dated May 23, 2006, the
relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is
DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN
DUE COURSE and GRANTED, and accordingly, the assailed Decision dated November 28,
2003 and Resolution dated February 27, 2004 of the NLRC are SET ASIDE and VACATED.
Instead judgment is rendered hereby declaring the dismissal of Basso illegal and ordering
Continental to pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to pay Basso his
full backwages from the date of his said illegal dismissal until date of this decision. The
claim for moral and exemplary damages as well as attorney’s fees are dismissed.
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over
the subject matter of the case and over the parties. The Court of Appeals explained that
jurisdiction over the subject matter of the action is determined by the allegations of the
complaint and the law. Since the case filed by Basso is a termination dispute that is
"undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC had
jurisdiction to rule on the merits of the case. On the issue of jurisdiction over the person of
the parties, who are foreigners, the Court of Appeals ruled that jurisdiction over the person
of Basso was acquired when he filed the complaint for illegal dismissal, while jurisdiction
over the person of CMI was acquired through coercive process of service of summons to its
agent in the Philippines. The Court of Appeals also agreed that the active participation of
CMI in the case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally dismissed
Basso. The Court of Appeals found that CMI’s allegations of loss of trust and confidence
were not established. CMI "failed to prove its claim of the incidents which were its alleged
bases for loss of trust or confidence." While managerial employees can be dismissed for
loss of trust and confidence, there must be a basis for such loss, beyond mere whim or
caprice.
After the parties filed their Motions for Reconsideration, the Court of Appeals
promulgated Resolution dated June 19, 2007 denying CMI’s motion, while partially granting
Basso’s as to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE
FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO
WHETHER OR NOT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE
LABOR ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE
ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO
WAS NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST OR
CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the
illegal dismissal case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction over the parties and the subject
matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to determine
proper jurisdiction over the parties and the subject matter of the case. It also alleges that the
existence of foreign elements calls for the application of US laws and the doctrines of lex
loci celebrationis (the law of the place of the ceremony), lex loci contractus (law of the place
where a contract is executed), and lex loci intentionis (the intention of the parties as to the
law that should govern their agreement). CMI also invokes the application of the rule of
forum non conveniens to determine the propriety of the assumption of jurisdiction by the
labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first.
Where the facts establish the existence of foreign elements, the case presents a conflict-of-
laws issue. The foreign element in a case may appear in different forms, such as in this
case, where one of the parties is an alien and the other is domiciled in another state.
 In Hasegawa v. Kitamura, we stated that in the judicial resolution of conflict-of-laws
problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. In resolving the conflicts problem, courts should ask the
following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this
case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one of the
basic exceptions to the application of foreign law? In short, is there any strong policy or
vital interest of the forum that is at stake in this case and which should preclude the
application of foreign law?
Jurisdiction is defined as the power and authority of the courts to hear, try and decide
cases. Jurisdiction over the subject matter is conferred by the Constitution or by law and by
the material allegations in the complaint, regardless of whether or not the plaintiff is entitled
to recover all or some of the claims or reliefs sought therein. It cannot be acquired through a
waiver or enlarged by the omission of the parties or conferred by the acquiescence of the
court. That the employment contract of Basso was replete with references to US laws, and
that it originated from and was returned to the US, do not automatically preclude our labor
tribunals from exercising jurisdiction to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under Article
217, clearly vests original and exclusive jurisdiction to hear and decide cases involving
termination disputes to the Labor Arbiter.
Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject matter of the
case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the
Labor Arbiter acquired jurisdiction over the person of Basso, notwithstanding his citizenship,
when he filed his complaint against CMI. On the other hand, jurisdiction over the person of
CMI was acquired through the coercive process of service of summons. We note that CMI
never denied that it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign corporation, CMI is
licensed to do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the country be
licensed to do so, is to subject the foreign corporations to the jurisdiction of our courts.
Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and
the subject matter of this case, these tribunals may proceed to try the case even if the rules
of conflict-of-laws or the convenience of the parties point to a foreign forum, this being an
exercise of sovereign prerogative of the country where the case is filed.
The next question is whether the local forum is the convenient forum in light of the facts
of the case. CMI contends that a Philippine court is an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws
case may assume jurisdiction if it chooses to do so, provided, that the following requisites
are met: (1) that the Philippine Court is one to which the parties may conveniently resort to;
(2) that the Philippine Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have power to enforce its
decision. All these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI had physical
presence in the Philippines during the duration of the trial. CMI has a Philippine branch,
while Basso, before his death, was residing here.
Thus, it could be reasonably expected that no extraordinary measures were needed for
the parties to make arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts. The
incident subject of this case (i.e. dismissal of Basso) happened in the Philippines, the
surrounding circumstances of which can be ascertained without having to leave the
Philippines. The acts that allegedly led to loss of trust and confidence and Basso’s eventual
dismissal were committed in the Philippines. As to the law, we hold that Philippine law is the
proper law of the forum, as we shall discuss shortly. Also, the labor tribunals have the
power to enforce their judgments because they acquired jurisdiction over the persons of
both parties.
Our labor tribunals being the convenient fora, the next question is what law should
apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the following
important questions: (1) What legal system should control a given situation where some of
the significant facts occurred in two or more states; and (2) to what extent should the
chosen legal system regulate the situation. These questions are entirely different from the
question of jurisdiction that only seeks to answer whether the courts of a state where the
case is initiated have jurisdiction to enter a judgment. As such, the power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law.
CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment originated
from and was returned to the US after Basso signed it, and hence, was perfected there.
CMI further claims that the references to US law in the employment contract show the
parties’ intention to apply US law and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State Department
Index, the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home state
income taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S.
Department of State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party without any
further liability on thirty days prior written notice."
CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI concludes
that if such laws were applied, there would have been no illegal dismissal to speak of
because the termination-at-will provision in Basso’s employment contract would have been
perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals, we emphasized that an essential element
of conflict rules is the indication of a "test" or "connecting factor" or "point of contact".
Choice-of-law rules invariably consist of a factual relationship (such as property right,
contract claim) and a connecting fact or point of contact, such as the situs of the res, the
place of celebration, the place of performance, or the place of wrongdoing. Pursuant to
Saudi Arabian Airlines, we hold that the "test factors," "points of contact" or "connecting
factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus actus;
(4) The place where the act is intended to come into effect, e.g., the place of
performance of contractual duties;
(5) The intention of the contracting parties as to the law that should govern their
agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or done.
Applying the foregoing in this case, we conclude that Philippine law is the applicable
law. Basso, though a US citizen, was a resident here from the time he was hired by CMI
until his death during the pendency of the case. CMI, while a foreign corporation, has a
license to do business in the Philippines and maintains a branch here, where Basso was
hired to work. The contract of employment was negotiated in the Philippines. A purely
consensual contract, it was also perfected in the Philippines when Basso accepted the
terms and conditions of his employment as offered by CMI. The place of performance
relative to Basso’s contractual duties was in the Philippines. The alleged prohibited acts of
Basso that warranted his dismissal were committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the problem.
Thus, we hold that CMI and Basso intended Philippine law to govern, notwithstanding some
references made to US laws and the fact that this intention was not expressly stated in the
contract. We explained in Philippine Export and Foreign Loan Guarantee Corporation v. V.
P. Eusebio Construction, Inc. that the law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or domicile of the parties. We
cautioned, however, that while Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to select the law applicable to
their contract, the selection is subject to the limitation that it is not against the law, morals,
or public policy of the forum.
Similarly, in Bank of America, NT & SA v. American Realty Corporation, we ruled that a
foreign law, judgment or contract contrary to a sound and established public policy of the
forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates
the fundamental principles of Conflict of Laws.
Termination-at-will is anathema to the public policies on labor protection espoused by
our laws and Constitution, which dictates that no worker shall be dismissed except for just
and authorized causes provided by law and after due process having been complied
with. Hence, the US Railway Labor Act, which sanctions termination-at-will, should not be
applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As any other
fact, it must be alleged and proved. If the foreign law is not properly pleaded or proved, the
presumption of identity or similarity of the foreign law to our own laws, otherwise known as
processual presumption, applies. Here, US law may have been properly pleaded but it was
not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third issues.
The Court of Appeals may review the factual findings of the NLRC in a Rule 65
petition.
CMI submits that the Court of Appeals overstepped the boundaries of the limited scope
of its certiorari jurisdiction when instead of ruling on the existence of grave abuse of
discretion, it proceeded to pass upon the legality and propriety of Basso’s dismissal.
Moreover, CMI asserts that it was error on the part of the Court of Appeals to re-evaluate
the evidence and circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition for
Certiorari under Rule 65 of the Revised Rules of Court was settled in our decision in St.
Martin Funeral Home v. NLRC. The general rule is that certiorari does not lie to review
errors of judgment of the trial court, as well as that of a quasi-judicial tribunal. In certiorari
proceedings, judicial review does not go as far as to examine and assess the evidence of
the parties and to weigh their probative value. However, this rule admits of exceptions. In
Globe Telecom, Inc. v. Florendo-Flores, we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution
is confined only to issues of jurisdiction and grave abuse of discretion on the part of the
labor tribunal. Hence, the Court refrains from reviewing factual assessments of lower
courts and agencies exercising adjudicative functions, such as the NLRC.
Occasionally, however, the Court is constrained to delve into factual matters where, as
in the instant case, the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and reexamine the questioned findings. As a corollary, this Court is
clothed with ample authority to review matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is necessary to arrive at a just decision of
the case. The same principles are now necessarily adhered to and are applied by the
Court of Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a factual
determination of the matters and on that basis reversed the ruling of the NLRC.
(Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual findings complained
of are not supported by the evidence on record; when it is necessary to prevent a
substantial wrong or to do substantial justice; when the findings of the NLRC contradict
those of the Labor Arbiter; and when necessary to arrive at a just decision of the case. To
make these findings, the Court of Appeals necessarily has to look at the evidence and make
its own factual determination.
 Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the
Court of Appeals correctly exercised its power to review the evidence and the records of the
illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI. Managerial
employees enjoy security of tenure and the right of the management to dismiss must be
balanced against the managerial employee’s right to security of tenure, which is not one of
the guaranties he gives up.
In Apo Cement Corporation v. Baptisma, we ruled that for an employer to validly
dismiss an employee on the ground of loss of trust and confidence under Article 282 (c) of
the Labor Code, the employer must observe the following guidelines: 1) loss of confidence
should not be simulated; 2) it should not be used as subterfuge for causes which are
improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; and 4) it must be genuine, not a mere afterthought
to justify earlier action taken in bad faith. More importantly, it must be based on a willful
breach of trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not founded on
clearly established facts and evidence sufficient to warrant dismissal from employment.
While proof beyond reasonable doubt is not required to establish loss of trust and
confidence, substantial evidence is required and on the employer rests the burden to
establish it. There must be some basis for the loss of trust, or that the employer has
reasonable ground to believe that the employee is responsible for misconduct, which
renders him unworthy of the trust and confidence demanded by his position.
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General Sales Agent and relied
heavily on its judgments.
(2) Basso excessively issued promotional tickets to his friends who had no direct
business with CMI.
(3) The advertising agency that CMI contracted had to deal directly with Guam because
Basso was hardly available. Mr. Schulz discovered that Basso exceeded the advertising
budget by $76,000.00 in 1994 and by $20,000.00 in 1995.
(4) Basso spent more time and attention to his personal businesses and was reputed to
own nightclubs in the Philippines.
(5) Basso used free tickets and advertising money to promote his personal
business, such as a brochure that jointly advertised one of Basso’s nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso, on the
other hand, had adequately explained his side. On the advertising agency and budget
issues raised by CMI, he explained that these were blatant lies as the advertising needs of
CMI were centralized in its Guam office and the Philippine office was not authorized to deal
with CMI’s advertising agency, except on minor issues. Basso further stated that under
CMI’s existing policy, ninety percent (90%) of the advertising decisions were delegated to
the advertising firm of McCann- Ericsson in Japan and only ten percent (10%) were left to
the Philippine office. Basso also denied the allegations of owning nightclubs and promoting
his personal businesses and explained that it was illegal for foreigners in the Philippines to
engage in retail trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the audit team
headed by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996,
personal passes for Continental and other airline employees were noted (sic) to be issued
for which no service charge was collected." The audit cited the trip pass log of a total of 10
months. The trip log does not show, however, that Basso caused all the ticket issuances.
More, half of the trips in the log occurred from March to July of 1996, a period beyond
the tenure of Basso. Basso was terminated effectively on January 31, 1996 as indicated in
the letter of Ms. Woodward.
CMI also accused Basso of making "questionable overseas phone calls". Basso,
however, adequately explained in his Reply that the phone calls to Italy and Portland, USA
were made for the purpose of looking for a technical maintenance personnel with US
Federal Aviation Authority qualifications, which CMI needed at that time. The calls to the US
were also made in connection with his functions as General Manager, such as inquiries on
his tax returns filed in Nevada. Basso also explained that the phone lines were open direct
lines that all personnel were free to use to make direct long distance calls.
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover
the transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous
General Manager, to him. CMI claimed that "nowhere in the said contract was it likewise
indicated that the Manila Polo Club share was part of the compensation package given by
CMI to Basso." CMI’s claims are not credible. Basso explained that the Manila Polo Club
share was offered to him as a bonus to entice him to leave his then employer, United
Airlines. A letter from Mr. Paul J. Casey, former president of Continental, supports Basso. In
the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was
given the Manila Polo Club share and authorized to have the share re-issued in his name.
In addition to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay the
dues for a period of three years and this was embodied in his contract with Continental. This
was all done with my knowledge and approval.
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club
in Manila that your immediate supervisor and I agree is of at least that value to
Continental through you in your role as our General Manager for the Philippines.
Taken together, the above pieces of evidence suggest that the Manila Polo Club share
was part of Basso’s compensation package and thus he validly used company funds to pay
for the transfer fees. If doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter.
Finally, CMI violated procedural due process in terminating Basso. In King of Kings
Transport, Inc. v. Mamac we detailed the procedural due process steps in termination of
employment:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a reasonable period.
"Reasonable opportunity" under the Omnibus Rules means every kind of assistance
that management must accord to the employees to enable them to prepare adequately
 for their defense. This should be construed as a period of at least five (5) calendar days As to the computation of backwages, we agree with CMI that Basso was entitled to
from receipt of the notice to give the employees an opportunity to study the accusation backwages only up to the time he reached 65 years old, the compulsory retirement age
against them, consult a union official or lawyer, gather data and evidence, and decide under the law. This is our consistent ruling.
on the defenses they will raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the notice should
contain a detailed narration of the facts and circumstances that will serve as basis for When Basso was illegally dismissed on January 31, 1996, he was already 58 years
the charge against the employees. A general description of the charge will not suffice. old. He turned 65 years old on October 2, 2002. Since backwages are granted on grounds
Lastly, the notice should specifically mention which company rules, if any, are violated of equity for earnings lost by an employee due to his illegal dismissal, Basso was entitled to
and/or which among the grounds under Art. 282 is being charged against the backwages only for the period he could have worked had he not been illegally dismissed,
employees. i.e. from January 31, 1996 to October 2, 2002.
(2) After serving the first notice, the employers should schedule and conduct a hearing
or conference wherein the employees will be given the opportunity to: (1) explain and WHEREFORE, premises considered, the Decision of the Court of Appeals dated May
clarify their defenses to the charge against them; (2) present evidence in support of their
23, 2006 and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No.
defenses; and (3) rebut the evidence presented against them by the management.
During the hearing or conference, the employees are given the chance to defend 83938 and CA-G.R. SP No. 84281 are
themselves personally, with the assistance of a representative or counsel of their AFFIRMED, with MODIFICATION as to the award of backwages. Petitioner
choice. Moreover, this conference or hearing could be used by the parties as an Continental Micronesia, Inc. is hereby ordered to pay Respondent Joseph Basso’s heirs: 1)
opportunity to come to an amicable settlement. separation pay equivalent to one (1) month pay for every year of service, and 2) full
(3) After determining that termination of employment is justified, the employers shall backwages from January 31, 1996, the date of his illegal dismissal, to October 2, 2002, the
serve the employees a written notice of termination indicating that: (1) all circumstances date of his compulsory retirement age.
involving the charge against the employees have been considered; and (2) grounds SO ORDERED.
have been established to justify the severance of their employment. (Emphasis in
original.)
——o0o——
Here, Mr. Schulz’s and Ms. Woodward’s letters dated December 19, 1995 and March
14, 1996, respectively, are not one of the valid twin notices. Neither identified the alleged
acts that CMI now claims as bases for Basso’s termination. Ms. Woodward’s letter even
stressed that the original plan was to remove Basso as General Manager but with an offer
to make him consultant. It was inconsistent of CMI to declare Basso as unworthy of its trust
and confidence and, in the same breath, offer him the position of consultant. As the Court of
Appeals pointed out:

But mark well that Basso was clearly notified that the sole ground for his dismissal was
the exercise of the termination at will clause in the employment contract. The alleged loss of
trust and confidence claimed by Continental appears to be a mere afterthought belatedly
trotted out to save the day.

Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, 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 up to the time of actual
reinstatement.

Where reinstatement is no longer viable as an option, separation pay equivalent to one

(1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. In the case of Basso,
reinstatement is no longer possible since he has already passed away. Thus, Basso’s
separation pay with full backwages shall be paid to his heirs.
 No. L-76633. October 18, 1988
EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT,
HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents.
Labor; Overseas Employment; Appeals; Non-exhaustion of administrative remedies, proper;
General rule that decisions of the POEA should first be appealed to the NLRC; Case at bar comes
under one of the exceptions, as the questions raised are questions of law; Absence of objection by
private respondent to petitioner’s direct resort to the Supreme Court.—Ordinarily, the decisions of the
POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia
that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This
case comes under one of the exceptions, however, as the questions the petitioner is raising are
essentially questions of law. Moreover, the private respondent herself has not objected to the
petitioner’s direct resort to this Court, observing that the usual procedure would delay the disposition of
the case to her prejudice.
Same; Same; Overseas employment and contract worker, defined; These definitions clearly apply
to the employee as he died under a contract of employment with petitioner alongside petitioner’s vessel
berthed in a foreign country.—Under the 1985 Rules and Regulations on Overseas Employment,
overseas employment is defined as “employment of a worker outside the Philippines, including
employment on board vessels plying international waters, covered by a valid contract.” A contract
worker is described as “any person working or who has worked overseas under a valid employment
contract and shall include seamen” or “any person working overseas or who has been employed by
another which may be a local employer, foreign employer, principal or partner under a valid
employment contract and shall include seamen.” These definitions clearly apply to Vitaliano Saco for it
is not disputed that he died while under a contract of employment with the petitioner and alongside the
petitioner’s vessel, the M/V Eastern Polaris, while berthed in a foreign country.
Same; Same; Same; Submission by petitioner of shipping articles to POEA and payments of
contributions to the Welfare Fund are tacit recognition of the nature of the employee’s appointment at
the time of his death.—It is worth observing that the petitioner performed at least two acts which
constitute implied or tacit recognition of the nature of Saco’s employment at the time of his death in
1985. The first is its submission of its shipping articles to the POEA for processing, formalization and
approval in the exercise of its regulatory power over overseas employment under Executive Order No.
797. The second is its payment of the contributions mandated by law and regulations to the Welfare
Fund for Overseas Workers, which was created by P.D. No. 1694 “for the purpose of providing social
and welfare services to Filipino overseas workers.”
Same; Same; Receipt prepared by the office administering the Welfare Fund described the
subject of burial benefits as an overseas contract worker.—Significantly, the office administering this
fund, in the receipt it prepared for the private respondent’s signature, described the subject of the burial
benefits as “overseas contract worker Vitaliano Saco.” While this receipt is certainly not controlling, it
does indicate, in the light of the petitioner’s own previous acts, that the petitioner and the Fund to which
it had made contributions considered Saco to be an overseas employee.
Same; Same; Award of death benefits and burial expenses under Memorandum Circular of the
POEA.; Circular prescribing a standard contract by foreign and domestic shipping companies deemed
written into the contract with the employee and a postulate of the police power of the State.—The
award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA
pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular
prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the
hiring of Filipino seamen for overseas employment. A similar contract had earlier been required by the
National Seamen Board and had been sustained in a number of cases by this Court. The petitioner
claims that it had never entered into such a contract with the deceased Saco, but that is hardly a
serious argument. In the first place, it should have done so as required by the circular, which
specifically declared that “all parties to the employment of any Filipino seamen on board any ocean-
going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to
desist from using any other format of employment contract effective that date.” In the second place,
even if it had not done so, the provisions of the said circular are nevertheless deemed written into the
contract with Saco as a postulate of the police power of the State.
Same; Same; Delegation of power; Legislative discretion as to the substantive contents of the law
cannot be delegated; What can be delegated is the discretion to determine how the law may be
enforced.—The second challenge is more serious as it is true that legislative discretion as to the
substantive contents of the law cannot be delegated. What can be delegated is the discretion to
determine how the law may be enforced, not what the law shall be. The ascertainment of the latter
subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the
legislature to the delegate.
Same; Same; Same; Accepted tests to determine whether or not there is valid delegation of
legislative power.—There are two accepted tests to determine whether or not there is a valid delegation
of legislative power, viz., the completeness test and the sufficient standard test. Under the first test, the
law must be complete in all its terms and conditions when it leaves the legislature such that when it
reaches the delegate the only thing he will have to do is enforce it. Under the sufficient standard test,
there must be adequate guidelines or limitations in the law to map out the boundaries of the delegate’s
authority and prevent the delegation from running riot. Both tests are intended to prevent a total
transference of legislative authority to the delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative.
Same; Same; Same; Principle of non-delegation of powers is applicable to all the 3 major powers
of the government, but is especially important in the case of the legislative power.—The principle of
non-delegation of powers is applicable to all the three major powers of the Government but is
especially important in the case of the legislative power because of the many instances when its
delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated
by the authorities to which they legally pertain. In the case of the legislative power, however, such
occasions have become more and more frequent, if not necessary. This had led to the observation that
the delegation of legislative power has become the rule and its non-delegation the exception.
Same; Same; Same; Reason for the frequent delegation of power by the legislature.—The reason
is the increasing complexity of the task of government and the growing inability of the legislature to
cope directly with the myriad problems demanding its attention. The growth of society has ramified its
activities and created peculiar and sophisticated problems that the legislature cannot be expected
reasonably to comprehend. Specialization even in legislation has become necessary. To many of the
problems attendant upon present-day undertakings, the legislature may not have the competence to
provide the required direct and efficacious, not to say, specific solutions. These solutions may,
however, be expected from its delegates, who are supposed to be experts in the particular fields
assigned to them.
Same; Same; Same; Reasons for delegation of legislative powers are particularly applicable to
administrative bodies; Delegated power to issue rules to carry out the general provisions of the statute
is called power of subordinate legislation.—The reasons given above for the delegation of legislative
powers in general are particularly applicable to administrative bodies. With the proliferation of
specialized activities and their attendant peculiar problems, the national legislature has found it more
and more necessary to entrust to administrative agencies the authority to issue rules to carry out the
general provisions of the statute. This is called the “power of subordinate legislation.”
Same; Same; Same; Administrative bodies implement the broad policies by promulgating their
supplemental regulations, such as the implementing rules issued by the Department of Labor on the
new Labor Code.—With this power, administrative bodies may implement the broad policies laid down
in a statute by “filling in” the details which the Congress may not have the opportunity or competence to
provide. This is effected by their promulgation of what are known as supplementary regulations, such
as the implementing rules issued by the Department of Labor on the new Labor Code. These
regulations have the force and effect of “law.
Same; Same; Same; Memorandum Circular No. 2 which prescribes a model contract is not
challenged by the employer.—Memorandum Circular No. 2 is one such administrative regulation. The
model contract prescribed thereby has been applied in a significant number of cases without challenge
by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the
model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of
the said authority. That standard is discoverable in the executive order itself which, in creating the
Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino
workers to “fair and equitable employment practices.”
Same; Same; Same; Sufficient standards of delegation of legislative power.—Parenthetically, it is
recalled that this Court has accepted as sufficient standards “public interest” in People v. Rosenthal,
“justice and equity” in Antamok Gold Fields v. CIR, “public convenience and welfare” in Calalang v.
Williams, and “simplicity, economy and efficiency” in Cervantes v. Auditor General, to mention only a
few cases. In the United States, the “sense and experience of men” was accepted in Mutual Film Corp.
v. Industrial Commission, and “national security” in Hirabayashi v. United States.
Same; Same; Same; Payment of death benefit pension, funeral benefit burial gratuity to private
respondent will not preclude allowance of private respondent’s claim against petitioner which is
specifically reserved in the standard contract of employment for Filipino seamen.—It is not denied that
the private respondent has been receiving a monthly death benefit pension of P514.42 since March
1985 and that she was also paid of P1,000.00 funeral benefit by the Social Security System. In
addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for
Overseas Workers. These payments will not preclude allowance of the private respondent’s claim
against the petitioner because it is specifically reserved in the standard contract of employment for
Filipino seamen under Memorandum Circular No. 2, Series of 1984.
Same; Same; Same; Provisions under the standard contract of employment for Filipino seamen
pursuant to Memorandum Circular No. 2 are manifestations of the State for the working class
consistently with the social justice and protection of the working class provisions of the Constitution.—
The above provisions are manifestations of the concern of the State for the working class, consistently
with the social justice policy and the specific provisions in the Constitution calling for the protection of
the working class and the promotion of its interest.
Same; Same; Same; Due process, not a case of; Administrative agencies vested with two basic
powers, quasi-legislative and quasi-judicial; Power of administrative agencies to promulgate
implementing rules and regulations and interprets and applies them, not violative of due process as
long as the cardinal rights in the Ang Tibay vs. CIR case are observed.—One last challenge of the
petitioner must be dealt with to close this case. Its argument that it has been denied due process
because the same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is
an uninformed criticism of administrative law itself. Administrative agencies are vested with two basic
powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing
rules and regulations, and the second enables them to interpret and apply such regulations. Examples
abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank
on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the
Philippine Patent Office and the Videogram Regulatory Board and Civil Aeronautics Administration and
the Department of Natural Resources and so on ad infinitum on their respective administrative
regulations. Such an arrangement has been accepted as a fact of life of modern governments and
cannot be considered violative of due process as long as the cardinal rights laid down by Justice Laurel
in the landmark case of Ang Tibay v. Court of Industrial Relations are observed.
Same; Same; Same; Doubts regarding the rights of the parties are resolved in favor of private
respondent under the principle that those with less in life should have more in law.—Whatever doubts
may still remain regarding the rights of the parties in this case are resolved in favor of the private
respondent, in line with the express mandate of the Labor Code and the principle that those with less in
life should have more in law.
Same; Same; Same; When the conflicting interests of labor and capital are weighed on the scales
of social justice, capital should be counterbalanced with sympathy and compassion the law must
accord to labor.—When the conflicting interests of labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be counterbalanced by the sympathy and compassion
the law must accord the underprivileged worker. This is only fair if he is to be given the opportunity—
and the right—to assert and defend his cause not as a subordinate but as a peer of management, with
which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal
partner.
CRUZ, J.:
The private respondent in this case was awarded the sum of P192,000.00 by the
Philippine Overseas Employment Administration (POEA) for the death of her husband. The
decision is challenged by the petitioner on the principal ground that the POEA had no
jurisdiction over the case as the husband was not an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an
accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive
Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of
the vessel, argued that the complaint was cognizable not by the POEA but by the Social
Security System and should have been filed against the State Insurance Fund. The POEA
nevertheless assumed jurisdiction and after considering the position papers of the parties
ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits
and P12,000.00 for burial expenses.
The petitioner immediately came to this Court, prompting the Solicitor General to move
for dismissal on the ground of non-exhaustion of administrative remedies.
Ordinarily, the decisions of the POEA should first be appealed to the National Labor
Relations Commission, on the theory inter alia that the agency should be given an
opportunity to correct the errors, if any, of its subordinates. This case comes under one of
the exceptions, however, as the questions the petitioner is raising are essentially questions
of law. Moreover, the private respondent himself has not objected to the petitioner's direct
resort to this Court, observing that the usual procedure would delay the disposition of the
case to her prejudice.
The Philippine Overseas Employment Administration was created under Executive
Order No. 797, promulgated on May 1, 1982, to promote and monitor the overseas
employment of Filipinos and to protect their rights. It replaced the National Seamen Board
created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said
executive order, the POEA is vested with "original and exclusive jurisdiction over all cases,
including money claims, involving employee-employer relations arising out of or by virtue of
any law or contract involving Filipino contract workers, including seamen." These cases,
according to the 1985 Rules and Regulations on Overseas Employment issued by the
POEA, include "claims for death, disability and other benefits" arising out of such
employment. 
 The petitioner does not contend that Saco was not its employee or that the claim of his
widow is not compensable. What it does urge is that he was not an overseas worker but a
'domestic employee and consequently his widow's claim should have been filed with Social
Security System, subject to appeal to the Employees Compensation Commission.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an
overseas employee of the petitioner at the time he met with the fatal accident in Japan in
1985.
Under the 1985 Rules and Regulations on Overseas Employment, overseas
employment is defined as "employment of a worker outside the Philippines, including
employment on board vessels plying international waters, covered by a valid contract. A
contract worker is described as "any person working or who has worked overseas under a
valid employment contract and shall include seamen"  or "any person working overseas or
who has been employed by another which may be a local employer, foreign employer,
principal or partner under a valid employment contract and shall include seamen."  These
definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a
contract of employment with the petitioner and alongside the petitioner's vessel, the M/V
Eastern Polaris, while berthed in a foreign country. 
It is worth observing that the petitioner performed at least two acts which constitute
implied or tacit recognition of the nature of Saco's employment at the time of his death in
1985. The first is its submission of its shipping articles to the POEA for processing,
formalization and approval in the exercise of its regulatory power over overseas
employment under Executive Order NO. 797. The second is its payment of the contributions
mandated by law and regulations to the Welfare Fund for Overseas Workers, which was
created by P.D. No. 1694 "for the purpose of providing social and welfare services to
Filipino overseas workers."
Significantly, the office administering this fund, in the receipt it prepared for the private
respondent's signature, described the subject of the burial benefits as "overseas contract
worker Vitaliano Saco." While this receipt is certainly not controlling, it does indicate, in the
light of the petitioner's own previous acts, that the petitioner and the Fund to which it had
made contributions considered Saco to be an overseas employee.
The petitioner argues that the deceased employee should be likened to the employees
of the Philippine Air Lines who, although working abroad in its international flights, are not
considered overseas workers. If this be so, the petitioner should not have found it
necessary to submit its shipping articles to the POEA for processing, formalization and
approval or to contribute to the Welfare Fund which is available only to overseas workers.
Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under the
definitions given be considered seamen nor are their appointments coursed through the
POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was
made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on
February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign
and domestic shipping companies in the hiring of Filipino seamen for overseas employment.
A similar contract had earlier been required by the National Seamen Board and had been
sustained in a number of cases by this Court. The petitioner claims that it had never entered
into such a contract with the deceased Saco, but that is hardly a serious argument. In the
first place, it should have done so as required by the circular, which specifically declared
that "all parties to the employment of any Filipino seamen on board any ocean-going vessel
are advised to adopt and use this employment contract effective 01 February 1984 and to
desist from using any other format of employment contract effective that date." In the
second place, even if it had not done so, the provisions of the said circular are nevertheless
deemed written into the contract with Saco as a postulate of the police power of the State.
But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative
of the principle of non-delegation of legislative power. It contends that no authority had been
given the POEA to promulgate the said regulation; and even with such authorization, the
regulation represents an exercise of legislative discretion which, under the principle, is not
subject to delegation.
The authority to issue the said regulation is clearly provided in Section 4(a) of
Executive Order No. 797, reading as follows:
... The governing Board of the Administration (POEA), as hereunder provided shall
promulgate the necessary rules and regulations to govern the exercise of the
adjudicatory functions of the Administration (POEA).
Similar authorization had been granted the National Seamen Board, which, as earlier
observed, had itself prescribed a standard shipping contract substantially the same as the
format adopted by the POEA.
The second challenge is more serious as it is true that legislative discretion as to the
substantive contents of the law cannot be delegated. What can be delegated is the
discretion to determine how the law may be enforced, not whatthe law shall be. The
ascertainment of the latter subject is a prerogative of the legislature. This prerogative
cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v.
Intermediate Apellate Court which annulled Executive Order No. 626, this Court held:
We also mark, on top of all this, the questionable manner of the disposition of the
confiscated property as prescribed in the questioned executive order. It is there
authorized that the seized property shall be distributed to charitable institutions and
other similar institutions as the Chairman of the National Meat Inspection
Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may
see fit" is an extremely generous and dangerous condition, if condition it is. It is laden
with perilous opportunities for partiality and abuse, and even corruption. One searches
in vain for the usual standard and the reasonable guidelines, or better still, the
limitations that the officers must observe when they make their distribution. There is
none. Their options are apparently boundless. Who shall be the fortunate beneficiaries
of their generosity and by what criteria shall they be chosen? Only the officers named
can supply the answer, they and they alone may choose the grantee as they see fit, and
in their own exclusive discretion. Definitely, there is here a 'roving commission a wide
and sweeping authority that is not canalized within banks that keep it from overflowing,'
in short a clearly profligate and therefore invalid delegation of legislative powers.
There are two accepted tests to determine whether or not there is a valid delegation of
legislative power, viz, the completeness test and the sufficient standard test. Under the first
test, the law must be complete in all its terms and conditions when it leaves the legislature
such that when it reaches the delegate the only thing he will have to do is enforce it. Under
the sufficient standard test, there must be adequate guidelines or stations in the law to map
out the boundaries of the delegate's authority and prevent the delegation from running riot.
 Both tests are intended to prevent a total transference of legislative authority to the
delegate, who is not allowed to step into the shoes of the legislature and exercise a power
essentially legislative.
The principle of non-delegation of powers is applicable to all the three major powers of
the Government but is especially important in the case of the legislative power because of
the many instances when its delegation is permitted. The occasions are rare when
executive or judicial powers have to be delegated by the authorities to which they legally
certain. In the case of the legislative power, however, such occasions have become more
and more frequent, if not necessary. This had led to the observation that the delegation of
legislative power has become the rule and its non-delegation the exception.
The reason is the increasing complexity of the task of government and the growing
inability of the legislature to cope directly with the myriad problems demanding its attention.
The growth of society has ramified its activities and created peculiar and sophisticated
problems that the legislature cannot be expected reasonably to comprehend. Specialization
even in legislation has become necessary. To many of the problems attendant upon
present-day undertakings, the legislature may not have the competence to provide the
required direct and efficacious, not to say, specific solutions. These solutions may, however,
be expected from its delegates, who are supposed to be experts in the particular fields
assigned to them.
The reasons given above for the delegation of legislative powers in general are
particularly applicable to administrative bodies. With the proliferation of specialized activities
and their attendant peculiar problems, the national legislature has found it more and more
necessary to entrust to administrative agencies the authority to issue rules to carry out the
general provisions of the statute. This is called the "power of subordinate legislation."
With this power, administrative bodies may implement the broad policies laid down in a
statute by "filling in' the details which the Congress may not have the opportunity or
competence to provide. This is effected by their promulgation of what are known as
supplementary regulations, such as the implementing rules issued by the Department of
Labor on the new Labor Code. These regulations have the force and effect of law.
Memorandum Circular No. 2 is one such administrative regulation. The model contract
prescribed thereby has been applied in a significant number of the cases without challenge
by the employer. The power of the POEA (and before it the National Seamen Board) in
requiring the model contract is not unlimited as there is a sufficient standard guiding the
delegate in the exercise of the said authority. That standard is discoverable in the executive
order itself which, in creating the Philippine Overseas Employment Administration,
mandated it to protect the rights of overseas Filipino workers to "fair and equitable
employment practices."
Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public
interest" in People v. Rosenthal  "justice and equity" in Antamok Gold Fields v. CIR "public
convenience and welfare" in Calalang v. Williams and "simplicity, economy and efficiency"
in Cervantes v. Auditor General,  to mention only a few cases. In the United States, the
"sense and experience of men" was accepted in Mutual Film Corp. v. Industrial
Commission,  and "national security" in Hirabayashi v. United States. 
It is not denied that the private respondent has been receiving a monthly death benefit
pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral
benefit by the Social Security System. In addition, as already observed, she also received a
P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will
not preclude allowance of the private respondent's claim against the petitioner because it is
specifically reserved in the standard contract of employment for Filipino seamen under
Memorandum Circular No. 2, Series of 1984, that—
Section C. Compensation and Benefits.—
1. In case of death of the seamen during the term of his Contract, the employer shall
pay his beneficiaries the amount of:
a. P220,000.00 for master and chief engineers
b. P180,000.00 for other officers, including radio operators and master
electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits mentioned above shall be separate and
distinct from, and will be in addition to whatever benefits which the seaman is entitled to
under Philippine laws. ...
3. ...
c. If the remains of the seaman is buried in the Philippines, the owners shall pay
the beneficiaries of the seaman an amount not exceeding P18,000.00 for burial
expenses.
The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by
the National Seamen Board on July 12,1976, providing an follows:
Income Benefits under this Rule Shall be Considered Additional Benefits.—
All compensation benefits under Title II, Book Four of the Labor Code of the Philippines
(Employees Compensation and State Insurance Fund) shall be granted, in addition to
whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be
entitled to under the employment contract approved by the NSB. If applicable, all
benefits under the Social Security Law and the Philippine Medicare Law shall be
enjoyed by the seaman or his beneficiaries in accordance with such laws.
The above provisions are manifestations of the concern of the State for the working
class, consistently with the social justice policy and the specific provisions in the
Constitution for the protection of the working class and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case. Its argument that
it has been denied due process because the same POEA that issued Memorandum Circular
No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself.
Administrative agencies are vested with two basic powers, the quasi-legislative and the
quasi-judicial. The first enables them to promulgate implementing rules and regulations, and
the second enables them to interpret and apply such regulations. Examples abound: the
Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank
on its own circulars, the Securities and Exchange Commission on its own rules, as so too
do the Philippine Patent Office and the Videogram Regulatory Board and the Civil
Aeronautics Administration and the Department of Natural Resources and so on ad
infinitum on their respective administrative regulations. Such an arrangement has been
accepted as a fact of life of modern governments and cannot be considered violative of due
process as long as the cardinal rights laid down by Justice Laurel in the landmark case
of Ang Tibay v. Court of Industrial Relations  are observed.
 Whatever doubts may still remain regarding the rights of the parties in this case are
resolved in favor of the private respondent, in line with the express mandate of the Labor
Code and the principle that those with less in life should have more in law.

When the conflicting interests of labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be counter-balanced by the sympathy and
compassion the law must accord the underprivileged worker. This is only fair if he is to be
given the opportunity and the right to assert and defend his cause not as a subordinate but
as a peer of management, with which he can negotiate on even plane. Labor is not a mere
employee of capital but its active and equal partner.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The
temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered.

——o0o——
 G.R. No. 174585. October 19, 2007
FEDERICO M. LEDESMA, JR., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC-SECOND DIVISION) HONS. RAUL T. AQUINO, VICTORIANO R.
CALAYCAY and ANGELITA A. GACUTAN ARE THE COMMISSIONERS, PHILIPPINE
NAUTICAL TRAINING INC., ATTY. HERNANI FABIA, RICKY TY, PABLO MANOLO, C.
DE LEON and TREENA CUEVA, respondents.
Labor Law; Termination of Employment; Administrative Proceedings; Evidence; Substantial
Evidence; Well-entrenched is the principle that in order to establish a case before judicial and
quasiadministrative bodies, it is necessary that allegations must be supported by substantial evidence;
An employee’s claim of illegal dismissal supported by no other than his own bare, uncorroborated and
self-serving allegations which are also incoherent, inconsistent and contradictory does not amount to
substantial evidence.—Wellentrenched is the principle that in order to establish a case before judicial
and quasi-administrative bodies, it is necessary that allegations must be supported by substantial
evidence. Substantial evidence is more than a mere scintilla. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. In the present case, there is hardly
any evidence on record so as to meet the quantum of evidence required, i.e., substantial evidence.
Petitioner’s claim of illegal dismissal is supported by no other than his own bare, uncorroborated and,
thus, self-serving allegations, which are also incoherent, inconsistent and contradictory.
Same; Same; Burden of Proof; Before an employer must bear the burden of proving that the
dismissal of an employee was legal, the latter must first establish by substantial evidence the fact of his
dismissal from the service; The rule is that one who alleges a fact has the burden of proving it.—While
this Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden
of proof to prove that the termination was for a valid or authorized cause in the case at bar, however,
the facts and the evidence did not establish a prima facie case that the petitioner was dismissed from
employment. Before the private respondent must bear the burden of proving that the dismissal was
legal, petitioner must first establish by substantial evidence the fact of his dismissal from service.
Logically, if there is no dismissal, then there can be no question as to the legality or illegality thereof. In
Machica v. Roosevelt Services Center, Inc., 389 SCRA 534 (2006), we had underscored that the
burden of proving the allegations rest upon the party alleging, to wit: The rule is that one who alleges a
fact has the burden of proving it; thus, petitioners were burdened to prove their allegation that
respondents dismissed them from their employment. It must be stressed that the evidence to prove this
fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in
illegal dismissal cases finds no application here because the respondents deny having dismissed the
petitioners.
Same; Same; Social Justice; The law in protecting the rights of the employees, authorizes
neither oppression nor self-destruction of the employer—there may be cases where the circumstances
warrant favoring labor over the interests of management but never should the scale be so tilted if the
result is an injustice to the employer.—It is true that the Constitution affords full protection to labor, and
that in light of this Constitutional mandate, we must be vigilant in striking down any attempt of the
management to exploit or oppress the working class. However, it does not mean that we are bound to
uphold the working class in every labor dispute brought before this Court for our resolution. The law in
protecting the rights of the employees, authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scales of justice in favor of labor, it is in
recognition of the inherent economic inequality between labor and management. The intent is to
balance the scales of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est—justice is to
be denied to none.
CHICO-NAZARIO, J.:
This a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court, filed by petitioner Federico Ledesma, Jr., seeking to reverse and set aside the
Decision, dated 28 May 2005, and the Resolution, dated 7 September 2006, of the Court of
Appeals in CA-G.R. SP No. 79724. The appellate court, in its assailed Decision and
Resolution, affirmed the Decision dated 15 April 2003, and Resolution dated 9 June 2003,
of the National Labor Relations Commission (NLRC), dismissing petitioner’s complaint for
illegal dismissal and ordering the private respondent Philippine National Training Institute
(PNTI) to reinstate petitioner to his former position without loss of seniority rights.
The factual and procedural antecedents of the instant petition are as follows:
On 4 December 1998, petitioner was employed as a bus/service driver by the private
respondent on probationary basis, as evidenced by his appointment. As such, he was
required to report at private respondent’s training site in Dasmariñas, Cavite, under the
direct supervision of its site administrator, Pablo Manolo de Leon (de Leon).
On 11 November 2000, petitioner filed a complaint against de Leon for allegedly
abusing his authority as site administrator by using the private respondent’s vehicles and
other facilities for personal ends. In the same complaint, petitioner also accused de Leon of
immoral conduct allegedly carried out within the private respondent’s premises. A copy of
the complaint was duly received by private respondent’s Chief Accountant, Nita Azarcon
(Azarcon).
On 27 November 2000, de Leon filed a written report against the petitioner addressed
to private respondent’s Vice-President for Administration, Ricky Ty (Ty), citing his suspected
drug use.
In view of de Leon’s report, private respondent’s Human Resource Manager, Trina
Cueva (HR Manager Cueva), on 29 November 2000, served a copy of a Notice to petitioner
requiring him to explain within 24 hours why no disciplinary action should be imposed on
him for allegedly violating Section 14, Article IV of the private respondent’s Code of
Conduct.
On 3 December 2000, petitioner filed a complaint for illegal dismissal against private
respondent before the Labor Arbiter.
In his Position Paper, petitioner averred that in view of the complaint he filed against de
Leon for his abusive conduct as site administrator, the latter retaliated by falsely accusing
petitioner as a drug user. VP for Administration Ty, however, instead of verifying the
veracity of de Leon’s report, readily believed his allegations and together with HR Manager
Cueva, verbally dismissed petitioner from service on 29 November 2000.
Petitioner alleged that he was asked to report at private respondent’s main office in
España, Manila, on 29 November 2000. There, petitioner was served by HR Manager
Cueva a copy of the Notice to Explain together with the copy of de Leon’s report citing his
suspected drug use. After he was made to receive the copies of the said notice and report,
HR Manager Cueva went inside the office of VP for Administration Ty. After a while, HR
Manager Cueva came out of the office with VP for Administration Ty. To petitioner’s
surprise, HR Manager Cueva took back the earlier Notice to Explain given to him and flatly
declared that there was no more need for the petitioner to explain since his drug test result
revealed that he was positive for drugs. When petitioner, however, asked for a copy of the
said drug test result, HR Manager Cueva told him that it was with the company’s president,
but she would also later claim that the drug test result was already with the proper
authorities at Camp Crame.
Petitioner was then asked by HR Manager Cueva to sign a resignation letter and also
remarked that whether or not petitioner would resign willingly, he was no longer considered
an employee of private respondent. All these events transpired in the presence of VP for
Administration Ty, who even convinced petitioner to just voluntarily resign with the
assurance that he would still be given separation pay. Petitioner did not yet sign the
resignation letter replying that he needed time to think over the offers. When petitioner went
back to private respondent’s training site in Dasmariñas, Cavite, to get his bicycle, he was
no longer allowed by the guard to enter the premises.
On the following day, petitioner immediately went to St. Dominic Medical Center for a
drug test and he was found negative for any drug substance. With his drug result on hand,
petitioner went back to private respondent’s main office in Manila to talk to VP for
Administration Ty and HR Manager Cueva and to show to them his drug test result.
Petitioner then told VP for Administration Ty and HR Manager Cueva that since his drug
test proved that he was not guilty of the drug use charge against him, he decided to
continue to work for the private respondent.
On 2 December 2000, petitioner reported for work but he was no longer allowed to
enter the training site for he was allegedly banned therefrom according to the guard on duty.
This incident prompted the petitioner to file the complaint for illegal dismissal against the
private respondent before the Labor Arbiter.
For its part, private respondent countered that petitioner was never dismissed from
employment but merely served a Notice to Explain why no disciplinary action should be filed
against him in view of his superior’s report that he was suspected of using illegal drugs.
Instead of filing an answer to the said notice, however, petitioner prematurely lodged a
complaint for illegal dismissal against private respondent before the Labor Arbiter.
Private respondent likewise denied petitioner’s allegations that it banned the latter from
entering private respondent’s premises. Rather, it was petitioner who failed or refused to
report to work after he was made to explain his alleged drug use. Indeed, on 3 December
2000, petitioner was able to claim at the training site his salary for the period of 16-30
November 2000, as evidenced by a copy of the pay voucher bearing petitioner’s signature.
Petitioner’s accusation that he was no longer allowed to enter the training site was further
belied by the fact that he was able to claim his 13th month pay thereat on 9 December
2000, supported by a copy of the pay voucher signed by petitioner.
On 26 July 2002, the Labor Arbiter rendered a Decision, in favor of the petitioner
declaring illegal his separation from employment. The Labor Arbiter, however, did not order
petitioner’s reinstatement for the same was no longer practical, and only directed private
respondent to pay petitioner backwages. The dispositive portion of the Labor Arbiter’s
Decision reads:
WHEREFORE, premises considered, the dismissal of the [petitioner] is herein declared
to be illegal. [Private respondent] is directed to pay the complainant backwages and
separation pay in the total amount of One Hundred Eighty Four Thousand Eight
Hundred Sixty One Pesos and Fifty Three Centavos (₱184, 861.53).
Both parties questioned the Labor Arbiter’s Decision before the NLRC. Petitioner
assailed the portion of the Labor Arbiter’s Decision denying his prayer for reinstatement,
and arguing that the doctrine of strained relations is applied only to confidential employees
and his position as a driver was not covered by such prohibition. On the other hand, private
respondent controverted the Labor Arbiter’s finding that petitioner was illegally dismissed
from employment, and insisted that petitioner was never dismissed from his job but failed to
report to work after he was asked to explain regarding his suspected drug use.
On 15 April 2003, the NLRC granted the appeal raised by both parties and reversed the
Labor Arbiter’s Decision. The NLRC declared that petitioner failed to establish the fact of
dismissal for his claim that he was banned from entering the training site was rendered
impossible by the fact that he was able to subsequently claim his salary and 13th month
pay. Petitioner’s claim for reinstatement was, however, granted by the NLRC. The decretal
part of the NLRC Decision reads:
WHEREFORE, premises considered, the decision under review is, hereby REVERSED
and SET ASIDE, and another entered, DISMISSING the complaint for lack of merit.
[Petitioner] is however, ordered REINSTATED to his former position without loss of
seniority rights, but WITHOUT BACKWAGES.
The Motion for Reconsideration filed by petitioner was likewise denied by the NLRC in its
Resolution dated 29 August 2003.
The Court of Appeals dismissed petitioner’s Petition for Certiorari under Rule 65 of the
Revised Rules of Court, and affirmed the NLRC Decision giving more credence to private
respondent’s stance that petitioner was not dismissed from employment, as it is more in
accord with the evidence on record and the attendant circumstances of the instant
case. Similarly ill-fated was petitioner’s Motion for Reconsideration, which was denied by
the Court of Appeals in its Resolution issued on 7 September 2006.
Hence, this instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court,  filed by petitioner assailing the foregoing Court of Appeals Decision and Resolution
on the following grounds:
I.
WHETHER, THE HON. COURT OF APPEALS COMMITTED A MISAPPREHENSION
OF FACTS, AND THE ASSAILED DECISION IS NOT SUPPORTED BY THE
EVIDENCE ON RECORD. PETITIONER’S DISMISSAL WAS ESTABLISHED BY THE
UNCONTRADICTED EVIDENCES ON RECORD, WHICH WERE MISAPPRECIATED
BY PUBLIC RESPONDENT NLRC, AND HAD THESE BEEN CONSIDERED THE
INEVITABLE CONCLUSION WOULD BE THE AFFIRMATION OF THE LABOR
ARBITER’S DECISION FINDING ILLEGAL DISMISSAL
II.
WHETHER, THE HON. COURT OF APPEALS SUBVERTED DUE PROCESS OF LAW
WHEN IT DID NOT CONSIDER THE EVIDENCE ON RECORD SHOWING THAT
THERE WAS NO JUST CAUSE FOR DISMISSAL AS PETITIONER IS NOT A DRUG
USER AND THERE IS NO EVIDENCE TO SUPPORT THIS GROUND FOR
DISMISSAL.
III.
WHETHER, THE HON. COURT OF APPEALS COMMITTED REVERSIBLE ERROR
OF LAW IN NOT FINDING THAT RESPONDENTS SUBVERTED PETITIONER’S
RIGHT TO DUE PROCESS OF THE LAW.
Before we delve into the merits of this case, it is best to stress that the issues raised by
petitioner in this instant petition are factual in nature which is not within the office of a
Petition for Review. The raison d’etre  for this rule is that, this Court is not a trier of facts and
does not routinely undertake the re-examination of the evidence presented by the
contending parties for the factual findings of the labor officials who have acquired expertise
in their own fields are accorded not only respect but even finality, and are binding upon this
Court.
However, when the findings of the Labor Arbiter contradict those of the NLRC,
departure from the general rule is warranted, and this Court must of necessity make an
infinitesimal scrunity and examine the records all over again including the evidence
presented by the opposing parties to determine which findings should be preferred as more
conformable with evidentiary facts.
The primordial issue in the petition at bar is whether the petitioner was illegally
dismissed from employment.
The Labor Arbiter found that the petitioner was illegally dismissed from employment
warranting the payment of his backwages. The NLRC and the Court of Appeals found
otherwise.
In reversing the Labor Arbiter’s Decision, the NLRC underscored the settled evidentiary
rule that before the burden of proof shifts to the employer to prove the validity of the
employee’s dismissal, the employee must first sufficiently establish that he was indeed
dismissed from employment. The petitioner, in the present case, failed to establish the fact
of his dismissal. The NLRC did not give credence to petitioner’s allegation that he was
banned by the private respondent from entering the workplace, opining that had it been true
that petitioner was no longer allowed to enter the training site when he reported for work
thereat on 2 December 2000, it is quite a wonder he was able to do so the very next day, on
3 December 2000, to claim his salary.
The Court of Appeals validated the above conclusion reached by the NLRC and further
rationated that petitioner’s positive allegations that he was dismissed from service was
negated by substantial evidence to the contrary. Petitioner’s averments of what transpired
inside private respondent’s main office on 29 November 2000, when he was allegedly
already dismissed from service, and his claim that he was effectively banned from private
respondent’s premises are belied by the fact that he was able to claim his salary for the
period of 16-30 November 2000 at private respondent’s training site.
Petitioner, therefore, is now before this Court assailing the Decisions handed down by
the NLRC and the Court of Appeals, and insisting that he was illegally dismissed from his
employment. Petitioner argues that his receipt of his earned salary for the period of 16-30
November 2000, and his 13th month pay, is neither inconsistent with nor a negation of his
allegation of illegal dismissal. Petitioner maintains that he received his salary and benefit
only from the guardhouse, for he was already banned from the work premises.
We are not persuaded.
Well-entrenched is the principle that in order to establish a case before judicial and
quasi-administrative bodies, it is necessary that allegations must be supported by
substantial evidence. Substantial evidence is more than a mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.
In the present case, there is hardly any evidence on record so as to meet the quantum
of evidence required, i.e., substantial evidence. Petitioner’s claim of illegal dismissal is
supported by no other than his own bare, uncorroborated and, thus, self-serving allegations,
which are also incoherent, inconsistent and contradictory.
Petitioner himself narrated that when his presence was requested on 29 November
2000 at the private respondent’s main office where he was served with the Notice to Explain
his superior’s report on his suspected drug use, VP for Administration Ty offered him
separation pay if he will just voluntarily resign from employment. While we do not condone
such an offer, neither can we construe that petitioner was dismissed at that instance.
Petitioner was only being given the option to either resign and receive his separation pay or
not to resign but face the possible disciplinary charges against him. The final decision,
therefore, whether to voluntarily resign or to continue working still, ultimately rests with the
petitioner. In fact, by petitoner’s own admission, he requested from VP for Administration Ty
more time to think over the offer.
Moreover, the petitioner alleged that he was not allowed to enter the training site by the
guard on duty who told him that he was already banned from the premises. Subsequently,
however, petitioner admitted in his Supplemental Affidavit that he was able to return to the
said site on 3 December 2000, to claim his 16-30 November 2000 salary, and again on 9
December 2000, to receive his 13th month pay. The fact alone that he was able to return to
the training site to claim his salary and benefits raises doubt as to his purported ban from
the premises.
Finally, petitioner’s stance that he was dismissed by private respondent was further
weakened with the presentation of private respondent’s payroll bearing petitioner’s name
proving that petitioner remained as private respondent’s employee up to December 2000.
Again, petitioner’s assertion that the payroll was merely fabricated for the purpose of
supporting private respondent’s case before the NLRC cannot be given credence. Entries in
the payroll, being entries in the course of business, enjoy the presumption of regularity
under Rule 130, Section 43 of the Rules of Court. It is therefore incumbent upon the
petitioner to adduce clear and convincing evidence in support of his claim of fabrication and
to overcome such presumption of regularity. Unfortunately, petitioner again failed in such
endeavor.
On these scores, there is a dearth of evidence to establish the fact of petitioner’s
dismissal. We have scrupulously examined the records and we found no evidence
presented by petitioner, other than his own contentions that he was indeed dismissed by
private respondent.
While this Court is not unmindful of the rule that in cases of illegal dismissal, the
employer bears the burden of proof to prove that the termination was for a valid or
authorized cause in the case at bar, however, the facts and the evidence did not establish
a prima facie case that the petitioner was dismissed from employment. Before the private
respondent must bear the burden of proving that the dismissal was legal, petitioner must
first establish by substantial evidence the fact of his dismissal from service. Logically, if
there is no dismissal, then there can be no question as to the legality or illegality thereof.
 In Machica v. Roosevelt Services Center, Inc., we had underscored that the burden of be to strain both the imagination of the Court and the language of the law. (Equitable Banking
proving the allegations rest upon the party alleging, to wit: Corporation vs. Sadac, 490 SCRA 380 [2006])
The rule is that one who alleges a fact has the burden of proving it; thus, petitioners
were burdened to prove their allegation that respondents dismissed them from their ——o0o——
employment. It must be stressed that the evidence to prove this fact must be clear,
positive and convincing. The rule that the employer bears the burden of proof in illegal
dismissal cases finds no application here because the respondents deny having
dismissed the petitioners.

In Rufina Patis Factory v. Alusitain, this Court took the occasion to emphasize:

It is a basic rule in evidence, however, that the burden of proof is on the part of the party
who makes the allegations – ei incumbit probatio, qui dicit, non qui negat.  If he claims a
right granted by law, he must prove his claim by competent evidence, relying on
the strength of his own evidence and not upon the weakness of that of his
opponent.

It is true that the Constitution affords full protection to labor, and that in light of this
Constitutional mandate, we must be vigilant in striking down any attempt of the
management to exploit or oppress the working class. However, it does not mean that we
are bound to uphold the working class in every labor dispute brought before this Court for
our resolution.

The law in protecting the rights of the employees, authorizes neither oppression nor
self-destruction of the employer. It should be made clear that when the law tilts the scales of
justice in favor of labor, it is in recognition of the inherent economic inequality between labor
and management. The intent is to balance the scales of justice; to put the two parties on
relatively equal positions. There may be cases where the circumstances warrant favoring
labor over the interests of management but never should the scale be so tilted if the result is
an injustice to the employer. Justitia nemini neganda est -- justice is to be denied to none.36

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of

Appeals Decision dated 28 May 2005 and its Resolution dated 7 September 2006 in CA-
G.R. SP No. 79724 are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.

Notes.—The legal consequences of an illegal dismissal are reinstatement of the employee without loss
of seniority rights and other privileges, and payment of his full backwages, inclusive of allowances, and
other benefits or their monetary equivalent. (Pheschem Industrial Corporation vs. Moldez, 458 SCRA
339 [2005])

While an employee who was imprisoned is not entitled to any salary during the period of his detention,
he is however entitled to full backwages from the time his employer refused his reinstatement.
(Standard Electric Manufacturing Corporation vs. Standard Electric Employees Union-NAFLU-KMU,
468 SCRA 316 [2005])

Article 279 of the Labor Code mandates that an employee’s full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent, but the Court does not see that a salary
increase can be interpreted as either an allowance or a benefit—salary increases are not akin to
allowances or benefits, and cannot be confused with either. The term “allowances” is sometimes used
synonymously with “emoluments,” as indirect or contingent remuneration, which may or may not be
earned, but which is sometimes in the nature of compensation, and sometimes in the nature of
reimbursement. To extend the coverage of an allowance or a benefit to include salary increases would
 G.R. No. 200774, February 13, 2019
GERMAN MARINE AGENCIES, INC., ET AL. petitioners, vs. TEODOLAH R. CARO, in
behalf of her husband EDUARDO V. CARO, respondent.
DECISION
JARDELEZA, J.:
This petition for review on certiorari assails the December 22, 2011 Decision and
February 24, 2012 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 109711. The
CA reversed the Resolutions of the National Labor Relations Commission (NLRC) dated
January 30, 2009 and April 30, 2009 in LAC No. 07-000550-08,and ordered petitioners
German Marine Agencies, Inc., (German Marine) and/or Baltic Marine Mgt., Ltd. (Baltic
Marine), or Carlos Anacta to pay respondent Teodolah R. Caro (Teodolah) death benefits
and burial expenses in accordance with the 2000 Philippine Overseas Employment
Administration-Standard Employment Contract (2000 POEA-SEC) for the death of her
husband Eduardo V. Caro (Eduardo).
German Marine is a domestic corporation which recruited Eduardo for and in behalf of
its foreign principal, Baltic Marine. Since May 1996, German Marine had continuously hired
Eduardo until he signed his last employment contract with them as Second Officer on
February 15, 2005 for a period of nine months. Prior to the signing of this contract, Eduardo
underwent the Pre-Employment Medical Examination and was declared "[f]it to
[w]ork." Eduardo thereafter boarded the vessel "Pacific Senator" on March 16, 2005.
On January 3, 2006, Eduardo finished his contract of employment and was
repatriated. On June 25, 2007, Eduardo died of "acute respiratory failure" while he was
confined at the National Kidney and Transplant Institute.
On August 28, 2007, Teodolah filed a complaint with the Labor Arbiter for death
benefits, medical expenses, and attorney's fees. Teodolah alleged that: (1) during
Eduardo's employment, he suffered dry cough and experienced difficulty in breathing and
urinating; (2) Eduardo's illness, which he tried to address by self-medication, is attributed to
exposure to chemicals on board the vessel; (3) Eduardo felt very ill at the time of his
repatriation but he merely endured it in the hopes of getting another contract; and (4)
Eduardo consulted a physician at the Lung Center of the Philippines who diagnosed him to
be suffering from bronchial asthma induced by chemicals.
The Labor Arbiter, in his Decision, dismissed Teodolah's complaint for lack of merit. He
ruled that Eduardo's death is not compensable because it occurred after the expiration of
his employment contract. The Labor Arbiter further reasoned that even assuming Eduardo
died during the term of the contract, it was not clearly and sufficiently established that the
cause of death was work-related or considered an occupational disease.
Upon appeal, the NLRC affirmed the Labor Arbiter's Decision, noting that Teodolah
would be entitled to death benefits only if Eduardo died during the term of his employment
contract. Since Eduardo died one (1) year, five (5) months, and twenty-three (23) days after
the expiration of the contract, the employer-employee relationship already ceased to exist
prior to his death; thus, Teodolah cannot be granted death benefits. The NLRC likewise
denied the motion for reconsideration filed by Teodolah.
In its Decision dated December 22, 2011, the CA reversed the ruling of the NLRC. It
held that a perusal of the record reveals that Teodolah was able to present substantial
evidence to show her entitlement to death benefits. First, Eduardo's series of employment
contracts with Baltic Marine covered a total lengthy period of almost 10 years. Second, on
March 19, 2001, March 27, 2001, July 19, 2001, July 30, 2001, October 8, 2001, December
3, 2001, November 4, 2003, March 7, 2005, October 7, 2006, January 12, 2007, and
January 26, 2007, Eduardo consulted at the Lung Center of the Philippines where he was
diagnosed with allergic rhinitis, bronchial asthma, sinusitis, and bronchitis. Third, Eduardo,
as a Second Officer (formerly Third Officer) on board the vessel, was exposed to toxic
fumes, chemicals, and such other hazards which contributed to his lung illness. Fourth, the
immediate cause of Eduardo's death was "Acute Respiratory Failure" and the antecedent
cause was "Prob. Sec. to Pulmonary Thromboembolism."
The CA found that Eduardo acquired bronchial asthma, an occupational disease under
Section 32-A of the 2000 POEA-SEC, within the period of his service with Baltic Marine. For
the CA, there was at least a reasonable connection between Eduardo's job as a Second
Officer and his bronchial asthma, which eventually developed into acute respiratory failure.
It likewise held that it is of no moment that Eduardo died after the expiration of his last
contract, because what is controlling is the fact that he acquired his lung disease while he
was still rendering sea services. Such disease was further aggravated by continued
exposure to chemicals while on board. The CA held that the NLRC gravely abused its
discretion in affirming the Labor Arbiter's dismissal of the complaint considering that there
was substantial evidence showing a causal connection between Eduardo's lung illness and
his work as a seaman. It thus ordered petitioners to pay Teodolah death benefits and burial
expenses in accordance with the 2000 POEASEC.
The petitioners filed the instant petition after the CA issued a Resolution denying their
motion for reconsideration. They argue that: Teodolah is not entitled to death compensation
considering that Eduardo died after the termination of his contract; there was no proof that
Eduardo's illness, which resulted in his death, was work-related; the mere fact that the
immediate cause of Eduardo's death was acute respiratory failure does not necessarily
mean that he died due to a lung disease because the term acute respiratory failure merely
refers to a stage of lung failure due to complications arising from a person's illness, which in
this case, is his prostate cancer; and Eduardo failed to comply with the mandatory three-day
reportorial requirement under the 2000 POEA-SEC.
The petition is unmeritorious.
The pertinent provision of Section 20(A) on Compensation and Benefits for Death
under the 2000 POEA-SEC reads:
A. Compensation and benefits for death
1. In case of work-related death of the seafarer[,] during the term of his
contract[,] the employer shall pay his beneficiaries the Philippine Currency
equivalent to the amount of Fifty Thousand US dollars (US$50,000.00) and an
additional amount of Seven Thousand US dollars (US$7,000.00) to each child
under the age of twenty-one (21) but not exceeding four (4) children, at the
exchange rate prevailing during the time of payment.
 When a party claims benefits for the death of a seafarer due to a work related illness,
one must be able to establish that: (1) the death occurred during the term of his
employment; and (2) the illness is work-related.
Here, there is no contest that Eduardo's death occurred more than one year after the
end of his employment contract. The only issue for our consideration is whether Eduardo's
death is compensable for having been caused by an illness contracted during his
employment; in other words, whether Eduardo's death is work-related.
The CA concluded that Eduardo acquired bronchial asthma, an occupational disease
under Section 32-A of the 2000 POEA-SEC, during his employment with petitioners. The
CA further found that there was a reasonable connection between Eduardo's job as a
Second Officer and his bronchial asthma, which eventually developed into an acute
respiratory failure and ultimately caused his death.
We agree.
The causes of Eduardo's death as stated in his Certificate of Death are:
17. CAUSES OF DEATH
I. Immediate cause:  a. ACUTE RESPIRATORY FAILURE
  Antecedent cause: b. PROB. SEC. TO PULMONARY THROMBOEMBOLISM
  Underlying cause:  c. SEC. TO PROSTATE CA
Under the given definition of the 2000 POEA-SEC, a work-related illness is "any
sickness resulting to disability or death as a result of an occupational disease listed under
Section 32-A of this contract with the conditions set therein satisfied." The 2000 POEA-SEC
creates a disputable presumption that illnesses not mentioned therein are work-related.
However, on the ground of due process, the claimant may still prove by substantial
evidence, or that amount of relevant evidence which a person might accept as adequate to
justify a conclusion, that the seafarer's work conditions caused or, at least, increased the
risk of contracting the disease. This is because awards of compensation cannot rest entirely
on bare assertions and presumptions; substantial evidence is required to prove the
concurrence of the conditions that will merit compensability, consistent with the liberal
interpretation accorded the provisions of the Labor Code and the social justice guarantee in
favor of the workers.
In the present case, Teodolah was able to prove through substantial evidence the
causal connection between Eduardo's work as a seafarer and his cause of death. Evidence
substantiating the same included an enumeration of Eduardo's exposure to chemicals,
noise and whole-body vibrations, strong draft winds and stormy weather, cold stress and
heat stress, excessive heat from burners and steam pipes, and ultraviolet radiation during
welding operations while on board and in the exercise of his duties as a Second Officer for
petitioners.
In point of fact, Teodolah already established the causal link between the nature of
Eduardo's work and the cause of the deterioration of his health leading to his repatriation at
the first instance in her complaint before the Labor Arbiter. There, she contended, among
others, that after his repatriation, a physician at the Lung Center of the Philippines
diagnosed him then to have been suffering from bronchial asthma, which was chemical--
induced. These claims were not dispelled by the Labor Arbiter but were merely disregarded
on the reasoning that Eduardo's death was not compensable because it occurred after the
expiration of his employment contract.
Upon full consideration of the evidence presented by Teodolah, the CA correctly found
that there is at least reasonable correlation established between the nature of Eduardo's
work and the cause of his death. Under settled jurisprudence, reasonable correlation is all
that is required to prove a rightful claim for death benefits.
In the early case of Iloilo Dock & Engineering Co. v. Workmen's Compensation
Commission, this Court has already made the pronouncement that the question of
compensation coverage necessarily revolves around the core requirement of work-
connection, and the corresponding evidence that establishes it. This Court has also taken
the early occasion to qualify that when it comes to evaluating work-relatedness with respect
to its guiding provisions in labor laws and their implementing rules, the same must always
be construed fairly, reasonably, or liberally in favor, or for the benefit, of employees and
their dependents, with all doubts as to the right to compensation being resolved, and all
presumptions indulged in their favor.
This liberal construction of the rules pertaining to compensability has been affirmed
time and again, as in the recent case of Canuel v. Magsaysay Maritime Corporation, where
we said:
However, a strict and literal construction of the 2000 POEA-SEC, especially when
the same would result into inequitable consequences against labor, is not subscribed to
in this jurisdiction. Concordant with the State's avowed policy to give maximum aid and
full protection to labor as enshrined in Article XIII of the 1987 Philippine Constitution,
contracts of labor, such as the 2000 POEA SEC, are deemed to be so impressed with
public interest that the more beneficial conditions must be endeavoured in favor of the
laborer. The rule therefore is one of liberal construction. x x x (Emphasis supplied;
citations omitted.)
The application of the liberal construction in favor of labor in our jurisdiction and settled
jurisprudence requires only that a reasonable connection between the nature of the
occupation and the cause of death be established to entitle claimants to accountability, as
aptly defined in the case of Wallem Maritime Services, Inc. v. NLRC:
It is not required that the employment be the sole factor in the growth, development
or acceleration of the illness to entitle the claimant to the benefits provided therefor.  It is
enough that the employment had contributed, even in a small degree, to the
development of the disease and in bringing about his death.
It is indeed safe to presume that, at the very least, the nature of Faustino
Inductive's employment had contributed to the aggravation of his illness-if indeed it was
preexisting at the time of his employment and therefore it is but just that he be duly
compensated for it. It cannot be denied that there was at least a reasonable connection
between his job and his lung infection, which eventually developed into septicemia and
ultimately caused his death. As a utility[ ]man on board the vessel, he was exposed to
harsh sea weather, chemical irritants, dusts, etc., all of which invariably contributed to
his illness.
Neither is it necessary, in order to recover compensation, that the employee must
have been in perfect condition or health at the time he contracted the disease. Every
working[ ]man brings with him to his employment certain infirmities, and while the
employer is not the insurer of the health of the employees, he takes them as he finds
them and assumes the risk of liability. If the disease is the proximate cause of the
employee's death for which compensation is sought, the previous physical condition of
 the employee is unimportant and recovery may be had therefor independent of any pre-
existing disease. (Emphasis supplied; citation omitted.)

Veritably, if the illness which caused the employee's death was either contracted in the
course of his employment or aggravated during the same period, the clear causal
connection between such illness and the employee's eventual death already legally exists,
making the death compensable regardless of when such subsequent death occurred. It is
not even required that the illness contracted during the course of employment be the exact
same illness that caused the eventual death, for as long as it can be established that the
work-related ailment he contracted during the course of his employment be that which
triggered the deterioration of his body's resistance against the said illness, any related
condition, or any other affliction that he may have subsequently had.

In the present case, Eduardo's causes of death included acute respiratory failure which
was diagnosed as secondary to pulmonary thromboembolism. It does not demand a stretch
of the imagination to reasonably presume that the conditions to which Eduardo was
exposed to during the fulfillment of his duties as Second Officer aboard petitioners' vessel at
the very least contributed to either the contracting of said respiratory illness or the
aggravation thereof.

Such a seafarer's sacrifice of labor and health for the petitioners' ultimate profit as in
this case demands that the death resulting therefrom be duly indemnified, consistent with
our avowed doctrine of protection of the rights of labor and our high aspirations for social
justice.

WHEREFORE, the petition is DENIED. The assailed Decision dated December 22, 2011
and Resolution dated February 24, 2012 of the Court of Appeals in CA-G.R. SP No. 109711
are AFFIRMED.
SO ORDERED.