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G.R. No.

93699 September 10, 1993


RAMON PRIETO, PACIFICO CANILLO, and WILFREDO AZUELA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, AR and SONS INTERNATIONAL
DEVELOPMENT CORP., SAUDI SERVICES and OPERATING COMPANY, LTD., and
SAUDI ARABIAN MORRISON, respondents.
Capuyan & Quimpo Law Office for petitioners.
Carag, Caballes, Jamora, Rodriguez & Somera Law Offices for private respondent.

CRUZ, J.:
The petitioners seek modification of the decision of the National Labor Relations
Commission dated May 31, 1990, reversing the decision of the Philippine Overseas
Employment Administration dated July 24, 1989. It is averred that the public respondent
committed grave abuse of discretion in ruling in favor of the private respondents,
contrary to the evidence on record.
This case arose from a complaint filed by Ramon Prieto, Pacifico Canillo and Wilfredo
Azuela against AR and Sons International Development Corporation, Saudi Services
and Operations Co. Ltd., and Saudi Arabian Morrison. 1 Their claim was for nonpayment of wages, illegal dismissal, illegal exaction of placement fees, illegal imposition
of performance bond, substitution of contract and deployment of workers to an
unaccredited principal.
The complainants alleged they were recruited by AR and Sons International
Development Corporation (AR and Sons) for employment for a period of 24 months with
Saudi Services and Operating Co., Ltd. (SSOC) in Saudi Arabia. The corresponding
Agency Worker Agreements, which were duly approved by the POEA, provided for their
respective positions and salaries as follows:
Name Position Salary (per month in
US Dollars)
Prieto Mechanic A/C $370.00
Azuela Mechanic A/C $370.00
Canillo Clerk $420.00
Later, however, taking advantage of their need for employment, the respondent
placement agency coerced them into signing another employment contract with Saudi
Arabia Morrison (SAM) without the knowledge and approval of the POEA. The second

contract gave all three of them the lower positions of assistant cook with a salary of only
SR625.00 per month for a period of three years. 2
The complainants said that when they reached Jeddah, Saudi Arabia, in November
1987, they were asked to sign still another employment contract by a certain
Muhammad Abbas, a representative of SAM, which would further lower their salaries to
SR250.00 a month. When they refused, they were not assigned any work but were
confined in a small room in a villa and given spoiled food for their sustenance. On
December 22, 1987, they were summarily dismissed and repatriated to the Philippines. 3
The respondents denied the charges and said that the complainants entered into
separate uniform Agency Worker Agreements where it was stipulated that they would
be employed by SSOC for 24 months upon departure from the Philippines. When the
petitioners arrived in Jeddah, it was discovered that Prieto and Azuela were not
qualified as mechanics and that Canillo was not qualified as clerk, so all three of them
were rejected. The complainants then requested SSOC to help them secure
employment as assistant cooks with SAM, which at that time was also a foreign
principal of AR and Sons. Taking pity on them, SSOC referred them to the latter agency
but they also failed to pass the trade tests for assistant cooks. It was for this reason that
they were finally repatriated to the Philippines at the expense of the latter agency.
After considering the evidence and arguments of the parties, the POEA held in favor of
the complainants. The dispositive portion of its decision decreed as follows:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered
ordering AR & SONS INTERNATIONAL DEVELOPMENT
CORPORATION and SAUDI ARABIAN MORRISON to pay jointly and
severally complainants Ramon Prieto, Pacifico Canillo and Wilfredo
Azuela the following amounts to be paid in Philippine Currency at the
prevailing rate of exchange at the rate of actual payment:
1. for Ramon Prieto
a) SIX HUNDRED SIXTEEN US DOLLARS AND 67/100
(US$616.67) representing his salaries from November 2,
1987 to December 22, 1987;
b) EIGHT THOUSAND TWO HUNDRED SIXTY THREE US
DOLLARS AND 33/100 (US$8,263.33) representing his
salaries for the unexpired portion of his employment
contract.
2. for Pacifico Canillo

a) SIX HUNDRED TEN US DOLLARS (US$610.00)


representing his salaries from November 12, 1987 to
December 22, 1987;
b) NINE THOUSAND FOUR HUNDRED SEVENTY US
DOLLARS (US$9,470.00) representing his salaries for the
unexpired portion of his employment contract.
3. for Wilfredo Azuela
a) SIX HUNDRED SIXTEEN US DOLLARS AND 67/100
(US$616.67) representing his salaries from November 2,
1987 to December 22, 1987;
b) EIGHT THOUSAND TWO HUNDRED SIXTY THREE US
DOLLARS AND 33/100 (US$8,263.33) representing his
salaries for the unexpired portion of his employment
contract; and
4. FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees.
SO ORDERED.
The decision was reversed by the NLRC, which ordered the dismissal of the complaint.
The NLRC found that the complainants had misrepresented themselves as mechanics
and cooks when they were not qualified for these positions and so had only themselves
to blame if they were subsequently rejected by a foreign employer.
The factual findings of administrative bodies are as a rule binding on this Court, but this
is true only when they do not come under the established exceptions. One of these is
where the findings of the POEA and the NLRC are contrary to each other, 4 as in this
case, and there is a necessity to determine which of them should be preferred as more
conformable to the established facts.
A study of the two decisions, together with the evidence and the arguments adduced by
the parties, inclines the Court in favor of the POEA.
We reject the respondents' argument that the petitioners' services were terminated
because they were not qualified either as mechanics or as assistant cooks. It is
presumed that before their deployment, the petitioners were subjected to the trade tests
required by law to be conducted by the recruiting agency to insure employment of only
technically qualified workers for the foreign principal. There was no misrepresentation
on the part of the petitioners. They had applied as A/C mechanics and clerk, and we
may assume that the trade tests conducted on them were for these positions and not for
the position of assistant cook. If they fell short of the employer's expectations, the fault

lies not with the petitioners but with the recruiting agency for deploying them even if they
did not possess the skills necessary for the positions they were seeking.
As we said in one case: 5
. . . Moreover, before the private respondents were hired they were
lengthily interviewed by a representative of the foreign employer, Modern
System. They must have passed, otherwise, they would not have been
hired. They must also be subjected to a trade test because this is one of
the requirements for employment abroad. Thirdly, the private respondents
were not given sufficient time to prove their fitness for the positions they
were hired. Two weeks for this purpose is not enough.
The private respondents point to the petitioners' allegation in their complaint that they
were mere assistant cooks and argue that this belies their representation that they did
not apply for these positions. The argument has no merit. The petitioners were not
assisted by lawyers when they filed their complaint and must have had in mind the
positions stipulated in the second contract. In the amended complaint, this statement
was rectified. At any rate, the slight error must not be taken against the petitioners. As
we held in Cuadra v. NLRC, 6 "our overseas workers are mostly ordinary laborers not
conversant with legal principles and with the manner they can assert and protect rights.
They have no compatriot lawyers to consult and no labor unions to support them in the
foreign land. . . . The claims of our overseas workers should therefore be received with
sympathy and allowed, if warranted, conformably to the constitutional mandate for the
protection of the working class."
We find no basis either for the conclusion of the NLRC that there was no
employer-employee relationship between the parties. The record shows that the
petitioners became employees of Saudi Services and Operating Company, Ltd., and
later of Saudi Arabian Morrison, both entities being represented by AR and Sons
International Development Corporation, which admitted in its Comment that the
petitioners were "hired and deployed abroad . . ." This relationship is even more firmly
supported by the Agency Worker Agreements between the petitioners and AR and Sons
acting for SSOC which were approved by the POEA under Accreditation Certificate No
8181, 7 and by the second contract under which the petitioners were deployed to SAM,
its other principal, by AR and Sons. 8
Article 279 of the Labor Code provides:
Art. 279. Security of Tenure In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this title. An employee who was unjustly
dismissed from work shall be entitled to reinstatement without lose of
seniority rights and to his backwages computed from the time his
compensation was withheld from him up to the time of reinstatement.

Where the employer-employee relationship has been established, the burden of proof in
termination cases lies with the employer. 9 This burden was not discharged by the
private respondents. It is clear form the record that the petitioners were hired as
mechanics and clerk (or as assistant cooks under the second contract) after presumably
having passed the corresponding trade tests conducted by the recruiting agency prior to
their deployment. If AR and Sons felt they were not qualified for these positions, it
should have rejected their applications outright instead of accepting their recruitment
fees just the same and assuring them that their employment had already been approved
by the foreign principal. It was the fault of AR and Sons for holding the petitioners to its
foreign principal as qualified when they were found later to be deficient. As a result of its
negligence, if not its deliberate misrepresentation, the petitioners found themselves
stranded in a foreign land, without the employment and income that they hoped would
give them a better life.
The principle of "no work, no pay" does not apply in this case for, as correctly pointed
out by POEA, the fact that the complainants had not worked at the jobsite was not of
their own doing. If they were not able to work at all, it was because they refused to sign
the third contract providing for another lowering of their salaries in violation of their first
agreement as approved by the POEA. They had a right to insist on the higher salaries
agreed upon in the original contract and to reject the subsequent impositions of SAM,
which obviously thought the petitioners would have to accept because they had no
choice.
Rule V, Book I of the Omnibus Rules Implementing the Labor Code defines the duties
and obligations of a duly licensed placement and recruitment agency. Section 2(e)
requires a private employment agency to assume all responsibilities for the
implementation of the contract of employment of an overseas worker. Section 10(a) (2)
provides that a private employment agency can be sued jointly and severally with the
principal or foreign-based employer for any violation of the recruitment agreement or the
contract of employment.
Book II, Rule II, Section 1(f) (3) of the new Rules and Regulations Governing Overseas
Employment promulgated by the Governing Board of the POEA substantially reiterates
Rule II of Book II, Section 1(d) (3) of 1985 POEA Rules, which governs this case. It
provides that a private employment agency shall assume joint and solidary liability with
the employer for all claims and liabilities that may arise in connection with the
implementation of the contracts including but not limited to payment of wages, health
and disability compensation and repatriation. There is no doubt that, under the facts
established in this case, AR and Sons is jointly and solidarily liable with overseas
employer SAM for the claims of the petitioners.
The Court is not unaware of the many abuses suffered by our overseas workers in the
foreign land where they have ventured, usually with heavy hearts, in pursuit of a more
fulfilling future. Breach of contract, maltreatment, rape, insufficient nourishment, subhuman lodgings, insults and other forms of debasement, are only a few of the inhumane
acts to which they are subjected by their foreign employers, who probably feel they can

do as they please in their own country. While these workers may indeed have relatively
little defense against exploitation while they are abroad, that disadvantage must not
continue to burden them when they return to their own territory to voice their muted
complaint. There is no reason why, in their very own land, the protection of our own
laws cannot be extended to them in full measure for the redress of their grievances.
WHEREFORE, the challenged decision of the NLRC dated May 31, 1980 is
REVERSED and SET ASIDE. The POEA decision dated July 24, 1989 is
REINSTATED, with costs against the private respondents.
SO ORDERED.

G.R. No. 106027 July 25, 1994


BPI CREDIT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and BENJAMIN
JOVELLANOS, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioner.
Severo S. Jovellanos for private respondent.

PUNO, J.:
The most frequently assaulted right of workers is their right to security of tenure. The
Constitution shields this right against unjustified attacks. The petition at bench
represents another attempt to negate this constitutional right of workers to security of
tenure. It cannot succeed.
The records show that private respondent Benjamin Jovellanos is the Marketing
Assistant of petitioner BPI Family Bank, Dagupan City branch. Ricardo Torio worked as
Credit Investigator Appraiser in the same bank.
On July 8, 1987, a certain Alex Racimo executed an Affidavit linking Jovellanos and
Torio to certain anomalies, viz:
(1) That I obtained a loan from the BPI Family Bank, Dagupan City in the
amount of P200,000.00;
(2) That in the processing of my application for this loan I had dealt with
RIC TORIO, an old acquaintance;
(3) That in the beginning when I was still applying for a loan I was made to
believe by RIC TORIO that I will not pay any charges except the
application fee in the sum of P500.00, which still be refunded to me upon
release of my approved loan;
(4) That when my loan was released the above named person
approached me and demanded from me something which they termed it
for the boys and he mentioned the name of BEN JOVELLANOS a coemployee at the BPI Credit Corporation, Dagupan City;
(5) That out of gratitude I was handling to him the sum of P1,000.00 but he
ignored it and instead he told me that he ought to charge five (5%) of the

total amount of the approved loan, upon release, but considering that we
were friends, 2% would be enough;
(6) That I tried to bargain with him that he accepts the P1,000.00 and just
as soon as I sell my property in Dagupan, I will give him the remaining
P3,000.00, but he declined and turned his back towards me;
(7) That I found it very strange because instead of being refunded the
amount of P500.00 which I paid as application fee, said person is
collecting from me a certain percentage of my approved loan; . . . .
Upon receipt of the affidavit, petitioner confronted respondent Jovellanos on August 12,
1987. According to the petition, Gaspar Antonio de los Santos, AVP of petitioner ". . .
brought up the subject as he and Jovellanos were on their way homefrom a staff
presentation at about 9:45 p.m." 1 It is also stated that Santos ". . . confronted
Jovellanos about the contents of the affidavit without naming Racimo as its
author." 2 Respondent Jovellanos was also instructed to report to the head office of the
petitioner on August 17, 1987.
On August 17, 1987, petitioner alleged that de los Santos "once more brought up the
matter of the reported irregularities with Jovallanos." 3 On this occasion, according to
petitioner, de los Santos "named Racimo and read portions of his (Racimo's)
affidavit." 4 Thereafter, de los Santos served the notice of preventive suspension on
Jovellanos signed by Socorro Lantin, another AVP of petitioner. 5 The notice reads:
Please be advised that pending investigation of the reported irregular
transactions pertaining to Real Estate Mortgage Loans of which you are
CI-Appraiser with the end in view of ascertaining degree of responsibility
and/or extent of violation of Bank policies and regulations as well as
possible losses to the Bank, you are hereby relieved of your duties and
placed under preventive suspension effective immediately.
In the meantime, you are free to submit whatever explanation/statement
you may have about the incident or any information that could held in the
prove of the reported anomally.
Respondent Jovellanos denied the charge against him. He said he did not know
Racimo.
On August 20, 1987, respondent Jovellanos wrote a letter to Lantin seeking to lift his
preventive suspension. Attached to the letter was his Affidavit which reads:
That I was made aware of the affidavit executed by Alex Racimo of
Binalonan, Pangasinan before the Clerk of Court of the Regional Trial
Court, Urdaneta, Pangasinan, which contained among others, Alex
Racimo's statement.

(a) that Ric Torio asked Alex Racimo some


money in return to the approval of his loan with
BPI Credit Corporation;
(b) That in asking the money, Ric Torio
represented to Alex Racimo that I was the one
who instructed Ric Torio to make the demand;
That I never instructed Ric Torio to ask for money from Alex Racimo nor I
ever connived with him to ask or demand for money; and in fact and in
truth I did not know that Ric Torio asked for money from Alex Racimo;
That if I had known that Ric Torio used my name, I would not have
consented to it;
That I have not engaged myself in any irregular or anomalous transaction
in relation to my duties and responsibilities as marketing assistant with BPI
Credit Corporation.
Likewise attached was the Sworn Clarificatory Statement of Racimo, viz:
That I previously executed an affidavit before the Clerk of Court, Regional
Trial Court, Urdaneta, Pangasinan;
That in said affidavit, I stated that Ric Torio upon the instruction of Ben
Jovellanos asked me money in return to the approval of my loan with BPI
Credit Corporation;
That in fairness to Ben Jovellanos, I should like to clarify my statement as
follows:
(a) That Ben Jovellanos never personally approached me or asked me for
money;
(b) That I did not have any basis to tell whether Ben Jovellanos really
instructed or convinced (sic) with Ric Torio in asking money; hence Ben
Jovellanos might have just been used by Ric Torio in asking money.
Respondent Jovellanos bewailed the failure of petitioner to give the details of the
"reported irregular transactions to real estate mortgage loans." 6
Respondent's preventive suspension was not lifted. Instead, it was extended as
petitioner formed a committee 7 to investigate the reported irregularities. According to
the petition, the result of the investigation is as follows: 8
xxx xxx xxx

7. The results of the investigation, which were affirmed under oath by the
head of the audit/investigating team, revealed the following: On the
solicitation of a percentage of the approved loans, the team visited ten
(10) clients of BPI Credit other than Mr. Alex Racimo to verify whether the
employees were demanding for a percentage of the approved loans. The
team was able to talk to seven (7) clients with the following results:
(a) Five (5) clients said that the employees did
not ask them for any consideration for the
approval of their loans.
(b) Two (2) clients said that they were
approached by the employees for certain
considerations. They were, however, hesitant
to give their written statements, probably afraid
that the employees would avenge them. One of
them, Imelda Ico, said that Torio and
Jovellanos asked her for a "blow out" on two
separate occasions; the first was when she
filed her loan application, and later, when her
loan was approved. She, thus, tendered two
"blow outs" which Torio and Jovellanos,
together with ten to thirteen of their friends
attended. The client also informed the team
that before she applied for a loan at BPI Credit,
she was forewarned by her friends of certain
employees who reportedly demand a
percentage of the approved loan. The other,
Angelita Reminguer, said that Jovellanos
asked for five percent of the approved loan
(P800,000.00) while the second release of her
construction loan was being processed. She
complained to SAM PS Coquia of BPI
Dagupan Branch who advised her not to give
in to the demand. SAM PS Coquia relayed the
client's complaint to the Manager of the
Dagupan Branch and the Business Center
Head.
8. With respect to the overvaluation of properties, twelve (12) properties
previously appraised, by Torio were re-appraised by the appraiser of BPI
Dagupan Business Center. Torio's appraisal of two of these properties
varied considerably from the figures reached when these were reappraised. The first property which was owned by Pedro/Victoria Revote
and subject of a real estate mortgage as security for a P100,000.00 loan,
was appraised by Torio on 3 July 1986 as follows:

Land: 287 sq. m. @ 400/sq.m. P114,800,00


Bungalow: 130.35 sq.m. @ 2,300/
sq. m. 299,000.00

Total: Appraised Value P413,800,00


Torio did not subject the property to depreciation since the "Estimated
Remaining Economic Life based on Present Physical condition" equaled
the "Normal Economic Life for Type of Building." The bungalow, moreover,
was reported to be well-maintained.
9. On the other hand, Jorge Monje, Appraiser of BPI Dagupan Branch
submitted a markedly different appraisal of the property on 4 September
1987. He depreciated the bungalow based on the estimated remaining life
of seven years:
Land: 287 sq. m. @ 400/sq . m. P114,800.00
Improvement:
10.35 sq. m. @
2,300/sq.m. 299,806.00
Less: 72% depreciation
(based on estimated
remaining life of
7 years) 215,859.00 83,946.00
Total Appraised value P198,746.00
Monje also found that the improvement, which was built in 1969, was not
properly maintained. Mr. John Cornel, an appraiser of Dagupan Business
Center who accompanied Monje during the inspection, appraised the
property at P222,729.00. The difference of P23,983.00 from the appraisal
of Jorge Monje was due to the lower depreciation rated adopted by
Cornel. Compared to the appraisals made by Monje and Cornel, Torio
appraised the property at twice its value. Moreover, the fact that the
property was foreclosed by the Rural Bank of Malsiqui on 17 September
1984 and redeemed by the borrowers on 1 October 1984, was not
reflected on the Loan Offering Memo addressed to the Credit Committee.
This Loan Offering Memo was signed by Marketing Assistant Benjamin
Jovellanos. That he signed the same was never denied by him. He
likewise never bothered to explain why he, knowing that the collateral had
a history of foreclosure and defaults, omitted mentioning this important
fact in the Loan Offering Memo.

Respondent Jovellanos was then served a Notice of Termination effective November


25, 1987 on the ground of wilfull breach of trust. Jovellanos countered by filing a
complaint for illegal dismissal with damages. On September 5, 1990, the Labor Arbiter
ruled in favor of Respondent Jovellanos, thus:
Wherefore, consistent with the foregoing tenor, judgment is hereby
rendered, to wit:
1. As to complainant Benjamin Jovellanos, respondent is guilty of illegal
dismissal, accordingly, respondent BPI Credit Corporation is ordered, as
follows:
a) To reinstate immediately complainant Benjamin Jovellanos to his
former position or equivalent thereto without loss of seniority rights or at
the option of respondent BPI CREDIT CORPORATION, payroll
reinstatement;
b) To pay complainant Benjamin Jovellanos two (2) years backwages
without qualification or deduction in the amount of SEVENTY SIX
THOUSAND AND EIGHT HUNDRED PESOS (P76,800.00); and
c) To pay attorney's fees ten percent (10%) of the judgment award in the
amount of P7,680.00.
Petitioner appealed to the respondent NLRC. On December 20, 1991, the Third Division
of the respondent NLRC, affirmed the ruling of the Labor Arbiter except that it deleted
the award of attorney's fees in favor of respondent Jovellanos. 9Petitioner's motion for
reconsideration was denied by the respondent commission on April 30, 1992. 10
In this petition for certiorari, petitioner argues:
ARGUMENTS
I
THE HONORABLE COMMISSION COMMITTED A GRAVE ABUSE
DISCRETION IN FINDING THAT THERE WAS NO JUST CAUSE FOR
THE DISMISSAL OF PRIVATE RESPONDENT.
II
THE HONORABLE COMMISSION COMMITTED A GROSS
MISAPPRECIATION OF THE ATTENDANT FACTS AND OF THE
APPLICABLE LAW IN FINDING THAT PETITIONER DID NOT OBSERVE
DUE PROCESS BEFORE TERMINATING PRIVATE RESPONDENT'S
SERVICES.

We find no merit in the petition.


Petitioner's submissions ignore the prosecution accorded by our Constitution to the
worker's precious right to security of tenure. The enthronement of the worker's right to
security of tenure in our fundamental law was not achieved overnight. For all its liberality
towards labor, our 1935 Constitution did not elevate the right as a constitutional right.
For a long time, the worker's security of tenure had only the protective mantle of
statutes and their interpretative rules and regulations. It was an uncertain protection that
sometimes yielded to the political permutations of the times. It took labor nearly four
decades of sweat and tears to persuade our people thru their leaders, to exalt the
worker's right to security of tenure as a sacrosanct constitutional right. It was Article II,
section 2 of our 1973 Constitution that declared as a policy that the State shall assure
the right of workers to security of tenure. The 1987 Constitution is even more solicitous
of the welfare of labor. Section 3 of its Article XIII mandates that the State shall afford
full protection to labor and declares that all workers shall be entitled to security of
tenure. Among the enunciated State policies are the promotion of social justice 11 and a
just and dynamic social order. 12 In contrast, the prerogative of management to dismiss
a worker, as an aspect of property right, has never been endowed with a constitutional
status.
The unequivocal constitutional declaration that all workers shall be entitled to security of
tenure spurred our lawmakers to strengthen the protective walls around this hard
earned right. The right was protected from undue infringement both by our substantive
and procedural laws. Thus, the causes for dismissing employees were more defined
and restricted; 13 on the other hand, the procedure of termination was also more clearly
delineated. 14 These substantive and procedural laws must be strictly complied with
before a worker can be dismissed from his employment.
Prescinding from these premises, we affirm the ruling of the NLRC that private
respondent was dismissed; in violation of his right to procedural due process. Article
277(b) of the Labor Code provides the procedure for terminating a worker, viz:
xxx xxx xxx
(b) Subject to the constitutional right of workers to security of tenure and
their right to be protected against dismissal except for a just and
authorized cause and without prejudice to the requirement of notice under
Article 283 of this Code the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the regional branch of the

National Labor Relations Commission. The burden of proving that the


termination was for a valid or authorized cause shall rest on the employer.
The Secretary of the Department of a Labor and Employment may
suspend the effects of the termination pending resolution of the dispute in
the event of a prima faciefinding by the appropriate official of the
Department of Labor and Employment before whom such dispute is
pending that the termination may cause a serious labor dispute or is in
implementation of a mass lay-off.
In the case at bench, petitioner did not give fair notice to private respondent of the
charges against him. According to the petitioner, on August 12, 1987, its Assistant Vice
President de los Santos ". . . brought up the subject as he and Jovellanoswere on their
way home from a staff presentation at about 9:45 p.m." He also ". . . confronted
Jovellanos about the contents of the affidavit without naming g Racimo as its author."
Such casualness and incompleteness of information cannot satisfy the requirements of
due process. Neither could the notice of preventive suspension served on private
respondent on August 17, 1987 have any curative effect. A reading of said notice will
show that it required private respondent to explain his participation in certain ". . .
reported irregular transactions pertaining to Real Estate Mortgage Loans of which you
are CI-Appraiser . . ." The lack of specificity or the generality of the charge speaks for
itself. Worse still, petitioner thereafter conducted its own ex parte investigation without
the participation of the private respondent. It interviewed a certain Imelda Ico who
revealed that Jovellanos and Torio asked her for a "blow out" when she filed her loan
application, and later when her loan was approved. Another woman, Angelita
Reminguer, also declared that Jovellanos asked for five percent (5%) of her approved
loan. The two, however, refused to give any sworn statement. Private respondent who
was not aware of the investigation was never given an opportunity to disprove their
accusation. Yet, primarily on the basis of the damaging statements of Ico and
Reminguer, petitioner dismissed private respondent effective November 25, 1987 on the
ground of willful breach of trust. The opportunity of private respondent to defend himself
was thus more chimerical than real.
We also affirm the ruling of the NLRC that the evidence on record does not justify the
dismissal of the private respondent. Alex Racimo retracted his affidavit implicating
private respondent. The charges made by Imelda Ico and Angelita Reminguer hardly
had any evidentiary value. As ruled by the Labor Arbiter and the NLRC:
As gleaned from the record, other charges made against complainant
Jovellanos accusing him of soliciting percentage fee by a certain Angelita
Reminguer and Imelda Ico could not also be given credit. Firstly, because
it is an unsworn statement; Secondly, being mere allegation unsupportive
(sic) by corroborative evidence; Thirdly, complainant Jovellanos was not
aware of such accusation during his confrontation with the assistant VicePresident of BPI Credit, Gaspar Centino de los Santos. Neither was it
specified in his suspension order leading to his termination. It is pertinent
further, to note the fact that the foreclosure and redemption of a real

property not having been reflected on the loan offering memo addressed
to the Credit Committee could have been done intentionally by
complainant Jovellanos. For such omission, We believe that complainant
could not be solely responsible, since the memo was also signed by the
Business Center Head Francisco Nery and Assistant Vice-President
Bienvenido Manangun who are higher in rank than complainant
Jovellanos being merely marketing assistant. This omission therefore,
should not be taken against him and charge of cooperating or lending
assistance to the Credit Investigator in the overvaluation of the appraisal
of the property of a client of the Bank.
All these notwithstanding, petitioner insists that on ground of loss of trust and
confidence it can dismiss private respondent considering the nature of his position as
Marketing Assistant. It posits the thesis that the dismissal can be justified as long as it
has "some basis" since the position of private respondent calls for trust. Time does not
stand still and petitioner ought to know that this thesis has long been entombed by our
Constitution which has elevated the security of tenure of our workers to a constitutional
right. We hold that this right cannot be eroded, let alone be forfeited except upon a clear
and convincing showing of a just and lawful cause. In the case at bench, it is not
disputed that private respondent has served the petitioner from April 23, 1976 up to
September 18, 1987 starting as credit investigator until he rose to the position of
Marketing Assistant. His eleven (11) years of service with the petitioner has not been
tainted with any kind of dishonesty. We cannot allow petitioner to disregard this long
length of faithful service on the basis of evidence that is hearsay, uncorroborated, and
untrustworthy, otherwise, the tenurial right of our workers would have but a scrap value.
IN VIEW WHEREOF, the petition is DISMISSED, there being no showing of grave
abuse of discretion committed by the public respondent in its Decision of December 20,
1991. Costs against petitioner.
SO ORDERED.

G.R. No. 82511 March 3, 1992


GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and IMELDA
SALAZAR, respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
Gerardo S. Alansalon for private respondent.

ROMERO, J.:
For private respondent Imelda L. Salazar, it would seem that her close association with
Delfin Saldivar would mean the loss of her job. In May 1982, private respondent was
employed by Globe-Mackay Cable and Radio Corporation (GMCR) as general systems
analyst. Also employed by petitioner as manager for technical operations' support was
Delfin Saldivar with whom private respondent was allegedly very close.
Sometime in 1984, petitioner GMCR, prompted by reports that company equipment and
spare parts worth thousands of dollars under the custody of Saldivar were missing,
caused the investigation of the latter's activities. The report dated September 25, 1984
prepared by the company's internal auditor, Mr. Agustin Maramara, indicated that
Saldivar had entered into a partnership styled Concave Commercial and Industrial
Company with Richard A. Yambao, owner and manager of Elecon Engineering Services
(Elecon), a supplier of petitioner often recommended by Saldivar. The report also
disclosed that Saldivar had taken petitioner's missing Fedders airconditioning unit for his
own personal use without authorization and also connived with Yambao to defraud
petitioner of its property. The airconditioner was recovered only after petitioner GMCR
filed an action for replevin against Saldivar. 1
It likewise appeared in the course of Maramara's investigation that Imelda Salazar
violated company reglations by involving herself in transactions conflicting with the
company's interests. Evidence showed that she signed as a witness to the articles of
partnership between Yambao and Saldivar. It also appeared that she had full
knowledge of the loss and whereabouts of the Fedders airconditioner but failed to
inform her employer.
Consequently, in a letter dated October 8, 1984, petitioner company placed private
respondent Salazar under preventive suspension for one (1) month, effective October 9,
1984, thus giving her thirty (30) days within which to, explain her side. But instead of
submitting an explanations three (3) days later or on October 12, 1984 private
respondent filed a complaint against petitioner for illegal suspension, which she
subsequently amended to include illegal dismissal, vacation and sick leave benefits,
13th month pay and damages, after petitioner notified her in writing that effective
November 8, 1984, she was considered dismissed "in view of (her) inability to refute
and disprove these findings. 2
After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered petitioner
company to reinstate private respondent to her former or equivalent position and to pay
her full backwages and other benefits she would have received were it not for the illegal
dismissal. Petitioner was also ordered to pay private respondent moral damages of
P50,000.00. 3
On appeal, public respondent National Labor Relations, Commission in the questioned
resolution dated December 29, 1987 affirmed the aforesaid decision with respect to the

reinstatement of private respondent but limited the backwages to a period of two (2)
years and deleted the award for moral damages. 4
Hence, this petition assailing the Labor Tribunal for having committed grave abuse of
discretion in holding that the suspension and subsequent dismissal of private
respondent were illegal and in ordering her reinstatement with two (2) years'
backwages.
On the matter of preventive suspension, we find for petitioner GMCR.
The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in
conflict with his position as technical operations manager, necessitated immediate and
decisive action on any employee closely, associated with Saldivar. The suspension of
Salazar was further impelled by th.e discovery of the missing Fedders airconditioning
unit inside the apartment private respondent shared with Saldivar. Under such
circumstances, preventive suspension was the proper remedial recourse available to
the company pending Salazar's investigation. By itself, preventive suspension does, not
signify that the company has adjudged the employee guilty of the charges she was
asked to answer and explain. Such disciplinary measure is resorted to for the protection
of the company's property pending investigation any alleged malfeasance or
misfeasance committed by the employee. 5
Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to
due process when she was promptly suspended. If at all, the fault, lay with private
respondent when she ignored petitioner's memorandum of October 8, 1984 "giving her
ample opportunity to present (her) side to the Management." Instead, she went directly
to the Labor Department and filed her complaint for illegal suspension without giving her
employer a chance to evaluate her side of the controversy.
But while we agree with the propriety of Salazar's preventive suspension, we hold that
her eventual separation from employment was not for cause.
What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the
victim who has not merely lost her job which, under settled Jurisprudence, is a property
right of which a person is not to be deprived without due process, but also the
compensation that should have accrued to her during the period when she was
unemployed?
Art. 279 of the Labor Code, as amended, provides:
Security of Tenure. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his

compensation was withheld from him up to the time of his actual


reinstatement. 6 (Emphasis supplied)
Corollary thereto are the following provisions of the Implementing Rules and
Regulations of the Labor Code:
Sec. 2. Security of Tenure. In cases of regular employments, the
employer shall not terminate the services of an employee except for a just
cause as provided in the Labor Code or when authorized by existing laws.
Sec. 3. Reinstatement. An employee who is unjustly dismissed from
work shall by entitled to reinstatement without loss of seniority rights and
to backwages." 7 (Emphasis supplied)
Before proceeding any furthers, it needs must be recalled that the present Constitution
has gone further than the 1973 Charter in guaranteeing vital social and economic rights
to marginalized groups of society, including labor. Given the pro-poor orientation of
several articulate Commissioners of the Constitutional Commission of 1986, it was not
surprising that a whole new Article emerged on Social Justice and Human Rights
designed, among other things, to "protect and enhance the right of all the people to
human dignity, reduce social, economic and political inequalities, and remove cultural
inequities by equitably diffusing wealth and political power for the common
good." 8 Proof of the priority accorded to labor is that it leads the other areas of concern
in the Article on Social Justice, viz., Labor ranks ahead of such topics as Agrarian and
Natural Resources Reform, Urban Land Roform and Housing, Health, Women, Role
and Rights of Poople's Organizations and Human Rights. 9
The opening paragraphs on Labor states
The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including
the right to strike in accordance with law. They shall be entitled tosecurity
of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights
and benefits is may be provided by law. 10 (Emphasis supplied)
Compare this with the sole.provision on Labor in the 1973 Constitution under the Article
an Declaration of Principles and State Policies that provides:
Sec. 9. The state shall afford protection to labor, promote full employment
and equality in employment, ensure equal work opportunities regardless of
sex, race, or creed, and regulate the relations between workers and

employers. The State shall ensure the rights of workers to selforganization, collective baegaining, security of tenure, and just and
humane conditions of work. The State may provide for compulsory
arbitration. 11
To be sure, both Charters recognize "security of tenure" as one of the rights of labor
which the State is mandated to protect. But there is no gainsaying the fact that the intent
of the framers of the present Constitution was to give primacy to the rights of labor and
afford the sector "full protection," at least greater protection than heretofore accorded
them, regardless of the geographical location of the workers and whether they are
organized or not.
It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
substantially contributed to the present formulation of the protection to labor provision
and proposed that the same be incorporated in the Article on Social Justice and not just
in the Article on Declaration of Principles and State Policies "in the light of the special
importance that we are giving now to social justice and the necessity of emphasizing the
scope and role of social justice in national development." 12
If we have taken pains to delve into the background of the labor provisions in our
Constitution and the Labor Code, it is but to stress that the right of an employee not to
be dismissed from his job except for a just or authorized cause provided by law has
assumed greater importance under the 1987 Constitution with the singular prominence
labor enjoys under the article on Social Justice. And this transcendent policy has been
translated into law in the Labor Code. Under its terms, where a case of unlawful or
unauthorized dismissal has been proved by the aggrieved employee, or on the other
hand, the employer whose duty it is to prove the lawfulness or justness of his act of
dismissal has failed to do so, then the remedies provided in Article 279 should find,
application. Consonant with this liberalized stance vis-a-vis labor, the legislature even
went further by enacting Republic Act No. 6715 which took effect on March 2, 1989 that
amended said Article to remove any possible ambiguity that jurisprudence may have
generated which watered down the constitutional intent to grant to labor "full
protection." 13
To go back to the instant case, there being no evidence to show an authorized, much
less a legal, cause for the dismissal of private respondent, she had every right, not only
to be entitled to reinstatement, but ay well, to full backwages." 14
The intendment of the law in prescribing the twin remedies of reinstatement and
payment of backwages is, in the former, to restore the dismissed employee to her status
before she lost her job, for the dictionary meaning of the word "reinstate" is "to restore to
a state, conditione positions etc. from which one had been removed" 15 and in the latter,
to give her back the income lost during the period of unemployment. Both remedies,
looking to the past, would perforce make her "whole."

Sadly, the avowed intent of the law has at times been thwarted when reinstatement has
not been forthcoming and the hapless dismissed employee finds himself on the outside
looking in.
Over time, the following reasons have been advanced by the Court for denying
reinstatement under the facts of the case and the law applicable thereto; that
reinstatement can no longer be effected in view of the long passage of time (22 years of
litigation) or because of the realities of the situation; 16 or that it would be "inimical to the
employer's interest; " 17 or that reinstatement may no longer be feasible; 18 or, that it will
not serve the best interests of the parties involved; 19 or that the company would be
prejudiced by the workers' continued employment; 20 or that it will not serve any prudent
purpose as when supervening facts have transpired which make execution on that
score unjust or inequitable 21 or, to an increasing extent, due to the resultant
atmosphere of "antipathy and antagonism" or "strained relations" or "irretrievable
estrangement" between the employer and the employee. 22
In lieu of reinstatement, the Court has variously ordered the payment of backwages and
separation pay 23 or solely separation pay. 24
In the case at bar, the law is on the side of private respondent. In the first place the
wording of the Labor Code is clear and unambiguous: "An employee who is unjustly
dismissed from work shall be entitled to reinstatement. . . . and to his full backwages. . .
." 25 Under the principlesof statutory construction, if a statute is clears plain and free
from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legis derived from the
maxim index animi sermo est (speech is the index of intention) rests on the valid
presumption that the words employed by, the legislature in a statute correctly express
its intent or will and preclude the court from construing it differently. 26 The legislature is
presumed to know the meaning of the words, to:have used words advisedly, and to
have expressed its intent by the use of such words as are found in the statute. 27 Verba
legis non est recedendum, or from the words of a statute there should be no departure.
Neither does the provision admit of any qualification. If in the wisdom of the Court, there
may be a ground or grounds for non-application of the above-cited provision, this should
be by way of exception, such as when the reinstatement may be inadmissible due to
ensuing strained relations between the employer and the employee.
In such cases, it should be proved that the employee concerned occupies a position
where he enjoys the trust and confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism may be generated as to
adversely affect the efficiency and productivity of the employee concerned.
A few examples, will suffice to illustrate the Court's application of the above principles:
where the employee is a Vice-President for Marketing and as such, enjoys the full trust
and confidence of top management; 28 or is the Officer-In-Charge of the extension office
of the bank where he works; 29 or is an organizer of a union who was in a position to
sabotage the union's efforts to organize the workers in commercial and industrial

establishments; 30 or is a warehouseman of a non-profit organization whose primary


purpose is to facilitate and maximize voluntary gifts. by foreign individuals and
organizations to the Philippines; 31 or is a manager of its Energy Equipment Sales. 32
Obviously, the principle of "strained relations" cannot be applied indiscriminately.
Otherwisey reinstatement can never be possible simply because some hostility is
invariably engendered between the parties as a result of litigation. That is human
nature. 33
Besides, no strained relations should arise from a valid and legal act of asserting one's
right; otherwise an employee who shall assert his right could be easily separated from
the service, by merely paying his separation pay on the pretext that his relationship with
his employer had already become strained. 34
Here, it has not been proved that the position of private respondent as systems analyst
is one that may be characterized as a position of trust and confidence such that if
reinstated, it may well lead to strained relations between employer and employee.
Hence, this does not constitute an exception to the general rule mandating
reinstatement for an employee who has been unlawfully dismissed.
On the other hand, has she betrayed any confidence reposed in her by engaging in
transactions that may have created conflict of interest situations? Petitioner GMCR
points out that as a matter of company policy, it prohibits its employees from involving
themselves with any company that has business dealings with GMCR. Consequently,
when private respondent Salazar signed as a witness to the partnership papers of
Concave (a supplier of Ultra which in turn is also a supplier of GMCR), she was deemed
to have placed. herself in an untenable position as far as petitioner was concerned.
However, on close scrutiny, we agree with public respondent that such a circumstance
did not create a conflict of interests situation. As a systems analyst, Salazar was very
far removed from operations involving the procurement of supplies. Salazar's duties
revolved around the development of systems and analysis of designs on a continuing
basis. In other words, Salazar did not occupy a position of trust relative to the approval
and purchase of supplies and company assets.
In the instant case, petitioner has predicated its dismissal of Salazar on loss of
confidence. As we have held countless times, while loss of confidence or breach of trust
is a valid ground for terminations it must rest an some basis which must be convincingly
established. 35 An employee who not be dismissed on mere presumptions and
suppositions. Petitioner's allegation that since Salazar and Saldivar lived together in the
same apartment, it "presumed reasonably that complainant's sympathy would be with
Saldivar" and its averment that Saldivar's investigation although unverified, was
probably true, do not pass this Court's test. 36 While we should not condone the acts of
disloyalty of an employee, neither should we dismiss him on the basis of suspicion
derived from speculative inferences.

To rely on the Maramara report as a basis for Salazar's dismissal would be most
inequitous because the bulk of the findings centered principally oh her friend's alleged
thievery and anomalous transactions as technical operations' support manager. Said
report merely insinuated that in view of Salazar's special relationship with Saldivar,
Salazar might have had direct knowledge of Saldivar's questionable activities. Direct
evidence implicating private respondent is wanting from the records.
It is also worth emphasizing that the Maramara report came out after Saldivar had
already resigned from GMCR on May 31, 1984. Since Saldivar did not have the
opportunity to refute management's findings, the report remained obviously one-sided.
Since the main evidence obtained by petitioner dealt principally on the alleged
culpability of Saldivar, without his having had a chance to voice his side in view of his
prior resignation, stringent examination should have been carried out to ascertain
whether or not there existed independent legal grounds to hold Salatar answerable as
well and, thereby, justify her dismissal. Finding none, from the records, we find her to
have been unlawfully dismissed.
WHEREFORE, the assailed resolution of public respondent National Labor Relations
Commission dated December 29, 1987 is hereby AFFIRMED. Petitioner GMCR is
ordered to REINSTATE private respondent Imelda Salazar and to pay her backwages
equivalent to her salary for a period of two (2) years only.
This decision is immediately executory.
SO ORDERED.

G.R. No. 201701

June 3, 2013

UNILEVER PHILIPPINES, INC., Petitioner,


vs.
MARIA RUBY M. RIVERA, Respondent.
DECISION
MENDOZA, J.:
Subject of this disposition is the petition for review on certiorari1 under Rule 45 of the
Rules of Court filed by petitioner Unilever Philippines, Inc. (Unilever) questioning the
June 22, 2011 Decision2 and the April 25, 2012 Resolution3 of the Court of Appeals
(CA)-Cagayan de Oro City, in CA G.R. SP No. 02963-MIN, an Illegal Dismissal case
filed by respondent Maria Ruby M. Rivera (Rivera). The CA affirmed with modification
the March 31, 2009 Resolution of the National Labor Relations Commission (NLRC)
finding Rivera's dismissal from work to be valid as it was for a just cause and declaring

that she was not entitled to any retirement benefit. The CA, however, awarded
separation pay in her favor as a measure of social justice.
The Facts
Unilever is a company engaged in the production, manufacture, sale, and distribution of
various food, home and personal care products, while Rivera was employed as its Area
Activation Executive for Area 9 South in the cities of Cotabato and Davao. She was
primarily tasked with managing the sales, distribution and promotional activities in her
area and supervising Ventureslink International, Inc. (Ventureslink), a third party service
provider for the companys activation projects. Unilever enforces a strict policy that
every trade activity must be accompanied by a Trade Development Program (TDP) and
that the allocated budget for a specific activity must be used for such activity only.4
Sometime in 2007, Unilevers internal auditor conducted a random audit and found out
that there were fictitious billings and fabricated receipts supposedly from Ventureslink
amounting to P11,200,000.00. It was also discovered that some funds were diverted
from the original intended projects. Upon further verification, Ventureslink reported that
the fund deviations were upon the instruction of Rivera.
On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain
the following charges, to wit: a) Conversion and Misappropriation of Resources; b)
Breach of Fiduciary Trust; c) Policy Breaches; and d) Integrity Issues.
Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions,
but explained that such actions were mere resourceful utilization of budget because of
the difficulty of procuring funds from the head office.5 She insisted that the diverted
funds were all utilized in the companys promotional ventures in her area of coverage.
Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach
of the companys Code of Business Principles compelling it to sever their professional
relations. In a letter, dated September 20, 2007, Rivera asked for reconsideration and
requested Unilever to allow her to receive retirement benefits having served the
company for fourteen (14) years already. Unilever denied her request, reasoning that
the forfeiture of retirement benefits was a legal consequence of her dismissal from work.
On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary
claims against Unilever.
On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and
denied her claim for retirement benefits, but ordered Unilever to pay a proportionate
13th month pay and the corresponding cash equivalent of her unused leave credits. The
decretal portion of the LA decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack
of merit the illegal dismissal complaint. However, UNILEVER PHILIPPINES, INC. is

hereby ordered to pay complainant the total amount of PESOS: FIFTY SEVEN
THOUSAND EIGHTY TWO & 90/100 ONLY (P57,082.90) representing proportionate
13th month pay and unused leave credits.
The complaint against individual respondents Recto Sampang and Alejandro Concha
are likewise dismissed for it was not shown that they acted in bad faith in the dismissal
of complainant. Moreover, their legal personality is separate and distinct from that of the
corporation.
All other money claims are dismissed for lack of basis.6
On appeal, the NLRC partially granted Riveras prayer. In its Resolution, dated
November 28, 2008, the NLRC held that although she was legally dismissed from the
service for a just cause, Unilever was guilty of violating the twin notice requirement in
labor cases. Thus, Unilever was ordered to pay her P30,000.00 as nominal damages,
retirement benefits and separation pay. The dispositive portion reads:
WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED.
The assailed Decision dated 28 April 2008 is hereby MODIFIED in the sense that
respondent UNILEVER PHILIPPINES, INC. is hereby ordered to pay the following
sums:
1. The amount of P30,000.00 representing nominal damages for violation of
complainants right to procedural due process;
2. Retirement benefits under the companys applicable retirement policy or
written agreement, and in the absence of which, to pay complainant her
retirement pay equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year;
3. Separation pay under the companys applicable policy or written agreement,
and in the absence of which, to pay separation pay equivalent to at least one-half
(1/2) month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year.
The rest of the Decision is hereby AFFIRMED.
SO ORDERED.7
Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated
March 31, 2009, the NLRC modified its earlier ruling by deleting the award of separation
pay and reducing the nominal damages from P30,000.00 to P20,000.00, but affirmed
the award of retirement benefits to Rivera. The fallo reads:

WHEREFORE, foregoing premises considered, the instant Motion for Partial


Reconsideration is PARTLY GRANTED. The Resolution dated 28 November 2008 of
the Commission is hereby
RECONSIDERED as follows:
(1)The award of separation pay is hereby deleted for lack of factual and legal
basis; and
(2)The award of nominal damages is hereby tempered and reduced to the
amount of P20,000.00.
The rest of the award for retirement benefits is affirmed in toto.
SO ORDERED.8
Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a
petition for certiorari under Rule 65 of the Rules of Court.
On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the
deletion of the award of retirement benefits, the CA explained that, indeed, under
Unilevers Retirement Plan, a validly dismissed employee cannot claim any retirement
benefit regardless of the length of service. Thus, Rivera is not entitled to any retirement
benefit. It stated, however, that there was no proof that she personally gained any
pecuniary benefit from her infractions, as her instructions were aimed at increasing the
sales efficiency of the company and competing in the local market. For said reason, the
CA awarded separation pay in her favor as a measure of social justice.9 The decretal
portion of the CA decision reads:
WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5),
Cagayan De Oro City is hereby AFFIRMED with MODIFICATION. Consequently,
UNILEVER is directed to pay MARIA RUBY M. RIVERA the following:
a) Separation pay, to be computed based on the companys applicable policy or
written agreement, or in the absence thereof, the equivalent of at least one-half
(1/2) month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year;
b) P20,000.00 as nominal damages; and
c) Proportionate 13th month pay and unused leave credits, to be computed
based on her salary during the period relevant to the case.
The award of retirement benefits is hereby DELETED.
SO ORDERED.10

Unilever filed a motion for partial reconsideration,11 but it was denied in a Resolution,
dated April 25, 2012.
Hence, this petition.12
In support of its position, Unilever submits for consideration the following
GROUNDS
I.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN GRANTING AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN
IF SHE DID NOT FILE ANY PETITION FOR CERTIORARI TO CHALLENGE THE
NLRC RESOLUTIONS.
II.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN AWARDING SEPARATION PAY IN FAVOR OF RIVERA
CONSIDERING THAT THE LATTER WAS VALIDLY DISMISSED FROM
EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.
III.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN RULING THAT THE COMPANY VIOLATED RIVERAS RIGHT TO
PROCEDURAL DUE PROCESS BEFORE TERMINATING HER EMPLOYMENT, AND
CONSEQUENTLY, IN AWARDING NOMINAL DAMAGES.13
Unilever argues that Rivera did not file any separate petition for certiorari before the CA.
Neither did she file any comment on its petition. Hence, it was erroneous for the CA to
grant an affirmative relief because it was inconsistent with the doctrine that a party who
has not appealed cannot obtain from the appellate court any affirmative relief other than
the ones granted in the appealed decision. The petitioner stresses that Rivera
misappropriated company funds amounting to millions of pesos and that granting her
separation pay undermines the serious misdeeds she committed against the company.
Moreover, the length of her service with Unilever does not mitigate her offense, but
even aggravates the depravity of her acts.14
The petition is partly meritorious.
The pivotal issue in the case at bench is whether or not a validly dismissed employee,
like Rivera, is entitled to an award of separation pay.

As a general rule, an employee who has been dismissed for any of the just causes
enumerated under Article 28215of the Labor Code is not entitled to a separation
pay.16 Section 7, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code
provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the
services of an employee shall be those provided in Article 282 of the Code. The
separation from work of an employee for a just cause does not entitle him to the
termination pay provided in the Code, without prejudice, however, to whatever rights,
benefits and privileges he may have under the applicable individual or collective
agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally
dismissed employee as an act of "social justice" or on "equitable grounds." In both
instances, it is required that the dismissal (1) was not for serious misconduct; and (2)
did not reflect on the moral character of the employee.17 The leading case of Philippine
Long Distance Telephone Co. vs. NLRC18 is instructive on this point:
We hold that henceforth separation pay shall be allowed as a measure of social justice
only in those instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not
be required to give the dismissed employee separation pay, or financial assistance, or
whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding
rather than punishing the erring employee for his offense. And we do not agree that the
punishment is his dismissal only and the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if the employee who steals from the
company is granted separation pay even as he is validly dismissed, it is not unlikely that
he will commit a similar offense in his next employment because he thinks he can
expect a like leniency if he is again found out.1wphi1 This kind of misplaced
compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the
Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it
is committed by the underprivileged. At best, it may mitigate the penalty but it certainly
will not condone the offense. Compassion for the poor is an imperative of every humane
society but only when the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels any more than can equity
be an impediment to the punishment of the guilty. Those who invoke social justice may
do so only if their hands are clean and their motives blameless and not simply because
they happen to be poor. This great policy of our Constitution is not meant for the

protection of those who have proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their own character.19
In the subsequent case of Toyota Motor Philippines Corporation Workers Association
(TMPCWA) v. National Labor Relations Commission,20 it was further elucidated that "in
addition to serious misconduct, in dismissals based on other grounds under Art. 282 like
willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust,
and commission of a crime against the employer or his family, separation pay should
not be conceded to the dismissed employee."21 In Reno Foods, Inc, v. Nagkakaisang
Lakas ng Manggagawa (NLM)-Katipunan,22 the Court wrote that "separation pay is only
warranted when the cause for termination is not attributable to the employees fault,
such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases
of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause."23
In this case, Rivera was dismissed from work because she intentionally circumvented a
strict company policy, manipulated another entity to carry out her instructions without
the companys knowledge and approval, and directed the diversion of funds, which she
even admitted doing under the guise of shortening the laborious process of securing
funds for promotional activities from the head office. These transgressions were serious
offenses that warranted her dismissal from employment and proved that her termination
from work was for a just cause. Hence, she is not entitled to a separation pay.
More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC
disallowing the award of separation pay to her. It was Unilever who elevated the case to
the CA. It is axiomatic that a party who does not appeal, or file a petition for certiorari, is
not entitled to any affirmative relief.24 Due process prevents the grant of additional
awards to parties who did not appeal.25 An appellee who is not an appellant may assign
errors in his brief where his purpose is to maintain the judgment, but he cannot seek
modification or reversal of the judgment or claim affirmative relief unless he has also
appealed.26 It was, therefore, erroneous for the CA to grant an affirmative relief to
Rivera who did not ask for it.
Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged
non-observance of the requirements of procedural due process. It insists that she was
given ample opportunity "to explain her side, interpose an intelligent defense and
adduce evidence on her behalf." 27
The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing
the Labor Code expressly states:
Section 2. Standard of due process: requirements of notice.
In all cases of termination of employment, the following standards of due process
shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the
Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him;
and
(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstance, grounds have been established to
justify his termination.
In case of termination, the foregoing notices shall be served on the employees last
known address.
King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due
process can be satisfactorily complied with. Thus:
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 from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide 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 the
charge against the employees. A general description of the charge will not
suffice. Lastly, the notice should specifically mention which company rules, if any,
are violated and/or which among the grounds under Art. 282 is being charged
against the employees.
(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 clarify their defenses to the charge against them; (2) present
evidence in support of their 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 themselves personally, with the
assistance of a representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an opportunity to come to
an amicable settlement.
(3) After determining that termination of employment is justified, the employers
shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of
their employment.29
In this case, Unilever was not direct and specific in its first notice to Rivera. The words it
used were couched in general terms and were in no way informative of the charges
against her that may result in her dismissal from employment. Evidently, there was a
violation of her right to statutory due process warranting the payment of indemnity in the
form of nominal damages. Hence, the Court finds no compelling reason to reverse the
award of nominal damages in her favor. The Court, however, deems it proper to
increase the award of nominal damages from P20,000.00 to P30,000.00, as initially
awarded by the NLRC, in accordance with existing jurisprudence. 30
WHEREFORE, the petition is hereby PARTIALLY GRANTED.1wphi1 The June 22,
2011 Decision and the April 25, 2012 Resolution of the Court of Appeals (CA)-Cagayan
de Oro City in CA-G.R. SP No. 02963-MIN are AFFIRMED with MODIFICATION. The
dispositive portion should read as follows:
WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de
Oro City, is hereby AFFIRMED with MODIFICATION. UNILEVER PHILIPPINES, INC.,
is hereby directed to pay MARIA RUBY M. RIVERA the following:
a) P30,000.00 as nominal damages; and
b) Proportionate 13th month pay and unused leave credits, to be computed
based on her salary during the period relevant to the case.
The award of retirement benefit is DELETED.
SO ORDERED.

PHILIPPINE
NATIONAL
BANK, petitioner,
CABANSAG, respondent.
DECISION
PANGANIBAN, J.:

vs.

FLORENCE

O.

The Court reiterates the basic policy that all Filipino workers, whether employed
locally or overseas, enjoy the protective mantle of Philippine labor and social
legislations. Our labor statutes may not be rendered ineffective by laws or judgments
promulgated, or stipulations agreed upon, in a foreign country.

The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of
Court, seeking to reverse and set aside the July 16, 2002 Decision[2] and the January
29, 2003 Resolution[3]of the Court of Appeals (CA) in CA-GR SP No. 68403. The
assailed Decision dismissed the CA Petition (filed by herein petitioner), which had
sought to reverse the National Labor Relations Commission (NLRC)s June 29, 2001
Resolution,[4] affirming Labor Arbiter Joel S. Lustrias January 18, 2000 Decision.[5]
The assailed CA Resolution denied herein petitioners Motion for Reconsideration.

The Facts
The facts are narrated by the Court of Appeals as follows:
In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She
applied for employment, with the Singapore Branch of the Philippine National Bank, a private
banking corporation organized and existing under the laws of the Philippines, with principal
offices at the PNB Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB
Branch was under the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of
Vice-President of the Bank. At the time, too, the Branch Office had two (2) types of employees:
(a) expatriates or the regular employees, hired in Manila and assigned abroad including
Singapore, and (b) locally (direct) hired. She applied for employment as Branch Credit Officer,
at a total monthly package of $SG4,500.00, effective upon assumption of duties after approval.
Ruben C. Tobias found her eminently qualified and wrote on October 26, 1998, a letter to the
President of the Bank in Manila, recommending the appointment of Florence O. Cabansag, for
the position.
xxx

xxx

xxx

The President of the Bank was impressed with the credentials of Florence O. Cabansag that he
approved the recommendation of Ruben C. Tobias. She then filed an Application, with the
Ministry of Manpower of the Government of Singapore, for the issuance of an Employment
Pass as an employee of the Singapore PNB Branch. Her application was approved for a period
of two (2) years.
On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a
temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a
month and, upon her successful completion of her probation to be determined solely, by the

Bank, she may be extended at the discretion of the Bank, a permanent appointment and that her
temporary appointment was subject to the following terms and conditions:
1.
You will be on probation for a period of three (3) consecutive months from the date of
your assumption of duty.
2.
You will observe the Banks rules and regulations and those that may be adopted from
time to time.
3.
You will keep in strictest confidence all matters related to transactions between the
Bank and its clients.
4.
You will devote your full time during business hours in promoting the business and
interest of the Bank.
5.
You will not, without prior written consent of the Bank, be employed in anyway for
any purpose whatsoever outside business hours by any person, firm or company.
6.
Termination of your employment with the Bank may be made by either party after
notice of one (1) day in writing during probation, one month notice upon confirmation or the
equivalent of one (1) days or months salary in lieu of notice.
Florence O. Cabansag accepted the position and assumed office. In the meantime, the
Philippine Embassy in Singapore processed the employment contract of Florence O. Cabansag
and, on March 8, 1999, she was issued by the Philippine Overseas Employment Administration,
an Overseas Employment Certificate, certifying that she was a bona fide contract worker for
Singapore.
xxx

xxx

xxx

Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on
March 9, 1999, her initial Performance Report. Ruben C. Tobias was so impressed with the
Report that he made a notation and, on said Report: GOOD WORK. However, in the
evening of April 14, 1999, while Florence O. Cabansag was in the flat, which she and Cecilia
Aquino, the Assistant Vice-President and Deputy General Manager of the Branch and Rosanna
Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that Ruben C.
Tobias has asked them to tell Florence O. Cabansag to resign from her job. Florence O.
Cabansag was perplexed at the sudden turn of events and the runabout way Ruben C. Tobias
procured her resignation from the Bank. The next day, Florence O. Cabansag talked to Ruben C.
Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento had told her was true.
Ruben C. Tobias confirmed the veracity of the information, with the explanation that her
resignation was imperative as a cost-cutting measure of the Bank. Ruben C. Tobias, likewise,
told Florence O. Cabansag that the PNB Singapore Branch will be sold or transformed into a
remittance office and that, in either way, Florence O. Cabansag had to resign from her
employment. The more Florence O. Cabansag was perplexed. She then asked Ruben C. Tobias

that she be furnished with a Formal Advice from the PNB Head Office in Manila. However,
Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of resignation.
On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and
demanded that she submit her letter of resignation, with the pretext that he needed a Chinesespeaking Credit Officer to penetrate the local market, with the information that a Chinesespeaking Credit Officer had already been hired and will be reporting for work soon. She was
warned that, unless she submitted her letter of resignation, her employment record will be
blemished with the notation DISMISSED spread thereon. Without giving any definitive
answer, Florence O. Cabansag asked Ruben C. Tobias that she be given sufficient time to look
for another job. Ruben C. Tobias told her that she should be out of her employment by May
15, 1999.
However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and
adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she
received a letter from Ruben C. Tobias terminating her employment with the Bank.
xxx

xxx

xxx

On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and
against the Respondents, the decretal portion of which reads as follows:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding
respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered:
1. To reinstate complainant to her former or substantially equivalent position without
loss of seniority rights, benefits and privileges;
2. Solidarily liable to pay complainant as follows:
a)

To pay complainant her backwages from 16 April 1999 up to her actual


reinstatement. Her backwages as of the date of the promulgation of this
decision amounted to SGD 40,500.00 or its equivalent in Philippine Currency
at the time of payment;

b)

Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine


Currency at the time of payment;

c)

Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent
in Philippine Currency at the time of payment;

d)

Monetary equivalent of leave credits earned on Sunday banking in the amount


of SGD 1,557.67 or its equivalent in Philippine Currency at the time of
payment;

e)

Monetary equivalent of unused sick leave benefits in the amount of SGD


1,150.60 or its equivalent in Philippine Currency at the time of payment.

f)

Monetary equivalent of unused vacation leave benefits in the amount of SGD


319.85 or its equivalent in Philippine Currency at the time of payment.

g)

13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine
Currency at the time of payment;

3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its
equivalent in Philippine Currency at the time of payment, and moral damages in the
amount of PhP 200,000.00, exemplary damages in the amount of PhP 100,000.00;
4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine
Currency at the time of payment, representing attorneys fees.
SO ORDERED. [6] [Emphasis in the original.]
PNB appealed the labor arbiters Decision to the NLRC. In a Resolution dated June
29, 2001, the Commission affirmed that Decision, but reduced the moral damages
to P100,000 and the exemplary damages to P50,000. In a subsequent Resolution, the
NLRC denied PNBs Motion for Reconsideration.

Ruling of the Court of Appeals


In disposing of the Petition for Certiorari, the CA noted that petitioner bank had
failed to adduce in evidence the Singaporean law supposedly governing the latters
employment Contract with respondent. The appellate court found that the Contract had
actually been processed by the Philippine Embassy in Singapore and approved by the
Philippine Overseas Employment Administration (POEA), which then used that Contract
as a basis for issuing an Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an employment pass from
the Singapore Ministry of Employment, she did not thereby waive Philippine labor laws,
or the jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal
dismissal. In so doing, neither did she submit herself solely to the Ministry of Manpower
of Singapores jurisdiction over disputes arising from her employment. The appellate
court further noted that a cursory reading of the Ministrys letter will readily show that no
such waiver or submission is stated or implied.
Finally, the CA held that petitioner had failed to establish a just cause for the
dismissal of respondent. The bank had also failed to give her sufficient notice and an
opportunity to be heard and to defend herself. The CA ruled that she was consequently
entitled to reinstatement and back wages, computed from the time of her dismissal up to
the time of her reinstatement.

Hence, this Petition.[7]

Issues
Petitioner submits the following issues for our consideration:
1. Whether or not the arbitration branch of the NLRC in the National Capital Region has
jurisdiction over the instant controversy;
2. Whether or not the arbitration of the NLRC in the National Capital Region is the most
convenient venue or forum to hear and decide the instant controversy; and
3. Whether or not the respondent was illegally dismissed, and therefore, entitled to
recover moral and exemplary damages and attorneys fees.[8]
In addition, respondent assails, in her Comment,[9] the propriety of Rule 45 as the
procedural mode for seeking a review of the CA Decision affirming the NLRC
Resolution. Such issue deserves scant consideration. Respondent miscomprehends
the Courts discourse in St. Martin Funeral Home v. NLRC,[10] which has indeed affirmed
that the proper mode of review of NLRC decisions, resolutions or orders is by a special
civil action for certiorari under Rule 65 of the Rules of Court. The Supreme Court and
the Court of Appeals have concurrent original jurisdiction over such petitions
for certiorari. Thus, in observance of the doctrine on the hierarchy of courts, these
petitions should be initially filed with the CA.[11]
Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition
for Certiorari. In seeking a review by this Court of the CA Decision -- on questions of
jurisdiction, venue and validity of employment termination -- petitioner is likewise correct
in invoking Rule 45.[12]
It is true, however, that in a petition for review on certiorari, the scope of the
Supreme Courts judicial review of decisions of the Court of Appeals is generally
confined only to errors of law. It does not extend to questions of fact. This doctrine
applies with greater force in labor cases. Factual questions are for the labor tribunals to
resolve. [13] In the present case, the labor arbiter and the NLRC have already
determined the factual issues. Their findings, which are supported by substantial
evidence, were affirmed by the CA. Thus, they are entitled to great respect and are
rendered conclusive upon this Court, absent a clear showing of palpable error or
arbitrary disregard of evidence.[14]
The Courts Ruling
The Petition has no merit.

First Issue:
Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the
Labor Code as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wage, rates of pay, hours of work and other terms and conditions of
employment
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
of exceeding five thousand pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.
(b)
The commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.
xxx

xxx

x x x.

More specifically, Section 10 of RA 8042 reads in part:


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

xxx

xxx

x x x

Based on the foregoing provisions, labor arbiters clearly have original and
exclusive jurisdiction over claims arising from employer-employee relations,
including termination disputesinvolving all workers, among whom are overseas Filipino
workers (OFW).[15]
We are not unmindful of the fact that respondent was directly hired, while on a
tourist status in Singapore, by the PNB branch in that city state. Prior to employing
respondent, petitioner had to obtain an employment pass for her from the Singapore
Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to the
immigration regulations of that country.[16]
Similarly, the Philippine government requires non-Filipinos working in the country to
first obtain a local work permit in order to be legally employed here. That permit,
however, does not automatically mean that the non-citizen is thereby bound by local
laws only, as averred by petitioner. It does not at all imply a waiver of ones national
laws on labor. Absent any clear and convincing evidence to the contrary, such permit
simply means that its holder has a legal status as a worker in the issuing country.
Noteworthy is the fact that respondent likewise applied for and secured an
Overseas Employment Certificate from the POEA through the Philippine Embassy in
Singapore. The Certificate, issued on March 8, 1999, declared her a bona fide contract
worker for Singapore. Under Philippine law, this document authorized her working
status in a foreign country and entitled her to all benefits and processes under our
statutes. Thus, even assuming arguendo that she was considered at the start of her
employment as a direct hire governed by and subject to the laws, common practices
and customs prevailing in Singapore[17] she subsequently became a contract worker or
an OFW who was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already possessed the
POEA employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation doing business through
a branch office in Singapore.[18] Significantly, respondents employment by the
Singapore branch office had to be approved by Benjamin P. Palma Gil, [19] the president
of the bank whose principal offices were in Manila. This circumstance militates against
petitioners contention that respondent was locally hired; and totally governed by and
subject to the laws, common practices and customs of Singapore, not of the
Philippines. Instead, with more reason does this fact reinforce the presumption that
respondent falls under the legal definition of migrant worker, in this case one deployed
in Singapore. Hence, petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of the Court in Royal
Crown Internationale v. NLRC:[20]
x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to afford protection to

labor, promote full employment, ensure equal work opportunities regardless of sex, race or
creed, and regulate the relations between workers and employers. For the State assures the basic
rights of all workers to self-organization, collective bargaining, security of tenure, and just and
humane conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18,
Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered
imperative by Article 17 of the Civil Code which states that laws which have for their object
public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determination or conventions agreed upon in a foreign country.

Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
Section 1. Venue (a) All cases which Labor Arbiters have authority to hear and decide may be
filed in the Regional Arbitration Branch having jurisdiction over the workplace of the
complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall
be filed before the Regional Arbitration Branch where the complainant resides or where the
principal office of the respondent/employer is situated, at the option of the complainant.
For purposes of venue, workplace shall be understood as the place or locality where the
employee is regularly assigned when the cause of action arose. It shall include the place where
the employee is supposed to report back after a temporary detail, assignment or travel. In the
case of field employees, as well as ambulant or itinerant workers, their workplace is where they
are regularly assigned, or where they are supposed to regularly receive their salaries/wages or
work instructions from, and report the results of their assignment to their employers.
Under the Migrant Workers and Overseas Filipinos Act of 1995 (RA 8042),
a migrant worker refers to a person who is to be engaged, is engaged or has been
engaged in a remunerated activity in a state of which he or she is not a legal resident; to
be used interchangeably with overseas Filipino worker.[21] Undeniably, respondent was
employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino
and not a legal resident of that state. She thus falls within the category of migrant
worker or overseas Filipino worker.
As such, it is her option to choose the venue of her Complaint against petitioner for
illegal dismissal. The law gives her two choices: (1) at the Regional Arbitration Branch
(RAB) where she resides or (2) at the RAB where the principal office of her employer is
situated. Since her dismissal by petitioner, respondent has returned to the Philippines -specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint
before the RAB office in Quezon City, she has made a valid choice of proper venue.

Third Issue:
Illegal Dismissal

The appellate court was correct in holding that respondent was already a regular
employee at the time of her dismissal, because her three-month probationary period of
employment had already ended. This ruling is in accordance with Article 281 of the
Labor Code: An employee who is allowed to work after a probationary period shall be
considered a regular employee. Indeed, petitioner recognized respondent as such at
the time it dismissed her, by giving her one months salary in lieu of a one-month notice,
consistent with provision No. 6 of her employment Contract.

Notice and Hearing


Not Complied With
As a regular employee, respondent was entitled to all rights, benefits and privileges
provided under our labor laws. One of her fundamental rights is that she may not be
dismissed without due process of law. The twin requirements of notice and hearing
constitute the essential elements of procedural due process, and neither of these
elements can be eliminated without running afoul of the constitutional guarantee. [22]
In dismissing employees, the employer must furnish them two written notices: 1)
one to apprise them of the particular acts or omissions for which their dismissal is
sought; and 2) the other to inform them of the decision to dismiss them. As to the
requirement of a hearing, its essence lies simply in the opportunity to be heard.[23]
The evidence in this case is crystal-clear. Respondent was not notified of the
specific act or omission for which her dismissal was being sought. Neither was she
given any chance to be heard, as required by law. At any rate, even if she were given
the opportunity to be heard, she could not have defended herself effectively, for she
knew no cause to answer to.
All that petitioner tendered to respondent was a notice of her employment
termination effective the very same day, together with the equivalent of a one-month
pay. This Court has already held that nothing in the law gives an employer the option to
substitute the required prior notice and opportunity to be heard with the mere payment
of 30 days salary.[24]
Well-settled is the rule that the employer shall be sanctioned for noncompliance with
the requirements of, or for failure to observe, due process that must be observed in
dismissing an employee.[25]

No Valid Cause
for Dismissal
Moreover, Articles 282,[26] 283[27] and 284[28] of the Labor Code provide the valid
grounds or causes for an employees dismissal. The employer has the burden of
proving that it was done for any of those just or authorized causes. The failure to

discharge this burden means that the dismissal was not justified, and that the employee
is entitled to reinstatement and back wages.[29]
Notably, petitioner has not asserted any of the grounds provided by law as a valid
reason for terminating the employment of respondent. It merely insists that her
dismissal was validly effected pursuant to the provisions of her employment Contract,
which she had voluntarily agreed to be bound to.
Truly, the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between
them. However, petitioner overlooks the qualification that those terms and conditions
agreed upon must not be contrary to law, morals, customs, public policy or public
order.[30] As explained earlier, the employment Contract between petitioner and
respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and
terms and conditions of the Contract must not contravene our labor law provisions.
Moreover, a contract of employment is imbued with public interest. The Court has
time and time again reminded parties that they are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply
contracting with each other.[31] Also, while a contract is the law between the parties, the
provisions of positive law that regulate such contracts are deemed included and shall
limit and govern the relations between the parties.[32]
Basic in our jurisprudence is the principle that when there is no showing of any
clear, valid, and legal cause for the termination of employment, the law considers the
matter a case of illegal dismissal.[33]

Awards for Damages


Justified
Finally, moral damages are recoverable when the dismissal of an employee is
attended by bad faith or constitutes an act oppressive to labor or is done in a manner
contrary to morals, good customs or public policy.[34] Awards for moral and exemplary
damages would be proper if the employee was harassed and arbitrarily dismissed by
the employer.[35]
In affirming the awards of moral and exemplary damages, we quote with approval
the following ratiocination of the labor arbiter:
The records also show that [respondents] dismissal was effected by [petitioners] capricious
and high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to
morals, good customs and public policy. Bad faith and fraud are shown in the acts committed by
[petitioners] before, during and after [respondents] dismissal in addition to the manner by which
she was dismissed. First, [respondent] was pressured to resign for two different and
contradictory reasons, namely, cost-cutting and the need for a Chinese[-]speaking credit officer,
for which no written advice was given despite complainants request. Such wavering stance or
vacillating position indicates bad faith and a dishonest purpose. Second, she was employed on

account of her qualifications, experience and readiness for the position of credit officer and
pressured to resign a month after she was commended for her good work. Third, the demand for
[respondents] instant resignation on 19 April 1999 to give way to her replacement who was
allegedly reporting soonest, is whimsical, fraudulent and in bad faith, because on 16 April 1999
she was given a period of [sic] until 15 May 1999 within which to leave. Fourth, the pressures
made on her to resign were highly oppressive, anti-social and caused her absolute torture, as
[petitioners] disregarded her situation as an overseas worker away from home and family, with
no prospect for another job. She was not even provided with a return trip fare. Fifth, the notice
of termination is an utter manifestation of bad faith and whim as it totally disregards
[respondents] right to security of tenure and due process. Such notice together with the
demands for [respondents] resignation contravenes the fundamental guarantee and public policy
of the Philippine government on security of tenure.
[Respondent] likewise established that as a proximate result of her dismissal and prior demands
for resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock and social humiliation. Her standing in
the social and business community as well as prospects for employment with other entities have
been adversely affected by her dismissal. [Petitioners] are thus liable for moral damages under
Article 2217 of the Civil Code.
xxx

xxx

xxx

[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating


[respondents] employment and are therefore liable for exemplary damages. This should served
[sic] as protection to other employees of [petitioner] company, and by way of example or
correction for the public good so that persons similarly minded as [petitioners] would be deterred
from committing the same acts.[36]
The Court also affirms the award of attorneys fees. It is settled that when an action
is instituted for the recovery of wages, or when employees are forced to litigate and
consequently incur expenses to protect their rights and interests, the grant of attorneys
fees is legally justifiable.[37]
WHEREFORE, the Petition is DENIED and
Resolution AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,


vs.

the

assailed

Decision

and

Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO.,


INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities
out of poverty. Their earnings have built houses, provided health care, equipped
schools and planted the seeds of businesses. They have woven together the world by
transmitting ideas and knowledge from country to country. They have provided the
dynamic human link between cultures, societies and economies. Yet, only recently have
we begun to understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph
of Section 10, Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without
just, valid or authorized cause as defined by law or contract, the workers shall be
entitled to the full reimbursement of his placement fee with interest of twelve percent
(12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is
less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their
entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired
portion of their employment contract "or for three months for every year of the unexpired
term, whichever is less" (subject clause). Petitioner claims that the last clause violates
the OFWs' constitutional rights in that it impairs the terms of their contract, deprives
them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals
(CA), which applied the subject clause, entreating this Court to declare the subject
clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)approved Contract of Employment with the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5


On March 19, 1998, the date of his departure, petitioner was constrained to accept a
downgraded employment contract for the position of Second Officer with a monthly
salary of US$1,000.00, upon the assurance and representation of respondents that he
would be made Chief Officer by the end of April 1998.6
Respondents did not deliver on their promise to make petitioner Chief Officer. 7 Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines on
May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998
up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served
only two (2) months and seven (7) days of his contract, leaving an unexpired portion of
nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for
constructive dismissal and for payment of his money claims in the total amount of
US$26,442.73, broken down as follows:
May
27/31,
1998 (5
days)
incl.
Leave
pay

US$ 413.90

June
01/30,
1998

2,590.00

July
01/31,

2,590.00

1998
August
01/31,
1998

2,590.00

Sept.
01/30,
1998

2,590.00

Oct.
01/31,
1998

2,590.00

Nov.
01/30,
1998

2,590.00

Dec.
01/31,
1998

2,590.00

Jan.
01/31,
1999

2,590.00

Feb.
01/28,
1999

2,590.00

Mar.
1/19,
1999
(19
days)
incl.
leave
pay

1,640.00

-------------------------------------------------------------------------------25,382.23
Amount
adjusted
to chief
mate's
salary
(March
19/31,

1,060.5010

1998 to
April
1/30,
1998) +
--------------------------------------------------------------------------------------------TOTAL
CLAIM

US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees.


The LA rendered a Decision dated July 15, 1999, declaring the dismissal of
petitioner illegal and awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that
the dismissal of the complainant (petitioner) by the respondents in the aboveentitled case was illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount of EIGHT
THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainants salary for three (3) months of the unexpired
portion of the aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly
and severally, in Philippine Currency, based on the rate of exchange prevailing at
the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$
45.00),12 representing the complainants claim for a salary differential. In addition,
the respondents are hereby ordered to pay the complainant, jointly and severally,
in Philippine Currency, at the exchange rate prevailing at the time of payment,
the complainants (petitioner's) claim for attorneys fees equivalent to ten percent
(10%) of the total amount awarded to the aforesaid employee under this
Decision.
The claims of the complainant for moral and exemplary damages are hereby
DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his
computation on the salary period of three months only -- rather than the entire
unexpired portion of nine months and 23 days of petitioner's employment
contract - applying the subject clause. However, the LA applied the salary rate of
US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month +

US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =


US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to
question the finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not
applying the ruling of the Court inTriple Integrated Services, Inc. v. National
Labor Relations Commission17 that in case of illegal dismissal, OFWs are entitled
to their salaries for the unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are
hereby ordered to pay complainant, jointly and severally, in Philippine currency,
at the prevailing rate of exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential

45.00

US$4,245.00
3. 10% Attorneys fees

424.50

TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner
by reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A.
No. 8042 "does not provide for the award of overtime pay, which should be proven to
have been actually performed, and for vacation leave pay." 20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.21The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional
challenge against the subject clause.24After initially dismissing the petition on a
technicality, the CA eventually gave due course to it, as directed by this Court in its
Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as
G.R. No. 151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the
reduction of the applicable salary rate; however, the CA skirted the constitutional issue
raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his
cause to this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in
accord with applicable decision of the Supreme Court involving similar issue of granting
unto the migrant worker back wages equal to the unexpired portion of his contract of
employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely
applying their interpretation of Section 10 of Republic Act No. 8042, it is submitted that
the Court of Appeals gravely erred in law when it failed to discharge its judicial duty to
decide questions of substance not theretofore determined by the Honorable Supreme
Court, particularly, the constitutional issues raised by the petitioner on the
constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment
of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No.
8042, the Court of Appeals gravely erred in law in excluding from petitioners award the
overtime pay and vacation pay provided in his contract since under the contract they
form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is
already old and sickly, and he intends to make use of the monetary award for his
medical treatment and medication.29 Required to comment, counsel for petitioner filed a
motion, urging the court to allow partial execution of the undisputed monetary award
and, at the same time, praying that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes
up the full merit of the petition mindful of the extreme importance of the constitutional
question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was
illegal is not disputed. Likewise not disputed is the salary differential of US$45.00

awarded to petitioner in all three fora. What remains disputed is only the computation of
the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of
petitioner at the monthly rate of US$1,400.00 covering the period of three months out of
the unexpired portion of nine months and 23 days of his employment contract or a total
of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition
to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23
more or a total of US$25,382.23, equivalent to his salaries for the entire nine months
and 23 days left of his employment contract, computed at the monthly rate of
US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs
the freedom of OFWs to negotiate for and stipulate in their overseas employment
contracts a determinate employment period and a fixed salary package. 32 It also
impinges on the equal protection clause, for it treats OFWs differently from local Filipino
workers (local workers) by putting a cap on the amount of lump-sum salary to which
OFWs are entitled in case of illegal dismissal, while setting no limit to the same
monetary award for local workers when their dismissal is declared illegal; that the
disparate treatment is not reasonable as there is no substantial distinction between the
two groups;33 and that it defeats Section 18,34 Article II of the Constitution which
guarantees the protection of the rights and welfare of all Filipino workers, whether
deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not
in line with existing jurisprudence on the issue of money claims of illegally dismissed
OFWs. Though there are conflicting rulings on this, petitioner urges the Court to sort
them out for the guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042
serves no other purpose but to benefit local placement agencies. He marks the
statement made by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the
court or if the foreign employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money claims was reduced
under Section 10 of R.A. No. 8042. 37 (Emphasis supplied)

Petitioner argues that in mitigating the solidary liability of placement agencies, the
subject clause sacrifices the well-being of OFWs. Not only that, the provision makes
foreign employers better off than local employers because in cases involving the illegal
dismissal of employees, foreign employers are liable for salaries covering a maximum of
only three months of the unexpired employment contract while local employers are
liable for the full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of
backwages they have to give their employees they have illegally dismissed, following
well-entrenched and unequivocal jurisprudence on the matter. On the other hand,
foreign employers will only be limited to giving the illegally dismissed migrant workers
the maximum of three (3) months unpaid salaries notwithstanding the unexpired term of
the contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it
deprives him of the salaries and other emoluments he is entitled to under his fixedperiod employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue
should not be entertained, for this was belatedly interposed by petitioner in his appeal
before the CA, and not at the earliest opportunity, which was when he filed an appeal
before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15,
1995, its provisions could not have impaired petitioner's 1998 employment contract.
Rather, R.A. No. 8042 having preceded petitioner's contract, the provisions thereof are
deemed part of the minimum terms of petitioner's employment, especially on the matter
of money claims, as this was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the
nature of their employment, such that their rights to monetary benefits must necessarily
be treated differently. The OSG enumerates the essential elements that distinguish
OFWs from local workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our
courts to acquire jurisdiction, or against whom it is almost impossible to enforce
judgment; and second, as held in Coyoca v. National Labor Relations
Commission43 and Millares v. National Labor Relations Commission,44 OFWs are
contractual employees who can never acquire regular employment status, unlike local
workers who are or can become regular employees. Hence, the OSG posits that there
are rights and privileges exclusive to local workers, but not available to OFWs; that
these peculiarities make for a reasonable and valid basis for the differentiated treatment
under the subject clause of the money claims of OFWs who are illegally dismissed.

Thus, the provision does not violate the equal protection clause nor Section 18, Article II
of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power
measure adopted to mitigate the solidary liability of placement agencies for this
"redounds to the benefit of the migrant workers whose welfare the government seeks to
promote. The survival of legitimate placement agencies helps [assure] the government
that migrant workers are properly deployed and are employed under decent and
humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its
co-equals, such as the Congress, it does so only when these conditions obtain: (1) that
there is an actual case or controversy involving a conflict of rights susceptible of judicial
determination;47 (2) that the constitutional question is raised by a proper party48 and at
the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of
the case,50 otherwise the Court will dismiss the case or decide the same on some other
ground.51
Without a doubt, there exists in this case an actual controversy directly involving
petitioner who is personally aggrieved that the labor tribunals and the CA computed his
monetary award based on the salary period of three months only as provided under the
subject clause.
The constitutional challenge is also timely. It should be borne in mind that the
requirement that a constitutional issue be raised at the earliest opportunity entails the
interposition of the issue in the pleadings before a competent court, such that, if the
issue is not raised in the pleadings before that competent court, it cannot be considered
at the trial and, if not considered in the trial, it cannot be considered on
appeal.52 Records disclose that the issue on the constitutionality of the subject clause
was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his Petition
for Certiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised
because it is not the NLRC but the CA which has the competence to resolve the
constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining questions of fact to
which the legislative policy of R.A. No. 8042 is to be applied and to resolving such
questions in accordance with the standards laid down by the law itself; 55 thus, its
foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the
validity of its provisions. The CA, on the other hand, is vested with the power of judicial
review or the power to declare unconstitutional a law or a provision thereof, such as the
subject clause.56Petitioner's interposition of the constitutional issue before the CA was

undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in
its decision.
The third condition that the constitutional issue be critical to the resolution of the case
likewise obtains because the monetary claim of petitioner to his lump-sum salary for the
entire unexpired portion of his 12-month employment contract, and not just for a period
of three months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject
clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary package he will receive 57 is
not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,58 and cannot affect acts or contracts already
perfected;59 however, as to laws already in existence, their provisions are read into
contracts and deemed a part thereof.60 Thus, the non-impairment clause under Section
10, Article II is limited in application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the
execution of the employment contract between petitioner and respondents in 1998.
Hence, it cannot be argued that R.A. No. 8042, particularly the subject clause, impaired
the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of
R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be
declared unconstitutional on the ground that it impinges on the impairment clause, for
the law was enacted in the exercise of the police power of the State to regulate a
business, profession or calling, particularly the recruitment and deployment of OFWs,
with the noble end in view of ensuring respect for the dignity and well-being of OFWs
wherever they may be employed.61 Police power legislations adopted by the State to

promote the health, morals, peace, education, good order, safety, and general welfare
of the people are generally applicable not only to future contracts but even to those
already in existence, for all private contracts must yield to the superior and legitimate
measures taken by the State to promote public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor
shall any person be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor
sector, without distinction as to place of deployment, full protection of their rights and
welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions
translate to economic security and parity: all monetary benefits should be equally
enjoyed by workers of similar category, while all monetary obligations should be borne
by them in equal degree; none should be denied the protection of the laws which is
enjoyed by, or spared the burden imposed on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to
incorporate, when it sees fit, a system of classification into its legislation; however, to be
valid, the classification must comply with these requirements: 1) it is based on
substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to
existing conditions only; and 4) it applies equally to all members of the class. 66
There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a
legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the
government must show that the challenged classification serves an important state
interest and that the classification is at least substantially related to serving that
interest;68 and c) strict judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right70 or operates to the
peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden
is upon the government to prove that the classification is necessary to achieve
acompelling state interest and that it is the least restrictive means to protect such
interest.72

Under American jurisprudence, strict judicial scrutiny is triggered by suspect


classifications73 based on race74 or gender75but not when the classification is drawn
along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a
provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial
institution (GFI), was challenged for maintaining its rank-and-file employees under the
Salary Standardization Law (SSL), even when the rank-and-file employees of other
GFIs had been exempted from the SSL by their respective charters. Finding that the
disputed provision contained a suspect classification based on salary grade, the Court
deliberately employed the standard of strict judicial scrutiny in its review of the
constitutionality of said provision. More significantly, it was in this case that the Court
revealed the broad outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies
should be accorded recognition and respect by the courts of justice except when they
run afoul of the Constitution. The deference stops where the classification violates a
fundamental right, or prejudices persons accorded special protection by the
Constitution. When these violations arise, this Court must discharge its primary role as
the vanguard of constitutional guaranties, and require a stricter and more exacting
adherence to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the
Constitution requires a stricter judicial scrutiny finds no support in American or English
jurisprudence. Nevertheless, these foreign decisions and authorities are not per se
controlling in this jurisdiction. At best, they are persuasive and have been used to
support many of our decisions. We should not place undue and fawning reliance upon
them and regard them as indispensable mental crutches without which we cannot come
to our own decisions through the employment of our own endowments. We live in a
different ambience and must decide our own problems in the light of our own interests
and needs, and of our qualities and even idiosyncrasies as a people, and always with
our own concept of law and justice. Our laws must be construed in accordance with the
intention of our own lawmakers and such intent may be deduced from the language of
each law and the context of other local legislation related thereto. More importantly, they
must be construed to serve our own public interest which is the be-all and the end-all of
all our laws. And it need not be stressed that our public interest is distinct and different
from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal
protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The
Preamble proclaims "equality" as an ideal precisely in protest against crushing

inequities in Philippine society. The command to promote social justice in Article II,
Section 10, in "all phases of national development," further explicitated in Article XIII,
are clear commands to the State to take affirmative action in the direction of greater
equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal support
for a more vigorous state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic
rights to marginalized groups of society, including labor. Under the policy of social
justice, the law bends over backward to accommodate the interests of the working class
on the humane justification that those with less privilege in life should have more in law.
And the obligation to afford protection to labor is incumbent not only on the legislative
and executive branches but also on the judiciary to translate this pledge into a living
reality. Social justice calls for the humanization of laws and the equalization of social
and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding
questions of constitutionality, recognizing the broad discretion given to Congress in
exercising its legislative power. Judicial scrutiny would be based on the "rational basis"
test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right,
or the perpetuation of prejudice against persons favored by the Constitution with
special protection, judicial scrutiny ought to be more strict. A weak and watered
down view would call for the abdication of this Courts solemn duty to strike down any
law repugnant to the Constitution and the rights it enshrines. This is true whether the
actor committing the unconstitutional act is a private person or the government itself or
one of its instrumentalities. Oppressive acts will be struck down regardless of the
character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or
officer-employee status. It is akin to a distinction based on economic class and status,
with the higher grades as recipients of a benefit specifically withheld from the lower
grades. Officers of the BSP now receive higher compensation packages that are
competitive with the industry, while the poorer, low-salaried employees are limited to the
rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file
employees are paid the strictly regimented rates of the SSL while employees higher in
rank - possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to stay.
Considering that majority, if not all, the rank-and-file employees consist of people whose
status and rank in life are less and limited, especially in terms of job marketability, it is
they - and not the officers - who have the real economic and financial need for the

adjustment . This is in accord with the policy of the Constitution "to free the people from
poverty, provide adequate social services, extend to them a decent standard of living,
and improve the quality of life for all." Any act of Congress that runs counter to this
constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the
subject clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all
OFWs. However, a closer examination reveals that the subject clause has a
discriminatory intent against, and an invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs
with employment contracts of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with
employment contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National
Labor Relations Commission79(Second Division, 1999) that the Court laid down the
following rules on the application of the periods prescribed under Section 10(5) of R.A.
No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to
award an illegally dismissed overseas contract worker, i.e., whether his salaries
for the unexpired portion of his employment contract or three (3) months salary
for every year of the unexpired term, whichever is less, comes into play only
when the employment contract concerned has a term of at least one (1) year or
more. This is evident from the words "for every year of the unexpired term" which
follows the words "salaries x x x for three months." To follow petitioners thinking
that private respondent is entitled to three (3) months salary only simply because it is
the lesser amount is to completely disregard and overlook some words used in the
statute while giving effect to some. This is contrary to the well-established rule in legal
hermeneutics that in interpreting a statute, care should be taken that every part or word
thereof be given effect since the law-making body is presumed to know the meaning of
the words employed in the statue and to have used them advisedly. Ut res magis valeat
quam pereat.80 (Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month
contract, but was awarded his salaries for the remaining 8 months and 6 days of his
contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting
rulings on Section 10(5). One wasAsian Center for Career and Employment System and
Services v. National Labor Relations Commission (Second Division, October
1998),81 which involved an OFW who was awarded a two-year employment
contract, but was dismissed after working for one year and two months. The LA
declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary
covering eight months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary, this being the
lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment
without just, valid or authorized cause is entitled to his salary for the unexpired portion
of his employment contract or for three (3) months for every year of the unexpired term,
whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is
eight (8) months. Private respondent should therefore be paid his basic salary
corresponding to three (3) months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations
Commission (Third Division, December 1998),83 which involved an OFW (therein
respondent Erlinda Osdana) who was originally granted a 12-month contract, which was
deemed renewed for another 12 months. After serving for one year and seven-and-ahalf months, respondent Osdana was illegally dismissed, and the Court awarded her
salaries for the entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following
cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied
in the
Computation of
the Monetary
Award

Skippers v.
Maguad84

6 months

2 months

4 months

4 months

Bahia
Shipping v.
Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial
Transmarine
v. dela Cruz
l86

9 months

4 months

5 months

5 months

Talidano v.
Falcon87

12 months

3 months

9 months

3 months

Univan v.
CA 88

12 months

3 months

9 months

3 months

Oriental v.
CA 89

12 months more than 2


months

10 months

3 months

PCL v.
NLRC90

12 months more than 2


months

more or less 9
months

3 months

Olarte v.
Nayona91

12 months

21 days

11 months and
9 days

3 months

JSS
v.Ferrer92

12 months

16 days

11 months and
24 days

3 months

Pentagon v.
Adelantar93

12 months

9 months
and 7 days

2 months and
23 days

2 months and 23
days

Phil. Employ
v. Paramio,
et al.94

12 months

10 months

2 months

Unexpired
portion

Flourish
Maritime v.
Almanzor 95

2 years

26 days

23 months and
4 days

6 months or 3
months for each
year of contract

Athenna
Manpower v.
Villanos 96

1 year, 10
months
and 28
days

1 month

1 year, 9
months and 28
days

6 months or 3
months for each
year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two
categories. The first category includes OFWs with fixed-period employment contracts of
less than one year; in case of illegal dismissal, they are entitled to their salaries for the
entire unexpired portion of their contract. The second category consists of OFWs with
fixed-period employment contracts of one year or more; in case of illegal dismissal, they
are entitled to monetary award equivalent to only 3 months of the unexpired portion of
their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers,
the respondent OFW worked for only 2 months out of his 6-month contract, but was

awarded his salaries for the remaining 4 months. In contrast, the respondent OFWs
in Oriental and PCL who had also worked for about 2 months out of their 12-month
contracts were awarded their salaries for only 3 months of the unexpired portion of their
contracts. Even the OFWs involved in Talidanoand Univan who had worked for a longer
period of 3 months out of their 12-month contracts before being illegally dismissed were
awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A
with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and
a hypothetical OFW-B with an employment contract of 15 months with the same
monthly salary rate of US$1,000.00. Both commenced work on the same day and under
the same employer, and were illegally dismissed after one month of work. Under the
subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the
remaining 9 months of his contract, whereas OFW-B will be entitled to only
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his
contract, instead of US$14,000.00 for the unexpired portion of 14 months of his
contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account
jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14,
1995,97 illegally dismissed OFWs, no matter how long the period of their employment
contracts, were entitled to their salaries for the entire unexpired portions of their
contracts. The matrix below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation
of the Monetary
Award

ATCI v. CA,
et al.98

2 years

2 months

22 months

22 months

Phil.
Integrated v.
NLRC99

2 years

7 days

23 months
and 23
days

23 months and 23
days

JGB v.
NLC100

2 years

9 months

15 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC,
et al.102

2 years

5 months

19 months

19 months

Barros v.
NLRC, et
al.103

12 months

4 months

8 months

8 months

Philippine
Transmarine
v. Carilla104

12 months

6 months
and 22
days

5 months
and 18
days

5 months and 18
days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the
unexpired portions thereof, were treated alike in terms of the computation of their
monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform
rule of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their
employment periods, in the process singling out one category whose contracts have
an unexpired portion of one year or more and subjecting them to the peculiar
disadvantage of having their monetary awards limited to their salaries for 3 months or
for the unexpired portion thereof, whichever is less, but all the while sparing the other
category from such prejudice, simply because the latter's unexpired contracts fall short
of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court
now has misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the
unexpired term, whichever is less" contains the qualifying phrases "every year" and
"unexpired term." By its ordinary meaning, the word "term" means a limited or definite
extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is
significant in many ways: first, the unexpired term must be at least one year, for if it
were any shorter, there would be no occasion for such unexpired term to be measured
by every year; and second, the original term must be more than one year, for otherwise,
whatever would be the unexpired term thereof will not reach even a year. Consequently,
the more decisive factor in the determination of when the subject clause "for three (3)
months for every year of the unexpired term, whichever is less" shall apply is not the
length of the original contract period as held in Marsaman,106 but the length of the
unexpired portion of the contract period -- the subject clause applies in cases when the
unexpired portion of the contract period is at least one year, which arithmetically
requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among
OFWs whose contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled to their salaries
for the entire unexpired portion thereof, while those who are illegally dismissed with one
year or more remaining in their contracts shall be covered by the subject clause, and
their monetary benefits limited to their salaries for three months only.

To concretely illustrate the application of the foregoing interpretation of the subject


clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24month contract at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed
on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12
months remaining in the contract period of OFW-C, the subject clause applies to the
computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to
US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the
contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months
out of the 12-month unexpired term of the contract. On the other hand, OFW-D is
spared from the effects of the subject clause, for there are only 11 months left in the
latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is
equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the
monetary awards of illegally dismissed OFWs was in place. This uniform system was
applicable even to local workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of
the Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and
employees should have been made of a fixed period, none of the contracting parties,
without the consent of the other, may withdraw from the fulfillment of said contract until
the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage
suffered, with the exception of the provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers
prior to the expiration of their fixed-term employment. The Court therein held the
shipping company liable for the salaries of its managers for the remainder of their fixedterm employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code
of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent
should be for a definite period or voyage, they cannot be discharged until the fulfillment
of their contracts, except for reasons of insubordination in serious matters, robbery,
theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice
or manifest or proven negligence.

Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in


which the Court held the shipping company liable for the salaries and subsistence
allowance of its illegally dismissed employees for the entire unexpired portion of their
employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of
Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain
time and for a certain work cannot leave or be dismissed without sufficient cause,
before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586
as a conjunctive "and" so as to apply the provision to local workers who are employed
for a time certain although for no particular skill. This interpretation of Article 1586 was
reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and
Palomar, the Court adopted the general principle that in actions for wrongful discharge
founded on Article 1586, local workers are entitled to recover damages to the extent of
the amount stipulated to be paid to them by the terms of their contract. On the
computation of the amount of such damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been
brought to our attention to the contrary under Spanish jurisprudence, that when an
employee is wrongfully discharged it is his duty to seek other employment of the same
kind in the same community, for the purpose of reducing the damages resulting from
such wrongful discharge. However, while this is the general rule, the burden of showing
that he failed to make an effort to secure other employment of a like nature, and that
other employment of a like nature was obtainable, is upon the defendant. When an
employee is wrongfully discharged under a contract of employment his prima facie
damage is the amount which he would be entitled to had he continued in such
employment until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen
vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis
supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2
(Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book
IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil
Code do not expressly provide for the remedies available to a fixed-term worker who is
illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v.
Rich,117 the Court carried over the principles on the payment of damages underlying
Article 1586 of the Civil Code of 1889 and applied the same to a case involving the
illegal discharge of a local worker whose fixed-period employment contract was entered
into in 1952, when the new Civil Code was already in effect. 118

More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in
First Asian Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were
illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor
Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of
her fixed-period employment contract as a baby sitter, was awarded salaries
corresponding to the unexpired portion of her contract. The Court arrived at the same
ruling in Anderson v. National Labor Relations Commission,121 which involved a
foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was
illegally dismissed after only nine months on the job -- the Court awarded him salaries
corresponding to 15 months, the unexpired portion of his contract. In Asia World
Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a
security officer in 1989 in Angola was awarded his salaries for the remaining period of
his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co.,
Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was
illegally cut short in the second month was declared entitled to his salaries for the
remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment
who were illegally discharged were treated alike in terms of the computation of their
money claims: they were uniformly entitled to their salaries for the entire unexpired
portions of their contracts. But with the enactment of R.A. No. 8042, specifically the
adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of
one year or more in their employment contract have since been differently treated in
that their money claims are subject to a 3-month cap, whereas no such limitation is
imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in
that, in the computation of the monetary benefits of fixed-term employees who
are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims
of other OFWs or local workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a peculiar
disadvantage.
There being a suspect classification involving a vulnerable sector protected by the
Constitution, the Court now subjects the classification to a strict judicial scrutiny, and
determines whether it serves a compelling state interest through the least restrictive
means.
What constitutes compelling state interest is measured by the scale of rights and
powers arrayed in the Constitution and calibrated by history.124 It is akin to the
paramount interest of the state125 for which some individual liberties must give way,
such as the public interest in safeguarding health or maintaining medical
standards,126 or in maintaining access to information on matters of public concern. 127

In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect
the employment of Filipino seafarers overseas x x x. By limiting the liability to three
months [sic], Filipino seafarers have better chance of getting hired by foreign
employers." The limitation also protects the interest of local placement agencies, which
otherwise may be made to shoulder millions of pesos in "termination pay." 128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the
court or if the foreign employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money are reduced under
Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps
[assure] the government that migrant workers are properly deployed and are employed
under decent and humane conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of
its perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego
in sponsorship of House Bill No. 14314 (HB 14314), from which the law
originated;130 but the speech makes no reference to the underlying reason for the
adoption of the subject clause. That is only natural for none of the 29 provisions in HB
14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money
claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of the complaint, the claim arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims
under this Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims


exclusive of damages under this Section shall not be less than fifty percent (50%) of
such money claims: Provided, That any installment payments, if applicable, to satisfy
any such compromise or voluntary settlement shall not be more than two (2) months.
Any compromise/voluntary agreement in violation of this paragraph shall be null and
void.
Non-compliance with the mandatory period for resolutions of cases provided under this
Section shall subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution
within the prescribed period shall be, or caused to be, withheld until the said
official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public
office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any
liability which any such official may have incurred under other existing laws or rules and
regulations as a consequence of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the
computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted
and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court
examined the rationale of the subject clause in the transcripts of the "Bicameral
Conference Committee (Conference Committee) Meetings on the Magna Carta on
OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)."
However, the Court finds no discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against
OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect
the employment of OFWs by mitigating the solidary liability of placement agencies, such
callous and cavalier rationale will have to be rejected. There can never be a justification
for any form of government action that alleviates the burden of one sector, but imposes
the same burden on another sector, especially when the favored sector is composed of
private businesses such as placement agencies, while the disadvantaged sector is
composed of OFWs whose protection no less than the Constitution commands. The

idea that private business interest can be elevated to the level of a compelling state
interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in
place that can be employed to achieve that purpose without infringing on the
constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of
Land-Based Overseas Workers, dated February 4, 2002, imposes administrative
disciplinary measures on erring foreign employers who default on their contractual
obligations to migrant workers and/or their Philippine agents. These disciplinary
measures range from temporary disqualification to preventive suspension. The POEA
Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated
May 23, 2003, contains similar administrative disciplinary measures against erring
foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of
aiding local placement agencies in enforcing the solidary liability of their foreign
principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative
of the right of petitioner and other OFWs to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause
directly violates state policy on labor under Section 3,131 Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there
are some which this Court has declared not judicially enforceable, Article XIII being
one,133 particularly Section 3 thereof, the nature of which, this Court, in Agabon v.
National Labor Relations Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be
deemed as self-executing in the sense that these are automatically acknowledged and
observed without need for any enabling legislation. However, to declare that the
constitutional provisions are enough to guarantee the full exercise of the rights
embodied therein, and the realization of ideals therein expressed, would be impractical,
if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of
tenure", when examined in isolation, are facially unqualified, and the broadest
interpretation possible suggests a blanket shield in favor of labor against any form of
removal regardless of circumstance. This interpretation implies an unimpeachable right
to continued employment-a utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion, not only

the rights of the labor sector, but of the employers' as well. Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to
approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a
positive enforceable right to stave off the dismissal of an employee for just cause
owing to the failure to serve proper notice or hearing. As manifested by several framers
of the 1987 Constitution, the provisions on social justice require legislative enactments
for their enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional.
It may unwittingly risk opening the floodgates of litigation to every worker or union over
every conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working
class any actual enforceable right, but merely clothes it with the status of a sector for
whom the Constitution urges protection through executive or legislative action
and judicial recognition. Its utility is best limited to being an impetus not just for the
executive and legislative departments, but for the judiciary as well, to protect the welfare
of the working class. And it was in fact consistent with that constitutional agenda that
the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc.
v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is
premised on the perpetuation of prejudice against persons favored by the Constitution
with special protection -- such as the working class or a section thereof -- the Court may
recognize the existence of a suspect classification and subject the same to strict judicial
scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny
formulated in Central Bank Employee Association exaggerate the significance of
Section 3, Article XIII is a groundless apprehension. Central Bank applied Article XIII in
conjunction with the equal protection clause. Article XIII, by itself, without the application
of the equal protection clause, has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of
limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal,
is to give them a better chance of getting hired by foreign employers. This is plain
speculation. As earlier discussed, there is nothing in the text of the law or the records of
the deliberations leading to its enactment or the pleadings of respondent that would
indicate that there is an existing governmental purpose for the subject clause, or even
just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it
is for that precise reason that the clause violates not just petitioner's right to equal
protection, but also her right to substantive due process under Section 1, 137 Article III of
the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the
entire unexpired period of nine months and 23 days of his employment contract,
pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis
in the computation of his monetary award, because these are fixed benefits that have
been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For
seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a
Standard Employment Contract of Seafarers, in which salary is understood as the basic
wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the regular eight hours, and holiday
pay is compensation for any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of
overtime and holiday pay in the computation of petitioner's monetary award, unless
there is evidence that he performed work during those periods. As the Court held
in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of
our ruling in Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was
actually performed are conditions to be satisfied before a seaman could be entitled to
overtime pay which should be computed on the basis of 30% of the basic monthly
salary. In short, the contract provision guarantees the right to overtime pay but the
entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the
contract is unwarranted since the same is given during the actual service of the
seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months
for every year of the unexpired term, whichever is less" in the 5th paragraph of Section
10 of Republic Act No. 8042 is DECLAREDUNCONSTITUTIONAL; and the December
8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals areMODIFIED to

the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of
US$1,400.00 per month.
No costs.
SO ORDERED.

BATONG BUHAY GOLD MINES, INC., petitioner, vs. HONORABLE DIONISIO DELA
SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY,
ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER
COMPLAINANTS* IN
CASE
NO.
NCR-LSED-CI-2047-87;
MFT
CORPORATION AND SALTER HOLDINGS PTY. LTD., respondents.
RESOLUTION
PURISIMA, J.:
At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a Prayer
for Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc.
(BBGMI for brevity) to annul three orders issued by respondent Undersecretary Dionisio dela
Serna of the Department of Labor and Employment, dated September 16, 1988, December 14,
1988 and February 13, 1989, respectively.
The Order of September 16, 1988 stated the facts as follows:
"xxx on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O.
Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1) Nonpayment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984, inclusive,
under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for the period 16
June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-payment of their
salaries for the period 16 March 1986 to the present; (4) Non-payment of their 13th month pay
for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick leave, and the
compensatory leaves of mine site employees; and (6) Non-payment of the salaries of employees
who were placed on forced leaves since November, 1985 to the present, if this is not feasible, the
affected employees be awarded corresponding separation pay.
On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.
On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.
On 27 February 1987, the complainants filed a Motion for the issuance of an inspection
authority.
xxx

On 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the
following recommendations:
WHEREFORE, premises considered, this case is hereby submitted with the recommendation
that an Order of Compliance be issued directing respondent Batong Buhay Gold Mines Inc. to
pay complainants Elsie Rosalina Ty, et al. FOUR MILLION EIGHT HUNDRED EIGHTEEN
THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY
CENTAVOS (P4,818,746.40) by way of unpaid salaries of workers from March 16, 1987 to
present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months
pay for 1985 and 1986, and upaid (sic) vacation/sick/compensatory leave benefits.
On 31 July 1987, the Regional Director[1] adopted the recommendation of the LSWOs and issued
an order directing the respondent to pay the complainants the sum of P4,818,746.40 representing
their unpaid 13th month pay for 1985 and 1986, wage and ECOLA differentials under wage
order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and vacation/sick leave
benefits for 1984, 1985 and 1986.
On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of
execution and appointment of special sheriff.
xxx
On 21 August 1987, the Regional Director issued an Order directing the respondent to put up a
cash or surety bond otherwise a writ of execution will be issued.
xxx
When the respondent failed to post a cash/surety bond, and upon motion for the issuance of a
writ of execution by the complainants, the Regional Director, on 14 September 1987 issued a
writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing him
to do the following:
You are to collect the above-stated amount from the respondent and deposit the same with
Cashier of this Office for appropriate disposition to herein complainants under the supervision
of the office of the Director. Otherwise, you are to execute this writ by attaching the goods and
chattels of the respondent not exempt from execution or in case of insufficiency thereof against
the real or immovable property of the respondent.
The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized
three (3) units of Peterbuilt trucks and then sold the same by public auction. Various materials
and motor vehicles were also seized on different dates and sold at public auction by said sheriff.
xxx xxx

xxx

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted this
Office to issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos
from enforcing the writ of execution. xxx[2]
BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to
respondent Undersecretary Dionisio de la Serna, contending that the Regional Director had no
jurisdiction over the case.
On September 16, 1988, the public respondent issued the first challenged Order upholding
the jurisdiction of the Regional Director and annulling all the auction sales conducted by Special
Sheriff John Ramos. The decretal portion of the said Order ruled:
WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital
Region, is hereby AFFIRMED. Accordingly, the writ of execution dated 14 September 1987
issued in connection thereto is hereby declared VALID.
However, the public auction sales conducted by special sheriff John Ramos pursuant to the writ
of execution dated 14 September 1987 on 24 September 2, 20, 23, and 29 October 1987 are all
hereby declared NULL AND VOID. Furthermore, the personal properties sold and the proceeds
thereof which have been turned over to the complainants thru their legal counsel are hereby
ordered returned to the custody of the respondent and the buyers respectively.
SO ORDERED.[3]
On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by
the complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied.
On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting
attention to a Deed of Sale executed in its favor by Fidel Bermudez, the highest bidder in the
auction sale conducted on October 29, 1987.
On December 2, 1988, another Motion for Intervention was filed, this time by Salter
Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject
properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and Salter
Holdings Pty., Ltd.
The two Motions for Intervention were granted in the second questioned order dated
December 14, 1988, directing the exclusion from annulment of the properties sold at the October
29, 1987 auction sale and claimed by the intervenors, including one cluster of junk mining
machineries, equipment and supplies, and disposing thus:
WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors
MFT and Salter are hereby granted. Correspondingly, this Offices Order dated 16 September
1988 is hereby modified to exclude from annulment the one lot of junk mining machineries,
equipment and supplies as-is-where-is sold by Sheriff John C. Ramos in the auction sale of 29
October 1987.
xxx xxx

xxx

Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the
respondent employees but to no avail. The same were likewise denied in the third assailed Order
dated February 13, 1989.
Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or
excess of jurisdiction to the public respondent in issuing the three Orders under attack.
The questioned Orders aforementioned have given rise to the issues: (1) whether the
Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2)
whether or not the auction sales conducted by the said Special Sheriff are valid.
Anent the first issue, an affirmative ruling is indicated. The Regional Director has
jurisdiction over the BBGMI employees who are the complainants in Case Number NCR-LSEDCI-2047-87.
The subject labor standards case of the petition arose from the visitorial and enforcement
powers by the Regional Director of Department of Labor and Employment (DOLE). Labor
standards refers to the minimum requirements prescribed by existing laws, rules and regulations
relating to wages, hours of work, cost of living allowance and other monetary and welfare
benefits, including occupational, safety and health standards.[4] Labor standards cases are
governed by Article 128(b) of the Labor Code.
The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor
standards case.
As can be gleaned from the records on hand, subject labor standards case was filed on
February 5, 1987 at which time Article 128 (b) read as follows[5]:
Art. 128 ( b) Visitorial and enforcement powers (b) The Minister of Labor or his duly authorized representative shall have the power to order
and administer, after due notice and hearing, compliance with the labor standards provisions of
this Code based on the findings of labor regulation officers or industrial safety engineers made in
the course of inspection, and to issue writs of execution to the appropriate authority for the
enforcement of their order, except in cases where the employer contests the findings of the labor
regulations officers and raises issues which cannot be resolved without considering evidentiary
matters that are not verifiable in the ordinary course of inspection.
Petitioner theorizes that the Regional Director is without jurisdiction over subject case,
placing reliance on the ruling in Zambales Base Inc. vs. Minister of Labor[6]and Oreshoot Mining
Company vs. Arellano.[7]
Respondent Undersecretary Dionision C. Dela Serna, on the other hand, upheld the
jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to quote:
Considering therefore that there still exists an employer-employee relationship between the
parties; that the case involves violations of the labor standard provisions of the labor code; that
the issues therein could be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection; and, if only to give meaning and not render
nugatory and meaningless the visitorial and enforcement powers of the Secretary of Labor and

Employment as provided by Article 128(b) of the Labor Code, as amended by Section 2 of


Executive Order No. 111 which states:
The provisions of article 217 of this code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists, the Minister of Labor and Employment or his
duly authorized representative shall have the power to order and administer, after due notice and
hearing, compliance with the labor standards provision of this Code based on the findings of the
findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of
their order, except in cases where the employer contests the findings of the labor regulations
officers and raises issues which cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.
We agree with the complainants that the regional office a quo has jurisdiction to hear and decide
the instant labor standard case.
xxx xxx

xxx[8]

The Court agrees with the public respondent. In the case of Maternity Childrens Hospital
vs Secretary of Labor (174 SCRA 632), the Court in upholding the jurisdiction of the Regional
Director over the complaint on underpayment of wages and ECOLAs filed on May 23, 1986, by
the employees of Maternity Childrens Hospital, held:
This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as amended by
E.O. 111.
xxx xxx

xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Directors authority
over money claims was unclear. The complaint in the present case was filed on May 23, 1986
when E.O. 111 was not yet in effect. xxx
xxx
We believe, however , that even in the absence of E.O. 111 , Regional Directors already had
enforcement powers over money claims, effective under P.D. 850, issued on December 16, 1975,
which transferred labor standards cases from the arbitration system to the enforcement system.
In the aforecited case, the Court in reinforcing its conclusion that Regional Director has
jurisdiction over labor standards cases, treated E.O. 111 as a curative statute, ruling as follows:
E.O. No. 111 was issued on December 24, 1986 or three(3) months after the promulgation of
the Secretary of Labors decision upholding private respondents salary differentials and
ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers of
the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated in
Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested
money claims in cases where an employer-employee relationship still exists. This intention must
be given weight and entitled to great respect. As held in Progressive Workers Union, et al. vs.
F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:

.xx The interpretation by officers of laws which are entrusted to their administration is entitled
to great respect. We see no reason to detract from this rudimentary rule in administrative law,
particularly when later events have proved said interpretation to be in accord with the legislative
intent. xx
The proceedings before the Regional Director must, perforce be upheld on the basis of Article
128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order to be
considered in the nature of a curative statute with retrospective application. (Progressive
Workers Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al.
G.R.No. l-47629, may 28,1979, 90 SCRA 331).
With regard to the petitioners reliance on the cases of Zambales Base, Inc. vs. Minister of
Labor (supra) and Oreshoot Mining Company vs. Arellano, (supra), this is misplaced. In the
case of Zambales Base, Inc., the court has already ruled that:
xxx, in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs.
Minister of Labor is no longer good law. (Emphasis supplied) Executive Order No. 111 is in
the character of a curative law, that is to say, it was intended to remedy a defect that, in the
opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise of her
lawmaking powers under the Freedom Constitution) had attached to the provision under the
amendment.
xxx xxx

xxx[9]

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally
dismissed employees. As the employer-employee relationship has already ceased and
reinstatement is sought, jurisdiction necessarily falls under the Labor Arbiter. Petitioner should
not have used this to support its theory as this petition involves labor standards cases and not
monetary claims of illegally dismissed employees.
The Court would have ruled differently had the petitioner shown that subject labor standards
case is within the purview of the exception clause in Article 128 (b) of the Labor Code. Said
provision requires the concurrence of the following elements in order to divest the Regional
Director or his representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests
the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve
such issues, there is a need to examine evidentiary matters; and (c) that such matters are not
verifiable in the normal course of inspection.[10]
Nowhere in the records does it appear that the petitioner alleged any of the aforestated
grounds. In fact, in its Motion for Reconsideration of the Order of the Regional Director dated
August 20, 1987, the grounds which petitioner raised were the following:
1. This Honorable Office has no jurisdiction to hear this case and its Order of 31 October 1987
is therefore null and void;
2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent, the
complaint should have been directed also against the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent


Omnibus Motion to declare void the Writ of Execution for lack of jurisdiction and the
Oppositions it filed on the Motions for Intervention questioning the legal personality of the
intervenors, questions as to the amounts complained of by the employees or absence of violation
of labor standards laws were never raised. Raising lack of jurisdiction in a Motion to Dismiss is
not the contest contemplated by the exception clause under Article 128(b) of the Labor Code
which would take the case out of the jurisdiction of the Regional Director and bring it before the
Labor Arbiter.
The only instance when there was a semblance of raising the aforestated grounds, was when
they filed an Appeal Memorandum dated January 14, 1988, before the respondent
undersecretary. In the said Appeal Memorandum, petitioner comes up with the defense that the
Regional Director was without jurisdiction, as employer-employee relationship was absent, since
petitioner had ceased doing business since 1985.
Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint
Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other
related documents. The officers of the petitioner alleged that the company is presently under
receivership of the Development Bank of the Philippines.[11] In lieu of this, the Regional Director
had ordered that a summary investigation be conducted.[12] Despite proper notices, the petitioner
refused to appear before the Regional Director. To give it another chance, an order to file its
position paper was issued to substantiate its defenses. Notwithstanding all these opportunities to
be heard, petitioner chose not to avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA
111):
xxx Under Art. 128(a) of the Labor Code, the Secretary of Labor or his duly authorized
representatives, such as the Regional Directors, has visitorial powers which authorize him to
inspect the records nd premises of an employer at any time of the day or night whenever work is
being undertaken therein, to question any employee and investigate any fact, condition or matter,
and to determine violations of labor laws, wage orders or rules and regulations. If the employer
refuses to attend the inspection or conference or to submit any record, such as payrolls and
daily time records, he will be deemed to have waived his right to present evidence. (emphasis
supplied)
Petitioners refusal to allow the Labor Standards and Welfare Officers to conduct inspection
in the premises of their head office in Makati and the failure to file their position paper is
equivalent to a waiver of its right to contest the claims of the employees. This Court had
occasion to hold there is no violation of due process where the Regional Director merely
required the submission of position papers and resolved the case summarily
thereafter.[13] Furthermore, the issuance of the compliance order was well within the jurisdiction
of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases
provides:
Section 14. Failure to Appear - Where the employer or the complainant fails or refuses to
appear during the investigation, despite proper notice, for two (2) consecutive hearings without
justifiable reasons, the hearing officer may recommend to the Regional Director the issuance

of a compliance order based on the evidence at hand or an order of dismissal of the


complaint as the case may be. (Emphasis supplied)
It bears stressing that this petition involves a labor standards case and it is in keeping with
the law that the worker need not litigate to get what legally belongs to him, for the whole
enforcement machinery of the Department of Labor exists to insure its expeditious delivery to
him free of charge.[14]
Thus, their claim of closure for business, among other things, are factual issues which
cannot be brought here for the first time. As petitioner refused to participate in the proceedings
below where it could have ventilated the appropriate defenses, to do so in this petition is
unavailing. The reason for this is that factual issues are not proper subjects of a special civil
action for certiorari to the Supreme Court.[15]
It is therefore abundantly clear that at the time of the filing of the claims of petitioners
employees, the Regional Director was already exercising visitorial and enforcement powers.
Regional Directors visitorial and enforcement powers under Art. 128 (b) has undergone
series of amendments which the Court feels to be worth mentioning.
Confusion was engendered by the promulgation of the decision in the case of Servandos
Inc. vs. Secretary of Labor and Employment and the Regional Director, Region VI, Department
of Labor and Employment.[16] In the said case, the Regional Director took cognizance of the
labor standards cases of the employees of Servandos Inc., but this Court held that:
In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering
Corp. vs. Sec. Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of the
Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees money
claims, including those cases which the labor Arbiters had previously exercised
jurisdiction. However, in a subsequent modificatory resolution in the Briad Agro Case, dated 9
November 1989, the Court modified its original decision in view of the enactment of RA 6715,
and upheld the power of the Regional Directors to adjudicate money claims subject to the
conditions set forth in Section 2 of said law (RA 6715).
The power then of the Regional Director (under the present state of law) to adjudicate employees
money claims is subject to the concurrence of all the requisites provided under Sec. 2 of RA
6715, to wit:
(a) the claim is represented by an employer or person employed in domestic or
household service, or househelper;
(b) the claim arises from employer-employee relationship;
(c) the claimant does not seek reinstatement; and
(d) the aggregate money claim of each employee or househelper does not
exceed P5,000.
xxx xxx

xxx[17]

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA
6715 as to include labor standards cases under Article 128 (b) and no longer limited to ordinary
monetary claims under Article 129.
In fact, in the Motion for Reconsideration[18] presented by the private respondents in the
Servando case, the court applied more squarely the P5,000 limit to the visitorial and enforcement
power of the Regional Director, to wit:
To construe the visitorial power of the Secretary of Labor to order and enforce compliance with
labor laws as including the power to hear and decide cases involving employees claims for
wages, arising from employer-employee relations, even if the amount of said claims
exceed P5,000 for each employee, would, in our considered opinion, emasculate and render
meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article 129 of the Labor
Code which, as above-pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and
decide such employees claims, regardless of amount, can be heard and determined by the
Secretary of Labor under his visitorial power. This does not, however, appear to be the
legislative intent.
But prevailing law and jurisprudence rendered the Servando ruling inapplicable. In the
recent case of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment
Leonardo A. Quisumbing, GR # 131750, promulgated on November 16, 1998, this Court upheld
the jurisdiction of the Regional Director notwithstanding the fact that the amounts awarded
exceeded P5,000.
Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor
Secretary and his representatives reads:
Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate authority for the enforcement of
their orders, except in cases where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.
xxx xxx

xxx (emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion
that the Regional Director has jurisdiction over the present labor standards case.
Well-settled is the rule that jurisdiction over the subject matter is determined by the law in
force when the action was commenced, unless a subsequent statute provides for its retroactive
application, as when it is a curative legislation.[19]
Curative statutes are intended to supply defects, abridge superfluities in existing laws and
curb certain evils. They are intended to enable persons to carry into effect that which they have

designed and intended, but has failed of expected legal consequence by reason of some statutory
disability or irregularity in their own action. They make valid that which, before the enactment
of the statute, was invalid.[20]
In arriving at this conclusion, the case of Briad Agro Development vs. De la Cerna[21] comes
to the fore. In the said case, RA 6715 was held to be a curative statute. There, the Court ruled
that RA 6715 is deemed a curative statute and should be applied to pending cases. The rationale
of the ruling of the Court was that prior to RA 6715, Article 217 as amended by E.O. 111,
created a scenario where the Labor Arbiter and the Regional Director of DOLE had overlapping
jurisdiction over money claims. Such a situation was viewed as a defect in the law so that when
RA 6715 was passed, it was treated or interpreted by the Court as a rectification of the infirmity
of the law, and therefore curative in nature, with retroactive application.
Parenthetically, the same rationale applies in treating RA 7730 as a curative statute. Explicit
in its title[22] is the legislative intent to rectify the error brought about by this Courts ruling that
RA 6715 covers even labor standards cases where the amounts to be awarded by the Regional
Director exceed P5,000 as provided for under RA 6715. Congressional records relative to
Republic Act 7730 reveal that, this bill seeks to do away with the jurisdictional limitations
imposed thru said ruling (referring to Servando) and to finally settle any lingering doubts on the
visitorial and enforcement powers of the Secretary of Labor and Employment.[23]
All the foregoing studiedly considered, the ineluctable conclusion is that the application of
RA 7730 to the case under consideration is proper.
Thus, it is decisively clear that the public respondent did not act with grave abuse of
discretion in issuing the Order dated September 16, 1988.
The second issue for resolution is the validity of the auction sales conducted by Special
Sheriff Ramos. It bears stressing that the writ of execution issued by the Regional Director led to
the several auction sales conducted on September 24, 1987, October 2, 1987, October 23, 1987,
October 29, 1987 and October 30, 1987.
In the first Order of public respondent, the five (5) auction sales were declared null and
void. As the public respondent put it, the scandalously low price for which the personal
properties of the respondent were sold leads us to no other recourse but to invalidate the auction
sales conducted by the special sheriff.[24]
In the September 16, 1988 Order[25] of public respondent, the personal properties and
corresponding prices for which they were sold were as follows:
Personal properties sold on September 24, 1987:
1. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No.
139155-P not running condition.
2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No.
6A410235, truck with Engine No. (Truck 4) not running condition.
3. One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No.
139163-P Truck No. 4 not running condition.

Proceeds of Sale ............P178,000.00


Personal Properties Sold on October 2, 1987:
1. One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No.
1391539-P.
2. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No.
139149.
3. One (1) unit payloader (caterpillar with Engine No. (not visible) 966.
4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and one
(1) Lot of scrap irons impounded inside the Batong Buhay Compound, Calanan,
Kalinga Apayao.
5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.
Proceeds of Sale....P228,750.00
Personal Properties Sold on October 23, 1987:
1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No.
81400500227, Plate No. BAT 353, burned, damage not running condition, type of
body jeep motor not visible.
2. Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis
Nos. not visible.
3. One (1) Unit Layland, burned, damaged and Motor No. not visible.
4. Two (units) air compressor, burned, damaged and one (1) generator.
5. One (1) Unit Loader Michigan 50, damaged and burned, and
6. One (1) rock crasher, damaged, burned, scrap iron junk.
Proceeds of Sale...........P98,000.00
Properties sold on October 29, 1987:
1. One (1) lot of scrap construction materials
2. One (1) lot of scrap mining machineries equipments and supplies.
3. One (1) lot of junk machineries, equipments and supplies.
Proceeds of Sale............P1,699,999.99
Personal Properties Sold on October 20, 1987*
1. One (1) lot of scrap construction materials

2. One (1) lot of scrap mining machineries, equipments and supplies


Proceeds of Sale...........P2,185,000.00
Total Proceeds Sale.... P4,389,749.99
to satisfy the judgment award in the amount of P4,818,746.00.
As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies
are not to be disturbed absent any showing of grave abuse of discretion tainting the same. But in
the case under scrutiny, there was grave abuse of discretion when the public respondent, without
any evidentiary support, adjudged such prices as scandalously low. He merely relied on the
self-serving assertion by the petitioner that the value of the auctioned properties was more than
the price bid. Obviously, this ratiocination did not suffice to set aside the auction sales.
The presumption of regularity in the performance of official function is applicable
here. Conformably, any party alleging irregularity vitiating auction sales must come forward
with clear and convincing proof.
Furthermore, it is a well-settled principle that:
Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale where
the sale is regular, proper and legal in other respects, the parties stand on an equal footing,
there are no confidential relation between them, there is no element of fraud, unfairness, or
oppression, and there is no misconduct, accident, mistake or surprise connected with, and
tending to cause, the inadequacy.[26]
Consequently, in declaring the nullity of the subject auction sales on the ground of
inadequacy of price, the public respondent acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.
But, this is not to declare the questioned auction sales as valid. The same are null and void
since on the properties of petitioner involved was constituted a mortgage between petitioner and
the Development Bank of the Philippines, as shown by the:
(a) Deed of Mortgage dated December 28,1973;
(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;
(c) Amendment to Joint Mortgage dated October 18, 1976.
(d) Confirmation of Mortgage dated March 27,1979; and
(e) Additional Joint First Mortgage dated March 31, 1981.[27]
The aforementioned documents were executed between the petitioner and Development
Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioners
employees. The properties having been mortgaged to DBP, the applicable law is Section 14 of
Executive Order No. 81, dated 3 December 1986, otherwise known as the The 1986 Revised
Charter of the Development Bank of the Philippines, which exempts the properties of petitioner
mortgaged to DBP from attachment or execution sales. Section 14 of E.O. 81, reads:

Sec. 14. Exemption from Attachment. The provisions of any law to the contrary
notwithstanding, securities on loans and/or other accommodations granted by the Bank or its
predecessor-in-interest shall not be subject to attachment, execution or any other court process,
nor shall they be included in the property of insolvent persons or institutions, unless all debts
and obligations of the Bank or its predecessor-in-interest, penalties, collection of expenses, and
other charges, subject to the provisions of paragraph (e) of Sec. 9 of this Charter.
In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the
Asset Privatization Trust, to the Office of the Clerk of Court of the Supreme Court, certified that
the petitioner is covered by Proclamation No. 50 issued on December 8, 1986 by President
Corazon C. Aquino.
Quoted hereunder are the pertinent portions of the said letter:[28]
RE: BBGMI vs. Hon. dela Serna, GR No. 86963
Supreme Court Certiorari
SIR:
xxx

xxx

xxx

xxx all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have
been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation
No. 50 dated December 8, 1986 of her Excellency, President Corazon C. Aquino. All the said
assets of BBGMI are covered by real and chattel mortgages executed in favor of the Philippine
National Bank (PNB), the Development Bank of the Philippines (DBP) and the National
Investment and Development Corporation (NIDC).
xxx xxx

xxx

Section 14, Executive Order No. 81:


xxx xxx

xxx

Pursuant to the above-quoted provision of law, you are hereby warned that all the assets
(real and personal /chattel) of BBGMI are exempted from writs of execution, attachment, or
any other lien or court processes. The Government, through APT, shall initiate any
administrative measures and remedies against you for any violation of the vested rights of
PNB, DBP and APT.
xxx xxx

xxx
(sgd)
JOSE C. SISON

The exemption referred to in the aforecited letter is one of the circumstances contemplated
by Rule 39 of the Revised Rules of Court, to wit:
Sec. 13. Property exempt from execution. - Except as otherwise expressly provided by law,
the following properties, and no other, shall be exempt from execution:
xxx xxx

xxx

(m) Properties specially exempted by law.


xxx xxx

xxx

Private respondents contend that even if subject properties were mortgaged to DBP (now
under Asset Privatization Trust), Article 110[29] of the Labor Code, as amended by RA 6715,
applies just the same. According to them, the said provision of law grants preference to money
claims of workers over and above all credits of the petitioner. This contention is untenable. In
the case of DBP vs. NLRC,[30] the Supreme Court held that the workers preference regarding
wages and other monetary claims under Article 110 of the Labor Code, as amended,
contemplates bankruptcy or liquidation proceedings of the employers business. What is more, it
does not disregard the preferential lien of mortgagees considered as preferred credits under the
provisions of the New Civil Code on the classification, concurrence and preference of credits.
We now come to the issue with respect to the second Order, dated December 14, 1988,
which declared as valid the auction sale conducted on October 29, 1987 by Special Sheriff John
Ramos. Public respondent had no authority to validate the said auction sale on the ground that
the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value,
acquired legal title over subject properties.
It is well to remember that the said properties were transferred to the intervenors, when Fidel
Bermudez, the highest bidder at the auction sale, sold the properties to MFT Corporation which,
in turn, sold the same properties to Salter Holdings Pty., Ltd. Public respondent opined that the
contract of sale between the intervenors and the highest bidder should be respected as these sales
took place during the interregnum after the auction sale was conducted on October 29, 1987 and
before the issuance of the first disputed Order declaring all the auction sales null and void.
On this issue, the Court rules otherwise.
As regards personal properties, the general rule is that title, like a stream, cannot rise higher
than its source.[31] Consequently, a seller without title cannot transfer a title better than what he
holds. MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez,
who was the highest bidder of a void auction sale over properties exempt from execution. Such
being the case, the subsequent sale made by him (FidelBermudez) is incapable of vesting title or
ownership in the vendee.
The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid,
was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December
14, 1988 of Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE. The

Order of September 16, 1988, upholding the jurisdiction of the Regional Director, is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

G.R. No. 119205 April 15, 1998


SIME DARBY PILIPINAS, INC. petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY
SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding
their paid lunch break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires,
tubes and other rubber products. Sime Darby Salaried Employees Association (ALUTUCP), private respondent, is an association of monthly salaried employees of
petitioner at its Marikina factory. Prior to the present controversy, all company factory
workers in Marikina including members of private respondent union worked from 7:45
a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees
advising all its monthly salaried employees in its Marikina Tire Plant, except those in the
Warehouse and Quality Assurance Department working on shifts, a change in work
schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule of the factory
office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and

2:30 P.M. 3:30 P.M.


Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who
are on shifting. Their work and break time schedules will be maintained as it is
now. 1
Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its
members a complaint with the Labor Arbiter for unfair labor practice, discrimination and
evasion of liability pursuant to the resolution of this Court in Sime Darby International
Tire Co., Inc. v.NLRC. 2 However, the Labor Arbiter dismissed the complaint on the
ground that the change in the work schedule and the elimination of the 30-minute paid
lunch break of the factory workers constituted a valid exercise of management
prerogative and that the new work schedule, break time and one-hour lunch break did
not have the effect of diminishing the benefits granted to factory workers as the working
time did not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they
continued to be paid during their lunch break even if they were no longer "on call" or
required to work during the break. He also ruled that the decision in the earlier Sime
Darby case 3 was not applicable to the instant case because the former involved
discrimination of certain employees who were not paid for their 30-minute lunch break
while the rest of the factory workers were paid; hence, this Court ordered that the
discriminated employees be similarly paid the additional compensation for their lunch
break.
Private respondent appealed to respondent National Labor Relations Commission
(NLRC) which sustained the Labor Arbiter and dismissed the appeal. 4 However, upon
motion for reconsideration by private respondent, the NLRC, this time with two (2) new
commissioners replacing those who earlier retired, reversed its earlier decision of 20
April 1994 as well as the decision of the Labor Arbiter. 5 The NLRC considered the
decision of this Court in the Sime Darby case of 1990 as the law of the case wherein
petitioner was ordered to pay "the money value of these covered employees deprived of
lunch and/or working time breaks." The public respondent declared that the new work
schedule deprived the employees of the benefits of a time-honored company practice of
providing its employees a 30-minute paid lunch break resulting in an unjust diminution
of company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence,
this petition alleging that public respondent committed grave abuse of discretion
amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair
labor practice in the implementation of the change in the work schedule of its
employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch
break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits

when the 30-minute paid lunch break was eliminated; (c) in failing to consider that in the
earlier Sime Darby case affirming the decision of the NLRC, petitioner was authorized to
discontinue the practice of having a 30-minute paid lunch break should it decide to do
so; and, (d) in ignoring petitioner's inherent management prerogative of determining and
fixing the work schedule of its employees which is expressly recognized in the collective
bargaining agreement between petitioner and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion
recommending that the petitioner be granted, alleging that the 14 August 1992
memorandum which contained the new work schedule was not discriminatory of the
union members nor did it constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the
employees rests principally on their employer. In the instant case petitioner, as the
employer, cites as reason for the adjustment the efficient conduct of its business
operations and its improved production. 6 It rationalizes that while the old work schedule
included a 30-minute paid lunch break, the employees could be called upon to do jobs
during that period as they were "on call." Even if denominated as lunch break, this
period could very well be considered as working time because the factory employees
were required to work if necessary and were paid accordingly for working. With the new
work schedule, the employees are now given a one-hour lunch break without any
interruption from their employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only for eating but also for their
rest and comfort which are conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work during this one-hour lunch
break, there is no more need for them to be compensated for this period. We agree with
the Labor Arbiter that the new work schedule fully complies with the daily work period of
eight (8) hours without violating the Labor Code. 7 Besides, the new schedule applies to
all employees in the factory similarly situated whether they are union members or not. 8
Consequently, it was grave abuse of discretion for public respondent to equate the
earlier Sime Darby case 9 with the facts obtaining in this case. That ruling in the former
case is not applicable here. The issue in that case involved the matter of granting lunch
breaks to certain employees while depriving the other employees of such breaks. This
Court affirmed in that case the NLRC's finding that such act of management was
discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of
employees but only the issue of whether the change of work schedule, which
management deems necessary to increase production, constitutes unfair labor practice.
As shown by the records, the change effected by management with regard to working
time is made to apply to all factory employees engaged in the same line of work
whether or not they are members of private respondent union. Hence, it cannot be said
that the new scheme adopted by management prejudices the right of private respondent
to self-organization.

Every business enterprise endeavors to increase its profits. In the process, it may
devise means to attain that goal. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. 10 Thus, management is free to regulate, according to its
own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. 11 Further,
management retains the prerogative, whenever exigencies of the service so require, to
change the working hours of its employees. So long as such prerogative is exercised in
good faith for the advancement of the employer's interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold such exercise. 12
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every dispute will be automatically
decided in favor of labor. Management also has rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Although this Court has
inclined more often than not toward the worker and has upheld his cause in his conflicts
with the employer, such favoritism has not blinded the Court to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor
Relations Commission dated 29 November 1994 is SET ASIDE and the decision of the
Labor Arbiter dated 26 November 1993 dismissing the complaint against petitioner for
unfair labor practice is AFFIRMED.
SO ORDERED.

G.R. No. 148415

July 14, 2008

RICARDO G. PALOMA, Petitioner,


vs.
PHILIPPINE AIRLINES, INC. and THE NATIONAL LABOR RELATIONS
COMMISSION, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 156764

PHILIPPINE AIRLINES, INC., Petitioner,


vs.
RICARDO G. PALOMA, Respondent.
DECISION
VELASCO, JR., J.:
The Case
Before us are these two consolidated petitions for review under Rule 45 separately
interposed by Ricardo G. Paloma and Philippine Airlines, Inc. (PAL) to nullify and set
aside the Amended Decision1 dated May 31, 2001 of the Court of Appeals (CA) in CAG.R. SP No. 56429, as effectively reiterated in its Resolution2 of January 14, 2003.
The Facts
Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35
years of continuous service, as senior vice president for finance. In March 1992, or
some nine (9) months before Paloma retired on November 30, 1992, PAL was
privatized.
By way of post-employment benefits, PAL paid Paloma the total amount of PhP
5,163,325.64 which represented his separation/retirement gratuity and accrued vacation
leave pay. For the benefits thus received, Paloma signed a document denominated
Release and Quitclaim3 but inscribed the following reservation therein: "Without
prejudice to my claim for further leave benefits embodied in my aide memoire
transmitted to Mr. Roberto Anonas covered by my 27 Nov. 1992 letter x x x."
The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick
leave credits which PAL allegedly only paid the equivalent of 18 days. He anchored his
entitlement on Executive Order No. (EO) 10774 dated January 9, 1986, and his having
accumulated a certain number of days of sick leave credits, as acknowledged in a letter
of Alvia R. Leao, then an administrative assistant in PAL. Leaos letter dated
November 12, 1992 pertinently reads:
At your request, we are pleased to confirm herewith the balance of your sick leave
credits as they appear in our records: 230 days.
According to our existing policy, an employee is entitled to accumulate sick leave with
pay only up to a maximum of 230 days.
Had there been no ceiling as mandated by Company policy, your sick leave credits
would have totaled 450 days to date.5

Answering Palomas written demands for conversion to cash of his accrued sick leave
credits, PAL asserted having paid all of Palomas commutable sick leave credits due
him pursuant to company policy made applicable to PAL officers starting 1990.
The company leave policy adverted to grants PALs regular ground personnel a
graduated sick leave benefits, those having rendered at least 25 years of service being
entitled to 20 days of sick leave for every year of service. An employee, under the
policy, may accumulate sick leaves with pay up to 230 days. Subject to defined
qualifications, sick leave credits in excess of 230 days shall be commutable to cash at
the employees option and shall be paid in lump sum on or before May 31st of the
following year they were earned.6 Per PALs records, Paloma appears to have, for the
period from 1990 to 1992, commuted 58 days of his sick leave credits, broken down as
follows: 20 days each in 1990 and 1991 and 18 days in 1992.
Subsequently, Paloma filed before the Arbitration Branch of the National Labor
Relations Commission (NLRC) a Complaint7 for Commutation of Accrued Sick Leaves
Totaling 392 days. In the complaint, docketed as NLRC-NCR-Case No. 00-08-0579294, Paloma alleged having accrued sick leave credits of 450 days commutable upon his
retirement pursuant to EO 1077 which allows retiring government employees to
commute, without limit, all his accrued vacation and sick leave credits. And of the 450day credit, Paloma added, he had commuted only 58 days, leaving him a balance of
392 days of accrued sick leave credits for commutation.
Ruling of the Labor Arbiter
Issues having been joined with the filing by the parties of their respective position
papers,8 the labor arbiter rendered on June 30, 1995 a Decision9 dispositively reading:
WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC. is
hereby ordered to pay within ten (10) days from receipt hereof herein complainant
Ricardo G. Paloma, the sum of Six Hundred Seventy Five Thousand Pesos
(P675,000.00) representing his one Hundred sixty two days [162] accumulated sick
leave credits, plus ten (10%) percent attorneys fees of P67,500.00, or a total sum of
P742,500.00.
SO ORDERED.
The labor arbiter held that PAL is not covered by the civil service system and,
accordingly, its employees, like Paloma, cannot avail themselves of the beneficent
provision of EO 1077. This executive issuance, per the labor arbiters decision, applies
only to government officers and employees covered by the civil service, exclusive of the
members of the judiciary whose leave and retirement system is covered by a special
law.

However, the labor arbiter ruled that Paloma is entitled to a commutation of his
alternative claim for 202 accrued sick leave credits less 40 days for 1990 and 1991.
Thus, the grant of commutation for 162 accrued leave credits.
Both parties appealed10 the decision of the labor arbiter to the NLRC.
Ruling of the NLRC in NLRC NCR CA No. 009652-95
(NLRC-NCR-Case No. 00-08-05792-94)
On November 26, 1997, the First Division of the NLRC rendered a Decision affirming
that of the labor arbiter, thus:
WHEREFORE, as recommended, both appeals are DISMISSED. The decision of Labor
Arbiter Felipe T. Garduque II dated June 30, 1995 is AFFIRMED.
SO ORDERED.11
Both parties moved for reconsideration. In its Resolution of November 10, 1999, the
NLRC, finding Paloma to have, upon his retirement, commutable accumulated sick
leave credits of 230 days, modified its earlier decision, disposing as follows:
In view of all the foregoing, our decision dated November 26, 1997, be modified by
increasing the sick leave benefits of complainant to be commuted to cash from 162
days to 230 days.
SO ORDERED.12
From the above modificatory resolution of the NLRC, PAL went to the CA on a petition
for certiorari under Rule 65, the recourse docketed as CA-G.R. SP No. 56429.
Ruling of the CA in its April 28, 2000 Decision
By a Decision dated April 28, 2000, the CA found for PAL, thus:
WHEREFORE, the petition is granted. Public respondents November 10, 1999
Resolution is set aside. And the complaint of Ricardo Paloma is hereby DISMISSED.
Without costs.
SO ORDERED.13
In time, Paloma sought reconsideration.14
The May 31, 2001 Amended Decision
On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28,
2000 Decision. The fallo of the Amended Decision reads:

WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is hereby


vacated and, set aside, and another one entered reinstating the Resolution, dated 10
November 1999, issued by the public respondent National Labor Relations Commission
in NLRC NCR Case No. 00-08-05792-94 [NLRC NCR CA No. 009652-95], entitled
Ricardo G. Paloma v. Philippine Airlines, Incorporated, with the only modification that
the total sums granted by Labor Arbiter Felipe T. Garduque II (P742,500.00, inclusive of
the ten percent (10%) attorneys fees), as affirmed by public respondent National Labor
Relations Commission, First Division, in said NLRC Case No. 00-08-05792-94, shall
earn legal interest from the date of the institution of the complaint until fully
paid/discharged. (Art. 2212, New Civil Code).
SO ORDERED.15
Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and
necessarily to Paloma on the following rationale: Section 2(1) of Article IX(B) of the
1987 Constitution applies prospectively and, thus, the expressed limitation therein on
the applicability of the civil service law only to government-owned and controlled
corporations (GOCCs) with original charters does not preclude the applicability of EO
1077 to PAL and its then employees. This conclusion, the CA added, becomes all the
more pressing considering that PAL, at the time of the issuance of EO 1077, was still a
GOCC and that Paloma had already 29 years of service at that time. The appellate
court also stated that since PAL had then no existing retirement program, the provisions
of EO 1077 shall serve as a retirement program for Paloma who had meanwhile
acquired vested rights under the EO pursuant to Arts. 10016 and 28717 of the Labor
Code.
Significantly, despite affirmatively positing the applicability of EO 1077, the Amended
Decision still deferred to PALs existing policy on the 230-day limit for accrued sick
leave with pay that may be credited to its employees. Incongruously, while the CA
reinstated the November 10, 1999 Resolution of the NLRC, it decreed the
implementation of the labor arbiters Decision dated June 30, 1995. As may be recalled,
the NLRC, in its November 10, 1999 Resolution, allowed a 230-day sick leave
commutation, up from the 162 days granted under the June 30, 1995 Decision of the
labor arbiter.
Paloma immediately appealed the CAs Amended Decision via a Petition for Review on
Certiorari under Rule 45, docketed as G.R. No. 148415. On the other hand, PAL first
sought reconsideration of the Amended Decision, coming to us after the CA, per its
January 14, 2003 Resolution, denied the desired reconsideration. In net effect then,
PALs Petition for Review on Certiorari, docketed as G.R. No. 156764, assails both the
Amended Decision and Resolution of the CA.
The Issues
In G.R. No. 148415, Paloma raises the sole issue of:

WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE
TO PETITIONER AND YET APPLYING COMPANY POLICY BY AWARDING THE
CASH EQUIVALENT OF ONLY 162 DAYS SICK LEAVE CREDITS INSTEAD OF THE
450 DAYS SICK LEAVE CREDITS PETITIONER IS ENTITLED TO UNDER E.O. NO.
1077, DECIDED A QUESTION OF SUBSTANCE IN A MANNER CONTRARY TO LAW
AND APPLICABLE JURISPRUDENCE.18
In G.R. No. 156764, PAL raises the following issues for our consideration:
1. May an employee of a non-government corporation [invoke EO] 1077 which
the then President Ferdinand E. Marcos issued on January 9, 1986, solely for the
benefit of government officers and employees covered by the civil service?
2. Can a judicial body modify or alter a company policy by ordering the
commutation of sick leave credits which, under company policy is noncommutable?19
The issues submitted boil down to the question of whether or not EO 1077, before
PALs privatization, applies to its employees, and corollarily, whether or not Paloma is
entitled to a commutation of his accrued sick leave credits. Subsumed to the main issue
because EO 1077 applies only to government employees subject to civil service law is
the question of whether or not PALwhich, as early as 1960 until its privatization, had
been considered as a government-controlled corporationis covered by and subject to
the limitations peculiar under the civil service system.
There can be no quibbling, as a preliminary consideration, about PAL having been
incorporated as a private corporation whose controlling stocks were later acquired by
the GSIS, which is wholly owned by the government. Through the years before GSIS
divested itself of its controlling interests over the airline, PAL was considered a
government-controlled corporation, as we said as much in Phil. Air Lines Employees
Assn. v. Phil. Air Lines, Inc.,20 a case commenced in August 1958 and finally resolved
by the Court in 1964. The late Blas Ople, former Labor Secretary and a member of the
1986 Constitutional Commission, described PAL and other like entities spun off from the
GSIS as "second generation corporations functioning as private subsidiaries."21 Before
the coming into force of the 1973 Constitution, a subsidiary of a wholly governmentowned corporation or a government corporation with original charter was covered by the
Labor Code. Following the ratification of the 1973 Constitution, these subsidiaries
theoretically came within the pale of the civil service on the strength of this provision:
"[T]he civil service embraces every branch, agency, subdivision and instrumentality of
the Government, including every [GOCC] x x x."22 Then came the 1987 Constitution
which contextually delimited the coverage of the civil service only to a GOCC "with
original charter."23
The Courts Ruling

Considering the applicable law and jurisprudence in the light of the undisputed factual
milieu of the instant case, the setting aside of the assailed amended decision and
resolution of the CA is indicated.
Core Issue: Applicability of EO 1077
Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the Computation
of Creditable Vacation and Sick Leaves of Government Officers and Employees,
provides:
WHEREAS, under existing law and civil service regulations, the number of days of
vacation and sick leaves creditable to a government officer or employee is limited to 300
days;
WHEREAS, by special law, members of the judiciary are not subject to such restriction;
WHEREAS, it is the continuing policy of the government to institute to the extent
possible a uniform and equitable system of compensation and benefits and to enhance
the morale and performance in the civil service.
xxxx
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby order and direct the
following:
Section 1. Any officer [or] employee of the government who retires or voluntary resigns
or is separated from the service through no fault of his own and whose leave benefits
are not covered by special law, shall be entitled to the commutation of all the
accumulated vacation and/or sick leaves to his credit, exclusive of Saturdays, Sundays,
and holidays, without limitation as to the number of days of vacation and sick leaves
that he may accumulate. (Emphasis supplied.)
Paloma maintains that he comes within the coverage of EO 1077, the same having
been issued in 1986, before he severed official relations with PAL, and at a time when
the applicable constitutional provision on the coverage of the civil service made no
distinction between GOCCs with original charters and those without, like PAL which was
incorporated under the Corporation Code. Implicit in Palomas contention is the
submission that he earned the bulk of his sick leave credits under the aegis of the 1973
Constitution when PAL, being then a government-controlled corporation, was under civil
service coverage.
The contention is without merit.
PAL never ceased to be operated as a private corporation, and was not subjected
to the Civil Service Law

The Court can allow that PAL, during the period material, was a government-controlled
corporation in the sense that the GSIS owned a controlling interest over its stocks. One
stubborn fact, however, remains: Through the years, PAL functioned as a private
corporation and managed as such for profit. Their personnel were never considered
government employees. It may perhaps not be amiss for the Court to take judicial notice
of the fact that the civil service law and rules and regulations have not actually been
made to apply to PAL and its employees. Of governing application to them was the
Labor Code. Consider: (a) Even during the effectivity of the 1973 Constitution but prior
to the promulgation on January 17, 1985 of the decision in No. L-64313 entitled National
Housing Corporation v. Juco,24 the Court no less recognized the applicability of the
Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes
involving discipline, personnel movements, and dismissal in GOCCs, among them
PAL;25 (b) Company policy and collective bargaining agreements (CBAs), instead of the
civil service law and rules, govern the terms and conditions of employment in PAL. In
fact, Ople rhetorically asked how PAL can be covered by the civil service law when, at
one time, there were three (3) CBAs in PAL, one for the ground crew, one for the flight
attendants, and one for the pilots;26 and (c) When public sector unionism was just an
abstract concept, labor unions in PAL with the right to engage in strike and other
concerted activities were already active.27
Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees Assn.,
wherein the Court stated that "the Civil Service Law has not been actually applied to
PAL."28
Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits
of EO 1077 which, to stress, was issued to narrow the gap between the leave privileges
between the members of the judiciary, on one hand, and other government officers and
employees in the civil service, on the other. That PAL and Paloma may have, at a time,
come within the embrace of the civil service by virtue of the 1973 Constitution is of little
moment at this juncture. As held inNational Service Corporation v. National Labor
Relations Commission (NASECO),29 the issue of whether or not a given GOCC falls
within the ambit of the civil service subject, vis--vis disputes respecting terms and
conditions of employment, to the jurisdiction of the Civil Service Commission or the
NLRC, as the case may be, resolves itself into the question of which between the 1973
Constitution, which does not distinguish between a GOCC with or without an original
charter, and the 1987 Constitution, which does, is in place. To borrow from the 1988
NASECO ruling, it is the 1987 Constitution, which delimits the coverage of the civil
service, that should govern this case because it is the Constitution in place at the time
the case was decided, even if, incidentally, the cause of action accrued during the
effectivity of the 1973 Constitution. This has been the consistent holding of the Court in
subsequent cases involving GOCCs without original charters.30
It cannot be overemphasized that when Paloma filed his complaint for commutation of
sick leave credits, private interests already controlled, if not owned, PAL. Be this as it
may, Paloma, when he filed said complaint, cannot even assert being covered by the
civil service and, hence, entitled to the benefits attached to civil service employment,

such as the right under EO 1077 to accumulate and commute leave credits without limit.
In all, then, Paloma, while with PAL, was never a government employee covered by the
civil service law. As such, he did not acquire any vested rights on the retirement benefits
accorded by EO 1077.
Paloma not entitled to the benefits granted in EO 1077; existing company policy
on the matter applies
What governs Palomas entitlement to sick leave benefits and the computation and
commutation of creditable benefits is not EO 1077, as the labor arbiter and originally the
NLRC correctly held, but PALs company policy on the matter which, as found below,
took effect in 1990. The text of the policy is reproduced in the CAs April 28, 2000
Decision and sets out the following pertinent rules:
POLICY
Regular employees shall be entitled to a yearly period of sick leave with pay, the exact
number of days to be determined on the basis of the employees category and length of
service in the company.
RULES
A. For ground personnel
2. Sick leave shall be granted only upon certification by a company physician that an
employee is incapable of discharging his duties due to illness or injury x x x.
xxxx
3. Sick leave entitlement accrues from the date of an employees regular employment x
x x.
In case of direct conversion from temporary/daily/project/contract to regular status,
regular employment shall be deemed to have begun on the date of the employees
conversion as a regular employee.
xxxx
4. An employee may accumulate sick leave with pay up to Two Hundred Thirty
(230) days;
An employee who has accumulated seventy-five (75) days sick leave credit at the end
of each year may, at his option, commute seventy-five percent (75%) of his current sick
leave entitlement to cash and the other twenty-five percent (25%) to be added to his
accrued sick leave credits up to two hundred thirty (230) calendar days.

The seventy-five percent (75%) commutable to cash as above provided, shall be paid
up in lump sum on or before May 31st of the following year.
Sick leave credits in excess of two hundred thirty (230) days shall be commutable
to cash at the employees option, and shall be paid in lump sum on or before May
31st of the following year it was earned.31 (Emphasis ours.)
As may be gathered from the records, accrued sick leave credits in excess of 230 days
were not, if earned before 1990 when the above policy took effect, commutable to cash;
they were simply forfeited. Those earned after 1990, but still subject to the 230-day
threshold rule, were commutable to cash to the extent of 75% of the employees current
entitlement, and payable on or before May 31st of the following year, necessarily
implying that the privilege to commute is time-bound.
It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave
credits. Following company policy, Paloma was deemed to have forfeited the monetary
value of his leave credits in excess of the 230-day ceiling. Now, then, it is undisputed
that he earned additional accrued sick leave credits of 20 days in 1990 and 1991 and 18
days in 1992, which he duly commuted pursuant to company policy and received with
the corresponding cash value. Therefore, PAL is correct in contending that Paloma had
received whatever was due on the commutation of his accrued sick leave credits in
excess of the 230 days limit, specifically the 58 days commutation for 1990, 1991, and
1992.
No commutation of 230 days accrued sick leave credits
The query that comes next is how the 230 days accrued sick leave credits Paloma
undoubtedly had when he retired are to be treated. Is this otherwise earned credits
commutable to cash? These should be answered in the negative.
The labor arbiter granted 162 days commutation, while the NLRC allowed the
commutation of the maximum 230 days. The CA, while seemingly affirming the NLRCs
grant of 230 days commutation, actually decreed a 162-day commutation. We cannot
sustain any of the dispositions thus reached for lack of legal basis, for PALs company
policy upon which either disposition was predicated did not provide for a commutation of
the first 230 days accrued sick leave credits employees may have upon their retirement.
Hence, the NLRC and the CA, by their act of allowing commutation to cash, erred as
they virtually read in the policy something not written or intended therein. Indeed, no law
provides for commutation of unused or accrued sick leave credits in the private sector.
Commutation is allowed by way of voluntary endowment by an employer through a
company policy or by a CBA. None of such medium presently obtains and it would be
incongruous if the Court fills up the vacuum.
Confronted with a similar situation as depicted above, the Court, in Baltazar v. San
Miguel Brewery, Inc., declared as follows:

In connection with the question of whether or not appellee is entitled to the cash value
of six months accumulated sick leave, it appears that while under the last paragraph of
Article 5 of appellants Rules and Regulations of the Health, Welfare and Retirement
Plan (Exhibit 3), unused sick leave may be accumulated up to a maximum of six
months, the same is not commutable or payable in cash upon the employees option.
In our view, the only meaning and import of said rule and regulation is that if an
employee does not choose to enjoy his yearly sick leave of thirty days, he may
accumulate such sick leave up to a maximum of six months and enjoy this six months
sick leave at the end of the sixth year but may not commute it to cash. 321avvphi1
In fine, absent any provision in the applicable company policy authorizing the
commutation of the 230 days accrued sick leave credits existing upon retirement,
Paloma may not, as a matter of enforceable right, insist on the commutation of his sick
leave credits to cash.
As PALs senior vice-president for finance upon his retirement, Paloma knew or at least
ought to have known the company policy on accrued sick leave credits and how it was
being implemented. Had he acted on that knowledge in utmost good faith, these
proceedings would have not come to pass.
WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of
merit, while the petition under G.R. No. 156764 is hereby GIVEN DUE COURSE. The
Amended Decision dated May 31, 2001 of the CA in CA-G.R. SP No. 56429 and its
Resolution of January 14, 2003 are hereby ANNULLED and SET ASIDE, and the CA
Decision dated April 28, 2000 is accordingly REINSTATED.
Costs against Ricardo G. Paloma.
SO ORDERED.

G.R. No. 201298

February 5, 2014

RAUL C. COSARE, Petitioner,


vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of
Court, which assails the Decision2dated November 24, 2011 and Resolution3 dated
March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the

CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the
jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal
against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of
Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the National
Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by
Arevalo, who was then in the business of selling broadcast equipment needed by
television networks and production houses. In December 2000, Arevalo set up the
company Broadcom, still to continue the business of trading communication and
broadcast equipment. Cosare was named an incorporator of Broadcom, having been
assigned 100 shares of stock with par value of P1.00 per share.5 In October 2001,
Cosare was promoted to the position of Assistant Vice President for Sales (AVP for
Sales) and Head of the Technical Coordination, having a monthly basic net salary and
average commissions of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President
for Sales and thus, became Cosares immediate superior. On March 23, 2009, Cosare
sent a confidential memo7 to Arevalo to inform him of the following anomalies which
were allegedly being committed by Abiog against the company: (a) he failed to report to
work on time, and would immediately leave the office on the pretext of client visits; (b)
he advised the clients of Broadcom to purchase camera units from its competitors, and
received commissions therefor; (c) he shared in the "under the-table dealings" or
"confidential commissions" which Broadcom extended to its clients personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcoms
uncompetitive salaries and wages and delay in the payment of other benefits, even in
the presence of office staff. Cosare ended his memo by clarifying that he was not
interested in Abiogs position, but only wanted Arevalo to know of the irregularities for
the corporations sake.
Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to
tender his resignation in exchange for "financial assistance" in the amount
of P300,000.00.8 Cosare refused to comply with the directive, as signified in a
letter9 dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcoms
Manager for Finance and Administration, a memo10 signed by Arevalo, charging him of
serious misconduct and willful breach of trust, and providing in part:

1. A confidential memo was received from the VP for Sales informing me that you
had directed, or at the very least tried to persuade, a customer to purchase a
camera from another supplier. Clearly, this action is a gross and willful violation
of the trust and confidence this company has given to you being its AVP for
Sales and is an attempt to deprive the company of income from which you, along
with the other employees of this company, derive your salaries and other
benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found
abandoned in another place outside of the office without proper turnover from
you to this office which had assigned said vehicle to you. The vehicle was found
to be inoperable and in very bad condition, which required that the vehicle be
towed to a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the
company of your activities within and outside of company premises despite
repeated reminders. However, it has been observed that you have been both
frequently absent and/or tardy without proper information to this office or your
direct supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as
evidenced by the fact that you have not recorded any sales for the past
immediate twelve (12) months. This was inspite of the fact that my office decided
to relieve you of your duties as technical coordinator between Engineering and
Sales since June last year so that you could focus and concentrate [on] your
activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to
present his explanation on the charges. He was also "suspended from having access to
any and all company files/records and use of company assets effective
immediately."12 Thus, Cosare claimed that he was precluded from reporting for work on
March 31, 2009, and was instead instructed to wait at the offices receiving section.
Upon the specific instructions of Arevalo, he was also prevented by Villareal from
retrieving even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and
was told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the
barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo 14 by which he
addressed and denied the accusations cited in Arevalos memo dated March 30, 2009.
The respondents refused to receive the memo on the ground of late filing, prompting
Cosare to serve a copy thereof by registered mail. The following day, April 3, 2009,
Cosare filed the subject labor complaint, claiming that he was constructively dismissed

from employment by the respondents. He further argued that he was illegally


suspended, as he placed no serious and imminent threat to the life or property of his
employer and co-employees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare
committed the following acts inimical to the interests of Broadcom: (a) he failed to sell
any broadcast equipment since the year 2007; (b) he attempted to sell a Panasonic
HMC 150 Camera which was to be sourced from a competitor; and (c) he made an
unauthorized request in Broadcoms name for its principal, Panasonic USA, to issue an
invitation for Cosares friend, one Alex Paredes, to attend the National Association of
Broadcasters Conference in Las Vegas, USA.16 Furthermore, they contended that
Cosare abandoned his job17 by continually failing to report for work beginning April 1,
2009, prompting them to issue on April 14, 2009 a memorandum 18accusing Cosare of
absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosares failure to establish that
he was dismissed, constructively or otherwise, from his employment. For the LA, what
transpired on March 30, 2009 was merely the respondents issuance to Cosare of a
show-cause memo, giving him a chance to present his side on the charges against him.
He explained:
It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action
by filing this complaint just a day after he submitted his written explanation. Moreover,
by specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosares]
motive for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his
allegations of illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA
Menese. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the
Respondents are found guilty of Illegal Constructive Dismissal. Respondents
BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosares] backwages,
and separation pay, as well as damages, in the total amount of P1,915,458.33, per
attached Computation.

SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is
accorded to [Cosares] contention that he was constructively dismissed by Respondent
Arevalo when he was asked to resign from his employment." 23 The fact that Cosare was
suspended from using the assets of Broadcom was also inconsistent with the
respondents claim that Cosare opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRCs
finding that the termination of Cosares employment was effected by the respondents in
bad faith and in a wanton, oppressive and malevolent manner. The claim for unpaid
commissions was denied on the ground of the failure to include it in the prayer of
pleadings filed with the LA and in the appeal.
The respondents motion for reconsideration was denied.24 Dissatisfied, they filed a
petition for certiorari with the CA founded on the following arguments: (1) the
respondents did not have to prove just cause for terminating the employment of Cosare
because the latters complaint was based on an alleged constructive dismissal; (2)
Cosare resigned and was thus not dismissed from employment; (3) the respondents
should not be declared liable for the payment of Cosares monetary claims; and (4)
Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA.25 They argued that the case
involved a complaint against a corporation filed by a stockholder, who, at the same time,
was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the
respondents petition. It agreed with the respondents contention that the case involved
an intra-corporate controversy which, pursuant to Presidential Decree No. 902-A, as
amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was
listed as one of its directors. Moreover, he held the position of [AVP] for Sales which is
listed as a corporate office. Generally, the president, vice-president, secretary or
treasurer are commonly regarded as the principal or executive officers of a corporation,
and modern corporation statutes usually designate them as the officers of the
corporation. However, it bears mentioning that under Section 25 of the Corporation
Code, the Board of Directors of [Broadcom] is allowed to appoint such other officers as
it may deem necessary. Indeed, [Broadcoms] By-Laws provides:
Article IV
Officer

Section 1. Election / Appointment Immediately after their election, the Board of


Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which
was submitted to the Securities and Exchange Commission (SEC) on October 22,
2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it
unnecessary to resolve the main issues that were raised in the petition. Cosare filed a
motion for reconsideration, but this was denied by the CA via the Resolution 28 dated
March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petitions full resolution are as follows: (1) whether or not the
case instituted by Cosare was an intra-corporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was
constructively and illegally dismissed from employment by the respondents.
The Courts Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling
of the CA, it is the LA, and not the regular courts, which has the original jurisdiction over
the subject controversy. An intra-corporate controversy, which falls within the jurisdiction
of regular courts, has been regarded in its broad sense to pertain to disputes that
involve any of the following relationships: (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or association and
the state in so far as its franchise, permit or license to operate is concerned; (3)
between the corporation, partnership or association and its stockholders, partners,
members or officers; and (4) among the stockholders, partners or associates,
themselves.29 Settled jurisprudence, however, qualifies that when the dispute involves a
charge of illegal dismissal, the action may fall under the jurisdiction of the LAs upon
whose jurisdiction, as a rule, falls termination disputes and claims for damages arising
from employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an

officer of Broadcom at the time the subject controversy developed failed to necessarily
make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished
between a "regular employee" and a "corporate officer" for purposes of establishing the
true nature of a dispute or complaint for illegal dismissal and determining which body
has jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether
the dismissed officer was a regular employee or corporate officer unravels the
conundrum" of whether a complaint for illegal dismissal is cognizable by the LA or by
the RTC. "In case of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for
being its AVP for Sales, was not a "corporate officer" as the term is defined by law. We
emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for
the purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" Corporate officers in the context of Presidential Decree No. 902-A are those officers
of the corporation who are given that character by the Corporation Code or by the
corporations by-laws. There are three specific officers whom a corporation must have
under Section 25 of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A corporation may have
such other officers as may be provided for by its by-laws like, but not limited to, the vicepresident, cashier, auditor or general manager. The number of corporate officers is thus
limited by law and by the corporations by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature
of corporate offices:
It has been held that an "office" is created by the charter of the corporation and the
officer is elected by the directors and stockholders. On the other hand, an "employee"
usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur
in order for an individual to be considered a corporate officer, as against an ordinary
employee or officer, namely: (1) the creation of the position is under the corporations
charter or by-laws; and (2) the election of the officer is by the directors or stockholders.
It is only when the officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intra-corporate dispute which falls within
the jurisdiction of the trial courts.

To support their argument that Cosare was a corporate officer, the respondents referred
to Section 1, Article IV of Broadcoms by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held
concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CAs main basis in ruling that the matter was an intra-corporate
dispute that was within the trial courts jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices
that are created under Broadcoms by-laws are the following: the President, VicePresident, Treasurer and Secretary. Although a blanket authority provides for the
Boards appointment of such other officers as it may deem necessary and proper, the
respondents failed to sufficiently establish that the position of AVP for Sales was
created by virtue of an act of Broadcoms board, and that Cosare was specifically
elected or appointed to such position by the directors. No board resolutions to establish
such facts form part of the case records. Further, it was held in Marc II Marketing, Inc. v.
Joson38 that an enabling clause in a corporations by-laws empowering its board of
directors to create additional officers, even with the subsequent passage of a board
resolution to that effect, cannot make such position a corporate office. The board of
directors has no power to create other corporate offices without first amending the
corporate by-laws so as to include therein the newly created corporate office.39 "To
allow the creation of a corporate officer position by a simple inclusion in the corporate
by-laws of an enabling clause empowering the board of directors to do so can result in
the circumvention of that constitutionally well-protected right [of every employee to
security of tenure]."40
The CAs heavy reliance on the contents of the General Information Sheets 41, which
were submitted by the respondents during the appeal proceedings and which plainly
provided that Cosare was an "officer" of Broadcom, was clearly misplaced. The said
documents could neither govern nor establish the nature of the office held by Cosare
and his appointment thereto. Furthermore, although Cosare could indeed be classified
as an officer as provided in the General Information Sheets, his position could only be
deemed a regular office, and not a corporate office as it is defined under the
Corporation Code. Incidentally, the Court noticed that although the Corporate Secretary
of Broadcom, Atty. Efren L. Cordero, declared under oath the truth of the matters set

forth in the General Information Sheets, the respondents failed to explain why the
General Information Sheet officially filed with the Securities and Exchange Commission
in 2011 and submitted to the CA by the respondents still indicated Cosare as an AVP
for Sales, when among their defenses in the charge of illegal dismissal, they asserted
that Cosare had severed his relationship with the corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the
cases filing did not necessarily make the action an intra- corporate controversy. "Not all
conflicts between the stockholders and the corporation are classified as intra-corporate.
There are other facts to consider in determining whether the dispute involves corporate
matters as to consider them as intra-corporate controversies."42 Time and again, the
Court has ruled that in determining the existence of an intra-corporate dispute, the
status or relationship of the parties and the nature of the question that is the subject of
the controversy must be taken into account.43 Considering that the pending dispute
particularly relates to Cosares rights and obligations as a regular officer of Broadcom,
instead of as a stockholder of the corporation, the controversy cannot be deemed intracorporate. This is consistent with the "controversy test" explained by the Court in Reyes
v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intracorporate. The controversy must not only be rooted in the existence of an intracorporate relationship, but must as well pertain to the enforcement of the parties
correlative rights and obligations under the Corporation Code and the internal and intracorporate regulatory rules of the corporation. If the relationship and its incidents are
merely incidental to the controversy or if there will still be conflict even if the relationship
does not exist, then no intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CAs finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the
General Information Sheet of 2009 referred to in the CA decision to support such finding
failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRCs ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy within
the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRCs ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed,
citing among other circumstances the charges that were hurled and the suspension that
was imposed against him via Arevalos memo dated March 30, 2009. Even prior to such

charge, he claimed to have been subjected to mental torture, having been locked out of
his files and records and disallowed use of his office computer and access to personal
belongings.47 While Cosare attempted to furnish the respondents with his reply to the
charges, the latter refused to accept the same on the ground that it was filed beyond the
48-hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow
Cosares entry into the companys premises. These incidents were cited in the CA
decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to
deny his request, so [Cosare] again waited at the receiving section of the office. On
April 1, 2009, [Cosare] was not allowed to enter the office premises. He was asked to
just wait outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for
further instructions on how and when he could get his personal belongings. [Cosare]
waited until 8 p.m. for instructions but none were given. Thus, [Cosare] sought the
assistance of the officials of Barangay San Antonio, Pasig who advised him to file a
labor or replevin case to recover his personal belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated
March 30, 2009, Cosare was allegedly summoned to Arevalos office and was asked to
tender his immediate resignation from the company, in exchange for a financial
assistance of P300,000.00.49 The directive was said to be founded on Arevalos choice
to retain Abiogs employment with the company.50 The respondents failed to refute
these claims.
Given the circumstances, the Court agrees with Cosares claim of constructive and
illegal dismissal. "[C]onstructive dismissal occurs when there is cessation of work
because continued employment is rendered impossible, unreasonable, or unlikely as
when there is a demotion in rank or diminution in pay or when a clear discrimination,
insensibility, or disdain by an employer becomes unbearable to the employee leaving
the latter with no other option but to quit."51 In Dimagan v. Dacworks United,
Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employees
position would have felt compelled to give up his position under the circumstances. It is
an act amounting to dismissal but is made to appear as if it were not. Constructive
dismissal is therefore a dismissal in disguise. The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the
coercive acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosares
continued involvement with the company. Even their refusal to accept the explanation
which Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny

Cosare of the opportunity to be heard prior to any decision on the termination of his
employment. The respondents allegedly refused acceptance of the explanation as it
was filed beyond the mere 48-hour period which they granted to Cosare under the
memo dated March 30, 2009. However, even this limitation was a flaw in the memo or
notice to explain which only further signified the respondents discrimination, disdain
and insensibility towards Cosare, apparently resorted to by the respondents in order to
deny their employee of the opportunity to fully explain his defenses and ultimately,
retain his employment. The Court emphasized in King of Kings Transport, Inc. v.
Mamac54 the standards to be observed by employers in complying with the service of
notices prior to termination:
[T]he 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
from receipt of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence, and decide
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
the charge against the employees. A general description of the charge will not suffice.
Lastly, the notice should specifically mention which company rules, if any, are violated
and/or which among the grounds under Art. 282 is being charged against the
employees.55 (Citation omitted, underscoring ours, and emphasis supplied)
In sum, the respondents were already resolute on a severance of their working
relationship with Cosare, notwithstanding the facts which could have been established
by his explanations and the respondents full investigation on the matter. In addition to
this, the fact that no further investigation and final disposition appeared to have been
made by the respondents on Cosares case only negated the claim that they actually
intended to first look into the matter before making a final determination as to the guilt or
innocence of their employee. This also manifested from the fact that even before
Cosare was required to present his side on the charges of serious misconduct and
willful breach of trust, he was summoned to Arevalos office and was asked to tender his
immediate resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure
to report to work or file a leave of absence beginning April 1, 2009. This was even the
subject of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to
explain his absence within 48 hours from the date of the memo. As the records clearly
indicated, however, Arevalo placed Cosare under suspension beginning March 30,
2009. The suspension covered access to any and all company files/records and the use
of the assets of the company, with warning that his failure to comply with the memo

would be dealt with drastic management action. The charge of abandonment was
inconsistent with this imposed suspension. "Abandonment is the deliberate and
unjustified refusal of an employee to resume his employment. To constitute
abandonment of work, two elements must concur: (1) the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and (2)
there must have been a clear intention on the part of the employee to sever the
employer- employee relationship manifested by some overt act."57 Cosares failure to
report to work beginning April 1, 2009 was neither voluntary nor indicative of an
intention to sever his employment with Broadcom. It was illogical to be requiring him to
report for work, and imputing fault when he failed to do so after he was specifically
denied access to all of the companys assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on
April 1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us
and make [it appear] that [Cosare] failed to report for work when they had in fact had
[sic] placed him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify
the NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons
Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally or
constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or
separation pay, if reinstatement is no longer viable; and (2) backwages. 60 The award of
exemplary damages was also justified given the NLRC's finding that the respondents
acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly
declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356
are SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED.

G.R. No. 154213

August 23, 2012

EASTERN MEDITERRANEAN MARITIME LTD. AND AGEMAR MANNING AGENCY,


INC., Petitioners,
vs.
EST ANISLAO SURIO, FREDDIE PALGUIRAN, GRACIANO MORALES, HENRY

CASTILLO, ARISTOTLE ARREOLA, ALEXANDER YGOT, ANRIQUE BA TTUNG,


GREGORIO ALDOVINO, NARCISO FRIAS, VICTOR FLORES, SAMUEL MARCIAL,
CARLITO PALGUIRAN, DUQUE VINLUAN, .JESUS MENDEGORIN, NEIL FLORES,
ROMEO MANGALIAG, JOE GARFIN and SALESTINO SUSA, Respondents.
*

PEREZ
DECISION

BERSAMIN, J.:
On appeal is the decision the Court of Appeals (CA) promulgated on December 21,
2001 affirming the resolution of the National Labor Relations Commission (NLRC)
declaring itself to be without appellate jurisdiction to review the decision of the Philippine
Overseas Employment Administration (POEA) involving petitioners complaint for
disciplinary action against respondents.1
Respondents were former crewmembers of MT Seadance, a vessel owned by petitioner
Eastern Mediterranean Maritime Ltd. and manned and operated by petitioner Agemar
Manning Agency, Inc. While respondents were still on board the vessel, they
experienced delays in the payment of their wages and in the remittance of allotments,
and were not paid for extra work and extra overtime work. They complained about the
vessels inadequate equipment, and about the failure of the petitioners to heed their
repeated requests for the improvement of their working conditions. On December 19,
1993, when MT Seadance docked at the port of Brofjorden, Sweden to discharge oil,
representatives of the International Transport Federation (ITF) boarded the vessel and
found the wages of the respondents to be below the prevailing rates. The ensuing
negotiations between the ITF and the vessel owner on the increase in respondents
wages resulted in the payment by the vessel owner of wage differentials and the
immediate repatriation of respondents to the Philippines.
Subsequently, on December 23, 1993, the petitioners filed against the newly-repatriated
respondents a complaint for disciplinary action based on breach of discipline and for the
reimbursement of the wage increases in the Workers Assistance and Adjudication
Office of the POEA.
During the pendency of the administrative complaint in the POEA, Republic Act No.
8042 (Migrant Workers and Overseas Filipinos Act of 1995) took effect on July 15,
1995. Section 10 of Republic Act No. 8042 vested original and exclusive jurisdiction
over all money claims arising out of employer-employee relationships involving
overseas Filipino workers in the Labor Arbiters, to wit:
Section 10. Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an employer-employee

relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of damages.
The jurisdiction over such claims was previously exercised by the POEA under the
POEA Rules and Regulations of 1991(1991 POEA Rules).
On May 23, 1996, the POEA dismissed the complaint for disciplinary action. Petitioners
received the order of dismissal on July 24, 1996.2
Relying on Section 1, Rule V, Book VII of the 1991 POEA Rules, petitioners filed a
partial appeal on August 2, 1996 in the NLRC, still maintaining that respondents should
be administratively sanctioned for their conduct while they were on board MT
Seadance.
On March 21, 1997, the NLRC dismissed petitioners appeal for lack of
jurisdiction,3 thus:
We dismiss the partial appeal.
The Commission has no jurisdiction to review cases decided by the POEA Administrator
involving disciplinary actions. Under the Migrant Workers and Overseas Filipinos Act of
1995, the Labor Arbiter shall have jurisdiction over money claims involving employeremployee relationship (sec. 10, R.A. 8042). Said law does not provide that appeals from
decisions arising from complaint for disciplinary action rest in the Commission.
PREMISES CONSIDERED, instant appeal from the Order of May 23, 1996 is hereby
DISMISSED for lack of jurisdiction.
SO ORDERED.
Not satisfied, petitioners moved for reconsideration, but the NLRC denied their motion.
They received the denial on July 8, 1997.4
Petitioners then commenced in this Court a special civil action for certiorari and
mandamus. Citing St. Martin Funeral Homes v. National Labor Relations
Commission,5 however, the Court referred the petition to the CA on November 25,
1998.
Petitioners contended in their petition that:
THE NLRC GRAVELY ABUSED ITS DISCRETION AND/OR GRAVELY ERRED IN
DISMISSING PETITIONERS APPEAL AND MOTION FOR RECONSIDERATION
WHEN IT REFUSED TO TAKE COGNIZANCE OF PETITIONERS APPEAL DESPITE
BEING EMPOWERED TO DO SO UNDER THE LAW.6

On December 21, 2001, the CA dismissed the petition for certiorari and mandamus,
holding that the inclusion and deletion of overseas contract workers from the POEA
blacklist/watchlist were within the exclusive jurisdiction of the POEA to the exclusion of
the NLRC, and that the NLRC had no appellate jurisdiction to review the matter, viz:
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, provides that:
"Money Claims Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing
of the complaint, the claims arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
xxxx
Likewise, the Rules and Regulations implementing RA 8042 reiterate the jurisdiction of
POEA, thus:
"Section 28. Jurisdiction of the POEA. The POEA shall exercise original and exclusive
jurisdiction to hear and decide:
a) All cases, which are administrative in character, involving or arising out of violations
of rules and regulations relating to licensing and registration of recruitment and
employment agencies or entities; and
b) Disciplinary action cases and other special cases, which are administrative in
character, involving employers, principals, contracting partners and Filipino migrant
workers."
Further, Sections 6 and 7 Rule VII, Book VII of the POEA Rules & Regulations (1991)
provide:
"Sec. 6. Disqualification of Contract Workers. Contract workers, including seamen,
against whom have been imposed or with pending obligations imposed upon them
through an order, decision or resolution shall be included in the POEA Blacklist Workers
shall be disqualified from overseas employment unless properly cleared by the
Administration or until their suspension is served or lifted.
Sec. 7. Delisting of the Contract Workers Name from the POEA Watchlist. The name of
an overseas worker may be excluded, deleted and removed from the POEA Watchlist
only after disposition of the case by the Administration."
Thus, it can be concluded from the afore-quoted law and rules that, public respondent
has no jurisdiction to review disciplinary cases decided by the POEA involving contract

workers. Clearly, the matter of inclusion and deletion of overseas contract workers in
the POEA Blacklist/Watchlist is within the exclusive jurisdiction of the POEA to the
exclusion of the public respondent. Nor has the latter appellate jurisdiction to review the
findings of the POEA involving such cases.
xxx
In fine, we find and so hold, that, no grave abuse of discretion can be imputed to the
public respondent when it issued the assailed Decision and Order, dated March 21,
1997 and June 13, 1997, respectively, dismissing petitioners appeal from the decision
of the POEA.
WHEREFORE, finding the instant petition not impressed with merit, the same is hereby
DENIED DUE COURSE. Costs against petitioners.
SO ORDERED.7
Issue
Petitioners still appeal, submitting to the Court the sole issue of:
WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL
CASES DECIDED BY THE POEA ON MATTERS PERTAINING TO DISCIPLINARY
ACTIONS AGAINST PRIVATE RESPONDENTS.
They contend that both the CA and the NLRC had no basis to rule that the NLRC had
no jurisdiction to entertain the appeal only because Republic Act No. 8042 had not
provided for its retroactive application.
Respondents counter that the appeal should have been filed with the Secretary of Labor
who had exclusive jurisdiction to review cases involving administrative matters decided
by the POEA.
Ruling
The petition for review lacks merit.
Petitioners adamant insistence that the NLRC should have appellate authority over the
POEAs decision in the disciplinary action because their complaint against respondents
was filed in 1993 was unwarranted. Although Republic Act No. 8042, through its Section
10, transferred the original and exclusive jurisdiction to hear and decide money claims
involving overseas Filipino workers from the POEA to the Labor Arbiters, the law did not
remove from the POEA the original and exclusive jurisdiction to hear and decide all
disciplinary action cases and other special cases administrative in character involving
such workers. The obvious intent of Republic Act No. 8042 was to have the POEA focus
its efforts in resolving all administrative matters affecting and involving such workers.

This intent was even expressly recognized in the Omnibus Rules and Regulations
Implementing the Migrant Workers and Overseas Filipinos Act of 1995 promulgated on
February 29, 1996, viz:
Section 28. Jurisdiction of the POEA. The POEA shall exercise original and exclusive
jurisdiction to hear and decide:
(a) all cases, which are administrative in character, involving or arising out of violations
or rules and regulations relating to licensing and registration of recruitment and
employment agencies or entities; and
(b) disciplinary action cases and other special cases, which are administrative in
character, involving employers, principals, contracting partners and Filipino migrant
workers.
Section 29. Venue The cases mentioned in Section 28(a) of this Rule, may be filed
with the POEA Adjudication Office or the DOLE/POEA regional office of the place where
the complainant applied or was recruited, at the option of the complainant. The office
with which the complaint was first filed shall take cognizance of the case.
Disciplinary action cases and other special cases, as mentioned in the preceding
Section, shall be filed with the POEA Adjudication Office.
It is clear to us, therefore, that the NLRC had no appellate jurisdiction to review the
decision of the POEA in disciplinary cases involving overseas contract workers.
Petitioners position that Republic Act No. 8042 should not be applied retroactively to
the review of the POEAs decision dismissing their complaint against respondents has
no support in jurisprudence. Although, as a rule, all laws are prospective in application
unless the contrary is expressly provided,8 or unless the law is procedural or curative in
nature,9there is no serious question about the retroactive applicability of Republic Act
No. 8042 to the appeal of the POEAs decision on petitioners disciplinary action against
respondents. In a way, Republic Act No. 8042 was a procedural law due to its providing
or omitting guidelines on appeal. A law is procedural, according to De Los Santos v.
Vda. De Mangubat,10when it
Refers to the adjective law which prescribes rules and forms of procedure in order that
courts may be able to administer justice. Procedural laws do not come within the legal
conception of a retroactive law, or the general rule against the retroactive operation of
statues they may be given retroactive effect on actions pending and undetermined at
the time of their passage and this will not violate any right of a person who may feel that
he is adversely affected, insomuch as there are no vested rights in rules of procedure.
Republic Act No. 8042 applies to petitioners complaint by virtue of the case being then
still pending or undetermined at the time of the laws passage, there being no vested
rights in rules of procedure.11 They could not validly insist that the reckoning period to

ascertain which law or rule should apply was the time when the disciplinary complaint
was originally filed in the POEA in 1993. Moreover, Republic Act No. 8042 and its
implementing rules and regulations were already in effect when petitioners took their
appeal. A statute that eliminates the right to appeal and considers the judgment
rendered final and unappealable only destroys the right to appeal, but not the right to
prosecute an appeal that has been perfected prior to its passage, for, at that stage, the
right to appeal has already vested and cannot be impaired. 12 Conversely and by
analogy, an appeal that is perfected when a new statute affecting appellate jurisdiction
comes into effect should comply with the provisions of the new law, unless otherwise
provided by the new law. Relevantly, petitioners need to be reminded that the right to
appeal from a decision is a privilege established by positive laws, which, upon
authorizing the taking of the appeal, point out the cases in which it is proper to present
the appeal, the procedure to be observed, and the courts by which the appeal is to be
proceeded with and resolved.13 This is why we consistently hold that the right to appeal
is statutory in character, and is available only if granted by law or statute. 14
When Republic Act No. 8042 withheld the appellate jurisdiction of the NLRC in respect
of cases decided by the POEA, the appellate jurisdiction was vested in the Secretary of
Labor in accordance with his power of supervision and control under Section 38(1),
Chapter 7, Title II, Book III of the Revised Administrative Code of 1987, to wit:
Section 38. Definition of Administrative Relationship. Unless otherwise expressly
stated in the Code or in other laws defining the special relationships of particular
agencies, administrative relationships shall be categorized and defined as follows:
Supervision and Control. Supervision and control shall include authority to act directly
whenever a specific function is entrusted by law or regulation to a subordinate; direct
the performance of duty; restrain the commission of acts; review, approve, reverse or
modify acts and decisions of subordinate officials or units; determine priorities in the
execution of plans and programs. Unless a different meaning is explicitly provided in the
specific law governing the relationship of particular agencies, the word "control" shall
encompass supervision and control as defined in this paragraph. xxx.
Thus, Section 1, Part VII, Rule V of the 2003 POEA Rules and Regulations specifically
provides, as follows:
Section 1. Jurisdiction. The Secretary shall have the exclusive and original jurisdiction
to act on appeals or petition for review of disciplinary action cases decided by the
Administration.
In conclusion, we hold that petitioners should have appealed the adverse decision of the
POEA to the Secretary of Labor instead of to the NLRC. Consequently, the CA, being
correct on its conclusions, committed no error in upholding the NLRC.
WHEREFORE, we AFFIRM the decision promulgated on December 21, 2001 by the
Court of Appeals; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

G.R. No. 170454

October 11, 2012

CECILIA T. MANESE, JULIETES E. CRUZ, and EUFEMIO PENANO II, Petitioners,


vs.
JOLLIBEE FOODS CORPORATION, TONY TAN CAKTIONG, ELIZABETH DELA
CRUZ, DIVINA EVANGELISTA, and SYLVIA M. MARIANO, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari1 of the Decision2 of the Court of Appeals, dated
August 30, 2005, in CA-G.R. SP No. 88223, and its Resolution3 dated November 16,
2005 denying petitioners' motion for reconsideration.
The Decision of the Court of Appeals at1irmed the Resolution4 of the National Labor
Relations Commission (NLRC) dated June 30, 2004, with the following modifications:
(1) declaring petitioner Julietes Cruz as legally dismissed in accordance with Article
282, paragraph (c) of the Labor Code, and (2) holding respondent Jollibee Foods
Corporation liable for the payment of the unpaid salary of petitioner Cecilia Manese from
June 1 to 15, 2001; the payment of sick leave from May 16 to 31, 2001; and the
payment of cooperative savings. It also directed the Labor Arbiter to compute the
monetary claims.
The facts, culled from the decisions of the Court of Appeals and the Labor Arbiter, are
as follows:
Petitioners were employees of respondent Jollibee Foods Corporation (Jollibee). At the
time of their termination, petitioner Cecilia T. Manese (Manese), hired on September 16,
1996, was First Assistant Store Manager Trainee with the latest monthly salary of
P21,040.00; petitioner Julietes E. Cruz (Cruz), hired on May 7, 1996, was Second
Assistant Store Manager with the latest monthly salary of P16,729.00; and Eufemio M.
Peano II (Peano), hired on June 22, 1998, was Shift Manager, who functioned as
Assistant Store Manager Trainee (equivalent to Kitchen Manager), with the latest
monthly salary of P10,330.00.
Petitioners were part of the team tasked to open a new Jollibee branch at Festival Mall,
Level 4, in Alabang, Muntinlupa City on December 12, 2000. In preparation for the

opening of the new branch, petitioner Cruz requested the Commissary Warehouse and
Distribution (commissary) for the delivery of wet and frozen goods on December 9, 2000
to comply with the 30-day thawing process of the wet goods, particularly the Jollibee
product called "Chickenjoy."
However, the opening of the store was postponed thrice. When the opening was
rescheduled to December 24, 2000, petitioner Cruz made another requisition for the
delivery of the food on December 23, 2000, but the opening date was again postponed.
Thereafter, Jollibee's Engineering Team assured the operations manager, respondent
Elizabeth dela Cruz, that the new store could proceed to open on December 28, 2000.
Petitioner Cruz, upon the advice of their Opening Team Manager Jun Reonal, did not
cancel the request for delivery of the products.
On December 23, 2000, 450 packs of Chickenjoy were delivered and petitioners placed
them in the freezer. On December 26, 2000, petitioner Cruz thawed the 450 packs of
Chickenjoy (ten pieces in each pack), or 4,500 pieces of Chickenjoy, in time for the
branch opening on December 28, 2000. The shelf life of the Chickenjoy is 25 days from
the time it is marinated; and, once thawed, it should be served on the third day. Its shelf
life cannot go beyond three days from thawing. After that, the remaining Chickenjoy
products are no longer served, and they are packed in plastic, ten pieces in each pack,
and placed in a garbage bag to be stored in the freezer. Within the period provided for
in the company policy, valid Chickenjoy rejects are usually returned to the commissary,
while rejects which are unreturnable are wasted and disposed of properly.
Despite postponements of the store's opening, the store's sales targets for December
28 and 29, 2000, considered peak times, were not revised by the operations manager.
The sales targets of P200,000.00 for the first day and P225,000.00 for the second day
were not reached, as the store's actual sales were only P164,000.00 and P159,000.00,
respectively.
Sometime in January 2001, petitioner Cruz attempted to return 150 pieces of
Chickenjoy rejects to the commissary, but the driver of the commissary refused to
accept them due to the discoloration and deteriorated condition of the Chickenjoy
rejects, and for fear that the rejects may be charged against him. Thus, the Chickenjoy
rejects were returned to the freezer.
On February 13, 2001, the area manager conducted a store audit in all departments.
The audit's results, which included food stocks and safety, were fair and satisfactory for
petitioners' branch.
During the first week of March 2001, the team of petitioners had a meeting on what to
do with the stored Chickenjoy rejects. They decided to soak and clean the Chickenjoy
rejects in soda water and segregate the valid rejects from the wastes.
On April 2, 2001, petitioner Cruz was transferred to Jollibee Shell South Luzon Tollway
branch in Alabang, Muntinlupa. She estimated that the total undisposed Chickenjoy

rejects from the 450 packs (4,500 pieces of Chickenjoy) delivered on December 23,
2000 was only about 1,140 pieces as of January 2001. She failed to make the proper
indorsement as the area manager directed her to report immediately to her new
assignment.
On May 3, 2001, the area manager, Divina Evangelista, visited four stores, including the
subject Jollibee branch at Festival Mall, Level 4. When Evangelista arrived at the
subject Jollibee branch, she saw petitioner Peano cleaning the Chickenjoy rejects.
Evangelista told petitioner Manese to dispose of the Chickenjoy rejects, but Manese
replied that they be allowed to find a way to return them to the Commissary. 5
On May 8, 2001, Evangelista required petitioners Cruz and Manese to submit an
incident report on the Chickenjoy rejects. On May 10, 2001, a corporate audit was
conducted to spot check the waste products. According to the audit, 2,130 pieces of
Chickenjoy rejects were declared wastage.
On May 15, 2001, Evangelista issued a memorandum with a charge sheet,6 requiring
petitioners to explain in writing within 48 hours from receipt why they should not be
meted the appropriate penalty under the respondent company's Code of Discipline for
extremely serious misconduct, gross negligence, product tampering, fraud or
falsification of company records and insubordination in connection with their findings
that 2,130 pieces of Chickenjoy rejects were kept inside the walk-in freezer, which could
cause product contamination and threat to food safety.
The petitioners and other store managers submitted their respective letters of
explanation.
In her letter7 of explanation dated May 20, 2001, petitioner Manese said that the foul
smell and discoloration of the Chickenjoy rejects were due to the breakdown of the
walk-in facilities prior to the stores grand opening. During that time, the store was using
temporary power supply, so that it could open during Christmas Day and the Metro
Manila Film Festival. She admitted that she was not able to immediately inform Area
Manager Divina Evangelista about it. She appealed that they be not accused of gross
negligence, because they did their best, but they were not able to save a bulk of the
said Chickenjoy due to the holiday season. Manese explained that petitioner Peano,
the kitchen manager at that time, asked for assistance from other stores, but they could
only accommodate a few stocks, as most of their storage areas were filled with their
own stocks. She said that they did not immediately dispose of the Chickenjoy rejects out
of fear of being reprimanded and it would add to the existing problems of the branch
regarding low sales and profit. She explained that the Chickenjoy rejects were not
disposed immediately, as instructed by Evangelista on May 3, out of desperation and
fear. She admitted that this was wrong, but wasting such a big amount made her so
worried, considering that the store was already suffering from cost problems. Manese
pleaded with respondent corporation to try to understand their situation, and that they
did their best for the sake of Jollibee; that they did not intend to hide something or
neglect their respective jobs; that some things were just beyond their control; that some

of them were not well trained in the kitchen and that she tried training them, but she
could only do so much.
In his letter8 of explanation dated May 20, 2001, petitioner Peano said that in
December 2000, he was the Service Manager of Jollibee Festival Mall branch and was
transferred from Level 1 to Level 4. One of his key responsibility areas was service,
which included hiring and scheduling of the crew members. According to him, he was
not familiar with the duties pertaining to the management of the kitchen area, as he had
no proper training, and that Lee Macayana failed to make an indorsement when he was
transferred to Level 4 branch and designated as kitchen manager from April 2 to 19,
2001. He was aware that there were Chickenjoy rejects, but he did not know that they
were so many (2,130 pieces). Since he had no training in the kitchen, he merely
followed Maneses instructions.
In her letter9 of explanation dated May 21, 2001, petitioner Cruz stated that before her
transfer to the Jollibee Shell branch on April 2, 2001, the Chickenjoy rejects were only
about 1,200 pieces. Some of those were valid rejects scheduled for pull-out until April 8,
2001, while some could no longer be pulled out because they were already greenish, as
they were the Chickenjoy products delivered when the store first opened. The
Chickenjoy products turned greenish or quickly deteriorated because those were the
ones delivered when the walk-in freezers were still on pre-setting temperature and were
operating on temporary power. She tried reporting them as rejects, but the driver would
not accept them because of their condition. She decided that it was not practical to
report the rejects in one month as it would hurt the newly-opened store. They could not
just throw the rejects, as they were also considering proper waste disposal. She denied
any involvement in the alleged product tampering, since it happened after she was
already assigned to the Jollibee Shell branch on April 2, 2001.
Thereafter, respondents Human Resource Manager Sylvia Mariano, Operations
Manager Elizabeth dela Cruz, and Atty. Rey Montoya, lawyer for corporate affairs,
conducted an administrative hearing on the incident.
On June 11, 2001, the Investigating Committee sent petitioner Cruz a
Memorandum10 on its administrative findings and decision, and the said memorandum
notified her that she was terminated from employment due to loss of trust and
confidence.
On June 13, 2001, petitioners Manese and Peano each received a similar
Memorandum11 on the administrative findings and decision of the Investigating
Committee, and the said Memoranda also notified them that they were terminated from
employment due to loss of trust and confidence.
Thereafter, petitioners Manese and Cruz filed a Complaint12 against respondents for
illegal dismissal with a claim for separation pay, retirement benefits, illegal deduction,
unfair labor practice, damages, non-payment of maternity leave, non-payment of last
salary, non-payment of sick leave and release of cooperative contributions and

damages and attorney's fees. Petitioner Peano also filed a complaint 13 for illegal
dismissal, non-payment of 13th month pay, damages and attorney's fees. These
complaints were consolidated.
Petitioners contended that they did not waste the Chickenjoy rejects, because there
were so many rejects since the opening of the store. Hence, they planned to report the
Chickenjoy rejects to the commissary on a staggered basis, but the driver of the
commissary refused to accept the rejects. They tried to find some solutions so that they
could convince the driver of the commissary to accept their rejects, and they were able
to return some 400 pieces of Chickenjoy rejects. They emphasized that their food cost
was relatively high and the profit margins were low, so they could not declare the rejects
as wastes and charge it to the store. Their purpose was salutary, and they even decided
to pay for the rejects themselves if the same would no longer be accepted by the
commissary.
Petitioners further argued that there was no product contamination, as the rejects were
packed by tens and wrapped in plastic, placed in garbage bags, then placed in a crate
before being stored in the freezer. From the opening of the store until their dismissal,
they had not experienced any wastage of other wet and frozen items. In addition, they
claimed that there was no insubordination, considering that the last word of Area
Manager Evangelista on the wastage was "sige kung gusto niyong remedyuhan at
makapagsasauli kayo." She allegedly did not direct petitioner Manese to waste the
Chickenjoy. Her parting words to Manese were considered the green light to their
attempts to find a solution for the proper disposal of the rejects.
In its Position Paper,14 respondent Jollibee replied that as a policy, a store can request
for the return of the ordered products to the commissary for re-delivery on another date,
especially if there are reasons to return them like postponement of the store opening or
defective storage freezers. A store can also request other nearby Jollibee stores to
accommodate wet products in their walk-in freezers and even allow the use of these
products. Petitioner Cruz failed to resort to these remedies. All 450 packs of Chickenjoy
were thawed for the store opening on December 28, 2000, and since not all were
consumed, she allowed the same to be served beyond their shelf life until December
31. When the area manager visited the store on May 6, 2001 to make sure that her
instruction on May 3, 2001 to dispose of the greenish Chickenjoy products was carried
out, she found out that the greenish Chickenjoy products were still in the store. Hence,
respondent Jollibee contended that there was no illegal dismissal, as petitioners were
dismissed for gross negligence and/or incompetence, and for breach of trust and
confidence reposed in them as managerial employees.
On July 31, 2003, the Labor Arbiter rendered a Decision,15 the dispositive portion of
which reads:
WHEREFORE, premises considered, the complaints for illegal dismissal of
complainants Cecilia T. Manese and Eufemio M. Peano II, are hereby dismissed for

want of merit. Cecilia A. Manese's money claims further, are likewise dismissed for
similar reason.
The complaint for illegal dismissal filed by complainant Julietes E. Cruz is resolved in
her favor, against respondent herein. On ground of strained relationship, respondent
Jollibee, Inc. is hereby held liable for the payment of her separation pay computed at
one (1) month pay for every year of service, or the amount of P59,530.00 instead of
reinstatement. The payment of backwages is ruled out as an equitable solution to the
losses sustained by the respondent.
SO ORDERED.16
The Labor Arbiter stated that the charges against petitioners of having caused possible
product contamination and endangering public health should not be collective, because
at the time the incident was discovered on May 3, 2001, petitioner Cruz was no longer
working at Jollibee Festival Mall, Level 4, as she was already transferred to Jollibee
Shell South Luzon Tollway, Alabang, Muntinlupa on April 2, 2001. Thus, the Labor
Arbiter held that Cruz could not be held liable therefor; hence, her dismissal was illegal.
The Labor Arbiter also found no sufficient basis for the other charges foisted on Cruz.
However, the Labor Arbiter awarded separation pay to Cruz, considering the strained
relationship between the parties. Moreover, on the basis of equitable consideration for
the losses sustained by the company on account of some errors of judgment, the Labor
Arbiter resolved not to award backwages to Cruz.
Further, the Labor Arbiter held that petitioner Manese was not entitled to her money
claims, particularly unpaid salary, sick leave for the period from May 16-31, 2001,
cooperative savings, maternity benefit, mid-year bonus and retirement pay, because
she was either not entitled thereto by reason of company policy and practice, or her
accountabilities to the company/cooperative far exceed that which may be due her. The
Labor Arbiter took note of respondents' argument in their Position Paper as follows:
x x x Cecilia's payroll for June 1-15 and coop savings together with other benefits due
her like 13th month and encashment were not yet given to her because she has in her
position the case (car plan given by the company) still with outstanding balance of
P70,266.67. Even after computing the amount due her vis-a-vis the car loan balance
she still has a negative balance of P14,262.76. She was informed of this amount and
she promised to pay but has not settled to date. We asked her to surrender the car first
but she gave excuses.17
Petitioners appealed the Decision of the Labor Arbiter to the NLRC. Respondents filed
an Opposition to Appeal18 on October 10, 2003.
On June 30, 2004, the NLRC issued a Resolution,19 the dispositive portion of which
reads:

WHEREFORE, premises considered, respondents' appeal is hereby ordered


DISMISSED and the assailed Decision is hereby AFFIRMED in toto.20
However, the NLRC held that the Labor Arbiter erred in ruling that petitioner Cruz was
illegally dismissed as it found that she committed the offenses enumerated in
paragraphs 1.1 to 1.5 and paragraph 2 of the Memorandum 21 sent to her. Nevertheless,
since respondents failed to interpose a timely appeal, the NLRC stated that it was
constrained to affirm the findings and award of separation pay granted to petitioner Cruz
by the Labor Arbiter.
Petitioners' motion for reconsideration was denied by the NLRC in a Resolution 22 dated
October 29, 2004.
Petitioners appealed the Resolutions dated June 30, 2004 and October 29, 2004 of the
NLRC to the Court of Appeals via a petition for certiorari under Rule 65 of the Rules of
Court.
Before the Court of Appeals, petitioners raised the following issues: (1) the NLRC acted
with grave abuse of discretion in sustaining the findings of the Labor Arbiter that
petitioners Manese and Peano were responsible for the charges of having caused
possible product contamination and endangered public health, and in concluding that
their dismissal was due to a valid cause; (2) the NLRC acted with grave abuse of
discretion in sustaining the Labor Arbiter's ruling denying petitioner Cruzs reinstatement
with full backwages after declaring her dismissal illegal; and (3) the NLRC acted with
grave abuse of discretion in sustaining the Labor Arbiters ruling denying outright the
money claims of petitioners.23
On August 30, 2005, the Court of Appeals rendered a Decision affirming the
Resolutions of the NLRC with modification. The dispositive portion of the decision
reads:
WHEREFORE, the resolution dated June 30, 2004 of public respondent NLRC is
hereby AFFIRMED with the following modifications:
(1) Petitioner Julietes Cruz is declared legally dismissed in accordance with
Article 282, par. (c) of the Labor Code; and
(2) Private respondent Jollibee Foods Corporation is liable for the payment of
petitioner Cecilia Manese's unpaid salary for the period of June 1-15, 2001, sick
leave for the period of May 16-31, 2001, and cooperative savings. The Labor
Arbiter is hereby directed to compute the said monetary claims.24
The Court of Appeals found that petitioners were terminated based on the result of the
clarificatory hearing and administrative findings of respondent company. The Court held
that since petitioners were managerial employees, the mere existence of a basis for
believing that they have breached the trust of their employer would suffice for their

dismissal. It held that it cannot fault the respondent corporation for terminating
petitioners, considering their acts and omissions, enumerated in their respective notices
of termination, constituting the breach. Hence, the Court of Appeals held that the NLRC
did not commit grave abuse of discretion in issuing the assailed resolutions.
However, the Court of Appeals declared that the Labor Arbiter erred in adjudging that
petitioner Cruz was illegally dismissed and in denying petitioner Manese's money
claims.
The Court of Appeals stated that it is not disputed that petitioner Manese had already
earned her monetary claims; hence, she is entitled to the same, except for the maternity
benefit claimed by her. As the maternity benefit is usually given two weeks before the
delivery date, Manese is not entitled to the same. Moreover, the Court of Appeals held
that the Labor Arbiter cannot offset Manese's remaining balance on the car loan with
her monetary claims, because the balance on the car loan does not come within the
scope of jurisdiction of the Labor Arbiter. The respondent corporation's demand for
payment of Maneses balance on the car loan or the demand for the return of the car is
not a labor dispute, but a civil dispute. It involves debtor-creditor relations, rather than
employer-employee relations.
Petitioners' motion for reconsideration was denied by the Court of Appeals in a
Resolution25 dated November 16, 2005.
Hence, petitioners filed this petition raising the following issues:
I
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN
PASSING UPON THE LEGALITY OF THE DISMISSAL OF PETITIONER
JULIETES CRUZ, CONSIDERING THAT THE RESOLUTION OF THE
HONORABLE LABOR ARBITER A QUO HAD BECOME FINAL AND
EXECUTORY WHEN NO TIMELY APPEAL WAS FILED BY THE PRIVATE
RESPONDENT AS FAR AS THE LEGALITY OF HER DISMISSAL IS
CONCERNED.
II
THE COURT OF APPEALS GRAVELY ERRED IN PATENTLY DEVIATING IN
THE APPRECIATION OF FACTS AND ISSUES ANCHORING THE DISMISSAL
OF THE PETITIONERS BASED ON LOSS OF TRUST AND CONFIDENCE
BEING MANAGERIAL EMPLOYEES.
III.
THE COURT OF APPEALS GRAVELY ERRED IN ITS FINDINGS OF FACTS
WHEN IT HELD THAT PETITIONERS HAD SERVED THE CHICKENJOYS

BEYOND THE THREE-DAY SERVING PERIOD, THUS EXPOSING THE


PUBLIC HEALTH IN JEOPARDY.26
Petitioners contend that the Court of Appeals exceeded its jurisdiction in
dismissing petitioner Cruz as the decision of the Labor Arbiter that the dismissal
of petitioner Cruz was illegal had become final and executory, considering that
respondents failed to file a timely appeal from the said ruling. Although petitioner
Cruz filed a partial appeal, the issues raised were limited to reinstatement and
backwages.
The contention is meritorious.
SMI Fish Industries, Inc. v. NLRC27 held:
It is a well-settled procedural rule in this jurisdiction, and we see no reason why it should
not apply in this case, that an appellee who has not himself appealed cannot obtain
from the appellate court any affirmative relief other than those granted in the decision of
the court below. The appellee can only advance any argument that he may deem
necessary to defeat the appellant's claim or to uphold the decision that is being
disputed. He can assign errors on appeal if such is required to strengthen the views
expressed by the court a quo. Such assigned errors, in turn, may be considered by the
appellate court solely to maintain the appealed decision on other grounds, but not for
the purpose of modifying the judgment in the appellee's favor and giving him other
affirmative reliefs.28
In this case, respondents did not appeal from the decision of the Labor Arbiter who
ruled that the dismissal of petitioner Cruz was illegal. Respondents only filed an
Opposition to Appeal, which prayed for the reversal of the Labor Arbiters orders
declaring as illegal the dismissal of Cruz and directing payment of her separation pay.
The NLRC stated that the registry return receipt showed that respondents' counsel
received a copy of the Labor Arbiter's decision on August 28, 2003, and had ten days or
up to September 8, 2003 within which to file an appeal. However, instead of filing an
appeal, respondent filed an Opposition to complainants'/petitioners' appeal. The NLRC
stated that respondents' opposition could have been treated as an appeal, but it was
filed only in October, way beyond the ten-day reglementary period within which an
appeal may be filed. Although the NLRC found that Cruz was legally dismissed, it stated
that it was constrained to affirm the findings and award of separation pay granted to
Cruz by the Labor Arbiter, since respondents failed to interpose a timely appeal. Hence,
the NLRC affirmed the decision of the Labor Arbiter in toto.
In view of the foregoing, the Court holds that the Court of Appeals exceeded its
jurisdiction when it adjudged that petitioner Cruz was legally dismissed, as respondents
did not appeal from the decision of the Labor Arbiter who ruled that Cruz was illegally
dismissed. Respondents' failure to appeal from the decision of the Labor Arbiter renders
the decision on the illegal dismissal of Cruz final and executory.

Moreover, petitioners, particularly Manese and Peano, contend that the Court of
Appeals erred in its appreciation of facts when it affirmed their legal dismissal, albeit on
the ground of loss of trust and confidence, being managerial employees, when the
records show that they were dismissed based on the allegation of causing product
contamination that would endanger public health and based on alleged gross
negligence, as petitioners allegedly incurred excessive Chickenjoy rejects and failed to
dispose of the same. They assert that the favorable finding of the area manager in the
store audit, conducted on February 13, 2001, where the result in all departments,
including food stock and food safety, was fair and satisfactory negated the charge of
loss of trust and confidence.
The contention is unmeritorious.
The respective memorandum with a notice of termination given by respondent company
to each of the petitioners clearly expressed that their respective acts and omissions
enumerated in the said memoranda made respondent company lose its trust and
confidence in petitioners, who were managerial employees; hence, they were
terminated from employment.
The mere existence of a basis for the loss of trust and confidence justifies the dismissal
of the managerial employee because when an employee accepts a promotion to a
managerial position or to an office requiring full trust and confidence, such employee
gives up some of the rigid guaranties available to ordinary workers.29 Infractions, which
if committed by others would be overlooked or condoned or penalties mitigated, may be
visited with more severe disciplinary action.30Proof beyond reasonable doubt is not
required provided there is a valid reason for the loss of trust and confidence, such as
when the employer has a reasonable ground to believe that the managerial employee
concerned is responsible for the purported misconduct and the nature of his
participation renders him unworthy of the trust and confidence demanded by his
position.31
However, the right of the management to dismiss must be balanced against the
managerial employees right to security of tenure which is not one of the guaranties he
gives up.32 This Court has consistently ruled that managerial employees enjoy security
of tenure and, although the standards for their dismissal are less stringent, the loss of
trust and confidence must be substantial and founded on clearly established facts
sufficient to warrant the managerial employees separation from the
company.33 Substantial evidence is of critical importance and the burden rests on the
employer to prove it.34
In this case, the acts and omissions enumerated in the respective memorandum with
notice of termination of petitioners Cruz and Peano were valid bases for their
termination, which was grounded on gross negligence and/or loss of trust and
confidence. The Labor Arbiter, the NLRC and the Court of Appeals all found that the
dismissal of petitioners Manese and Peano from employment was justified. The
findings of fact of the Court of Appeals, where there is absolute agreement with those of

the NLRC, are accorded not only respect but even finality and are deemed binding upon
this Court so long as they are supported by substantial evidence.35 The Court has
carefully reviewed the records of this case and finds no reason to disturb the findings of
the Court of Appeals that the dismissal of petitioners Manese and Peano from
employment due to loss of trust and confidence is valid.
Lastly, petitioners contend that the Court of Appeals erred in finding that they served the
Chickenjoy beyond the three-day serving period, thus, exposing the public health to
jeopardy.
The last issue raised by petitioners questions a factual finding of the Court of Appeals.
Under Section 1, Rule 45, providing for appeals by certiorari before the Supreme Court,
it is clearly enunciated that only questions of law may be set forth.36The Court may
resolve questions of fact only in exceptional cases,37 which do not apply to this case.
In regard to petitioner Cruz, the Court upholds the decision of the Labor Arbiter in
ordering the payment of separation pay to Cruz due to the strained relationship between
the parties.
As regards the monetary claims of petitioner Manese, the Court of Appeals found that
petitioner Manese had already earned the same, except for the maternity leave. The
Position Paper of respondents even stated Maneses unpaid salary for the period of
June 1-15, 2001, sick leave from May 16-31, 2001 and her cooperative savings. As the
said monetary claims, except the maternity leave, have been earned by Manese, the
Court agrees with the Court of Appeals that respondent Jollibee should pay her the said
monetary claims.1wphi1
Moreover, the Court upholds the ruling of the Court of Appeals that petitioner Manese's
unpaid balance on her car loan cannot be set off against the monetary benefits due her.
The Court has held in Nestl Philippines, Inc. v. NLRC38 that the employer's demand for
payment of the employees' amortization on their car loans, or, in the alternative, the
return of the cars to the employer, is not a labor, but a civil, dispute. It involves debtorcreditor relations, rather than employee-employer relations.39
In this case, petitioner Manese has an obligation to pay the balance on the car loan to
respondent Jollibee. If she cannot afford to pay the balance, she can return the car to
Jollibee. Otherwise, Jollibee can file a civil case for the payment of the balance on the
car loan or for the return of the car. The legal remedy of respondent company is civil in
nature, arising from a contractual obligation.40
WHEREFORE, the Decision of the Court of Appeals, dated August 30, 2005, in CAG.R. SP No. 88223, and its Resolution dated November 16, 2005 are AFFIRMED with
MODIFICATION as follows:

1. Paragraph (1) of the dispositive portion of the Decision of the Court of Appeals
is DELETED, as the Decision of the Labor Arbiter holding petitioner Julietes E.
Cruz illegally dismissed is final and executory;
2. Petitioners Cecilia T. Manese and Eufemio M. Peano II are declared legally
dismissed for loss of trust and confidence under Article 282, paragraph (c) of the
Labor Code;
3. Respondent Jollibee Foods Corporation is ORDERED to pay petitioner
Julietes E. Cruz separation pay at the rate of one (1) month pay for every year of
service, or the amount of Fifty-Nine Thousand Five Hundred Thirty Pesos
(P59,530.00).
4. Respondent Jollibee roods Corporation is ORDERED to pay the monetary
claims of petitioner Cecilia T. Manese, particularly her unpaid salary for the
period of June 1-15, 2001; sick leave for the period of May 16-31, 2001 and other
leave credits due her, if any; and her cooperative savings. The Labor Arbiter is
hereby DIRECTED to compute the monetary claims of Cecilia T. Manese.
No costs.
SO ORDERED.

G.R. No. 157802

October 13, 2010

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K.


SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal
dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC).
The determination of whether the dismissed officer was a regular employee or a
corporate officer unravels the conundrum. In the case of the regular employee, the LA
has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision
dated September 13, 20021 and the resolution dated April 2, 2003,2 both promulgated in
C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial Corporation, et al.
v. Ricardo R. Coros and National Labor Relations Commission, whereby by the Court of

Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC)
to the effect that the LA had jurisdiction because the respondent was not a corporate
officer of petitioner Matling Industrial and Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the
respondent filed on August 10, 2000 a complaint for illegal suspension and illegal
dismissal against Matling and some of its corporate officers (petitioners) in the NLRC,
Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others, that
the complaint pertained to the jurisdiction of the Securities and Exchange Commission
(SEC) due to the controversy being intra-corporate inasmuch as the respondent was a
member of Matlings Board of Directors aside from being its Vice-President for Finance
and Administration prior to his termination.
The respondent opposed the petitioners motion to dismiss,5 insisting that his status as
a member of Matlings Board of Directors was doubtful, considering that he had not
been formally elected as such; that he did not own a single share of stock in Matling,
considering that he had been made to sign in blank an undated indorsement of the
certificate of stock he had been given in 1992; that Matling had taken back and retained
the certificate of stock in its custody; and that even assuming that he had been a
Director of Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination dated April 10,
2000 showed.
On October 16, 2000, the LA granted the petitioners motion to dismiss, 6 ruling that the
respondent was a corporate officer because he was occupying the position of Vice
President for Finance and Administration and at the same time was a Member of the
Board of Directors of Matling; and that, consequently, his removal was a corporate act
of Matling and the controversy resulting from such removal was under the jurisdiction of
the SEC, pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION
GRANTING APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT
AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING
THE BASIC PRINCIPLE OF DUE PROCESS.
II

THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE


CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondents
complaint for illegal dismissal was properly cognizable by the LA, not by the SEC,
because he was not a corporate officer by virtue of his position in Matling, albeit high
ranking and managerial, not being among the positions listed in Matlings Constitution
and By-Laws.8 The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring
and holding that the case at bench does not involve any intracorporate matter. Hence,
jurisdiction to hear and act on said case is vested with the Labor Arbiter, not the SEC,
considering that the position of Vice-President for Finance and Administration being
held by complainant-appellant is not listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of
origin in order that the Labor Arbiter below could act on the case at bench, hear both
parties, receive their respective evidence and position papers fully observing the
requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a
member of the Board of Directors, was a corporate officer whose removal was not
within the LAs jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration
the certified machine copies of Matlings Amended Articles of Incorporation and By
Laws to prove that the President of Matling was thereby granted "full power to create
new offices and appoint the officers thereto, and the minutes of special meeting held on
June 7, 1999 by Matlings Board of Directors to prove that the respondent was, indeed,
a Member of the Board of Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for
reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.G.R. No. SP 65714, contending that the NLRC committed grave abuse of discretion
amounting to lack of jurisdiction in reversing the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002, 12 the CA dismissed the
petition for certiorari, explaining:

For a position to be considered as a corporate office, or, for that matter, for one to be
considered as a corporate officer, the position must, if not listed in the by-laws, have
been created by the corporation's board of directors, and the occupant thereof
appointed or elected by the same board of directors or stockholders. This is the
implication of the ruling in Tabang v. National Labor Relations Commission, which
reads:
"The president, vice president, secretary and treasurer are commonly regarded as the
principal or executive officers of a corporation, and modern corporation statutes usually
designate them as the officers of the corporation. However, other offices are sometimes
created by the charter or by-laws of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create additional offices as may be
necessary.
It has been held that an 'office' is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an 'employee'
usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor
Relations Commission and De Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold
in the corporation, was not created by the corporations board of directors but only by its
president or executive vice-president pursuant to the by-laws of the corporation.
Moreover, Coros appointment to said position was not made through any act of the
board of directors or stockholders of the corporation. Consequently, the position to
which Coros was appointed and later on removed from, is not a corporate office despite
its nomenclature, but an ordinary office in the corporation.
Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor
arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners motion for reconsideration on April 2, 2003. 13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that
the respondent was a stockholder/member of the Matlings Board of Directors as well as
its Vice President for Finance and Administration; and that the CA consequently erred in
holding that the LA had jurisdiction.

The decisive issue is whether the respondent was a corporate officer of Matling or not.
The resolution of the issue determines whether the LA or the RTC had jurisdiction over
his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is
properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor Code,
as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective


bargaining agreements and those arising from the interpretation or enforcement
of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may
be provided in said agreements. (As amended by Section 9, Republic Act No.
6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the
controversy falls under the jurisdiction of the Securities and Exchange Commission
(SEC), because the controversy arises out of intra-corporate or partnership relations
between and among stockholders, members, or associates, or between any or all of
them and the corporation, partnership, or association of which they are stockholders,
members, or associates, respectively; and between such corporation, partnership, or
association and the State insofar as the controversy concerns their individual franchise
or right to exist as such entity; or because the controversy involves the election or
appointment of a director, trustee, officer, or manager of such corporation, partnership,
or association.14 Such controversy, among others, is known as an intra-corporate
dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799, 15 otherwise
known as The Securities Regulation Code, the SECs jurisdiction over all intra-corporate
disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commissions jurisdiction over all cases enumerated under Section 5
of Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in
the exercise of its authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.
Considering that the respondents complaint for illegal dismissal was commenced on
August 10, 2000, it might come under the coverage of Section 5.2 of RA No. 8799,
supra, should it turn out that the respondent was a corporate, not a regular, officer of
Matling.
II
Was the Respondents Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondents position as Vice President for
Finance and Administration was a corporate office. If it was, his dismissal by the Board

of Directors rendered the matter an intra-corporate dispute cognizable by the RTC


pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matlings President
pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the
meetings of the stockholders and directors; shall countersign all certificates, contracts
and other instruments of the corporation as authorized by the Board of Directors; shall
have full power to hire and discharge any or all employees of the corporation; shall have
full power to create new offices and to appoint the officers thereto as he may deem
proper and necessary in the operations of the corporation and as the progress of the
business and welfare of the corporation may demand; shall make reports to the
directors and stockholders and perform all such other duties and functions as are
incident to his office or are properly required of him by the Board of Directors. In case of
the absence or disability of the President, the Executive Vice President shall have the
power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the
individuals to assume the offices was delegated by Matlings Board of Directors to its
President through By-Law No. V, as amended; and that any office the President
created, like the position of the respondent, was as valid and effective a creation as that
made by the Board of Directors, making the office a corporate office. In justification,
they cite Tabang v. National Labor Relations Commission,17which held that "other
offices are sometimes created by the charter or by-laws of a corporation, or the board of
directors may be empowered under the by-laws of a corporation to create additional
officers as may be necessary."
The respondent counters that Matlings By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices; that Matlings
By-Law No. III listed only four corporate officers, namely: President, Executive Vice
President, Secretary, and Treasurer; 18 that the corporate offices contemplated in the
phrase "and such other officers as may be provided for in the by-laws" found in Section
25 of the Corporation Code should be clearly and expressly stated in the By-Laws; that
the fact that Matlings By-Law No. III dealt with Directors & Officers while its By-Law No.
V dealt with Officers proved that there was a differentiation between the officers
mentioned in the two provisions, with those classified under By-Law No. V being
ordinary or non-corporate officers; and that the officer, to be considered as a corporate
officer, must be elected by the Board of Directors or the stockholders, for the President
could only appoint an employee to a position pursuant to By-Law No. V.
We agree with respondent.

Section 25 of the Corporation Code provides:


Section 25. Corporate officers, quorum.--Immediately after their election, the directors of
a corporation must formally organize by the election of a president, who shall be a
director, a treasurer who may or may not be a director, a secretary who shall be a
resident and citizen of the Philippines, and such other officers as may be provided
for in the by-laws. Any two (2) or more positions may be held concurrently by the same
person, except that no one shall act as president and secretary or as president and
treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on
them by law and the by-laws of the corporation. Unless the articles of incorporation or
the by-laws provide for a greater majority, a majority of the number of directors or
trustees as fixed in the articles of incorporation shall constitute a quorum for the
transaction of corporate business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a quorum shall be valid as a
corporate act, except for the election of officers which shall require the vote of a majority
of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in
order to be considered as a corporate office. Thus, the creation of an office pursuant to
or under a By-Law enabling provision is not enough to make a position a corporate
office. Guerrea v. Lezama,19 the first ruling on the matter, held that the only officers of a
corporation were those given that character either by the Corporation Code or by the
By-Laws; the rest of the corporate officers could be considered only as employees or
subordinate officials. Thus, it was held in Easycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an employee occupies no office and
generally is employed not by the action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to be paid to
such employee.
In this case, respondent was appointed vice president for nationwide expansion by
Malonzo, petitioner's general manager, not by the board of directors of petitioner. It was
also Malonzo who determined the compensation package of respondent. Thus,
respondent was an employee, not a "corporate officer." The CA was therefore correct in
ruling that jurisdiction over the case was properly with the NLRC, not the SEC (now the
RTC).
This interpretation is the correct application of Section 25 of the Corporation Code,
which plainly states that the corporate officers are the President, Secretary, Treasurer
and such other officers as may be provided for in the By-Laws. Accordingly, the

corporate officers in the context of PD No. 902-A are exclusively those who are given
that character either by the Corporation Code or by the corporations By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to
circumvent the constitutionally guaranteed security of tenure of the employee by the
expedient inclusion in the By-Laws of an enabling clause on the creation of just any
corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering
the Corporation Code, adopted a similar interpretation of Section 25 of the Corporation
Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever
are the corporate officers enumerated in the by-laws are the exclusive Officers of the
corporation and the Board has no power to create other Offices without amending first
the corporate By-laws. However, the Board may create appointive positions other
than the positions of corporate Officers, but the persons occupying such
positions are not considered as corporate officers within the meaning of Section
25 of the Corporation Code and are not empowered to exercise the functions of the
corporate Officers, except those functions lawfully delegated to them. Their functions
and duties are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to
create a corporate office to the President, in light of Section 25 of the Corporation Code
requiring the Board of Directors itself to elect the corporate officers. Verily, the power to
elect the corporate officers was a discretionary power that the law exclusively vested in
the Board of Directors, and could not be delegated to subordinate officers or
agents.22 The office of Vice President for Finance and Administration created by
Matlings President pursuant to By Law No. V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers to
occupy them vested by By-Law No. V merely allowed Matlings President to create noncorporate offices to be occupied by ordinary employees of Matling. Such powers were
incidental to the Presidents duties as the executive head of Matling to assist him in the
daily operations of the business.
The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to
the effect that offices not expressly mentioned in the By-Laws but were created
pursuant to a By-Law enabling provision were also considered corporate offices, was
plainly obiter dictum due to the position subject of the controversy being mentioned in
the By-Laws. Thus, the Court held therein that the position was a corporate office, and
that the determination of the rights and liabilities arising from the ouster from the
position was an intra-corporate controversy within the SECs jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more
appropriate ruling, the position subject of the controversy was not expressly mentioned

in the By-Laws, but was created pursuant to a By-Law enabling provision authorizing
the Board of Directors to create other offices that the Board of Directors might see fit to
create. The Court held there that the position was a corporate office, relying on
the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of
their dicta is not unassailable, Tabangand Nacpil should no longer be controlling.
III
Did Respondents Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of
Matling, and relying on Paguio v. National Labor Relations
Commission24 and Ongkingko v. National Labor Relations Commission,25 the NLRC had
no jurisdiction over his complaint, considering that any case for illegal dismissal brought
by a stockholder/officer against the corporation was an intra-corporate matter that must
fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A.
The petitioners insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the
complainants were undeniably corporate officers due to their positions being expressly
mentioned in the By-Laws, aside from the fact that both of them had been duly elected
by the respective Boards of Directors. But the herein respondents position of Vice
President for Finance and Administration was not expressly mentioned in the By-Laws;
neither was the position of Vice President for Finance and Administration created by
Matlings Board of Directors. Lastly, the President, not the Board of Directors, appointed
him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification or any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping and
does not accord with reason, justice, and fair play. In order to determine whether a
dispute constitutes an intra-corporate controversy or not, the Court considers two
elements instead, namely: (a) the status or relationship of the parties; and (b) the nature
of the question that is the subject of their controversy. This was our thrust in Viray v.
Court of Appeals:27

The establishment of any of the relationships mentioned above will not necessarily
always confer jurisdiction over the dispute on the SEC to the exclusion of regular courts.
The statement made in one case that the rule admits of no exceptions or distinctions is
not that absolute. The better policy in determining which body has jurisdiction over a
case would be to consider not only the status or relationship of the parties but also the
nature of the question that is the subject of their controversy.
Not every conflict between a corporation and its stockholders involves corporate matters
that only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers.
If, for example, a person leases an apartment owned by a corporation of which he is a
stockholder, there should be no question that a complaint for his ejectment for nonpayment of rentals would still come under the jurisdiction of the regular courts and not of
the SEC. By the same token, if one person injures another in a vehicular accident, the
complaint for damages filed by the victim will not come under the jurisdiction of the SEC
simply because of the happenstance that both parties are stockholders of the same
corporation. A contrary interpretation would dissipate the powers of the regular courts
and distort the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these
determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the
controversy must pertain to any of the following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders,
partners, members or officers;
c) between the corporation, partnership or association and the State as far as its
franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the
parties involved are the stockholders and the corporation does not necessarily place the
dispute within the ambit of the jurisdiction of SEC. The better policy to be followed in
determining jurisdiction over a case should be to consider concurrent factors such as
the status or relationship of the parties or the nature of the question that is the subject of
their controversy. In the absence of any one of these factors, the SEC will not have
jurisdiction. Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as only the SEC
can resolve in the exercise of its adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office
at will, on one hand, and ordinary corporate employees who may only be terminated for

just cause, on the other hand, do not depend on the nature of the services performed,
but on the manner of creation of the office. In the respondents case, he was
supposedly at once an employee, a stockholder, and a Director of Matling. The
circumstances surrounding his appointment to office must be fully considered to
determine whether the dismissal constituted an intra-corporate controversy or a labor
termination dispute. We must also consider whether his status as Director and
stockholder had any relation at all to his appointment and subsequent dismissal as Vice
President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and
Administration because of his being a stockholder or Director of Matling. He had started
working for Matling on September 8, 1966, and had been employed continuously for 33
years until his termination on April 17, 2000, first as a bookkeeper, and his climb in 1987
to his last position as Vice President for Finance and Administration had been gradual
but steady, as the following sequence indicates:
1966 Bookkeeper
1968 Senior Accountant
1969 Chief Accountant
1972 Office Supervisor
1973 Assistant Treasurer
1978 Special Assistant for Finance
1980 Assistant Comptroller
1983 Finance and Administrative Manager
1985 Asst. Vice President for Finance and Administration
1987 to April 17, 2000 Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to
the position of Vice President for Finance and Administration in 1987 was by virtue of
the length of quality service he had rendered as an employee of Matling. His
subsequent acquisition of the status of Director/stockholder had no relation to his
promotion. Besides, his status of Director/stockholder was unaffected by his dismissal
from employment as Vice President for Finance and Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank
manager who had risen from the ranks but was dismissed, the Court held that her

complaint for illegal dismissal was correctly brought to the NLRC, because she was
deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July
14, 1963. From that position she rose to become supervisor. Then in 1982, she was
appointed Assistant Vice-President which she occupied until her illegal dismissal on
July 19, 1991. The banks contention that she merely holds an elective position
and that in effect she is not a regular employee is belied by the nature of her work
and her length of service with the Bank. As earlier stated, she rose from the ranks
and has been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the Foreign Department of the
Bank, she is tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or checks
purchased, including the signing of transmittal letters covering the same. It has been
stated that "the primary standard of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer. Additionally, "an employee is regular because
of the nature of work and the length of service, not because of the mode or even the
reason for hiring them." As Assistant Vice-President of the Foreign Department of the
Bank she performs tasks integral to the operations of the bank and her length of service
with the bank totaling 28 years speaks volumes of her status as a regular employee of
the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her
services may be terminated only for a just or authorized cause. This being in truth a
case of illegal dismissal, it is no wonder then that the Bank endeavored to the very end
to establish loss of trust and confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of
the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.

G.R. No. 197528

September 5, 2012

PERT/CPM MANPOWER EXPONENT CO., INC., Petitioner,


vs.
ARMANDO A. VINUY A, LOUIE M. ORDOVEZ, ARSENIO S. LUMANTA,. JR.,
ROBELITO S. ANIPAN, VIRGILIO R. ALCANTARA, MARINO M. ERA, SANDY 0.
ENJAMBRE and NOEL T. LADEA, Respondents.

DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the decision2 dated
May 9, 2011 and the resolution3dated June 23, 2011 of the Court of Appeals (CA) in
CA-G.R. SP No. 114353.
The Antecedents
On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez, Arsenio S.
Lumanta, Jr., Robelito S. Anipan, Virgilio R. Alcantara, Marino M. Era, Sandy O.
Enjambre and Noel T. Ladea (respondents) filed a complaint for illegal dismissal against
the petitioner Pert/CPM Manpower Exponent Co., Inc. (agency), and its President
Romeo P. Nacino.
The respondents alleged that the agency deployed them between March 29, 2007 and
May 12, 2007 to work as aluminum fabricator/installer for the agencys principal, Modern
Metal Solution LLC/MMS Modern Metal Solution LLC (Modern Metal) in Dubai, United
Arab Emirates.
The respondents employment contracts,4 which were approved by the Philippine
Overseas Employment Administration (POEA), provided for a two-year employment,
nine hours a day, salary of 1,350 AED with overtime pay, food allowance, free and
suitable housing (four to a room), free transportation, free laundry, and free medical and
dental services. They each paid a P 15,000.00 processing fee.5
On April 2, 2007, Modern Metal gave the respondents, except Era, appointment
letters6 with terms different from those in the employment contracts which they signed at
the agencys office in the Philippines. Under the letters of appointment, their
employment was increased to three years at 1,000 to 1,200 AED and food allowance of
200 AED.
The respondents claimed that they were shocked to find out what their working and
living conditions were in Dubai. They were required to work from 6:30 a.m. to 6:30 p.m.,
with a break of only one hour to one and a half hours. When they rendered overtime
work, they were most of the time either underpaid or not paid at all. Their housing
accommodations were cramped and were shared with 27 other occupants. The lodging
house was in Sharjah, which was far from their jobsite in Dubai, leaving them only three
to four hours of sleep a day because of the long hours of travel to and from their place
of work; there was no potable water and the air was polluted.
When the respondents received their first salaries (at the rates provided in their
appointment letters and with deductions for placement fees) and because of their
difficult living and working conditions, they called up the agency and complained about

their predicament. The agency assured them that their concerns would be promptly
addressed, but nothing happened.
On May 5, 2007, Modern Metal required the respondents to sign new employment
contracts,7 except for Era who was made to sign later. The contracts reflected the terms
of their appointment letters. Burdened by all the expenses and financial obligations they
incurred for their deployment, they were left with no choice but to sign the contracts.
They raised the matter with the agency, which again took no action.
On August 5, 2007, despondent over their unbearable living and working conditions and
by the agencys inaction, the respondents expressed to Modern Metal their desire to
resign. Out of fear, as they put it, that Modern Metal would not give them their salaries
and release papers, the respondents, except Era, cited personal/family problems for
their resignation.8Era mentioned the real reason "because I dont (sic) want the
company policy"9 for his resignation.
It took the agency several weeks to repatriate the respondents to the Philippines. They
all returned to Manila in September 2007. Except for Ordovez and Enjambre, all the
respondents shouldered their own airfare.
For its part, the agency countered that the respondents were not illegally dismissed;
they voluntarily resigned from their employment to seek a better paying job. It claimed
that the respondents, while still working for Modern Metal, applied with another
company which offered them a higher pay. Unfortunately, their supposed employment
failed to materialize and they had to go home because they had already resigned from
Modern Metal.
The agency further alleged that the respondents even voluntarily signed affidavits of
quitclaim and release after they resigned. It thus argued that their claim for benefits,
under Section 10 of Republic Act No. (R.A.) 8042, damages and attorneys fees is
unfounded.
The Compulsory Arbitration Rulings
On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a Decision 10 dismissing
the complaint, finding that the respondents voluntarily resigned from their jobs. He also
found that four of them Alcantara, Era, Anipan and Lumanta even executed a
compromise agreement (with quitclaim and release) before the POEA. He considered
the POEA recourse a case of forum shopping.
The respondents appealed to the National Labor Relations Commission (NLRC). They
argued that the labor arbiter committed serious errors in (1) admitting in evidence the
quitclaims and releases they executed in Dubai, which were mere photocopies of the
originals and which failed to explain the circumstances behind their execution; (2) failing
to consider that the compromise agreements they signed before the POEA covered only

the refund of their airfare and not all their money claims; and (3) ruling that they violated
the rule on non-forum shopping.
On May 12, 2009, the NLRC granted the appeal.11 It ruled that the respondents had
been illegally dismissed. It anchored its ruling on the new employment contracts they
were made to sign in Dubai. It stressed that it is illegal for an employer to require its
employees to execute new employment papers, especially those which provide benefits
that are inferior to the POEA-approved contracts.
The NLRC rejected the quitclaim and release executed by the respondents in Dubai. It
believed that the respondents executed the quitclaim documents under duress as they
were afraid that they would not be allowed to return to the Philippines if they did not sign
the documents. Further, the labor tribunal disagreed with the labor arbiters opinion that
the compromise agreement they executed before the POEA had effectively foreclosed
the illegal dismissal complaint before the NLRC and that the respondents had been
guilty of forum shopping. It pointed out that the POEA case involved pre-deployment
issues; whereas, the complaint before the NLRC is one for illegal dismissal and money
claims arising from employment.
Consequently, the NLRC ordered the agency, Nacino and Modern Metal to pay, jointly
and severally, the respondents, as follows:
WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and SET
ASIDE, a new Decision is hereby issued ordering the respondents PERT/CPM
MANPOWER EXPONENTS CO., INC., ROMEO NACINO, and MODERN METAL
SOLUTIONS, INC. to jointly and severally, pay the complainants the following:
Salary for
the
unexpired
Placement
portion of
fee
the contract
(1350 x 6
months)

Employee

Underpaid
Salary

Exemplary
Damages

Vinuya,
ARMANDO

150 x 6 = 900 AED

USD 400

8100 AED

P 20,000.00

Alcantara
VIRGILIO

150 X 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Era,
MARINO

350 x 4 = 1400 AED

USD 400

8100 AED

P 20,000.00

Ladea,
NOEL

150 x 5 = 750 AED

USD 400

8100 AED

P 20,000.00

Ordovez,
LOUIE

250 X 3 = 750 AED

USD 400

8100 AED

P 20,000.00

Anipan,
ROBELITO

150 x 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Enjambre,
SANDY

150 x 4 = 600 AED

USD 400

8100 AED

P 20,000.00

Lumanta,
ARSENIO

250 x 5 = 1250 AED

USD 400

8100 AED

P 20,000.00

TOTAL:

6,850 AED

US$3,200

64,800 AED

P 400,000.00

or their peso equivalent at the time of actual payment plus attorneys fees equivalent to
10% of the judgment award.12
The agency moved for reconsideration, contending that the appeal was never perfected
and that the NLRC gravely abused its discretion in reversing the labor arbiters
decision.The respondents, on the other hand, moved for partial reconsideration,
maintaining that their salaries should have covered the unexpired portion of their
employment contracts, pursuant to the Courts ruling in Serrano v. Gallant Maritime
Services, Inc.13
The NLRC denied the agencys motion for reconsideration, but granted the
respondents motion.14 It sustained the respondents argument that the award needed to
be adjusted, particularly in relation to the payment of their salaries, consistent with the
Courts ruling in Serrano. The ruling declared unconstitutional the clause, "or for three
(3) months for every year of the unexpired term, whichever is less," in Section 10,
paragraph 5, of R.A. 8042, limiting the entitlement of illegally dismissed overseas
Filipino workers to their salaries for the unexpired term of their contract or three months,
whichever is less. Accordingly, it modified its earlier decision and adjusted the
respondents salary entitlement based on the following matrix:
Unexpired
portion of
contract

Duration of
Contract

Departure date

Date dismissed

Vinuya,
ARMANDO

2 years

29 March 2007

8 August 2007

19 months
and 21 days

Alcantara,
VIRGILIO

2 years

3 April 2007

8 August 2007

20 months
and 5 days

Employee

Era,
MARINO

2 years

12 May 2007

8 August 2007

21 months
and 4 days

Ladea,
NOEL

2 years

29 March 2007

8 August 2007

19 months
and 21 days

Ordovez,
LOUIE

2 years

3 April 2007

26 July 2007

21 months
and 23 days

Anipan,
ROBELITO

2 years

3 April 2007

8 August 2007

20 months
and 5 days

Enjambre,
SANDY

2 years

29 March 2007

26 July 2007

20 months
and 3 days

Lumanta,
ARSENIO

2 years

29 March 2007

8 August 2007

19 months
and 21 days15

Again, the agency moved for reconsideration, reiterating its earlier arguments and,
additionally, questioning the application of the Serrano ruling in the case because it was
not yet final and executory. The NLRC denied the motion, prompting the agency to seek
recourse from the CA through a petition for certiorari.
The CA Decision
The CA dismissed the petition for lack of merit.16 It upheld the NLRC ruling that the
respondents were illegally dismissed. It found no grave abuse of discretion in the
NLRCs rejection of the respondents resignation letters, and the accompanying
quitclaim and release affidavits, as proof of their voluntary termination of employment.
The CA stressed that the filing of a complaint for illegal dismissal is inconsistent with
resignation. Moreover, it found nothing in the records to substantiate the agencys
contention that the respondents resignation was of their own accord; on the contrary, it
considered the resignation letters "dubious for having been lopsidedly-worded to ensure
that the petitioners (employers) are free from any liability."17
The appellate court likewise refused to give credit to the compromise agreements that
the respondents executed before the POEA. It agreed with the NLRCs conclusion that
the agreements pertain to the respondents charge of recruitment violations against the
agency distinct from their illegal dismissal complaint, thus negating forum shopping by
the respondents.

Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon being
reminded by the respondents), by adjusting the respondents salary award on the basis
of the unexpired portion of their contracts, as enunciated in the Serrano case.
The agency moved for, but failed to secure, a reconsideration of the CA decision. 18
The Petition
The agency is now before the Court seeking a reversal of the CA dispositions,
contending that the CA erred in:
1. affirming the NLRCs finding that the respondents were illegally dismissed;
2. holding that the compromise agreements before the POEA pertain only to the
respondents charge of recruitment violations against the agency; and
3. affirming the NLRCs award to the respondents of their salaries for the
unexpired portion of their employment contracts, pursuant to the Serrano ruling.
The agency insists that it is not liable for illegal dismissal, actual or constructive. It
submits that as correctly found by the labor arbiter, the respondents voluntarily resigned
from their jobs, and even executed affidavits of quitclaim and release; the respondents
stated family concerns for their resignation. The agency posits that the letters were duly
proven as they were written unconditionally by the respondents. It, therefore, assails the
conclusion that the respondents resigned under duress or that the resignation letters
were dubious.
The agency raises the same argument with respect to the compromise agreements,
with quitclaim and release, it entered into with Vinuya, Era, Ladea, Enjambre, Ordovez,
Alcantara, Anipan and Lumanta before the POEA, although it submitted evidence only
for six of them. Anipan, Lumanta, Vinuya and Ladea signing one document;19 Era20 and
Alcantara21 signing a document each. It points out that the agreement was prepared
with the assistance of POEA Conciliator Judy Santillan, and was duly and freely signed
by the respondents; moreover, the agreement is not conditional as it pertains to all
issues involved in the dispute between the parties.
On the third issue, the agency posits that the Serrano ruling has no application in the
present case for three reasons. First, the respondents were not illegally dismissed and,
therefore, were not entitled to their money claims. Second, the respondents filed the
complaint in 2007, while the Serrano ruling came out on March 24, 2009. The ruling
cannot be given retroactive application. Third, R.A. 10022, which was enacted on March
8, 2010 and which amended R.A. 8042, restored the subject clause in Section 10 of
R.A. 8042, declared unconstitutional by the Court.
The Respondents Position

In their Comment (to the Petition) dated September 28, 2011,22 the respondents ask the
Court to deny the petition for lack of merit. They dispute the agencys insistence that
they resigned voluntarily. They stand firm on their submission that because of their
unbearable living and working conditions in Dubai, they were left with no choice but to
resign. Also, the agency never refuted their detailed narration of the reasons for giving
up their employment.
The respondents maintain that the quitclaim and release affidavits,23 which the agency
presented, betray its desperate attempt to escape its liability to them. They point out
that, as found by the NLRC, the affidavits are ready-made documents; for instance, in
Lumantas24 and Eras25 affidavits, they mentioned a certain G & A International
Manpower as the agency which recruited them a fact totally inapplicable to all the
respondents. They contend that they had no choice but to sign the documents;
otherwise, their release papers and remaining salaries would not be given to them, a
submission which the agency never refuted.
On the agencys second line of defense, the compromise agreement (with quitclaim and
release) between the respondents and the agency before the POEA, the respondents
argue that the agreements pertain only to their charge of recruitment violations against
the agency. They add that based on the agreements, read and considered entirely, the
agency was discharged only with respect to the recruitment and pre-deployment issues
such as excessive placement fees, non-issuance of receipts and placement
misrepresentation, but not with respect to post-deployment issues such as illegal
dismissal, breach of contract, underpayment of salaries and underpayment and
nonpayment of overtime pay. The respondents stress that the agency failed to
controvert their contention that the agreements came about only to settle their claim for
refund of their airfare which they paid for when they were repatriated.
Lastly, the respondents maintain that since they were illegally dismissed, the CA was
correct in upholding the NLRCs award of their salaries for the unexpired portion of their
employment contracts, as enunciated in Serrano. They point out that the Serrano ruling
is curative and remedial in nature and, as such, should be given retroactive application
as the Court declared in Yap v. Thenamaris Ships Management.26 Further, the
respondents take exception to the agencys contention that the Serrano ruling cannot, in
any event, be applied in the present case in view of the enactment of R.A. 10022 on
March 8, 2010, amending Section 10 of R.A. 8042. The amendment restored the
subject clause in paragraph 5, Section 10 of R.A. 8042 which was struck down as
unconstitutional in Serrano.
The respondents maintain that the agency cannot raise the issue for the first time before
this Court when it could have raised it before the CA with its petition for certiorari which
it filed on June 8, 2010;27 otherwise, their right to due process will be violated. The
agency, on the other hand, would later claim that it is not barred by estoppel with
respect to its reliance on R.A. 10022 as it raised it before the CA in CA-G.R. SP No.
114353.28 They further argue that RA 10022 cannot be applied in their case, as the law
is an amendatory statute which is, as a rule, prospective in application, unless the

contrary is provided.29 To put the issue to rest, the respondents ask the Court to also
declare unconstitutional Section 7 of R.A. 10022.
Finally, the respondents submit that the petition should be dismissed outright for raising
only questions of fact, rather than of law.
The Courts Ruling
The procedural question
We deem it proper to examine the facts of the case on account of the divergence in the
factual conclusions of the labor arbiter on the one hand, and, of the NLRC and the CA,
on the other.30 The arbiter found no illegal dismissal in the respondents loss of
employment in Dubai because they voluntarily resigned; whereas, the NLRC and the
CA adjudged them to have been illegally dismissed because they were virtually forced
to resign.
The merits of the case
We find no merit in the petition. The CA committed no reversible error and neither
did it commit grave abuse of discretion in affirming the NLRCs illegal dismissal
ruling.
The agency and its principal, Modern Metal, committed flagrant violations of the law on
overseas employment, as well as basic norms of decency and fair play in an
employment relationship, pushing the respondents to look for a better employment and,
ultimately, to resign from their jobs.
First. The agency and Modern Metal are guilty of contract substitution. The respondents
entered into a POEA-approved two-year employment contract,31 with Modern Metal
providing among others, as earlier discussed, for a monthly salary of 1350 AED. On
April 2, 2007, Modern Metal issued to them appointment letters32 whereby the
respondents were hired for a longer three-year period and a reduced salary, from 1,100
AED to 1,200 AED, among other provisions. Then, on May 5, 2007, they were required
to sign new employment contracts33 reflecting the same terms contained in their
appointment letters, except that this time, they were hired as "ordinary laborer," no
longer aluminum fabricator/installer. The respondents complained with the agency
about the contract substitution, but the agency refused or failed to act on the matter.
The fact that the respondents contracts were altered or substituted at the workplace
had never been denied by the agency.1wphi1 On the contrary, it admitted that the
contract substitution did happen when it argued, "as to their claim for underpayment of
salary, their original contract mentioned 1350 AED monthly salary, which includes
allowance while in their Appointment Letters, they were supposed to receive 1,300
AED. While there was a difference of 50 AED monthly, the same could no longer be
claimed by virtue of their Affidavits of Quitclaims and Desistance."34

Clearly, the agency and Modern Metal committed a prohibited practice and engaged in
illegal recruitment under the law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for any individual, entity, licensee, or
holder of authority:
xxxx
(i) To substitute or alter employment contracts approved and verified by the Department
of Labor from the time of actual signing thereof by the parties up to and including the
periods of expiration of the same without the approval of the Secretary of Labor.
Further, Article 38 of the Labor Code, as amended by R.A. 8042,35 defined "illegal
recruitment" to include the following act:
(i) To substitute or alter to the prejudice of the worker, employment contracts approved
and verified by the Department of Labor and Employment from the time of actual
signing thereof by the parties up to and including the period of the expiration of the
same without the approval of the Department of Labor and Employment.
Second. The agency and Modern Metal committed breach of contract. Aggravating the
contract substitution imposed upon them by their employer, the respondents were made
to suffer substandard (shocking, as they put it) working and living arrangements. Both
the original contracts the respondents signed in the Philippines and the appointment
letters issued to them by Modern Metal in Dubai provided for free housing and
transportation to and from the jobsite. The original contract mentioned free and suitable
housing.36 Although no description of the housing was made in the letters of
appointment except: "Accommodation: Provided by the company," it is but reasonable
to think that the housing or accommodation would be "suitable."
As earlier pointed out, the respondents were made to work from 6:30 a.m. to 6:30 p.m.,
with a meal break of one to one and a half hours, and their overtime work was mostly
not paid or underpaid. Their living quarters were cramped as they shared them with 27
other workers. The lodging house was in Sharjah, far from the jobsite in Dubai, leaving
them only three to four hours of sleep every workday because of the long hours of travel
to and from their place of work, not to mention that there was no potable water in the
lodging house which was located in an area where the air was polluted. The
respondents complained with the agency about the hardships that they were suffering,
but the agency failed to act on their reports. Significantly, the agency failed to refute
their claim, anchored on the ordeal that they went through while in Modern Metals
employ.
Third. With their original contracts substituted and their oppressive working and living
conditions unmitigated or unresolved, the respondents decision to resign is not
surprising. They were compelled by the dismal state of their employment to give up their
jobs; effectively, they were constructively dismissed. A constructive dismissal or

discharge is "a quitting because continued employment is rendered impossible,


unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in
pay."37
Without doubt, the respondents continued employment with Modern Metal had become
unreasonable. A reasonable mind would not approve of a substituted contract that pays
a diminished salary from 1350 AED a month in the original contract to 1,000 AED to
1,200 AED in the appointment letters, a difference of 150 AED to 250 AED (not just 50
AED as the agency claimed) or an extended employment (from 2 to 3 years) at such
inferior terms, or a "free and suitable" housing which is hours away from the job site,
cramped and crowded, without potable water and exposed to air pollution.
We thus cannot accept the agencys insistence that the respondents voluntarily
resigned since they personally prepared their resignation letters38 in their own
handwriting, citing family problems as their common ground for resigning. As the CA
did, we find the resignation letters "dubious,"39 not only for having been lopsidedly
worded to ensure that the employer is rendered free from any liability, but also for the
odd coincidence that all the respondents had, at the same time, been confronted with
urgent family problems so that they had to give up their employment and go home. The
truth, as the respondents maintain, is that they cited family problems as reason out of
fear that Modern Metal would not give them their salaries and their release papers. Only
Era was bold enough to say the real reason for his resignation to protest company
policy.
We likewise find the affidavits40of quitclaim and release which the respondents executed
suspect. Obviously, the affidavits were prepared as a follow through of the respondents
supposed voluntary resignation. Unlike the resignation letters, the respondents had no
hand in the preparation of the affidavits. They must have been prepared by a
representative of Modern Metal as they appear to come from a standard form and were
apparently introduced for only one purpose to lend credence to the resignation
letters. In Modern Metals haste, however, to secure the respondents affidavits, they did
not check on the model they used. Thus, Lumantas affidavit41 mentioned a G & A
International Manpower as his recruiting agency, an entity totally unknown to the
respondents; the same thing is true for Eras affidavit.42 This confusion is an indication
of the employers hurried attempt to avoid liability to the respondents.
The respondents position is well-founded. The NLRC itself had the same impression,
which we find in order and hereunder quote:
The acts of respondents of requiring the signing of new contracts upon reaching the
place of work and requiring employees to sign quitclaims before they are paid and
repatriated to the Philippines are all too familiar stories of despicable labor practices
which our employees are subjected to abroad. While it is true that quitclaims are
generally given weight, however, given the facts of the case, We are of the opinion that
the complainants-appellants executed the same under duress and fear that they will not
be allowed to return to the Philippines.43

Fourth. The compromise agreements (with quitclaim and release)44 between the
respondents and the agency before the POEA did not foreclose their employeremployee relationship claims before the NLRC. The respondents, except Ordovez and
Enjambre, aver in this respect that they all paid for their own airfare when they returned
home45 and that the compromise agreements settled only their claim for refund of their
airfare, but not their other claims.46 Again, this submission has not been refuted or
denied by the agency.
On the surface, the compromise agreements appear to confirm the agencys position,
yet a closer examination of the documents would reveal their true nature. Copy of the
compromise agreement is a standard POEA document, prepared in advance and
readily made available to parties who are involved in disputes before the agency, such
as what the respondents filed with the POEA ahead (filed in 2007) of the illegal
dismissal complaint before the NLRC (filed on March 5, 2008).
Under the heading "Post-Deployment," the agency agreed to pay Era47 and
Alcantara48 P 12,000.00 each, purportedly in satisfaction of the respondents claims
arising from overseas employment, consisting of unpaid salaries, salary differentials and
other benefits, including money claims with the NLRC. The last document was signed
by (1) Anipan, (2) Lumanta, (3) Ladea, (4) Vinuya, (5) Jonathan Nangolinola, and (6)
Zosimo Gatchalian (the last four signing on the left hand side of the document; the last
two were not among those who filed the illegal dismissal complaint).49
The agency agreed to pay them a total of P 72,000.00. Although there was no
breakdown of the entitlement for each of the six, but guided by the compromise
agreement signed by Era and Alcantara, we believe that the agency paid
them P12,000.00 each, just like Era and Alcantara.
The uniform insubstantial amount for each of the signatories to the agreement lends
credence to their contention that the settlement pertained only to their claim for refund
of the airfare which they shouldered when they returned to the Philippines. The
compromise agreement, apparently, was intended by the agency as a settlement with
the respondents and others with similar claims, which explains the inclusion of the two
(Nangolinola and Gatchalian) who were not involved in the case with the NLRC. Under
the circumstances, we cannot see how the compromise agreements can be considered
to have fully settled the respondents claims before the NLRC illegal dismissal and
monetary benefits arising from employment. We thus find no reversible error nor grave
abuse of discretion in the rejection by the NLRC and the CA of said agreements.
Fifth. The agencys objection to the application of the Serrano ruling in the present case
is of no moment. Its argument that the ruling cannot be given retroactive effect, because
it is curative and remedial, is untenable. It points out, in this respect, that the
respondents filed the complaint in 2007, while the Serrano ruling was handed down in
March 2009. The issue, as the respondents correctly argue, has been resolved in Yap
v. Thenamaris Ships Management,50 where the Court sustained the retroactive
application of the Serrano ruling which declared unconstitutional the subject clause in

Section 10, paragraph 5 of R.A. 8042, limiting to three months the payment of salaries
to illegally dismissed Overseas Filipino Workers.
Undaunted, the agency posits that in any event, the Serrano ruling has been nullified by
R.A. No. 10022, entitled "An Act Amending Republic Act No. 8042, Otherwise Known as
the Migrant Workers and Overseas Filipinos Act of 1995, As Amended, Further
Improving the Standard of Protection and Promotion of the Welfare of Migrant Workers,
Their Families and Overseas Filipinos in Distress, and For Other Purposes."51 It argues
that R.A. 10022, which lapsed into law (without the Signature of the President) on
March 8, 2010, restored the subject clause in the 5th paragraph, Section 10 of R.A.
8042. The amendment, contained in Section 7 of R.A. 10022, reads as follows:
In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, or any unauthorized deductions from the migrant workers
salary, the worker shall be entitled to the full reimbursement "of" his placement fee and
the deductions made with interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.52 (emphasis ours)
This argument fails to persuade us. Laws shall have no retroactive effect, unless the
contrary is provided.53 By its very nature, the amendment introduced by R.A. 10022
restoring a provision of R.A. 8042 declared unconstitutional cannot be given
retroactive effect, not only because there is no express declaration of retroactivity in the
law, but because retroactive application will result in an impairment of a right that had
accrued to the respondents by virtue of the Serrano ruling - entitlement to their salaries
for the unexpired portion of their employment contracts.
All statutes are to be construed as having only a prospective application, unless the
purpose and intention of the legislature to give them a retrospective effect are expressly
declared or are necessarily implied from the language used.54 We thus see no reason to
nullity the application of the Serrano ruling in the present case. Whether or not R.A. 1
0022 is constitutional is not for us to rule upon in the present case as this is an issue
that is not squarely before us. In other words, this is an issue that awaits its proper day
in court; in the meanwhile, we make no pronouncement on it.
WHEREFORE, premises considered, the petition is DENIED. The assailed Decision
dated May 9, 2011 and the Resolution dated June 23, 2011 of the Court of Appeals in
CA-G.R. SP No. 114353 are AFFIRMED. Let this Decision be brought to the attention of
the Honorable Secretary of Labor and Employment and the Administrator of the
Philippine Overseas Employment Administration as a black mark in the deployment
record of petitioner Pert/CPM Manpower Exponent Co., Inc., and as a record that
should be considered in any similar future violations.
Costs against the petitioner.
SO ORDERED.

G.R. No. 127195

August 25, 1999

MARSAMAN MANNING AGENCY, INC. and DIAMANTIDES MARITIME, INC.,


petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO T.
CAJERAS, respondents.
BELLOSILLO, J.:
MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its foreign principal
DIAMANTIDES MARITIME, INC. (DIAMANTIDES) assail the Decision of public
respondent National Labor Relations Commission dated 16 September 1996 as well as
its Resolution dated 12 November 1996 affirming the Labor Arbiter's decision finding
them guilty of illegal dismissal and ordering them to pay respondent Wilfredo T. Cajeras
salaries corresponding to the unexpired portion of his employment contract, plus
attorney's fees.
Private respondent Wilfredo T. Cajeras was hired by petitioner MARSAMAN, the local
manning agent of petitioner DIAMANTIDES, as Chief Cook Steward on the MV
Prigipos, owned and operated by DIAMANTIDES, for a contract period of ten (10)
months with a monthly salary of US$600.00, evidenced by a contract between the
parties dated 15 June 1995. Cajeras started work on 8 August 1995 but less than two
(2) months later, or on 28 September 1995, he was repatriated to the Philippines
allegedly by "mutual consent."
On 17 November 1995 private respondent Cajeras filed a complaint for illegal dismissal
against petitioners with the NLRC National Capital Region Arbitration Branch alleging
that he was dismissed illegally, denying that his repatriation was by mutual consent, and
asking for his unpaid wages, overtime pay, damages, and attorney's fees. 1 Cajeras
alleged that he was assigned not only as Chief Cook Steward but also as assistant cook
and messman in addition to performing various inventory and requisition jobs. Because
of his additional assignments he began to feel sick just a little over a month on the job
constraining him to request for medical attention. He was refused at first by Capt.
Kouvakas Alekos, master of the MV Prigipos, who just ordered him to continue working.
However a day after the ship's arrival at the port of Rotterdam, Holland, on 26
September 1995 Capt. Alekos relented and had him examined at the Medical Center for
Seamen. However, the examining physician, Dr. Wden Hoed, neither apprised private
respondent about the diagnosis nor issued the requested medical certificate allegedly
because he himself would forward the results to private respondent's superiors. Upon
returning to the vessel, private respondent was unceremoniously ordered to prepare for

immediate repatriation the following day as he was said to be suffering from a disease
of unknown origin.1wphi1.nt
On 28 September 1995 he was handed his Seaman's Service Record Book with the
following entry: "Cause of discharge Mutual Consent."2 Private respondent promptly
objected to the entry but was not able to do anything more as he was immediately
ushered to a waiting taxi which transported him to the Amsterdam Airport for the return
flight to Manila. After his arrival in Manila on 29 September 1995. Cajeras complained to
MARSAMAN but to no avail.3
MARSAMAN and DIAMANTIDES, on the other hand, denied the imputation of illegal
dismissal. They alleged that Cajeras approached Capt. Alekos on 26 September 1995
and informed the latter that he could not sleep at night because he felt something
crawling over his body. Furthermore, Cajeras reportedly declared that he could no
longer perform his duties and requested for repatriation. The following paragraph in the
vessel's Deck Log was allegedly entered by Capt. Alekos, to wit:
Cajeras approached me and he told me that he cannot sleep at night and that he
feels something crawling on his body and he declared that he can no longer
perform his duties and he must be repatriated.4
Private respondent was then sent to the Medical Center for Seamen at Rotterdam
where he was examined by Dr. Wden Hoed whose diagnosis appeared in a Medical
Report as "paranoia" and "other mental problems."5 Consequently, upon Dr. Hoed's
recommendation, Cajeras was repatriated to the Philippines on 28 September 1995.
On 29 January 1996 Labor Arbiter Ernesto S. Dinopol resolved the dispute in favor of
private respondent Cajeras ruling that the latter's discharge from the MV
Prigipos allegedly by "mutual consent" was not proved by convincing evidence. The
entry made by Capt. Alekos in the Deck Log was dismissed as of little probative value
because it was a mere unilateral act unsupported by any document showing mutual
consent of Capt. Alekos, as master of the MV Prigipos, and Cajeras to the premature
termination of the overseas employment contract as required by Sec. H of the Standard
Employment Contract Governing the Employment of all Filipino Seamen on Board
Ocean-Going Vessels. Dr. Hoed's diagnosis that private respondent was suffering from
"paranoia" and "other mental problems" was likewise dismissed as being of little
evidentiary value because it was not supported by evidence on how the paranoia was
contracted, in what stage it was, and how it affected respondent's functions as Chief
Cook Steward which, on the contrary, was even rated "Very Good" in respondent's
Service Record Book. Thus, the Labor Arbiter disposed of the case as follows:
WHEREFORE, judgment is hereby rendered declaring the repatriation and
dismissal of complaint Wilfredo T. Cajeras as illegal and ordering respondents
Marsaman Manning Agency, Inc. and Diamantides Maritime, Inc. to jointly and
severally pay complainant the sum of USD 5,100.00 or its peso equivalent at the
time of payment plus USD 510.00 as 10% attorney's fees it appearing that

complainant had to engage the service of counsel to protect his interest in the
prosecution of this case.
The claims for nonpayment of wages and overtime pay are dismissed for having
been withdrawn (Minutes, December 18, 1995). The claims for damages are
likewise dismissed for lack of merit, since no evidence was presented to show
that bad faith characterized the dismissal.6
Petitioners appealed to the NLRC.7 On 16 September 1996 the NLRC affirmed the
appealed findings and conclusions of the Labor Arbiter.8 The NLRC subscribed to the
view that Cajeras' repatriation by alleged mutual consent was not proved by petitioners,
especially after noting that private respondent did not actually sign his Seaman's
Service Record Book to signify his assent to the repatriation as alleged by petitioners.
The entry made by Capt. Alekos in the Deck Log was not considered reliable proof that
private respondent agreed to his repatriation because no opportunity was given the
latter to contest the entry which was against his interest. Similarly, the Medical Report
issued by Dr. Hoed of Holland was dismissed as being of dubious value since it
contained only a sweeping statement of the supposed ailment of Cajeras without any
elaboration on the factual basis thereof.
Petitioners' motion for reconsideration was denied by the NLRC in its Resolution dated
12 November 1996.9 Hence, this petition contending that the NLRC committed grave
abuse of discretion: (a) in not according full faith and credit to the official entry by Capt.
Alekos in the vessel's Deck Log conformably with the rulings in Haverton Shipping
Ltd. v. NLRC 10and Wallem Maritime Services, Inc. v. NLRC;11 (b) in not appreciating
the Medical Report issued by Dr. Wden Hoed as conclusive evidence that respondent
Cajeras was suffering from paranoia and other mental problems; (c) in affirming the
award of attorney's fees despite the fact that Cajeras' claim for exemplary damages was
denied for lack of merit; and, (d) in ordering a monetary award beyond the maximum of
three (3) months' salary for every year of service set by RA 8042.
We deny the petition. In the Contract of Employment12 entered into with private
respondent, petitioners convenanted strict and faithful compliance with the terms and
conditions of the Standard Employment Contract approved by the POEA/DOLE13 which
provides:
1. The employment of the seaman shall cease upon expiration of the contract
period indicated in the Crew Contractunless the Master and the Seaman, by
mutual consent, in writing agree to an early termination . . . . (emphasis our).
Clearly, under the foregoing, the employment of a Filipino seaman may be terminated
prior to the expiration of the stipulated period provided that the master and the seaman
(a) mutually consent thereto and (b) reduce their consent in writing.
In the instant case, petitioners do not deny the fact that they have fallen short of the
requirement. No document exists whereby Capt. Alekos and private respondent

reduced to writing their alleged "mutual consent" to the termination of their employment
contract. Instead, petitioners presented the vessel's Deck Log wherein an
entry unilaterally made by Capt. Alekos purported to show that private respondent
himself asked for his repatriation. However, the NLRC correctly dismissed its
evidentiary value. For one thing, it is a unilateral act which is vehemently denied by
private respondent. Secondly, the entry in no way satisfies the requirement of a bilateral
documentation to prove early termination of an overseas employment contract by
mutual consent required by the Standard Employment Contract. Hence, since the latter
sets the minimum terms and conditions of employment for the protection of Filipino
seamen subject only to the adoption of better terms and conditions over and above the
minimum standards,14 the NLRC could not be accused of grave abuse of discretion in
not accepting any thing less.
However petitioners contend that the entry should be considered prima facie evidence
that respondent himself requested his repatriation conformably with the rulings
in Haverton Shipping Ltd. v. NLRC 15 and Abacast Shipping and Management
Agency, Inc. v. NLRC.16 Indeed, Haverton says that a vessel's log book is prima
facie evidence of the facts stated therein as they are official entries made by a person in
the performance of a duty required by law. However, this jurisprudential principle does
not apply to win the case for petitioners. In Wallem Maritime
Services, Inc. v. NLRC 17 the Haverton ruling was not given unqualified application
because the log book presented therein was a mere typewritten collation of excerpts
from what could be the log book.18 The Court reasoned that since the log book was the
only piece of evidence presented to prove just cause for the termination of respondent
therein, the log book had to be duly identified and authenticated lest an injustice would
result from a blind adoption of its contents which were but prima facie evidence of the
incidents stated therein.
In the instant case, the disputed entry in the Deck Log was neither authenticated nor
supported by credible evidence. Although petitioners claim that Cajeras signed his
Seaman's Service Record Book to signify his conformity to the repatriation, the NLRC
found the allegation to be actually untrue since no signature of private respondent
appeared in the Record Book.
Neither could the "Medical Report" prepared by Dr. Hoed be considered corroborative
and conclusive evidence that private respondent was suffering from "paranoia" and
"other mental problems," supposedly just causes for his repatriation. Firstly, absolutely
no evidence, not even an allegation, was offered to enlighten the NLRC or this Court as
to Dr. Hoed's qualifications to diagnose mental illnesses. It is a matter of judicial notice
that there are various specializations in medical science and that a general practitioner
is not competent to diagnose any and all kinds of illnesses and diseases. Hence, the
findings of doctors who are not proven experts are not binding on this
Court.19 Secondly, the Medical Report prepared by Dr. Hoed contained only a general
statement that private respondent was suffering from "paranoia" and "other mental
problems" without providing the details on how the diagnosis was arrived at or in what
stage the illness was. If Dr. Hoed indeed competently examined private respondent then

he would have been able to discuss at length the circumstances and precedents of his
diagnosis. Petitioners cannot rely on the presumption of regularity in the performance of
official duties to make the Medical Report acceptable because the presumption applies
only to public officers from the highest to the lowest in the service of the Government,
departments, bureaus, offices, and/or its political subdivisions,20 which Dr. Wden Hoed
was not shown to be. Furthermore, neither did petitioners prove that private respondent
was incompetent or continuously incapacitated for the duties for which he was
employed by reason of his alleged mental state. On the contrary his ability as Chief
Cook Steward, up to the very moment of his repatriation, was rated "Very Good" in his
Seaman's Service Record Book as correctly observed by public respondent.
Considering all the foregoing we cannot ascribe grave abuse of discretion on the part of
the NLRC in ruling that petitioners failed to prove just cause for the termination of
private respondent's overseas employment. Grave abuse of discretion is committed only
when the judgment is rendered in a capricious, whimsical, arbitrary or despotic manner,
which is not true in the present case.21
With respect to attorney's fees, suffice it to say that in actions for recovery of wages or
where an employee was forced to litigate and thus incurred expenses to protect his
rights and interests, a maximum award of ten percent (10%) of the monetary award by
way of attorney's fees is legally and morally justifiable under Art. 111 of the Labor
Code,22 Sec. 8, Rule VIII, Book III of its Implementing Rules,23 and par. 7, Art. 220824 of
the Civil Code.25 The case of Albenson Enterprises Corporation v. Court of
Appeals26 cited by petitioners in arguing against the award of attorney's fees is clearly
not applicable, being a civil action for damages which deals with only one of the eleven
(11) instances when attorney's fees could be recovered under Art. 2208 of the Civil
Code.
Lastly, on the amount of salaries due private respondent, the rule has always been that
an illegally dismissed worker whose employment is for a fixed period is entitled to
payment of his salaries corresponding to the unexpired portion of his
employment.27 However on 15 July 1995, RA 8042 otherwise known as the "Migrant
Workers and Overseas Filipinos Act of 1995" took effect, Sec. 10 of which provides:
Sec. 10. In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the worker shall be entitled to the
full reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of the employment contract or
for three (3) months for every year of the unexpired term whichever is
less (emphasis ours).
The Labor Arbiter, rationalizing that the aforesaid law did not apply since it became
effective only one (1) month after respondent's overseas employment contract was
entered into on 15 June 1995, simply awarded private respondent his salaries
corresponding to the unexpired portion of his employment contract, i.e., for 8.6 months.
The NLRC affirmed the award and the Office of the Solicitor General (OSG) fully

agreed. But petitioners now insist that Sec. 10, RA 8042 is applicable because although
private respondent's contract of employment was entered into before the law became
effective his alleged cause of action, i.e., his repatriation on 28 September 1995 without
just, valid or authorized cause, occurred when the law was already in effect. Petitioners'
purpose in so arguing is to invoke the law in justifying a lesser monetary award to
private respondent, i.e., salaries for three (3) months only pursuant to the last portion of
Sec. 10 as opposed to the salaries for 8.6 months awarded by the Labor Arbiter and
affirmed by the NLRC.
We agree with petitioners that Sec. 10, RA 8042, applies in the case of private
respondent and to all overseas contract workers dismissed on or after its effectivity on
15 July 1995 in the same way that Sec. 34,28 RA 6715,29 is made applicable to locally
employed workers dismissed on or after 21 March 1989.30 However, we cannot
subscribe to the view that private respondent is entitled to three (3) months' salary only.
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months' salary for every year of the
unexpired term, whichever is less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is evident from the words
"for every year of the unexpired term" which follows the words "salaries . . . for three
months." To follow petitioners' thinking that private respondent is entitled to three (3)
months salary only simply because it is the lesser amount is to completely disregard
and overlook some words used in the statute while giving effect to some. This is
contrary to the well-established rule in legal hermeneutics that in interpreting a statute,
care should be taken that every part or word thereof be given effect31 since the lawmaking body is presumed to know the meaning of the words employed in the statue and
to have used them advisedly.32 Ut res magis valeat quam pereat.33
WHEREFORE, the questioned Decision and Resolution dated 16 September 1996 and
12 November 1996, respectively, of public respondent National Labor Relations
Commission are AFFIRMED. Petitioners MARSAMAN MANNING AGENCY, INC., and
DIAMANTIDES MARITIME, INC., are ordered, jointly and severally, to pay private
respondent WILFREDO T. CAJERAS his salaries for the unexpired portion of his
employment contract or USD$5,100.00, reimburse the latter's placement fee with twelve
percent (12%) interest per annum conformably with Sec. 10 of RA 8042, as well as
attorney's fees of ten percent (10%) of the total monetary award. Costs against
petitioners.1wphi1.nt
SO ORDERED.

G.R. No. 168445 November 11, 2005

PEOPLE OF THE PHILIPPINES, Appellee,


vs.
CAPT. FLORENCIO O. GASACAO, Appellant.
DECISION
YNARES-SANTIAGO, J.:
This is an appeal from the May 18, 2005 Decision1 of the Court of Appeals in CA-G.R.
CR No. 00800 dismissing the appeal of appellant, Florencio O. Gasacao and affirming
the March 5, 2001 Joint Decision2 of the Regional Trial Court (RTC) of Quezon City,
Branch 218, finding appellant guilty beyond reasonable doubt of Large Scale Illegal
Recruitment in Crim. Case No. Q-00-94240 and acquitting him of the charge in Crim.
Case No. Q-00-94241.
The factual antecedents are as follows:
Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed
local manning agency, while his nephew and co-accused, Jose Gasacao, was the
President. As the crewing manager, appellants duties included receiving job
applications, interviewing the applicants and informing them of the agencys
requirement of payment of performance or cash bond prior to deployment.
On August 4, 2000, appellant and Jose Gasacao were charged with Large Scale Illegal
Recruitment defined under Section 6, paragraphs (a), (l) and (m) of Republic Act (RA)
No. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995, and penalized
under Section 7 (b) of the same law, before the RTC of Quezon City.
The informations read:
In Criminal Case No. Q-00-94240
That sometime in the months of May to December, 1999 or thereabout, in Quezon City,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused, conspiring, confederating and mutually helping one another, did then
and there willfully, unlawfully and criminally recruit, enlist and promise overseas
employment to the private complainants, namely, Lindy M. Villamor, Dennis
Cabangahan, Erencio C. Alaba, Victorino U. Caderao, Rommel B. Patolen, Joseph A.
Demetria and Louie A. Arca, as overseas seamen/seafarers, the said accused thereby
charging, exacting and collecting from the said private complainants cash bonds and/or
performance bonds in amounts ranging from P10,000.00 to P20,000.00 without any
authority to do so and despite the fact that the same is prohibited by the POEA Rules
and Regulations, which amount is greater than that specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, and despite the
payment of the said fees, the said accused failed to actually deploy the private
complainants without valid reasons as determined by the Department of Labor and

Employment and despite the failure of deployment, the said accused failed to reimburse
the expenses incurred by the said private complainants in connection with their
documentation and processing for the purpose of their supposed deployment.
CONTRARY TO LAW.3
In Criminal Case No. Q-00-94241
That sometime in the months of September to November 1999 or thereabout, in
Quezon City, Metro Manila, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, conspiring, confederating and mutually helping one
another, did then and there willfully, unlawfully and criminally recruit, enlist and promise
overseas employment to the private complainants, namely, Melvin I. Yadao, Frederick
Calambro and Andy Bandiola, as overseas seamen/seafarers, the said accused thereby
charging, exacting and collecting from the said private complainants cash bonds and/or
performance bonds in amounts ranging from P10,000.00 to P20,000.00 without any
authority to do so and despite the fact that the same is prohibited by the POEA Rules
and Regulations, which amount is greater that that specified in the schedule of
allowable fees prescribed by the Secretary Labor and Employment, and despite the
payment of said fees, the said accused failed to actually deploy the private
complainants without valid reasons as determined by the Department of Labor and
Employment and despite the failure of deployment, the said accused failed to reimburse
the expenses incurred by the said private complainants in connection with their
documentation and processing for the purpose of their supposed deployment.
SO ORDERED.4
Only the appellant was arrested while Jose Gasacao remained at large. When
arraigned, appellant pleaded not guilty to the offense charged. Thereafter, trial on the
merits ensued. On March 5, 2001, the RTC of Quezon City, Branch 218, rendered its
Joint Decision convicting appellant of Large Scale Illegal Recruitment in Crim. Case No.
Q-00-94240 and acquitting him of the charge in Crim. Case No. Q-00-94241. The
dispositive portion of the joint decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Crim. Case No. Q-00-94240, the prosecution having established the guilt of the
accused beyond reasonable doubt, the Court finds Florencio O. Gasacao GUILTY of
Large Scale Illegal Recruitment punishable under Section 7, (b) of R.A. 8042. He is
sentenced to suffer life imprisonment and a fine of P500,000.00. He shall also indemnify
Dennis C. Cabangahan in the amount of P8,750.00; Lindy M. Villamor for P20,000.00;
Victorino U. Caderao for P20,000.00; Rommel B. Patolen for P20,000.00; and Erencio
C. Alaba for P20,000.00. Complainants Louie A. Arca and Joseph A. Demetria did not
testify.

2. In Crim. Case No. Q-00-94241, complainants Melvin I. Yadao, Frederick Calambro


and Andy Bandiola did not testify. Moreover, the Court believes all these complainants
should have been grouped in just one (1) information. Hence, for failure of the
prosecution to prove the guilt of the accused beyond reasonable doubt, the Court finds
Florencio O. Gasacao NOT GUILTY of the offense charged.
SO ORDERED.5
Conformably with our pronouncement in People v. Mateo,6 which modified pertinent
provisions of the Rules of Court insofar as they provide for direct appeals from the RTC
to the Supreme Court in cases where the penalty imposed is death, reclusion
perpetua or life imprisonment, as in this case, as well as this Courts Resolution dated
September 19, 1995, we resolved on February 2, 2005 to transfer the case to the Court
of Appeals for appropriate action and disposition.7
On May 18, 2005, the Court of Appeals promulgated the assailed Decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack
of merit. The appealed Joint Decision dated March 5, 2001 of the trial court in Criminal
Case No. Q-00-94240 is hereby AFFIRMED and UPHELD.
With costs against the accused-appellant.
SO ORDERED.8
Hence, this appeal.
The core issue for resolution is whether error attended the trial courts findings, as
affirmed by the Court of Appeals, that appellant was guilty beyond reasonable doubt of
the crime of large scale illegal recruitment.
RA No. 8042 defines illegal recruitment as follows:
II. ILLEGAL RECRUITMENT
Sec. 6. DEFINITIONS. For purposes of this Act, illegal recruitment shall mean any act
of canvassing, enlisting, contracting, transporting, utilizing, hiring, procuring workers and
includes referring, contract services, promising or advertising for employment abroad,
whether for profit or not, when undertaken by a non-licensee or non-holder of authority
contemplated under Article 13(f) of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines: Provided, that such non-licensee
or non-holder who, in any manner, offers or promises for a fee employment abroad to
two or more persons shall be deemed so engaged. It shall likewise include the following
acts, whether committed by any persons, whether a non-licensee, non-holder, licensee
or holder of authority.

(a) To charge or accept directly or indirectly any amount greater than the specified in
the schedule of allowable fees prescribed by the Secretary of Labor and Employment,
or to make a worker pay any amount greater than that actually received by him as a
loan or advance;
....
(l) Failure to actually deploy without valid reason as determined by the Department of
Labor and Employment; and
(m) Failure to reimburse expenses incurred by the workers in connection with his
documentation and processing for purposes of deployment, in cases where the
deployment does not actually take place without the worker's fault. Illegal recruitment
when committed by a syndicate or in large scale shall be considered as offense
involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate carried out by a group of three
(3) or more persons conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or more persons individually or
as a group.
A license is a document issued by the Department of Labor and Employment (DOLE)
authorizing a person or entity to operate a private employment agency, while an
authority is a document issued by the DOLE authorizing a person or association to
engage in recruitment and placement activities as a private recruitment entity. However,
it appears that even licensees or holders of authority can be held liable for illegal
recruitment should they commit any of the above-enumerated acts.
Thus, it is inconsequential that appellant committed large scale illegal recruitment while
Great Eastern Shipping Agency, Inc. was holding a valid authority. We thus find that the
court below committed no reversible error in not appreciating that the manning agency
was a holder of a valid authority when appellant recruited the private complainants.
There is no merit in appellants contention that he could not be held liable for illegal
recruitment since he was a mere employee of the manning agency, pursuant to Section
6 of RA No. 8042 which provides:
The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or
direction of their business shall be liable.
Contrary to appellants claim, he is not a mere employee of the manning agency but the
crewing manager. As such, he receives job applications, interviews applicants and
informs them of the agencys requirement of payment of performance or cash bond prior
to the applicants deployment. As the crewing manager, he was at the forefront of the
companys recruitment activities.

Private complainant Lindy Villamor testified that it was appellant who informed him that
if he will give a cash bond of P20,000.00, he will be included in the first batch of
applicants to be deployed. Notwithstanding the payment of the cash bond as evidenced
by a receipt dated December 15, 1999 and issued by the appellant, Villamor was not
deployed overseas. He further testified that when he found out that appellant was no
longer connected with Great Eastern Shipping Agency Inc., he confronted Jose
Gasacao and showed to him a photocopy of the receipt. Jose Gasacao gave him the
address of the appellant but he failed to recover the amount from the latter.
Another private complainant, Erencio C. Alaba testified that he applied as a seaman
with Great Eastern Shipping Agency Inc. in May 1999 and submitted all the
requirements to appellant. The latter told Alaba that after payment of a cash bond, he
will be deployed within three months. On June 3, 1999, Alaba gave P10,000.00 to the
appellant as evidenced by a cash voucher which was approved and signed by the
appellant in the presence of Alaba.
Afterwards, appellant asked Alaba to have his medical examination. He was also
informed that those who had completed paying the P20,000.00 cash bond will have
priority in deployment. Thus, Alaba gave another P10,000.00 to appellant on August 2,
1999 and was again informed that he will be deployed in a dredging or supply boat
within three months from August 1999. Despite appellants representations, Alaba was
never deployed and was also unable to recover the amount of the cash bond that he
paid.
Private complainant Dennis Cabangahan testified that he applied as a seaman with
Great Eastern Shipping Agency Inc. on July 27, 1999 and paid the cash bond of
P19,000.00 as evidenced by a receipt issued by appellant. The latter informed him that
he will be deployed abroad within three months. As what had happened to the other
complainants, Cabangahan was never deployed overseas nor did he recover his
money.
Victoriano Cadirao9 also testified that on August 1, 1999, he applied with the manning
agency for the position of mess man. He submitted his application to appellant who told
him to come back when he has the money to cover the cash bond of P20,000.00.
Appellant told him that the payment of the cash bond is optional, but that his
deployment will be fast-tracked if he pays the cash bond. On August 10, 1999, he gave
P20,000.00 to appellant who issued a receipt. When the promised employment failed to
materialize, the appellant told Cadirao to wait for another dredging vessel. In December
1999, he found out that appellant was no longer connected with Great Eastern Shipping
Agency Inc. so he went to his residence and demanded the return of his money.
Appellant however refused to return the amount of the cash bond.
On the other hand, Rommel B. Patolen testified that he applied with Great Eastern
Shipping Agency Inc. as an ordinary seaman in May 1999. After complying with the
requirements, appellant told him to report to the agency thrice a week. From May to
December 1999, Patolen reported to the agency as instructed. On December 11, 1999,

he gave P20,000.00 to appellant who acknowledged its receipt. Patolen further testified
that he paid the cash bond because appellant told him that his prospective employer will
arrive in December 1999 from Saudi Arabia with a vessel to accommodate him. He was
further advised that he could leave within three months if he paid the cash bond.
However, Patolen was never deployed and when he found out that appellant was no
longer connected with Great Eastern Shipping Agency Inc., he went to the house of the
latter and informed him that he was withdrawing his application. Appellant asked him to
wait for his new agency, Ocean Grandeur, which has no license yet.
The foregoing testimonies of the private complainants clearly established that appellant
is not a mere employee of Great Eastern Shipping Agency Inc. As the crewing
manager, it was appellant who made representations with the private complainants that
he can secure overseas employment for them upon payment of the cash bond.
It is well settled that to prove illegal recruitment, it must be shown that appellant gave
complainants the distinct impression that he had the power or ability to send
complainants abroad for work such that the latter were convinced to part with their
money in order to be employed.10 Appellants act of promising the private complainants
that they will be deployed abroad within three months after they have paid the cash
bond clearly shows that he is engaged in illegal recruitment.
The trial courts appreciation of the complainants testimonies deserves the highest
respect since it was in a better position to asses their credibility.
Even assuming that appellant was a mere employee, such fact is not a shield against
his conviction for large scale illegal recruitment. In the case of People v. Cabais,11 we
have held that an employee of a company or corporation engaged in illegal recruitment
may be held liable as principal, together with his employer, if it is shown that he actively
and consciously participated in the recruitment process. We further stated that:
In this case, evidence showed that accused-appellant was the one who informed
complainant of job prospects in Korea and the requirements for deployment. She also
received money from them as placement fees. All of the complainants testified that they
personally met the accused-appellant and transacted with her regarding the overseas
job placement offers. Complainants parted with their money, evidenced by receipts
signed by accused Cabais and accused Forneas. Thus, accused-appellant actively
participated in the recruitment of the complainants.12
Clearly, the acts of appellant vis--vis the private complainants, either as the crewing
manager of Great Eastern Shipping Agency Inc. or as a mere employee of the same,
constitute acts of large scale illegal recruitment which should not be countenanced.
We find no reason to deviate from the findings of the trial court that appellant is guilty
beyond reasonable doubt of large scale illegal recruitment. It was established that he
promised overseas employment to five applicants, herein private complainants. He
interviewed and required them to complete and submit documents purportedly needed

for their employment. Although he informed them that it is optional, he collected cash
bonds and promised their deployment notwithstanding the proscription against its
collection under Section 60 of the Omnibus Rules and Regulations Implementing R.A.
No. 804213 which state that:
SEC. 60. Prohibition on Bonds and Deposits. In no case shall an employment
agency require any bond or cash deposit from the worker to guarantee performance
under the contract or his/her repatriation.
We find as flimsy and self serving appellants assertion that he was unaware of the
prohibition against the collection of bonds or cash deposits from applicants. It is an
established dictum that ignorance of the law excuses no one from compliance
therewith.14 The defense of good faith is neither available.
It is also undisputed that appellant failed to deploy the private complainants without any
valid reason, this notwithstanding his promise to them that those who can pay the cash
bond will be deployed within three months from payment of the same. Such failure to
deploy constitutes a violation of Section 6 (l) of RA No. 8042. Worse, when it became
clear that appellant cannot deploy the private complainants without their fault, he failed
to return the amount of the cash bond paid by them.
Illegal recruitment is deemed committed in large scale if committed against three or
more persons individually or as a group. In this case, five complainants testified against
appellants acts of illegal recruitment, thereby rendering his acts tantamount to
economic sabotage. Under Section 7 (b) of RA No. 8042, the penalty of life
imprisonment and a fine of not less than P500,000.00 nor more than P1,000.000.00
shall be imposed if illegal recruitment constitutes economic sabotage.
Verily, the trial court and the Court of Appeals correctly found appellant guilty beyond
reasonable of large scale illegal recruitment.
WHEREFORE, the May 18, 2005 Decision of the Court of Appeals in CA-G.R. CR No.
00800 is AFFIRMED.
SO ORDERED.

G.R. No. 125044 July 13, 1998


IMELDA DARVIN, petitioner,
vs.
HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

ROMERO, J.:
Before us is a petition for review of the decision of the Court of Appeals in C.A.-G.R. No.
15624 dated January 31, 1996, 1which affirmed in toto the judgment of the Regional
Trial Court, Branch 19, Bacoor, Cavite, convicting accused-appellant, Imelda Darvin for
simple illegal recruitment under Article 38 and Article 39, in relation to Article 13 (b) and
(c), of the Labor Code as amended.
Accused-appellant was charged under the following information:
That on our about the 13th day of April 1992, in the Municipality of Bacoor,
Province of Cavite, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused, through fraudulent representation to
one Macaria Toledo to the effect that she has the authority to recruit
workers and employees for abroad and can facilitate the necessary
papers in connection thereof, did, then and there, wilfully, unlawfully and
feloniously, hire, recruit and promise a job abroad to one Macaria Toledo,
without first securing the necessary license and permit from the Philippine
Overseas Employment Administration to do so, thereby causing damage
and prejudice to the aforesaid Macaria Toledo.
Contrary to law. 2
The evidence for the prosecution, based on the testimony of private respondent,
Macaria Toledo, shows that sometime in March, 1992, she met accused-appellant
Darvin in the latter's residence at Dimasalang, Imus, Cavite, through the introduction of
their common friends, Florencio Jake Rivera and Leonila Rivera. In said meeting,
accused-appellant allegedly convinced Toledo that by giving her P150,000.00, the latter
can immediately leave for the United States without any appearance before the U.S.
embassy. 3 Thus, on April 13, 1992, Toledo gave Darvin the amount of P150,000.00, as
evidenced by a receipt stating that the "amount of P150,000.00 was for U.S. Visa and
Air fare." 4 After receiving the money, Darvin assured Toledo that she can leave within
one week. However, when after a week, there was no word from Darvin, Toledo went to
her residence to inquire about any development, but could not find Darvin. Thereafter,
on May 7, 1992, Toledo filed a complaint with the Bacoor Police Station against Imelda
Darvin. Upon further investigation, a certification was issued by the Philippine Overseas
Employment Administration (POEA) stating that Imelda Darvin is neither licensed nor
authorized to recruit workers for overseas employment. 5 Accused-appellant was then
charged for estafa and illegal recruitment by the Office of the Provincial Prosecutor of
Cavite.
Accused-appellant, on the other hand, testified that she used to be connected with Dale
Travel Agency and that in 1992, or thereabouts, she was assisting individuals in
securing passports, visa, and airline tickets. She came to know Toledo through

Florencio Jake Rivera, Jr. and Leonila Rivera, alleging that Toledo sought her help to
secure a passport, US visa and airline tickets to the States. She claims that she did not
promise any employment in the U.S. to Toledo. She, however, admits receiving the
amount of P150,000.00 from the latter on April 13, 1992 but contends that it was used
for necessary expenses of an intended trip to the United States of Toledo and her
friend, Florencio Rivera 6 as follows. P45,000.00 for plane fare for one person;
P1,500.00 for passport, documentation and other incidental expenses for each person;
P20,000.00 for visa application cost for each person; and P17,000.00 for
services. 7 After receiving the money, she allegedly told Toledo that the papers will be
released within 45 days. She likewise testified that she was able to secure Toledo's
passport on April 20, 1992 and even set up a date for an interview with the US
embassy. Accused alleged that she was not engaged in illegal recruitment but merely
acted as a travel agent in assisting individuals to secure passports and visa.
In its judgment rendered on June 17, 1993, the Bacoor, Cavite RTC found accusedappellant guilty of the crime of simple illegal recruitment but acquitted her of the crime of
estafa. The dispositive portion of the judgment reads as follows:
WHEREFORE, premises considered, accused Imelda Darvin is hereby
found guilty beyond reasonable doubt of the crime of Simple Illegal
Recruitment for having committed the prohibited practice as defined by
paragraph (b) of Article 34 and punished by paragraph (c) of Article 39 of
the Labor Code, as amended by PD 2018.
Accused Imelda Darvin is hereby ordered to suffer the prison term of Four
(4) years, as minimum, to Eight (8) years, as maximum; and to pay the
fine of P25,000.00.
Regarding her civil liability, she is hereby ordered to reimburse the private
complainant the sum of P150,000.00 and attorney's fees of P10,000.00.
She is hereby acquitted of the crime of Estafa.
SO ORDERED. 8
On appeal, the Court of Appeals affirmed the decision of the trial court in toto, hence
this petition.
Before this Court, accused-appellant assails the decision of the trial and appellate
courts in convicting her of the crime of simple illegal recruitment. She contends that
based on the evidence presented by the prosecution, her guilt was not proven beyond
reasonable doubt.
We find the appeal impressed with merit.

Art. 13 of the Labor Code, as amended, provides the definition of recruitment and
placement as:
. . .; b) any act of canvassing, enlisting, contracting, transporting, utilizing,
hiring, or procuring workers, and includes referrals, contract services,
promising or advertising for employment locally or abroad, whether for
profit or not: Provided, that any person or entity which, in any manner,
offers or promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement.
On the other hand, Article 38 of the Labor Code provides:
a) Any recruitment activities, including the prohibited practices
enumerated under Article 34 of this Code, to be undertaken by nonlicensees or non-holders of authority shall be deemed illegal and
punishable under Article 39 of this Code. The Ministry of Labor and
Employment or any law enforcement officer may initiate complaints under
this Article.
xxx xxx xxx
Applied to the present case, to uphold the conviction of accused-appellant, two
elements need to be shown: (1) the person charged with the crime must have
undertaken recruitment activities; and (2) the said person does not have a license or
authority to do so. 9
In this case, private respondent, Macaria Toledo alleged that she was offered a job in
the United States as nursing aide 10by accused-appellant. In her direct examination, she
testified as follows:
Atty. Alejandro:
Q : How did you come to know the accused?
Witness : I was introduced by my two friends. One of whom
is my best friend. That according to them, this accused has
connections and authorizations, that she can make people
leave for abroad, sir.
Court : What connections?
Witness : That she has connections with the Embassy and
with people whom she can approach regarding work abroad,
your Honor.
xxx xxx xxx

Q : When you came to meet for the first time in Imus, Cavite,
what transpired in that meeting of yours?
A : When I came to her house, the accused convinced me
that by means of P150,000.00, I will be able to leave
immediately without any appearance to any embassy, nonappearance, Sir.
Q : When you mentioned non-appearance, as told to you by
the accused, precisely, what do you mean by that?
A : I was told by the accused that non-appearance, means
without working personally for my papers and through her
efforts considering that she is capacitated as according to
her I will be able to leave the country, Sir.
xxx xxx xxx
Atty. Alejandro : What transpired after the accused told you
all these things that you will be able to secure all the
documents without appearing to anybody or to any embassy
and that you will be able to work abroad?
Witness : She told me to get ready with my P150,000.00,
that is if I want to leave immediately, Sir.
Atty. Alejandro : When you mentioned kaagad, how many
days or week?
Witness : She said that if I will able to part with my
P150,000.00. I will be able to leave in just one week time,
Sir.
xxx xxx xxx 11
The prosecution, as evidence, presented the certification issued by the POEA that
accused-appellant Imelda Darvin is not licensed to recruit workers abroad.
It is not disputed that accused-appellant does not have a license or authority to engage
in recruitment activities. The pivotal issue to be determined, therefore, is whether the
accused-appellant indeed engaged in recruitment activities, as defined under the Labor
Code. Applying the rule laid down in the case of People v. Goce, 12 to prove that
accused-appellant was engaged in recruitment activities as to commit the crime of
illegal recruitment, it must be shown that the accused appellant gave private respondent
the distinct impression that she had the power or ability to send the private respondent

abroad for work such that the latter was convinced to part with her money in order to be
so employed.
In this case, we find no sufficient evidence to prove that accused-ppellant offered a job
to private respondent. It is not clear that accused gave the impression that she was
capable of providing the private respondent work abroad. What is established, however,
is that the private respondent gave accused-appellant P150,000.00. The claim of the
accused that the P150,000.00 was for payment of private respondent's air fare and US
visa and other expenses cannot be ignored because the receipt for the P150,000.00,
which was presented by both parties during the trial of the case, stated that it was "for
Air Fare and Visa to USA." 13 Had the amount been for something else in addition to air
fare and visa expenses, such as work placement abroad, the receipt should have so
stated.
By themselves, procuring a passport, airline tickets and foreign visa for another
individual, without more, can hardly qualify as recruitment activities. Aside from the
testimony of private respondent, there is nothing to show that accused-appellant
engaged in recruitment activities. We also note that the prosecution did not present the
testimonies of witnesses who could have corroborated the charge of illegal recruitment,
such as Florencio Rivera, and Leonila Rivera, when it had the opportunity to do so. As it
stands, the claim of private respondent that accused-appellant promised her
employment abroad is uncorroborated. All these, taken collectively, cast reasonable
doubt on the guilt of the accused.
This Court can hardly rely on the bare allegations of private respondent that she was
offered by accused-appellant employment abroad, nor on mere presumptions and
conjectures, to convict the latter. No sufficient evidence was shown to sustain the
conviction, as the burden of proof lies with the prosecution to establish that accusedappellant indeed engaged in recruitment activities, thus committing the crime of illegal
recruitment.
In criminal cases, the burden is on the prosecution to prove, beyond reasonable doubt,
the essential elements of the offense with which the accused is charged; and if the proof
fails to establish any of the essential elements necessary to constitute a crime, the
defendant is entitled to an acquittal. Proof beyond reasonable doubt does not mean
such a degree of proof as, excluding the possibility of error, produces absolute certainty.
Moral certainty only is required, or that degree of proof which produces conviction in an
unprejudiced mind. 14
At best, the evidence proffered by the prosecution only goes so far as to create a
suspicion that accused-appellant probably perpetrated the crime charged. But suspicion
alone is insufficient, the required quantum of evidence being proof beyond reasonable
doubt. When the People's evidence fail to indubitably prove the accused' s authorship of
the crime of which he stands accused, then it is the Court's duty, and the accused's
right, to proclaim his innocence. Acquittal, therefore, is in order. 15

WHEREFORE, the appeal is hereby GRANTED and the decision of the Court of
Appeals in CA-G.R. CR No. 15624 dated January 31, 1996, is REVERSED and SET
ASIDE. Accused-appellant Imelda Darvin is hereby ACQUITTED on ground of
reasonable doubt. Accordingly, let the accused be immediately released from her place
of confinement unless there is reason to detain her further for any other legal or valid
cause. No pronouncement as to costs.
SO ORDERED.
G.R. No. 93666 April 22, 1991
GENERAL MILLING CORPORATION and EARL TIMOTHY CONE, petitioners,
vs.
HON. RUBEN D. TORRES, in his capacity as Secretary of Labor and Employment,
HON. BIENVENIDO E. LAGUESMA, in his capacity as Acting Secretary of Labor
and Employment, and BASKETBALL COACHES ASSOCIATION OF THE
PHILIPPINES, respondents.
Sobrevinas, Diaz, Hayudini & Bodegon Law Office for petitioners.
Rodrigo, Cuevas & De Borja for respondent BCAP.
RESOLUTION

FELICIANO, J.:
On 1 May 1989, the National Capital Region of the Department of Labor and
Employment issued Alien Employment Permit No. M-0689-3-535 in favor of petitioner
Earl Timothy Cone, a United States citizen, as sports consultant and assistant coach for
petitioner General Milling Corporation ("GMC").
On 27 December 1989, petitioners GMC and Cone entered into a contract of
employment whereby the latter undertook to coach GMC's basketball team.
On 15 January 1990, the Board of Special Inquiry of the Commission on Immigration
and Deportation approved petitioner Cone's application for a change of admission
status from temporary visitor to pre-arranged employee.
On 9 February 1990, petitioner GMC requested renewal of petitioner Cone's alien
employment permit. GMC also requested that it be allowed to employ Cone as fullfledged coach. The DOLE Regional Director, Luna Piezas, granted the request on 15
February 1990.

On 18 February 1990, Alien Employment Permit No. M-02903-881, valid until 25


December 1990, was issued.
Private respondent Basketball Coaches Association of the Philippines ("BCAP")
appealed the issuance of said alien employment permit to the respondent Secretary of
Labor who, on 23 April 1990, issued a decision ordering cancellation of petitioner
Cone's employment permit on the ground that there was no showing that there is no
person in the Philippines who is competent, able and willing to perform the services
required nor that the hiring of petitioner Cone would redound to the national interest.
Petitioner GMC filed a Motion for Reconsideration and two (2) Supplemental Motions for
Reconsideration but said Motions were denied by Acting Secretary of Labor Bienvenido
E. Laguesma in an Order dated 8 June 1990.
Petitioners are now before the Court on a Petition for Certiorari, dated 14 June 1990,
alleging that:
1. respondent Secretary of Labor gravely abused his discretion when he
revoked petitioner Cone's alien employment permit; and
2. Section 6 (c), Rule XIV, Book I of the Omnibus Rules Implementing the
Labor Code is null and void as it is in violation of the enabling law as the
Labor Code does not empower respondent Secretary to determine if the
employment of an alien would redound to national interest.
Deliberating on the present Petition for Certiorari, the Court considers that petitioners
have failed to show any grave abuse of discretion or any act without or in excess of
jurisdiction on the part of respondent Secretary of Labor in rendering his decision, dated
23 April 1990, revoking petitioner Cone's Alien Employment Permit.
The alleged failure to notify petitioners of the appeal filed by private respondent BCAP
was cured when petitioners were allowed to file their Motion for Reconsideration before
respondent Secretary of Labor. 1
Petitioner GMC's claim that hiring of a foreign coach is an employer's prerogative has
no legal basis at all. Under Article 40 of the Labor Code, an employer seeking
employment of an alien must first obtain an employment permit from the Department of
Labor. Petitioner GMC's right to choose whom to employ is, of course, limited by the
statutory requirement of an alien employment permit.
Petitioners will not find solace in the equal protection clause of the Constitution. As
pointed out by the Solicitor-General, no comparison can be made between petitioner
Cone and Mr. Norman Black as the latter is "a long time resident of the country," and
thus, not subject to the provisions of Article 40 of the Labor Code which apply only to
"non-resident aliens." In any case, the term "non-resident alien" and its obverse

"resident alien," here must be given their technical connotation under our law on
immigration.
Neither can petitioners validly claim that implementation of respondent Secretary's
decision would amount to an impairment of the obligations of contracts. The provisions
of the Labor Code and its Implementing Rules and Regulations requiring alien
employment permits were in existence long before petitioners entered into their contract
of employment. It is firmly settled that provisions of applicable laws, especially
provisions relating to matters affected with public policy, are deemed written into
contracts. 2 Private parties cannot constitutionally contract away the otherwise
applicable provisions of law.
Petitioners' contention that respondent Secretary of Labor should have deferred to the
findings of Commission on Immigration and Deportation as to the necessity of
employing petitioner Cone, is, again, bereft of legal basis. The Labor Code itself
specifically empowers respondent Secretary to make a determination as to the
availability of the services of a "person in the Philippines who is competent, able and
willing at the time of application to perform the services for which an alien is
desired." 3 In short, the Department of Labor is the agency vested with jurisdiction to
determine the question of availability of local workers. The constitutional validity of legal
provisions granting such jurisdiction and authority and requiring proof of non-availability
of local nationals able to carry out the duties of the position involved, cannot be
seriously questioned.
Petitioners apparently also question the validity of the Implementing Rules and
Regulations, specifically Section 6 (c), Rule XIV, Book I of the Implementing Rules, as
imposing a condition not found in the Labor Code itself. Section 6 (c), Rule XIV, Book I
of the Implementing Rules, provides as follows:
Section 6. Issuance of Employment Permit the Secretary of Labor may
issue an employment permit to the applicant based on:
a) Compliance by the applicant and his employer with the requirements of
Section 2 hereof;
b) Report of the Bureau Director as to the availability or non-availability of
any person in the Philippines who is competent and willing to do the job
for which the services of the applicant are desired.
(c) His assessment as to whether or not the employment of the applicant
will redound to the national interest;
(d) Admissibility of the alien as certified by the Commission on Immigration
and Deportation;

(e) The recommendation of the Board of Investments or other appropriate


government agencies if the applicant will be employed in preferred areas
of investments or in accordance with the imperative of economic
development;
xxx xxx xxx
(Emphasis supplied)
Article 40 of the Labor Code reads as follows:
Art. 40. Employment per unit of non-resident aliens. Any alien seeking
admission to the Philippines for employment purposes and any domestic
or foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of
Labor.
The employment permit may be issued to a non-resident alien or to the
applicant employer after a determination of the non-availability of a person
in the Philippines who is competent, able and willing at the time of
application to perform the services for which the alien is desired.
For an enterprise registered in preferred areas of investments, said
employment permit may be issued upon recommendation of the
government agency charged with the supervision of said registered
enterprise. (Emphasis supplied)
Petitioners apparently suggest that the Secretary of Labor is not authorized to
take into account the question of whether or not employment of an alien applicant
would "redound to the national interest" because Article 40 does not explicitly
refer to such assessment. This argument (which seems impliedly to concede that
the relationship of basketball coaching and the national interest is tenuous and
unreal) is not persuasive. In the first place, the second paragraph of Article 40
says: "[t]he employment permit may be issued to a non-resident alien or to the
applicant employer after a determination of the non-availability of a person in the
Philippines who is competent, able and willing at the time of application to
perform the services for which the alien is desired." The permissive language
employed in the Labor Code indicates that the authority granted involves the
exercise of discretion on the part of the issuing authority. In the second place,
Article 12 of the Labor Code sets forth a statement of objectives that the
Secretary of Labor should, and indeed must, take into account in exercising his
authority and jurisdiction granted by the Labor Code,
Art. 12. Statement of Objectives. It is the policy of the State:

a) To promote and maintain a state of full employment through improved


manpower training, allocation and utilization;
xxx xxx xxx
c) To facilitate a free choice of available employment by persons seeking
work in conformity with the national interest;
d) To facilitate and regulate the movement of workers in conformity with
the national interest;
e) To regulate the employment of aliens, including the establishment of a
registration and/or work permit system;
xxx xxx xxx
Thus, we find petitioners' arguments on the above points of constitutional law too
insubstantial to require further consideration.
Petitioners have very recently manifested to this Court that public respondent Secretary
of Labor has reversed his earlier decision and has issued an Employment Permit to
petitioner Cone. Petitioners seek to withdraw their Petition for Certiorarion the ground
that it has become moot and academic.
While ordinarily this Court would dismiss a petition that clearly appears to have become
moot and academic, the circumstances of this case and the nature of the questions
raised by petitioners are such that we do not feel justified in leaving those questions
unanswered. 4 Moreover, assuming that an alien employment permit has in fact been
issued to petitioner Cone, the basis of the reversal by the Secretary of Labor of his
earlier decision does not appear in the record. If such reversal is based on some view of
constitutional law or labor law different from those here set out, then such employment
permit, if one has been issued, would appear open to serious legal objections.
ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of
merit. Costs against petitioners.

G.R. No. 122917 July 12, 1999


MARITES BERNARDO, ELVIRA GO DIAMANTE, REBECCA E. DAVID, DAVID P.
PASCUAL, RAQUEL ESTILLER, ALBERT HALLARE, EDMUND M. CORTEZ,
JOSELITO O. AGDON GEORGE P. LIGUTAN JR., CELSO M. YAZAR, ALEX G.
CORPUZ, RONALD M. DELFIN, ROWENA M. TABAQUERO, CORAZON C. DELOS

REYES, ROBERT G. NOORA, MILAGROS O. LEQUIGAN, ADRIANA F.


TATLONGHARI, IKE CABANDUCOS, COCOY NOBELLO, DORENDA
CANTIMBUHAN, ROBERT MARCELO, LILIBETH Q. MARMOLEJO, JOSE E.
SALES, ISABEL MAMAUAG, VIOLETA G. MONTES, ALBINO TECSON, MELODY V.
GRUELA, BERNADETH D. AGERO, CYNTHIA DE VERA, LANI R. CORTEZ, MA.
ISABEL B. CONCEPCION, DINDO VALERIO, ZENAIDA MATA, ARIEL DEL PILAR,
MARGARET CECILIA CANOZA, THELMA SEBASTIAN, MA. JEANETTE
CERVANTES, JEANNIE RAMIL, ROZAIDA PASCUAL, PINKY BALOLOA,
ELIZABETH VENTURA, GRACE S. PARDO and TIMOSA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FAR EAST BANK AND TRUST
COMPANY, respondents.

PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified disabled persons be
granted the same terms and conditions of employment as qualified able-bodied
employees. Once they have attained the status of regular workers, they should be
accorded all the benefits granted by law, notwithstanding written or verbal contracts to
the contrary. This treatments is rooted not merely on charity or accomodation, but on
justice for all.
The Case
Challenged in the Petition for Certiorari 1 before us is the June 20, 1995 Decision 2 of
the National Labor Relations Commission (NLRC), 3 which affirmed the August, 22 1994
ruling of Labor Arbiter Cornelio L. Linsangan. The labor arbiter's Decision disposed as
follows: 4
WHEREFORE, judgment is hereby rendered dismissing the abovementioned complaint for lack of merit.
Also assailed is the August 4, 1995 Resolution 5 of the NLRC, which denied the Motion
for Reconsideration.
The Facts
The facts were summarized by the NLRC in this wise:

Complainants numbering 43 (p. 176, Records) are deaf-mutes who were


hired on various periods from 1988 to 1993 by respondent Far East Bank
and Trust Co. as Money Sorters and Counters through a uniformly worded
agreement called "Employment Contract for Handicapped Workers". (pp.
68 & 69, Records) The full text of said agreement is quoted below:

EMPLOYMENT CONTRACT FOR


HANDICAPPED WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal
banking corporation duly organized and existing under and
by virtue of the laws of the Philippines, with business
address at FEBTC Building, Muralla, Intramuros, Manila,
represented herein by its Assistant Vice President, MR.
FLORENDO G. MARANAN, (hereinafter referred to as the
"BANK");
-and, years old, of legal age, ,
and residing at (hereinafter referred to as the
("EMPLOYEE").
WITNESSETH : That
WHEREAS, the BANK, cognizant of its social responsibility,
realizes that there is a need to provide disabled and
handicapped persons gainful employment and opportunities
to realize their potentials, uplift their socio-economic well
being and welfare and make them productive, self-reliant
and useful citizens to enable them to fully integrate in the
mainstream of society;
WHEREAS, there are certain positions in the BANK which
may be filled-up by disabled and handicapped persons,
particularly deaf-mutes, and the BANK ha[s] been
approached by some civic-minded citizens and authorized
government agencies [regarding] the possibility of hiring
handicapped workers for these positions;
WHEREAS, the EMPLOYEE is one of those handicapped
workers who [were] recommended for possible employment
with the BANK;
NOW, THEREFORE, for and in consideration of the
foregoing premises and in compliance with Article 80 of the
Labor Code of the Philippines as amended, the BANK and
the EMPLOYEE have entered into this Employment Contract
as follows:

1. The BANK agrees to employ and train the EMPLOYEE,


and the EMPLOYEE agrees to diligently and faithfully work
with the BANK, as Money Sorter and Counter.
2. The EMPLOYEE shall perform among others, the
following duties and responsibilities:
i. Sort out bills according to color;
ii. Count each denomination per
hundred, either manually or with
the aid of a counting machine;
iii. Wrap and label bills per
hundred;
iv. Put the wrapped bills into
bundles; and
v. Submit bundled bills to the
bank teller for verification.
3. The EMPLOYEE shall undergo a training period of one (1)
month, after which the BANK shall determine whether or not
he/she should be allowed to finish the remaining term of this
Contract.
4. The EMPLOYEE shall be entitled to an initial
compensation of P118.00 per day, subject to adjustment in
the sole judgment of the BANK, payable every 15th and end
of the month.1wphi1.nt
5. The regular work schedule of the EMPLOYEE shall be
five (5) days per week, from Mondays thru Fridays, at eight
(8) hours a day. The EMPLOYEE may be required to
perform overtime work as circumstance may warrant, for
which overtime work he/she [shall] be paid an additional
compensation of 125% of his daily rate if performed during
ordinary days and 130% if performed during Saturday or [a]
rest day.
6. The EMPLOYEE shall likewise be entitled to the following
benefits:
i. Proportionate 13th month pay
based on his basic daily wage.

ii. Five (5) days incentive leave.


iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to abide [by] and
comply with all the BANK Rules and Regulations and
Policies, and to conduct himself/herself in a manner
expected of all employees of the BANK.
8. The EMPLOYEE acknowledges the fact that he/she had
been employed under a special employment program of the
BANK, for which reason the standard hiring requirements of
the BANK were not applied in his/her case. Consequently,
the EMPLOYEE acknowledges and accepts the fact that the
terms and conditions of the employment generally observed
by the BANK with respect to the BANK's regular employee
are not applicable to the EMPLOYEE, and that therefore, the
terms and conditions of the EMPLOYEE's employment with
the BANK shall be governed solely and exclusively by this
Contract and by the applicable rules and regulations that the
Department of Labor and Employment may issue in
connection with the employment ofdisabled and
handicapped workers. More specifically, the EMPLOYEE
hereby acknowledges that the provisions of Book Six of the
Labor Code of the Philippines as amended, particularly on
regulation of employment and separation pay are not
applicable to him/her.
9. The Employment Contract shall be for a period of six (6)
months or from to unless earlier terminated by the
BANK for any just or reasonable cause. Any continuation or
extension of this Contract shall be in writing and therefore
this Contract will automatically expire at the end of its terms
unless renewed in writing by the BANK.
IN WITNESS WHEREOF, the parties, have hereunto affixed
their signature[s] this day of , at
Intramuros, Manila, Philippines.
In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989
another two (2); in 1990, nineteen (19); in 1991 six (6); in 1992, six (6) and
in 1993, twenty-one (21). Their employment[s] were renewed every six
months such that by the time this case arose, there were fifty-six (56)
deaf-mutes who were employed by respondent under the said
employment agreement. The last one was Thelma Malindoy who was
employed in 1992 and whose contract expired on July 1993.

xxx xxx xxx


Disclaiming that complainants were regular employees, respondent Far
East Bank and Trust Company maintained that complainants who are a
special class of workers the hearing impaired employees were hired
temporarily under [a] special employment arrangement which was a result
of overtures made by some civic and political personalities to the
respondent Bank; that complainant[s] were hired due to "pakiusap" which
must be considered in the light of the context career and working
environment which is to maintain and strengthen a corps of professionals
trained and qualified officers and regular employees who are
baccalaureate degree holders from excellent schools which is an
unbending policy in the hiring of regular employees; that in addition to this,
training continues so that the regular employee grows in the corporate
ladder; that the idea of hiring handicapped workers was acceptable to
them only on a special arrangement basis; that it was adopted the special
program to help tide over a group of workers such as deaf-mutes like the
complainants who could do manual work for the respondent Bank; that the
task of counting and sorting of bills which was being performed by tellers
could be assigned to deaf-mutes that the counting and sorting of money
are tellering works which were always logically and naturally part and
parcel of the tellers' normal functions; that from the beginning there have
been no separate items in the respondent Bank plantilla for sortes or
counters; that the tellers themselves already did the sorting and counting
chore as a regular feature and integral part of their duties (p. 97, Records);
that through the "pakiusap" of Arturo Borjal, the tellers were relieved of
this task of counting and sorting bills in favor of deaf-mutes without
creating new positions as there is no position either in the respondent or in
any other bank in the Philippines which deals with purely counting and
sorting of bills in banking operations.
Petitioners specified when each of them was hired and dimissed, viz: 7
NAME OF PETITIONER
1. MARITES BERNARDO
2. ELVIRA GO DIAMANTE
3. REBECCA E. DAVID
4. DAVID P. PASCUAL
5. RAQUEL ESTILLER
6. ALBERT HALLARE
7. EDMUND M. CORTEZ
8. JOSELITO O. AGDON
9. GEORGE P. LIGUTAN JR.

WORKPLACE
Intramuros
Intramuros
Intramuros
Bel-Air
Intramuros
West
Bel-Air
Intramuros
Intramuros

Date Hired
12-Nov-90
24-Jan-90
16-Apr-90
15-Oct-88
2-Jul-92
4-Jan-91
15-Jan-91
5-Nov-90
6-Sep-89

Date
Dismissed
17-Nov-93
11-Jan-94
23-Oct-93
21-Nov-94
4-Jan-94
9-Jan-94
3-Dec-93
17-Nov-93
19-Jan-94

10. CELSO M. YAZAR


11. ALEX G. CORPUZ
12. RONALD M. DELFIN
13. ROWENA M. TABAQUERO
14. CORAZON C. DELOS REYES
15. ROBERT G. NOORA
16. MILAGROS O. LEQUIGAN
17. ADRIANA F. TATLONGHARI
18. IKE CABUNDUCOS
19. COCOY NOBELLO
20. DORENDA CATIMBUHAN
21. ROBERT MARCELO
22. LILIBETH Q. MARMOLEJO
23. JOSE E. SALES
24. ISABEL MAMAUAG
25. VIOLETA G. MONTES
26. ALBINO TECSON
27. MELODY B. GRUELA
28. BERNADETH D. AGERO
29. CYNTHIA DE VERA
30. LANI R. CORTEZ
31. MARIA ISABEL
B.CONCEPCION
32. DINDO VALERIO
33. ZENAIDA MATA
34. ARIEL DEL PILAR
35. MARGARET CECILIA CANOZA
36. THELMA SEBASTIAN
37. MA. JEANETTE CERVANTES
38. JEANNIE RAMIL
39. ROZAIDA PASCUAL
40. PINKY BALOLOA
41. ELIZABETH VENTURA
42. GRACE S. PARDO
43. RICO TIMOSA

Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
West
West
West
West
Intramuros
Intramuros
West
West
Bel-Air
Bel-Air
West

8-Feb-93
15-Feb-93
22-Feb-93
22-Feb-93
8-Feb-93
15-Feb-93
1-Feb-93
22-Jan-93
24-Feb-93
22-Feb-93
15-Feb-93
31 JUL 93 8
15-Jun-90
6-Aug-92
8-May-92
2-Feb-90
7-Nov-91
28-Oct-91
19-Dec-90
26-Jun-90
15-Oct-88
6-Sep-90

8-Aug-93
15-Aug-93
22-Aug-93
22-Aug-93
8-Aug-93
15-Aug-93
1-Aug-93
22-Jul-93
24-Aug-93
22-Aug-93
15-Aug-93
1-Aug-93
21-Nov-93
12-Oct-93
10-Nov-93
15-Jan-94
10-Nov-93
3-Nov-93
27-Dec-93
3-Dec-93
10-Dec-93
6-Feb-94

Intramuros
Intramuros
Intramuros
Intramuros
Intramuros
West
Intramuros
Bel-Air
West
West
West
Intramuros

30-May-93
10-Feb-93
24-Feb-93
27-Jul-90
12-Nov-90
6-Jun-92
23-Apr-90
20-Apr-89
3-Jun-91
12-Mar-90
4-Apr-90
28-Apr-93

30-Nov-93
10-Aug-93
24-Aug-93
4-Feb-94
17-Nov-93
7-Dec-93
12-Oct-93
29-Oct-93
2-Dec-93
FEB 94 [sic]
13-Mar-94
28-Oct-93

As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein
petitioners. Hence, this recourse to this Court. 9

The Ruling of the NLRC


In affirming the ruling of the labor arbiter that herein petitioners could not be deemed
regular employees under Article 280 of the Labor Code, as amended, Respondent
Commission ratiocinated as follows:
We agree that Art. 280 is not controlling herein. We give due credence to
the conclusion that complainants were hired as an accommodation to [the]
recommendation of civic oriented personalities whose employment[s] were
covered by . . . Employment Contract[s] with special provisions on
duration of contract as specified under Art. 80. Hence, as correctly held by
the Labor Arbiter a quo, the terms of the contract shall be the law between
the parties. 10
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable,
"considering the prevailing circumstances/milieu of the case."
Issues
In their Memorandum, petitioners cite the following grounds in support of their cause:
I. The Honorable Commission committed grave abuse of discretion in
holding that the petitioners money sorters and counters working in a
bank were not regular employees.
II. The Honorable Commission committed grave abuse of discretion in
holding that the employment contracts signed and renewed by the
petitioners which provide for a period of six (6) months were valid.
III. The Honorable Commission committed grave abuse of discretion in not
applying the provisions of the Magna Carta for the Disabled (Republic Act
No. 7277), on proscription against discrimination against disabled
persons. 11
In the main, the Court will resolve whether petitioners have become regular employees.
This Court's Ruling
The petition is meritorious. However, only the employees, who worked for more than six
months and whose contracts were renewed are deemed regular. Hence, their dismissal
from employement was illegal.
Preliminary Matter:
Propriety of Certiorari

Respondent Far East Bank and Trust Company argues that a review of the findings of
facts of the NLRC is not allowed in a petition for certiorari. Specifically, it maintains that
the Court cannot pass upon the findings of public respondent that petitioners were not
regular employees.
True, the Court, as a rule, does not review the factual findings of public respondents in
a certiorari proceeding. In resolving whether the petitioners have become regular
employees, we shall not change the facts found by the public respondent. Our task is
merely to determine whether the NLRC committed grave abuse of discretion in applying
the law to the established facts, as above-quoted from the assailed Decision.
Main Issue
Are Petitioners Regular Employee?
Petitioners maintain that they should be considered regular employees, because their
task as money sorters and counters was necessary and desirable to the business of
respondent bank. They further allege that their contracts served merely to preclude the
application of Article 280 and to bar them from becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as
"special workers and should not in any way be considered as part of the regular
complement of the Bank." 12 Rather, they were "special" workers under Article 80 of the
Labor Code. Private respondent contends that it never solicited the services of
petitioners, whose employment was merely an "accommodation" in response to the
requests of government officials and civic-minded citizens. They were told from the
start, "with the assistance of government representatives," that they could not become
regular employees because there were no plantilla positions for "money sorters," whose
task used to be performed by tellers. Their contracts were renewed several times, not
because of need "but merely for humanitarian reasons." Respondent submits that "as of
the present, the "special position" that was created for the petitioners no longer exist[s]
in private respondent [bank], after the latter had decided not to renew anymore their
special employment contracts."
At the outset, let it be known that this Court appreciates the nobility of private
respondent's effort to provide employment to physically impaired individuals and to
make them more productive members of society. However, we cannot allow it to elude
the legal consequences of that effort, simply because it now deems their employment
irrelevant. The facts, viewed in light of the Labor Code and the Magna Carta for
Disabled Persons, indubitably show that the petitioners, except sixteen of them, should
be deemed regular employees. As such, they have acquired legal rights that this Court
is duty-bound to protect and uphold, not as a matter of compassion but as a
consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained
for a period of one month, after which the employer shall determine whether or not they

should be allowed to finish the 6-month term of the contract. Furthermore, the employer
may terminate the contract at any time for a just and reasonable cause. Unless renewed
in writing by the employer, the contract shall automatically expire at the end of the
term.1wphi1.nt
According to private respondent, the employment contracts were prepared in
accordance with Article 80 of the Labor code, which provides;
Art. 80. Employment agreement. Any employer who employs
handicapped workers shall enter into an employment agreement with
them, which agreement shall include:
(a) The names and addresses of the handicapped workers
to be employed;
(b) The rate to be paid the handicapped workers which shall
be not less than seventy five (75%) per cent of the
applicable legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the
Secretary of Labor or his duly authorized representatives.
The stipulations in the employment contracts indubitably conform with the aforecited
provision. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for
Disabled Persons), 13 however, justify the application of Article 280 of the Labor Code.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988
to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring
of others lead to the conclusion that their tasks were beneficial and necessary to the
bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability did not render them
unqualified or unfit for the tasks assigned to them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled
employee should be given the same terms and conditions of employment as a
qualified able-bodied person. Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. No disabled person shall be
denied access to opportunities for suitable employment. A qualified
disabled employee shall be subject to the same terms and conditions of

employment and the same compensation, privileges, benefits, fringe


benefits, incentives or allowances as a qualified able bodied person.
The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords
them the rights of qualified able-bodied persons, they are thus covered by Article 280 of
the Labor Code, which provides:
Art. 280. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered as regular employee with respect to the activity in
which he is employed and his employment shall continue while such
activity exists.
The test of whether an employee is regular was laid down in De Leon v. NLRC, 14 in
which this Court held:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The
test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least one year, even if the
performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of
the necessity if not indispensibility of that activity to the business. Hence,
the employment is considered regular, but only with respect to such
activity, and while such activity exist.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the
business of respondent bank. With the exception of sixteen of them, petitioners
performed these tasks for more than six months. Thus, the following twenty-seven

petitioners should be deemed regular employees: Marites Bernardo, Elvira Go


Diamante, Rebecca E. David, David P. Pascual, Raquel Estiller, Albert Hallare, Edmund
M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo, Jose E.
Sales, Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela,
Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion,
Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil,
Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the
pernicious practice of making permanent casuals of our lowly employees by the simple
expedient of extending to them probationary appointments, ad infinitum." 15The contract
signed by petitioners is akin to a probationary employment, during which the bank
determined the employees' fitness for the job. When the bank renewed the contract
after the lapse of the six-month probationary period, the employees thereby became
regular employees. 16 No employer is allowed to determine indefinitely the fitness of its
employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure;
that is, their services may be terminated only for a just or authorized cause. Because
respondent failed to show such cause, 17 these twenty-seven petitioners are deemed
illegally dismissed and therefore entitled to back wages and reinstatement without loss
of seniority rights and other privileges. 18 Considering the allegation of respondent that
the job of money sorting is no longer available because it has been assigned back to
the tellers to whom it originally belonged, 18 petitioners are hereby awarded separation
pay in lieu of reinstatement. 20
Because the other sixteen worked only for six months, they are not deemed regular
employees and hence not entitled to the same benefits.
Applicability of the
Brent Ruling
Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the
validity of an employment contract with a fixed term, argues that the parties entered into
the contract on equal footing. It adds that the petitioners had in fact an advantage,
because they were backed by then DSWD Secretary Mita Pardo de Tavera and
Representative Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the
petitioners were disabled, and that the bank had to determine their fitness for the
position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted
earlier, petitioners proved themselves to be qualified disabled persons who, under the
Magna Carta for Disabled Persons, are entitled to terms and conditions of employment
enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply because
petitioners are qualified for their positions. The validation of the limit imposed on their

contracts, imposed by reason of their disability, was a glaring instance of the very
mischief sought to be addressed by the new law.
Moreover, it must be emphasized that a contract of employment is impressed with
public interest. 22 Provisions of applicable statutes are deemed written into the contract,
and the "parties are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each other." 23 Clearly,
the agreement of the parties regarding the period of employment cannot prevail over the
provisions of the Magna Carta for Disabled Persons, which mandate that petitioners
must be treated as qualified able-bodied employees.
Respondent's reason for terminating the employment of petitioners is instructive.
Because the Bangko Sentral ng Pilipinas (BSP) required that cash in the bank be turned
over to the BSP during business hours from 8:00 a.m. to 5:00 p.m., respondent resorted
to nighttime sorting and counting of money. Thus, it reasons that this task "could not be
done by deaf mutes because of their physical limitations as it is very risky for them to
travel at night." 24 We find no basis for this argument. Travelling at night involves risks to
handicapped and able-bodied persons alike. This excuse cannot justify the termination
of their employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely "accommodated" employees. This fact
does not change the nature of their employment. As earlier noted, an employee is
regular because of the nature of work and the length of service, not because of the
mode or even the reason for hiring them.
Equally unavailing are private respondent's arguments that it did not go out of its way to
recruit petitioners, and that its plantilla did not contain their positions. In L. T. Datu
v. NLRC, 25 the Court held that "the determination of whether employment is casual or
regular does not depend on the will or word of the employer, and the procedure of hiring
. . . but on the nature of the activities performed by the employee, and to some extent,
the length of performance and its continued existence."
Private respondent argues that the petitioners were informed from the start that they
could not become regular employees. In fact, the bank adds, they agreed with the
stipulation in the contract regarding this point. Still, we are not persuaded. The wellsettled rule is that the character of employment is determined not by stipulations in the
contract, but by the nature of the work performed. 26 Otherwise, no employee can
become regular by the simple expedient of incorporating this condition in the contract of
employment.
In this light, we iterate our ruling in Romares v. NLRC: 27
Art. 280 was emplaced in our statute books to prevent the circumvention
of the employee's right to be secure in his tenure by indiscriminately and

completely ruling out all written and oral agreements inconsistent with the
concept of regular employment defined therein. Where an employee has
been engaged to perform activities which are usually necessary or
desirable in the usual business of the employer, such employee is
deemed a regular employee and is entitled to security of tenure
notwithstanding the contrary provisions of his contract of employment.
xxx xxx xxx
At this juncture, the leading case of Brent School, Inc. v. Zamora proves
instructive. As reaffirmed in subsequent cases, this Court has upheld the
legality of fixed-term employment. It ruled that the decisive determinant in
"term employment" should not be the activities that the employee is called
upon to perform but the day certain agreed upon the parties for the
commencement and termination of their employment relationship. But this
Court went on to say that where from the circumstances it is apparent that
the periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary
to public policy and morals.
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor
of the working class, but also the concern of the State for the plight of the disabled. The
noble objectives of Magna Carta for Disabled Persons are not based merely on charity
or accommodation, but on justice and the equal treatment of qualified persons, disabled
or not. In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance
to their work. The eloquent proof of this statement is the repeated renewal of their
employment contracts. Why then should they be dismissed, simply because they are
physically impaired? The Court believes, that, after showing their fitness for the work
assigned to them, they should be treated and granted the same rights like any other
regular employees.
In this light, we note the Office of the Solicitor General's prayer joining the petitioners'
cause. 28
WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20,
1995 Decision and the August 4, 1995 Resolution of the NLRC are REVERSED and
SET ASIDE. Respondent Far East Bank and Trust Company is hereby ORDERED to
pay back wages and separation pay to each of the following twenty-seven (27)
petitioners, namely, Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David P.
Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George
P. Ligutan Jr., Liliberh Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G.
Montes, Albino Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani
R. Cortez, Ma. Isabel B. Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma.
Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura
and Grace S. Pardo. The NLRC is hereby directed to compute the exact amount due

each of said employees, pursuant to existing laws and regulations, within fifteen days
from the finality of this Decision. No costs.1wphi1.nt
SO ORDERED.

G.R. No. 101738

April 12, 2000

PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES, petitioner,


vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of Labor and Employment,
HON. HENRY PABEL, Director of the Department of Labor and Employment
Regional Office No. XI and/or the Representation Officer of the Industrial
Relations Division who will act for and in his behalf, PCOP- BISLIG
SUPERVISORY AND TECHNICAL STAFF EMPLOYEES UNION, ASSOCIATED
LABOR UNION and FEDERATION OF FREE WORKERS, respondents.

DE LEON, JR., J.:


Before us is a petition for certiorari seeking to annul the Resolution1 and the
Order2 dated April 17, 1991 and August 7, 1991, respectively, of public respondent
Bienvenido E. Laguesma, acting then as Undersecretary, now the Secretary, of the
Department of Labor and Employment (DOLE), which reversed the Order dated March
27, 19903 of Med-Arbiter Phibun D. Pura declaring that supervisors and section heads
of petitioner under its new organizational structure are managerial employees and
should be excluded from the list of voters for the purpose of a certification election
among supervisory and technical staff employees of petitioner.4
The facts of the case are the following:
Petitioner Paper Industries Corporation of the Philippines (PICOP) is engaged in the
manufacture of paper and timber products, with principal place of operations at Tabon,
Bislig, Surigao del Sur. It has over 9,0005 employees, 9446 of whom are supervisory
and technical staff employees. More or less 487 of these supervisory and technical staff
employees are signatory members of the private respondent PICOP-Bislig Supervisory
and Technical Staff Employees Union (PBSTSEU).7
On August 9, 1989, PBSTSEU instituted a Petition8 for Certification Election to
determine the sole and exclusive bargaining agent of the supervisory and technical staff
employees of PICOP for collective bargaining agreement (CBA) purposes.

In a Notice9 dated August 10, 1989, the initial hearing of the petition was set on August
18, 1989 but it was reset to August 25, 1989, at the instance of PICOP, as it requested
a fifteen (15) day period within which to file its comments and/or position paper. But
PICOP failed to file any comment or position paper. Meanwhile, private respondents
Federation of Free Workers (FFW) and Associated Labor Union (ALU) filed their
respective petitions for intervention.
On September 14, 1989, Med-Arbiter Arturo L. Gamolo issued an Order 10 granting the
petitions for interventions of the FFW and ALU. Another Order 11 issued on the same
day set the holding of a certification election among PICOP's supervisory and technical
staff employees in Tabon, Bislig, Surigao del Sur, with four (4) choices, namely: (1)
PBSTSEU; (2) FFW; (3) ALU; and (4) no union.
On September 21, 1989, PICOP appealed 12 the Order which set the holding of the
certification election contending that the Med-Arbiter committed grave abuse of
discretion in deciding the case without giving PICOP the opportunity to file its
comments/answer, and that PBSTSEU had no personality to file the petition for
certification election.
After PBSTSEU filed its Comments 13 to petitioner's appeal, the Secretary of the
Labor 14 issued a Resolution 15 dated November 17, 1989 which upheld the MedArbiter's Order dated September 17, 1989, with modification allowing the supervising
and staff employees in Cebu, Davao and Iligan City to participate in the certification
election.
During the pre-election conference on January 18, 1990, PICOP questioned and
objected to the inclusion of some section heads and supervisors in the list of voters
whose positions it averred were reclassified as managerial employees in the light of the
reorganization effected by it. 16 Under the Revised Organizational Structure of the
PICOP, the company was divided into four (4) main business groups, namely: Paper
Products Business, Timber Products Business, Forest Resource Business and Support
Services Business. A vice- president or assistant vice-president heads each of these
business groups. A division manager heads the divisions comprising each business
group. A department manager heads the departments comprising each division. Section
heads and supervisors, now called section managers and unit managers, head the
sections and independent units, respectively, comprising each department. 17 PICOP
advanced the view that considering the alleged present authority of these section
managers and unit managers to hire and fire, they are classified as managerial
employees, and hence, ineligible to form or join any labor organization. 18
Following the submission by the parties of their respective position papers 19 and
evidence 20 on this issue, Med-Arbiter Phibun D. Pura issued an Order 21 dated March
27, 1990, holding that supervisors and section heads of the petitioner are managerial
employees and therefore excluded from the list of voters for purposes of certification
election.

PBSTSEU appealed 22 the Order of the Med-Arbiter to the Office of the Secretary,
DOLE. ALU likewise appealed. 23PICOP submitted evidence militating against the
appeal. 24 Public respondent Bienvenido E. Laguesma, acting as the then
Undersecretary of Labor, issued the assailed Order 25 dated April 17, 1991 setting aside
the Order dated March 27, 1990 of the Med-Arbiter and declaring that the subject
supervisors and section heads are supervisory employees eligible to vote in the
certification election.
PICOP sought 26 reconsideration of the Order dated April 7, 1991. However, public
respondent in his Order 27 dated August 7, 1991 denied PICOP's motion for
reconsideration.
Hence, this petition.
PICOP anchors its petition on two (2) grounds, to wit:
I.
THE PUBLIC RESPONDENT HONORABLE BIENVENIDO E. LAGUESMA,
UNDERSECRETARY OF LABOR AND EMPLOYMENT, IN A CAPRICIOUS,
ARBITRARY AND WHIMSICAL EXERCISE OF POWER ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION, TANTAMOUNT TO ACTING
WITHOUT OR IN EXCESS OF JURISDICTION WHEN HE DENIED YOUR
PETITIONER'S PLEA TO PRESENT ADDITIONAL EVIDENCE TO PROVE
THAT SOME OF ITS MANAGERIAL EMPLOYEES ARE DISQUALIFIED FROM
JOINING OR FORMING A UNION REPRESENTED BY CO-RESPONDENT
PBSTSEU, IN VIEW OF A SUPERVENING EVENT BROUGHT ABOUT BY THE
CHANGES IN THE ORGANIZATIONAL STRUCTURE OF YOUR PETITIONER
WHICH WAS FULLY IMPLEMENTED IN JANUARY 1991 AFTER THE CASE
WAS ELEVATED ON APPEAL AND SUBMITTED FOR DECISION.
II.
THE PUBLIC RESPONDENT, HONORABLE BIENVENIDO E. LAGUESMA,
ALSO ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION,
TANTAMOUNT TO ARBITRARILY ACTING WITHOUT OR IN EXCESS OF
JURISDICTION WHEN HE TOTALLY DISREGARDED THE DOCUMENTARY
EVIDENCE SO FAR SUBMITTED BY YOUR PETITIONER AND RELIED
MAINLY ON THE UNSUBSTANTIATED CLAIM AND MERE ALLEGATIONS OF
PRIVATE RESPONDENT, PBSTSEU, THAT THE REORGANIZATION OF
YOUR PETITIONER WAS A SHAM AND CALCULATED MERELY TO
FRUSTRATE THE UNIONIZATION OF YOUR PETITIONER'S SUPERVISORY
PERSONNEL; AND SOLELY ON THIS BASIS, DENIED YOUR PETITIONER'S
URGENT MOTION FOR RECONSIDERATION. 28

PICOP's main thesis is that the positions Section Heads and Supervisors, who have
been designated as Section Managers and Unit Managers, as the case may be, were
converted to managerial employees under the decentralization and reorganization
program it implemented in 1989. Being managerial employees, with alleged authority to
hire and fire employees, they are ineligible for union membership under Article 245 29 of
the Labor Code. Furthermore, PICOP contends that no malice should be imputed
against it for implementing its decentralization program only after the petition for
certification election was filed inasmuch as the same is a valid exercise of its
management prerogative, and that said program has long been in the drawing boards of
the company, which was realized only in 1989 and fully implemented in 1991. PICOP
emphatically stresses that it could not have conceptualized the decentralization program
only for the purpose of "thwarting the right of the concerned employees to selforganization."
The petition, not being meritorious, must fail and the same should be as it is hereby
dismissed.
First. In United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma, 30 we had occasion
to elucidate on the term "managerial employees." Managerial employees are ranked as
Top Managers, Middle Managers and First Line Managers. Top and Middle Managers
have the authority to devise, implement and control strategic and operational policies
while the task of First-Line Managers is simply to ensure that such policies are carried
out by the rank-and- file employees of an organization. Under this distinction,
"managerial employees" therefore fall in two (2) categories, namely, the "managers"per
se composed of Top and Middle Managers, and the "supervisors" composed of FirstLine Managers. 31 Thus, the mere fact that an employee is designated "manager" does
not ipso facto make him one. Designation should be reconciled with the actual job
description of the employee, 32 for it is the job description that determines the nature of
employment. 33
In the petition before us, a thorough dissection of the job description 34 of the concerned
supervisory employees and section heads indisputably show that they are not actually
managerial but only supervisory employees since they do not lay down company
policies. PICOP's contention that the subject section heads and unit managers exercise
the authority to hire and fire 35 is ambiguous and quite misleading for the reason that
any authority they exercise is not supreme but merely advisory in character. Theirs is
not a final determination of the company policies inasmuch as any action taken by them
on matters relative to hiring, promotion, transfer, suspension and termination of
employees is still subject to confirmation and approval by their respective
superior. 36 Thus, where such power, which is in effect recommendatory in character, is
subject to evaluation, review and final action by the department heads and other higher
executives of the company, the same, although present, is not effective and not an
exercise of independent judgment as required by law. 37
Second. No denial of due process can be ascribed to public respondent Undersecretary
Laguesma for the latter's denial to allow PICOP to present additional evidence on the

implementation of its program inasmuch as in the appeal before the said public
respondent, PICOP even then had already submitted voluminous supporting
documents. 38 The record of the case is replete with position papers and exhibits that
dealt with the main thesis it relied upon. What the law prohibits is the lack of opportunity
to be heard. 39 PICOP has long harped on its contentions and these were dealt upon
and resolved in detail by public respondent Laguesma. We see no reason or justification
to deviate from his assailed resolutions for the reason that law and jurisprudence aptly
support them.1wphi1
Finally, considering all the foregoing, the fact that PICOP voiced out its objection to the
holding of certification election, despite numerous opportunities to ventilate the same,
only after respondent Undersecretary of Labor affirmed the holding thereof, simply
bolstered the public respondents' conclusion that PICOP raised the issue merely to
prevent and thwart the concerned section heads and supervisory employees from
exercising a right granted them by law. Needless to stress, no obstacle must be placed
to the holding of certification elections, for it is a statutory policy that should not be
circumvented.40
WHEREFORE, the petition is hereby DISMISSED, and the Resolution and Order of
public respondent Bienvenido E. Laguesma dated April 17, 1991 and August 17, 1991,
respectively, finding the subject supervisors and section heads as supervisory
employees eligible to vote in the certification election are AFFIRMED. Costs against
petitioner.
SO ORDERED.1wphi1.nt

G.R. No. 178184

January 29, 2014

GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO and WILLIAM


HOW, Petitioners,
vs.
WILFREDO GALVEZ, JOEL SALES, CRISTITO GRUTA, DANILO ARGUELLES,
RENATO BATAYOLA, PATRICIO FRESMILLO,* JOVY NOBLE, EMILIO DOMINICO,
BENNY NILMAO, and JOSE AUSTRAL, Respondents.
DECISION
DEL CASTILLO, J.:
The employer has broader discretion in dismissing managerial employees on the
ground of loss of trust and confidence than those occupying ordinary ranks. While plain
accusations are not sufficient to justify the dismissal of rank and file employees, the
mere existence of a basis for believing that managerial employees have breached the
trust reposed on them by their employer would suffice to justify their dismissal. 1

Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006
Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 82379, which annulled the
September 10, 2003 Decision4 and January 14, 2004 Resolution5 of the National Labor
Relations Commission (NLRC), thereby reinstating the August 30, 2001 Decision 6 of the
Labor Arbiter for having attained finality as a result of petitioners failure to post the
correct amount of bond in their appeal before the NLRC. Likewise assailed is the May
23, 2007 Resolution7 of the CA which denied petitioners Motion for Reconsideration.8
Factual Antecedents
Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation engaged
in transporting liquified petroleum gas (LPG) from Petron Corporations refinery in
Limay, Bataan to Petrons Plant in Ugong, Pasig and Petrons Depot in Rosario, Cavite.
Petitioners William How and Eduardo Francisco are its President and General Manager,
respectively. Respondents, on the other hand, are crewmembers of one of GASLIs
vessels, M/T Dorothy Uno, with the following designations: Wilfredo Galvez (Galvez) as
Captain; Joel Sales (Sales) as Chief Mate; Cristito Gruta (Gruta) as Chief Engineer;
Danilo Arguelles (Arguelles) as Radio Operator; Renato Batayola (Batayola), Patricio
Fresmillo (Fresmillo) and Jovy Noble (Noble) as Able Seamen; Emilio Dominico
(Dominico) and Benny Nilmao (Nilmao) as Oilers; and Jose Austral (Austral) as 2nd
Engineer.
Sometime in January 2000, one of the vessels Oilers, Richard Abis (Abis), reported to
GASLIs Office and Crewing Manager, Elsa Montegrico (Montegrico), an alleged illegal
activity being committed by respondents aboard the vessel. Abis revealed that after
about four to five voyages a week, a substantial volume of fuel oil is unconsumed and
stored in the vessels fuel tanks. However, Gruta would misdeclare it as consumed fuel
in the Engineers Voyage Reports. Then, the saved fuel oil is siphoned and sold to other
vessels out at sea usually at nighttime. Respondents would then divide among
themselves the proceeds of the sale. Abis added that he was hesitant at first to report
respondents illegal activities for fear for his life.
An investigation on the alleged pilferage was conducted. After audit and examination of
the Engineers Voyage Reports, GASLIs Internal Auditor, Roger de la Rama (De la
Rama), issued a Certification of Overstatement of Fuel Oil Consumption9 for M/T
Dorothy Uno stating that for the period June 30, 1999 to February 15, 2000 fuel oil
consumption was overstated by 6,954.3 liters amounting to P74,737.86.10
On February 11, 2000, a formal complaint11 for qualified theft was filed with the Criminal
Investigation and Detection Group (CIDG) at Camp Crame against respondents, with
Montegricos Complaint-Affidavit12 attached. On February 14, 2000, Abis submitted his
Sinumpaang Salaysay,13 attesting to the facts surrounding respondents pilferage of fuel
oil while on board the vessel, which he alleged started in August of 1999. On March 22,
2000, GASLIs Port Captain, Genaro Bernabe (Bernabe), and De la Rama submitted a
Complaint-Joint Affidavit,14 stating that in Grutas Engineers Voyage Reports,
particularly for the period June 30, 1999 to February 15, 2000, he overstated the

number of hours the vessels main and auxiliary engines, as well as its generators, were
used resulting in the exaggerated fuel consumption. They also stated that according to
independent surveyor Jade Sea-Land Inspection Services, the normal diesel fuel
consumption of M/T Dorothy Uno for Petron UgongBataan RefineryPetron Ugong
route averaged 1,021 liters only. Thus, comparing this with the declared amount of fuel
consumed by the vessel when manned by the respondents, Bernabe and De la Rama
concluded that the pilferage was considerable.15 In her Supplementary Complaint
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal activity.
Bernabe, in his Reply-Affidavit,17 further detailed their analysis of the voyage reports visa-vis the report of Jade Sea-Land Inspection Services to strengthen the accusations.
In their Joint Counter-Affidavit18 and Joint Rejoinder-Affidavit,19 respondents denied the
charge. They alleged that the complaint was based on conflicting and erroneous
computation/estimates of fuel consumption; that the complaint was fabricated as borne
out by its failure to specify the exact time the alleged pilferage took place; that the
allegations that the pilferage has been going on since August 1999 and that Austral and
Sales acted as lookouts are not true because both embarked on the vessel only on
December 28, 1999 and January of 2000, respectively; that four other officers who were
on board the vessel much longer than Austral and Sales were not included in the
charge; and, that the complaint was intended as a mere leverage.
In a letter20 dated April 14, 2000, the CIDG referred the case to the Office of the City
Prosecutor of Manila, which, after finding a prima facie case, filed the corresponding
Information for Qualified Theft21 dated August 18, 2000 with the Regional Trial Court
(RTC) of Manila.
Meanwhile, GASLI placed respondents under preventive suspension. After conducting
administrative hearings, petitioners decided to terminate respondents from employment.
Respondents (except Sales) were thus served with notices22informing them of their
termination for serious misconduct, willful breach of trust, and commission of a crime or
offense against their employer.
It appears that several other employees and crewmembers of GASLIs two other
vessels were likewise suspended and terminated from employment. Nine seafarers of
M/T Deborah Uno were charged and terminated for insubordination, defying orders and
refusal to take responsibility of cargo products/fuel.23 For vessel M/T Coral Song, two
crewmembers were dismissed for serious act of sabotage and grave
insubordination.24 Proceedings before the Labor Arbiter Respondents and the other
dismissed crewmembers of M/T Deborah Uno and M/T Coral Song (complainants) filed
with the NLRC separate complaints25 for illegal suspension and dismissal,
underpayment/non-payment of salaries/wages, overtime pay, premium pay for holiday
and rest day, holiday pay, service incentive leave pay, hazard pay, tax refunds and
indemnities for damages and attorneys fees against petitioners. The complaints,
docketed as NLRC NCR Case Nos. 00-04-02026-00, 00-04-02062-00, 00-05-02620-00
and 00-07-03769-00, were consolidated.1wphi1

On August 30, 2001, the Labor Arbiter rendered a Decision26 finding the dismissal of all
21 complainants illegal. As regards the dismissal of herein respondents, the Labor
Arbiter ruled that the filing of a criminal case for qualified theft against them did not
justify their termination from employment. The Labor Arbiter found it abstruse that the
specific date and time the alleged pilferage took place were not specified and that some
crewmembers who boarded the vessel during the same period the alleged pilferage
transpired were not included in the charge. With regard to the other complainants,
petitioners likewise failed to prove the legality of their dismissal.
The Labor Arbiter ordered petitioners to reinstate complainants with full backwages and
to pay their money claims for unpaid salary, overtime pay, premium pay for holidays and
rest days, holiday and service incentive leave pay, as indicated in the Computation of
Money Claims. Complainants were likewise awarded damages due to the attending bad
faith in effecting their termination, double indemnity prescribed by Republic Act (RA) No.
818827 in view of violation of the Minimum Wage Law, as well as 10% attorneys fee.
With respect to the claim for tax refund, the same was referred to the Bureau of Internal
Revenue, while the claim for hazard pay was dismissed for lack of basis. The Labor
Arbiter modified and recomputed the money claims of respondents, as follows:
1. WILFREDO GALVEZ (Dismissed in Mar.
2000)
Backwages from Mar. 2000 to
May 2001 (P8,658.74 x 14 mos.)

----------

P 121,225.16

13th Month Pay for the period

----------

8,658.94

Unpaid Salary from Feb 16 to 29, 2000

----------

3,985.38

Non-payment of Premium Pay for Holiday;


Restday and Non-payment of Holiday Pay;
(limited to 3 years only = P7,372.90 x 3 yrs.)

----------

22,188.70

Non-payment of (5 days) Service Incentive


Leave Pay (for every year of service, but
Limited to 3 years only): = P1,423.35 x 3 yrs.)

----------

P 4,270.05

Actual Moral Exemplary & Compensatory


Damages

----------

P 100,000.00

(P260,258.23)
Ten (10%) Percent Attorneys Fees

P 26,025.82

TOTAL
2. JOEL SALES (Dismissed in Mar. 2000)
Backwages from Mar. 2000 to May 2001
(P8,274.14 x 14 mos.)

P 286,284.05

----------

-P
115,840.76

13th Month Pay for the period&

----------

8,274.34

Actual, Moral, Exemplary &


Compensatory Damages

----------

P 100,000.00

(P224,115.10)
Ten (10%) Percent Attorneys Fees

P 22,411.51

TOTAL

P 246,526.61

3. CRISTITO G. GRUTA (Dismissed in Mar.


2000)
Backwages from Mar. 200[0] to May 2001
(P8,274.14 x 14 mos.)

----------

P 115,840.76

13th Month Pay for the period

----------

8,274.34

Non-payment of Premium Pay for Holiday; Restday and


Non-payment of Holiday Pay: (P7,045.57 x 2 yrs.)

14,091.51

Non-payment of (5 days) Service Incentive


Leave Pay
(for every year of service = P1,360.15 x 2 yrs.)

----------

2,720.30

Actual, Moral, Exemplary &


Compensatory Damages

----------

P 100,000.00

(P240,926.91)
Ten (10%) Percent Attorneys Fees

----------

TOTAL

P 24,092.69
P 265,019.60

4. DANILO ARGUELLES (Dismissed in Feb.


2000)
Backwages from Mar. 2000 to May 2001
(P7,340.62 x 15 mos.)

----------

[P]110,109.30

13th Month Pay for the period

----------

7,340.62

Unpaid Salary from Feb. 16 to 29, 2000


(P225.00 x 14 days)

----------

3,150.00

Underpayment/Non-payment of Salary/Wages:
A. From April 98 to Nov. 98 (7 mos.)
Minimum Wage P198 x 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 6,459.75
4,320.00
P 2,139.75

x 7 mos.
P 14,978.25
Double Indemnity prescribed by Rep. Act 8188, Sec. 4
B. From Dec. 98 to Mar. 2000 (16 mos.)
Minimum Wage P225 391.5 [/] 12 =

P 29,956.50
P 7,340.62

Actual Basic Wage for the period

6,240.00

Difference

P 1,100.62
x 16 mos.
P 17,609.92

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

P 35,219.84

Underpayment/Non-payment of Overtime Pay:


A. From Apr. 98 to Nov. 98 (7 mos.)
30% of Minimum Wage
(P6,459.75 x
30%)

P 1,937.92

30% of Salary Actually Paid


(P4,320.00 x
30%)
Difference

1,872.00

P 641.92
x 7 mos.
P 4,493.44

P 4,493.44

(P7,340.62 x
30%)

2,202.18

B. From Dec. 98 to Mar. 2000 (16 mos.)


30% of Minimum Wage

30% of Salary Actually Paid


(P6,240.00 x
30%)
Difference

P 330.18
x 16 mos.

1,872.00

P 5,282.88
Non-payment of Premium Pay for Holiday; Restday and

P 5,282.88
P 11,655.00

Non-payment of Holiday Pay (P5,872.50 x 2 yrs.)


Non-payment of (5 days) Service Incentive Leave Pay
(for every year of service/but limited to 2 yrs. only):

2,250.00

= P 1,125.00 x 2 yrs.
Actual, Moral, Exemplary &
Compensatory Damages

P 100,000.00
(P309,457.58)

Ten (10%) Percent Attorneys Fees

P 30,945.75

TOTAL

P 340,403.33

5. RENATO BATAYOLA
6. PATRICIO FRESNILLO
7. JOVY NOBLE
8. EMILIO DOMINICO
9. BENNY NILMAO (All dismissed in Feb. 2001)
Backwages from Mar. 2000 to May 2001
(P7,340.62 x 15 mos.)
13th Month Pay for the period

P 110,109.30
----------

Unpaid Salary from Feb. 16 to 29, 2000


(P225.00 x 14 days)

7,340.62
3,150.00

Underpayment/Non-payment of Salary/Wages:
A. From Apr. 97 to Jan. 98 ([9] mos.)
Minimum Wage P185 x 391.5 [/] 12 =
Actual Basic Wage for the period
Difference

P 6,035.62
4,098.24
P 1,932.58
x 9 mos.
P 17,436.42

Double Indemnity prescribed by Rep. Act 8188, Sec. 4


B. From Feb. 98 to Nov. 98 (10 mos.)

P 34,872.84
P 6,459.75

Minimum Wage P198 x 391.5 [/] 12 =


Actual Basic Wage for the period
Difference

4,098.24
P 2,361.51
x 10 mos.
P 23,615.10

Double Indemnity prescribed by Rep. Act 8188,


Sec. 4

P 47,230.20

C. From Dec. 98 to Mar. 2000 (16 mos.)


Minimum Wage P225 x 391.5 [/] 12 =

7,340.62

Actual Basic Wage for the period

6,022.00

Difference

P 1,318.62
x 16 mos.
P 21,098.00

Double Indemnity prescribed by Rep. Act 8188, Sec. 4

P 42,196.00

Underpayment/Non-payment of Overtime Pay:


A. From Apr. 97 to Jan. 98 (9 mos.)
30% Minimum Wage
(P6,035.62 x
30%)

P 1,810.68

30% of Salary Actually Paid


(P4,098.24 x
30%)
Difference

1,226.77

P 583.91
x 9 mos.
P 5,255.19

B. From Feb. 98 to Nov. 98 (10 mos.)


30% Minimum Wage
(P6,459.75 x 30%)

P 1,937.92

- P 5,255.19

30% of Salary Actually Paid


1,226.72
(P4,098.24 x 30%)
Difference

P 711.15
x 10 mos.
P 7,111.70

C. From Dec. 98 to Mar. 2000 (16 mos.)


30% Minimum Wage

- P 7,111.70

P 2,202.18

(P7,340.62 x 30%)
30% of Salary Actually Paid

P 1,806.75

(P6,022.50 x 30%)
x 16 mos.
Difference
P 6,326.97
Non-Payment of Premium Pay for Holiday &
Restday; and
Non-Payment of Holiday Pay: (P5,827.50 x 3
yrs.)

P 17,482.50

Non-Payment of (5 days) Service Incentive Leave Pay


(for every year of service/but limited to 3 years only)
= P1,125.00 x 3 yrs.)
Actual, Moral, Exemplary &
Compensatory Damages

- P 6,326.97

----------

3,375.00
100,000.00

(P384,450.12)
P 38, 445.01
Ten (10%) Percent Attorneys Fees
P2,114,475.00)
(Total for 5 above-named Complainants
10. JOSE AUSTRAL (Dismissed in Feb. 2000)
Backwages from Mar. 2000 to May 2001
(P8,900.00 x 15 mos.)

P 133.500.00

13th Month Pay for the period

8,900.00

Unpaid Salary from Feb. 16 to 29, 2000


(P8,900.00 x 12 mos. / 365 days = (P292.60 x
14 days)

4,096.40

Actual, [M]oral, Exemplary &


Compensatory Damages

----------

P 100,000.00

(P246,496.40)
Ten (10%) Percent Attorneys Fees

P 24,679.64

TOTAL

P 271, 146.04

28

The dispositive portion of the Labor Arbiters Decision reads:


WHEREFORE, premises all considered, judgment is hereby rendered finding the
dismissal of all 21 complainants herein as illegal and ordering respondents Grand Asian
Shipping Lines, Inc., Eduardo P. Franscisco and William How to pay, jointly and
severally, each complainant the amounts, as follows, to wit:
A) 1. Wilfredo Galvez

P 286,284.05

2. Joel Sales

246,526.61

3. Cristito G. Gruta

265,019.60

4. Danilo Arguelles

340,403.33

5. Renato Batayola

422,895.13

6. Patricio Fresnillo

422,895.13

7. Jovy Noble

422,895.13

8. Emilio Dominico

422,895.13

9. Benny Nilmao

422,895.13

10. Jose Austral

271,146.04

11. Nobelito Rivas

281,900.13

12. Elias Facto

259,471.41

13. Jeremias Bonlagua

316,683.53

14. Rannie Canon

391,816.70

15. Fernando Malia

411,355.45

16. Calixto Flores

411,355.45

17. Necito Llanzana

411,355.45

18. Ramie Barrido

411,355.45

19. Albert Faulan

265,982.28

20. Magno Tosalem

419,352.79

21. Rolando Dela Guardia

419,352.79

(Grand Total) P 7,104,483.84


B) The awards of P100,000.00 each, as indemnity for damages and ten percent
(10%) of the total amount, as attorneys fees, are included in the above-individual
amount so awarded.
C) Respondents should immediately reinstate all the complainants to their former
position without loss of seniority [sic] and other benefits; and to pay them full
backwages up to the time of their actual reinstatement.
All other claims of complainants, not included in the above awards, are hereby ordered
dismissed for lack of merit.
SO ORDERED.29
Proceedings before the National Labor Relations Commission
Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce Bond30 before
the NLRC and posted a cash bond in the amount of P500,000.00.
In a Supplemental Motion to Reduce Bond,31 petitioners cited economic depression,
legality of the employees termination, compliance with labor standards, and wage
increases as grounds for the reduction of appeal bond.
The NLRC issued an Order32 dated February 20, 2002 denying petitioners motion to
reduce bond and directing them to post an additional bond in the amount
of P4,084,736.70 in cash or surety within an unextendible period of 10 days; otherwise,
their appeal would be dismissed. Petitioners failed to comply with the Order. Thus, on
February 3, 2003, complainants moved for the dismissal of the appeal since petitioners
had thus far posted only P1.5 million supersedeas bond and P500,000.00 cash bond,
short of the amount required by the NLRC.33
In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order denying
petitioners motion for the reduction of bond, reduced the amount of appeal bond
to P1.5 million and gave due course to petitioners appeal. It also found the appeal
meritorious and ruled that petitioners presented sufficient evidence to show just causes

for terminating complainants employment and compliance with due process.


Accordingly, complainants dismissal was valid, with the exception of Sales. The NLRC
adjudged petitioners to have illegally dismissed Sales as there was absence of any
record that the latter received any notice of suspension, administrative hearing, or
termination.
The NLRC struck down the monetary awards given by the Labor Arbiter, which, it ruled,
were based merely on the computations unilaterally prepared by the complainants. It
also ruled that Galvez, a ship captain, is considered a managerial employee not entitled
to premium pay for holiday and rest day, holiday pay and service incentive leave pay.
As for the other complainants, the award for premium pay, holiday pay, rest day pay
and overtime pay had no factual basis because no proof was adduced to show that
work was performed on a given holiday or rest day or beyond the eight hours normal
work time. Even then, the NLRC opined that these claims had already been given since
complainants salaries were paid on a 365-day basis. Likewise, service incentive leave
pay, awards for damages and double indemnity were deleted. Further, the NLRC
sustained respondents contention that it is the Secretary of Labor or the Regional
Director who has jurisdiction to impose the penalty of double indemnity for violations of
the Minimum Wage Laws and not the Labor Arbiter. The NLRC disposed of the case as
follows:
WHEREFORE, premises considered, the assailed Decision is hereby reversed as to all
complainants but modified with respect to Joel Sales.
Respondents are adjudged not guilty of illegal dismissal with respect to all complainants
except complainant Joel Sales. With the exception of Joel Sales, all the monetary
awards to all complainants are deleted from the decision.1wphi1
Respondents are ordered to pay, jointly and severally complainant Joel Sales his
backwages in the amount of P124,115.10 as computed in the assailed decision plus ten
(10%) thereof as attorneys fees.
We also sustain the order to reinstate him to his former position without loss of seniority
rights and other benefits and to pay him backwages up to the time of his actual
reinstatement.
SO ORDERED.35
Complainants filed Motions for Reconsideration while petitioners filed a Motion for
Partial Reconsideration. In a Resolution36 dated January 14, 2004, the NLRC
reconsidered its ruling with respect to Sales, absolving petitioners from the charge of
illegally dismissing him as Sales was neither placed under preventive suspension nor
terminated from the service. The NLRC upheld petitioners claim that it was Sales who
abandoned his work by failing to report back for re-assignment. The dispositive portion
of the Resolution reads:

WHEREFORE, premises considered, the Motions for Reconsideration filed by


complainants are denied for lack of merit. The Motion for Partial Reconsideration filed
by respondents is granted. The assailed decision is reconsidered in that Respondents
are likewise adjudged not guilty of illegal dismissal with respect to complainant Joel
Sales. The monetary awards in favor of complainant Joel Sales as well as the
reinstatement order are hereby deleted from the Decision.
SO ORDERED.37
Proceedings before the Court of Appeals
Respondents, excluding the other complainants, filed a Petition for Certiorari38 with the
CA, attributing grave abuse of discretion on the part of the NLRC in entertaining the
appeal despite the insufficiency of petitioners appeal bond. Respondents also assailed
the NLRCs ruling upholding the validity of their dismissal. They posited that the charge
of pilferage is not supported by clear, convincing and concrete evidence. In fact, the
RTC, Branch 15 of Manila already rendered a Decision39 on December 19, 2003
acquitting them of the crime of qualified theft lodged by the petitioners. Respondents
further prayed for the reinstatement of the Labor Arbiters monetary awards in their
favor.
In a Decision40 dated September 12, 2006, the CA set aside the NLRCs Decision and
Resolution. It held that the NLRCs act of entertaining the appeal is a jurisdictional error
since petitioners failure to post additional bond rendered the Labor Arbiters Decision
final, executory and immutable. The CA, nonetheless, proceeded to discuss the merits
of the case insofar as the illegal dismissal charge is concerned. The CA conformed with
the Labor Arbiters ruling that petitioners evidence was inadequate to support the
charge of pilferage and justify respondents termination. The CA ruled that Sales was
also illegally dismissed, stating that Sales active participation in the labor case against
petitioners belies the theory that he was not terminated from employment. The
dispositive portion of the CA Decision reads:
WHEREFORE, the petition is GRANTED and the assailed September 10, 2003
Decision and January 14, 2003 Resolution are, accordingly, ANNULLED and SET
ASIDE. In lieu thereof, the Labor Arbiters August 30, 2001 Decision is ordered
REINSTATED.
SO ORDERED.41
Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that
respondents were illegally dismissed, in reinstating the monetary awards granted by the
Labor Arbiter without passing upon the merits of these money claims and in ascribing
grave abuse of discretion on the part of the NLRC in taking cognizance of the appeal
before it.

On May 23, 2007, the CA issued a Resolution43 denying petitioners Motion for
Reconsideration. Hence, the instant Petition.
Issues
Petitioners assign the following errors:
I.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS WERE
ILLEGALLY DISMISSED.
A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic]
DISREGARDED THE FACT THAT THE OFFICE OF THE CITY PROSECUTOR
OF MANILA DETERMINED THAT THERE WAS A PRIMA FACIE CASE FOR
QUALIFIED THEFT AGAINST PETITIONERS, CONTRARY TO DECISIONS
THIS MOST HONORABLE COURT OF APPEAL[S] HAS HELD WHERE
SIMILAR FINDINGS OF THE INVESTIGATING PUBLIC PROSECUTOR HAD
BEEN CONSIDERED SUBSTANTIAL EVIDENCE TO JUSTIFY TERMINATION
OF EMPLOYMENT BASED ON LOSS OF TRUST AND CONFIDENCE.
B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN
DISCREDITING PRIVATE RESPONDENTS EVIDENCE ONE BY ONE WHEN,
TAKEN TOGETHER, SUCH EVIDENCE PROVIDED ADEQUATE BASIS FOR
THE DISMISSAL OF PETITIONERS IN ACCORDANCE WITH RELEVANT
SUPREME COURT OF APPEAL [sic] DECISIONS.
C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE
SUBSTANTIVE AND PROCEDURAL REQUIREMENTS FOR THE
TERMINATION OF THEIR EMPLOYMENT WERE SATISFIED IN THIS CASE.
D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN
RULING THAT PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.
II.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
JURISPRUDENCE WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE
TO VALIDLY PERFECT [THEIR] APPEAL OF THE LABOR ARBITERS DECISION.44
Petitioners claim that the NLRC properly took cognizance of their appeal and properly
granted their motion for reduction of the appeal bond, explaining that strict
implementation of the rules may be relaxed in certain cases so as to avoid a
miscarriage of justice. Petitioners also claim that there was adequate basis to render
respondents dismissal from service valid, as correctly ruled by the NLRC.

Our Ruling
The assailed CA Decision must be vacated and set aside.
There was substantial compliance with
the rules on appeal bonds.
In order to perfect an appeal from the Decision of the Labor Arbiter granting monetary
award, the Labor Code requires the posting of a bond, either in cash or surety bond, in
an amount equivalent to the monetary award. Article 223 of the Labor Code provides:
ART. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. x x x
xxxx
In case of a judgment involving a monetary award, an appeal by the employer [may] be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from.
Nonetheless, we have consistently held that rules should not be applied in a very rigid
and strict sense.45 This is especially true in labor cases wherein the substantial merits of
the case must accordingly be decided upon to serve the interest of justice. 46 When there
has been substantial compliance, relaxation of the Rules is warranted. 47
In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal bond in
the amount of P650,000.00 instead of P1,025,081.82 award stated in the Decision of
the Labor Arbiter is substantial compliance with the requirement under Article 223.
Likewise, in Pasig Cylinder Mfg. Corp. v. Rollo,49 we ruled that the filing of a reduced
appeal bond ofP100,000.00 is not fatal in an appeal from the labor arbiters ruling
awarding P3,132,335.57 to the dismissed employees. In Rosewood Processing, Inc. v.
National Labor Relations Commission,50 we allowed the filing of a reduced bond
ofP50,000.00, accompanied with a motion, in an appeal from the Labor Arbiters award
of P789,154.39.
In the case at bench, petitioners appealed from the Decision of the Labor Arbiter
awarding to crewmembers the amount ofP7,104,483.84 by filing a Notice of Appeal with
a Very Urgent Motion to Reduce Bond and posting a cash bond in the amount
of P500,000.00 and a supersedeas bond in the amount of P1.5 million. We find this to
be in substantial compliance with Article 223 of the Labor Code. It is true that the NLRC
initially denied the request for reduction of the appeal bond. However, it eventually
allowed its reduction and entertained petitioners appeal. We disagree with the CA in
holding that the NLRC acted with grave abuse of discretion as the granting of a motion

to reduce appeal bond lies within the sound discretion of the NLRC upon showing of the
reasonableness of the bond tendered and the merits of the grounds relied
upon.51 Hence, the NLRC did not err or commit grave abuse of discretion in taking
cognizance of petitioners appeal before it.
Galvez and Gruta were validly dismissed
on the ground of loss of trust and
confidence; there were no valid grounds
for the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and
Austral.
We do not, however, agree with the findings of the NLRC that all respondents were
dismissed for just causes. In termination disputes, the burden of proving that the
dismissal is for a just or valid cause rests on the employers. Failure on their part to
discharge such burden will render the dismissal illegal.52
As specified in the termination notice, respondents were dismissed on the grounds of (i)
serious misconduct, particularly in engaging in pilferage while navigating at sea, (ii)
willful breach of the trust reposed by the company, and (iii) commission of a crime or
offense against their employer. Petitioners claim that based on the sworn statement of
Abis, joint affidavit of Bernabe and De la Rama, letter of petitioner Francisco requesting
assistance from the CIDG, formal complaint sheet, complaint and supplementary
complaint affidavit of Montegrico, CIDGs letter referring respondents case to the Office
of the City Prosecutor of Manila, resolution of the City Prosecutor finding a prima facie
case of qualified theft, and the Information for qualified theft, there is a reasonable
ground to believe that respondents were responsible for the pilferage of diesel fuel oil at
M/T Dorothy Uno, which renders them unworthy of the trust and confidence reposed on
them.
After examination of the evidence presented, however, we find that petitioners failed to
substantiate adequately the charges of pilferage against respondents. "[T]he quantum
of proof which the employer must discharge is substantial evidence. x x x Substantial
evidence is that amount of relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise."53
Here, the mere filing of a formal charge, to our mind, does not automatically make the
dismissal valid. Evidence submitted to support the charge should be evaluated to see if
the degree of proof is met to justify respondents termination. The affidavit executed by
Montegrico simply contained the accusations of Abis that respondents committed
pilferage, which allegations remain uncorroborated. "Unsubstantiated suspicions,
accusations, and conclusions of employers do not provide for legal justification for
dismissing employees."54 The other bits of evidence were also inadequate to support
the charge of pilferage. The findings made by GASLIs port captain and internal auditor
and the resulting certification executed by De la Rama merely showed an overstatement

of fuel consumption as revealed in the Engineers Voyage Reports. The report of Jade
Sea Land Inspection Services only declares the actual usage and amount of fuel
consumed for a particular voyage. There are no other sufficient evidence to show that
respondents participated in the commission of a serious misconduct or an offense
against their employer.
As for the second ground for respondents termination, which is loss of trust and
confidence, distinction should be made between managerial and rank and file
employees. "[W]ith respect to rank-and-file personnel, loss of trust and confidence, as
ground for valid dismissal, requires proof of involvement in the alleged events x x x
[while for] managerial employees, the mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his dismissal."55
In the case before us, Galvez, as the ship captain, is considered a managerial
employee since his duties involve the governance, care and management of the
vessel.56 Gruta, as chief engineer, is also a managerial employee for he is tasked to
take complete charge of the technical operations of the vessel.57 As captain and as
chief engineer, Galvez and Gruta perform functions vested with authority to execute
management policies and thereby hold positions of responsibility over the activities in
the vessel. Indeed, their position requires the full trust and confidence of their employer
for they are entrusted with the custody, handling and care of company property and
exercise authority over it.
Thus, we find that there is some basis for the loss of confidence reposed on Galvez and
Gruta. The certification issued by De la Rama stated that there is an overstatement of
fuel consumption. Notably, while respondents made self-serving allegations that the
computation made therein is erroneous, they never questioned the competence of De la
Rama to make such certification. Neither did they question the authenticity and validity
of the certification. Thus, the fact that there was an overstatement of fuel consumption
and that there was loss of a considerable amount of diesel fuel oil remained unrefuted.
Their failure to account for this loss of company property betrays the trust reposed and
expected of them. They had violated petitioners trust and for which their dismissal is
justified on the ground of breach of confidence.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of
involvement in the loss of the vessels fuel as well as their participation in the alleged
theft is required for they are ordinary rank and file employees. And as discussed above,
no substantial evidence exists in the records that would establish their participation in
the offense charged. This renders their dismissal illegal, thus, entitling them to
reinstatement plus full backwages, inclusive of allowances and other benefits, computed
from the time of their dismissal up to the time of actual reinstatement.
No evidence of Sales dismissal from employment.
The rule that the employer bears the burden of proof in illegal dismissal cases finds no
application when the employer denies having dismissed the employee. 58 The employee

must first establish by substantial evidence the fact of dismissal59before shifting to the
employer the burden of proving the validity of such dismissal.
We give credence to petitioners claim that Sales was not dismissed from employment.
Unlike the other respondents, we find no evidence in the records to show that Sales
was preventively suspended, that he was summoned and subjected to any
administrative hearing and that he was given termination notice. From the records, it
appears Sales was not among those preventively suspended on February 26, 2000. To
bolster this fact, petitioners presented the Payroll Journal Register for the period March
1-15, 200060 showing that Sales was still included in the payroll and was not among
those who were charged with an offense to warrant suspension. In fact, Sales signature
in the Semi-Monthly Attendance Report for February 26, 2000 to March 10,
200061 proves that he continued to work as Chief Mate for the vessel M/T Dorothy Uno
along with a new set of crewmembers. It is likewise worth noting that in the
Supplemental Complaint Affidavit of Montegrico, Sales was not included in the list of
those employees who were accused of having knowledge of the alleged pilferage. This
only shows that he was never subjected to any accusation or investigation as a prelude
to termination. Hence, it would be pointless to determine the legality or illegality of his
dismissal because, in the first place, he was not dismissed from employment.
Respondents are not entitled to their
money claims except 13th month pay for
the period of their illegal dismissal,
unpaid salaries, salary differentials,
double indemnity for violation of the
Minimum Wage Law and attorneys fees.
As for the money claims of respondents, we note that petitioners did not bring this issue
before us or assign it as error in this Petition. It was raised by the petitioners only in their
Memorandum of Appeal filed with the NLRC and in their Motion for Reconsideration of
the CAs Decision reinstating the Labor Arbiters award. Nonetheless, in order to arrive
at a complete adjudication of the case and avoid piecemeal dispensation of justice, we
deem it necessary to resolve the validity of respondents money claims and to discuss
the propriety of the Labor Arbiters award.
Galvez and Gruta, as managerial employees, are not entitled to their claims for holiday
pay, service incentive leave pay and premium pay for holiday and restday. Article 82 of
the Labor Code specifically excludes managerial employees from the coverage of the
law regarding conditions of employment which include hours of work, weekly rest
periods, holidays, service incentive leaves and service charges.62
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot
sustain the argument that they are classified as field personnel under Article 82 of the
Labor Code who are likewise excluded. Article 82 defines field personnel as referring to
"non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in

the field cannot be determined with reasonable certainty." They are those who perform
functions which "cannot be effectively monitored by the employer or his
representative."63 Here, respondents, during the entire course of their voyage, remain
on board the vessel. They are not field personnel inasmuch as they were constantly
supervised and under the effective control of the petitioners through the vessels ship
captain.
Nevertheless, we cannot grant them their claims for holiday pay, premium pay for
holiday and restday, overtime pay and service incentive leave pay. Respondents do not
dispute petitioners assertion that in computing respondents salaries, petitioners use
365 days as divisor. In fact, this was the same divisor respondents used in computing
their money claims against petitioners. Hence, they are paid all the days of the month,
which already include the benefits they claim.64 As for overtime pay and premium pay
for holidays and restdays, no evidence was presented to prove that they rendered work
in excess of the regular eight working hours a day or worked during holidays and
restdays. In the absence of such proof, there could be no basis to award these
benefits.65
For the claim of service incentive leave pay, respondents did not specify what year they
were not paid such benefit. In addition, records show that they were paid their vacation
leave benefits.66 Thus, in accordance with Article 95 of the Labor Code,67 respondents
can no longer claim service incentive leave pay.
On the other hand, for failure to effectively refute the awards for 13th month pay for the
period that respondents were illegally dismissed, unpaid salaries and salary
differentials,68 we affirm the grant thereof as computed by the Labor Arbiter. Petitioners
evidence which consist of a mere tabulation69 of the amount of actual benefits paid and
given to respondents is self-serving as it does not bear the signatures of the employees
to prove that they had actually received the amounts stated therein.
Next, we come to the legitimacy of the Labor Arbiters authority to impose the penalty of
double indemnity for violations of the Minimum Wage Law. Petitioners argue that the
authority to issue compliance orders in relation to underpayment of wages is vested
exclusively on the Secretary of Labor or the Regional Director and that the Labor Arbiter
has no jurisdiction thereover. They cite Section 12 of RA 6727,70 as amended by RA
8188, which provides:
Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which
refuses or fails to pay any of the prescribed increases or adjustments in the wage rates
made in accordance with this Act shall be punished by a fine [of] not less than Twentyfive thousand pesos (P25,000) nor more than One hundred thousand pesos (P100,000)
or imprisonment of not less than two (2) years nor more than four (4) years or both such
fine and imprisonment at the discretion of the court: Provided, That any person
convicted under this Act shall not be entitled to the benefits provided for under the
Probation Law.

The employer concerned shall be ordered to pay an amount equivalent to double the
unpaid benefits owing to the employees: Provided, That payment of indemnity shall not
absolve the employer from the criminal liability under this Act.
If the violation is committed by a corporation, trust or firm, partnership, association or
any other entity, the penalty of imprisonment shall be imposed upon the entitys
responsible officers including but not limited to, the president, vice president, chief
executive officer, general manager, managing director or partner.
Petitioners contention is untenable. First, there is no provision in RA 6727 or RA 8188
which precludes the Labor Arbiter from imposing the penalty of double indemnity
against employers. Second, Article 217 of the Labor Code gives the Labor Arbiter
jurisdiction over cases of termination disputes and those cases accompanied with a
claim for reinstatement. Thus, in Bay Haven, Inc. v. Abuan 71 the Court held that an
allegation of illegal dismissal deprives the
Secretary of Labor of jurisdiction over claims to enforce compliance with labor standards
law.1wphi1 This was also pronounced in Peoples Broadcasting Service (Bombo
Radyo Phils., Inc.) v. Secretary of the Department of Labor and Employment, 72wherein
we stated that the Secretary of Labor has no jurisdiction in cases where employeremployee relationship has been terminated. We thus sustain the Labor Arbiters award
of double indemnity.
We also sustain the award of attorneys fees since respondents were compelled to file a
complaint for the recovery of wages and were forced to litigate and incur expenses. 73
The Labor Arbiters grant of actual/compensatory, moral and exemplary damages in the
amount of P100,000.00 is, however, incorrect. In order to recover actual or
compensatory damages, it must be capable of proof and must be necessarily proved
with a reasonable degree of certainty.74 While moral damages is given to a dismissed
employee when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or
public policy. Exemplary damages, on the other hand, is given if the dismissal is
effected in a wanton, oppressive or malevolent manner.75 Here, the Labor Arbiter erred
in awarding the damages by lumping actual, moral and exemplary damages. Said
damages rest on different jural foundations and, hence, must be independently
identified and justified.76 Also, there are no competent evidence of actual expenses
incurred that would justify the award of actual damages. Lastly, respondents were
terminated after being accused of the charge of pilferage of the vessels fuel oil after
examination of the report made by the vessels chief engineer which showed a
considerable amount of fuel lost. Although the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and Austral is illegal, based on the circumstances
surrounding their dismissal, petitioners could not have been motivated by bad faith in
deciding to terminate their services.

Lastly, this Court exculpates petitioners Francisco and How from being jointly and
severally liable with GASLI for the illegal dismissal and payment of money claims of
herein respondents. In order to hold them liable, it must first be shown by competent
proof that they have acted with malice and bad faith in directing the corporate
affairs.77 For want of such proof, Francisco and How should not be held liable for the
corporate obligations of GASLI.
WHEREFORE, the Court of Appeals Decision dated September 12, 2006 and the
Resolution dated May 23, 2007 in CA-G.R. SP No. 82379 are ANNULLED and SET
ASIDE. Respondents Wilfredo Galvez and Cristito Gruta are hereby DECLARED
dismissed from employment for just cause while respondent Joel Sales was not
dismissed from employment. Respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico, Benny
Nilmao, and Jose Austral are DECLARED to have been illegally dismissed; hence,
petitioners are ordered to reinstate them to their former position or its equivalent without
loss of seniority rights and to pay them full backwages, inclusive of allowances and
other benefits, computed from the time of dismissal up to the time of actual
reinstatement, as well as 13th month pay for the period of their illegal dismissal.
Petitioner Grand Asian Shipping Lines, Inc. is also ordered to pay respondents Wilfredo
Galvez, Danilo Arguelles, Renato Batayola, Patricio Fresnillo, Jovy Noble, Emilio
Dominico, Benny Nilmao and Jose Austral unpaid salaries from February 16 to 29,
2000, as computed by the Labor Arbiter; and to pay respondents Danilo Arguelles,
Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico and Benny Nilmao
salary differentials plus double indemnity, as computed by the Labor Arbiter. Ten
percent (10%) of the monetary award should be added as and by way of attorneys
fees. Interest at the rate of six percent (6%) per annum shall be imposed on all
monetary awards from date of finality of this Decision until full payment pursuant to
Nacar v. Gallery Frames.78
Petitioners Eduardo P. Francisco and William How are absolved from the liability
adjudged against petitioner Grand Asian Shipping Lines, Inc.
SO ORDERED.

G.R. No. 156367

May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,


vs.
ANTONIO BAUTISTA, respondent.
DECISION

CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision1 and
Resolution2 of the Court of Appeals affirming the Decision3 of the National Labor
Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13th month pay and service incentive
leave pay) by deleting the award of 13th month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto
Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes ManilaTuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio.
Respondent was paid on commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe,
Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus
No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any
warning.
Respondent averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost twentyfour (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent
further alleged that he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged
buses and that despite respondents pleas for reconsideration, the same was ignored by
management. After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with
Money Claims for nonpayment of 13th month pay and service incentive leave pay
against Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete
with offenses involving reckless imprudence, gross negligence, and dishonesty. To
support its claim, petitioner presented copies of letters, memos, irregularity reports, and
warrants of arrest pertaining to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative,
respondents employment was terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by
the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision, 4 the dispositive
portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for
Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is
hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay
to the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his
dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service
with the respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for
lack of merit.5
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to
the NLRC which rendered its decision on 28 September 2001, the decretal portion of
which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851,
particularly Sec. 3 provides:
"Section 3. Employers covered. The Decree shall apply to all employers
except to:
xxx

xxx

xxx

e) employers of those who are paid on purely commission, boundary, or


task basis, performing a specific work, irrespective of the time consumed
in the performance thereof. xxx."
Records show that complainant, in his position paper, admitted that he was paid
on a commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed
Decision by deleting the award of 13thmonth pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting


the award of 13th month pay. The other findings are AFFIRMED.6
In other words, the award of service incentive leave pay was maintained. Petitioner thus
sought a reconsideration of this aspect, which was subsequently denied in a Resolution
by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the
review of said decision with the Court of Appeals which was subsequently denied by the
appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of
merit; and the assailed Decision of respondent Commission in NLRC NCR CA
No. 026584-2000 is hereby AFFIRMED in toto. No costs.7
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the
Labor Code, as amended, is applicable to respondents claim of service incentive leave
pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article 95
of the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules
and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is


unsupervised by the employer including those who are engaged on task or
contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the
performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations
of the Labor Code to apply only to those employees not explicitly excluded by Section 1
of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply
to employees classified as "field personnel." The phrase "other employees whose

performance is unsupervised by the employer" must not be understood as a separate


classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."8
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis."Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow.9 Hence, employees engaged on task
or contract basis or paid on purely commission basis are not automatically exempted
from the grant of service incentive leave, unless, they fall under the classification of field
personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced.
What must be ascertained in order to resolve the issue of propriety of the grant of
service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, "field personnel" shall refer to nonagricultural employees who regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine TechnicalClerical Commercial Employees Association10 which states that:
As a general rule, [field personnel] are those whose performance of their
job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers
cannot be said to be field personnel despite the fact that they are performing
work away from the principal office of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said
advisory opinion, no employee would ever be considered a field personnel because
every employer, in one way or another, exercises control over his employees. Petitioner
further argues that the only criterion that should be considered is the nature of work of
the employee in that, if the employees job requires that he works away from the
principal office like that of a messenger or a bus driver, then he is inevitably a field
personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a "field
personnel" is not merely concerned with the location where the employee regularly
performs his duties but also with the fact that the employees performance is

unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employees time and performance are constantly
supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies,
there are its inspectors assigned at strategic places who board the bus and
inspect the passengers, the punched tickets, and the conductors reports. There
is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether
or not there are problems thereon as reported by the driver and/or conductor.
They too, must be at specific place as [sic] specified time, as they generally
observe prompt departure and arrival from their point of origin to their point of
destination. In each and every depot, there is always the Dispatcher whose
function is precisely to see to it that the bus and its crew leave the premises at
specific times and arrive at the estimated proper time. These, are present in the
case at bar. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be considered a
field personnel.11
We agree in the above disquisition. Therefore, as correctly concluded by the appellate
court, respondent is not a field personnel but a regular employee who performs tasks
usually necessary and desirable to the usual trade of petitioners business. Accordingly,
respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive
leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not
the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable
to respondents claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employeremployee relationship shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered
is when does the cause of action for money claims accrue in order to determine the
reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant violative of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.12
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time
when the third element of a cause of action transpired. Stated differently, in the
computation of the three-year prescriptive period, a determination must be made as to
the period when the act constituting a violation of the workers right to the benefits being
claimed was committed. For if the cause of action accrued more than three (3) years
before the filing of the money claim, said cause of action has already prescribed in
accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it
is established that the benefits being claimed have been withheld from the employee for
a period longer than three (3) years, the amount pertaining to the period beyond the
three-year prescriptive period is therefore barred by prescription. The amount that can
only be demanded by the aggrieved employee shall be limited to the amount of the
benefits withheld within three (3) years before the filing of the complaint.14
It is essential at this point, however, to recognize that the service incentive leave is a
curious animal in relation to other benefits granted by the law to every employee. In the
case of service incentive leave, the employee may choose to either use his leave
credits or commute it to its monetary equivalent if not exhausted at the end of the
year.15 Furthermore, if the employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. As enunciated by the Court
in Fernandez v. NLRC:16
The clear policy of the Labor Code is to grant service incentive leave pay to
workers in all establishments, subject to a few exceptions. Section 2, Rule V,
Book III of the Implementing Rules and Regulations provides that "[e]very
employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay." Service incentive leave is a
right which accrues to every employee who has served "within 12 months,
whether continuous or broken reckoned from the date the employee started
working, including authorized absences and paid regular holidays unless the
working days in the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in which case said
period shall be considered as one year." It is also "commutable to its money
equivalent if not used or exhausted at the end of the year." In other words, an
employee who has served for one year is entitled to it. He may use it as leave
days or he may collect its monetary value. To limit the award to three years, as
the solicitor general recommends, is to unduly restrict such right.17 [Italics
supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an


entitled employee to claim his service incentive leave pay accrues from the moment the
employer refuses to remunerate its monetary equivalent if the employee did not make
use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate his leave credits and opts for its commutation upon
his resignation or separation from employment, his cause of action to claim the whole
amount of his accumulated service incentive leave shall arise when the employer fails to
pay such amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive
leave, we can conclude that the three (3)-year prescriptive period commences, not at
the end of the year when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the
employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and interpretation of
the provisions of the Labor Code and its implementing regulations, the workingmans
welfare should be the primordial and paramount consideration.18 The policy is to extend
the applicability of the decree to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of the State to
give maximum aid and protection to labor.19
In the case at bar, respondent had not made use of his service incentive leave nor
demanded for its commutation until his employment was terminated by petitioner.
Neither did petitioner compensate his accumulated service incentive leave pay at the
time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of action to claim
the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his accumulated
service incentive leave pay at the time of his dismissal. Since respondent had filed his
money claim after only one month from the time of his dismissal, necessarily, his money
claim was filed within the prescriptive period provided for by Article 291 of the Labor
Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.
SO ORDERED.

G.R. No. 146530

January 17, 2005

PEDRO CHAVEZ, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and
ALVIN LEE, Plant Manager,respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated
December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the
complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC
decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming
that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and distribution. It
engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25,
1984. As such, the petitioner was tasked to deliver the respondent companys products
from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila.
The respondent company furnished the petitioner with a truck. Most of the petitioners
delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and
returning thereto in the afternoon two or three days after. The deliveries were made in
accordance with the routing slips issued by respondent company indicating the order,
time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per
trip. This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal,
the petitioner was receivingP900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent
companys plant manager, his (the petitioners) desire to avail himself of the benefits
that the regular employees were receiving such as overtime pay, nightshift differential
pay, and 13th month pay, among others. Although he promised to extend these benefits
to the petitioner, respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before
the case could be heard, respondent company terminated the services of the petitioner.
Consequently, on May 25, 1995, the petitioner filed an amended complaint against the
respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay,
nightshift differential pay, 13th month pay, among others. The case was docketed as
NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee
relationship between the respondent company and the petitioner. They averred that the
petitioner was an independent contractor as evidenced by the contract of service which
he and the respondent company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to
hire and the Contractor [referring to Pedro Chavez], by nature of their specialized line or
service jobs, accepts the services to be rendered to the Principal, under the following
terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the
contractor to the principal, shall only cover travel route from Mariveles to Metro
Manila. Otherwise, any change to this travel route shall be subject to further
agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery
transport services fully rendered by the Contractor shall be on a per trip basis
depending on the size or classification of the truck being used in the transport
service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be
THREE HUNDRED PESOS (P300.00) and EFFECTIVE December 15,
1984.
b) If the hauling or delivery service require a truck of ten wheeler, the
payment on a per trip basis, following the same route mentioned, shall be
THREE HUNDRED FIFTY (P350.00) Pesos and Effective December 15,
1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at
least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the
Principal for the cost of any damage to, loss of any goods, cargoes, finished
products or the like, while the same are in transit, or due to reckless [sic] of its
men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its
men working for him subject to this agreement, and that the Contractor shall hold
the Principal free and harmless from any liability or claim that may arise by virtue
of the Contractors non-compliance to the existing provisions of the Minimum
Wage Law, the Employees Compensation Act, the Social Security System Act, or
any other such law or decree that may hereafter be enacted, it being clearly
understood that any truck drivers, helpers or men working with and for the
Contractor, are not employees who will be indemnified by the Principal for any
such claim, including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties,
subject to renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed
twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the
petitioner, the terms of the contracts were substantially the same. The relationship of
the respondent company and the petitioner was allegedly governed by this contract of
service.
The respondents insisted that the petitioner had the sole control over the means and
methods by which his work was accomplished. He paid the wages of his helpers and
exercised control over them. As such, the petitioner was not entitled to regularization
because he was not an employee of the respondent company. The respondents,
likewise, maintained that they did not dismiss the petitioner. Rather, the severance of
his contractual relation with the respondent company was due to his violation of the
terms and conditions of their contract. The petitioner allegedly failed to observe the
minimum degree of diligence in the proper maintenance of the truck he was using,
thereby exposing respondent company to unnecessary significant expenses of
overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the
Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal. The
Labor Arbiter declared that the petitioner was a regular employee of the respondent
company as he was performing a service that was necessary and desirable to the
latters business. Moreover, it was noted that the petitioner had discharged his duties as
truck driver for the respondent company for a continuous and uninterrupted period of
more than ten years.
The contract of service invoked by the respondents was declared null and void as it
constituted a circumvention of the constitutional provision affording full protection to
labor and security of tenure. The Labor Arbiter found that the petitioners dismissal was
anchored on his insistent demand to be regularized. Hence, for lack of a valid and just
cause therefor and for their failure to observe the due process requirements, the
respondents were found guilty of illegal dismissal. The dispositive portion of the Labor
Arbiters decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring


respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with
business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said
respondent to pay complainant his separation pay equivalent to one (1) month pay per
year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement
as his reinstatement back to work will not do any good between the parties as the
employment relationship has already become strained and full backwages from the time
his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off
date) until compliance, otherwise, his backwages shall continue to run. Also to pay
complainant his 13th month pay, night shift differential pay and service incentive leave
pay hereunder computed as follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as
attorneys fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal
was dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in
toto the decision of the Labor Arbiter. In the said decision, the NLRC characterized the
contract of service between the respondent company and the petitioner as a "scheme"
that was resorted to by the respondents who, taking advantage of the petitioners
unfamiliarity with the English language and/or legal niceties, wanted to evade the effects
and implications of his becoming a regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC.
Acting thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its
earlier decision and, this time, holding that no employer-employee relationship existed
between the respondent company and the petitioner. In reconsidering its earlier
decision, the NLRC stated that the respondents did not exercise control over the means
and methods by which the petitioner accomplished his delivery services. It upheld the
validity of the contract of service as it pointed out that said contract was silent as to the
time by which the petitioner was to make the deliveries and that the petitioner could hire
his own helpers whose wages would be paid from his own account. These factors
indicated that the petitioner was an independent contractor, not an employee of the
respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280
of the Labor Code on the regularization of employees. Said contract, including the fixed
period of employment contained therein, having been knowingly and voluntarily entered
into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The
NLRC, thus, dismissed the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by
the NLRC in its Resolution dated September 7, 1998. He then filed with this Court a
petition for certiorari, which was referred to the CA following the ruling inSt. Martin
Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10,
1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said
decision, the CA ruled that the petitioner was a regular employee of the respondent
company because as its truck driver, he performed a service that was indispensable to
the latters business. Further, he had been the respondent companys truck driver for
ten continuous years. The CA also reasoned that the petitioner could not be considered
an independent contractor since he had no substantial capital in the form of tools and
machinery. In fact, the truck that he drove belonged to the respondent company. The
CA also observed that the routing slips that the respondent company issued to the
petitioner showed that it exercised control over the latter. The routing slips indicated the
chronological order and priority of delivery, the urgency of certain deliveries and the
time when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his
job noting that he just filed a complaint for regularization. This actuation of the petitioner
negated the respondents allegation that he abandoned his job. The CA held that the
respondents failed to discharge their burden to show that the petitioners dismissal was
for a valid and just cause. Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the
respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers
from attaining the status of regular employment, it is but necessary for the courts to
scrutinize with extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into to preclude
acquisition of tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the "contract of
service" is just another attempt to exploit the unwitting employee and deprive him of the
protection of the Labor Code by making it appear that the stipulations of the parties
were governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete
turn around as it rendered the assailed Resolution dated December 15, 2000 upholding

the contract of service between the petitioner and the respondent company. In
reconsidering its decision, the CA explained that the extent of control exercised by the
respondents over the petitioner was only with respect to the result but not to the means
and methods used by him. The CA cited the following circumstances: (1) the
respondents had no say on how the goods were to be delivered to the customers; (2)
the petitioner had the right to employ workers who would be under his direct control;
and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten
years was, according to the CA, of no moment because his status was determined not
by the length of service but by the contract of service. This contract, not being contrary
to morals, good customs, public order or public policy, should be given the force and
effect of law as between the respondent company and the petitioner. Consequently, the
CA reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioners
complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000
Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION
TO THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND
PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE
PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH
IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employeremployee relationship between the respondent company and the petitioner. We rule in
the affirmative.
The elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employers power to control the employees conduct. 11 The most

important element is the employers control of the employees conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish
it.12 All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner
without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time,
task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be
rendered."13 That the petitioner was paid on a per trip basis is not significant. This is
merely a method of computing compensation and not a basis for determining the
existence or absence of employer-employee relationship. One may be paid on the basis
of results or time expended on the work, and may or may not acquire an employment
status, depending on whether the elements of an employer-employee relationship are
present or not.14 In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered to the
latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to
pay his employees by means of payroll.15 The payroll should show, among other things,
the employees rate of pay, deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the payroll to support their
claim that the petitioner was not their employee, raising speculations whether this
omission proves that its presentation would be adverse to their case.16
Third. The respondents power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this power by
terminating the petitioners services albeit in the guise of "severance of contractual
relation" due allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship,
the "control test" is the most important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under its own responsibility
according to its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the
results thereof.17 Hence, while an independent contractor enjoys independence and
freedom from the control and supervision of his principal, an employee is subject to the
employers power to control the means and methods by which the employees work is to
be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and
methods by which the petitioner accomplished his work, a careful review of the records

shows that the latter performed his work as truck driver under the respondents
supervision and control. Their right of control was manifested by the following attendant
circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be
used exclusively to deliver respondent companys goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park
the truck in either of two specific places only, to wit: at its office in Metro Manila at
2320 Osmea Street, Makati City or at BEPZ, Mariveles, Bataan;20and
4. Respondents determined how, where and when the petitioner would perform
his task by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological
order and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc.
This meant that the petitioner had to deliver the same according to the
order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be
delivered urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods
were to be delivered to the customers as, for example, the words
"tomorrow morning" was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised control
over the means and methods by which the petitioner accomplished his work as truck
driver of the respondent company. On the other hand, the Court is hard put to believe
the respondents allegation that the petitioner was an independent contractor engaged
in providing delivery or hauling services when he did not even own the truck used for
such services. Evidently, he did not possess substantial capitalization or investment in
the form of tools, machinery and work premises. Moreover, the petitioner performed the
delivery services exclusively for the respondent company for a continuous and
uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier
discussed indubitably establish the existence of an employer-employee relationship
between the respondent company and the petitioner. It bears stressing that the
existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract and providing therein that the employee is an independent
contractor when, as in this case, the facts clearly show otherwise. Indeed, the
employment status of a person is defined and prescribed by law and not by what the
parties say it should be.22

Having established that there existed an employer-employee relationship between the


respondent company and the petitioner, the Court shall now determine whether the
respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and
just cause.23 In this case, the respondents failed to prove any such cause for the
petitioners dismissal. They insinuated that the petitioner abandoned his job. To
constitute abandonment, these two factors must concur: (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship.24 Obviously, the petitioner did not intend to sever his
relationship with the respondent company for at the time that he allegedly abandoned
his job, the petitioner just filed a complaint for regularization, which was forthwith
amended to one for illegal dismissal. A charge of abandonment is totally inconsistent
with the immediate filing of a complaint for illegal dismissal, more so when it includes a
prayer for reinstatement.25
Neither can the respondents claim that the petitioner was guilty of gross negligence in
the proper maintenance of the truck constitute a valid and just cause for his dismissal.
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.26 The negligence, to warrant
removal from service, should not merely be gross but alsohabitual.27 The single and
isolated act of the petitioners negligence in the proper maintenance of the truck alleged
by the respondents does not amount to "gross and habitual neglect" warranting his
dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was not
dismissed from the service but due to complainants breach of their contractual relation,
i.e., his violation of the terms and conditions of the contract, we are very much inclined
to believe complainants story that his dismissal from the service was anchored on his
insistent demand that he be considered a regular employee. Because complainant in
his right senses will not just abandon for that reason alone his work especially so that it
is only his job where he depends chiefly his existence and support for his family if he
was not aggrieved by the respondent when he was told that his services as driver will
be terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is
unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.29 However, as found by the
Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioners
reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an

award of separation pay equivalent to one month for every year of service from the time
of his illegal dismissal up to the finality of this judgment in addition to his full backwages,
allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15,
2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP
No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the
Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of
illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.

G.R. No. 153511

July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON


NAPUD, in his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed to perform in the
restaurant of a hotel. On August 9, 1999, respondent, whose stage name was Joey R.
Roa, filed a complaint for alleged unfair labor practice, constructive illegal dismissal, and
the underpayment/nonpayment of his premium pay for holidays, separation pay, service
incentive leave pay, and 13111 month pay. He prayed for attorney's fees, moral
damages off P100,000.00 and exemplary damages for P100,000.00. 1
Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was given to
him after each nights performance; that his rate had increased to P750.00/night; and
that during his employment, he could not choose the time of performance, which had
been fixed from 7:00 pm to 10:00 pm for three to six times/week. He added that the
Legend Hotels restaurant manager had required him to conform with the venues motif;
that he had been subjected to the rules on employees representation checks and chits,
a privilege granted to other employees; that on July 9, 1999, the management had
notified him that as a cost-cutting measure his services as a pianist would no longer be
required effective July 30, 1999; that he disputed the excuse, insisting that Legend
Hotel had been lucratively operating as of the filing of his complaint; and that the loss of
his employment made him bring his complaint.2

In its defense, petitioner denied the existence of an employer-employee relationship


with respondent, insisting that he had been only a talent engaged to provide live music
at Legend Hotels Madison Coffee Shop for three hours/day on two days each week;
and stated that the economic crisis that had hit the country constrained management to
dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit
upon finding that the parties had no employer-employee relationship.3 The LA explained
thusly:
xxx
On the pivotal issue of whether or not there existed an employer-employee relationship
between the parties, our finding is in the negative. The finding finds support in the
service contract dated September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service contract, as complainant
suggests in his reply (third paragraph, page 4), the picture would not change because of
the admission by complainant in his letter dated October 8, 1996 (Annex "C") that what
he was receiving was talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly,
unlike the regular employees of the hotel who are paid by monthly xxx.
xxx
And thus, absent the power to control with respect to the means and methods by which
his work was to be accomplished, there is no employer-employee relationship between
the parties xxx.
xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4
Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed
the LA on May 31, 2001.5
Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on
certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:

xxx
Applying the above-enumerated elements of the employee-employer relationship in this
case, the question to be asked is, are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of employer-employee relationship, it
is the power of control that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioners line
of work, he was supervised and controlled by respondents restaurant manager who at
certain times would require him to perform only tagalog songs or music, or wear barong
tagalog to conform with Filipiniana motif of the place and the time of his performance is
fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner
could not choose the time of his performance. xxx.
As to the status of petitioner, he is considered a regular employee of private
respondents since the job of the petitioner was in furtherance of the restaurant business
of respondent hotel. Granting that petitioner was initially a contractual employee, by the
sheer length of service he had rendered for private respondents, he had been converted
into a regular employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize
business losses, which is recognized by law under Article 283 of the Labor Code, xxx.
xxx
WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx. 7
Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND
RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED
WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER
POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE

MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL


JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT
RELATIONSHIP BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES,
SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT
THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC
NCR CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION
DATED JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN
HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC
AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE
DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH
ROA FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA
WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED
OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI UNDER
RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE
OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC
OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE
CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the petition
for certiorari filed in the CA was the proper recourse; and into two substantive issues,
namely: (a) whether or not respondent was an employee of petitioner; and (b) if
respondent was petitioners employee, whether he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondents petition for certiorari was improper as a remedy
against the NLRC due to its raising mainly questions of fact and because it did not
demonstrate that the NLRC was guilty of grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari
brought to assail the decision of the NLRC may raise factual issues, and the CA may
then review the decision of the NLRC and pass upon such factual issues in the
process.8 The power of the CA to review factual issues in the exercise of its original
jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg.
129, which pertinently provides that the CA "shall have the power to try cases and
conduct hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship
existed between the parties.
The issue of whether or not an employer-employee relationship existed between
petitioner and respondent is essentially a question of fact.9 The factors that determine
the issue include who has the power to select the employee, who pays the employees
wages, who has the power to dismiss the employee, and who exercises control of the
methods and results by which the work of the employee is accomplished.10 Although no
particular form of evidence is required to prove the existence of the relationship, and
any competent and relevant evidence to prove the relationship may be admitted,11 a
finding that the relationship exists must nonetheless rest on substantial evidence, which
is that amount of relevant evidence that a reasonable mind might accept as adequate to
justify a conclusion.12
Generally, the Court does not review factual questions, primarily because the Court is
not a trier of facts. However, where, like here, there is a conflict between the factual
findings of the Labor Arbiter and the NLRC, on the one hand, and those of the CA, on
the other hand, it becomes proper for the Court, in the exercise of its equity jurisdiction,
to review and re-evaluate the factual issues and to look into the records of the case and
re-examine the questioned findings.13
A review of the circumstances reveals that respondent was, indeed, petitioners
employee. He was undeniably employed as a pianist in petitioners Madison Coffee
Shop/Tanglaw Restaurant from September 1992 until his services were terminated on
July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered into
the service contract dated September 1, 1992 with respondent. This is true,
notwithstanding petitioners insistence that respondent had only offered his services to
provide live music at petitioners Tanglaw Restaurant, and despite petitioners position
that what had really transpired was a negotiation of his rate and time of availability. The
power of selection was firmly evidenced by, among others, the express written

recommendation dated January 12, 1998 by Christine Velazco, petitioners restaurant


manager, for the increase of his remuneration.14
Petitioner could not seek refuge behind the service contract entered into with
respondent. It is the law that defines and governs an employment relationship, whose
terms are not restricted to those fixed in the written contract, for other factors, like the
nature of the work the employee has been called upon to perform, are also considered.
The law affords protection to an employee, and does not countenance any attempt to
subvert its spirit and intent. Any stipulation in writing can be ignored when the employer
utilizes the stipulation to deprive the employee of his security of tenure. The inequality
that characterizes employer-employee relations generally tips the scales in favor of the
employer, such that the employee is often scarcely provided real and better options. 15
Secondly, petitioner argues that whatever remuneration was given to respondent were
only his talent fees that were not included in the definition of wage under the Labor
Code; and that such talent fees were but the consideration for the service contract
entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00
pm, three to six nights a week. Such rate of remuneration was later increased to
P750.00 upon restaurant manager Velazcos recommendation. There is no denying that
the remuneration denominated as talent fees was fixed on the basis of his talent and
skill and the quality of the music he played during the hours of performance each night,
taking into account the prevailing rate for similar talents in the entertainment industry. 16
Respondents remuneration, albeit denominated as talent fees, was still considered as
included in the term wage in the sense and context of the Labor Code, regardless of
how petitioner chose to designate the remuneration. Anent this, Article 97(f) of the
Labor Code clearly states:
xxx wage paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee.
Clearly, respondent received compensation for the services he rendered as a pianist in
petitioners hotel. Petitioner cannot use the service contract to rid itself of the
consequences of its employment of respondent. There is no denying that whatever
amounts he received for his performance, howsoever designated by petitioner, were his
wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v.
Lagrama,17 every employer is required to pay his employees by means of a payroll,
which should show in each case, among others, the employees rate of pay, deductions
made from such pay, and the amounts actually paid to the employee. Yet, petitioner did
not present the payroll of its employees to bolster its insistence of respondent not being
its employee.
That respondent worked for less than eight hours/day was of no consequence and did
not detract from the CAs finding on the existence of the employer-employee
relationship. In providing that the " normal hours of work of any employee shall not
exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of
number of hours as "normal hours of work" but did not prohibit work of less than eight
hours.
Thirdly, the power of the employer to control the work of the employee is considered the
most significant determinant of the existence of an employer-employee
relationship.18 This is the so-called control test, and is premised on whether the person
for whom the services are performed reserves the right to control both the end achieved
and the manner and means used to achieve that end.19
Petitioner submits that it did not exercise the power of control over respondent and cites
the following to buttress its submission, namely: (a) respondent could beg off from his
nightly performances in the restaurant for other engagements; (b) he had the sole
prerogative to play and perform any musical arrangements that he wished; (c) although
petitioner, through its manager, required him to play at certain times a particular music
or song, the music, songs, or arrangements, including the beat or tempo, were under
his discretion, control and direction; (d) the requirement for him to wear barong Tagalog
to conform with the Filipiniana motif of the venue whenever he performed was by no
means evidence of control; (e) petitioner could not require him to do any other work in
the restaurant or to play the piano in any other places, areas, or establishments,
whether or not owned or operated by petitioner, during the three hour period from 7:00
pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to
sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a
pianist under petitioners supervision and control. Specifically, petitioners control of both
the end achieved and the manner and means used to achieve that end was
demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed
from 7:00 pm to 10:00 pm, three to six times a week;
b. He could not choose the place of his performance;

c. The restaurants manager required him at certain times to perform only


Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana
motif; and
d. He was subjected to the rules on employees representation check and chits, a
privilege granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the
performance of duties by the employee, for it sufficed that the employer has the right to
wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being
even subject to its Code of Discipline, and that the power to terminate the working
relationship was mutually vested in the parties, in that either party might terminate at
will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum informing respondent of
the discontinuance of his service because of the present business or financial condition
of petitioner20 showed that the latter had the power to dismiss him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to
prevent losses, the conclusion that his termination was by reason of retrenchment due
to an authorized cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees
recognized by the Labor Code. It is a management prerogative resorted to by
employers to avoid or to minimize business losses. On this matter, Article 283 of the
Labor Code states:
Article 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. xxx. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in
extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively
prevent the expected losses; and
(d) The alleged losses, if already incurred, and the expected imminent losses
sought to be forestalled must be proved by sufficient and convincing evidence. 22
Anent the last standard of sufficient and convincing evidence, it ought to be pointed out
that a less exacting standard of proof would render too easy the abuse of retrenchment
as a ground for termination of services of employees.23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or
authorized cause rests upon the employer. Here, petitioner did not submit evidence of
the losses to its business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondents termination was due to its "present
business/financial condition." This bare statement fell short of the norm to show a valid
retrenchment. Hence, we hold that there was no valid cause for the retrenchment of
respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1wphi1 The employer must prove, among others, that the losses are
substantial and that the retrenchment is reasonably necessary to avert such losses.
Thus, by its failure to present sufficient and convincing evidence to prove that
retrenchment was necessary, respondents termination due to retrenchment is not
allowed.
The Court realizes that the lapse of time since the retrenchment might have rendered
respondent's reinstatement to his former job no longer feasible. If that should be true,
then petitioner should instead pay to him separation pay at the rate of one. month pay
for every year of service computed from September 1992 (when he commenced to work
for the petitioners) until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision
of the Court of Appeals promulgated on February 11, 2002, subject to the modification
that should reinstatement be no longer feasible, petitioner shall pay to respondent
separation pay of one month for every year of service computed from September 1992

until the finality of this decision, and full backwages from the time his compensation was
withheld until the finality of this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.

G.R. No. 126383 November 28, 1997


SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA.
CONSUELO MACQUILING LEONARDO MARTINEZ, DOMINGO ELA, JR.,
RODOLFO CALUCIN, JR., PERLA MENDOZA, REX RAPHAEL REYES, ROGELIO
BELMONTE, and 375 other EMPLOYEE-UNION MEMBERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, and SAN JUAN DE DIOS
HOSPITAL, respondents.

FRANCISCO, J.:
Petitioners, the rank-and-file employee-union officers and members of San Juan De
Dios Hospital Employees Association, sent on July 08, 1991, a "four (4)-page letter with
attached support signatures . . . requesting and pleading for the expeditious
implementation and payment by respondent" Juan De Dios Hospital "of the '40HOURS/5-DAY WORKWEEK' with compensable weekly two (2) days off provided for by
Republic Act 5901 as clarified for enforcement by the Secretary of Labor's Policy
Instructions No. 54 dated April 12, 1988." 1 Respondent hospital failed to give a
favorable response; thus, petitioners filed a complaint regarding their "claims for
statutory benefits under the above-cited law and policy issuance" 2, docketed as NLRC
NCR Case No. 00-08-04815-19. On February 26, 1992, the Labor Arbiter 3 dismissed
the complaint. Petitioners appealed before public respondent National Labor Relations
Commission 4 (NLRC), docketed as NLRC NCR CA 003028-92, which affirmed the
Labor Arbiter's decision. Petitioners' subsequent motion for reconsideration was denied;
hence, this petition under Rule 65 of the Rules of Court ascribing grave abuse of
discretion on the part of NLRC in concluding that Policy Instructions No. 54 "proceeds
from a wrong interpretation of RA 5901" 5 and Article 83 of the Labor Code.
As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by then
Labor Secretary (now Senator) Franklin M. Drilon is valid or not.
The policy instruction in question provides in full as follows:
Policy Instruction No. 54

To: All Concerned


Subject: Working Hours and Compensation of Hospital/Clinic Personnel
This issuance clarifies the enforcement policy of this Department on the
working hours and compensation of personnel employed by
hospitals/clinics with a bed capacity of 100 or more and those located in
cities and municipalities with a population of one million or more.
Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5 day
work week for hospital/clinic personnel. At the same time, the Act prohibits
the diminution of the compensation of these workers who would suffer a
reduction in their weekly wage by reason of the shortened workweek
prescribed by the Act. In effect, RA 5901 requires that the covered
hospital workers who used to work seven (7) days a week should be paid
for such number of days for working only 5 days or 40 hours a week.
The evident intention of RA 5901 is to reduce the number of hospital
personnel, considering the nature of their work, and at the same time
guarantee the payment to them of a full weekly wage for seven (7) days.
This is quite clear in the Exemplary Note of RA 5901 which states:
As compared with the other employees and laborers, these
hospital and health clinic personnel are over-worked despite
the fact that their duties are more delicate in nature. If we
offer them better working conditions, it is believed that the
"brain drain", that our country suffers nowadays as far as
these personnel are concerned will be considerably
lessened. The fact that these hospitals and health clinics
personnel perform duties which are directly concerned with
the health and lives of our people does not mean that they
should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other
workers. Making them work longer than is necessary may
endanger, rather than protect the health of their patients.
Besides, they are not receiving better pay than the other
workers. Therefore, it is just and fair that they may be made
to enjoy the privileges of equal working hours with other
workers except those excepted by law. (Sixth Congress of
the Republic of the Philippines, Third Session, House of
Representatives, H. No. 16630)
The Labor Code in its Article 83 adopts and incorporates the basic
provisions of RA 5901 and retains its spirit and intent which is to shorten
the workweek of covered hospital personnel and at the same time assure
them of a full weekly wage.

Consistent with such spirit and intent, it is the position of the Department
that personnel in subject hospital and clinics are entitled to a full weekly
wage for seven (7) days if they have completed the 40-hour/5-day
workweek in any given workweek.
All enforcement and adjudicatory agencies of this Department shall be
guided by this issuance in the disposition of cases involving the personnel
of covered hospitals and clinics.
Done in the City of Manila, this 12th day of April, 1988.
(Sgd.)
FRAN
KLIN
M.
DRIL
ON
Secret
ary
(Emphasis Added)
We note that Policy Instruction No. 54 relies and purports to implement Republic Act
No. 5901, otherwise known as "An Act Prescribing Forty Hours A Week Of Labor For
Government and Private Hospitals Or Clinic Personnel", enacted on June 21, 1969.
Reliance on Republic Act No. 5901, however, is misplaced for the said statute, as
correctly ruled by respondent NLRC, has long been repealed with the passage of the
Labor Code on May 1, 1974, Article 302 of which explicitly provides: "All labor laws not
adopted as part of this Code either directly or by reference are hereby repealed. All
provisions of existing laws, orders, decree, rules and regulations inconsistent herewith
are likewise repealed." Accordingly, only Article 83 of the Labor Code which appears to
have substantially incorporated or reproduced the basic provisions of Republic Act No.
5901 may support Policy Instructions No. 54 on which the latter's validity may be
gauged. Article 83 of the Labor Code states:
Art. 83. Normal Hours of Work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least
one million (1,000,000) or in hospitals and clinics with a bed capacity of at
least one hundred (100) shall hold regular office hours for eight (8) hours a
day, for five (5) days a week, exclusive of time for meals, except where
the exigencies of the service require that such personnel work for six (6)
days or forty-eight (48) hours, in which case they shall be entitled to an
additional compensation of at least thirty per cent (30%) of their regular
wage for work on the sixth day. For purposes of this Article, "health

personnel" shall include: resident physicians, nurses, nutritionists,


dietitians, pharmacists, social workers, laboratory technicians,
paramedical technicians, psychologists, midwives, attendants and all other
hospital or clinic personnel. (Emphasis supplied)
A cursory reading of Article 83 of the Labor Code betrays petitioners' position that
"hospital employees" are entitled to "a full weekly salary with paid two (2) days' off if
they have completed the 40-hour/5-day workweek". 6 What Article 83 merely provides
are: (1) the regular office hour of eight hours a day, five days per week for health
personnel, and (2) where the exigencies of service require that health personnel work
for six days or forty-eight hours then such health personnel shall be entitled to an
additional compensation of at least thirty percent of their regular wage for work on the
sixth day. There is nothing in the law that supports then Secretary of Labor's assertion
that "personnel in subject hospitals and clinics are entitled to a full weekly wage for
seven (7) days if they have completed the 40-hour/5-day workweek in any given
workweek". Needless to say, the Secretary of Labor exceeded his authority by including
a two days off with pay in contravention of the clear mandate of the statute. Such act
the Court shall not countenance. Administrative interpretation of the law, we reiterate, is
at best merely advisory, 7 and the Court will not hesitate to strike down an administrative
interpretation that deviates from the provision of the statute.
Indeed, even if we were to subscribe with petitioners' erroneous assertion that Republic
Act No. 5901 has neither been amended nor repealed by the Labor Code, we
nevertheless find Policy Instructions No. 54 invalid. A perusal of Republic Act No.
5901 8 reveals nothing therein that gives two days off with pay for health personnel who
complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of House Bill
No. 16630 (later passed into law as Republic Act No. 5901) explicitly states that the
bill's sole purpose is to shorten the working hours of health personnel and not to dole
out a two days off with pay.
Hence:
The accompanying bill seeks to grant resident physicians, staff nurses,
nutritionist, midwives, attendants and other hospital and health clinic
personnel of public and private hospitals and clinics, the privilege of
enjoying the eight hours a week exclusive of time for lunch granted by law
to all government employees and workers except those employed in
schools and in courts. At present those hospitals and clinics, work six days
a week, 8 hours a day or 48 hours a week.
As compared with the other employees and laborers, these hospital and
health clinic personnel are over-worked despite the fact that their duties
are more delicate in nature. If we offer them better working conditions, it is
believed that the "brain drain", that our country suffers nowadays as far as
these personnel are concerned will be considerably lessened. The fact
that these hospitals and health clinic personnel perform duties which are

directly concerned with the health and lives of our people does not mean
that they should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other workers. Making
them work longer than is necessary may endanger, rather than protect,
the health of their patients. Besides, they are not receiving better pay than
the other workers. Therefore, it is just and fair that they be made to enjoy
the privileges of equal working hours with other workers except those
excepted by law.
In the light of the foregoing, approval of this bill is strongly recommended.
(SGD.
)
SERG
IO H.
LOYO
LA
"Cong
ressm
an,
3rd
Distric
t
Manila
"
(Anne
x "F"
of
petitio
n,
emph
asis
suppli
ed)
Further, petitioners' position is also negated by the very rules and regulations
promulgated by the Bureau of Labor Standards which implement Republic Act
No. 5901. Pertinent portions of the implementing rules provide:
RULES AND REGULATIONS IMPLEMENTING
REPUBLIC ACT NO. 5901
By virtue of Section 79 of the Revised Administrative Code, as modified by
section 18 of Implementation Report for Reorganization Plan No. 20-A on
Labor, vesting in the Bureau of Labor Standards the authority to

promulgate rules and regulations to implement wage and hour laws, the
following rules and regulations to are hereby issued for the implementation
of Republic Act No. 5901.
CHAPTER I Coverage
Sec. 1. General Statement on Coverage. Republic Act No. 5901,
hereinafter referred to as the Act, shall apply to:
(a) All hospitals and clinics, including those with a bed capacity of less
than one hundred, which are situated in cities or municipalities with a
population of one million or more; and to
(b) All hospitals and clinics with a bed capacity of at least one hundred,
irrespective of the size of population of the city or municipality where they
may be situated.
xxx xxx xxx
Sec. 7. Regular Working Day. The regular working days of covered
employees shall be not more than five days in a workweek. The workweek
may begin at any hour and on any day, including Saturday or Sunday,
designated by the employer.
Employers are not precluded from changing the time at which the workday
or workweek begins, provided that the change is not intended to evade the
requirements of these regulations on the payment of additional
compensation.
xxx xxx xxx
Sec. 15. Additional Pay Under the Act and C.A. No. 444. (a) Employees of
covered hospitals and clinics who are entitled to the benefits provided
under the Eight-Hour Labor Law, as amended, shall be paid an additional
compensation equivalent to their regular rate plus at least twenty-five
percent thereof for work performed on Sunday and Holidays, not
exceeding eight hours, such employees shall be entitled to an additional
compensation of at least 25% of their regular rate.
(b) For work performed in excess of forty hours a week, excluding those
rendered in excess of eight hours a day during the week, employees
covered by the Eight-Hour Labor Law shall be entitled to an additional
straight-time pay which must be equivalent at least to their regular rate.
If petitioners are entitled to two days off with pay, then there appears to be no sense at
all why Section 15 of the implementing rules grants additional compensation equivalent

to the regular rate plus at least twenty-five percent thereof for work performed on
Sunday to health personnel, or an "additional straight-time pay which must be
equivalent at least to the regular rate" "[f]or work performed in excess of forty hours a
week. . . . Policy Instructions No. 54 to our mind unduly extended the statute. The
Secretary of Labor moreover erred in invoking the "spirit and intent" of Republic Act No.
5901 and Article 83 of the Labor Code for it is an elementary rule of statutory
construction that when the language of the law is clear and unequivocal, the law must
be taken to mean exactly what it says. 9 No additions or revisions may be permitted.
Policy Instructions No. 54 being inconsistent with and repugnant to the provision of
Article 83 of the Labor Code, as well as to Republic Act No. 5901, should be, as it is
hereby, declared void.
WHEREFORE, the decision appealed from is AFFIRMED. No costs.
SO ORDERED.

G.R. No. 120592 March 14, 1997


TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL NOEL A.
CRUZ, respondents.

REGALADO, J.:
Petitioner Traders Royal Bank Employees Union and private respondent Atty.
Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm, entered into
a retainer agreement on February 26, 1987 whereby the former obligated itself to pay
the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's
undertaking to render the services enumerated in their contract. 1 Parenthetically, said
retainer agreement was terminated by the union on April 4, 1990. 2
During the existence of that agreement, petitioner union referred to private respondent
the claims of its members for holiday, mid-year and year-end bonuses against their
employer, Traders Royal Bank (TRB). After the appropriate complaint was filed by
private respondent, the case was certified by the Secretary of Labor to the National
Labor Relations Commission (NLRC) on March 24, 1987 and docketed as NLRC-NCR
Certified Case No. 0466. 3
On September 2, 1988, the NLRC rendered a decision in the foregoing case in favor of
the employees, awarding them holiday pay differential, mid-year bonus differential, and
year-end bonus differential. 4 The NLRC, acting on a motion for the issuance of a writ of

execution filed by private respondent as counsel for petitioner union, raffled the case to
Labor Arbiter Oswald Lorenzo. 5
However, pending the hearing of the application for the writ of execution, TRB
challenged the decision of the NLRC before the Supreme Court. The Court, in its
decision promulgated on August 30, 1990, 6 modified the decision of the NLRC by
deleting the award of mid-year and year-end bonus differentials while affirming the
award of holiday pay differential. 7
The bank voluntarily complied with such final judgment and determined the holiday pay
differential to be in the amount of P175,794.32. Petitioner never contested the amount
thus found by TRB. 8 The latter duly paid its concerned employees their respective
entitlement in said sum through their payroll. 9
After private respondent received the above decision of the Supreme Court on
September 18, 1990, 10 he notified the petitioner union, the TRB management and the
NLRC of his right to exercise and enforce his attorney's lien over the award of holiday
pay differential through a letter dated October 8, 1990. 11
Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter
Lorenzo for the determination of his attorney's fees, praying that ten percent (10%) of
the total award for holiday pay differential computed by TRB at P175,794.32, or the
amount of P17,579.43, be declared as his attorney's fees, and that petitioner union be
ordered to pay and remit said amount to him. 12
The TRB management manifested before the labor arbiter that they did not wish to
oppose or comment on private respondent's motion as the claim was directed against
the union, 13 while petitioner union filed a comment and opposition to said motion on
July 15, 1991. 14 After considering the position of the parties, the labor arbiter issued an
order 15 on November 26, 1991 granting the motion of private respondent, as follows:
WHEREFORE, premises considered, it is hereby ordered that the
TRADERS ROYAL BANK EMPLOYEES UNION with offices at Kanlaon
Towers, Roxas Boulevard is hereby ordered (sic) to pay without delay the
attorney's fees due the movant law firm, E.N.A. CRUZ and ASSOCIATES
the amount of P17,574.43 or ten (10%) per cent of the P175,794.32
awarded by the Supreme Court to the members of the former.
This constrained petitioner to file an appeal with the NLRC on December 27,
1991, seeking a reversal of that order.16
On October 19, 1994, the First Division of the NLRC promulgated a resolution affirming
the order of the labor arbiter. 17The motion for reconsideration filed by petitioner was
denied by the NLRC in a resolution dated May 23, 1995, 18 hence the petition at bar.

Petitioner maintains that the NLRC committed grave abuse of discretion amounting to
lack of jurisdiction in upholding the award of attorney's fees in the amount of
P17,574.43, or ten percent (10%) of the P175,794.32 granted as holiday pay differential
to its members, in violation of the retainer agreement; and that the challenged resolution
of the NLRC is null and void, 19 for the reasons hereunder stated.
Although petitioner union concedes that the NLRC has jurisdiction to decide claims for
attorney's fees, it contends that the award for attorney's fees should have been
incorporated in the main case and not after the Supreme Court had already reviewed
and passed upon the decision of the NLRC. Since the claim for attorney's fees by
private respondent was neither taken up nor approved by the Supreme Court, no
attorney's fees should have been allowed by the NLRC.
Thus, petitioner posits that the NLRC acted without jurisdiction in making the award of
attorney's fees, as said act constituted a modification of a final and executory judgment
of the Supreme Court which did not award attorney's fees. It then cited decisions of the
Court declaring that a decision which has become final and executory can no longer be
altered or modified even by the court which rendered the same.
On the other hand, private respondent maintains that his motion to determine attorney's
fees was just an incident of the main case where petitioner was awarded its money
claims. The grant of attorney's fees was the consequence of his exercise of his
attorney's lien. Such lien resulted from and corresponds to the services he rendered in
the action wherein the favorable judgment was obtained. To include the award of the
attorney's fees in the main case presupposes that the fees will be paid by TRB to the
adverse party. All that the non-inclusion of attorney's fees in the award means is that the
Supreme Court did not order TRB to pay the opposing party attorney's fees in the
concept of damages. He is not therefore precluded from filing his motion to have his
own professional fees adjudicated.
In view of the substance of the arguments submitted by petitioner and private
respondent on this score, it appears necessary to explain and consequently clarify the
nature of the attorney's fees subject of this petition, in order to dissipate the apparent
confusion between and the conflicting views of the parties.
There are two commonly accepted concepts of attorney's fees, the so-called ordinary
and extraordinary. 20 In its ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to the
latter. The basis of this compensation is the fact of his employment by and his
agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by
the court to be paid by the losing party in a litigation. The basis of this is any of the
cases provided by law where such award can be made, such as those authorized in
Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they

have agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof.
It is the first type of attorney's fees which private respondent demanded before the labor
arbiter. Also, the present controversy stems from petitioner's apparent misperception
that the NLRC has jurisdiction over claims for attorney's fees only before its judgment is
reviewed and ruled upon by the Supreme Court, and that thereafter the former may no
longer entertain claims for attorney's fees.
It will be noted that no claim for attorney's fees was filed by private respondent before
the NLRC when it acted on the money claims of petitioner, nor before the Supreme
Court when it reviewed the decision of the NLRC. It was only after the High Tribunal
modified the judgment of the NLRC awarding the differentials that private respondent
filed his claim before the NLRC for a percentage thereof as attorney's fees.
It would obviously have been impossible, if not improper, for the NLRC in the first
instance and for the Supreme Court thereafter to make an award for attorney's fees
when no claim therefor was pending before them. Courts generally rule only on issues
and claims presented to them for adjudication. Accordingly, when the labor arbiter
ordered the payment of attorney's fees, he did not in any way modify the judgment of
the Supreme Court.
As an adjunctive episode of the action for the recovery of bonus differentials in NLRCNCR Certified Case No. 0466, private respondent's present claim for attorney's fees
may be filed before the NLRC even though or, better stated, especially after its earlier
decision had been reviewed and partially affirmed. It is well settled that a claim for
attorney's fees may be asserted either in the very action in which the services of a
lawyer had been rendered or in a separate action. 21
With respect to the first situation, the remedy for recovering attorney's fees as an
incident of the main action may be availed of only when something is due to the
client. 22 Attorney's fees cannot be determined until after the main litigation has been
decided and the subject of the recovery is at the disposition of the court. The issue over
attorney's fees only arises when something has been recovered from which the fee is to
be paid. 23
While a claim for attorney's fees may be filed before the judgment is rendered, the
determination as to the propriety of the fees or as to the amount thereof will have to be
held in abeyance until the main case from which the lawyer's claim for attorney's fees
may arise has become final. Otherwise, the determination to be made by the courts will
be premature. 24Of course, a petition for attorney's fees may be filed before the
judgment in favor of the client is satisfied or the proceeds thereof delivered to the
client. 25
It is apparent from the foregoing discussion that a lawyer has two options as to when to
file his claim for professional fees. Hence, private respondent was well within his rights

when he made his claim and waited for the finality of the judgment for holiday pay
differential, instead of filing it ahead of the award's complete resolution. To declare that
a lawyer may file a claim for fees in the same action only before the judgment is
reviewed by a higher tribunal would deprive him of his aforestated options and render
ineffective the foregoing pronouncements of this Court.
Assailing the rulings of the labor arbiter and the NLRC, petitioner union insists that it is
not guilty of unjust enrichment because all attorney's fees due to private respondent
were covered by the retainer fee of P3,000.00 which it has been regularly paying to
private respondent under their retainer agreement. To be entitled to the additional
attorney's fees as provided in Part D (Special Billings) of the agreement, it avers that
there must be a separate mutual agreement between the union and the law firm prior to
the performance of the additional services by the latter. Since there was no agreement
as to the payment of the additional attorney's fees, then it is considered waived.
En contra, private respondent contends that a retainer fee is not the attorney's fees
contemplated for and commensurate to the services he rendered to petitioner. He
asserts that although there was no express agreement as to the amount of his fees for
services rendered in the case for recovery of differential pay, Article 111 of the Labor
Code supplants this omission by providing for an award of ten percent (10%) of a
money judgment in a labor case as attorney's fees.
It is elementary that an attorney is entitled to have and receive a just and reasonable
compensation for services performed at the special instance and request of his client.
As long as the lawyer was in good faith and honestly trying to represent and serve the
interests of the client, he should have a reasonable compensation for such services. 26 It
will thus be appropriate, at this juncture, to determine if private respondent is entitled to
an additional remuneration under the retainer agreement 27 entered into by him and
petitioner.
The parties subscribed therein to the following stipulations:
xxx xxx xxx
The Law Firm shall handle cases and extend legal services under the parameters of the
following terms and conditions:
A. GENERAL SERVICES
1. Assurance that an Associate of the Law Firm shall be designated and
be available on a day-to-day basis depending on the Union's needs;
2. Legal consultation, advice and render opinion on any actual and/or
anticipatory situation confronting any matter within the client's normal
course of business;

3. Proper documentation and notarization of any or all transactions


entered into by the Union in its day-to-day course of business;
4. Review all contracts, deeds, agreements or any other legal document to
which the union is a party signatory thereto but prepared or caused to be
prepared by any other third party;
5. Represent the Union in any case wherein the Union is a party litigant in
any court of law or quasi-judicial body subject to certain fees as qualified
hereinafter;
6. Lia(i)se with and/or follow-up any pending application or any papers
with any government agency and/or any private institution which is directly
related to any legal matter referred to the Law Firm.
B. SPECIAL LEGAL SERVICES
1. Documentation of any contract and other legal instrument/documents
arising and/or required by your Union which do not fall under the category
of its ordinary course of business activity but requires a special,
exhaustive or detailed study and preparation;
2. Conduct or undertake researches and/or studies on special projects of
the Union;
3. Render active and actual participation or assistance in conference table
negotiations with TRB management or any other third person(s), juridical
or natural, wherein the presence of counsel is not for mere consultation
except CBA negotiations which shall be subject to a specific agreement
(pursuant to PD 1391 and in relation to BP 130 & 227);
4. Preparation of Position Paper(s), Memoranda or any other pleading for
and in behalf of the Union;
5. Prosecution or defense of any case instituted by or against the Union;
and,
6. Represent any member of the Union in any proceeding provided that
the particular member must give his/her assent and that prior consent be
granted by the principal officers. Further, the member must conform to the
rules and policies of the Law Firm.
C. FEE STRUCTURE
In consideration of our commitment to render the services enumerated
above when required or necessary, your Union shall pay a monthly

retainer fee of THREE THOUSAND PESOS (PHP 3,000.00), payable in


advance on or before the fifth day of every month.
An Appearance Fee which shall be negotiable on a case-to-case basis.
Any and all Attorney's Fees collected from the adverse party by virtue of a
successful litigation shall belong exclusively to the Law Firm.
It is further understood that the foregoing shall be without prejudice to our
claim for reimbursement of all out-of-pocket expenses covering filing fees,
transportation, publication costs, expenses covering reproduction or
authentication of documents related to any matter referred to the Law Firm
or that which redound to the benefit of the Union.
D. SPECIAL BILLINGS
In the event that the Union avails of the services duly enumerated in Title
B, the Union shall pay the Law Firm an amount mutually agreed upon
PRIOR to the performance of such services. The sum agreed upon shall
be based on actual time and effort spent by the counsel in relation to the
importance and magnitude of the matter referred to by the Union.
However, charges may be WAIVED by the Law Firm if it finds that time
and efforts expended on the particular services are inconsequential but
such right of waiver is duly reserved for the Law Firm.
xxx xxx xxx
The provisions of the above contract are clear and need no further interpretation; all that
is required to be done in the instant controversy is its application. The P3,000.00 which
petitioner pays monthly to private respondent does not cover the services the latter
actually rendered before the labor arbiter and the NLRC in behalf of the former. As
stipulated in Part C of the agreement, the monthly fee is intended merely as a
consideration for the law firm's commitment to render the services enumerated in Part A
(General Services) and Part B (Special Legal Services) of the retainer agreement.
The difference between a compensation for a commitment to render legal services and
a remuneration for legal services actually rendered can better be appreciated with a
discussion of the two kinds of retainer fees a client may pay his lawyer. These are a
general retainer, or a retaining fee, and a special
retainer. 28
A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future
services as general counsel for any ordinary legal problem that may arise in the
routinary business of the client and referred to him for legal action. The future services
of the lawyer are secured and committed to the retaining client. For this, the client pays
the lawyer a fixed retainer fee which could be monthly or otherwise, depending upon

their arrangement. The fees are paid whether or not there are cases referred to the
lawyer. The reason for the remuneration is that the lawyer is deprived of the opportunity
of rendering services for a fee to the opposing party or other parties. In fine, it is a
compensation for lost opportunities.
A special retainer is a fee for a specific case handled or special service rendered by the
lawyer for a client. A client may have several cases demanding special or individual
attention. If for every case there is a separate and independent contract for attorney's
fees, each fee is considered a special retainer.
As to the first kind of fee, the Court has had the occasion to expound on its concept
in Hilado vs. David 29 in this wise:
There is in legal practice what is called a "retaining fee," the purpose of
which stems from the realization that the attorney is disabled from acting
as counsel for the other side after he has given professional advice to the
opposite party, even if he should decline to perform the contemplated
services on behalf of the latter. It is to prevent undue hardship on the
attorney resulting from the rigid observance of the rule that a separate and
independent fee for consultation and advice was conceived and
authorized. "A retaining fee is a preliminary fee given to an attorney or
counsel to insure and secure his future services, and induce him to act for
the client. It is intended to remunerate counsel for being deprived, by
being retained by one party, of the opportunity of rendering services to the
other and of receiving pay from him, and the payment of such fee, in the
absence of an express understanding to the contrary, is neither made nor
received in payment of the services contemplated; its payment has no
relation to the obligation of the client to pay his attorney for the services for
which he has retained him to perform." (Emphasis supplied).
Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the
union and the law firm refers to a general retainer, or a retaining fee, as said monthly
fee covers only the law firm's pledge, or as expressly stated therein, its "commitment to
render the legal services enumerated." The fee is not payment for private respondent's
execution or performance of the services listed in the contract, subject to some
particular qualifications or permutations stated there.
Generally speaking, where the employment of an attorney is under an express valid
contract fixing the compensation for the attorney, such contract is conclusive as to the
amount of compensation. 30 We cannot, however, apply the foregoing rule in the instant
petition and treat the fixed fee of P3,000.00 as full and sufficient consideration for
private respondent's services, as petitioner would have it.
We have already shown that the P3,000.00 is independent and different from the
compensation which private respondent should receive in payment for his services.
While petitioner and private respondent were able to fix a fee for the latter's promise to

extend services, they were not able to come into agreement as to the law firm's actual
performance of services in favor of the union. Hence, the retainer agreement cannot
control the measure of remuneration for private respondent's services.
We, therefore, cannot favorably consider the suggestion of petitioner that private
respondent had already waived his right to charge additional fees because of their
failure to come to an agreement as to its payment.
Firstly, there is no showing that private respondent unequivocally opted to waive the
additional charges in consonance with Part D of the agreement. Secondly, the prompt
actions taken by private respondent, i.e., serving notice of charging lien and filing of
motion to determine attorney's fees, belie any intention on his part to renounce his right
to compensation for prosecuting the labor case instituted by the union. And, lastly, to
adopt such theory of petitioner may frustrate private respondent's right to attorney's
fees, as the former may simply and unreasonably refuse to enter into any special
agreement with the latter and conveniently claim later that the law firm had relinquished
its right because of the absence of the same.
The fact that petitioner and private respondent failed to reach a meeting of the minds
with regard to the payment of professional fees for special services will not absolve the
former of civil liability for the corresponding remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. 31 One of the sources of extracontractual obligations found in our Civil Code is the quasi-contract premised on the
Roman maxim that nemo cum alterius detrimento locupletari protest. As embodied in
our law, 32 certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at the
expense of another.
A quasi-contract between the parties in the case at bar arose from private respondent's
lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting the
latter's consent and approval. Petitioner cannot deny that it did benefit from private
respondent's efforts as the law firm was able to obtain an award of holiday pay
differential in favor of the union. It cannot even hide behind the cloak of the monthly
retainer of P3,000.00 paid to private respondent because, as demonstrated earlier,
private respondent's actual rendition of legal services is not compensable merely by
said amount.
Private respondent is entitled to an additional remuneration for pursuing legal action in
the interest of petitioner before the labor arbiter and the NLRC, on top of the P3,000.00
retainer fee he received monthly from petitioner. The law firm's services are decidedly
worth more than such basic fee in the retainer agreement. Thus, in Part C thereof on
"Fee Structure," it is even provided that all attorney's fees collected from the adverse
party by virtue of a successful litigation shall belong exclusively to private respondent,
aside from petitioner's liability for appearance fees and reimbursement of the items of
costs and expenses enumerated therein.

A quasi-contract is based on the presumed will or intent of the obligor dictated by equity
and by the principles of absolute justice. Some of these principles are: (1) It is
presumed that a person agrees to that which will benefit him; (2) Nobody wants to
enrich himself unjustly at the expense of another; and (3) We must do unto others what
we want them to do unto us under the same circumstances. 33
As early as 1903, we allowed the payment of reasonable professional fees to an
interpreter, notwithstanding the lack of understanding with his client as to his
remuneration, on the basis of quasi-contract. 34 Hence, it is not necessary that the
parties agree on a definite fee for the special services rendered by private respondent in
order that petitioner may be obligated to pay compensation to the former. Equity and fair
play dictate that petitioner should pay the same after it accepted, availed itself of, and
benefited from private respondent's services.
We are not unaware of the old ruling that a person who had no knowledge of, nor
consented to, or protested against the lawyer's representation may not be held liable for
attorney's fees even though he benefited from the lawyer's services. 35But this doctrine
may not be applied in the present case as petitioner did not object to private
respondent's appearance before the NLRC in the case for differentials.
Viewed from another aspect, since it is claimed that petitioner obtained respondent's
legal services and assistance regarding its claims against the bank, only they did not
enter into a special contract regarding the compensation therefor, there is at least the
innominate contract of facio ut des (I do that you may give). 36 This rule of law, likewise
founded on the principle against unjust enrichment, would also warrant payment for the
services of private respondent which proved beneficial to petitioner's members. In any
case, whether there is an agreement or not, the courts can fix a reasonable
compensation which lawyers should receive for their professional services. 37 However,
the value of private respondent's legal services should not be established on the basis
of Article 111 of the Labor Code alone. Said article provides:
Art. 111. Attorney's fees. (a) In cases of unlawful withholding of wages
the culpable party may be assessed attorney's fees equivalent to ten
percent of the amount of the wages recovered.
xxx xxx xxx
The implementing provision 38 of the foregoing article further states:
Sec. 11. Attorney's fees. Attorney's fees in any judicial or administrative
proceedings for the recovery of wages shall not exceed 10% of the
amount awarded. The fees may be deducted from the total amount due
the winning party.
In the first place, the fees mentioned here are the extraordinary attorney's fees
recoverable as indemnity for damages sustained by and payable to the prevailing part.

In the second place, the ten percent (10%) attorney's fees provided for in Article 111 of
the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the
maximum of the award that may thus be granted. 39 Article 111 thus fixes only the limit
on the amount of attorney's fees the victorious party may recover in any judicial or
administrative proceedings and it does not even prevent the NLRC from fixing an
amount lower than the ten percent (10%) ceiling prescribed by the article when
circumstances warrant it. 40
The measure of compensation for private respondent's services as against his client
should properly be addressed by the rule of quantum meruit long adopted in this
jurisdiction. Quantum meruit, meaning "as much as he deserves," is used as the basis
for determining the lawyer's professional fees in the absence of a contract, 41 but
recoverable by him from his client.
Where a lawyer is employed without a price for his services being agreed upon, the
courts shall fix the amount on quantum meruit basis. In such a case, he would be
entitled to receive what he merits for his services. 42
It is essential for the proper operation of the principle that there is an acceptance of the
benefits by one sought to be charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task was expecting to be paid
compensation therefor. The doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a person to retain
benefit without paying for it. 43
Over the years and through numerous decisions, this Court has laid down guidelines in
ascertaining the real worth of a lawyer's services. These factors are now codified in
Rule 20.01, Canon 20 of the Code of Professional Responsibility and should be
considered in fixing a reasonable compensation for services rendered by a lawyer on
the basis of quantum meruit. These are: (a) the time spent and the extent of services
rendered or required; (b) the novelty and difficulty of the questions involved; (c) the
importance of the subject matter; (d) the skill demanded; (e) the probability of losing
other employment as a result of acceptance of the proffered case; (f) the customary
charges for similar services and the schedule of fees of the IBP chapter to which the
lawyer belongs; (g) the amount involved in the controversy and the benefits resulting to
the client from the services; (h) the contingency or certainty of compensation; (i) the
character of the employment, whether occasional or established; and (j) the
professional standing of the lawyer.
Here, then, is the flaw we find in the award for attorney's fees in favor of private
respondent. Instead of adopting the above guidelines, the labor arbiter forthwith but
erroneously set the amount of attorney's fees on the basis of Article 111 of the Labor
Code. He completely relied on the operation of Article 111 when he fixed the amount of
attorney's fees at P17,574.43. 44 Observe the conclusion stated in his order. 45
xxx xxx xxx

FIRST. Art. 111 of the Labor Code, as amended, clearly declares


movant's right to a ten (10%) per cent of the award due its client. In
addition, this right to ten (10%) per cent attorney's fees is supplemented
by Sec. 111, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code, as amended.
xxx xxx xxx
As already stated, Article 111 of the Labor Code regulates the amount recoverable as
attorney's fees in the nature ofdamages sustained by and awarded to the prevailing
party. It may not be used therefore, as the lone standard in fixing the exact amount
payable to the lawyer by his client for the legal services he rendered. Also, while it limits
the maximum allowable amount of attorney's fees, it does not direct the instantaneous
and automatic award of attorney's fees in such maximum limit.
It, therefore, behooves the adjudicator in questions and circumstances similar to those
in the case at bar, involving a conflict between lawyer and client, to observe the above
guidelines in cases calling for the operation of the principles ofquasicontract and quantum meruit, and to conduct a hearing for the proper determination of
attorney's fees. The criteria found in the Code of Professional Responsibility are to be
considered, and not disregarded, in assessing the proper amount. Here, the records do
not reveal that the parties were duly heard by the labor arbiter on the matter and for the
resolution of private respondent's fees.
It is axiomatic that the reasonableness of attorney's fees is a question of
fact. 46 Ordinarily, therefore, we would have remanded this case for further reception of
evidence as to the extent and value of the services rendered by private respondent to
petitioner. However, so as not to needlessly prolong the resolution of a comparatively
simple controversy, we deem it just and equitable to fix in the present recourse a
reasonable amount of attorney's fees in favor of private respondent. For that purpose,
we have duly taken into account the accepted guidelines therefor and so much of the
pertinent data as are extant in the records of this case which are assistive in that regard.
On such premises and in the exercise of our sound discretion, we hold that the amount
of P10,000.00 is a reasonable and fair compensation for the legal services rendered by
private respondent to petitioner before the labor arbiter and the NLRC.
WHEREFORE, the impugned resolution of respondent National Labor Relations
Commission affirming the order of the labor arbiter is MODIFIED, and petitioner is
hereby ORDERED to pay the amount of TEN THOUSAND PESOS (P10,000.00) as
attorney's fees to private respondent for the latter's legal services rendered to the
former.
SO ORDERED.

G.R. No. 132805 February 2, 1999


PHILIPPINE AIRLINES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ROMULUS
PROTACIO and DR. HERMINIO A. FABROS, respondents.

PUNO, J.:
Petitioner Philippine Airlines, Inc. assails the decision of the National Labor Relations
Commission dismissing its appeal from the decision of Labor Arbiter Romulus S.
Protacio which declared the suspension of private respondent Dr. Herminio A. Fabros
illegal and ordered petitioner to pay private respondent the amount equivalent to all the
benefits he should have received during his period of suspension plus P500,000.00
moral damages.
The facts are as follow:
Private respondent was employed as flight surgeon at petitioner company. He was
assigned at the PAL Medical Clinic at Nichols and was on duty from 4:00 in the
afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic
to have his dinner at his residence, which was about five-minute drive away. A few
minutes later, the clinic received an emergency call from the PAL Cargo Services. One
of its employees, Mr. Manuel Acosta, had suffered a heart attack. The nurse on duty,
Mr. Merlino Eusebio, called private respondent at home to inform him of the emergency.
The patient arrived at the clinic at 7:50 in the evening and Mr. Eusebio immediately
rushed him to the hospital. When private respondent reached the clinic at around 7:51
in the evening, Mr. Eusebio had already left with the patient. Mr. Acosta died the
following day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon
ordered the Chief Flight Surgeon to conduct an investigation. The Chief Flight Surgeon,
in turn, required private respondent to explain why no disciplinary sanction should be
taken against him.
In his explanation, private respondent asserted that he was entitled to a thirty-minute
meal break; that he immediately left his residence upon being informed by Mr. Eusebio
about the emergency and he arrived at the clinic a few minutes later; that Mr. Eusebio
panicked and brought the patient to the hospital without waiting for him.

Finding private respondent's explanation unacceptable, the management charged


private respondent with abandonment of post while on duty. He was given ten days to
submit a written answer to the administrative charge.
In his answer, private respondent reiterated the assertions in his previous explanation.
He further denied that he abandoned his post on February 17, 1994. He said that he
only left the clinic to have his dinner at home. In fact, he returned to the clinic at 7:51 in
the evening upon being informed of the emergency.
After evaluating the charge as well as the answer of private respondent, petitioner
company decided to suspend private respondent for three months effective December
16, 1994.
Private respondent filed a complaint for illegal suspension against petitioner.
On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a decision 1 declaring the
suspension of private respondent illegal. It also ordered petitioner to pay private
respondent the amount equivalent to all the benefits he should have received during his
period of suspension plus P500,000.00 moral damages. The dispositive portion of the
decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered
declaring the suspension of complainant as illegal, and ordering the
respondents the restitution to the complainant of all employment benefits
equivalent to his period of suspension, and the payment to the
complainant of P500,000.00 by way of moral damages. 2
Petitioner appealed to the NLRC. The NLRC, however, dismissed the appeal after
finding that the decision of the Labor Arbiter is supported by the facts on record and the
law on the matter. 3 The NLRC likewise denied petitioner's motion for reconsideration. 4
Hence, this petition raising the following arguments:
1. The public respondents acted without or in
excess of their jurisdiction and with grave
abuse of discretion in nullifying the 3-month
suspension of private respondent despite the
fact that the private respondent has committed
an offense that warranted the imposition of
disciplinary action.
2. The public respondents acted without or in
excess of their jurisdiction and with grave
abuse of discretion in holding the petitioner
liable for moral damages:

(a) Despite the fact that no formal


hearing whatsoever was
conducted for complainant to
substantiate his claim;
(b) Despite the absence of proof
that the petitioner acted in bad
faith in imposing the 3-month
suspension; and
(c) Despite the fact that the Labor
Arbiter's award of moral damages
is highly irregular, considering
that it was more than what the
private respondent prayed for. 5
We find that public respondents did not err in nullifying the three-month suspension of
private respondent. They, however, erred in awarding moral damages to private
respondent.
First, as regards the legality of private respondent's suspension. The facts do not
support petitioner's allegation that private respondent abandoned his post on the
evening of February 17, 1994. Private respondent left the clinic that night only to have
his dinner at his house, which was only a few minutes' drive away from the clinic. His
whereabouts were known to the nurse on duty so that he could be easily reached in
case of emergency. Upon being informed of Mr. Acosta's condition, private respondent
immediately left his home and returned to the clinic. These facts belie petitioner's claim
of abandonment.
Petitioner argues that being a full-time employee, private respondent is obliged to stay
in the company premises for not less than eight (8) hours. Hence, he may not leave the
company premises during such time, even to take his meals.
We are not impressed.
Art. 83 and 85 of the Labor Code read:
Art. 83. Normal hours of work. The normal hours of work of any
employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least
one million (1,000,000) or in hospitals and clinics with a bed capacity of at
least one hundred (100) shall hold regular office hours for eight (8) hours a
day, for five (5) days a week, exclusive of time for meals, except where
the exigencies of the service require that such personnel work for six (6)
days or forty-eight (48) hours, in which case they shall be entitled to an

additional compensation of at least thirty per cent (30%) of their regular


wage for work on the sixth day. For purposes of this Article, "health
personnel" shall include: resident physicians, nurses, nutritionists,
dieticians, pharmacists, social workers, laboratory technicians,
paramedical technicians, psychologists, midwives, attendants and all other
hospital or clinic personnel. (emphasis supplied)
Art. 85. Meal periods. Subject to such regulations as the Secretary of
Labor may prescribe, it shall be the duty of every employer to give his
employees not less than sixty (60) minutes time-off for their regular meals.
Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further
states:
Sec. 7. Meal and Rest Periods. Every employer shall give his
employees, regardless of sex, not less than one (1) hour time-off for
regular meals, except in the following cases when a meal period of not
less than twenty (20) minutes may be given by the employer provided that
such shorter meal period is credited as compensable hours worked of the
employee;
(a) Where the work is non-manual work in nature or does not involve
strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen
hours a day;
(c) In cases of actual or impending emergencies or there is urgent work to
be performed on machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable
goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes
shall be considered as compensable working time.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law
may it be inferred that employees must take their meals within the company premises.
Employees are not prohibited from going out of the premises as long as they return to
their posts on time. Private respondent's act, therefore, of going home to take his dinner
does not constitute abandonment.
We now go to the award of moral damages to private respondent.

Not every employee who is illegally dismissed or suspended is entitled to damages. As


a rule, moral damages are recoverable only where the dismissal or suspension of the
employee was attended by bad faith or fraud, or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs or public policy. 6 Bad faith
does not simply mean negligence or bad judgment. It involves a state of mind
dominated by ill will or motive. It implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or some moral obliquity. 7 The person claiming
moral damages must prove the existence of bad faith by clear and convincing evidence
for the law always presumes good faith. 8
In the case at bar, there is no showing that the management of petitioner company was
moved by some evil motive in suspending private respondent. It suspended private
respondent on an honest, albeit erroneous, belief that private respondent's act of
leaving the company premises to take his meal at home constituted abandonment of
post which warrants the penalty of suspension. Also, it is evident from the facts that
petitioner gave private respondent all the opportunity to refute the charge against him
and to defend himself. These negate the existence of bad faith on the part of petitioner.
Under the circumstances, we hold that private respondent is not entitled to moral
damages.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The portion of the assailed
decision awarding moral damages to private respondent is DELETED. All other aspects
of the decision are AFFIRMED.
SO ORDERED.

G.R. No. 122240 November 18, 1999


CRISTONICO B. LEGAHI, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and UNITED PHILIPPINE LINES,
INC., NORTHSOUTH SHIP MGT., (PTE), LTD., SINGAPORE, GREGORIO V. DE
LIMA, JR., TOR KARLSEN and PIONEER INSURANCE & SURETY
CORP., respondents.

KAPUNAN, J.:
At issue is the validity of petitioner's dismissal from his employment.
In a complaint filed with the Philippine Overseas Employment Administration (POEA),
Cristonico B. Legahi alleged that he was hired as "Chief Cook" aboard M/V "Federal

Nord" by the Northsouth Ship Management (PTE), Ltd., Singapore and represented by
its local agent United Philippine Lines, Inc. (UPLI).
The contract of employment stipulated that his term of employment was for ten months
beginning October 9, 1992 with a basic monthly salary of US$450.00 with 44 hours
weekly as minimum number of hours worked with a fixed overtime pay (OT) of $185.00
and three (3) days leave with pay every month.
Sometime in November, 1992 petitioner was asked by the Shipmaster to prepare a
victualling cost statement for the month of October, 1992. After learning that such
preparation involves mathematical skills, as it would require estimation of food cost,
value of stocks, etc. he intimated that he did not know how to do such work as it was not
part of the duties of a chief cook. He was told that it was not a difficult job and that he
only needed to copy the previous forms. After much reluctance, petitioner nonetheless
prepared the statement in deference to the Shipmaster.
In December, petitioner was requested again to prepare the victualling cost statement
for the month of November. He obeyed since he was afraid he would earn the ire of his
superiors if he refused.
Sometime in January, 1993, the Shipmaster asked petitioner to do the victualling cost
statement for December which he complied. On January 6, 1993, the Shipmaster
requested the petitioner to prepare a corrected victualling statement for the same month
of December. Petitioner asked the Shipmaster if he could defer the correction as he was
busy doing his chores. The response certainly did not sit well with the Shipmaster so he
was called for a meeting which petitioner did not attend.
On January 14, 1993, a committee was formed headed by the Shipmaster himself with
the Chief Officer, Chief Engineer and Bosun as members.
In this meeting, the Shipmaster read to him the offenses he committed on board. He
was asked to answer the charges but petitioner opted to remain silent. Thereafter,
petitioner was informed that he was dismissed.
The next day, petitioner was repatriated to the Philippines through the assistance of the
Philippine Consulate.
Upon arrival or on February 16, 1993, petitioner filed with the POEA a complaint for
illegal dismissal against private respondents. He sought the payment of his salary
corresponding to the unexpired portion of his contract, unpaid overtime pay, leave pay,
salary differential and damages.
In answer to the complaint, private respondent stated that prior to petitioner's
deployment, he was asked if he knew how to prepare the victualling cost statement
which he answered yes. On January 6, 1993, petitioner was asked to prepare the
statement. He refused and even arrogantly replied that "the Shipmaster should let some

other officer do the job since he only came to the ship to cook." On January 13, 1993,
petitioner left the vessel without permission and did not perform his job that day. On
January 14, 1993, a committee was formed to hear the case of petitioner. Petitioner
remained silent so the committee decided to send him home. Contrary to petitioner's
allegation, it was not the Philippine Consulate, but the shipowner's agent, Navios Ship
Agencies, which arranged his repatriation. The respondent noticed petitioner to be very
homesick and surmised that he deliberately committed the offenses just so he could be
sent home. Upon his return, petitioner did not even report to the local representative
UPLI implying that he had no cause of action against them. Petitioner was terminated
for just cause and must, therefore, reimburse private respondent for the cost of
repatriation.
On April 6, 1994, the POEA promulgated a decision finding that there was just cause for
petitioner's dismissal.
On appeal to the National Labor Relations Commission (NLRC), the Commission
affirmed in toto the POEA decision.
Hence, this petition.
To constitute a valid dismissal from employment, two (2) requisites must concur: (a) the
dismissal must be for any of the causes provided in Article 282 of the Labor Code, and
(b) the employee must be accorded due process, the elements of which are notice and
the opportunity to be heard and to defend himself. 1
Procedural due process requires that the employee must be apprised of the charges
against him. He must be given reasonable time to answer the charges, allowed ample
opportunity to be heard and defend himself, and assisted by a representative if the
employee so desires. 2 Two written notices are required before termination of
employment can be legally effected. They are: (1) notice which apprises the employee
of the particular acts or omissions for which his dismissal is sought, and (2) the
subsequent notice which informs the employee of the employer's decision to dismiss
him; 3 not to mention the opportunity to answer and rebut the charges against him, in
between such notices. 4
In the case at bar, the evidence on record belies private respondents' claim that
petitioner was afforded due process. The abstract of the logbook states:
M/V FEDERAL NORD
ABSTRACT FROM DECK LOG BOOK RE: CH/COOK LEGAHI
CRISTONICO B.
6th JANUARY 1993

AT 0900 HRS. TODAY THE MASTER WAS ASKING THE CH/COOK


LAGAHE, CRISTONICO IF HE OR THE R/OFF COULD HELP HIM WITH
THE VICT. COST STATEMENT WHICH HE WAS NOT ABLE TO DO
HIMSELF CORRECT.
WHEN THE MASTER TOLD HIM TO TAKE TIME AND TRY TO
CORRECT HIS REPLY IN A BAD WAY WAS, LET SOME OFFICERS DO
THE JOB. I ONLY COME TO THE SHIP TO COOK. HE ALSO REFUSED
TO MEET IN THE MASTER'S OFFICE TOGETHER WITH THE
CH/OFFICER WHEN HE WAS ORDERED TO.
SINCE HE IS REFUSING TO TAKE ORDERS FROM THE MASTER OF
THE SHIP HE WILL BE SENT HOME IN FIRST POSSIBLE PORT WERE
HE CAN BE RELIEFED (SIC).
13th JANUARY 1993
AT 0700 HRS. THE CH/COOK LEGAHI CRISTONICO B. LEFT THE
VESSEL WITHOUT PERMISSION, HE RETURNED LATER IN THE DAY
BUT WAS NOT DOING ANY WORK.
14th JANUARY 1993
AT 1030 HRS. A HEARING WAS HELD IN THE OWNERS OFFICE
REGARDING THE DISMISSAL OF CH/COOK LEGAHI CRISTONICO B.
MASTER AS CHAIRMAN AND COMMITTEE CONSISTING OF CH/OFF.
PULGO LEONIDES T., CH/ENGR. SERMONINA TOMAS C., AND
BOSUN DAMOCLES CAMILO A. THE CASE OF DISMISSAL WAS READ
OUT FOR THE CH/COOK LEGAHI ACCORDING TO THE PROCEDURE
PARA 16 IN THE SEAMAN'S ACT. ENTERED IN THE LOG BOOK 6/1-93
AND 13/1-93. AT 1140 THE HEARING WAS ENDED, AND AT 1200 HRS.
THE CH/COOK LEGAHI WILL LEAVE THE VESSEL TO BE SENT
HOME. 5
Reading between the lines from the entries of the logbook, which by the very nature of
things could well be self-serving, it is rather apparent that as early as January 6, 1993,
the employer had already decided to dismiss petitioner and sent home for his alleged
refusal to obey the orders of his superiors. On January 14, 1993, the committee read to
petitioner his alleged offenses which were his refusal to take orders from his superior on
January 6 and his leaving the vessel without permission on January 13. When petitioner
remained silent, the committee informed him that he was dismissed. He was sent home
that same day. Petitioner was not given reasonable time to answer the charges hurled
against him or to defend himself. The notice apprising him of the charges and the notice
of dismissal were done in one morning all in the January 14 committee hearing. The
submission that the entry in the logbook made on January 6 which stated that for
petitioner's refusal "to take orders from the master of the ship he will be sent home in

first possible port" was sufficient compliance of the first notice requirement is not welltaken. This is not the kind of notice that satisfies due process contemplated by law. In
such a case where there is a failure to comply with the requirements of the law as to the
notice and hearing, the dismissal is certainly tainted with illegality.
On the substantive issue, we find no just cause for petitioner's dismissal. According to
the POEA, petitioner was found guilty for insubordination for his refusal "to obey the
order of the master to prepare the victual statement on January 6, 1993," 6 which was
presumably for the month of January.
The NLRC, which simply adopted in toto the findings of the POEA, concluded that
complainant refused albeit in a bad manner the request of the Shipmaster to prepare a
correct victualling cost statement for the month of December.
Based on the POEA findings, petitioner was dismissed because of his refusal to prepare
the victualling statement for the month of January, 1993. The facts as found by the
POEA are all muddled up. The victualling cost statement for the month of January was
not yet due when he was asked to prepare the same on January 6 of that month. A
victualling cost statement was necessary to show the food expense incurred for the past
month, not for the present month. Thus, from the victualling statements submitted for
the month of October, November and December, 1992, it can be seen that the period
indicated therein began on the first day of each month and ended on the last day of said
month. This means that the report for October was made in November, for November in
December, and that for December in January. Such being the case, petitioner's refusal
to prepare the victualling statement of January was justified since the victualling cost for
the month of January was not yet due or necessary.
On the other hand, the NLRC's conclusion that petitioner refused to correct the
victualling statement for the month of December as ordered to, was also not sufficient
basis for his dismissal. There is no doubt that petitioner had complied with his superior's
orders to prepare the statement for December. It was only the correction of the
December statement that he requested to defer which the Shipmaster took as a
downright refusal to make and considered such act as a serious and gross
insubordination.
For willful disobedience to be considered as just cause for dismissal, the employee's
conduct must be willful or intentional, the willfulness being characterized by a wrongful
and perverse attitude and the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he has been engaged to
discharge. 7
In the instant case, it was actually not petitioner's duty to prepare the victualling
statement. The allegation that this was part of his duty as chief cook and the fact that he
was aware of such duty when he was interviewed for the post is only self-serving and
without basis. The employment contract does not mention anything that this was part of
his duty as chief cook.8 A perusal of the victualling cost statement form meanwhile

reveals that only the signatures of a Relieving Chief Steward and the Chief Master were
required. 9 Nowhere does it contain that the signature of the chief cook was necessary.
Even assuming that petitioner refused to obey the order of his superior to prepare a
corrected victualling cost statement for December, although he maintained that he just
asked for time to do it, as he was then busy performing his usual duty, which we believe
to be the case, his refusal cannot be considered as one being characterized by a
"wrongful and perverse attitude." From the beginning, petitioner already intimated that
he did not know how to accomplish the victual cost statement since it entailed some
mathematical skills which he admittedly did not have. Indeed, to use his own words, "he
came aboard only to cook." His capability on manual skill was limited to cooking and
nothing more and for which reason he applied for the job as chief cook and was
eventually hired as such. The fact that he was able to do the victualling cost statements
for the past three months was an extra work on his part. His failure or alleged refusal to
go on with the work did not merit the severest penalty of dismissal from the service and
his immediate repatriation without even affording him due process of law. 10
Petitioner's dismissal without a valid cause constitute a breach of contract.
Consequently, he should only be paid the unexpired portion of his employment contract.
However, the payment of the overtime pay should be disallowed in the light of our ruling
in the case of Cagampan v. NLRC, 11 where we held that:
Petitioners have conveniently adopted the view that the "guaranteed or
fixed overtime pay of 30% of the basic salary per month" embodied in their
employment contract should be awarded to them as part of a "package
benefit." They have theorized that even without sufficient evidence of
actual rendition of overtime work, they would automatically be entitled to
overtime pay. Their thinking is erroneous for being illogical and unrealistic.
Their thinking even runs counter to the intention behind the provision. The
contract provision means that the fixed overtime pay of 30% would be
the basis for computing the overtime pay if and when overtime work would
be rendered. Simply, stated, the rendition of overtime work and the
submission of sufficient proof that said work was actually performed are
conditions to be satisfied before a seaman could be entitled to overtime
pay which should be computed on the basis of 30% of the basic monthly
salary. In short, the contract provision guarantees the right to overtime pay
but the entitlement to such benefit must first be established. Realistically
speaking, a seaman, by the very nature of his job, stays on board a ship
or vessel beyond the regular eight-hour work schedule. For the employer
to give him overtime pay for the extra hours when he might be sleeping or
attending to his personal chores or even just lulling away his time would
be extremely unfair and unreasonable.
We already resolved the question of overtime pay of worker aboard a vessel in the case
of National Shipyards and Steel Corporation v. CIR (3 SCRA 890). We ruled:

We can not agree with the Court below that respondent Malondras should
be paid overtime compensation for every hour in excess of the regular
working hours that he was on board his vessel or barge each day,
irrespective of whether or not he actually put in work during those hours.
Seamen are required to stay on board their vessels by the very nature of
their duties, and it is for this reason that, in addition to their regular
compensation, they are given free living quarters and subsistence
allowances when required to be on board. It could not have been the
purpose of our law to require their employers to pay them overtime even
when they are not actually working; otherwise, every sailor on board a
vessel would be entitled to overtime for sixteen hours each a day, even if
he spent all those hours resting or sleeping in his bunk, after his regular
tour of duty. The correct criterion in determining whether or not sailors are
entitled to overtime pay is not, therefore, whether they were on board and
can not leave ship beyond the regular eight working hours a day, but
whether they actually rendered service in excess of said number of hours.
(Emphasis supplied)
In the same vein, the claim for day's leave pay for the unexpired portion of the contract
is unwarranted since the same is given during the actual service of the seaman. 12
The claim for moral and exemplary damages are deleted for lack of sufficient basis.
Considering that petitioner was forced to litigate, we hold that the amount of P10,000.00
is a reasonable and fair compensation for the legal services rendered by counsel.
WHEREFORE, the petition is GRANTED. The decision of the NLRC is SET ASIDE.
Private respondent is hereby ORDERED to pay only the petitioner his salary equivalent
to seven (7) months corresponding to the unexpired portion of the contract plus
attorney's fees of P10,000.00.
SO ORDERED.

G.R. No. 144664

March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner,


vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M.
BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union
representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR
UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of
Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as
Director of Bureau of Working Conditions,respondents.
DECISION

CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule
65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000
Decision1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993
"Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled
"Workers Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good
Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998
Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin
applied as well to April 9, 1998, and 3) the September 18, 1998 4 Resolution of the Panel
of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary
Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein
it clarified, inter alia, that employees are entitled to 200% of their basic wage on April 9,
1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a
legal holiday], is alsoAraw ng Kagitingan [which is also a legal holiday]. The bulletin
reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from
being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the
same day, this Department is of the view that the covered employees are entitled to at
least two hundred percent (200%) of their basic wage even if said holiday is unworked.
The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday
and the second 100% is the payment of holiday pay for the same date as Araw ng
Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both
Maundy Thursday and Araw ng Kagitinganx x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to
pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent
Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining
Agreement (CBA) existing between petitioner and BATLU, the controversy was
submitted for voluntary arbitration. x x x x On July 31, 1998, the Office of the Voluntary
Arbitrator rendered a decision directing petitioner to pay its covered employees "200%
and not just 100% of their regular daily wages for the unworked April 9, 1998 which
covers two regular holidays, namely, Araw ng Kagitignan and Maundy Thursday."
(Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:

ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing
less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth and thirtieth of December and the
day designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that
the regular holidays are now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the
Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay for
every regular holiday, the computation of which is determined by a legal formula which
is not changed by the fact that there are two holidays falling on one day, like on April 9,
1998 when it wasAraw ng Kagitingan and at the same time was Maundy Thursday; and
that that the law, as amended, enumerates ten regular holidays for every year should
not be interpreted as authorizing a reduction to nine the number of paid regular holidays
"just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also
Holy Friday or Maundy Thursday."

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner
and BATLU, the law governing the relations between them, clearly recognizes their
intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they
may fall in any calendar year, as paid legal holidays during the effectivity of the CBA
and that "[t]here is no condition, qualification or exception for any variance from the
clear intent that all holidays shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law
which provides for [a] reduction of holiday pay if two holidays happen to fall on the same
day, any doubt in the interpretation and implementation of the Labor Code provisions on
holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS
OF THE COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND
SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY
THE PARTIES THEMSELVES
II
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE
VALIDITY OF THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS
LAID TO REST BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE
EXPLANATORY BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLEITN
WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE
RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE
MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11,
1993, IN THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR
CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND

INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE


OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW
V
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE
DEPARTMENT OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED
MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR
APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE
CONTRARY
VI
WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF
PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS
WELL AS EQUAL PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner lodged the present petition for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any
alleged errors committed by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not by a special civil action
of certiorari. If the aggrieved party fails to do so within the reglementary period, and the
decision accordingly becomes final and executory, he cannot avail himself of the writ of
certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under
Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45
and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the
decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless
of the nature of the action or proceeding involved, may be appealed to this Court by
filing a petition for review, which would be but a continuation of the appellate process
over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15)
days from notice of judgment or denial of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must
show that he has no plain, speedy and adequate remedy in the ordinary course of law
against its perceived grievance. A remedy is considered "plain, speedy and adequate" if
it will promptly relieve the petitioner from the injurious effects of the judgment and the

acts of the lower court or agency. In this case, appeal was not only available but also a
speedy and adequate remedy.6
The records of the case show that following petitioners receipt on August 18, 2000 of a
copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for
Reconsideration, it filed the present petition for certiorari on September 15, 2000, at
which time the Court of Appeals decision had become final and executory, the 15-day
period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that
the State shall afford protection to labor.7 Its purpose is not merely "to prevent
diminution of the monthly income of the workers on account of work interruptions. In
other words, although the worker is forced to take a rest, he earns what he should earn,
that is, his holiday pay."8 It is also intended to enable the worker to participate in the
national celebrations held during the days identified as with great historical and cultural
significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last
Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were
declared national holidays to afford Filipinos with a recurring opportunity to
commemorate the heroism of the Filipino people, promote national identity, and deepen
the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the
contributions of the working class to the development of the nation, while the religious
holidays designated in Executive Order No. 203 allow the worker to celebrate his faith
with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the
enjoyment of ten paid regular holidays.9The provision is mandatory,10 regardless of
whether an employee is paid on a monthly or daily basis.11 Unlike a bonus, which is a
management prerogative,12 holiday pay is a statutory benefit demandable under the
law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that
two holidays fall on the same date should not operate to reduce to nine the ten holiday
pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the
law is clear and unequivocal, the law must be taken to mean exactly what it says. 13 In
the case at bar, there is nothing in the law which provides or indicates that the
entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on
the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11,
1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthlypaid employees are entitled to an additional days pay if a holiday falls on a Sunday.
This Court, in answering the issue in the negative, observed that in fixing the monthly

salary of its employees,Wellington took into account "every working day of the
year including the holidays specified by law and excluding only Sunday." In the instant
case, the issue is whether daily-paid employees are entitled to be paid for two regular
holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working mans welfare should be the primordial and
paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor
Code provides that "Nothing in the law or the rules shall justify an employer in
withdrawing or reducing any benefits, supplements or payments for unworked regular
holidays as provided in existing individual or collective agreement or employer practice
or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had
obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998
CBA incorporates the following provision:
ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)

Only an employee who works on the day immediately preceding or after a regular
holiday shall be entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday
payment in addition to normal vacation pay but will not entitle the employee to another
vacation leave.
Under similar circumstances, the COMPANY will give a days wage for November 1st
and December 31st whenever declared a holiday. When required to work on said days,
the employee will be paid according to Art. VI, Sec. 3B hereof. 18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

G.R. No. 157634

May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO


LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES,
AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA,
TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO
MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO,
MIGUEL TORREFRANCA, and SANTOS BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the Court
of Appeals (CA)1 in CA-G.R. SP No. 68642, entitled "Rolando Adana, Wenefredo
Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel &
Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners' motion for
reconsideration. The assailed CA decision reversed the NLRC Decision which had
dismissed all of respondents' complaints,3 and reinstated the Joint Decision of the Labor
Arbiter4 which ruled that respondents were illegally dismissed and entitled to their
money claims.
The facts, culled from the records, are as follows:5

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po,6whose mother, petitioner Josefa Po Lam, manages the
establishment.7 The hotel and restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant
hired the following people, all respondents in this case, with the following jobs: 8
1. Wenefredo Loveres

Accountant and Officer-incharge


2. Paterno Llarena
Front Desk Clerk
3. Gregorio Nicerio
Supervisory Waiter
4. Amado Macandog
Roomboy
5. Luis Guades
Utility/Maintenance Worker
6. Santos Broola
Roomboy
7. Teodoro Laurenaria
Waiter
8. Eduardo Alamares
Roomboy/Waiter
9. Lourdes Camigla
Cashier
10. Chona Bumalay
Cashier
11. Jose Atractivo
Technician
12. Amado Alamares
Dishwasher and Kitchen Helper
13. Roger Burce
Cook
14. Rolando Adana
Waiter
15. Miguel Torrefranca
Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space
occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the
business were suspended on March 31, 1997.9 The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the
construction of a new Mayon Hotel & Restaurant at Pearanda Street, Legazpi
City.10 Only nine (9) of the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed complaints for
underpayment of wages and other money claims against petitioners, as follows: 12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for
illegal dismissal, underpayment of wages, nonpayment of holiday and rest day
pay; service incentive leave pay (SILP) and claims for separation pay plus
damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
underpayment of wages; nonpayment of cost of living allowance (COLA) and

overtime pay; premium pay for holiday and rest day; SILP; nightshift differential
pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of
wages; nonpayment of holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential
pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day
and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest
day pay, holiday pay, SILP, and damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and
overtime pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint
Decision in favor of the employees. The Labor Arbiter awarded substantially all of
respondents' money claims, and held that respondents Loveres, Macandog and Llarena
were entitled to separation pay, while respondents Guades, Nicerio and Alamares were
entitled to their retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the
complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was
denied, they filed a petition for certiorariwith the CA which rendered the now assailed
decision.
After their motion for reconsideration was denied, petitioners now come to this Court,
seeking the reversal of the CA decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the National
Labor Relations Commission (Second Division) by holding that the findings of
fact of the NLRC were not supported by substantial evidence despite ample and
sufficient evidence showing that the NLRC decision is indeed supported by
substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of the
labor arbiter which ruled that private respondents were illegally dismissed from
their employment, despite the fact that the reason why private respondents were

out of work was not due to the fault of petitioners but to causes beyond the
control of petitioners.
III. The Honorable Court of Appeals erred in upholding the award of monetary
benefits by the labor arbiter in his joint decision in favor of the private
respondentS, including the award of damages to six (6) of the private
respondents, despite the fact that the private respondents have not proven by
substantial evidence their entitlement thereto and especially the fact that they
were not illegally dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the
owner of the business establishment, petitioner Mayon Hotel and Restaurant,
thus disregarding the certificate of registration of the business establishment
ISSUED by the local government, which is a public document, and the
unqualified admissions of complainants-private respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of
petitioner Mayon Hotel & Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and
Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages,
and nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay,
and night shift differential pay?
It is petitioners' contention that the above issues have already been threshed out
sufficiently and definitively by the NLRC. They therefore assail the CA's reversal of the
NLRC decision, claiming that based on the ruling in Castillo v. NLRC,15 it isnon
sequitur that the CA should re-examine the factual findings of both the NLRC and the
Labor Arbiter, especially as in this case the NLRC's findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latter's
findings.16 But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.17 And when the factual findings of the Labor Arbiter and
the NLRC are diametrically opposed and this disparity of findings is called into question,
there is, necessarily, a re-examination of the factual findings to ascertain which opinion
should be sustained.18 As ruled inAsuncion v. NLRC,19

Although, it is a legal tenet that factual findings of administrative bodies are


entitled to great weight and respect, we are constrained to take a second look at
the facts before us because of the diversity in the opinions of the Labor Arbiter
and the NLRC. A disharmony between the factual findings of the Labor Arbiter
and those of the NLRC opens the door to a review thereof by this Court. 20
The CA, therefore, did not err in reviewing the records to determine which opinion was
supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative
bodies like the NLRC are affirmed only if they are supported by substantial
evidence that is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of
a decision of a Labor Arbiter. Mere variance in evidentiary assessment between
the NLRC and the Labor Arbiter does not automatically call for a full review of the
facts by this Court. The NLRC's decision, so long as it is not bereft of substantial
support from the records, deserves respect from this Court. As a rule, the original
and exclusive jurisdiction to review a decision or resolution of respondent NLRC
in a petition for certiorari under Rule 65 of the Rules of Court does not include a
correction of its evaluation of the evidence but is confined to issues of jurisdiction
or grave abuse of discretion. Thus, the NLRC's factual findings, if supported by
substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence
before it or had misappreciated the evidence to such an extent as to compel a
contrary conclusion if such evidence had been properly appreciated. (citations
omitted)22
After careful review, we find that the reversal of the NLRC's decision was in order
precisely because it was not supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa
Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC
reversed this decision, the CA, on review, agreed with the Labor Arbiter that
notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po
Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper
respondent in the complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po,
we cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the
subject hotel and restaurant. There were conflicting documents submitted by
Josefa herself. She was ordered to submit additional documents to clearly
establish ownership of the hotel and restaurant, considering the testimonies
given by the [respondents] and the non-appearance and failure to submit her

own position paper by Pacita Po. But Josefa did not comply with the directive of
the Labor Arbiter. The ruling of the Supreme Court in Metropolitan Bank and
Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in
this wise:
When the evidence tends to prove a material fact which imposes a liability
on a party, and he has it in his power to produce evidence which from its
very nature must overthrow the case made against him if it is not founded
on fact, and he refuses to produce such evidence, the presumption arises
that the evidence[,] if produced, would operate to his prejudice, and
support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and
restaurant, the labor arbiter relied also on the testimonies of the witnesses,
during the hearing of the instant case. When the conclusions of the labor arbiter
are sufficiently corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position to assess and
evaluate the credibility of the contending parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that
petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that
the documents they submitted to the Labor Arbiter sufficiently and clearly establish the
fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam.
They contend that petitioner Josefa Po Lam's participation was limited to merely (a)
being the overseer; (b) receiving the month-to-month and/or year-to-year financial
reports prepared and submitted by respondent Loveres; and (c) visitation of the
premises.24They also put emphasis on the admission of the respondents in their
position paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as
the manager, and Pacita Po as the owner.25 This, they claim, is a judicial admission and
is binding on respondents. They protest the reliance the Labor Arbiter and the CA
placed on their failure to submit additional documents to clearly establish ownership of
the hotel and restaurant, claiming that there was no need for petitioner Josefa Po Lam
to submit additional documents considering that the Certificate of Registration is the
best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that
petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the
Labor Arbiter. Despite receipt of the Labor Arbiter's notice and summons, other notices
and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the
Labor Arbiter in these cases, nor file her position paper.26 It was only on appeal with the
NLRC that Pacita Po signed the pleadings.27 The apathy shown by petitioner Pacita Po
is contrary to human experience as one would think that the owner of an establishment
would naturally be concerned when all her employees file complaints against her.

Second. The records of the case belie petitioner Josefa Po Lam's claim that she is
merely an overseer. The findings of the Labor Arbiter on this question were based on
credible, competent and substantial evidence. We again quote the Joint Decision on this
matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While
[petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the
hotel and restaurant when the latter purchased the same from one Palanos in
1981, Josefa failed to submit the document of sale from said Palanos to Pacita
as allegedly the sale was only verbal although the license to operate said hotel
and restaurant is in the name of Pacita which, despite our Order to Josefa to
present the same, she failed to comply (p. 38, tsn. August 13, 1998). While
several documentary evidences were submitted by Josefa wherein Pacita was
named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol.
I, rollo)[,] there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While
Josefa explained her participation and interest in the business as merely to help
and assist her daughter as the hotel and restaurant was near the former's store,
the testimonies of [respondents] and Josefa as well as her demeanor during the
trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the acts
and manifestation of ownership of the hotel and restaurant like transferring
employees from the Greatwall Palace Restaurant which she and her husband
Roy Po Lam previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing, attending (sic)
to Labor Inspectors during ocular inspections. Except for documents whereby
Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the
record shows any circumstance or manifestation that Pacita Po is the owner of
Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a
person to purchase a hotel and restaurant in the very heart of the City of Legazpi
verbally. Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former should [have]
submitted the lease contract between the owner of the building where Mayon
Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to
clearly establish ownership by the latter of said enterprise. Josefa failed. We are
not surprised why some employers employ schemes to mislead Us in order to
evade liabilities. We therefore consider and hold Josefa Po Lam as the
owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in
these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the
best proof of ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lam's involvement in the
enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore

within his jurisdiction to require the additional documents to ascertain who was the real
owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve the
demand of substantial justice.29 The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and intention of the Labor Code
that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.30 Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no allegation that
petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial
admissions to respondents who are but lowly employees - would be to exact
compliance with technicalities of law that is contrary to the demands of substantial
justice. Moreover, the issue of ownership was an issue that arose only during the
course of the proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient opportunity
to be heard on the issue of ownership.33 The essence of due process in administrative
proceedings is simply an opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of.34 And there is nothing in the
records which would suggest that petitioners had absolute lack of opportunity to be
heard.35 Obviously, the choice not to present evidence was made by petitioners
themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when the
case was on appeal with the NLRC, nothing was submitted to negate the Labor Arbiter's
finding that Pacita Po is not the real owner of the subject hotel and restaurant. Indeed,
no such evidence was submitted in the proceedings with the CA nor with this Court.
Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it
is most telling that they continue to withhold evidence which would shed more light on
this issue. We therefore agree with the CA that the failure to submit could only mean
that if produced, it would have been adverse to petitioners' case. 37
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is
the owner of petitioner Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broola. 38

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to
respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and
Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal,
the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code
as amended.39The Labor Arbiter ruled that respondent Atractivo was not entitled to
separation pay because he had been transferred to work in the restaurant operations in
Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio,
Macandog and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is
attendant in the case at bar" and that respondents "did not submit any evidence to that
effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own
surmises and conjectures."41 In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that
none of the above-named respondents were illegally dismissed, or entitled to separation
or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that
when the illegal dismissal case was filed by respondents on April 1997, they had as yet
no cause of action. Petitioners therefore conclude that the filing by respondents of the
illegal dismissal case was premature and should have been dismissed outright by the
Labor Arbiter.42 Petitioners also claim that since the validity of respondents' dismissal is
a factual question, it is not for the reviewing court to weigh the conflicting evidence. 43
We do not agree. Whether respondents are still working for petitioners is a factual
question. And the records are unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and
Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the
other hand, was also laid-off when the Elizondo Street operations closed, as were all
the other respondents. Since then, respondents have not been permitted to work nor
recalled, even after the construction of the new premises at Pearanda Street and the
reopening of the hotel operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the
complaint was filed:44
[F]rom the records, more than six months had lapsed without [petitioner] having
resumed operation of the hotel. After more than one year from the temporary
closure of Mayon Hotel and the temporary transfer to another site of Mayon
Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and
restaurant will be transferred has been finally constructed and the same is
operated as a hotel with bar and restaurant nevertheless, none of [respondents]
herein who were employed at Mayon Hotel and Restaurant which was also
closed on April 30, 1998 was/were recalled by [petitioner] to continue their
services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents
as they had not filed an amended complaint to question the cessation of their
employment after the closure of Mayon Hotel & Restaurant on March 31, 1997. 45
The above factual finding of the Labor Arbiter was never refuted by petitioners in their
appeal with the NLRC. It confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by ruling that respondents have not
introduced any evidence to show that they were illegally dismissed, and that the Labor
Arbiter's finding was based on conjecture.46 It was a serious error that the NLRC did not
inquire as to the legality of the cessation of employment. Article 286 of the Labor Code
is clear there is termination of employment when an otherwise bona fide suspension
of work exceeds six (6) months.47 The cessation of employment for more than six
months was patent and the employer has the burden of proving that the termination was
for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves
from the charges. First, in the proceedings with the Labor Arbiter, they claimed that it
could not be illegal dismissal because the lay-off was merely temporary (and due to the
expiration of the lease contract over the old premises of the hotel).
They specifically invoked Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual basis.49 Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had
exceeded the six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of
the Labor Code is misplaced, considering that the reason why private
respondents were out of work was not due to the fault of petitioners. The failure
of petitioners to reinstate the private respondents to their former positions should
not likewise be attributable to said petitioners as the private respondents did not
submit any evidence to prove their alleged illegal dismissal. The petitioners
cannot discern why they should be made liable to the private respondents for
their failure to be reinstated considering that the fact that they were out of work
was not due to the fault of petitioners but due to circumstances beyond the
control of petitioners, which are the termination and non-renewal of the lease
contract over the subject premises. Private respondents, however, argue in their
Comment that petitioners themselves sought the application of Article 286 of the
Labor Code in their case in their Position Paper filed before the Labor Arbiter. In
refutation, petitioners humbly submit that even if they invoke Article 286 of the
Labor Code, still the fact remains, and this bears stress and emphasis, that the
temporary suspension of the operations of the establishment arising from the
non-renewal of the lease contract did not result in the termination of employment
of private respondents and, therefore, the petitioners cannot be faulted if said
private respondents were out of work, and consequently, they are not entitled to
their money claims against the petitioners.50

It is confounding how petitioners have fashioned their arguments. After having admitted,
in effect, that respondents have been laid-off since April 1997, they would have this
Court excuse their refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven the illegality of their
dismissal.
Petitioners' arguments reflect their lack of candor and the blatant attempt to use
technicalities to muddle the issues and defeat the lawful claims of their
employees. First, petitioners admit that since April 1997, when hotel operations were
suspended due to the termination of the lease of the old premises, respondents
Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to work.
Second, even after six months of what should have been just a temporary lay-off, the
same respondents were still not recalled to work. As a matter of fact, the Labor
Arbiter even found that as of the time when he rendered his Joint Decision on July 2000
or more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased, notwithstanding
that the new premises had been completed and the same operated as a hotel with bar
and restaurant. This is clearly dismissal or the permanent severance or complete
separation of the worker from the service on the initiative of the employer regardless of
the reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of
the filing of the complaint, respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-off of the respondents was
merely temporary, pending construction of the new building at Pearanda Street. 52
While the closure of the hotel operations in April of 1997 may have been temporary, we
hold that the evidence on record belie any claim of petitioners that the lay-off of
respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the
complaint for illegal dismissal immediately after the closure of the hotel operations in
Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners' allegations that the employees assigned to the hotel
operations knew about this beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the
employer-employee relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis.53 But they made no
mention of any intent to recall these respondents to work upon completion of the
new premises. Third, the various pleadings on record show that petitioners held
respondents, particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner Josefa Po Lam's
affidavit on July 21, 1998, for example, squarely blamed respondents, specifically
Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon
Hotel & Restaurant to sustain "continuous losses until it is closed." She then asserts
that respondents "are not entitled to separation pay for they were not terminated and if

ever the business ceased to operate it was because of losses." 54 Again, petitioners
make the same allegation in their memorandum on appeal with the NLRC, where they
alleged that three (3) years prior to the expiration of the lease in 1997, the operation of
the Hotel had been sustaining consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's mismanagement and abuse of
petitioners' trust and confidence.55 Even the petition filed in this court made reference to
the separation of the respondents due to "severe financial losses and reverses," again
imputing it to respondents' mismanagement.56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against Loveres, is
inconsistent with the desire to recall them to work. Fourth, petitioners' memorandum on
appeal also averred that the case was filed "not because of the business being operated
by them or that they were supposedly not receiving benefits from the Labor Code which
is true, but because of the fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of the building terminated
the Lease Contract."57 Fifth, petitioners had inconsistencies in their pleadings (with the
NLRC, CA and with this Court) in referring to the closure,58 i.e., in the petition filed with
this court, they assert that there is no illegal dismissal because there was "only a
temporary cessation or suspension of operations of the hotel and restaurant due to
circumstances beyond the control of petitioners, and that is, the non-renewal of the
lease contract..."59 And yet, in the same petition, they also assert that: (a) the separation
of respondents was due to severe financial losses and reverses leading to the closure
of the business; and (b) petitioner Pacita Po had to close shop and was bankrupt
and has no liquidity to put up her own building to house Mayon Hotel &
Restaurant.60 Sixth, and finally, the uncontroverted finding of the Labor Arbiter that
petitioners terminated all the other respondents, by not employing them when the Hotel
and Restaurant transferred to its new site on Pearanda Street. 61 Indeed, in this same
memorandum, petitioners referred to all respondents as "former employees of Mayon
Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken together, they lead us to
conclude that petitioners really intended to dismiss all respondents and merely used the
termination of the lease (on Rizal Street premises) as a means by which they could
terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997
was merely temporary, it becamedismissal by operation of law when petitioners failed
to reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the
Labor Code.
We are not impressed by petitioners' claim that severe business losses justified their
failure to reinstate respondents. The evidence to prove this fact is inconclusive. But
more important, serious business losses do not excuse the employer from complying
with the clearance or report required under Article 283 of the Labor Code and its
implementing rules before terminating the employment of its workers.63 In the absence
of justifying circumstances, the failure of petitioners to observe the procedural
requirements set out under Article 284, taints their actuations with bad faith, especially

since they claimed that they have been experiencing losses in the three years before
1997. To say the least, if it were true that the lay-off was temporary but then serious
business losses prevented the reinstatement of respondents, then petitioners should
have complied with the requirements of written notice. The requirement of law
mandating the giving of notices was intended not only to enable the employees to look
for another employment and therefore ease the impact of the loss of their jobs and the
corresponding income, but more importantly, to give the Department of Labor and
Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized
cause of termination.64
And even assuming that the closure was due to a reason beyond the control of the
employer, it still has to accord its employees some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the services of an employee
for a just or authorized cause, the dismissal of employees must be made within the
parameters of law and pursuant to the tenets of fair play.66 And in termination disputes,
the burden of proof is always on the employer to prove that the dismissal was for a just
or authorized cause.67 Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal dismissal. 68
Under these circumstances, the award of damages was proper. As a rule, moral
damages are recoverable where the dismissal of the employee was attended by bad
faith or fraud or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy.69 We believe that the dismissal of the
respondents was attended with bad faith and meant to evade the lawful obligations
imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from
employment in 1997 as a matter of fact, but without legal redress. This runs counter to
notions of fair play, substantial justice and the constitutional mandate that labor rights
should be respected. 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
employer must affirmatively show rationally adequate evidence that the dismissal was
for a justifiable cause.70 It is a time-honored rule that in controversies between a laborer
and his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's favor.71 The policy is to
extend the doctrine to a greater number of employees who can avail of the benefits
under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog
and Llarena; (Santos Broola cannot be granted separation pay as he made no
such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the
time of dismissal were entitled to their retirement benefits pursuant to Article 287
of the Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the
burden of proving that the monetary claims of the respondents have been paid. 74 The
CA thus reinstated the Labor Arbiter's grant of respondents' monetary claims, including
damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as
there was no illegal dismissal, then respondents are not entitled to their monetary
claims or separation pay and damages. Petitioners' arguments are not only tiring,
repetitive and unconvincing, but confusing and confused entitlement to labor
standard benefits is a separate and distinct concept from payment of separation pay
arising from illegal dismissal, and are governed by different provisions of the Labor
Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other documents the labor
standard benefits they are entitled to, and which they alleged that petitioners have failed
to pay them. It was therefore petitioners' burden to prove that they have paid these
money claims. One who pleads payment has the burden of proving it, and even where
the employees must allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners
submitted, i.e., affidavits executed by some of respondents during an ocular inspection
conducted by an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove payment.76 Despite
repeated orders from the Labor Arbiter,77 petitioners failed to submit the pertinent
employee files, payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for overtime work, night
shift differential, premium pay for work on holidays and rest day, and payment of these
as well as the COLA and the SILP documents which are not in respondents'
possession but in the custody and absolute control of petitioners.78 By choosing not to
fully and completely disclose information and present the necessary documents to
prove payment of labor standard benefits due to respondents, petitioners failed to
discharge the burden of proof.79 Indeed, petitioners' failure to submit the necessary
documents which as employers are in their possession, inspite of orders to do so, gives

rise to the presumption that their presentation is prejudicial to its cause.80 As aptly
quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a
party, and he has it in his power to produce evidence which from its very nature
must overthrow the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises that the evidence, if
produced, would operate to his prejudice, and support the case of his
adversary.81
Petitioners next claim that the cost of the food and snacks provided to respondents as
facilities should have been included in reckoning the payment of respondents' wages.
They state that although on the surface respondents appeared to receive minimal
wages, petitioners had granted respondents other benefits which are considered part
and parcel of their wages and are allowed under existing laws.82 They claim that these
benefits make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an appropriate Facility
Evaluation Order issued by the Regional Director of the DOLE.84 Petitioners also aver
that they give five (5) percent of the gross income each month as incentives. As proof of
compliance of payment of minimum wages, petitioners submitted the Notice of
Inspection Results issued in 1995 and 1997 by the DOLE Regional Office. 85
The cost of meals and snacks purportedly provided to respondents cannot be deducted
as part of respondents' minimum wage. As stated in the Labor Arbiter's decision: 86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol.
II, rollo) issued by the DOLE Regional Office whereby the cost of meals given by
[petitioners] to [respondents] were specified for purposes of considering the
same as part of their wages, We cannot consider the cost of meals in the Orders
as applicable to [respondents]. [Respondents] were not interviewed by the DOLE
as to the quality and quantity of food appearing in the applications of [petitioners]
for facility evaluation prior to its approval to determine whether or not
[respondents] were indeed given such kind and quantity of food. Also, there was
no evidence that the quality and quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while some [of the respondents]
admitted that they were given meals and merienda, the quality of food serve[d] to
them were not what were provided for in the Orders and that it was only when
they filed these cases that they came to know about said Facility Evaluation
Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner]
Josefa herself, who applied for evaluation of the facility (food) given to
[respondents], testified that she did not inform [respondents] concerning said
Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities,
such facilities could not be deducted without compliance with certain legal requirements.

As stated in Mabeza v. NLRC,87 the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents' written authorization. Indeed, the
Labor Arbiter found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was provided for in the
Facility Evaluation Orders and it was only when they filed the cases that they came to
know of this supposed Facility Evaluation Orders.88 Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she had
applied for.89
Considering the failure to comply with the above-mentioned legal requirements, the
Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided
to respondents should be deducted as part of their salaries, on the ground that
respondents have availed themselves of the food given by petitioners. 90 The law is clear
that mere availment is not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on record that
they were required to eat in the hotel and restaurant so that they will not go home and
there is no interruption in the services of Mayon Hotel & Restaurant. As ruled
in Mabeza, food or snacks or other convenience provided by the employers are deemed
as supplements if they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so much lie in the
kind (food, lodging) but the purpose.91 Considering, therefore, that hotel workers are
required to work different shifts and are expected to be available at various odd hours,
their ready availability is a necessary matter in the operations of a small hotel, such as
petitioners' business.92 The deduction of the cost of meals from respondents' wages,
therefore, should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of the
establishment can be considered as part of the respondents' wages. We quote with
approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts
as profit share, the same cannot be considered as part of their wages in
determining their claims for violation of labor standard benefits. Although called
profit share[,] such is in the nature of share from service charges charged by the
hotel. This is more explained by [respondents] when they testified that what they
received are not fixed amounts and the same are paid not on a monthly basis
(pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit
evidence that the amounts received by [respondents] as profit share are to be
considered part of their wages and had been agreed by them prior to their
employment. Further, how can the amounts receive[d] by [respondents] be
considered as profit share when the same [are] based on the gross receipt of the

hotel[?] No profit can as yet be determined out of the gross receipt of an


enterprise. Profits are realized after expenses are deducted from the gross
income.
On the issue of the proper minimum wage applicable to respondents, we sustain the
Labor Arbiter. We note that petitioners themselves have admitted that the establishment
employs "more or less sixteen (16) employees,"93 therefore they are estopped from
claiming that the applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that this
is not a defense to payment of labor standard benefits. The employer cannot exempt
himself from liability to pay minimum wages because of poor financial condition of the
company. The payment of minimum wages is not dependent on the employer's ability to
pay.94
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents' employment in an underhanded
manner, and have used and abused the quasi-judicial and judicial processes to resist
payment of their employees' rightful claims, thereby protracting this case and causing
the unnecessary clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances of this case
would have called for exemplary damages, as the dismissal was effected in a wanton,
oppressive or malevolent manner,95 and public policy requires that these acts must be
suppressed and discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages
of P10,000.00 each to all respondents. While it is true that other forms of damages
under the Civil Code may be awarded to illegally dismissed employees,97 any award of
moral damages by the Labor Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.98 And the law is clear that exemplary damages can only be
awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory
damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and
Broola specifically claimed damages from petitioners, then only they are entitled to
exemplary damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to
each respondent. It is settled that in actions for recovery of wages or where an
employee was forced to litigate and incur expenses to protect his rights and interest, he
is entitled to an award of attorney's fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003
of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July
14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97 is
AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to
respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all
respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all
respondents except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo,
and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total
monetary benefits awarded and due to the employees concerned in accordance with
the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within
thirty (30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.
G.R. No. 100701

March 28, 2001

PRODUCERS BANK OF THE PHILIPPINES, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK
EMPLOYEES ASSOCIATION,1respondents.
GONZAGA-REYES, J.:
Before us is a special civil action for certiorari with prayer for preliminary injunction
and/or restraining order seeking the nullification of (1) the decision of public respondent
in NLRC-NCR Case No. 02-00753-88, entitled "Producers Bank Employees Association
v. Producers Bank of the Philippines," promulgated on 30 April 1991, reversing the
Labor Arbiter's dismissal of private respondent's complaint and (2) public respondent's
resolution dated 18 June 1991 denying petitioner's motion for partial
reconsideration.1wphi1.nt

The present petition originated from a complaint filed by private respondent on 11


February 1988 with the Arbitration Branch, National Capital Region, National Labor
Relations Commission (NLRC), charging petitioner with diminution of benefits, noncompliance with Wage Order No. 6 and non-payment of holiday pay. In addition, private
respondent prayed for damages.2
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondent's claims
to be unmeritorious and dismissed its complaint.3 In a complete reversal, however, the
NLRC4 granted all of private respondent's claims, except for damages. 5 The dispositive
portion of the NLRC's decision provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby,
SET ASIDE and another one issued ordering respondent- appellee to pay
complainant-appellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the
corresponding adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3)
years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a
Resolution issued on 18 June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the
succeeding reasons stated in its Petition 1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when
(1) it contravened the Supreme Court decision in Traders Royal Bank v. NLRC, et al.,
G.R. No. 88168, promulgated on August 30, 1990, (2) its ruling is not justified by law
and Art. 100 of the Labor Code, (3) its ruling is contrary to the CBA, and (4) the socalled "company practice invoked by it has no legal and moral bases" (p. 2, Motion for
Partial Reconsideration, Annex "H");
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely
abused its discretion when it patently and palpably erred in holding that it is "more
inclined to adopt the stance of appellant (private respondent UNION) in this issue since
it is more in keeping with the law and its implementing provisions and the intendment of
the parties as revealed in their CBA" without giving any reason or justification for such

conclusions as the stance of appellant (private respondent UNION) does not traverse
the clear and correct finding and conclusion of the Labor Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under
Wage Order No. 6.
Finally, the "wage differentials under Wage Order No. 6 for November 1, 1984 and the
corresponding adjustment thereof" (par. 2, dispositive portion, NLRC Decision), has
prescribed (p. 12, Motion for Partial Reconsideration, Annex "H").
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its
discretion when it patently and palpably erred in approving and adopting "the position of
appellant (private respondent UNION)" without giving any reason or justification therefor
which position does not squarely traverse or refute the Labor Arbiter's correct finding
and ruling (p. 18, Motion for Partial Reconsideration, Annex "H").6
On 29 July 1991, the Court granted petitioner's prayer for a temporary restraining order
enjoining respondents from executing the 30 April 1991 Decision and 18 June 1991
Resolution of the NLRC.7
Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.
Bonuses
As to the bonuses, private respondent declared in its position papers filed with the
NLRC that
1. Producers Bank of the Philippines, a banking institution, has been providing several
benefits to its employees since 1971 when it started its operation. Among the benefits it
had been regularly giving is a mid-year bonus equivalent to an employee's one-month
basic pay and a Christmas bonus equivalent to an employee's one whole month salary
(basic pay plus allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay
previously being given as part of the Christmas bonus was applied as compliance to it
(P.D. 851), the allowances remained as Christmas bonus;
3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year
bonus, one month basic pay as 13thmonth pay but the Christmas bonus was no longer
based on the allowance but on the basic pay of the employees which is higher;
4. In the early part of 1984, the bank was placed under conservatorship but it still
provided the traditional mid-year bonus;

5. By virtue of an alleged Monetary Board Resolution No. 1566, bank only gave a onehalf (1/2) month basic pay as compliance of the 13th month pay and none for the
Christmas bonus. In a tabular form, here are the bank's violations:
YEAR

MID- YEAR BONUS

CHRISTMAS BONUS

13TH MO. PAY

previous years

one mo. basic

one mo. basic

one mo. Basic

1984

[one mo. basic]

-none-

one-half mo. Basic

1985

one-half mo. basic

-none-

one-half mo. Basic

1986

one-half mo. basic

one-half mo. basic

one mo. Basic

1987

one-half mo. basic

one-half mo. basic

one mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their
having been given for thirteen consecutive years, have ripened into a vested right and,
as such, can no longer be unilaterally withdrawn by petitioner without violating Article
100 of Presidential Decree No. 4429 which prohibits the diminution or elimination of
benefits already being enjoyed by the employees. Although private respondent
concedes that the grant of a bonus is discretionary on the part of the employer, it argues
that, by reason of its long and regular concession, it may become part of the employee's
regular compensation.10
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged
bonus differentials due to its depressed financial condition, as evidenced by the fact that
in 1984 it was placed under conservatorship by the Monetary Board. According to
petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an assertion
which was affirmed by the labor arbiter. Moreover, petitioner points out that the
collective bargaining agreement of the parties does not provide for the payment of any
mid-year or Christmas bonus. On the contrary, section 4 of the collective bargaining
agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided
in this Agreement, even if now accorded or hereafter accorded to the employees,
shall be deemed purely acts of grace dependent upon the sole judgment and
discretion of the BANK to grant, modify or withdraw .11
A bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employer's business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of
bigger profits.12 The granting of a bonus is a management prerogative, something given

in addition to what is ordinarily received by or strictly due the recipient. 13 Thus, a bonus
is not a demandable and enforceable obligation,14 except when it is made part of the
wage, salary or compensation of the employee.15
However, an employer cannot be forced to distribute bonuses which it can no longer
afford to pay. To hold otherwise would be to penalize the employer for his past
generosity. Thus, in Traders Royal Bank v. NLRC,16 we held that It is clear x x x that the petitioner may not be obliged to pay bonuses to its
employees. The matter of giving them bonuses over and above their lawful
salaries and allowances is entirely dependent on the profits, if any, realized by
the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had
decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the
Bank still gave out the usual two (2) months basic mid-year and two months
gross year-end bonuses. The petitioner pointed out, however, that the Bank
weakened considerably after 1986 on account of political developments in the
country. Suspected to be a Marcos-owned or controlled bank, it was placed
under sequestration by the present administration and is now managed by the
Presidential Commission on Good Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the
granting of bonuses to the employees had ripened into a company practice that
may not be adjusted to the prevailing financial condition of the Bank has no legal
and moral bases. Its fiscal condition having declined, the Bank may not be forced
to distribute bonuses which it can no longer afford to pay and, in effect, be
penalized for its past generosity to its employees. Private respondent's contention, that the decrease in the mid-year and year-end
bonuses constituted a diminution of the employees' salaries, is not correct, for
bonuses are not part of labor standards in the same class as salaries, cost of
living allowances, holiday pay, and leave benefits, which are provided by the
Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v.
NLR17 wherein the Court made the following pronouncements
By definition, a "bonus" is a gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right. It is something given in
addition to what is ordinarily received by or strictly due the recipient. The granting
of a bonus is basically a management prerogative which cannot be forced upon
the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employee's basic salaries or wages,
especially so if it is incapable of doing so.

xxx xxx xxx


Clearly then, a bonus is an amount given ex gratia to an employee by an
employer on account of success in business or realization of profits. How then
can an employer be made liable to pay additional benefits in the nature of
bonuses to its employees when it has been operating on considerable net losses
for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in
the mid-80's. As early as 1984, the Central Bank found that Manila bank had
been suffering financial losses. Presumably, the problems commenced even
before their discovery in 1984. As earlier chronicled, the Central Bank placed
petitioner bank under comptrollership in 1984 because of liquidity problems and
excessive interbank borrowings. In 1987, it was placed under receivership and
ordered to close operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the
years 1984, 1985 and 1986, thus, resulting to its eventual closure in 1987 and
liquidation in 1988. Clearly, there was no success in business or realization of
profits to speak of that would warrant the conferment of additional benefits
sought by private respondents. No company should be compelled to act liberally
and confer upon its employees additional benefits over and above those
mandated by law when it is plagued by economic difficulties and financial losses.
No act of enlightened generosity and self-interest can be exacted from near
empty , if not empty coffers.
It was established by the labor arbiter18 and the NLRC19 and admitted by both
parties20 that petitioner was placed under conservatorship by the Monetary Board,
pursuant to its authority under Section 28-A of Republic Act No. 265,21 as amended by
Presidential Decree No. 72,22 which provides
Sec.28-A. Appointment of conservator. - Whenever, on the basis of a report
submitted by the appropriate supervising and examining department, the
Monetary Board finds that a bank is in a state of continuing inability or
unwillingness to maintain a condition of solvency and liquidity deemed adequate
to protect the interest of depositors and creditors, the Monetary Board may
appoint a conservator to take charge of the assets, liabilities, and the
management of that banking institution, collect all monies and debts due said
bank and exercise all powers necessary to preserve the assets of the bank,
reorganize the management thereof and restore its viability .He shall have the
power to overrule or revoke "the actions of the previous management and board
of directors of the bank, any provision of law to the contrary notwithstanding, and
such other powers as the Monetary Board shall deem necessary.1wphi1.nt
xxx xxx xxx

Under Section 28-A, the Monetary Board may place a bank under the control of a
conservator when it finds that the bank is continuously unable or unwilling to maintain a
condition of solvency or liquidity .In Central Bank of the Philippines v. Court of
Appeals,23 the Court declared that the order placing petitioner herein under
conservatorship had long become final and its validity could no longer be litigated upon.
Also, in the same case, the Court found that sometime in August, 1983, some news
items triggered a bank-run in petitioner which resulted in continuous over- drawings on
petitioner's demand deposit account with the Central Bank; the over- drawings reached
P143.955 million by 17 January 1984; and as of 13 February 1990, petitioner had overdrawings of up to P1.233 billion, which evidences petitioner's continuing inability to
maintain a condition of solvency and liquidity, thus justifying the conservatorship. Our
findings in the Central Bank case coincide with petitioner's claims that it continuously
suffered losses from 1984 to 1988 as follows
YEAR

NET LOSSES IN
MILLIONS OF
PESOS

1984

P 144.418

1985

P 144.940

1986

P 132.940

1987

P 84.182

January-February
1988

P 9.271

These losses do not include the interest expenses on the overdraft loan of the petitioner
to the Central Bank, which interest as of July 31, 1987, amounted to P610.065 Million,
and penalties on reserve deficiencies which amounted to P89.029 Million. The principal
balance of the overdraft amounted to P971.632 Million as of March 16, 1988. 24
Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same
amount of bonuses to its employees. Thus, the conservator was justified in reducing the
mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be
to defeat the reason for the conservatorship which is to preserve the assets and restore
the viability of the financially precarious bank. Ultimately, it is to the employees'
advantage that the conservatorship achieve its purposes for the alternative would be
petitioner's closure whereby employees would lose not only their benefits, but their jobs
as well.

13th Month Pay


With regard to the 13th month pay, the NLRC adopted the position taken by private
respondent and held that the conservator was not justified in diminishing or not paying
the 13th month pay and that petitioner should have instead applied for an exemption, in
accordance with section 7 of Presidential Decree No. 851 (PD 851), as amended by
Presidential Decree No. 1364, but that it did not do so.25 The NLRC held that the actions
of the conservator ran counter to the provisions of PD 851.
In its position paper,26 private respondent claimed that petitioner made the following
payments to its members
YEAR

MID-YEAR BONUS

13th MONTH PAY

CHRISTMAS BONUS

1984

1 month basic

month basic

None

1985

month basic

month basic

None

1986

month basic

1 month basic

month basic

1987

month basic

1 month basic

month basic

However, in its Memorandum27 filed before this Court, private respondent revised its
claims as follows
YEAR

MID- YEAR BONUS

13th MONTH PAY

CHRISTMAS BONUS

1984

1 month basic

None

month basic

1985

month basic

None

month basic

1986

month basic

1/2 month basic

1 month basic

1987

1/2 month basic

month basic

1 month basic

1988

1/2 month basic

month basic

1 month basic

Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas
bonuses it has been giving its employees from 1984 to 1988 exceeds the basic salary
for one month (except for 1985 where a total of one month basic salary was given).
Hence, this amount should be applied towards the satisfaction of the 13 th month pay,
pursuant to Section 2 of PD 851.28

PD 851, which was issued by President Marcos on 16 December 1975, requires all
employers to pay their employees receiving a basic salary of not more than P 1,000 a
month,29 regardless of the nature of the employment, a 13th month pay, not later than
December 24 of every year.30 However, employers already paying their employees a
13th month pay or its equivalent are not covered by the law. Under the Revised
Guidelines on the Implementation of the 13th-Month Pay Law,31 the term "equivalent"
shall be construed to include Christmas bonus, mid-year bonus, cash bonuses and
other payments amounting to not less than 1/12 of the basic salary. The intention of the
law was to grant some relief - not to all workers - but only to those not actually paid a
13th month salary or what amounts to it, by whatever name called. It was not envisioned
that a double burden would be imposed on the employer already paying his employees
a 13th month pay or its equivalent whether out of pure generosity or on the basis of a
binding agreement. To impose upon an employer already giving his employees the
equivalent of a 13th month pay would be to penalize him for his liberality and in all
probability, the employer would react by withdrawing the bonuses or resist further
voluntary grants for fear that if and when a law is passed giving the same benefits, his
prior concessions might not be given due credit.32
In the case at bar, even assuming the truth of private respondent's claims as contained
in its position paper or Memorandum regarding the payments received by its members
in the form of 13th month pay, mid-year bonus and Christmas bonus, it is noted that, for
each and every year involved, the total amount given by petitioner would still exceed, or
at least be equal to, one month basic salary and thus, may be considered as an
"equivalent" of the 13th month pay mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part
of the 13th month pay.
Wage Order No. 6
Wage Order No.6, which came into effect on 1 November 1984, increased the statutory
minimum wage of workers, with different increases being specified for agricultural
plantation and non-agricultural workers. The bone of contention, however, involves
Section 4 thereof which reads
All wage increase in wage and/or allowance granted by employers between June
17, 1984 and the effectivity of this Order shall be credited as compliance with the
minimum wage and allowance adjustments prescribed herein, provided that
where the increases are less than the applicable amount provided in this Order,
the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements unless
the agreement expressly provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement
providing for the following salary adjustments

Article VIII. Section 1. Salary Adjustments. - Cognizant of the effects of, among
others, price increases of oil and other commodities on the employees' wages
and earnings, and the certainty of continued governmental or statutory actions
adjusting employees' minimum wages, earnings, allowances, bonuses and other
fringe benefits, the parties have formulated and agreed on the following highly
substantial packaged increases in salary and allowance which take into account
and cover (a) any deflation in income of employees because of such price
increases and inflation and (b) the expected governmental response thereto in
the form of statutory adjustments in wages, allowances and benefits, during the
next three (3) years of this Agreement:
(i) Effective March 1, 1984 - P225.00 per month as salary increase plus P100.00
per month as increase in allowance to employees within the bargaining unit on
March 1, 1984.
(ii) Effective March 1,1985 -P125.00 per month as salary increase plus P100.00
per month as increase in allowance to employees within the bargaining unit on
March 1,1985.
(iii) Effective March 1,1986 -P125.00 per month as salary increase plus P100.00
per month as increase in allowance to employees within the bargaining unit on
March 1, 1986.
In addition, the collective bargaining agreement of the parties also included a provision
on the chargeability of such salary or allowance increases against government-ordered
or legislated income adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order
dated October 24, 1984, the first-year salary and allowance increases shall be
chargeable against adjustments under Wage Order No. 5, which took effect on
June 16, 1984. The charge ability of the foregoing salary increases against
government-ordered or legislated income adjustments subsequent to Wage
Order No. 5 shall be determined on the basis of the provisions of such
government orders or legislation.
Petitioner argues that it complied with Wage Order No. 6 because the first year salary
and allowance increase provided for under the collective bargaining agreement can be
credited against the wage and allowance increase mandated by such wage order.
Under Wage Order No. 6, all increases in wages or allowances granted by the employer
between 17 June 1984 and 1 November 1984 shall be credited as compliance with the
wage and allowance adjustments prescribed therein. Petitioner asserts that although
the collective bargaining agreement was signed by the parties on 16 November. 1984,
the first year salary and allowance increase was made to take effect retroactively,
beginning from 1 March 1984 until 28 February 1985. Petitioner maintains that this
period encompasses the period of creditability provided for under Wage Order No. 6
and that, therefore, the balance remaining after applying the first year salary and

allowance increase in the collective bargaining agreement to the increase mandated by


Wage Order No. 5, in the amount of P125.00, should be made chargeable against the
increase prescribed by Wage Order No. 6, and if not sufficient, petitioner is willing to
pay the difference.33
On the other hand, private respondent contends that the first year salary and allowance
increases under the collective bargaining agreement cannot be applied towards the
satisfaction of the increases prescribed by Wage Order No. 6 because the former were
not granted within the period of creditability provided for in such wage order. According
to private respondent, the significant dates with regard to the granting of the first year
increases are 9 November 1984 the date of issuance of the MOLE Resolution, 16
November 1984 - the date when the collective bargaining agreement was signed by the
parties and 1 March 1984 the retroactive date of effectivity of the first year increases.
Private respondent points out that none of these dates fall within the period of
creditability under Wage Order No. 6 which is from 17 June 1984 to 1 November 1984.
Thus, petitioner has not complied with Wage Order No. 6.34
The creditability provision in Wage Order No. 6 is based on important public policy, that
is, the encouragement of employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases prescribed by statute or
administrative regulation. Thus, we held in Apex Mining Company, Inc. v. NLRC35 that
[t]o obliterate the creditability provisions in the Wage Orders through
interpretation or otherwise, and to compel employers simply to add on legislated
increases in salaries or allowances without regard to what is already being paid,
would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counter-productive
so far as securing the interest of labor is concerned. The creditability provisions
in the Wage Orders prevent the penalizing of employers who are industry leaders
and who do not wait for statutorily prescribed increases in salary or allowances
and pay their workers more than what the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that
"...the parties have formulated and agreed on the following highly substantial packaged
increases in salary and allowance which take into account and cover (a) any deflation in
income of employees because of such price increases and inflation and (b) the
expected governmental response thereto in the form of statutory adjustments in wages,
allowances and benefits, during the next three (3) years of this Agreement..." The
unequivocal wording of this provision manifests the clear intent of the parties to apply
the wage and allowance increases stipulated in the collective bargaining agreement to
any statutory wage and allowance, adjustments issued during the effectivity of such
agreement from 1 March 1984 to 28 February 1987. Furthermore, contrary to private
respondent's contentions, there is nothing in the wording of Section 2 of Article VIII of
the collective bargaining agreement that would prevent petitioner from crediting the first
year salary and allowance increases against the increases prescribed by Wage Order
No. 6.

It would be inconsistent with the above stated rationale underlying the creditability
provision of Wage Order No. 6 if, after applying the first year increase to Wage Order
No. 5, the balance was not made chargeable to the increases under Wage Order No. 6
for the fact remains that petitioner actually granted wage and allowance increases
sufficient to cover the increases mandated by Wage Order No. 5 and part of the
increases mandated by Wage Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily
wage during regular holidays36 and that the employer may require an employee to work
on any holiday but such employee shall be paid a compensation equivalent to twice his
regular rate. In this case, the Labor Arbiter found that the divisor used by petitioner in
arriving at the employees' daily rate for the purpose of computing salary-related benefits
is 314.37 This finding was not disputed by the NLRC.38 However, the divisor was
reduced to 303 by virtue of an inter-office memorandum issued on 13 August 1986, to
wit
To increase the rate of overtime pay for rank and filers, we are pleased to inform
that effective August 18, 1986, the acting Conservator approved the use of 303
days as divisor in the computation of Overtime pay. The present Policy of 314
days as divisor used in the computation for cash conversion and determination of
daily rate, among others, still remain, Saturdays, therefore, are still considered
paid rest days.
Corollarily, the Acting Conservator also approved the increase of meal allowance
from P25.00 to P30.00 for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor
Arbiter observed that the reduction of the divisor to 303 was for the sole purpose of
increasing the employees' overtime pay and was not meant to replace the use of 314 as
the divisor in the computation of the daily rate for salary-related benefits.39
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314
in arriving at the daily wage rate of monthly-salaried employees. Private respondent
also concedes that the divisor was changed to 303 for purposes of computing overtime
pay only. In its Memorandum, private respondent states that
49. The facts germane to this issue are not debatable. The Memorandum
Circular issued by the Acting Conservator is clear. Prior to August 18,1986, the
petitioner bank used a divisor of 314 days in arriving at the daily wage rate of the
monthly-salaried employees. Effective August 18, 1986, this was changed. It
adopted the following formula:
Basic salary x 12 months = Daily Wage Rate

303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable
that the petitioner bank is not actually paying its employees the regular holiday
pay mandated by law. Consequently, it is bound to pay the salary differential of
its employees effective November 1, 1974 up to the present.
xxx

xxx

xxx

54. Since it is a question of fact, the Inter-office Memorandum dated August


13,1986 (Annex "E") provides for a divisor of 303 days in computing overtime
pay. The clear import of this document is that from the 365 days in a year, we
deduct 52 rest days which gives a total of 313 days. Now, if 313 days is the
number of working days of the employees then, there is a disputable
presumption that the employees are paid their holiday pay. However, this is not
so in the case at bar. The bank uses 303 days as its divisor. Hence, it is not
paying its employees their corresponding holiday pay.40
In Union of Filipro Employees v. Vivar, ]r.41 the Court held that "[t]he divisor assumes an
important role in determining whether or not holiday pay is already included in the
monthly paid employee's salary and in the computation of his daily rate." This was also
our ruling in Chartered Bank Employees Association v. Ople,42 as follows
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the
employees are so computed as to include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the
Chartered Bank, in computing overtime compensation for its employees, employs
a "divisor" of 251 days. The 251 working days divisor is the result of subtracting
all Saturdays, Sundays and the ten (10) legal holidays form the total number of
calendar days in a year. If the employees are already paid for all non-working
days, the divisor should be 365 and not 251.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total
number of calendar days in a year, since Saturdays are considered paid rest days, as
stated in the inter-office memorandum. Thus, the use of 314 as a divisor leads to the
inevitable conclusion that the ten legal holidays are already included therein.
We agree with the labor arbiter that the reduction of the divisor to 303 was done for the
sole purpose of increasing the employees' overtime pay, and was not meant to exclude
holiday pay from the monthly salary of petitioner's employees. In fact, it was expressly
stated in the inter-office memorandum - also referred to by private respondent in its
pleadings - that the divisor of 314 will still be used in the computation for cash
conversion and in the determination of the daily rate. Thus, based on the records of this

case and the parties' own admissions, the Court holds that petitioner has complied with
the requirements of Article 94 of the Labor Code.1wphi1.nt
Damages
As to private respondent's claim for damages, the NLRC was correct in ruling that there
is no basis to support the same.
WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public
respondent in NLRC-NCR Case No. 02-00753-88, entitled "Producers Bank Employees
Association v. Producers Bank of the Philippines," and its 18 June 1991 - Resolution
issued in the same case are hereby SET ASIDE, with the exception of public
respondent's ruling on damages.
SO ORDERED.

G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,


vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999
Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed
by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National
Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of
the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an
Agreement ("Agreement") with the Mel and Jay Management and Development
Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as
"AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as

talent for radio and television. The Agreement listed the services SONZA would render
to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the
first year and P317,000 for the second and third year of the Agreement. ABS-CBN
would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered
into by your goodself on behalf of ABS-CBN with our company relative to our
talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station
violative of the Agreement and the station as in breach thereof. In this
connection, we hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in Quezon City. SONZA complained
that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th
month pay, signing bonus, travel allowance and amounts due under the Employees
Stock Option Plan ("ESOP").

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employeremployee relationship existed between the parties. SONZA filed an Opposition to the
motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss
and directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not paid
certain claims, it is sufficient enough as to confer jurisdiction over the instant
case in this Office. And as to whether or not such claim would entitle complainant
to recover upon the causes of action asserted is a matter to be resolved only
after and as a result of a hearing. Thus, the respondents plea of lack of
employer-employee relationship may be pleaded only as a matter of defense. It
behooves upon it the duty to prove that there really is no employer-employee
relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to
Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are
affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for
lack of jurisdiction.6 The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true
nature of the contract of a talent," it stands to reason that a "talent" as abovedescribed cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of
his peculiar skills and talent as a TV host and a radio broadcaster. Unlike
an ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The benefits conferred to
complainant under the May 1994 Agreement are certainly very much higher than

those generally given to employees. For one, complainant Sonzas monthly talent
fees amount to a staggering P317,000. Moreover, his engagement as a talent
was covered by a specific contract. Likewise, he was not bound to render eight
(8) hours of work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not
by reason of employer-employee relationship. As correctly put by the
respondent, "All these benefits are merely talent fees and other contractual
benefits and should not be deemed as salaries, wages and/or other
remuneration accorded to an employee, notwithstanding the nomenclature
appended to these benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but the intent of the
parties to the Agreement conferring such benefit."
The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employeremployee relationship. As held by the Supreme Court, "The line should be
drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which
the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the
Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the
appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication
and as the law puts it, the act of the agent is the act of the principal itself. This
fact is made particularly true in this case, as admittedly MJMDC is a
management company devoted exclusively to managing the careers of Mr.
Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to
Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant
Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from
the provisions of the May 1994 Agreement which specifically referred to MJMDC
as the AGENT. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of
rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact
that historically, the parties to the said agreements are ABS-CBN and Mr. Sonza.
And it is only in the May 1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said
Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of
ABS-CBN such that there exist[s] employer-employee relationship between the
latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an
agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for
alleged breach of contractual obligation on the part of respondent-appellee. As
squarely apparent from complainant-appellants Position Paper, his claims for
compensation for services, 13th month pay, signing bonus and travel allowance
against respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds under
Stock Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on
an amount not lower than the amount he was receiving prior to effectivity
of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled


to a commutable travel benefit amounting to at least One Hundred Fifty
Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the
fact that his contractual relations with ABS-CBN are founded on the New Civil
Code, rather than the Labor Code, that instead of merely resigning from ABSCBN, complainant-appellant served upon the latter a notice of rescission of
Agreement with the station, per his letter dated April 1, 1996, which asserted that
instead of referring to unpaid employee benefits, he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said Agreement.
(Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee,
the same can be resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and, thus, lie with the regular
courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama,
238 SCRA 267, 21 November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship
between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the
NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRCs
conclusion.12 The Court of Appeals added that it could not re-examine the parties
evidence and substitute the factual findings of the NLRC with its own. 13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS
DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.14
The Courts Ruling
We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of


Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the
case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is
the first time that the Court will resolve the nature of the relationship between a
television and radio station and one of its "talents." There is no case law stating that a
radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay"
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was
an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter
has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate
courts accord the factual findings of the Labor Arbiter and the NLRC not only respect
but also finality when supported by substantial evidence.15 Substantial evidence means
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.16 A party cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or circumstantial. The Court
does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. Case law has consistently held that the elements of an employeremployee relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employee on the means and methods by which the work is accomplished. 18 The last
element, the so-called "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the "discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees. The specific selection and hiring of

SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with
the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job
contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the
parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay"20 which the law automatically incorporates into every employer-employee
contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of
an employer-employee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are
so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the
status of SONZA as an independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom
MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on

grounds other than breach of contract, such as retrenchment to prevent losses as


provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long
as "AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the
life of the Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN
still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as
an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it
were true that complainant was really an employee, he would merely resign, instead."
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZAs letter clearly bears this out.26 However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether
SONZA rescinded the Agreement or resigned from work does not determine his status
as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR")27 that a
television program host is an independent contractor. We quote the following findings of
the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a
television actress is a skilled position requiring talent and training not
available on-the-job. x x x In this regard, Alberty possesses a masters degree
in public communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of Puerto Rico; and
acted in several theater and television productions prior to her affiliation with
"Desde Mi Pueblo." Second, Alberty provided the "tools and
instrumentalities" necessary for her to perform. Specifically, she provided, or
obtained sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes that this
factor favors independent contractor status because WIPR provided the
"equipment necessary to tape the show." Albertys argument is misplaced. The

equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo"
related to her appearance on the show. Others provided equipment for filming
and producing the show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other individuals
often provide the equipment required for different aspects of the collaboration. x x
x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Albertys contracts with WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde Mi Pueblo." There is no
evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x28(Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee
but an independent contractor. The control test is the most important test our courts
apply in distinguishing an employee from an independent contractor. 29This test is based
on the extent of control the hirer exercises over a worker. The greater the supervision
and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods
of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to
co-host the "Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA.
To perform his work, SONZA only needed his skills and talent. How SONZA delivered
his lines, appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The Agreement
required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and
post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZAs
script. However, the Agreement prohibited SONZA from criticizing in his shows ABSCBN or its interests.32 The clear implication is that SONZA had a free hand on what to
say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZAs work.33ABS-CBN did not instruct SONZA how to perform
his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming."34 ABS-CBNs sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-CBN
did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to

pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that
ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.35
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over
the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled
that vaudeville performers were independent contractors although the management
reserved the right to delete objectionable features in their shows. Since the
management did not have control over the manner of performance of the skills of the
artists, it could only control the result of the work by deleting objectionable features. 37
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime
needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and
airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What
SONZA principally needed were his talent or skills and the costumes necessary for his
appearance.38 Even though ABS-CBN provided SONZA with the place of work and the
necessary equipment, SONZA was still an independent contractor since ABS-CBN did
not supervise and control his work. ABS-CBNs sole concern was for SONZA to display
his talent during the airing of the programs.39
A radio broadcast specialist who works under minimal supervision is an independent
contractor.40 SONZAs work as television and radio program host required special skills
and talent, which SONZA admittedly possesses. The records do not show that ABSCBN exercised any supervision and control over how SONZA utilized his skills and
talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control "not only [over] his manner of work but also the quality of
his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance "covering talents"41 of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the

Agreement refers to the "Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics."42 The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.43 In this case, SONZA failed to show that these
rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the industry. We
have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with
the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means
used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although
the hirer reserved certain supervision to insure the attainment of the desired result. The
hirer, however, must not deprive the one hired from performing his services according to
his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme
form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is
an employee of ABS-CBN. Even an independent contractor can validly provide his
services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.46 This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and
effort "in building up its talents as well as the programs they appear in and thus expects
that said talents remain exclusive with the station for a commensurate period of

time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for
a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
"labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor;
(2) the employee who is ostensibly under the employ of the "labor-only" contractor; and
(3) the principal who is deemed the real employer. Under this scheme,the "labor-only"
contractor is the agent of the principal. The law makes the principal responsible to
the employees of the "labor-only contractor" as if the principal itself directly hired or
employed the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA
and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly
states that MJMDC acted as the "AGENT" of SONZA. The records do not show that
MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople
on 8 January 1979 finally settled the status of workers in the broadcast industry. Under
this policy, the types of employees in the broadcast industry are the station and program
employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force
and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The

classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and
Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television industry.
SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented
from denying or refuting the allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after the submission of the
position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and
shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x
xx
Section 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memorandum, the Labor Arbiter
shall motu propio determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or information,
including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.51 The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. 52 If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are nonlitigious in nature. Subject to the requirements of due process, the technicalities of law
and the rules obtaining in the courts of law do not strictly apply in proceedings before a
Labor Arbiter.

Talents as Independent Contractors


ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if
there is an employer-employee relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship. To hold that every person
who renders services to another for a fee is an employee - to give meaning to the
security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services
as independent contractors. The right to life and livelihood guarantees this freedom to
contract as independent contractors. The right of labor to security of tenure cannot
operate to deprive an individual, possessed with special skills, expertise and talent, of
his right to contract as an independent contractor. An individual like an artist or talent
has a right to render his services without any one controlling the means and methods by
which he performs his art or craft. This Court will not interpret the right of labor to
security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No.
7716,55 as amended by Republic Act No. 8241,56 treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax ("VAT") on services they render. Exempted from the VAT are those
under an employer-employee relationship.57 This different tax treatment accorded to
talents and broadcasters bolters our conclusion that they are independent contractors,
provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation
pay, service incentive leave, signing bonus, travel allowance, and amounts due under
the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and
the Court of Appeals that SONZAs claims are all based on the May 1994 Agreement
and stock option plan, and not on the Labor Code. Clearly, the present case does
not call for an application of the Labor Code provisions but an interpretation and
implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for
breach of contract which is intrinsically a civil dispute cognizable by the regular courts. 58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 160073 October 24, 2005


ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR CORFARM WORKERS UNION
(PACIWU CHAP-TPC),Petitioners,
vs.
ASSET PRIVATIZATION TRUST,* Respondent.
DECISION
PANGANIBAN, J.:
esponsibility for the liabilities of a mortgagor towards its employees cannot be
transferred via an auction sale to a purchaser who is also the mortgagee-creditor of the
foreclosed assets and chattels. Clearly, the mortgagee-creditor has no employer__________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo,
p. 480.
employee relations with the mortgagors workers. The mortgage constitutes a lien on
the determinate properties of the employer-debtor, because it is a specially preferred
credit to which the workers monetary claims is deemed subordinate.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the
January 30, 2003 Decision2 and the August 27, 2003 Resolution3 of the Court of
Appeals (CA), in CA-GR SP No. 58813. The disposition or fallo of the questioned
Decision reads as follows:
"IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the
assailed NLRC Decision dated February 18, 2000 is hereby RECALLED and SET
ASIDE insofar as herein petitioner APT is concerned. No cost."4
The reversed Decision5 of the National Labor Relations Commission (NLRC) disposed
as follows:

"WHEREFORE, premises considered, the decision appealed from is AFFIRMED with


modifications as follows:
1. Complainants are awarded their monetary claims for underpayment of salaries and
payment of allowances per their computation on pp. 97-99 and 142-144 of the records;
2. Complainants are declared to have been illegally dismissed and should be paid their
backwages from 01 May 1991 to 30 October 1992."6
The challenged August 27, 2003 Resolution denied petitioners Motion for
Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we quote:
"Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia
Sugar Development Corporation (BISUDECO), a sugar plantation mill located in
Himaao, Pili, Camarines Sur.
"On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was
created under Proclamation No. 50, as amended, mandated to take title to and
possession of, conserve, provisionally manage and dispose of non-performing assets of
the Philippine government identified for privatization or disposition.
"Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino
issued Administrative Order No. 14 identifying certain assets of government institutions
that were to be transferred to the National Government. Among the assets transferred
was the financial claim of the Philippine National Bank against BISUDECO in the form
of a secured loan. Consequently, by virtue of a Trust Agreement executed between the
National Government and APT on February 27, 1987, APT was constituted as trustee
over BISUDECOs account with the PNB.
"Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine
Sugar Corporation (Philsucor) to take over the management of the sugar plantation and
milling operations until August 31, 1992.
"Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan
with PNB, its mortgaged properties were foreclosed and subsequently sold in a public
auction to APT, as the sole bidder. On April 2, 1991, APT was issued a Sheriffs
Certificate of Sale.
"On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal,
illegal deduction and underpayment of wages and other labor standard benefits plus
damages.

"In the meantime, on July 15, 1992, APTs Board of Trustees issued a resolution
accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar
plantation and mill. Again, on September 23, 1992, the board passed another resolution
authorizing the payment of separation benefits to BISUDECOs employees in the event
of the companys privatization. Then, on October 30, 1992, BAPCI purchased the
foreclosed assets of BISUDECO from APT and took over its sugar milling operations
under the trade name Peafrancia Sugar Mill (Pensumil).
"On December 17, 1992, the union filed a similar complaint, later to be consolidated
with its earlier complaint and docketed as RAB V Case No. 07-00184-91.
"On March 2, 1993, it filed an amended complaint, impleading as additional party
respondents APT and Pensumil.
"In their Position Paper, the union alleged that when Philsucor initially took over the
operations of the company, it retained BISUDECOs existing personnel under the same
terms and conditions of employment. Nonetheless, at the start of the season sometime
in May 1991, Philsucor started recalling workers back to work, to the exception of the
union members. Management told them that they will be re-hired only if they resign from
the union. Just the same, thereafter, the company started to employ the services of
outsiders under the pakyaw system.
"BISUDECO, Pensumil and APT all interposed the defense of lack of employeremployee relationship.
xxxxxxxxx
"After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano
disposed as follows:
WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein
complainants of the mandated employment benefits provided for under Section 27 of
Proclamation No. 50 which benefits had been earlier extended to other employees
similarly situated.
SO ORDERED.
"Both the union and APT elevated the labor arbiters decision before NLRC." 7
The NLRC affirmed APTs liability for petitioners money claims. While no employeremployee relationship existed between members of the petitioner union and APT, at the
time of the employees illegal dismissal, the assets of BISUDECO had been transferred
to the national government through APT. Moreover, the NLRC held that APT should
have treated petitioners claim as a lien on the assets of BISUDECO. The Commission
opined that APT should have done so, considering its awareness of the pending

complaint of petitioners at the time BISUDECO sold its assets to BAPCI, and APT
started paying separation pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their money
claims for underpayment, labor-standard benefits, and ECOLA. It also awarded them
their back wages, computed at the prevailing minimum wage, for the period May 1,
1991 (the date of their illegal dismissal) until October 30, 1992 (the sale of BISUDECO
assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were not
entitled to separation pay because of the huge business losses incurred by BISUDECO,
which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the
Rules of Court.
Ruling of the Court of Appeals
The CA ruled that APT should not be held liable for petitioners claims for unfair labor
practice, illegal dismissal, illegal deduction and underpayment of wages, as well as
other labor-standard benefits plus damages. As found by the NLRC, APT was not the
employer of petitioners, but was impleaded only for possessing BISUDECOs
mortgaged properties as trustee and, later, as the highest bidder in the foreclosure sale
of those assets.
Citing Batong Buhay Gold Mines v. Dela Serna,8 the CA concluded that petitioners
claims could not be enforced against APT as mortgagee of the foreclosed properties of
BISUDECO.
Hence, this Petition.9
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"I. Whether or not the Court of Appeals erred in ruling that Respondent Asset
Privatization Trust (APT) should not be held liable for the petitioner unions claim for
unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages and
other labor standard benefits plus damages.
"II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB
as mortgagee of the foreclosed properties of BISUDECO.
"III. Whether or not the entitlement of petitioners upon their claims against Respondent
APT is recognized under the law."10
In brief, the main issue raised is whether Respondent APT is liable for petitioners
monetary claims.

The Courts Ruling


The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series
of 1987,11 PNBs assets, loans and receivables from its borrowers were transferred to
APT as trustee of the national government. Among the liabilities transferred to APT was
PNBs financial claim against BISUDECO, not the latters assets and chattel. Contrary
to petitioners assertions, BISUDECO remained the owner of the mortgaged properties
in August 1988, when the Philippine Sugar Corporation (Philsucor) undertook the
operation and management of the sugar plantation until August 31, 1992, under a socalled Contract of Lease between the two corporations. At the time, APT was merely a
secured creditor of BISUDECO.12
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO
because of the latters continued failure to pay outstanding loan obligations to
PNB/APT. The properties were sold at public auction to APT, the highest bidder, as
indicated in the Sheriffs Certificate of Sale issued on April 2, 1991. It was only in
September 1992 (after the expiration of the lease/management Contract with Philsucor
in August 1992), however, when APT took over BISUDECO assets, preparatory to the
latters privatization.
In the present case, petitioner-unions members who were not recalled to work by
Philsucor in May 1991 seek to hold APT liable for their monetary claims and allegedly
illegal dismissal. Significantly, prior to the actual sale of BISUDECO assets to BAPCI on
October 30, 1992, the APT board of trustees had approved a Resolution on September
23, 1992. The Resolution authorized the payment of separation benefits to the
employees of the corporation in the event of its privatization. Not included in the
Resolution, though, were petitioner-unions members who had not been recalled to work
in May 1991.
The question now before the Court is whether APT is liable to pay petitioners monetary
claims, including back wages from May 1, 1991, to October 30, 1992 (the date of the
sale of BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its monetary
liabilities to its employees, were not all automatically assumed by APT as purchaser of
the foreclosed properties at the auction sale. Any assumption of liability must be
specifically and categorically agreed upon. In Sundowner Development Corp. v.
Drilon,13 the Court ruled that, unless expressly assumed, labor contracts like collective

bargaining agreements are not enforceable against the transferee of an enterprise.


Labor contracts are in personam and thus binding only between the parties.
No succession of employment rights and obligations can be said to have taken place
between the two. Between the employees of BISUDECO and APT, there is no privity of
contract that would make the latter a substitute employer that should be burdened with
the obligations of the corporation. To rule otherwise would result in unduly imposing
upon APT an unwarranted assumption of accounts not contemplated in Proclamation
No. 50 or in the Deed of Transfer between the national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the
latters employees.14 The most that the purchasing company may do, for reasons of
public policy and social justice, is to give preference of reemployment to the selling
companys qualified separated employees, who in its judgment are necessary to the
continued operation of the business establishment.15
In any event, the national government (in whose trust APT previously held the mortgage
credits of BISUDECO) is not the employer of petitioner-unions members, who had been
dismissed sometime in May 1991, even before APT took over the assets of the
corporation. Hence, under existing law and jurisprudence, there is no reason to expect
any kind of bailout by the national government.16 Even the NLRC found that no
employer-employee relationship existed between APT and petitioners. Thus, the
Commission gravely abused its discretion in nevertheless holding that APT, as the
transferee of the assets of BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals,17 this
Court supposedly ruled that the "sale of a business of a going concern does not ipso
facto terminate the employer-employee relations insofar as the successor-employer is
concerned, and that change of ownership or management of an establishment or
company is not one of the just causes provided by law for termination of
employment[.]"18
A careful reading of the Courts Decision in that case plainly shows that it does not
contain the words quoted by counsel for petitioners. At this juncture, we admonish their
counsel19 of his bounden duty as an officer of the Court to refrain from misquoting or
misrepresenting the text of its decisions.20 Ever present is the danger that, if not
faithfully and exactly quoted, they may lose their proper and correct meaning, to the
detriment of other courts, lawyers and the public who may thereby be misled.21
In that case, contrary to the assertions of petitioners, the Court held as follows:
"There can be no controversy for it is a principle well-recognized, that it is within the
employers legitimate sphere of management control of the business to adopt economic
policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the

exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially all of its assets and
properties which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted in such a
manner as to permit the employer to escape payment of termination pay. x x x.
"In a number of cases on this point, the rule has been laid down that the sale or
disposition must be motivated by good faith as an element of exemption from liability.
Indeed, an innocent transferee of a business establishment has no liability to the
employees of the transferor to continue employing them. Nor is the transferee liable for
past unfair labor practices of the previous owner, except, when the liability therefor is
assumed by the new employer under the contract of sale, or when liability arises
because of the new owners participation in thwarting or defeating the rights of the
employees."22 (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not enforceable
against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2)
the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the
monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECOs assets.
Moreover, it should be remembered that APT merely became a transferee of
BISUDECOs assets for purposes of conservation because of its lien on those assets -a lien it assumed as assignee of the loan secured by the corporation from PNB.
Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the
foreclosed properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by
Republic Act No. 6715, which reads:
"Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy or
liquidation of the employers business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid."23
This Court has ruled in a long line of cases24 that under Articles 2241 and 2242 of the
Civil Code, a mortgage credit is a special preferred credit that enjoys preference with
respect to a specific/determinate property of the debtor. On the other hand, the workers
preference under Article 110 of the Labor Code is an ordinary preferred credit. While
this provision raises the workers money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over
special preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of their
employer cannot have any preference over the latters mortgage credit. In other words,

being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special


preferred lien that must be satisfied first before the claims of the workers.
Development Bank of the Philippines v. NLRC25 explained the rationale of this ruling as
follows:
"x x x. A preference applies only to claims which do not attach to specific properties. A
lien creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvents
assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor. x x x"
Furthermore, workers claims for unpaid wages and monetary benefits cannot be paid
outside of a bankruptcy or judicial liquidation proceedings against the employer. 26 It is
settled that the application of Article 110 of the Labor Code is contingent upon the
institution of those proceedings, during which all creditors are convened, their claims
ascertained and inventoried, and their preferences determined. 27 Assured thereby is an
orderly determination of the preference given to creditors claims; and preserved in
harmony is the legal scheme of classification, concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone. In
holding that the latter, which has never really been an employer of petitioners, is not
liable for their claims, this Court is not reversing or ruling upon their entitlement to back
wages and other unpaid benefits from their previous employer.
On the basis of the foregoing clarification, the Court finds no reversible error in the
questioned CA Decision, which set aside the February 8, 2000 Decision of the NLRC.
As a mere transferee of the mortgage credit and later as the purchaser in a public
auction of BISUDECOs foreclosed properties, APT cannot be held liable for petitioners
claims against BISUDECO: illegal dismissal, unpaid back wages and other monetary
benefits.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.

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