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SECOND DIVISION

[G.R. No. 160391. August 9, 2005]

DUSIT HOTEL NIKKO and PHILIPPINE HOTELIERS,


INC., petitioners, vs. NATIONAL UNION OF WORKERS IN
HOTEL, RESTAURANT AND ALLIED INDUSTRIES
(NUWHRAIN) - DUSIT HOTEL NIKKO CHAPTER and
ROWENA AGONCILLO, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of


Appeals (CA) in CA-G.R. SP No. 72006 which affirmed the Decision [2] of the
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 014111-97
finding Dusit Hotel Nikko (Hotel) and Philippine Hoteliers, Inc. (PHI) of illegally
terminating the employment services of respondent Rowena Agoncillo.

The Case for Rowena Agoncillo

The PHI owned and operated the Dusit Hotel Nikko. Since March 1, 1984,
Rowena Agoncillo was employed by the Hotel. After some time, she was
promoted as Supervisor of Outlet Cashiers and later promoted as Senior Front
Office Cashier, with a monthly salary of P14,600.00, inclusive of service charge.
[3]
In January 1995, the Hotel decided to trim down the number of its employees
from the original count of 820 to 750.[4]
On February 21, 1996, the Hotel, through an Inter-Office Memorandum
signed by the general manager of Dusit, Yoshikazu Masuda, offered a Special
Early Retirement Program (SERP) to all its employees. It was stated therein that
the program was intended to provide employees financial benefits prior to
prolonged renovation period and, at the same time, to enable management to
streamline the organization by eliminating redundant positions and having a more
efficient and productive manpower complement. [5]
In a Letter dated February 26, 1996 addressed to the Hotel, the National
Union of Workers in Hotel, Restaurant and Allied Industries, Hotel Nikko Manila
Garden Chapter (Union), through its president, Mr. Reynaldo Rasing, sought a
commitment from the management that the employees terminated due to
redundancy will not be replaced by new employees; nor will their positions be
given to subcontractors, agencies or casual employees.
The Union received a Letter dated March 30, 1996 from Masuda confirming
his earlier decision to separate 243 employees from the Hotels services
anchored on redundancy and that the separation of the said employees will take
effect on April 30, 1996.[6] Consequently, a total of 243 employees, including
Agoncillo, 161 of whom were Union officers and members, were separated from
the Hotels employment. As a result, the membership of the Union was
substantially reduced.
On April 1, 1996, the Hotel wrote Regional Director Romeo Young of the
Department of Labor and Employment (DOLE), National Capital Region,
informing him that the Hotel terminated the employment of 243 employees due to
redundancy. On the same day, Agoncillo was summoned by Hotel Comptroller
Reynaldo Casacop, who gave her a letter of even date informing the latter of her
separation from service due to redundancy effective close of office hours of April
30, 1996.[7]
Casacop advised Agoncillo to just avail of the Hotel's SERP, as embodied in
the inter-office memorandum of Masuda. [8] He informed her that she had the
option to avail of the program and that, in the meantime, he will defer the
processing of her termination papers to give her time to decide. On April 3, 1996,
Agoncillo finally told Casacop that she would not avail of the SERP benefits. By
then, she had decided to file a complaint for illegal dismissal against the Hotel.
Meanwhile, the Hotel temporarily closed operations because of the
renovation thereof.
When news spread among the hotel employees that Agoncillo would contest
her termination before the NLRC, she was summoned by Personnel Manager
Leticia Delarmente to a conference. The two met on May 21, 1996 in the
presence of Willy Dizon, who later became the Director for Personnel and
Training of the Hotel. At the said meeting, Delarmente and Dizon repeatedly
asked Agoncillo to give back the original copy of the April 1, 1996 termination
letter. Agoncillo told them that the letter was already in the possession of her
counsel. Agoncillo was relieved when she was given another letter of even date
stating that, by reason of her non-availment of the SERP, she was still
considered an employee but on temporary lay-off due to the ongoing renovation
of the Hotel[9] and that she will just be advised accordingly of her work schedule
when the Hotel reopens.[10]
But her relief was shortlived. Delarmente and Dizon offered to reinstate
Agoncillo but not to her former position as Senior Front Office Cashier. Agoncillo
objected but informed them that she could accept the position of Reservation
Clerk.[11] However, no response was received.
Meanwhile, the Hotel hired six (6) Front Office Cashiers on October 1, 1996.
[12]
On October 21, 1996, Agoncillo received a telegram from the Human
Resources Department of the Hotel directing her to report to Dizon as soon as
possible.[13] She was told by Dizon that the Hotel was willing to reinstate her but
as an Outlet Cashier. Dizon explained that the Hotel had already hired new
employees for the positions of Reservation Clerks. Agoncillo, however, pointed
out that she was already an Outlet Cashier Supervisor before her promotion as
Senior Front Office Cashier and that if she accepted the position, it would be an
unjustified demotion on her part. Dizon, however, explained that the management
wanted new graduates as front liners, i.e., new graduates who would occupy the
front desks and other sections exposed to guests. On the other hand, Agoncillo
reiterated that she could accept the lower position of Reservation Clerk, but
Dizon rejected the suggestion. Dizon countered that Agoncillo could be reinstated
as a Room Service Cashier para nakatago. At this point, Agoncillo was irked by
the comments of Dizon and asked, Bakit Sir, nakakaperhuwisyo ba ang physical
appearance ko? As to which Dizon replied, Kasi ikaw, nagpabaya ka sa katawan
mo. The conversation between them transpired in the presence and within
hearing distance of other hotel employees, including Reynaldo Rasing, the
president of the Union.[14]
After Agoncillos meeting with Dizon on October 22, 1996, the latter kept on
promising to find a suitable position for her. In those meetings, Dizon always
offered reinstatement to positions that do not require guest exposure like Linen
Dispatcher at the hotel basement or Secretary of Roomskeeping. When Agoncillo
refused, Dizon just instructed her to return. Agoncillo had no specific position or
assigned task to perform.
On November 1, 1996, the Hotel resumed operations. On November 11,
1996, the Union filed a Notice of Strike for unfair labor practice with the DOLE.
[15]
On November 12, 1996, Agoncillo with the assistance of the Union, filed a
Complaint against the PHI and Dusit Hotel Nikko for illegal dismissal before the
NLRC.
Meantime, the Secretary of Labor and Employment (SOLE) assumed
jurisdiction over the dispute on November 29, 1996 after the requisite strike- vote
was conducted.[16] The case was docketed as NCMB-NCR-NS-11-425-96.
On January 5, 1997, the Hotel published an advertisement in the newspaper
Manila Bulletin inviting prospective applicants as guest relations agents, bell
service agents/valet parkers, housekeeping agents, and sales executives. The
Hotel hired 135 additional employees, mostly on probationary and contractual
bases. These new workers performed tasks according to the reclassified
positions under the new Job Code, in violation of the Collective Bargaining
Agreement (CBA) between the Hotel and the Union. [17] A total of 215 workers
replaced the previously dismissed employees, including Agoncillo.

The Case for the Hotel

The petitioner Hotel, formerly known as Hotel Nikko Manila Garden, was
owned and managed by the PHI, a corporation substantially owned by Japan
Airlines (JAL). In November 1995, JAL formally turned over its majority
shareholdings in PHI to a Thai corporation, Dusit Thani Public Co., Ltd. (Dusit).
This gave Dusit the managerial control over the Hotel, which was then renamed
Dusit Hotel Nikko.[18]
With the very stiff competition in the hotel industry in mind, Dusit has set a
twofold objective, namely: (1) the total renovation of the Hotel, where it had
earmarked the amount of about P300,000,000.00; and (2) a complete
reorganization of the Hotels manpower complement. The renovation of the Hotel,
which called for its closure, began on May 1, 1996 and ended six months
thereafter. On the other hand, the reorganization was done to standardize the
Hotels organizational set-up with all Dusit Hotels around the world and train the
employees for their eventual deployment to its other chain of hotels. The
reorganization program started with a staff reduction program wherein
employees were given the chance to voluntarily avail of the SERP. As per its
guidelines, the SERP is a one-time program offered by the Hotel to its regular
employees who had at least one year of service as of April 30, 1996, in order to
achieve the following:

a.)realizeoptimumoperationalproductivityandefficiencythrougha
reorganizationthatwilleliminateredundantposition;

b.)reduceexpensesofthecompany;and

c.)provideemployeestheopportunitytoreceivelumpsumbenefitsfor
theirimmediateusebeforethe6monthclosure.[19]

Pursuant to the reorganization program, a reclassification of positions


ensued upon resumption of the Hotels operation. Consequently, the position of
Agoncillo as Senior Front Office Cashier was abolished and a new position of
Guest Services Agent absorbing its functions was created. Considering that the
new position requires skills in both reception and cashiering operations,
respondent Hotel deemed it necessary to transfer Agoncillo to another position
as Outlet Cashier, which does not require other skills aside from cashiering. [20]
The transfer of Agoncillo from Senior Front Office Cashier to Outlet Cashier
does not entail any diminution of salary or rank. Despite which, she vehemently
refused the transfer and insisted that she be reinstated to her former position.
Since Agoncillo was not amenable to the said transfer, she did not assume her
new position and since then had stopped reporting for work despite the Hotels
patient reminder to act on the contrary. Instead, she filed a complaint to question
the prerogative of the management to validly transfer her to another position as
she considers the transfer an act of constructive dismissal amounting to illegal
termination and unfair labor practice in the form of union busting. [21]
Proceedings before the Labor Arbiter, NLRC and the CA

On September 18, 1997, the Labor Arbiter rendered judgment dismissing the
complaint for unfair labor practice and constructive dismissal. The Labor Arbiter
ruled that the reassignment of the complainant was done by management in the
valid exercise of management prerogative, and that management has not
dismissed her in any way.[22] On October 27, 1997, the complainant appealed the
decision to the NLRC.
In the meantime, on January 6, 1998, the SOLE issued an Order in NCMB-
NCR-NS-11-425-96 in favor of the Union. The fallo of the Order reads:

WHEREFORE,judgmentisherebyrendered:

1.Declaringtheterminationof243employees,including161Unionofficers
andmembersonApril1,1996,illegal;

2.Orderingtheimmediatereinstatementofthe243employees,withoutlossof
seniorityrightsandwithfullbackwagesandbenefitsfromthetimeoftheir
terminationuntilactualreinstatement,lesstheamountsreceivedbythemon
accountoftheCompanysSpecialEarlyRetirementProgram;

3.DeclaringtheCompanyguiltyofunfairlaborpracticefor:

a.implementinganillegalredundancyprogramintheguiseofaSpecialEarly
RetirementProgram,terminatingintheprocess243employees,including161
Unionofficersandmembers;

b.implementingaNewJobandWageClassificationandManningStandards,
inviolationofArticle1,SectionVIIofthepartiesCollectiveBargaining
Agreement;and

c.violationoftheCBAprovisionsonentryratesofnewemployeesandrice
subsidyforretainedemployeeswhowereondutyduringtherenovationofthe
Hotel.

4.OrderingtheCompanytoceaseanddesistfromfurthercontinuingwithits
commissionoftheunfairlaborpracticeactshereincomplainedof.

SOORDERED.[23]

The respondents therein filed a motion for the reconsideration of the order
but the SOLE denied the same. On March 10, 2000, the Union and the Hotel
executed a Memorandum of Agreement (MOA) in which the Hotel agreed to
pay P15,000.00 to each member of the Union by way of amicable settlement of
NCMB-NCR-NS-11-425-96 in addition to the redundancy pay earlier paid to them
and that they shall file with the DOLE a motion praying for the following:

a.Dismissalofthecasewithprejudiceinregardto:

(i)illegalredundancyastothosewhohavereceivedthe
settlementpayaboveandsignedtheSpecialPower
ofAttorneyandRelease,WaiverandQuitclaim;
(ii)allULPcharges;and

b.Dismissalofthecasewithoutprejudiceastothosewhohavenotyet
receivedthesettlementpay.[24]

However, the MOA was not submitted to the NLRC for its approval. Neither
did Agoncillo receive any monetary benefits based on the MOA.
After due proceedings, the NLRC rendered judgment on January 30, 2002,
reversing the appealed decision of the Labor Arbiter, dated September 18, 1997.
The fallo of the decision reads:

WHEREFORE,theappealeddecisionisSETASIDE.Judgmentishereby
renderedorderingrespondentto:

1.immediatelyreinstatecomplainanttoherformerorequivalentposition
withoutlossofseniorityrightsandbenefits;and

2.topaycomplainantfullbackwagescomputedfromthetimeitwas
illegallywithheldfromherasaresultofherillegaldismissaluptothe
timesheisactuallyreinstated.

SOORDERED.[25]

The NLRC ruled that Agoncillo was illegally dismissed. It relied principally on
the evidence of the complainant and the Order of the SOLE dated January 6,
1998. The respondents filed a motion for reconsideration, [26] which the NLRC
denied. Hence, they filed before the Court of Appeals a Petition for Certiorari with
Very Urgent Prayer for the Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction,[27] which is anchored on the following grounds, to
wit:
I
WITHALLDUERESPECT,THEHONORABLENATIONALLABOR
RELATIONSCOMMISSIONGRAVELYERREDWHENITRULEDTHAT
PRIVATERESPONDENTAGONCILLOWASILLEGALLYDISMISSSED
CONSIDERINGTHAT,INTHEFIRSTPLACE,PRIVATERESPONDENT
AGONCILLOWASNEVERDISMISSED,CONSTRUCTIVELYOR
OTHERWISE;

II

CONTRARYTOTHERULINGOFTHEHONORABLECOMMISSION,
PRIVATERESPONDENTAGONCILLO'STRANSFERFROMTHE
POSITIONOFSENIORFRONTOFFICECASHIERTOTHEPOSITIONOF
OUTLETCASHIERWASAVALIDEXERCISEOFMANAGEMENT
PREROGATIVE;

III

EVENASSUMINGINGRATIAARGUMENTITHATPRIVATE
RESPONDENTAGONCILLOWASINDEEDSEPARATEDFROMTHE
HOTEL,HERSEPARATIONDUETOREDUNDANCYWASVALID
AND/ORLEGAL.CONTRARYTOTHERULINGOFTHEHONORABLE
COMMISSION,THEREDUNDANCYPROGRAMIMPLEMENTEDBY
THEHOTELISVALID.FURTHERMORE,PRIVATERESPONDENTS
AREBOUNDBYTHECOMPROMISEAGREEMENTBETWEENTHE
UNIONANDTHEHOTELWHICH,AMONGOTHERS,RECOGNIZES
THEVALIDITYOFTHESAIDPROGRAM;

IV

CONSIDERINGTHEFOREGOING,THEPETITIONERSARENOT
GUILTYOFUNFAIRLABORPRACTICE.PRIVATERESPONDENT
AGONCILLO,ONTHEOTHERHAND,ISNOTENTITLEDTO
REINSTATEMENTWITHFULLBACKWAGES.[28]

On June 26, 2003, the CA rendered judgment dismissing the petition on the
ground that no grave abuse of discretion was committed by the respondents
therein.
The petitioners motion for reconsideration [29] was denied by the CA. They
forthwith filed their petition for review alleging that:
THEHONORABLECOURTOFAPPEALSERREDINRENDERINGTHE
ASSAILEDDECISIONANDRESOLUTION,HAVINGDECIDEDA
QUESTIONOFSUBSTANCEINAWAYNOTINACCORDWITHLAW
ANDTHEAPPLICABLEDECISIONSOFTHISHONORABLECOURT,
CONSIDERINGTHAT

THENLRCGRAVELYABUSEDITSDISCRETIONAMOUNTINGTO
LACKOREXCESSOFJURISDICTIONWHENITRULEDTHAT
RESPONDENTAGONCILLOWASILLEGALLYDISMISSEDBECAUSE,
INTHEFIRSTPLACE,SHEWASNEVERDISMISSED,
CONSTRUCTIVELYOROTHERWISE.

II

RESPONDENTAGONCILLO'STRANSFERFROMTHEPOSITIONOF
SENIORFRONTOFFICECASHIERTOTHEPOSITIONOFOUTLET
CASHIERWASAVALIDEXERCISEOFMANAGEMENT
PREROGATIVE.

III

EVENONTHEASSUMPTIONTHATRESPONDENTAGONCILLOWAS
INDEEDSEPARATEDFROMTHEHOTEL,HERSEPARATIONDUETO
AREDUNDANCYPROGRAMWASLEGAL.THEREDUNDANCY
PROGRAMIMPLEMENTEDBYTHEHOTELISLIKEWISEVALID.
FURTHERMORE,RESPONDENTSAREBOUNDBYTHECOMPROMISE
AGREEMENTBETWEENTHEUNIONANDTHEHOTELWHICH,
AMONGOTHERS,RECOGNIZESTHEVALIDITYOFTHESAID
PROGRAM.

IV

INLIGHTOFTHEFOREGOING,THEPETITIONERSARENOTGUILTY
OFILLEGALDISMISSAL,MUCHLESSUNFAIRLABORPRACTICE.
HENCE,RESPONDENTAGONCILLOCANNOTBEENTITLEDTO
REINSTATEMENTNORTOFULLBACKWAGES.[30]

The Court's Ruling


The petition is unmeritorious.
The issues for resolution are factual and Rule 45 of the Rules of Court
provides that only questions of law may be raised in a petition for review
on certiorari. The raison detre is that the Court is not a trier of facts. It is not to
reexamine and reevaluate the evidence on record. Moreover, the factual findings
of the NLRC, as affirmed by the CA, are accorded high respect and finality
unless the factual findings and conclusions of the Labor Arbiter clash with those
of the NLRC and the CA in which case, the Court will have to review the records
and the arguments of the parties to resolve the factual issues and render
substantial justice to the parties.[31]
The petitioners reiterate their submission that respondent Agoncillo had
never been dismissed; she was merely transferred to another position, that of
Outlet Cashier. She had been temporarily laid off because of the renovation of
the hotel but she remained as an employee of the hotel. Following the completion
of the renovation of the hotel, she was offered the position of outlet cashier; but
she already filed her complaint before the Hotel was able to determine what
position she could occupy which was mutually acceptable. The petitioners aver
that the transfer of the respondent to the position of Outlet Cashier was a valid
exercise of management prerogative based on its assessment of her
qualification, aptitude and competence, absent any showing to be contrary to law,
morals or public policy, unreasonable, inconvenient and prejudicial to the
employee. The petitioners insist that the transfer of Agoncillo was pursuant to its
objective of completely reorganizing its manpower component. It did not entail
any diminution in salary, benefits, privileges or job level. The petitioners also
maintain that even if the respondent was separated from the Hotel, it was
justified to do so due to redundancy. The validity of the said program was even
recognized by the respondents in the MOA executed by petitioner Hotel and the
respondent Union. The petitioners maintain that the respondents are bound by
the MOA.
The contentions are untenable. It is plain as day that the petitioners
terminated the employment of respondent Agoncillo effective April 30, 1996, as
evidenced by their letter which reads:

April1,1996

Ms.RowenaAgoncillo
26A.Soriano,B.F.Homes
Paraaque,MetroManila

DearMs.Agoncillo:
WehaverecentlyconductedastudyoftheHotelsorganizationalstructureand
foundtheneedtoreorganizethesameandeliminatemanypositionsthathave
becomeredundant.

Asaresultofsuchstudy,itwasdeterminedthatyourpositionasSeniorFront
OfficeCashierisredundant.Inthisconnection,pleasebeadvisedofyour
separationfromserviceduetoredundancy,effectivecloseofofficehoursof
April30,1996.YouwillreceivenotlaterthanApril30,1996theseparation
payprovidedforunderthelaw,plustheamountofP19,000.00.

WetakethisopportunitytothankyouforyourservicetoHotelNikkoManila
Gardenandextendtoyouourbestwishesforyournextendeavors.

Verytrulyyours,


(Sgd.)
PEARLV.ARAGON
DirectorforAdministration[32]

The letter of the petitioners terminating the employment of Agoncillo on the


ground of redundancy was rejected by the Order of the SOLE in NCMB-NCR-
NS-11-425-96 where he ruled that the petitioners redundancy program was but a
ploy, a contrivance cunningly scripted by them to subvert the Union and
unlawfully dismiss many of its employees. The SOLE declared that, by their acts,
the petitioners were guilty of unfair labor practice.
Redundancy exists when the service capability of the workforce is in excess
of what is reasonably needed to meet the demands of the business enterprise. A
reasonably redundant position is one rendered superfluous by any number of
factors, such as overhiring of workers, decreased volume of business, dropping
of a particular product line previously manufactured by the company or phasing
out of service activity priorly undertaken by the business. Among the requisites of
a valid redundancy program are: (1) the good faith of the employer in abolishing
the redundant position; and (2) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and accordingly abolished. [33] As found by
the SOLE, the NLRC and the CA, the position of respondent Agoncillo was not
abolished or declared redundant. In fact, the petitioners hired an entirely new set
of employees to perform the tasks of respondent Agoncillo, namely:

DonVincentHembradorhiredonOctober1,1996
ReynaldoPajaritohiredonOctober1,1996
ElizaDeVeneciahiredonOctober1,1996
ScarletGalvehiredonOctober1,1996
DheenyLagguihiredonOctober1,1996
EricGaloshiredonOctober1,1996
CarlotaPinedahiredonJanuary25,1997[34]

We agree with the contention of the petitioners that it is the prerogative of


management to transfer an employee from one office to another within the
business establishment based on its assessment and perception of the
employees qualification, aptitude and competence, and in order to ascertain
where he can function with the maximum benefit to the company. However, this
Court emphasized that:

But,likeotherrights,therearelimitsthereto.Themanagerialprerogativeto
transferpersonnelmustbeexercisedwithoutgraveabuseofdiscretion,bearing
inmindthebasicelementsofjusticeandfairplay.Havingtherightshouldnot
beconfusedwiththemannerinwhichthatrightisexercised.Thus,itcannotbe
usedasasubterfugebytheemployertoridhimselfofanundesirableworker.
Inparticular,theemployermustbeabletoshowthatthetransferisnot
unreasonable,inconvenientorprejudicialtotheemployee;nordoesitinvolvea
demotioninrankoradiminutionofhissalaries,privilegesandotherbenefits.
Shouldtheemployerfailtoovercomethisburdenofproof,theemployees
transfershallbetantamounttoconstructivedismissal,whichhasbeendefined
asaquittingbecausecontinuedemploymentisrenderedimpossible,
unreasonableorunlikely;asanofferinvolvingademotioninrankand
diminutioninpay.[35]

There is constructive dismissal when there is a demotion in rank and/or


diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee. [36]
In the present case, the petitioners recalled the termination of respondent
Agoncillo when they learned that she was going to file a complaint against them
with the NLRC for illegal dismissal. However, instead of reinstating her to her
former position, she was offered the position of Linen Dispatcher in the hotel
basement or Secretary of the Roomskeeping Section, positions much lower than
that of a Supervisor of Outlet Cashiers which the respondent held before she was
promoted as Senior Front Office Cashier. With the said positions, the respondent
would not certainly be receiving the same salary and other benefits as Senior
Front Office Cashier.
We agree with the ruling of the NLRC that the offers by the petitioners to
transfer respondent Agoncillo to other positions were made in bad faith, a ploy to
stave off a suit for illegal dismissal. In fact, respondent Agoncillo had not been
transferred to another position at all.
Six months from the time the petitioners made offers to respondent Agoncillo,
the latter never heard from the petitioners again.

WhilethehotelgavecomplainantRowenaAgoncilloasecondletteradvising
herthatshewasstillanemployeewhowasmerelyontemporarylayoff,the
circumstancessurroundingtheissuanceofsuchsecondletterishighly
suspicious.Todate,complainantAgoncillosaffidavit(AnnexF)onthe
issuanceofthesecondletterremainsundisputed.Itcannotbegainsaidthatthe
secondletterwasissuedmerelytoenticecomplainantAgoncillotoreturnthe
terminationletter.Thesaidsecondletterdidnotmakementionofthe
terminationletter.If,asclaimedbythehotel,thesecondletterwasa
withdrawalofthefirstletter,whywastherenoclearstatementtothiseffect
whenitcouldhaveeasilybeendone?Whywasitalsonecessaryforthehotels
officerstoretrievetheterminationletterthatithadissuedtocomplainant?
Whatwecangatherfromhereisthatthehotelhadtriedtocoveritstracksin
ordertorectifyanerror.Certainly,goodfaithcannotbeattributedonthepartof
thehotelinissuingthesecondletter.[37]

Evenassuming,forthesakeofargument,thatthehotelhadavalidgroundfor
dismissing[the]complainantandthatithadmerelysparedhersuchfate,the
hotelisstillguiltyofillegaldismissal.Hadthehotelmadethetransferof
complainantingoodfaithandinthenormalcourseofitsoperation,itwould
havebeenjustified.Inthiscase,however,thesupposedtransferwasmadeonly
aftercomplainanthadbeenearlierterminated.Complainantsstatementinher
affidavitthatshewassummonedbythehotelafternewsofherplantocontest
herdismissalcirculatedremainsunrefuted.Furthermore,thehotelhasnot
explainedwhytherewasnoofficialmemorandumissuedtocomplainant
formallyinformingherofhertransfer.Alltheseleadtoonlyoneconclusion
thattheallegedtransferwasnotmadeingoodfaithasavalidexerciseof
managementprerogativebutwasintendedasasettlementoffertocomplainant
topreventherfromfilingacase.[38]

The offers made by the petitioners could not have the effect of validating an
otherwise arbitrary dismissal.[39]
We reject the contention of the petitioners that respondent Agoncillo is bound
by the MOA executed by the petitioners and respondent Union. There is no
denying the right of the Union and the petitioners under Article 227 of the Labor
Code to enter into and execute a compromise agreement with the assistance of
the DOLE; and that such agreement is binding not only on the Union generally
but on its individual members.[40]
However, a plain reading of the MOA will readily show that it is not binding on
respondent Agoncillo. The MOA reads:

1.TheHotelshallpaytheamountofP15,000.00eachtothemembersofthe
bargainingunitwhoarerepresentedbytheUnioninthiscasebywayof
amicablesettlementofthecaseandinadditiontotheredundancypayalready
earliergiventosuchmembers.

2.Forsecuritypurposesandanorderlyproceeding,onlyclaimantsortheir
authorizedrepresentativesshallbeallowedentryintothepremisesoftheHotel
accompaniedbyUnionrepresentative.

3.Onthedateofapplicationandactualpayment,theclaimantsshallexecute
swornrelease,waiverandquitclaimaswellasaspecialpowerofattorney
authorizingtheUnionpresidenttoamicablysettlethiscase.

4.Unclaimedsettlementpayafter15April2000shallbeturnedovertothe
UnionforitsdispositiononconditionthattheUnionshalltakecareofpaying
otherclaimantsifanyshouldshowuptolaytheirclaimthereafter.

5.FollowingtheexecutionofthisAgreement,theUnionandtheHotelshall
fileamanifestationandmotionwiththeDOLE,attachedthisAgreement,
prayingforthefollowing:

a.Dismissalofthecasewithprejudiceinregardto:

(i.)illegalredundancyastothosewhohavereceivedthesettlementpay
aboveandsignedtheSpecialPowerofAttorneyandRelease,
WaiverandQuitclaim;

(ii.)allULPcharges;and

b.Dismissalofthecasewithoutprejudiceastothosewhohavenotyetreceived
thesettlementpay.[41]

The Union executed the MOA in behalf of the members of the bargaining
unit. There is no showing that Agoncillo is a member of that unit. The MOA
applies only to the members of the bargaining unit who agreed to the termination
of their employment based on redundancy and received redundancy pay.
Agoncillo did not receive any redundancy pay or any monetary benefits under the
MOA or executed any deed or waiver or release in favor of the petitioners.
The MOA executed by the petitioners and the Union settled only the case of
the parties before the SOLE for unfair labor practice and for illegal redundancy. It
did not settle the case between the petitioners and Agoncillo before the NLRC.
This is the reason why the MOA was never submitted by the parties therein to the
NLRC for its approval. Although the petitioners sought a reconsideration of the
decision of the NLRC based, inter alia, on the MOA, the NLRC denied the said
motion. Indeed, the NLRC acted in accord with case law that:

First,evenifaclearmajorityoftheunionmembersagreedtoasettlementwith
theemployer,theunionhasnoauthoritytocompromisetheindividualclaims
ofmemberswhodidnotconsenttosuchsettlement.Rule138,Section23ofthe
1964RevisedRulesofCourtrequiresaspecialauthoritybeforeanattorney
maycompromisehisclientslitigation.Theauthoritytocompromisecannot
lightlybepresumedandshouldbedulyestablishedbyevidence.

Inthecaseatbar,minorityunionmembersdidnotauthorizetheunionto
compromisetheirindividualclaims.Absentashowingoftheunionsspecial
authoritytocompromisetheindividualclaimsofprivaterespondentsfor
reinstatementandbackwages,thereisnovalidwaiveroftheaforesaidrights.
Asprivaterespondentsdidnotauthorizetheuniontorepresenttheminthe
compromisesettlement,theyarenotboundbythetermsthereof.

Second,whetherminorityunionmemberswhodidnotconsenttoa
compromiseagreementareboundbythemajoritydecisionapprovinga
compromisesettlementhasbeenresolvedinthenegative.

InLaCampana,weexplicitlydeclared:

Moneyclaimsduetolaborerscannotbetheobjectofsettlementorcompromise
effectedbyaunionorcounselwithoutthespecificindividualconsentofeach
laborerconcerned.Thebeneficiariesaretheindividualcomplainants
themselves.Theuniontowhichtheybelongcanonlyassistthembutcannot
decideforthem.

ThecaseofLaCampanawasreaffirmedintheGeneralRubbercaseas
follows:

Intheinstantcase,thereisnodisputethatprivaterespondenthasnotratified
theReturntoWorkAgreement.Itfollows,andwesohold,thatprivate
respondentscannotbeheldboundbytheReturntoWorkAgreement.The
waiverofmoneyclaims,whichinthiscasewereaccruedmoneyclaims,by
workersandemployeesmustberegardedasapersonalright,thatis,arightthat
mustbepersonallyexercised.Forawaiverthereoftobelegallyeffective,the
individualconsentorratificationoftheworkersoremployeesinvolvedmustbe
shown.Neithertheofficersnorthemajorityortheunionhadanyauthorityto
waivetheaccruedrightspertainingtothedissentingminoritymembers,even
underacollectivebargainingagreementwhichprovidedforaunionshop.The
sameconsiderationsofpublicpolicywhichimpelledtheCourttoreachthe
conclusionitdidinLaCampana,areequallycompellinginthepresentcase.
Themembersoftheunionneedtheprotectiveshieldofthisdoctrinenot
onlyvisvistheiremployerbutalso,attimes,visavisthemanagementoftheir
ownunion,andatothertimesevenagainsttheirownimprudence
impecuniousness.

Wehaveconsistentlyruledthatacompromiseisgovernedbythebasic
principlethattheobligationsarisingtherefromhavetheforceoflawbetween
theparties.

Consequently,privaterespondentsmaypursuetheirindividualclaimsagainst
petitionersbeforetheLaborArbiter.

ThejudgmentoftheLaborArbiterbasedonthecompromiseagreementin
questiondoesnothavetheeffectofresjudicatauponprivaterespondentwho
didnotagreethereto.

Acompromise,onceapprovedbyfinalordersofthecourthastheforceofres
judicatabetweenthepartiesandshouldnotbedisturbedexceptforvicesof
consentorforgery.Acompromiseisbasicallyacontractperfectedbymere
consent.Consentismanifestedbythemeetingoftheofferandtheacceptance
uponthethingandthecausewhicharetoconstitutethecontract.A
compromiseagreementisnotvalidwhenapartyinthecasehasnotsignedthe
sameorwhensomeonesignsforandinbehalfofsuchpartywithoutauthority
todoso.

InSMIFishIndustries,Inc.vs.NLRC,thisCourtdeclaredthatwherethe
compromiseagreementwassignedbyonlythreeofthefiverespondents,the
nonsignatoriescannotbeboundbythatamicablesettlement.Thisissoasa
compromiseagreementisacontractandcannotaffectthirdpersonswhoarenot
partiestoit.
Privaterespondentswerenotpartiestothecompromiseagreement.Hence,the
judgmentapprovingsuchagreementcannothavetheeffectofresjudicataupon
themsincetherequirementofidentityofpartiesisnotsatisfied.Ajudgment
uponacompromiseagreementhasalltheforceandeffectofanyother
judgment,hence,conclusiveonlyuponpartiestheretoandtheirprivies. [42]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of


merit. Costs against the petitioners.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

[1]
Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Juan Q. Enriquez, Jr.
and Hakim S. Abdulwahid, concurring.
[2]
Penned by Commissioner Vicente S.E. Veloso, with Presiding Commissioner Roy V. Seeres
and Commissioner Alberto R. Quimpo, concurring.
[3]
Rollo, p. 115.
[4]
Id. at 340.
[5]
Id. at 138-139.
[6]
Rollo, p. 137.
[7]
Id. at 130.
[8]
Id. at 138-139.
[9]
Rollo, p. 142.
[10]
Ibid.
[11]
Id. at 117.
[12]
Rollo, p. 119.
[13]
Id. at 143.
[14]
Id. at 200.
[15]
Rollo, p. 349.
[16]
Id. at 341.
[17]
Rollo, pp. 341-342.
[18]
Id. at 160-176, 201-212.
[19]
Rollo, p. 196.
[20]
Id. at 10.
[21]
Rollo, p. 11.
[22]
Id. at 261-262.
[23]
Rollo, pp. 346-347.
[24]
Id. at 365-366.
[25]
Rollo, p. 108.
[26]
Id. at 110-111.
[27]
Id. at 58-93.
[28]
Rollo, pp. 61-62.
[29]
Id. at 367-390.
[30]
Rollo, pp. 6-7.
[31]
Union Motor Corporation v. NLRC, G.R. No. 159738, 9 December 2004, 445 SCRA 683.
[32]
Rollo, p. 290.
[33]
Asian Alcohol Corporation v. NLRC, G.R. No. 131108, 25 March 1999, 305 SCRA 416.
[34]
Rollo, p. 119.
[35]
Blue Dairy Corporation v. NLRC, G.R. No. 129843, 14 September 1999, 314 SCRA 401.
[36]
Escobio v. NLRC, G.R. No. 118159, 15 April 1998, 289 SCRA 48; Philippine Wireless, Inc.
(Pocketbell) v. NLRC, G.R. No. 112963, 20 July 1999, 310 SCRA 653.
[37]
Rollo, pp. 102-103.
[38]
Id. at 105.
[39]
Hantex Trading, Co., Inc. v. Court of Appeals, G.R. No. 148241, 27 September 2002, 390
SCRA 181.
[40]
Dionela vs. Court of Industrial Relations, G.R. No. L-18334, 31 August 1963, 8
SCRA 832; Chua v. NLRC, G.R. Nos. 89971-75, 17 October 1990, 190 SCRA 558.
[41]
Rollo, pp. 365-366.
[42]
Golden Donuts, Inc. v. NLRC, G.R. Nos. 113666-68, 19 January 2000, 322 SCRA 294.

FIRST DIVISION

[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF


LUCBAN, respondent.

DECISION
PANGANIBAN, J.:
The law protects both the welfare of employees and the prerogatives of
management. Courts will not interfere with business judgments of employers,
provided they do not violate the law, collective bargaining agreements, and
general principles of fair play and justice. The transfer of personnel from one
area of operation to another is inherently a managerial prerogative that shall be
upheld if exercised in good faith -- for the purpose of advancing business
interests, not of defeating or circumventing the rights of employees.

The Case

The Court applies these principles in resolving the instant Petition for
Review under Rule 45 of the Rules of Court, assailing the June 14, 2002
[1]

Decision and September 25, 2002 Resolution of the Court of Appeals (CA) in
[2] [3]

CA-GR SP No. 68030. The assailed Decision disposed as follows:

WHEREFORE,thepetitionforcertiorariisherebyDISMISSEDforlackof
merit.
[4]

The challenged Resolution denied petitioners Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc.,
issued Board Resolution Nos. 99-52 and 99-53, which read:

BoardRes.No.9952

RESOLVEDASITISHEREBYRESOLVEDthatinlinewiththepolicyof
thebanktofamiliarizebankemployeeswiththevariousphasesofbank
operationsandfurtherstrengthentheexistinginternalcontrolsystem[,]all
officersandemployeesaresubjecttoreshuffleofassignments.Moreover,this
resolutiondoesnotprecludethetransferofassignmentofbankofficersand
employeesfromthebranchofficetotheheadofficeandviceversa.

BoardRes.No.9553

PursuanttoResolutionNo.9952,thefollowingbranchemployeesarehereby
reshuffledtotheirnewassignmentswithoutchangesintheircompensationand
otherbenefits.
NAMEOFEMPLOYEESPRESENTASSIGNMENTNEWASSIGNMENT

JOYCEV.ZETABankTellerC/ATeller
CLODUALDOZAGALAC/AClerkActg.Appraiser
ELMERL.MENDOZAAppraiserClerkMeralcoCollection
CHONAR.MENDOZAClerkMeralcoBankTeller [5]

Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman,
directed Briccio V. Cada, the manager of the banks Tayabas branch, to
implement the reshuffle. The new assignments were to be effective on May 1,
[6]

1999 without changes in salary, allowances, and other benefits received by the
aforementioned employees. [7]

On May 3, 1999, in an undated letter addressed to Daya, Petitioner


Elmer Mendoza expressed his opinion on the reshuffle, as follows:

RE:Therecentreshuffleofemployeesasper

BoardResolutiondatedApril25,1999

DearSir:

Thisisinconnectionwiththeaforementionedsubjectmatterandwhichthe
undersignedreceivedonApril25,1999.

Needlesstostate,thereshufflingoftheundersignedfromthepresentposition
asAppraisertoClerkMeralcoCollectionisdeemedtobeademotionwithout
anylegalbasis.Beforethisactiononyourpart[,]theundersignedhasbeen
besiegedbyintriguesdueto[the]maliciousmachinationofacertainpublic
officialwhoisbruitedtobeyourgoodfriend.Thesemaliciousinsinuations
werebaselessanddespitethefactthatIhavebeenonmyjobasAppraiserfor
thepastsix(6)yearsingoodstandingandneverinvolvedinanyanomalous
conduct,mybeingreshuffledto[C]lerk[M]eralco[C]ollectionisablatant
harassmentonyourpartasapreludetomyterminationinduetime.Thiswill
constituteanunfairlaborpractice.

Meanwhile,mayIbeseechyourgoodofficethatImayremaininmyposition
asAppraiseruntilthereason[for]mybeingreshuffledismadeclear.

Yourkindconsiderationonthisrequestwillbehighlyappreciated. [8]
On May 10, 1999, Daya replied:

DearMr.Mendoza,

Anentyourundatedletterexpressingyourresentment/commentsontherecent
managementsdecisiontoreshufflethedutiesofbankemployees,pleasebe
informedthatitwasnevertheintention(ofmanagement)todowngradeyour
positioninthebankconsideringthatyourduecompensationasBankAppraiser
ismaintainedandnofuturereductionwasintended.

Asidefromgivingbankemployeesawiderexperienceinvariousbanking
operations,thereshufflewillalsoaffordmanagementaneffectivetoolin
providingthebankasoundinternalcontrolsystem/checkandbalanceanda
basisinevaluatingtheperformanceofeachemployee.Acontinuingbankwide
reshuffleofemployeesshallbemadeatthediscretionofmanagementwhich
mayincludebankofficers,ifnecessaryasexpressedinBoardResolutionNo.
9953,datedApril25,1999.Managementmerelyshiftedthedutiesof
employees,theirpositiontitle[maybe]retainedifrequestedformally.

Beingastandardprocedureinmaintaininganeffectiveinternalcontrolsystem
recommendedbytheBangkoSentralngPilipinas,webelievethattheconduct
ofreshuffleisalsoaprerogativeofbankmanagement. [9]

On June 7, 1999, petitioner submitted to the banks Tayabas branch manager


a letter in which he applied for a leave of absence from work:

DearSir:

IwishIcouldcontinueworkingbutduetotheailmentthatIalwaysfeelevery
nowandthen,Ihavethehonortoapplyforatleastten(10)dayssickleave
effectiveJune7,1999.

Hopingthatthisrequest[merits]yourfavorableandkindconsiderationand
understanding. [10]

On June 21, 1999, petitioner again submitted a letter asking for another
leave of absence for twenty days effective on the same date. [11]

On June 24, 1999, while on his second leave of absence, petitioner filed a
Complaint before Arbitration Branch No. IV of the National Labor Relations
Commission (NLRC). The Complaint -- for illegal dismissal, underpayment,
separation pay and damages -- was filed against the Rural Bank of Lucban
and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V.
Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q. [12]

The labor arbiters June 14, 2000 Decision upheld petitioners claims as
follows:

WHEREFORE,premisesconsidered,judgmentisherebyrenderedasfollows:

1.Declaringrespondentsguiltyofillegaldismissal.

2.Orderingrespondentstoreinstatecomplainanttohisformerpositionwithout
lossofseniorityrightswithfullbackwagesfromdateofdismissaltoactual
reinstatementintheamountofP55,000.00asofJune30,2000.

3.Orderingthepaymentofseparationpayifreinstatementisnotpossibleinthe
amountofP30,000.00inadditionto13thmonthpayofP5,000.00andthe
usualP10,000.00annualbonusaffordedtheemployees.

4.OrderingthepaymentofunpaidsalaryfortheperiodcoveringJuly130,
1999intheamountofP5,000.00

5.OrderingthepaymentofmoraldamagesintheamountofP50,000.00.

6.OrderingthepaymentofexemplarydamagesintheamountofP25,000.00

7.OrderingthepaymentofAttorneysfeesintheamountofP18,000.00which
is10%ofthemonetaryaward. [13]

On appeal, the NLRC reversed the labor arbiter. In its July 18, 2001
[14]

Resolution, it held:

Wecanconceiveofnoreasontoascribebadfaithormalicetotherespondent
bankforitsimplementationofitsBoardResolutiondirectingthereshuffleof
employeesatitsTayabasbranchtopositionsotherthanthosetheywere
occupying.Whileatfirsttheemployeestherebyaffectedwouldexperience
difficultyinadjustingtotheirnewjobs,itcannotbegainsaidthattheobjective
forthereshuffleisnoble,asnotonlywouldtheemployeesobtainadditional
knowledge,theywouldalsobemorewellroundedintheoperationsofthebank
andthushelpthelatterfurtherstrengthenitsalreadyexistinginternalcontrol
system.
Theonlyinconvenience,as[w]eseeit,thatthe[petitioner]mayhave
experiencedisthatfromanappraiserhewasmadetoperformtheworkofa
clerkinthecollectionofMeralcopayments,whichhemayhaveconsideredas
beneathhimandhisexperience,beingapioneeremployee.Butitcannotbe
discountedeitherthatotheremployeesattheTayabasbranchweresimilarly
reshuffled.TheonlylogicalconclusionthereforeisthattheBoardResolution
wasnotaimedsolelyatthe[petitioner],butforalltheotheremployeesofthex
xxbankaswell.Besides,thecomplainanthasnotshownbyclear,competent
andconvincingevidencethatheholdsavestedrighttothepositionof
Appraiser.xxx.

Howandbywhatmannerabusinessconcernconductsitsaffairsisnotforthis
Commissiontointerferewith,especiallysoifthereisnoshowing,asinthe
caseatbar,thatthereshufflewasmotivatedbybadfaithorillwill.xxx.
[15]

After the NLRC denied his Motion for Reconsideration, petitioner brought
[16]

before the CA a Petition for Certiorari assailing the foregoing Resolution.


[17]

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC,


the CA Decision ruled thus:

ThesocalledharassmentwhichMendozaallegedlyexperiencedinthe
aftermathofthereshufflingofemployeesatthebankisbutafigmentofhis
imaginationasthereisnoevidenceextantonrecordwhichsubstantiatesthe
same.Hisallegeddemotion,thecoldshoulderstance,thethingsabouthischair
andtable,andtheallegedreasonfortheharassmentarebutallegationsbereftof
proofandareperforceinadmissibleasselfservingstatementsandcanneverbe
consideredrepositoriesoftruthnorserveasfoundationsofcourtdecisions
anenttheresolutionofthelitigantsrights.

WhenMendozawasreshuffledtothepositionofclerkatthebank,hewasnot
demotedastherewasno[diminution]ofhissalarybenefitsandrank.Hecould
evenretainhispositiontitle,hadheonlyrequestedforitpursuanttothereply
oftheChairmanofthebanksboardofdirectorstoMendozasletterprotesting
thereshuffle.Thereis,therefore,nocausetodoubtthereasonswhichthebank
propoundedinsupportofitsmovetoreshuffleitsemployees,viz:
1.tofamiliarizebankemployeeswiththevariousphasesofbankoperations,
and

2.tofurtherstrengthentheexistinginternalcontrolsystemofthebank.

Thereshufflingofitsemployeeswasdoneingoodfaithandcannotbemade
thebasisofafindingofconstructivedismissal.

ThefactthatMendozawasnolongerincludedinthebankspayrollforJuly1to
15,1999doesnotsignifythatthebankhasdismissedtheformerfromits
employ.Mendozaseparatedhimselffromthebanksemploywhen,onJune24,
1999,whileonleave,hefiledtheillegaldismissalcaseagainsthisemployerfor
noapparentreasonatall. [18]

Hence, this Petition. [19]

The Issues

Petitioner raises the following issues for our consideration:

I.Whetherornotthepetitionerisdeemedtohavevoluntarilyseparatedhimself
fromtheserviceand/orabandonedhisjobwhenhefiledhisComplaintfor
constructiveandconsequentlyillegaldismissal;

II.Whetherornotthereshufflingofprivaterespondent[s]employeeswasdone
ingoodfaithandcannotbemadeasthebasisofafindingofconstructive
dismissal,evenasthe[petitioners]demotioninrankisadmittedbyboth
parties;

III.WhetherornottherulinginthelandmarkcaseofRubenSerranovs.
NLRC[andIsetannDepartmentStore(323SCRA445)]isapplicabletothe
caseatbar;

IV.WhetherornottheCourtofAppealserredindismissingthepetitioners
moneyclaims,damages,andunpaidsalariesfortheperiodJuly130,1999,
althoughthiswasnotdisputedbytheprivaterespondent;and

V.WhetherornottheentireproceedingsbeforetheHonorableCourtof
AppealsandtheNLRCareanullitysincetheappealfiledbyprivate
respondentbeforetheNLRConAugust5,2000wasonthe15 thdayorfive(5)
daysbeyondthereglem[e]ntaryperiodoften(10)daysasprovidedforbylaw
andtheNLRCRulesofProcedure. [20]

In short, the main issue is whether petitioner was constructively dismissed


from his employment.

The Courts Ruling

The Petition has no merit.

Main Issue:
Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to


when continued employment is rendered impossible, unreasonable or unlikely;
when there is a demotion in rank or a diminution of pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to the
employee. Petitioner argues that he was compelled to file an action for
[21]

constructive dismissal, because he had been demoted from appraiser to clerk


and not given any work to do, while his table had been placed near the toilet and
eventually removed. He adds that the reshuffling of employees was done in bad
[22]

faith, because it was designed primarily to force him to resign. [23]

Management Prerogative
to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this


reason, courts often decline to interfere in legitimate business decisions of
employers. Indeed, labor laws discourage interference in employers judgments
[24]

concerning the conduct of their business. The law must protect not only the
[25]

welfare of employees, but also the right of employers.


In the pursuit of its legitimate business interest, management has the
prerogative to transfer or assign employees from one office or area of operation
to another -- provided there is no demotion in rank or diminution of salary,
benefits, and other privileges; and the action is not motivated by discrimination,
made in bad faith, or effected as a form of punishment or demotion without
sufficient cause. This privilege is inherent in the right of employers to control
[26]

and manage their enterprise effectively. The right of employees to security of


[27]

tenure does not give them vested rights to their positions to the extent of
depriving management of its prerogative to change their assignments or to
transfer them. [28]
Managerial prerogatives, however, are subject to limitations provided by law,
collective bargaining agreements, and general principles of fair play and justice.
The test for determining the validity of the transfer of employees was explained
[29]

in Blue Dairy Corporation v. NLRC as follows:


[30]

[L]ikeotherrights,therearelimitsthereto.Themanagerialprerogativeto
transferpersonnelmustbeexercisedwithoutgraveabuseofdiscretion,bearing
inmindthebasicelementsofjusticeandfairplay.Havingtherightshouldnot
beconfusedwiththemannerinwhichthatrightisexercised.Thus,itcannotbe
usedasasubterfugebytheemployertoridhimselfofanundesirable
worker.Inparticular,theemployermustbeabletoshowthatthetransferisnot
unreasonable,inconvenientorprejudicialtotheemployee;nordoesitinvolvea
demotioninrankoradiminutionofhissalaries,privilegesandother
benefits.Shouldtheemployerfailtoovercomethisburdenofproof,the
employeestransfershallbetantamounttoconstructivedismissal,whichhas
beendefinedasaquittingbecausecontinuedemploymentisrendered
impossible,unreasonableorunlikely;asanofferinvolvingademotioninrank
anddiminutioninpay.Likewise,constructivedismissalexistswhenanactof
cleardiscrimination,insensibilityordisdainbyanemployerhasbecomeso
unbearabletotheemployeeleavinghimwithnooptionbuttoforegowithhis
continuedemployment. [31]

Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of the employee
has complied with the foregoing test. In the instant case, we find no reason to
disturb the conclusion of the NLRC and the CA that there was no constructive
dismissal. Their finding is supported by substantial evidence -- that amount of
relevant evidence that a reasonable mind might accept as justification for a
conclusion.[32]

Petitioners transfer was made in pursuit of respondents policy to familiarize


bank employees with the various phases of bank operations and further
strengthen the existing internal control system of all officers and employees. We
[33]

have previously held that employees may be transferred -- based on their


qualifications, aptitudes and competencies -- to positions in which they can
function with maximum benefit to the company. There appears no justification
[34]

for denying an employer the right to transfer employees to expand their


competence and maximize their full potential for the advancement of the
establishment. Petitioner was not singled out; other employees were also
reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of
his salary, privileges and other benefits. This fact is clear in respondents Board
Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager
Cada, and the May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his
allegations. Given no credence by both lower tribunals was his bare and self-
serving statement that he had been positioned near the comfort room, made to
work without a table, and given no work assignment. Purely conjectural is his
[35]

claim that the reshuffle of personnel was a harassment in retaliation for an


alleged falsification case filed by his relatives against a public official. While the
[36]

rules of evidence prevailing in courts of law are not controlling in proceedings


before the NLRC, parties must nonetheless submit evidence to support their
[37]

contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC does not apply to the present factual milieu. The Court
[38]

ruled therein that the lack of notice and hearing made the dismissal of the
employee ineffectual, but not necessarily illegal. Thus, the procedural infirmity
[39]

was remedied by ordering payment of his full back wages from the time of his
dismissal. The absence of constructive dismissal in the instant case precludes
[40]

the application of Serrano. Because herein petitioner was not dismissed, then he
is not entitled to his claimed monetary benefits.

Alleged Nullity of NLRC


and CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were
void, since respondents appeal before the NLRC had allegedly been filed beyond
the reglementary period. A careful scrutiny of his Petition for Review with the
[41] [42]

appellate court shows that this issue was not raised there. Inasmuch as the
instant Petition challenges the Decision of the CA, we cannot rule on arguments
that were not brought before it. This ruling is consistent with the due-process
requirement that no question shall be entertained on appeal, unless it has been
raised in the court below. [43]

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and
the September 25, 2002 Resolution of the Court of Appeals
are AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna,
JJ., concur.

[1]
Rollo, pp. 3-31.
[2]
Id., pp. 33-48. Fifteenth Division. Penned by Justice Oswaldo D. Agcaoili (chairman), with the
concurrence of Justices Eriberto U. Rosario Jr. and Danilo B. Pine (members).
[3]
Id., p. 50.
[4]
Assailed Decision, p. 15; rollo, p. 47.
[5]
Rollo, p. 119.
[6]
Assailed Decision, pp. 2-3; rollo, pp. 34-35.
[7]
Letter of Alejo B. Daya dated April 30, 1999; rollo, p. 120.
[8]
Rollo, p. 121.
[9]
Letter of Daya dated May 10, 1999; rollo, p. 122.
[10]
Letter of petitioner dated June 7, 1999; rollo, p. 123.
[11]
Letter of petitioner dated June 21, 1999; rollo, p. 124.
[12]
Assailed Decision, p. 6; rollo, p. 38.
[13]
Decision of Labor Arbiter Waldo Emerson R. Gan dated June 14, 2000, p. 5-6; rollo, pp. 145-
146.
[14]
CA Decision dated June 14, 2002, pp. 11-12; rollo, pp. 43-44.
[15]
NLRC Resolution dated July 18, 2001, pp. 4-5; rollo, pp. 79-80.
[16]
Assailed Decision, p. 12; rollo, p. 44.
[17]
Rollo, pp. 51-74.
[18]
Assailed Decision, pp. 14-15; rollo, pp. 46-47.
[19]
This case was deemed submitted for resolution on June 9, 2003, upon this Courts receipt of
respondents Memorandum, signed by Atty. Carlos Mayorico E. Caliwara. Petitioners
Memorandum, signed by Atty. Manuel M. Maramba, was received by this Court on April
23, 2003.
[20]
Petitioners Memorandum, p. 10; rollo, p. 220. Original in upper case.
[21]
Blue Dairy Corporation v. NLRC, 373 Phil. 179, 186, September 14, 1999; Escobin v. NLRC,
351 Phil. 973, 999, April 15, 1998; Philippine Japan Active Carbon Corporation v. NLRC,
171 SCRA 164, 168, March 8, 1989.
[22]
Petitioners Memorandum, pp. 11, 14; rollo, pp. 221, 224.
[23]
Id., p. 14; id., p. 224.
[24]
Metrolab Industries, Inc. v. Roldan-Confesor, 324 Phil. 416, 429, February 28, 1996.
[25]
Bontia v. NLRC, 325 Phil. 443, 452, March 18, 1996.
[26]
Lanzaderas v. Amethyst Security and General Services, Inc., 404 SCRA 505, June 20,
2003; Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, 334 Phil. 84, 93, January 2,
1997; Escobin v. NLRC, supra.
[27]
Ibid.
[28]
See Antonio H. Abad Jr., Compendium on Labor Law (2004), p. 55.
[29]
Philippine Airlines, Inc. v. NLRC, 225 SCRA 301, 308, August 13, 1993; University of Sto.
Tomas v. NLRC, 190 SCRA 758, 771, October 18, 1990.
[30]
Supra.
[31]
Id., p. 186, per Bellosillo, J.
[32]
Tan v. NLRC, 359 Phil. 499, 512, November 24, 1998. Substantial evidence is the quantum of
evidence required to establish a fact in cases before administrative and quasi-judicial
bodies like the NLRC (Equitable Banking Corporation v. NLRC, 273 SCRA 352, 373-374,
June 13, 1997).
[33]
Board Resolution No. 99-52; rollo, p. 119.
[34]
Allied Banking Corporation v. Court of Appeals, GR No. 144412, November 18, 2003; Blue
Dairy Corporation v. NLRC, supra, p. 186; Philippine Japan Active Carbon Corporation v.
NLRC, supra.
[35]
Petitioners Memorandum, p. 3; rollo, p. 213.
[36]
Ibid.
[37]
Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, supra, p. 92.
[38]
380 Phil. 416, January 27, 2000.
[39]
Id, p. 449. See herein ponentes Separate Opinion in Serrano. See also Dayan v. Bank of
Philippine Islands, 421 Phil. 620, 633, November 20, 2001.
[40]
Id, p. 451.
[41]
Petitioners Memorandum, p. 20; rollo, p. 230.
[42]
Rollo, pp. 51-74.
[43]
Del Rosario v. Bonga, 350 SCRA 101, 108, January 23, 2001.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 162021 June 16, 2014

MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP, Petitioners,
vs.
MARGARET A. DEFENSOR, Respondent.

DECISION

BERSAMIN, J.:
In labor cases, the rules on the degree of proof are enforced not as stringently as in other
cases in order to better serve the higher ends of justice. This lenity is intended to afford to
the employee every opportunity to level the playing field.

The Case

Being now assailed is the amended decision promulgated on November 19, 2003, whereby 1

the Court of Appeals (CA) reconsidered its original disposition, and granted the petition for
certiorari filed by respondent Margaret A. Defensor (respondent) by annulling and setting
aside the adverse resolutions dated July 31, 2002 and March 31, 2003 issued by the
National Labor Relations Commission (NLRC).

Antecedents

Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an
Associate Publisher in 1996, and later promoted her as a Group Publisher with a monthly
salary of P60,000.00. 2

In a memorandum dated February 25, 1999, the respondent proposed to MMPIs Executive
Vice-President Sarita V. Yap (Yap) year-end commissions for herself and a special incentive
plan for the Sales Department. 3

The proposed schedule of the respondents commissions would be as follows:

1. MMPI Total revenue at P28-P29 M 0.05% outright commission

2. MMPI Total revenue at P30-P34 M 0.075% outright commission

3. MMPI Total revenue at P35-P38 M 0.1% outright commission

4. MMPI Total revenue at P39-P41 M 0.1% outright commission

5. MMPI Total revenue at P41M up 0.1% outright commission

while the proposed schedule of the special incentive plan would be the following:

1. MMPI Total revenue at P28-P29 M P5,000 each by year-end

2. MMPI Total revenue at P30-P34 M P7,000 each by year-end

3. MMPI Total revenue at P35-P38 M P8,500 each by year-end

4. MMPI Total revenue at P39-P41 M P10,000 each by year-end

5. MMPI Total revenue at P41M up P10,000 each by year-end Plus incentive trip
abroad

Yap made marginal notes of her counter-proposals on her copy of the respondents
memorandum dated February 25, 1999 itself, crossing out proposed items 1 and 2 from the
4

schedule of the respondents commissions, and proposing instead that outright commissions
be at 0.1% of P35-P38 million in accordance with proposed item 3; and crossing out
proposed items 1 and 2 from the schedule of the special incentive plan, and writing "start
here" and "stet" in reference to item 3. Yap also wrote on the memorandum: "Marge, if
everything is ok w/ you, draft something for me to sign "; "You can also announce that at 5
M net for MMPI [acc to my computation, achievable if they only meet their month min. quota]
we can declare 14th month pay for entire company." 5

The respondent sent another memorandum on April 5, 1999 setting out the 1999
advertisement sales, target and commissions, and proposing that the schedule of her
outright commissions should start at .05% of P34.5 million total revenue,
or P175,000.00; and further proposing that the special incentives be given when total
6

revenues reached P35-P38 million.

On August 31, 1999, the respondent sent Yap a report on sales and sales targets. 7

On October 1999, the respondent tendered her letter of resignation effective at the end of
December 1999. Yap accepted the resignation. Before leaving MMPI, the respondent sent
1wphi1
8

Yap another report on the sales and advertising targets for 1999. On December 8, 1999, Yap
9

responded with a "formalization" of her approval of the 1999 special incentive scheme
proposed by the respondent through her memorandum dated February 25, 1999, revising10

anew the schedule by starting commissions at.05% of P35-P38 million gross advertising
revenue (including barter), and the proposed special incentives at P35-P38 million
with P8,500.00 bonus. 11

The respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had
been the result of Yaps own comments on the special incentive scheme she had proposed,
and that she had assumed that Yap had been amenable to the proposal when she did not
receive any further reaction from the latter. 12

On May 2000, after the respondent had left the company, she filed a complaint for payment
of bonus and incentive compensation with damages, specifically demanding the payment
13

ofP271,264.68 as sales commissions, P60,000.00 as 14th month pay, and P8,500.00 as her
share in the incentive scheme for the advertising and sales staff. 14

Ruling of the Labor Arbiter

In a decision dated February 5, 2001, the Labor Arbiter (LA) dismissed the respondents
15

complaint, ruling that the respondent had not presented any evidence showing that MMPI
had agreed or committed to the terms proposed in her memorandum of April 5, 1999; that
even assuming that the petitioners had agreed to her terms, the table she had submitted
justifying a gross revenue of P36,216,624.07 was not an official account by MMPI; and that
16

the petitioners had presented a 1999 statement of income and deficit prepared by the
auditing firm of Punongbayan & Araullo showing MMPIs gross revenue for 1999 being
only P31,947,677.00. 17

Decision of the NLRC

The respondent appealed, but the NLRC denied the appeal for its lack of merit, with the
18

NLRC concurring with the LAs ruling that there had been no agreement between the
petitioners and the respondent on the terms and conditions of the incentives reached.
The respondent filed a motion for reconsideration and a supplement to the motion for
reconsideration. In the supplement, she included a motion to admit additional evidence (i.e.,
1wphi1

the affidavit of Lie Tabingo who had worked as a traffic clerk in the Advertising Department of
MMPI and had been in charge of keeping track of the advertisements placed with MMPI) on
the ground that such evidence had been "unavailable during the hearing as newly
discovered evidence in a motion for new trial". 19

The NLRC denied the respondents motions for reconsideration. 20

Judgment of the CA

The respondent brought a special civil action for certiorari in the CA.

In its decision promulgated on August 28, 2003, the CA dismissed the respondents petition
21

for certiorari and upheld the resolutions of the NLRC.

On motion for reconsideration by the respondent, however, the CA promulgated on


November 19, 2003 its assailed amended decision granting the motion for reconsideration
and giving due course to the respondents petition for certiorari; annulling the challenged
resolutions of the NLRC; and remanding the case to the NLRC for the reception of additional
evidence. The CA opined that the NLRC had committed a grave abuse of discretion in
finding that there had been no special incentive scheme approved and implemented for
1999, and in disallowing the respondent from presenting additional evidence that was
22

crucial in establishing her claim about MMPIs gross revenue. The amended decision
23

disposed as follows:

WHEREFORE, premises considered, the motion for reconsideration is hereby GRANTED.


Our Decision of August 28, 2003 is hereby RECONSIDERED AND SET ASIDE. A new
judgment is hereby entered GIVING DUE COURSE to the petition and GRANTING the writ
prayed for. Accordingly, the challenged Resolutions of the NLRC in NLRC NCR 00-03-
61361-00 (CA No. 028358-01) dated July 31, 2002 and March 31, 2003 are hereby
ANNULLED and SET ASIDE. The case is hereby remanded to the NLRC for reception of
additional evidence on appeal as prayed for by petitioner and for proper proceedings in
accordance with Our disquisitions herein.

The denial of the claim for 14th month pay is sustained for lack of evidentiary basis.

No pronouncement as to costs.

SO ORDERED. 24

The petitioners and the respondent sought reconsideration of the CAs amended decision,
but the CA denied their motions through the resolution promulgated on February 4, 2004. 25

Issues

Hence, this appeal by petition for review on certiorari, with the petitioners urging that the CA
erred in ruling that

I. RESPONDENT CAN INTRODUCE EVIDENCE THAT IS NOT NEWLY-


DISCOVERED FOR THE FIRST TIME ON APPEAL.
II. A [REMAND] OF THE CASETO THE NLRC FOR FURTHER RECEPTION OF
EVIDENCE IS JUSTIFIED BY REASON OF DEARTH OF EVIDENCE TO PROVE
THAT TARGET GROSS SALES OR REVENUES WEREACTUALLY MET AS TO
ENTITLE RESPONDENT TO THE INCENTIVE BONUS FOR THE SUBJECT
PERIOD/YEAR. 26

The petitioners argue that the circumstances of the case did not warrant the relaxation of the
rules of procedure in order to allow the submission of the memorandum and the affidavit of
Tabingo to the LA and the NLRC. They contend that the respondent had sought to introduce
in the proceedings before the LA Tabingos memorandum dated December 10, 1999
addressed to the Accounting Department stating that the "gross revenue from all publications
was P36,022,624.07, while net revenue was P32,551,890.58"; that Tabingos affidavit was
27

meant to validate her memorandum; that such pieces of evidence sought to prove that
MMPIs target gross sales had been met, and would then entitle the respondent to her claims
of commissions and special incentives; that the LA actually considered but did not give any
weight or value to Tabingos memorandum in resolving the respondents claims; that any
affidavit from Tabingo that the respondent intended to introduce would be merely
corroborative of the evidence already presented, like the table purportedly showing MMPIs
gross revenue for 1999; and that such evidence was already considered by the NLRC in
resolving the appeal.28

The important issue is whether or not the respondent was entitled to the commissions and
the incentive bonus being claimed.

Ruling

The appeal is partly meritorious.

The grant of a bonus or special incentive, being a management prerogative, is not a


demandable and enforceable obligation, except when the bonus or special incentive is made
part of the wage, salary or compensation of the employee, or is promised by the employer
29

and expressly agreed upon by the parties. By its very definition, bonus is a gratuity or act of
30

liberality of the giver, and cannot be considered part of an employees wages if it is paid
31

only when profits are realized or a certain amount of productivity is achieved. If the desired
goal of production or actual work is not accomplished, the bonus does not accrue.

Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the
part of the giver, the respondent could not validly insist on the schedule proposed in her
memorandum of April 5, 1999 considering that the grant of the bonus or special incentive
remained a management prerogative. However, the Court agrees with the CAs ruling that
the petitioners had already exercised the management prerogative to grant the bonus or
special incentive. At no instance did Yap flatly refuse or reject the respondents request for
commissions and the bonus or incentive. This is plain from the fact that Yap even
"bargained" with the respondent on the schedule of the rates and the revenues on which the
bonus or incentive would be pegged. What remained contested was only the schedule of the
rates and the revenues. In her initial memorandum of February 25, 1999, the respondent had
suggested the following schedule, namely: (a) 0.05% outright commission on total revenue
of P28-P29 million; (b) 0.075% on P30-P34 million; (c) 0.1% on P35-P38 million; (d) 0.1%
on P39-P41 million pesos; and (f) 0.1% on P41 million or higher, but Yap had countered by
revising the schedule to start at 0.1% as outright commissions on a total revenue of P35-P38
million, and the special incentive bonus to start at revenues of P35-P38 million. Moreover, on
December 8, 1999, Yap sent to the respondent a memorandum entitled Re: Formalization of
my handwritten approval of 1999 Incentive scheme dated 25 February 1999. Such
actuations and actions by Yap indicated that, firstly, the petitioners had already acceded to
the grant of the special incentive bonus; and, secondly, the only issue still to be threshed out
was at which point and at what rate the respondents outright commissions and the special
incentive bonus for the sales staff should be given.

For sure, Yaps memorandum dated December 8, 1999, aside from being the petitioners
categorical admission of the grant of the commissions and the bonus or incentives, laid down
the petitioners own schedule of the commissions and the bonus or incentives, to wit:32

Re: Formalization of my handwritten approval of 1999 incentive scheme dated 25 February


1999

1999 Incentive Scheme for Group Publisher

MMPI Gross Advertising Revenue P35-38 M .05%


(includes barter) P39-41 M .075%
P41 M up 1%

Commissionable ad revenue is net of advertising agency commission and absorbed


production costs. Commission will be paid in bartered goods and cash in direct proportion to
1avvphi1

percentage of cash and bartered goods revenue for the year. This amount will be paid by
January 30, 2000 if the documents (contracts, P.O.s) to support the gross revenue claim are
in order and submitted to Finance.

Group Incentive for Sale and Traffic Team

MMPI Gross Advertising Revenue P35-38 M P8,500.00 each


P39-41 M P10,000.00 each
P41 M up P10,000.00 each

+ incentive trip abroad

Concerning the remand of the case to the NLRC for reception of additional evidence at the
instance of the respondent, we hold that the CA committed a reversible error. Although, as a
rule, the submission to the NLRC of additional evidence like documents and affidavits is not
prohibited, so that the NLRC may properly consider such evidence for the first time on
appeal, the circumstances of the case did not justify the application of the rule herein.
33

The additional evidence the respondent has sought to be admitted (i.e., Tabingos affidavit
executed on October 14, 2002) was already attached to the pleadings filed in the NLRC, and
was part of the records thereat. Its introduction was apparently aimed to rebut the petitioners
claim that its gross revenue was only P31,947,677.00 and did not reach the minimum P35
million necessary for the grant of the respondents outright commissions and the special
incentive bonus for the sales staff (inclusive of the respondent). Tabingos affidavit
corroborated her memorandum to the Accounting Department dated December 10, 1999
stating that MMPIs revenue for 1999 was P36,216,624.07. 34
1wphi1

Confronted with the conflicting claims on MMPIs gross revenue realized in 1999, the
question is which evidence must be given more weight?
The resolution of the question requires the re-examination and calibration of evidence. Such
35

re-examination and calibration, being of a factual nature, ordinarily lies beyond the purview
of the Courts authority in this appeal. Yet, because the documents are already before the
Court, we hereby treat the situation as an exception in order to resolve the question promptly
and finally instead of still remanding the case to the CA for the reevaluation and calibration.

We start by observing that the degree of proof required in labor cases is not as stringent as
in other types of cases. This liberal approach affords to the employee every opportunity to
36

level the playing field in which her employer is pitted against her. Here, on the one hand,
were Tabingos memorandum and affidavit indicating that MMPIs revenues in 1999
totaled P36,216,624.07, and, on the other, the audit report showing MMPIs gross revenues
amounting to only P31,947,677.00 in the same year. That the audit report was rendered by
the auditing firm of Punongbayan & Araullo did not make it weightier than Tabingos
memorandum and affidavit, for only substantial evidence that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion was required in
37

labor adjudication. Moreover, whenever the evidence presented by the employer and that by
the employee are in equipoise, the scales of justice must tilt in favor of the latter. For
38

purposes of determining whether or not the petitioners gross revenue reached the minimum
target of P35 million, therefore, Tabingos memorandum and affidavit sufficed to positively
establish that it did, particularly considering that Tabingos memorandum was made in the
course of the performance of her official tasks as a traffic clerk of MMPI. In her affidavit, too,
Tabingo asserted that her issuance of the memorandum was pursuant to MMPIs year-end
procedures, an assertion that the petitioners did not refute. In any event, Tabingos
categorical declaration in her affidavit that "[because] of that achievement, as part of the
Sales and Traffic Team of MMPI, in addition to my other bonuses that year, I
received P8,500.00 in gift certificates as my share in the Group Incentive for the Sales and
Traffic Team for gross advertising revenue of P35 to P38 million xxx," aside from the
39

petitioners not refuting it, was corroborated by the 1999 Advertising Target sent by the
respondent to Yap on December 2, 1999, in which the respondent reported a gross revenue
of P36,216,624.07 as of December 1, 1999. 40

Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright
commissions and to the special incentive bonus of P8,500.00 based on MMPI having
reached the minimum target of P35 million in gross revenues paid in "bartered goods and
cash in direct proportion to percentage of cash and bartered goods revenue for the year," as
provided in Yaps memorandum of December 8, 1999. 41

WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision
promulgated on November 19, 2003; ENTERS a new decision granting respondent Margaret
A. Defensors claim for outright commissions in the amount of P 181,083 .12 and special
incentive bonus of P8,500.00, or a total of 1!189,583.12; and DIRECTS petitioner Mega
Magazine Publications, Inc. to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO


Chief Justice
TERESITA J. LEONARDO-DE CASTRO JOSE PORTUGAL PEREZ*
Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

C E R TI F I C ATI O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO


Chief Justice

Footnotes

* Vice Associate Justice Martin S. Villarama, Jr., who penned the decision under
review, per the raffle of September 26, 2011.

1
Rollo, pp. 58-74; penned by Associate Justice Martin S. Villarama, Jr. (now a
Member of this Court), with the concurrence of Presiding Justice Cancio C. Garcia
(retired Member of this Court) and Associate Justice Mario L. Guaria, lll (retired).

2
Id. at 59.

3
Id. at 121-122.

4
Id.

5
Id.

6
Id. at 124-125.

7
Id. at 126-127.

8
Id. at 132.

9
Id. at 129.

10
Id. at 108.

11
Id.

12
Id. at 109,131.

13
Id. at 110-116.
14
Id. at 115.

15
Id. at 211-225.

16
Id. at 130.

17
Id. at 275.

18
Id. at 287-305.

19
Id. at 341-342.

20
Id. at 367-376.

21
Id. at 479-487.

22
Id. at 71.

23
Id. at 73.

24
Id. at 74.

25
Id. at 54-56.

26
Id. at 25.

27
Id. at 65.

28
Id. at 31.

See Protacio v. Laya Mananghaya & Co., G.R. No. 168654, March 25, 2009, 582
29

SCRA 417, 429.

Lepanto Ceramics, Inc. v. Lepanto Ceramics Employees Association, G.R. No.


30

180866, March 2, 2010, 614 SCRA 63, 71.

31
Id.

32
Rollo,p. 108; emphasis supplied.

Sasan, Sr. v. National Labor Relations Commission, 4th Division, G.R. No. 176240,
33

October 17, 2008, 569 SCRA 670, 686-687.

34
Rollo, pp. 343-347.

Reyes v. National Labor Relations Commission, G.R. No. 160233, August 8, 2007,
35

529 SCRA 487, 494.

36
House of Sara Lee v. Rey, G.R. No. 149013, August 31, 2006, 500 SCRA 419, 435.
Javier v. Fly Ace Corporation, G.R. No. 192558, February 15, 2012, 666 SCRA 382,
37

395.

Uy v. Centro Ceramica Corporation, G.R. No. 174631, October 19, 2011, 659
38

SCRA 604, 618;Mobile Protective & Detective Agency v. Ompad, G.R. No. 159195,
May 9, 2005, 458 SCRA 308, 323.

39
Rollo, p. 341.

40
Id. at 129.

41
Id. at 108.

Republic of the Philippines


Supreme Court
Manila

SECOND DIVISION

PRIMO E. CAONG, JR., G.R. No. 179428


ALEXANDER J. TRESQUIO, and
LORIANO D. DALUYON, Present:
Petitioners,
CARPIO, J.,
Chairperson,
NACHURA,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:
AVELINO REGUALOS,
Respondent. January 26, 2011

x------------------------------------------------------------------------------------x
DECISION

NACHURA, J.:
Is the policy of suspending drivers pending payment of arrears in their
boundary obligations reasonable? The Court of Appeals (CA) answered the
question in the affirmative in its Decision [1] dated December 14, 2006 and
Resolution dated July 16, 2007. In this petition for review on certiorari, we
take a second look at the issue and determine whether the situation at bar
merits the relaxation of the application of the said policy.

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio


(Tresquio), and Loriano D. Daluyon (Daluyon) were employed by
respondent Avelino Regualos under a boundary agreement, as drivers of
his jeepneys. In November 2001, they filed separate complaints[2] for illegal
dismissal against respondent who barred them from driving the vehicles due
to deficiencies in their boundary payments.

Caong was hired by respondent in September 1998 and became a


permanent driver sometime in 2000. In July 2001, he was assigned a brand-
new jeepney for a boundary fee of P550.00 per day. He was suspended on
October 9-15, 2001 for failure to remit the full amount of the boundary.
Consequently, he filed a complaint for illegal suspension. Upon expiration of
the suspension period, he was readmitted by respondent, but he was
reassigned to an older jeepney for a boundary fee of P500.00 per day. He
claimed that, on November 9, 2001, due to the scarcity of passengers, he was
only able to remit P400.00 to respondent. On November 11, 2001, he
returned to work after his rest day, but respondent barred him from driving
because of the deficiency in the boundary payment. He pleaded with
respondent but to no avail.[3]

Tresquio was employed by respondent as driver in August 1996. He


became a permanent driver in 1997. In 1998, he was assigned to drive a
new jeepney for a boundary fee of P500.00 per day. On November 6, 2001,
due to the scarcity of passengers, he was only able to remit P450.00. When
he returned to work on November 8, 2001 after his rest day, he was barred
by respondent because of the deficiency of P50.00. He pleaded with
respondent but the latter was adamant.[4]

On the other hand, Daluyon started working for respondent in March


1998. He became a permanent driver in July 1998. He was assigned to a
relatively new jeepney for a boundary fee of P500.00 per day. On November
7, 2001, due to the scarcity of passengers, he was only able to pay P470.00
to respondent. The following day, respondent barred him from driving
his jeepney. He pleaded but to no avail.[5]

During the mandatory conference, respondent manifested that


petitioners were not dismissed and that they could drive his jeepneys once
they paid their arrears. Petitioners, however, refused to do so.

Petitioners averred that they were illegally dismissed by respondent


without just cause. They maintained that respondent did not comply with
due process requirements before terminating their employment, as they were
not furnished notice apprising them of their infractions and another
informing them of their dismissal. Petitioners claimed that respondents offer
during the mandatory conference to reinstate them was an insincere
afterthought as shown by the warning given by respondent that, if they fail
to remit the full amount of the boundary yet again, they will be barred from
driving the jeepneys. Petitioners questioned respondents policy of
automatically dismissing the drivers who fail to remit the full amount of the
boundary as it allegedly (a) violates their right to due process; (b) does not
constitute a just cause for dismissal; (c) disregards the reality that there are
days when they could not raise the full amount of the boundary because of
the scarcity of passengers.

In his Position Paper, respondent alleged that petitioners were lessees


of his vehicles and not his employees; hence, the Labor Arbiter had no
jurisdiction. He claimed that he noticed that some of his lessees, including
petitioners, were not fully paying the daily rental of his jeepneys. In a list
which he attached to the Position Paper, it was shown that petitioners had
actually incurred arrears since they started working. The list showed that
Caongs total arrears amounted to P10,315.00, that of Tresquio
was P10,760.00, while that of Daluyon was P6,890.00. He made inquiries
and discovered that his lessees contracted loans with third parties and used
the income of the jeepneys in paying the loans. Thus, on November 4, 2001,
he gathered all the lessees in a meeting and informed them that, effective
November 5, 2001, those who would fail to fully pay the daily rental would
not be allowed to rent a jeepney on the following day. He explained to them
that the jeepneys were acquired on installment basis, and that he was paying
the monthly amortizations through the lease income. Most of the lessees
allegedly accepted the condition and paid their arrears. Petitioners, however,
did not settle their arrears. Worse, their remittances were again short of the
required boundary fee. Petitioner Daluyons rent payment was short
of P20.00 on November 5, 2001 and P80.00 on November 7, 2001. On
November 6, 2001, it was Tresquio who incurred an arrear of P100.00. On
November 7 and 9, 2001, petitioner Caong was in arrear of P50.00
and P100.00, respectively. Respondent stressed that, during the mandatory
conference, he manifested that he would renew his lease with petitioners if
they would pay the arrears they incurred during the said dates.[6]

On March 31, 2003, the Labor Arbiter decided the case in favor of
respondent, thus:

WHEREFORE, judgment is hereby rendered, DISMISSING the above-


entitled cases for lack of merit. However, respondent Regualos is directed
to accept back complainants Caong, Tresquio and Daluyon, as regular
drivers of his passenger jeepneys, after complainants have paid their
respective arrearages they have incurred in the remittance of their
respective boundary payments, in the amount of P150.00, P100.00
and P100.00. Complainants, if still interested to work as drivers, are
hereby ordered to report to respondent Regualos within fifteen (15) days
from the finality of this decision. Otherwise, failure to do so means
forfeiture of their respective employments.

Other claims of complainants are dismissed for lack of merit.


SO ORDERED.[7]
According to the Labor Arbiter, an employer-employee relationship existed
between respondent and petitioners. The latter were not dismissed
considering that they could go back to work once they have paid their
arrears. The Labor Arbiter opined that, as a disciplinary measure, it is proper
to impose a reasonable sanction on drivers who cannot pay their boundary
payments. He emphasized that respondent acquired the jeepneys on loan or
installment basis and relied on the boundary payments to comply with his
monthly amortizations.[8]

Petitioners appealed the decision to the National Labor Relations


Commission (NLRC). In its resolution[9] dated March 31, 2004, the NLRC
agreed with the Labor Arbiter and dismissed the appeal. It also denied
petitioners motion for reconsideration.[10]

Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision[11] dated December 14, 2006, the CA found no grave


abuse of discretion on the part of the NLRC. According to the CA, the
employer-employee relationship of the parties has not been severed, but
merely suspended when respondent refused to allow petitioners to drive
the jeepneys while there were unpaid boundary obligations. The CA pointed
out that the fact that it was within the power of petitioners to return to work
is proof that there was no termination of employment. The condition that
petitioners should first pay their arrears only for the period of November 5-9,
2001 before they can be readmitted to work is neither impossible nor
unreasonable if their total unpaid boundary obligations and the need to
sustain the financial viability of the employers enterprisewhich would
ultimately redound to the benefit of the employeesare taken into
consideration.[12]

The CA went on to rule that petitioners were not denied their right to due
process. It pointed out that the case does not involve a termination of
employment; hence, the strict application of the twin-notice rule is not
warranted. According to the CA, what is important is that petitioners were
given the opportunity to be heard. The meeting conducted by respondent on
November 4, 2001 served as sufficient notice to petitioners. During the said
meeting, respondent informed his employees, including petitioners, to
strictly comply with the policy regarding remittances and warned them that
they would not be allowed to take out the jeepneys if they did not remit the
full amount of the boundary.[13]
Dissatisfied, petitioners filed a motion for reconsideration, but the CA
denied the motion in its Resolution dated July 16, 2007.[14]

Petitioners are now before this Court resolutely arguing that they were
illegally dismissed by respondent, and that such dismissal was made in
violation of the due process requirements of the law.

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible


error, but grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of respondent. Mere abuse of discretion is not
enough. It must be shown that public respondent exercised its power in an
arbitrary or despotic manner by reason of passion or personal hostility, and
this must be so patent and so gross as to amount to an evasion of a positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.[15]

As correctly held by the CA, petitioners failed to establish that the


NLRC committed grave abuse of discretion in affirming the Labor Arbiters
ruling, which is supported by the facts on record.

It is already settled that the relationship


between jeepney owners/operators and jeepney drivers under the
boundary system is that of employer-employee and not of lessor-lessee. The
fact that the drivers do not receive fixed wages but only get the amount in
excess of the so-called boundary that they pay to the owner/operator is not
sufficient to negate the relationship between them as employer and
employee.[16]

The Labor Arbiter, the NLRC, and the CA uniformly declared that
petitioners were not dismissed from employment but merely suspended
pending payment of their arrears. Findings of fact of the CA, particularly
where they are in absolute agreement with those of the NLRC and the Labor
Arbiter, are accorded not only respect but even finality, and are deemed
binding upon this Court so long as they are supported by substantial
evidence.[17]

We have no reason to deviate from such findings. Indeed, petitioners


suspension cannot be categorized as dismissal, considering that there was no
intent on the part of respondent to sever the employer-employee relationship
between him and petitioners. In fact, it was made clear that petitioners could
put an end to the suspension if they only pay their recent arrears. As it was,
the suspension dragged on for years because of petitioners stubborn refusal
to pay. It would have been different if petitioners complied with the
condition and respondent still refused to readmit them to work. Then there
would have been a clear act of dismissal. But such was not the case. Instead
of paying, petitioners even filed a complaint for illegal dismissal against
respondent.

Respondents policy of suspending drivers who fail to remit the full


amount of the boundary was fair and reasonable under the circumstances.
Respondent explained that he noticed that his drivers were getting lax in
remitting their boundary payments and, in fact, herein petitioners had
already incurred a considerable amount of arrears. He had to put a stop to it
as he also relied on these boundary payments to raise the full amount of his
monthly amortizations on the jeepneys. Demonstrating their obstinacy,
petitioners, on the days immediately following the implementation of the
policy, incurred deficiencies in their boundary remittances.

It is acknowledged that an employer has free rein and enjoys a wide


latitude of discretion to regulate all aspects of employment, including the
prerogative to instill discipline on his employees and to impose penalties,
including dismissal, if warranted, upon erring employees. This is a
management prerogative. Indeed, the manner in which
management conducts its own affairs to achieve its purpose is within the
managements discretion. The only limitation on the exercise of management
prerogative is that the policies, rules, and regulations on work-related
activities of the employees must always be fair and reasonable, and the
corresponding penalties, when prescribed, commensurate to the offense
involved and to the degree of the infraction.[18]

Petitioners argue that the policy is unsound as it does not consider the
times when passengers are scarce and the drivers are not able to raise the
amount of the boundary.

Petitioners concern relates to the implementation of the policy, which


is another matter. A company policy must be implemented in such manner as
will accord social justice and compassion to the employee. In case of
noncompliance with the company policy, the employer must consider the
surrounding circumstances and the reasons why the employee failed to
comply. When the circumstances merit the relaxation of the application of
the policy, then its noncompliance must be excused.

In the present case, petitioners merely alleged that there were only few
passengers during the dates in question. Such excuse is not acceptable
without any proof or, at least, an explanation as to why passengers were
scarce at that time. It is simply a bare allegation, not worthy of belief. We
also find the excuse unbelievable considering that petitioners incurred the
shortages on separate days, and it appears that only petitioners failed to
remit the full boundary payment on said dates.

Under a boundary scheme, the driver remits the boundary, which is a


fixed amount, to the owner/operator and gets to earn the amount in excess
thereof. Thus, on a day when there are many passengers along the route, it is
the driver who actually benefits from it. It would be unfair then if, during the
times when passengers are scarce, the owner/operator will be made to suffer
by not getting the full amount of the boundary. Unless clearly shown or
explained by an event that irregularly and negatively affected the usual
number of passengers within the route, the scarcity of passengers should not
excuse the driver from paying the full amount of the boundary.

Finally, we sustain the CAs finding that petitioners were not denied
the right to due process. We thus quote with approval its discussion on this
matter:
Having established that the case at bench does not involve
termination of employment, We find that the strict, even rigid, application
of the twin-notice rule is not warranted.

But the due process safeguards are nonetheless still available to


petitioners.

Due process is not a matter of strict or rigid or formulaic process.


The essence of due process is simply the opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain ones side
or an opportunity to seek a reconsideration of the action or ruling
complained of. A formal or trial-type hearing is not at all times and in all
instances essential, as the due process requirements are satisfied where the
parties are afforded fair and reasonable opportunity to explain their side of
the controversy at hand. x x x.

xxxx

In the case at bench, private respondent, upon finding that


petitioners had consistently failed to remit the full amount of the boundary,
conducted a meeting on November 4, 2001 informing them to strictly
comply with the policy regarding their remittances and warned them to
discontinue driving if they still failed to remit the full amount of the
boundary.[19]

WHEREFORE, premises considered, the petition is DENIED. The


Court of Appeals Decision dated December 14, 2006 and Resolution dated
July 16, 2007 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA


Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD


Associate Justice Associate Justice

JOSE CATRAL MENDOZA


Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

C E R T I F I C AT I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice
[1]
Penned by Associate Justice Romulo V. Borja, with Associate Justices Sixto C. Marella, Jr. and Mario V.
Lopez, concurring; rollo, pp. 38-54.
[2]
Id. at 92-96.
[3]
Id. at 98-99.
[4]
Id. at 100.
[5]
Id. at 100-101.
[6]
Id. at 112-114.
[7]
Id. at 131.
[8]
Id. at 128-130.
[9]
Id. at 183.
[10]
Id. at 186.
[11]
Id. at 53.
[12]
Id. at 43-48.
[13]
Id. at 50-51.
[14]
Id. at 58.
[15]
Solvic Industrial Corporation v. NLRC, 357 Phil. 430, 438 (1998).
[16]
Martinez v. NLRC, 339 Phil. 176, 182 (1997), citing National Labor Union v. Dinglasan, 98 Phil. 649,
652-653 (1956).
[17]
San Miguel Corporation v. National Labor Relations Commission, G.R. Nos. 146121-22, April 16,
2008, 551 SCRA 410, 422.
[18]
St. Michaels Institute v. Santos, 422 Phil. 723, 732-733 (2001).
[19]
Rollo, pp. 50-51.

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