G.R. No.

187887 September 7, 2011

PAMELA FLORENTINA P. JUMUAD, Petitioner,

vs.
HI-FLYER FOOD, INC. and/or JESUS R. MONTEMAYOR, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari assailing the April 20, 2009 Decision1 of the Court of Appeals (CA) in CA-
G.R. SP No. 03346, which reversed the August 10, 2006 Decision2 and the November 29, 2007 Resolution3 of the
National Labor Relations Commission, 4th Division (NLRC), in NLRC Case No. V-000813-06. The NLRC Decision
and Resolution affirmed in toto the Decision4 of the Labor Arbiter Julie C. Ronduque (LA) in RAB Case No. VII-10-
2269-05 favoring the petitioner.

The Facts:

On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her employment with respondent Hi-
Flyer Food, Inc. (Hi-Flyer), as management trainee. Hi-Flyer is a corporation licensed to operate Kentucky Fried
Chicken (KFC) restaurants in the Philippines. Based on her performance through the years, Jumuad received
several promotions until she became the area manager for the entire Visayas-Mindanao 1 region, comprising the
provinces of Cebu, Bacolod, Iloilo and Bohol.5

Aside from being responsible in monitoring her subordinates, Jumuad was tasked to: 1) be highly visible in the
restaurants under her jurisdiction; 2) monitor and support day-to-day operations; and 3) ensure that all the facilities
and equipment at the restaurant were properly maintained and serviced.6 Among the branches under her
supervision were the KFC branches in Gaisano Mall, Cebu City (KFC-Gaisano); in Cocomall, Cebu City (KFC-
Cocomall); and in Island City Mall, Bohol (KFC-Bohol).

As area manager, Jumuad was allowed to avail of Hi-Flyers car loan program,7 wherein forty (40%) percent of the
total loanable amount would be subsidized by Hi-Flyer and the remaining sixty (60%) percent would be deducted
from her salary. It was also agreed that in the event that she would resign or would be terminated prior to the
payment in full of the said car loan, she could opt to surrender the car to Hi-Flyer or to pay the full balance of the
loan.8

In just her first year as Area Manager, Jumuad gained distinction and was awarded the 3rd top area manager
nationwide. She was rewarded with a trip to Singapore for her excellent performance.9

On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation audit at KFC-Gaisano. The audit,
denominated as CHAMPS Excellence Review (CER), revealed several sanitation violations, such as the presence
of rodents and the use of a defective chiller for the storage of food.10 When asked to explain, Jumuad first pointed
out that she had already taken steps to prevent the further infestation of the branch. As to why the branch became
infested with rodents, Jumuad faulted managements decision to terminate the services of the branchs pest control
program and to rely solely on the pest control program of the mall. As for the defective chiller, she explained that it
was under repair at the time of the CER.11 Soon thereafter, Hi-Flyer ordered the KFC-Gaisano branch closed.

Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol amid reports that certain employees
were covering up cash shortages. As a result, the following irregularities were discovered: 1) cash shortage
amounting to P 62,290.85; 2) delay in the deposits of cash sales by an average of three days; 3) the presence of
two sealed cash-for-deposit envelopes containing paper cut-outs instead of cash; 4) falsified entries in the deposit
logbook; 5) lapses in inventory control; and 6) material product spoilage.12 In her report regarding the incident,
Jumuad disclaimed any fault in the incident by pointing out that she was the one responsible for the discovery of this
irregularity.13

On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFC-Cocomall branch. Grout and leaks at the
branchs kitchen wall, dried up spills from the marinator, as well as a live rat under postmix, and signs of rodent
gnawing/infestation were found.14 This time, Jumuad explained to management that she had been busy conducting
management team meetings at the other KFC branches and that, at the date the CER was conducted, she had no
scheduled visit at the KFC-Cocomall branch.15

Seeking to hold Jumuad accountable for the irregularities uncovered in the branches under her supervision, Hi-Flyer
sent Jumuad an Irregularities Report16 and Notice of Charges17 which she received on September 5, 2005. On
September 7, 2005 Jumuad submitted her written explanation.18 On September 28, 2005, Hi-Flyer held an
administrative hearing where Jumuad appeared with counsel. Apparently not satisfied with her explanations, Hi-
Flyer served her a Notice of Dismissal19 dated October 14, 2005, effecting her termination on October 17, 2005.

This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R. Montemayor (Montemayor) for illegal
dismissal before the NLRC on October 17, 2005, praying for reinstatement and payment of separation pay, 13th
month pay, service incentive leave, moral and exemplary damages, and attorneys fees. Jumuad also sought the
reimbursement of the amount equivalent to her forty percent (40%) contribution to Hi-Flyers subsidized car loan
program.

While the LA found that Jumuad was not completely blameless for the anomalies discovered, she was of the view
that the employers prerogative to dismiss or layoff an employee "must be exercised without abuse of discretion"
and "should be tempered with compassion and understanding."20 Thus, the dismissal was too harsh considering the
circumstances. After finding that no serious cause for termination existed, the LA ruled that Jumuad was illegally
dismissed. The LA disposed:

WHEREFORE, VIEWED FROM THE FOREGOING PREMISES, judgment is hereby rendered declaring
complainants dismissal as ILLEGAL. Consequently, reinstatement not being feasible, respondents HI-FLYER
FOOD, INC. AND OR JESUS R. MONTEMAYOR are hereby ordered to pay, jointly and severally, complainant
PAMELA FLORENTINA P. JUMUAD, the total amount of THREE HUNDRED THIRTY-SIX THOUSAND FOUR
HUNDRED PESOS (P 336,400.00), Philippine currency, representing Separation Pay, within ten (10) days from
receipt hereof, through the Cashier of this Arbitration Branch.

Further, same respondents are ordered to reimburse complainant an amount equivalent to 40% of the value of her
car loaned pursuant to the car loan entitlement memorandum.

Other claims are DISMISSED for lack of merit.21

Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not awarding backwages and damages
despite its finding that she was illegally dismissed. Hi-Flyer and Montemayor, on the other hand, assailed the finding
that Jumuad was illegally dismissed and that they were solidarily liable therefor. They also questioned the orders of
the LA that they pay separation pay and reimburse the forty percent (40%) of the loan Jumuad paid pursuant to Hi-
Flyers car entitlement program.

Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the NLRC affirmed in toto the LA decision
dated August 10, 2006. In addition, the NLRC noted that even before the Irregularities Report and Notice of Charges
were given to Jumuad on September 5, 2005, two (2) electronic mails (e-mails) between Montemayor and officers of
Hi-Flyer showed that Hi-Flyer was already determined to terminate Jumuad. The first e-mail22 read:

From: Jess R. Montemayor

Sent: Tuesday, August 16, 2005 5:59 PM

To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma Ravela; Bernard Joseph A. Velasco

Cc: Odjie Belarmino; Jesse D. Cruz

Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality Violation

I agree if the sanctions are light we should change them. In the case of Pamela however, the fact that Cebu Colon
store had these violations is not the first time this incident has happened in her area. The Bohol case was also in her
area and maybe these two incidents is enough grounds already for her to be terminated or maybe asked to resign
instead of being terminated.

I know if any Ops person serves expired product this is ground for termination. I think serving off specs products
such as this lumpy gravy in the case of Coco Mall should be grounds for termination. How many customers have we
lost due to this lumpy clearly out of specs gravy? 20 customers maybe.

Jess.

The second e-mail,23 sent by one Bebe Chaves of Hi-Flyer to Montemayor and other officers of Hi-Flyer, reads:

From: bebe chaves

Sent: Sat 9/3/2005 3:45 AM

To: Maria Judith N. Marcelo

CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R. Montemayor

Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality Violation

Jojo,
Just an update of our meeting yesterday with Jennifer. After having reviewed the case and all existing documents,
we have decided that there is enough ground to terminate her services. IR/Jennifer are working hand in hand to
service due notice and close the case.

According to the NLRC, these e-mails were proof that Jumuad was denied due process considering that no matter
how she would refute the charges hurled against her, the decision of Hi-Flyer to terminate her would not change.24

Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40% of the value of the car loan, the
NLRC explained that Jumuad enjoyed this benefit during her period of employment as Area Manager and could
have still enjoyed the same if not for her illegal dismissal.25

Finally, the NLRC held that the active participation of Montemayor in the illegal dismissal of Jumuad justified his
solidary liability with Hi-Flyer.

Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their respective motions were denied
on November 29, 2007.26

Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the case before the CA in Cebu City.

On April 20, 2009, the CA rendered the subject decision reversing the decision of the labor tribunal. The appellate
court disposed:

WHEREFORE, in view of the foregoing, the Petition is GRANTED. The Decision of the National Labor Relations
Commission (4th Division) dated 28 September 2007 in NLRC Case No. V-000813-06 (RAB Case No. VII-10-2269-
05, as well as the Decision dated 10 August 2006 of the Honorable Labor Arbiter Julie C. Ronduque, and the 29
November 2006 Resolution of the NLRC denying petitioners Motion for Reconsideration dated 08 November 2007,
are hereby REVERSED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.27

Contrary to the findings of the LA and the NLRC, the CA was of the opinion that the requirements of substantive and
procedural due process were complied with affording Jumuad an opportunity to be heard first, when she submitted
her written explanation and then, when she was informed of the decision and the basis of her termination.28 As for
the e-mail exchanges between Montemayor and the officers of Hi-Flyer, the CA opined that they did not equate to a
predetermination of Jumuads termination. It was of the view that the e-mail exchanges were mere discussions
between Montemayor and other officers of Hi-Flyer on whether grounds for disciplinary action or termination existed.
To the mind of the CA, the e-mails just showed that Hi-Flyer extensively deliberated the nature and cause of the
charges against Jumuad.29

On the issue of loss of trust and confidence, the CA considered the deplorable sanitary conditions and the cash
shortages uncovered at three of the seven KFC branches supervised by Jumuad as enough bases for Hi-Flyer to
lose its trust and confidence in her.30

With regard to the reimbursement of the 40% of the car loan as awarded by the labor tribunal, the CA opined that
the terms of the car loan program did not provide for reimbursement in case an employee was terminated for just
cause and they, in fact, required that the employee should stay with the company for at least three (3) years from
the date of the loan to obtain the full 40% subsidy. The CA further stated that the rights and obligations of the parties
should be litigated in a separate civil action before the regular courts.31

The CA also exculpated Montemayor from any liability since it considered Jumuads dismissal with a just cause and
it found no evidence that he acted with malice and bad faith.32

Hence, this petition on the following

GROUNDS:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLD[ING] AS VALID THE TERMINATION
OF PETITIONERS SERVICES BY RESPONDENTS.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU CITY WHICH AFFIRMED THE
DECISION OF LABOR ARBITER JULUE RENDOQUE.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU CITY WHEN IT RULED THAT
PETITIONER IS NOT ENTITLED TO REIMBURSEMENT OF FORTY PERCENT (40%) OF THE CAR VALUE
BENEFITS.

It is a hornbook rule that factual findings of administrative or quasi-judicial bodies, which are deemed to have
acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even
finality, and bind the Court when supported by substantial evidence.33 While this rule is strictly adhered to in labor
cases, the same rule, however, admits exceptions. These include: (1) when there is grave abuse of discretion; (2)
when the findings are grounded on speculation; (3) when the inference made is manifestly mistaken; (4) when the
judgment of the Court of Appeals is based on a misapprehension of facts; (5) when the factual findings are
conflicting; (6) when the Court of Appeals went beyond the issues of the case and its findings are contrary to the
admissions of the parties; (7) when the Court of Appeals overlooked undisputed facts which, if properly considered,
would justify a different conclusion; (8) when the facts set forth by the petitioner are not disputed by the respondent;
and (9) when the findings of the Court of Appeals are premised on the absence of evidence and are contradicted by
the evidence on record.34

In the case at bench, the factual findings of the CA differ from that of the LA and the NLRC. This divergence of
positions between the CA and the labor tribunal below constrains the Court to review and evaluate assiduously the
evidence on record.

The petition is without merit.

On whether Jumuad was illegally dismissed, Article 282 of the Labor Code provides:

Art. 282. Termination by Employer. An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

Jumuad was terminated for neglect of duty and breach of trust and confidence. Gross negligence connotes want or
absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Fraud and willful neglect of duties imply bad
faith of the employee in failing to perform his job, to the detriment of the employer and the latters business. Habitual
neglect, on the other hand, implies repeated failure to perform one's duties for a period of time, depending upon the
circumstances. It has been said that a single or an isolated act of negligence cannot constitute as a just cause for
the dismissal of an employee.35 To be a ground for removal, the neglect of duty must be both gross and habitual.36

On the other hand, breach of trust and confidence, as a just cause for termination of employment, is premised on
the fact that the employee concerned holds a position of trust and confidence, where greater trust is placed by
management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the
essence of the offense for which an employee is penalized.37

It should be noted, however, that the finding of guilt or innocence in a charge of gross and habitual neglect of duty
does not preclude the finding of guilty or innocence in a charge of breach of trust and confidence. Each of the
charges must be treated separately, as the law itself has treated them separately. To repeat, to warrant removal
from service for gross and habitual neglect of duty, it must be shown that the negligence should not merely be
gross, but also habitual. In breach of trust and confidence, so long as it is shown there is some basis for
management to lose its trust and confidence and that the dismissal was not used as an occasion for abuse, as a
subterfuge for causes which are illegal, improper, and unjustified and is genuine, that is, not a mere afterthought
intended to justify an earlier action taken in bad faith, the free will of management to conduct its own business affairs
to achieve its purpose cannot be denied.

After an assiduous review of the facts as contained in the records, the Court is convinced that Jumuad cannot be
dismissed on the ground of gross and habitual neglect of duty. The Court notes the apparent neglect of Jumuad of
her duty in ensuring that her subordinates were properly monitored and that she had dutifully done all that was
expected of her to ensure the safety of the consuming public who continue to patronize the KFC branches under her
jursidiction. Had Jumuad discharged her duties to be highly visible in the restaurants under her jurisdiction, monitor
and support the day to day operations of the branches and ensure that all the facilities and equipment at the
restaurant were properly maintained and serviced, the deplorable conditions and irregularities at the various KFC
branches under her jurisdiction would have been prevented.
Considering, however, that over a year had lapsed between the incidences at KFC-Gaisano and KFC-Bohol, and
that the nature of the anomalies uncovered were each of a different nature, the Court finds that her acts or lack of
action in the performance of her duties is not born of habit. 1avv phi 1

Despite saying this, it cannot be denied that Jumuad willfully breached her duties as to be unworthy of the trust and
confidence of Hi-Flyer. First, there is no denying that Jumuad was a managerial employee. As correctly noted by the
appellate court, Jumuad executed management policies and had the power to discipline the employees of KFC
branches in her area. She recommended actions on employees to the head office. Pertinent is Article 212 (m) of the
Labor Code defining a managerial employee as one who is vested with powers or prerogatives to lay down and
execute management policies and/or hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees.

Based on established facts, the mere existence of the grounds for the loss of trust and confidence justifies
petitioners dismissal. Pursuant to the Courts ruling in Lima Land, Inc. v. Cuevas,38 as long as there is some basis
for such loss of confidence, such as when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of his participation therein renders him
unworthy of the trust and confidence demanded of his position, a managerial employee may be dismissed.

In the present case, the CERs reports of Hi-Flyer show that there were anomalies committed in the branches
managed by Jumuad. On the principle of respondeat superior or command responsibility alone, Jumuad may be
held liable for negligence in the performance of her managerial duties. She may not have been directly involved in
causing the cash shortages in KFC-Bohol, but her involvement in not performing her duty monitoring and supporting
the day to day operations of the branches and ensure that all the facilities and equipment at the restaurant were
properly maintained and serviced, could have truly prevented the whole debacle from ever occurring.

Moreover, it is observed that rather than taking proactive steps to prevent the anomalies at her branches, Jumuad
merely effected remedial measures. In the restaurant business where the health and well-being of the consuming
public is at stake, this does not suffice. Thus, there is reasonable basis for Hi-Flyer to withdraw its trust in her and
dismissing her from its service.

The disquisition of the appellate court on the matter is also worth mentioning:

In this case, there is ample evidence that private respondent indeed committed acts justifying loss of trust and
confidence of Hi-Flyer, and eventually, which resulted to her dismissal from service. Private respondents
mismanagement and negligence in supervising the effective operation of KFC branches in the span of less than a
year, resulting in the closure of KFC-Gaisano due to deplorable sanitary conditions, cash shortages in KFC-Bohol, in
which the said branch, at the time of discovery, was only several months into operation, and the poor sanitation at
KFC-Cocomall. The glaring fact that three (3) out of the seven (7) branches under her area were neglected cannot
be glossed over by private respondents explanation that there was no negligence on her part as the sanitation
problem was structural, that she had been usually busy conducting management team meetings in several branches
of KFC in her area or that she had no participation whatsoever in the alleged cash shortages.

xxx

It bears stressing that both the Labor Arbiter and the NLRC found that private respondent was indeed lax in her
duties. Thus, said the NLRC: "xxx [i]t is Our considered view that xxx complainant cannot totally claim that she was
not remiss in her duties xxx.39

As the employer, Hi-Flyer has the right to regulate, according to its discretion and best judgment, all aspects of
employment, including work assignment, working methods, processes to be followed, working regulations, transfer
of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Management
has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations.40 1wphi 1

So long as they are exercised in good faith for the advancement of the employers interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws or under valid agreements, the
employers exercise of its management prerogative must be upheld.41

In this case, Hi-Flyer exercised in good faith its management prerogative as there is no dispute that it has lost trust
and confidence in her and her managerial abilities, to its damage and prejudice. Her dismissal, was therefore,
justified.

As for Jumuads claim for the reimbursement of the 40% of the value of the car loan subsidized by Hi-Flyer under its
car loan policy, the same must also be denied. The rights and obligations of the parties to a car loan agreement is
not a proper issue in a labor dispute but in a civil one.42 It involves the relationship of debtor and creditor rather than
employee-employer relations.43 Jurisdiction, therefore, lies with the regular courts in a separate civil action.44

The law imposes many obligations on the employer such as providing just compensation to workers, observance of
the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct and loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to its interests.45

WHEREFORE, the petition is DENIED.

SO ORDERED.
G.R. No. 182397 September 14, 2011

ALERT SECURITY AND INVESTIGATION AGENCY, INC. AND/OR MANUEL D. DASIG, Petitioners,
vs.
SAIDALI PASAWILAN, WILFREDO VERCELES AND MELCHOR BULUSAN, Respondents.

DECISION

VILLARAMA, JR., J.:

This petition for review on certiorari assails the Decision1 dated February 1, 2008 of the Court of Appeals (CA) in
CA-G.R. SP No. 99861. The appellate court reversed and set aside the January 31, 2007 Decision2 and March 15,
2007 Resolution3 of the National Labor Relations Commission (NLRC) and reinstated the Labor Arbiters
Decision4finding petitioners guilty of illegal dismissal.

The facts follow.

Respondents Saidali Pasawilan, Wilfredo Verceles and Melchor Bulusan were all employed by petitioner Alert
Security and Investigation Agency, Inc. (Alert Security) as security guards beginning March 31, 1996, January 14,
1997, and January 24, 1997, respectively. They were paid 165.00 pesos a day as regular employees, and assigned
at the Department of Science and Technology (DOST) pursuant to a security service contract between the DOST
and Alert Security.

Respondents aver that because they were underpaid, they filed a complaint for money claims against Alert Security
and its president and general manager, petitioner Manuel D. Dasig, before Labor Arbiter Ariel C. Santos. As a result
of their complaint, they were relieved from their posts in the DOST and were not given new assignments despite the
lapse of six months. On January 26, 1999, they filed a joint complaint for illegal dismissal against petitioners.

Petitioners, on the other hand, deny that they dismissed the respondents. They claimed that from the DOST,
respondents were merely detailed at the Metro Rail Transit, Inc. at the Light Rail Transit Authority (LRTA)
Compound in Aurora Blvd. because the wages therein were already adjusted to the latest minimum wage.
Petitioners presented "Duty Detail Orders"5 that Alert Security issued to show that respondents were in fact
assigned to LRTA. Respondents, however, failed to report at the LRTA and instead kept loitering at the DOST and
tried to convince other security guards to file complaints against Alert Security. Thus, on August 3, 1998, Alert
Security filed a "termination report"6 with the Department of Labor and Employment relative to the termination of the
respondents.

Upon motion of the respondents, the joint complaint for illegal dismissal was ordered consolidated with respondents
earlier complaint for money claims. The records of the illegal dismissal case were sent to Labor Arbiter Ariel C.
Santos, but later returned to the Office of the Labor Arbiter hearing the illegal dismissal complaint because a
Decision7 has already been rendered in the complaint for money claims on July 14, 1999. In that decision, the
complaint for money claims was dismissed for lack of merit but petitioners were ordered to pay respondents their
latest salary differentials.

On July 28, 2000, Labor Arbiter Melquiades Sol D. Del Rosario rendered a Decision8 on the complaint for illegal
dismissal. The Labor Arbiter ruled:

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding complainants to have been
illegally dismissed. Consequently, each complainant should be paid in solidum by the respondents the individual
awards computed in the body of the decision, which is hereto adopted as part of this disposition.

SO ORDERED.9

Aggrieved, petitioners appealed the decision to the NLRC claiming that the Labor Arbiter erred in deciding a re-filed
case when it was filed in violation of the prohibitions against litis pendencia and forum shopping. Further, petitioners
argued that complainants were not illegally dismissed but were only transferred. They claimed that it was the
respondents who refused to report for work in their new assignment.

On January 31, 2007, the NLRC rendered a Decision10 ruling that Labor Arbiter Del Rosario did not err in taking
cognizance of respondents complaint for illegal dismissal because the July 14, 1999 Decision of Labor Arbiter
Santos on the complaint for money claims did not at all pass upon the issue of illegal dismissal. The NLRC,
however, dismissed the complaint for illegal dismissal after ruling that the fact of dismissal or termination of
employment was not sufficiently established. According to the NLRC, "[the] sweeping generalization that the
complainants were constructively dismissed is not sufficient to establish the existence of illegal dismissal."11 The
dispositive portion of the NLRC decision reads:

WHEREFORE, premises considered, the respondents appeal is hereby given due course and the decision dated
July 28, 2000 is hereby REVERSED and SET-ASIDE and a new one entered DISMISSING the complaint for illegal
dismissal for lack of merit.
SO ORDERED.12

Unfazed, respondents filed a petition for certiorari with the CA questioning the NLRC decision and alleging grave
abuse of discretion.

On February 1, 2008, the CA rendered the assailed Decision13 reversing and setting aside the NLRC decision and
reinstating the July 28, 2000 Decision of Labor Arbiter Del Rosario. The CA ruled that Alert Security, as an
employer, failed to discharge its burden to show that the employees separation from employment was not motivated
by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. The
CA also found that respondents were never informed of the "Duty Detail Orders" transferring them to a new post,
thereby making the alleged transfer ineffective. The dispositive portion of the CA decision states:

WHEREFORE, premises considered, the January 31, 2007 decision of the NLRC is hereby REVERSED and SET
ASIDE and the July 28, 2000 decision of the Labor Arbiter is hereby REVIVED.

SO ORDERED.14

Petitioners filed a motion for reconsideration, but the motion was denied in a Resolution15 dated March 31, 2008.

Petitioners are now before this Court to seek relief by way of a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended.

Petitioners argue that the CA erred when it held that the NLRC committed grave abuse of discretion. According to
petitioners, the NLRC was correct when it ruled that there was no sufficient basis to rule that respondents were
terminated from their employment while there was proof that they were merely transferred from DOST to LRTA as
shown in the "Duty Detail Orders". Verily, petitioners claim that there was no termination at all; instead, respondents
abandoned their employment by refusing to report for duty at the LRTA Compound.

Further, petitioners argue that the CA erred when it reinstated the July 28, 2000 Decision of Labor Arbiter Del
Rosario in its entirety. The dispositive portion of said decision ruled that respondents should be paid their monetary
awards in solidum by Alert Security and Manuel D. Dasig, its President and General Manager. They argue that Alert
Security is a duly organized domestic corporation which has a legal personality separate and distinct from its
members or owners. Hence, liability for whatever compensation or money claims owed to employees must be borne
solely by Alert Security and not by any of its individual stockholders or officers.

On the other hand, respondents claim that the NLRC committed a serious error in ruling that they failed to provide
factual substantiation of their claim of constructive dismissal. Respondents aver that their Complaint
Form16sufficiently constitutes the basis of their claim of illegal dismissal. Also, respondents aver that Alert Security
itself admitted that respondents were relieved from their posts as security guards in DOST, albeit raising the
defense that it was a mere transfer as shown by "Duty Detail Orders", which, however, were never received by
respondents, as observed by the Labor Arbiter.

Essentially, the issue for resolution is whether respondents were illegally dismissed.

We rule in the affirmative.

As a rule, employment cannot be terminated by an employer without any just or authorized cause. No less than
the 1987 Constitution in Section 3, Article 13 guarantees security of tenure for workers and because of this, an
employee may only be terminated for just17 or authorized18 causes that

must comply with the due process requirements mandated19 by law. Hence, employers are barred from arbitrarily
removing their workers whenever and however they want. The law sets the valid grounds for termination as well as
the proper procedure to take when terminating the services of an employee.

In De Guzman, Jr. v. Commission on Elections,20 the Court, speaking of the Constitutional guarantee of security of
tenure to all workers, ruled:

x x x It only means that an employee cannot be dismissed (or transferred) from the service for causes other than
those provided by law and after due process is accorded the employee. What it seeks to prevent is capricious
exercise of the power to dismiss. x x x (Emphasis supplied.)

Although we recognize the right of employers to shape their own work force, this management prerogative must not
curtail the basic right of employees to security of tenure. There must be a valid and lawful reason for terminating the
employment of a worker. Otherwise, it is illegal and would be dealt with by the courts accordingly.

As stated in Bascon v. Court of Appeals:21

x x x The employers power to dismiss must be tempered with the employees right to security of tenure. Time and
again we have said that the preservation of the lifeblood of the toiling laborer comes before concern for business
profits. Employers must be reminded to exercise the power to dismiss with great caution, for the State will not
hesitate to come to the succor of workers wrongly dismissed by capricious employers.

In the case at bar, respondents were relieved from their posts because they filed with the Labor Arbiter a complaint
against their employer for money claims due to underpayment of wages. This reason is unacceptable and illegal.
Nowhere in the law providing for the just and authorized causes of termination of employment is there any direct or
indirect reference to filing a legitimate complaint for money claims against the employer as a valid ground for
termination.

The Labor Code, as amended, enumerates several just and authorized causes for a valid termination of
employment. An employee asserting his right and asking for minimum wage is not among those causes. Dismissing
an employee on this ground amounts to retaliation by management for an employees legitimate grievance without
due process. Such stroke of retribution has no place in Philippine Labor Laws.

Petitioners aver that respondents were merely transferred to a new post wherein the wages are adjusted to the
current minimum wage standards. They maintain that the respondents voluntarily abandoned their jobs when they
failed to report for duty in the new location.

Assuming this is true, we still cannot hold that the respondents abandoned their posts. For abandonment of work to
fall under Article 282 (b) of the Labor Code, as amended, as gross and habitual neglect of duties there must be the
concurrence of two elements. First, there should be a failure of the employee to report for work without a valid or
justifiable reason, and second, there should be a showing that the employee intended to sever the employer-
employee relationship, the second element being the more determinative factor as manifested by overt acts.22

As regards the second element of intent to sever the employer-employee relationship, the CA correctly ruled that:

x x x the fact that petitioners filed a complaint for illegal dismissal is indicative of their intention to remain employed
with private respondent considering that one of their prayers in the complaint is for re-instatement. As declared by
the Supreme Court, a complaint for illegal dismissal is inconsistent with the charge of abandonment, because when
an employee takes steps to protect himself against a dismissal, this cannot, by logic, be said to be abandonment by
him of his right to be able to work.23

Further, according to Alert Security itself, respondents continued to report for work and loiter in the DOST after the
alleged transfer order was issued. Such circumstance makes it unlikely that respondents have clear intention of
leaving their respective jobs. In any case, there is no dispute that in cases of abandonment of work, notice shall be
served at the workers last known address.24 This petitioners failed to do.

On the element of the failure of the employee to report for work, we also cannot accept the allegations of petitioners
that respondents unjustifiably refused to report for duty in their new posts. A careful review of the records reveals
that there is no showing that respondents were notified of their new assignments. Granting that the "Duty Detail
Orders" were indeed issued, they served no purpose unless the intended recipients of the orders are informed of
such.

The employer cannot simply conclude that an employee is ipso facto notified of a transfer when there is no evidence
to indicate that the employee had knowledge of the transfer order. Hence, the failure of an employee to report for
work at the new location cannot be taken against him as an element of abandonment.

We acknowledge and recognize the right of an employer to transfer employees in the interest of the service. This
exercise is a management prerogative which is a lawful right of an employer. However, like all rights, there are
limitations to the right to transfer employees. As ruled in the case of Blue Dairy Corporation v. NLRC:25

x x x The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which
that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. x x x

In addition to these tests for a valid transfer, there should be proper and effective notice to the employee concerned.
It is the employers burden to show that the employee was duly notified of the transfer. Verily, an employer cannot
reasonably expect an employee to report for work in a new location without first informing said employee of the
transfer. Petitioners insistence on the sufficiency of mere issuance of the transfer order is indicative of bad faith on
their part.

Besides, according to petitioners, the reason for the transfer to LRTA of the respondents was that the wages in
LRTA were already adjusted to comply with the minimum wage rates. Now it is hard to believe that after being
ordered to transfer to LRTA where the wages are better, the respondents would still refuse the transfer. That would
mean that the respondents refused better wages and instead chose to remain in DOST, underpaid, and go through
the lengthy process of claiming and asking for minimum wage. This proposed scenario of petitioners simply does
not jibe with human logic and experience.

On the question of the propriety of holding petitioner Manuel D. Dasig, president and general manager of Alert
Security, solidarily liable with Alert Security for the payment of the money awards in favor of respondents, we find
petitioners arguments meritorious.

Basic is the rule that a corporation has a separate and distinct personality apart from its directors, officers, or
owners. In exceptional cases, courts find it proper to breach this corporate personality in order to make directors,
officers, or owners solidarily liable for the companies acts. Section 31, Paragraph 1 of the Corporation
Code26provides:

Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

xxxx

Jurisprudence has been consistent in defining the instances when the separate and distinct personality of a
corporation may be disregarded in order to hold the directors, officers, or owners of the corporation liable for
corporate debts. In McLeod v. National Labor Relations Commission,27 the Court ruled:

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith, or a
specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable
for corporate liabilities. x x x

Further, in Carag v. National Labor Relations Commission,28 the Court clarified the McLeod doctrine as regards
labor laws, to wit:

We have already ruled in McLeod v. NLRC29 and Spouses Santos v. NLRC30 that Article 212(e)31 of the Labor
Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. The 1awphi1

governing law on personal liability of directors for debts of the corporation is still Section 31 of the Corporation Code.
xxx

In the present case, there is no evidence to indicate that Manuel D. Dasig, as president and general manager of
Alert Security, is using the veil of corporate fiction to defeat public convenience, justify wrong, protect fraud, or
defend crime. Further, there is no showing that Alert Security has folded up its business or is reneging in its
obligations. In the final analysis, it is Alert Security that respondents are after and it is also Alert Security who should
take responsibility for their illegal dismissal.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. SP
No. 99861 and the Decision dated July 28, 2000 of the Labor Arbiter are MODIFIED. Petitioner Manuel D. Dasig is
held not solidarily liable with petitioner Alert Security and Investigation, Inc. for the payment of the monetary awards
in favor of respondents. Said Decision of the Court of Appeals in all other aspects is AFFIRMED.

With costs against the petitioners.

SO ORDERED.
G.R. No. 151309 October 15, 2008

BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIO,
VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C.
RIVERA, respondents.

DECISION

NACHURA, J.:

This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24, 2001 and Resolution dated
December 20, 2001, which affirmed the finding of the National Labor Relations Commission (NLRC) that the
petitioners' transfer to another workplace did not amount to a constructive dismissal and an unfair labor practice.

The pertinent factual antecedents are as follows:

Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is located in
Caloocan City. Petitioners Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are its regular
employees, occupying the positions of helper, shipment helper and factory workers, respectively, assigned to the
Production Department. They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining
representative of the rank-and-file employees.

Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for a compressed
workweek schedule to be implemented in the company effective May 20, 1996. The MOA was entered into pursuant
to Department of Labor and Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines on the
Implementation of Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday,
shall be considered as the regular working hours, and no overtime pay shall be due and payable to the employee for
work rendered during those hours. The MOA specifically stated that the employee waives the right to claim overtime
pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday considering that the compressed
workweek schedule is adopted in lieu of the regular workweek schedule which also consists of 46 hours. However,
should an employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to overtime
pay.

Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the
implementation of a compressed workweek in the company.3

In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement (CBA) but
failed to arrive at a new agreement.

Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the Department of
Agriculture reminding it that its production should be conducted in San Rafael, Bulacan, not in Caloocan City:

MR. WILFREDO C. RIVERA

President, Tryco Pharma Corporation
San Rafael, Bulacan

Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan

Dear Mr. Rivera:

This is to remind you that your License to Operate as Veterinary Drug and Product Manufacturer is
addressed at San Rafael, Bulacan, and so, therefore, your production should be done at the above
mentioned address only. Further, production of a drug includes propagation, processing, compounding,
finishing, filling, repacking, labeling, advertising, storage, distribution or sale of the veterinary drug product.
In no instance, therefore, should any of the above be done at your business office at 117 M. Ponce St.,
EDSA, Caloocan City.

Please be guided accordingly.

Thank you.

Very truly yours,

(sgd.)
 EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4

Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Aya-ay to report to the
company's plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on April 18,
1997.6 Subsequently, through a Memorandum7 dated May 9, 1997, Tryco also directed petitioners Egera, Lario and
Barte to report to the company's plant site in Bulacan.

BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor
practice. In protest, BMT declared a strike on May 26, 1997.

In August 1997, petitioners filed their separate complaints8 for illegal dismissal, underpayment of wages,
nonpayment of overtime pay and service incentive leave, and refusal to bargain against Tryco and its President,
Wilfredo C. Rivera. In their Position Paper,9 petitioners alleged that the company acted in bad faith during the CBA
negotiations because it sent representatives without authority to bind the company, and this was the reason why the
negotiations failed. They added that the management transferred petitioners Lario, Barte, Egera and Aya-ay from
Caloocan to San Rafael, Bulacan to paralyze the union. They prayed for the company to pay them their salaries
from May 26 to 31, 1997, service incentive leave, and overtime pay, and to implement Wage Order No. 4.

In their defense, respondents averred that the petitioners were not dismissed but they refused to comply with the
management's directive for them to report to the company's plant in San Rafael, Bulacan. They denied the
allegation that they negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President and Legal
Counsel as the company's representatives to the CBA negotiations. They claim that the failure to arrive at an
agreement was due to the stubbornness of the union panel.

Respondents further averred that, long before the start of the negotiations, the company had already been planning
to decongest the Caloocan office to comply with the government policy to shift the concentration of manufacturing
activities from the metropolis to the countryside. The decision to transfer the company's production activities to San
Rafael, Bulacan was precipitated by the letter-reminder of the Bureau of Animal Industry.

On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.10 The Labor Arbiter held that the
transfer of the petitioners would not paralyze or render the union ineffective for the following reasons: (1)
complainants are not members of the negotiating panel; and (2) the transfer was made pursuant to the directive of
the Department of Agriculture.

The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was justified because
the petitioners did not render work from May 26 to 31, 1997; overtime pay is not due because of the compressed
workweek agreement between the union and management; and service incentive leave pay cannot be claimed by
the complainants because they are already enjoying vacation leave with pay for at least five days. As for the claim of
noncompliance with Wage Order No. 4, the Labor Arbiter held that the issue should be left to the grievance
machinery or voluntary arbitrator.

On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case, thus:

PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and complainants'
appeal therefrom DISMISSED for lack of merit. Complainants Joselito Lario, Vivencio Barte, Saturnino
Egera and Simplicio Aya-ay are directed to report to work at respondents' San Rafael Plant, Bulacan but
without backwages. Respondents are directed to accept the complainants back to work.

SO ORDERED.11

On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack of merit.12

Left with no recourse, petitioners filed a petition for certiorari with the CA.

On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer order was a management
prerogative not amounting to a constructive dismissal or an unfair labor practice. The CA further sustained the
enforceability of the MOA, particularly the waiver of overtime pay in light of this Court's rulings upholding a waiver of
benefits in exchange of other valuable privileges. The dispositive portion of the said CA decision reads:

WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated February 27,
1998 and the Decision and Resolution of the NLRC promulgated on October 29, 1999 and December 22,
1999, respectively, in NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are AFFIRMED.

SO ORDERED.13

The CA denied the petitioners' motion for reconsideration on December 20, 2001.14
Dissatisfied, petitioners filed this petition for review raising the following issues:

-A-
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS
RULING OF THE LABOR ARBITER AND THE COMMISSION THAT THERE WAS NO DISMISSAL, MUCH
LESS ILLEGAL DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-B-
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE
RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE.
-C-
THE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE
ENTITLED TO THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND
ATTORNEY'S FEES.15

The petition has no merit.

We have no reason to deviate from the well-entrenched rule that findings of fact of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but
even finality, and bind us when supported by substantial evidence.16 This is particularly true when the findings of the
Labor Arbiter, the NLRC and the CA are in absolute agreement.17 In this case, the Labor Arbiter, the NLRC, and the
CA uniformly agreed that the petitioners were not constructively dismissed and that the transfer orders did not
amount to an unfair labor practice. But if only to disabuse the minds of the petitioners who have persistently pursued
this case on the mistaken belief that the labor tribunals and the appellate court committed grievous errors, this Court
will go over the issues raised in this petition.

Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain that the letter
of the Bureau of Animal Industry is not credible because it is not authenticated; it is only a ploy, solicited by
respondents to give them an excuse to effect a massive transfer of employees. They point out that the Caloocan
City office is still engaged in production activities until now and respondents even hired new employees to replace
them.

We do not agree.

We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry conspired with
the respondents just to effect the transfer of the petitioners. There is not an iota of proof to support this outlandish
claim. Absent any evidence, the allegation is not only highly irresponsible but is grossly unfair to the government
agency concerned. Even as this Court has given litigants and counsel a relatively wide latitude to present arguments
in support of their cause, we will not tolerate outright misrepresentation or baseless accusation. Let this be fair
warning to counsel for the petitioners.

Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it
was made pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control
and manage its enterprise effectively. While the law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot be denied.18

This prerogative extends to the management's right to regulate, according to its own discretion and judgment, all
aspects of employment, including the freedom to transfer and reassign employees according to the requirements of
its business.19 Management's prerogative of transferring and reassigning employees from one area of operation to
another in order to meet the requirements of the business is, therefore, generally not constitutive of constructive
dismissal.20 Thus, the consequent transfer of Tryco's personnel, assigned to the Production Department was well
within the scope of its management prerogative.

When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a
demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal.21 However, the employer has the burden of proving that the transfer of an
employee is for valid and legitimate grounds. The employer must show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits.22

Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of salaries,
benefits and other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that
it would cause them great inconvenience since they are all residents of Metro Manila and they would incur additional
expenses to travel daily from Manila to Bulacan.

The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of
constructive dismissal.23 Objection to a transfer that is grounded solely upon the personal inconvenience or hardship
that will be caused to the employee by reason of the transfer is not a valid reason to disobey an order of transfer.24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the employees therein was
unreasonable. However, the distance of the workplace to which the employees were being transferred can hardly
compare to that of the present case. In that case, the employees were being transferred from Basilan to Manila;
hence, the Court noted that the transfer would have entailed the separation of the employees from their families who
were residing in Basilan and accrual of additional expenses for living accommodations in Manila. In contrast, the
distance from Caloocan to San Rafael, Bulacan is not considerably great so as to compel petitioners to seek living
accommodations in the area and prevent them from commuting to Metro Manila daily to be with their families.

Petitioners, however, went further and argued that the transfer orders amounted to unfair labor practice because it
would paralyze and render the union ineffective.

To begin with, we cannot see how the mere transfer of its members can paralyze the union. The union was not
deprived of the membership of the petitioners whose work assignments were only transferred to another location.

More importantly, there was no showing or any indication that the transfer orders were motivated by an intention to
interfere with the petitioners' right to organize. Unfair labor practice refers to acts that violate the workers' right to
organize. With the exception of Article 248(f) of the Labor Code of the Philippines, the prohibited acts are related to
the workers' right to self-organization and to the observance of a CBA. Without that element, the acts, no matter
how unfair, are not unfair labor practices.26

Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary to law. The
MOA is enforceable and binding against the petitioners. Where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.27

D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive from
the adoption of a compressed workweek scheme, thus:

The compressed workweek scheme was originally conceived for establishments wishing to save on energy
costs, promote greater work efficiency and lower the rate of employee absenteeism, among others. Workers
favor the scheme considering that it would mean savings on the increasing cost of transportation fares for at
least one (1) day a week; savings on meal and snack expenses; longer weekends, or an additional 52 off-
days a year, that can be devoted to rest, leisure, family responsibilities, studies and other personal matters,
and that it will spare them for at least another day in a week from certain inconveniences that are the normal
incidents of employment, such as commuting to and from the workplace, travel time spent, exposure to dust
and motor vehicle fumes, dressing up for work, etc. Thus, under this scheme, the generally observed
workweek of six (6) days is shortened to five (5) days but prolonging the working hours from Monday to
Friday without the employer being obliged for pay overtime premium compensation for work performed in
excess of eight (8) hours on weekdays, in exchange for the benefits abovecited that will accrue to the
employees.

Moreover, the adoption of a compressed workweek scheme in the company will help temper any inconvenience that
will be caused the petitioners by their transfer to a farther workplace.

Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect the interest
of the employees in the implementation of a compressed workweek scheme:

1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which shall
not exceed their normal weekly hours of work prior to adoption of the compressed workweek arrangement;
2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe benefits
of the employees;
3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to the
adoption of the compressed workweek scheme, all such excess hours shall be considered overtime work
and shall be compensated in accordance with the provisions of the Labor Code or applicable Collective
Bargaining Agreement (CBA);
4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8) hours
a day may be devised by the parties to the agreement.
5. The effectivity and implementation of the new working time arrangement shall be by agreement of the
parties.

PESALA v. NLRC,28 cited by the petitioners, is not applicable to the present case. In that case, an employment
contract provided that the workday consists of 12 hours and the employee will be paid a fixed monthly salary rate
that was above the legal minimum wage. However, unlike the present MOA which specifically states that the
employee waives his right to claim overtime pay for work rendered beyond eight hours, the employment contract in
that case was silent on whether overtime pay was included in the payment of the fixed monthly salary. This
necessitated the interpretation by the Court as to whether the fixed monthly rate provided under the employment
contract included overtime pay. The Court noted that if the employee is paid only the minimum wage but with
overtime pay, the amount is still greater than the fixed monthly rate as provided in the employment contract. It,
therefore, held that overtime pay was not included in the agreed fixed monthly rate.
Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange of a
five-day workweek, there is no room for interpretation and its terms should be implemented as they are written.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and Resolution dated
December 20, 2001 are AFFIRMED.

SO ORDERED.
G.R. No. 163505 August 14, 2009

GUALBERTO AGUANZA, Petitioner,

vs.
ASIAN TERMINAL, INC., KEITH JAMES, RICHARD BARCLAY, and ATTY. RODOLFO CORVITE, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 assailing the Decision2 promulgated on 9 January 2004 of the Court of Appeals
(appellate court) as well as the Resolution3 promulgated on 5 May 2004 in CA-G.R. SP No. 74626. The appellate
court denied Gualberto Aguanzas (Aguanza) petition for certiorari and ruled that the National Labor Relations
Commission (NLRC) was correct when it held that the transfer of the base of Asian Terminal, Inc.s (ATI) Bismark IV
from Manila to Bataan was a valid exercise of management prerogative. Thus, Aguanza was no longer entitled to
receive out-of-port allowance and meal allowance for work done in Bataan.

The Facts

The appellate court narrated the facts as follows:

Petitioner Gualberto Aguanza was employed with respondent company Asian Terminal, Inc. from April 15, 1989 to
October 1997. He was initially employed as Derickman or Crane Operator and was assigned as such aboard
Bismark IV, a floating crane barge owned by Asian Terminals, Inc. based at the port of Manila.

As of October 1997, he was receiving the following salaries and benefits from [ATI]:

a. Basic salary - P8,303.30;

b. Meal allowance - P1,800 a month;

c. Fixed overtime pay of 16 hours when the barge is assigned outside Metro Manila;

d. P260.00 per day as out of port allowance when the barge is assigned outside Manila.

Sometime in September 1997, the Bismark IV, together with its crew, was temporarily assigned at the Mariveles
Grains Terminal in Mariveles, Bataan.

On October 20, 1997, respondent James Keith issued a memo to the crew of Bismark IV stating that the barge had
been permanently transferred to the Mariveles Grains terminal beginning October 1, 1997 and because of that, its
crew would no longer be entitled to out of port benefits of 16 hours overtime and P200 a day allowance.

[Aguanza], with four other members of the crew, stated that they did not object to the transfer of Bismark IV to
Mariveles, Bataan, but they objected to the reduction of their benefits.

When they objected to the reduction of their benefits, they were told by James Keith to report to the Manila office
only to be told to report back to Bataan. On both occasions, [Aguanza] was not given any work assignment.

After being shuttled between Manila and Bataan, [Aguanza] was constrained to write respondent Atty. Corvite for
clarification of his status, at the same time informing the latter of his willingness to work either in Manila or Bataan.

While he did not agree with private respondents terms and conditions, he was nonetheless willing to continue
working without prejudice to taking appropriate action to protect his rights.

Because of private respondents refusal to give him any work assignment and pay his salary, [Aguanza] filed a
complaint for illegal dismissal against respondents.

On the other hand, private respondents claim that:

[Aguanza] was employed by [ATI] on February 1, 1996 as a Derickman in Bismark IV, one of the floating crane
barges of [ATI] based in the port of Manila. In 1997, [ATI] started operation at the Mariveles Grains Terminals,
Mariveles, Bataan. Beginning October 1, 1997, Bismark IV including its crew was transferred to Mariveles. For their
transfer, [ATI] offered the crew the following:
"I am asking you to reply to me by the 31st October 1997 if you wish to be transferred to Mariveles under the
following salary conditions:

- regular 40-hour duty Monday to Friday

- overtime paid in excess of 8 hours/day

- overtime paid on Saturdays and Sundays

- no additional allowance

- no transportation"

By way of reply to the memorandum, [Aguanza] along with all the members of the crew of Bismark IV namely:
Rodrigo Cayabyab, Wilfredo Alamo, Eulogio Toling, Jonathan Pereno, Marcelito Vargas, Erwin Greyblas and
Christian Paul Almario (crew member Nestor Resuello did not sign the said letter) answered through an undated
letter, to wit:

"We used to receive the following whenever we are assigned out of town.

1) P200.00 a day allowance

2) P60.00 per day food allowance

3) 16 hours per day fixed overtime

We have been receiving this [sic] compensation and benefits whenever we are assigned to Bataan. x x x"

They asserted that they have no objection to their assignment in Mariveles, Bataan but on the former terms and
conditions.

Eventually, the other members of the crew of Bismark IV accepted the transfer and it was only [Aguanza] who
refused the transfer.

On November 12, 1997, [Aguanza] wrote the company asserting that he did not request his transfer "to Manila from
Mariveles." He stressed that he was willing to be assigned to Mariveles so long that there is no diminution of his
benefits while assigned to Mariveles, which meant, even if he was permanently based in Mariveles, Bataan, he
should be paid 24 hours a day 8 hours regular work and 16 hours overtime everyday plus P200.00 per day
allowance and P60.00 daily food allowance.

[Aguanza] insisted on reporting to work in Manila although his barge, Bismark IV, and its other crew were already
permanently based in Mariveles, Bataan. [Aguanza] was not allowed to time in in Manila because his work was in
Mariveles, Bataan.

In [Aguanza]s appointment paper, [Aguanza] agreed to the following conditions printed and which reads in part:

"That in the interest of the service, I hereby declare, agree and bind myself to work in such place of work as ATI
may assign or transfer me. I further agree to work during rest day, holidays, night time or other shifts or during
emergency."4

The Labor Arbiters Ruling

In his Decision dated 28 September 1998, the Labor Arbiter found that respondents illegally dismissed Aguanza.
Aguanza was willing to report back to work despite the lack of agreement on his demands but without prejudice to
his claims. The Labor Arbiter also construed ATIs offer of separation pay worth two months salary for every year of
service as indicative of ATIs desire to terminate Aguanzas services. ATI failed to justify its failure to allow Aguanza
to work because of Aguanzas continued insistence that he be paid his former salary and benefits. ATIs refusal to
pay the same amount to Aguanza violated the rule against diminution of benefits. Although ATI had the prerogative
to transfer employees, the prerogative could not be exercised if the result was demotion of rank or diminution of
salary, benefits and other prerogatives of the employee. The dispositive portion of the Labor Arbiters decision
reads:

WHEREFORE, premises considered, this office is convinced that complainant Aguanza was illegally dismissed by
respondents. Consequently, respondent is hereby ordered to immediately reinstate complainant to his former
position without loss of seniority rights and to pay him full backwages and benefits from the time he was dismissed
effective November 1997 until he is actually reinstated. Considering that it is clear from respondents letters that
their intention is to assign complainant to Mariveles, Bataan, he is entitled to all the salary and benefits due him if
assigned to said place.
Anent the claim of complainant for the cash conversion of his vacation and sick leave credits, respondents never
denied their liability for the same. Consequently, they are, likewise, also ordered to pay complainant the cash
equivalent of his unused vacation and sick leave credits.

Considering that the respondents are obviously in bad faith in effecting the dismissal as reflected in their ordering
him to report back for work but refusing to accept him back, complainant should be awarded moral and exemplary
damages in the amount of P50,000.00 and P100,000.00, respectively.

Further, respondents are ordered to pay complainant attorneys fees equivalent to ten (10%) percent of the total
amount awarded in favor of the complainant.

SO ORDERED.5

Respondents appealed from the Labor Arbiters judgment on 5 May 1999.

The Ruling of the NLRC

In its Decision promulgated on 11 February 2002, the NLRC dismissed Aguanzas complaint and set aside the
decision of the Labor Arbiter. The NLRC adopted the report and recommendation of Labor Arbiter Cristeta D.
Tamayo (Arbiter Tamayo). Arbiter Tamayo recommended that the appeal of respondents should be granted, and
found that Aguanzas insistence to be paid out-of-town benefits, despite the fact that the crane to which he was
assigned was already permanently based outside Metro Manila, was unreasonable.

The NLRC denied Aguanzas motion for reconsideration in an Order dated 23 September 2002.

The Decision of the Appellate Court

The appellate court affirmed the ruling of the NLRC and dismissed Aguanzas petition in a Decision promulgated on
9 January 2004. The appellate court stated that:

The fixed overtime of 16 hours, out-of-port allowance and meal allowance previously granted to [Aguanza] were
merely supplements or employment benefits given under a certain condition, i.e., if [Aguanza] will be temporarily
assigned out-of-port. It is not fixed and is contingent or dependent of [Aguanzas] out-of-port reassignment. Hence, it
is not made part of the wage or compensation.

This Court also finds utter bad faith on the part of [Aguanza]. [Aguanza] claims that he does not contest his
permanent reassignment to Mariveles, Bataan and yet he insisted on reporting to Manila. If petitioner had only been
sincere to his words, he would have reported to Mariveles, Bataan where his work is, and in compliance with the
employment contract with [ATI].

There was no illegal dismissal since it was [Aguanza] who refused to report to Mariveles, Bataan where he was
assigned.

[Aguanzas] other claims have no basis and, accordingly, should be denied.

WHEREFORE, premises considered, this petition is DENIED and ORDERED DISMISSED.

SO ORDERED.6

In a Resolution promulgated on 5 May 2004, the appellate court denied Aguanzas motion for reconsideration.

The Issues

In the present petition, Aguanza states that the appellate court committed the following errors:

1. It was grievous error for the Court of Appeals to uphold the decision of the NLRC in NLRC NCR CA No.
021014-99 notwithstanding the fact that respondents appeal to the NLRC was never perfected in view of the
insufficiency of the supersedeas bond posted by them.

2. There is no factual or legal basis for the respondent Court of Appeals to hold that respondents were
correct in not allowing petitioner to "time-in" in Manila.

3. The Court of Appeals likewise disregarded the evidence on record and applicable laws in declaring that
the petitioner is not entitled to the cash conversion of his vacation and sick leave credits as well as in
denying petitioners claims for moral and exemplary damages as well as attorneys fees.7

The Ruling of the Court

The petition has no merit. We see no reason to overturn the rulings of the NLRC and of the appellate court.

As a preliminary matter, we agree with the NLRC and the appellate court that the alleged defect in the perfection of
the appeal to the NLRC because of the insufficiency of the supersedeas bond is a defect in form which the NLRC
may waive.8

Transfer of Operations is a Valid Exercise of Management Prerogative

Aguanza asserts that his transfer constituted constructive dismissal, while ATI asserts that Aguanzas transfer was a
valid exercise of management prerogative. We agree with ATI.

ATIs transfer of Bismark IVs base from Manila to Bataan was, contrary to Aguanzas assertions, a valid exercise of
management prerogative. The transfer of employees has been traditionally among the acts identified as a
management prerogative subject only to limitations found in law, collective bargaining agreement, and general
principles of fair play and justice. Even as the law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot be denied.9

On the other hand, the transfer of an employee may constitute constructive dismissal "when continued employment
is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or
when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee."10

Aguanzas continued employment was not impossible, unreasonable or unlikely; neither was there a clear
discrimination against him. Among the employees assigned to Bismark IV, it was only Aguanza who did not report
for work in Bataan. Aguanzas assertion that he was not allowed to "time in" in Manila should be taken on its face:
Aguanza reported for work in Manila, where he wanted to work, and not in Bataan, where he was supposed to work.
There was no demotion in rank, as Aguanza would continue his work as Crane Operator. Furthermore, despite
Aguanzas assertions, there was no diminution in pay.

When Bismark IV was based in the port of Manila, Aguanza received basic salary, meal allowance, and fixed
overtime pay of 16 hours and per diem allowance when the barge was assigned outside of Manila. The last two
items were given to Aguanza upon the condition that Bismark IV was assigned outside of Manila. Aguanza was not
entitled to the fixed overtime pay and additional allowances when Bismark IV was in Manila. 1avv phi 1

When ATI transferred Bismark IVs operations to Bataan, ATI offered Aguanza similar terms: basic pay for 40 hours
of work from Monday to Friday, overtime pay for work done in excess of eight hours per day, overtime pay for work
done on Saturdays and Sundays, no additional allowance and no transportation for working in Bataan. The
circumstances of the case made no mention of the salary structure in case Bismark IV being assigned work outside
of Bataan; however, we surmise that it would not be any different from the salary structure applied for work done
out-of-port. We, thus, agree with the NLRC and the appellate court when they stated that the fixed overtime of 16
hours, out-of-port allowance and meal allowance previously granted to Aguanza were merely supplements or
employment benefits given on condition that Aguanzas assignment was out-of-port. The fixed overtime and
allowances were not part of Aguanzas basic salary. Aguanzas basic salary was not reduced; hence, there was no
violation of the rule against diminution of pay.11

Aguanza did not contest his transfer, but the reduction in his take-home pay. Aguanza even asserted, contrary to his
acts, that he bound himself to work in such place where ATI might assign or transfer him. ATI did not dismiss
Aguanza; rather, Aguanza refused to report to his proper workplace.

WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals promulgated on 9 January
2004 as well as the Resolution promulgated on 5 May 2004 in CA-G.R. SP No. 74626.

SO ORDERED.
G.R. No. 161615 January 30, 2009

ARNULFO O. ENDICO, Petitioner,

vs
QUANTUM FOODS DISTRIBUTION CENTER, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 23 December 2003 Decision2 of the Court of Appeals in CA-G.R. SP No. 69929.
The Court of Appeals reversed the 31 August 2001 Decision3 and the 28 November 2001 Resolution4 of the
National Labor Relations Commission (NLRC). The NLRC affirmed with modification the 17 January 2000
Decision5of the Labor Arbiter which held that Quantum Foods Distribution Center (Quantum Foods) constructively
dismissed Arnulfo O. Endico (Endico). The NLRC awarded Endico separation pay, backwages, moral and
exemplary damages, and other amounts totaling P559,021.65.6 The NLRC also affirmed the transfer of possession
and ownership of the service vehicle but ordered Endico to pay Quantum Foods 10% of its purchase price.

The Facts

On 2 January 1995, Quantum Foods hired Endico as Field Supervisor of Davao City. Quantum Foods provided
Endico with a service vehicle on the understanding that after five years of continuous service to the company and
upon payment of 10% of the vehicles book value, Quantum Foods would turn over possession and ownership of the
vehicle to Endico.

In June 1995, Endico was transferred to Cebu. On 2 January 1996, Endico was promoted as Area Manager of
Cebu. In 1997, in recognition of Endicos achievements and contributions to Quantum Foods, he was awarded
"Master Awards for Sales Excellence" as the most outstanding Area Manager and was also rewarded with an all-
expense paid trip to Thailand. In the same year, Endico was also given a plaque of recognition for the elite 100%
Achievers Award. In 1998, Endico was again rewarded with an all-expense paid trip to Hong Kong for his very good
performance that year.

In 1999, due to the economic slowdown and to save on operational costs, Quantum Foods streamlined its
operations through the reduction of the companys contractual merchandisers. Endicos merchandisers were
reduced from twelve to five.

In a fax message7 dated 11 June 1999, Edred Almero, National Sales Manager of Quantum Foods, instructed Pol H.
Acuros (Acuros), Regional Sales Manager and Endicos immediate supervisor, to immediately relieve Endico from
his position. Acuros was also instructed to handle the vacated position and to be responsible in the turn over of all
company properties issued to Endico including the service vehicle. Acuros was likewise ordered to advise Endico to
report to the head office on 14 June 1999. Endico complied with the order and proceeded to the head office in
Paraaque.

In the show cause memorandum8 dated 14 June 1999, Quantum Foods asked Endico to explain in writing, within 24
hours, why no administrative action should be taken against him because of "serious misconduct due to
mismanagement of sales area resulting to lost sales and goodwill with number one major account." The
memorandum stated that, from 1 May to 11 June 1999 at Shoemart Supermarket, Cebu (SM account), Endico
violated Rules 169 and 1710 of Quantum Foods general policies and procedure.

On the same day, Endico filed an application for leave of absence11 effective 17 June to 2 July 1999.

In his answer12 dated 16 June 1999, Endico denied that there was serious misconduct and mismanagement in his
area as far as the deployment of merchandisers was concerned. Endico said that he properly coordinated all his
actions with Acuros. Endico presented a letter13 dated 3 May 1999, where he informed Acuros and the head office
that the SM account wanted a merchandiser assigned to it for a whole day coverage and rejected the merchandiser
assigned to it with a half-day schedule. In another letter14 dated 7 May 1999, Endico gave the head office an update
on the status of the SM account. Endico added that Quantum Foods did not accord him due process because he
was immediately relieved without being given the opportunity to explain his side. On the same day, Endico also
withdrew his application for leave of absence.15

On 17 June 1999, Quantum Foods recalled Endicos application for leave of absence and required him to report to
the head office.16 Quantum Foods also issued a Personnel Action Request17 dated 11 June 1999, which provided for
Endicos transfer as Area Sales Manager of Cebu to Area Sales Manager of the head office effective 14 June 1999.
However, Endico failed to report for work. In telegrams dated 30 June18 and 6 July 1999,19 Quantum Foods
reiterated its directive for Endico to report to the head office.
Also on 17 June 1999, Endico, believing that Quantum Foods intended to ease him out of the company, filed a
complaint20 for constructive illegal dismissal. Endico also prayed for the payment of separation pay, backwages,
other monetary benefits, damages, attorneys fees and recovery of the service vehicle.

Ruling of the Labor Arbiter

On 17 January 2000, the Labor Arbiter rendered a decision in Endicos favor. The dispositive portion of the 17
January 2000 Decision provides:

WHEREFORE, premises considered, judgment is hereby rendered declaring as illegal the constructive dismissal of
complainant and ordering the respondent Quantum Foods, Inc. to pay him as follows:

1) Separation Pay Php 121,800.00

2) Backwages 176,136.00

3) Proportionate 13th month pay 13,038.00

4) Unused sick leave 42,120.00

5) Unused vacation leave 42,120.00

6) Performance bonus 10,150.00

7) Productivity bonus 22,837.50

8) Moral and exemplary damages 50,000.00

9) Attorneys fees (10%) 50,820.15

----------------

Total Php 559,021.6521

The respondent Quantum Foods, Inc. or its authorized representative is hereby ordered to transfer to complainant
the possession and ownership of one (1) motor vehicle, a Mitsubishi L-200 with plate no. TTC 934 in a running and
serviceable condition together with its accessories.

The other claims and the case against respondents Cesar Lota, Edred Almero and Rogelio de la Cruz are dismissed
for lack of merit.

SO ORDERED.22

The Labor Arbiter ruled that Quantum Foods constructively dismissed Endico because its actions made Endicos
continued employment impossible, unreasonable and unlikely. The Labor Arbiter said that Endico was the subject of
a "highhanded transfer of assignment" because Endico was given neither a copy of the order for his relief nor the
reason for his immediate relief. The Labor Arbiter added that Endico was relieved not because the head office
needed his services but as a form of disciplinary action for some baseless charges. According to the Labor Arbiter,
the loss of the SM account was due to the decision of Quantum Foods to reduce the number of merchandisers and
its inaction when Endico raised this concern.

Quantum Foods appealed to the NLRC.

Ruling of the National Labor Relations Commission

In its 31 August 2001 Decision, the NLRC affirmed the Labor Arbiters decision with modification that Endico pay
10% of the purchase price of the service vehicle. The dipositive portion of the 31 August 2001 Decision provides:

WHEREFORE, in view of the foregoing, the decision of the Labor Arbiter dated January 17, 2000 is hereby
AFFIRMED with a modification on the order to transfer the possession and ownership of the service vehicle,
Mitsubishi L-200 with plate no. TCC 934 to complainant, as such complainant is likewise directed to pay respondent
ten percent (10%) of the purchase price thereof.

SO ORDERED.23
The NLRC agreed with the Labor Arbiter that Quantum Foods constructively dismissed Endico. The NLRC said that
Endico was not just recalled but was immediately transferred to the head office, which was tantamount to dismissal.
The NLRC ruled that Quantum Foods failed to observe the twin requirements of notice and hearing. The NLRC
declared that Endico was immediately relieved from his functions and was given the opportunity to explain his side
only three days after the order for his relief was issued. The NLRC also ruled that the Labor Arbiter did not err in
awarding separation pay to Endico since reinstatement was no longer possible due to strained relations. With
respect to the award of unused vacation and sick leave credits, performance bonus, and productivity bonus, the
NLRC said that these should be granted because they had become company policy or practice which could not just
be withdrawn.

Quantum Foods filed a motion for reconsideration. In its 28 November 2001 Resolution,24 the NLRC denied the
motion.

Quantum Foods filed a petition for certiorari before the Court of Appeals.

Ruling of the Court of Appeals

In its 23 December 2003 Decision, the Court of Appeals ruled in favor of Quantum Foods. The dispositive portion of
the 23 December 2003 Decision provides:

WHEREFORE, the petition is GRANTED. The Decision of the NLRC dated August 31, 2002 as well as its
Resolution dated November 28, 2001 are hereby REVERSED AND SET ASIDE. The complaint for illegal dismissal
filed by private respondent is DISMISSED.

SO ORDERED.25

The Court of Appeals declared that the NLRC gravely abused its discretion when it ruled that Endico was
constructively dismissed. The Court of Appeals found nothing in the 11 June 1999 fax message and the show-cause
memorandum that supported the NLRCs conclusion that Endico was outrightly dismissed. The Court of Appeals
noted that Quantum Foods even approved Endicos application for leave of absence and, after Endico recalled his
leave application, ordered Endico to report to the head office for his new job assignment.

The Court of Appeals said that it is settled that the employer has the prerogative to transfer and reassign employees
for valid reasons and according to the requirements of its business, provided that there is no demotion in rank or
diminution of his salary, benefits and other privileges. The Court of Appeals declared that Quantum Foods acted in
good faith and was in the legitimate pursuit of its best interests when it transferred Endico from Cebu to the head
office. The Court of Appeals maintained that Endicos claim that the transfer would result in a diminution of his pay
or benefits was unsubstantiated. The Court of Appeals added that Quantum Foods had yet to decide on the
administrative case when Endico immediately filed the complaint for constructive dismissal. The Court of Appeals
concluded that Endico filed the complaint in anticipation of what he perceived to be the final outcome of the
administrative investigation.

Hence, this petition.

The Issues

Endico raises the following issues:

1. Whether he was constructively dismissed;

2. Whether he is entitled to separation pay, backwages, other monetary benefits, damages and attorneys
fees; and

3. Whether he is entitled to acquire the service vehicle.

The Ruling of the Court

The petition has no merit.

As a general rule, a petition for review on certiorari under Rule 45 of the Rules of Court is limited to questions of law.
However, this rule admits of exceptions, such as in this case where the findings of the Labor Arbiter and the NLRC
vary from the findings of the Court of Appeals.26

Endico maintains that he was constructively dismissed because he did not commit any offense that would justify his
relief. Endico adds that his transfer was intended to unreasonably inconvenience him and his family because of its
substantial effect on their finances and quality of family life, which would ultimately force him to quit.
On the other hand, Quantum Foods insists that Endico was not transferred but was only temporarily recalled to the
head office pending investigation. Quantum Foods argues that if it did transfer Endico, it was merely exercising a
management prerogative.

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with
an employers judgment in the conduct of its business.27 For this reason, the Court often declines to interfere in
legitimate business decisions of employers.28 The law must protect not only the welfare of employees, but also the
right of employers.29

In the pursuit of its legitimate business interests, especially during adverse business conditions, 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, bad faith, or effected as a form of punishment or demotion without sufficient cause.30 This privilege is
inherent in the right of employers to control and manage their enterprises effectively.31 The right of employees to
security of 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.32

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and
general principles of fair play and justice.33 The test for determining the validity of the transfer of employees was
explained in Blue Dairy Corporation v. NLRC34 as follows:

Like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should
not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution
of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the
employees transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because
continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank
and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his
continued employment.35

In this case, we find no reason to disturb the conclusion of the Court of Appeals that there was no constructive
dismissal. Reassignments made by management pending investigation of violations of company policies and
procedures allegedly committed by an employee fall within the ambit of management prerogative.36 The decision of
Quantum Foods to transfer Endico pending investigation was a valid exercise of management prerogative to
discipline its employees. The transfer, while incidental to the charges against Endico, was not meant as a penalty,
but rather as a preventive measure to avoid further loss of sales and the destruction of Quantum Foods image and
goodwill. It was not designed to be the culmination of the then on-going administrative investigation against Endico.

Neither was there any demotion in rank or any diminution of Endicos salary, privileges and other benefits. Endico
was being transferred to the head office as area sales manager, the same position Endico held in Cebu.37 There
was also no proof that the transfer involved a diminution of Endicos salary, privileges and other benefits.

On the alleged inconvenience on Endico and his family because of the transfer from Cebu to the head office in
Paraaque, we rule that the transfer is valid, there being no showing that there was bad faith on the part of Quantum
Foods.38 Moreover, we find that Quantum Foods, considering the declining sales and the loss of a major account in
Cebu, was acting in the legitimate pursuit of what it considered its best interest in deciding to transfer Endico to the
head office.

Since we have ruled that Quantum Foods did not constructively dismiss Endico, there is no need to discuss the
other issues raised by Endico.

WHEREFORE, we DENY the petition. We AFFIRM the 23 December 2003 Decision of the Court of Appeals in CA-
G.R. SP No. 69929.

SO ORDERED.
G.R. Nos. 158786 & 158789 October 19, 2007

TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), ED CUBELO, EDWIN ALARANA,
ALEX ALEJO, ERWIN ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO, DOMINADOR ARRIOLA, LESTER
ATUN, ROLANDO BALUYOT, RODERICK BAYANI, ABEL BERCES, BENNY BERING, MELCHOR BLANCO,
JERRY BOLOCON, ELMER BULAN, NELSON CABAHUG, JESSIE CABATAY, MARCELO CABEZAS, ROQUE
CANDELARIO, JR., LORENZO CARAQUEO, DENNIS CARINGAL, GIENELL CASABA, CHRISTOPHER
CATAPUSAN, RICO CATRAL, JULIUS COMETA, JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO
DAVID, JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS SANTOS, JOSELITO DE OCAMPO,
FRANK MANUEL DIA, ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR ESPADILLA, DENNIS
ESPELOA, JASON FAJILAGUTAN, JOHN FAJURA, MELENCIO FRANCO, DEXTER FULGAR, EDUARDO
GADO, ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA, RONALD GASPI, ANGELO GAVARRA,
REYNALDO GOJAR, EDGAR HILANGA, EUGENE JAY HONDRADA, ALEJANDRO IMPERIAL, FERDINAND
JAEN, JOEY JAVILLONAR, BASILIO LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY
LUCIDO, ROMMEL MACALINDONG, NIXON MADRAZO, ROGELIO MAGISTRADO, JR., PHILIP JOHN
MAGNAYE, ALLAN JOHN MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON, MANUEL
MANALO, JR., JONAMAR MANAOG, JOVITO MANECLANG, BAYANI MANGUIL, JR., CARLITO MARASIGAN,
ROMMEL MARIANO, BOBIT MENDOZA, ERICSON MONTERO, MARLAW MONTERO, EDWIN NICANOR,
RODERICK NIERVES, LOLITO NUNEZ, FELIMON ORTIZ, EDWIN PECAYO, ERWIN PENA, JOWALD
PENAMANTE, JORGE POLUTAN, EDDIE RAMOS, ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR.,
BERNARDO SALVADOR, BALDWIN SAN PABLO, JEFFREY SANGALANG, BERNABE SAQUILABON, ALEX
SIERRA, ROMUALDO SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN, JR., RODEL TOLENTINO,
ROMMEL TOLENTINO, GRANT ROBERT TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR
UMITEN, JR., APOLLO VIOLETA, SR., DOMINADOR ZAMORA, JR., ROMMEL ARCETA, ANTONIO
BORSIGUE, EMILIO COMPLETO, RANDY CONSIGNADO, BASILIO DELA CRUZ, ALEXANDER ESTEVA,
NIKKO FRANCO, RODEL GAMIT, ROBERTO GONZALES, PHILIP JALEA, JOEY LLANERA, GERONIMO
LOPEZ, RUEL MANEGO, EDWIN MANZANILLA, KENNETH NATIVIDAD, LARRY ORMILLA, CORNELIO
PLATON, PAUL ARTHUR SALES, ALEJANDRO SAMPANG, LAURO SULIT, ROLANDO TOMAS, JOSE
ROMMEL TRAZONA, MICHAEL TEDDY YANGYON, MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL
DIGMA, JOSELITO HUGO, and RICKY CHAVEZ, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (NLRC-2ND DIVISION), HON. COMMISSIONERS: VICTORINO
CALAYCAY, ANGELITA GACUTAN, and RAUL AQUINO, TOYOTA MOTOR PHILIPPINES CORPORATION,
TAKESHI FUKUDA, and DAVID GO, Respondents,

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 158798-99

TOYOTA MOTOR PHILIPPINES CORPORATION, Petitioner,

vs.
TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TMPCWA), Respondent.

DECISION

VELASCO, JR., J.:

The Case

In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor Philippines Corporation
Workers Association (Union) and its dismissed officers and members seek to set aside the February 27, 2003
Decision1 of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001
Decision2 and September 14, 2001 Resolution3 of the National Labor Relations Commission (NLRC), declaring
illegal the strikes staged by the Union and upholding the dismissal of the 227 Union officers and members.

On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines Corporation
(Toyota) prays for the recall of the award of severance compensation to the 227 dismissed employees, which was
granted under the June 20, 2003 CA Resolution4 in CA-G.R. SP Nos. 67100 and 67561.

In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4) interrelated cases,
they will be referred to as simply the Union and Toyota hereafter.

The Facts

The Union is a legitimate labor organization duly registered with the Department of Labor and Employment (DOLE)
and is the sole and exclusive bargaining agent of all Toyota rank and file employees.5

Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles and parts.6 It is a
Board of Investments (BOI) participant in the Car Development Program and the Commercial Vehicle Development
Program. It is likewise a BOI-preferred non-pioneer export trader of automotive parts and is under the "Special
Economic Zone Act of 1995." It is one of the largest motor vehicle manufacturers in the country employing around
1,400 workers for its plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets amount to PhP 5.525
billion, with net sales of PhP 14.646 billion and provisions for income tax of PhP 120.9 million.

On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file employees
with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No. NCR-OD-M-9902-
001. Med-Arbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE Secretary granted the
Unions prayer, and, through the June 25, 1999 Order, directed the immediate holding of the certification election.7

After Toyotas plea for reconsideration was denied, the certification election was conducted. Med-Arbiter Lameyras
May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all the Toyota rank and file
employees. Toyota challenged said Order via an appeal to the DOLE Secretary.8

In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but the latter
refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of strike on January 16,
2001 with the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyotas refusal to bargain. On February
5, 2001, the NCMB-NCR converted the notice of strike into a preventive mediation case on the ground that the issue
of whether or not the Union is the exclusive bargaining agent of all Toyota rank and file employees was still
unresolved by the DOLE Secretary.

In connection with Toyotas appeal, Toyota and the Union were required to attend a hearing on February 21, 2001
before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory
employees from the votes cast during the certification election. The February 21, 2001 hearing was cancelled and
reset to February 22, 2001. On February 21, 2001, 135 Union officers and members failed to render the required
overtime work, and instead marched to and staged a picket in front of the BLR office in Intramuros, Manila.9 The
Union, in a letter of the same date, also requested that its members be allowed to be absent on February 22, 2001
to attend the hearing and instead work on their next scheduled rest day. This request however was denied by
Toyota.

Despite denial of the Unions request, more than 200 employees staged mass actions on February 22 and 23, 2001
in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota. Due to the
deliberate absence of a considerable number of employees on February 22 to 23, 2001, Toyota experienced acute
lack of manpower in its manufacturing and production lines, and was unable to meet its production goals resulting in
huge losses of PhP 53,849,991.

Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring them to
explain within 24 hours why they should not be dismissed for their obstinate defiance of the companys directive to
render overtime work on February 21, 2001, for their failure to report for work on February 22 and 23, 2001, and for
their participation in the concerted actions which severely disrupted and paralyzed the plants operations.10 These
letters specifically cited Section D, paragraph 6 of the Companys Code of Conduct, to wit:

Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to [Toyotas] interest.

1st offense dismissal.11

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to participate in a
strike/picket and to abandon their posts, the pertinent portion of which reads, as follows:

YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And dating takot, kimi, at mahiyaing
manggagawa ay walang takot na nagmartsa at nagprotesta laban sa desperadong pagtatangkang baguhin ang
desisyon ng DOLE na pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa ang
lumahok.

xxxx

HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management ang CBA. Oo maari
tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn. Subalit may pagkakaiba ba ito sa unti-
unting pagpatay sa atin sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na lang ay
magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na lang ay marupok na ang
ating mga buto sa kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA, paano na? Hahayaan
ba nating ang kumpanya lang ang makinabang sa yamang likha ng higit sa isang dekadang pagpapagal natin?

HUWAG BIBITIW SA NASIMULANG TAGUMPAY!

PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG CBA!

HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA SA TOYOTA! 12 (Emphasis

supplied.)
On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-NS-02-061-01 for
union busting amounting to unfair labor practice.

On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the February 27, 2001
notices sent by Toyota to the erring employees. The Union members explained that their refusal to work on their
scheduled work time for two consecutive days was simply an exercise of their constitutional right to peaceably
assemble and to petition the government for redress of grievances. It further argued that the demonstrations staged
by the employees on February 22 and 23, 2001 could not be classified as an illegal strike or picket, and that Toyota
had already condoned the alleged acts when it accepted back the subject employees.13

Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees to clarify
whether or not they are adopting the March 1, 2001 Unions explanation as their own. The employees were also
required to attend an investigative interview,14 but they refused to do so.

On March 16, 2001, Toyota terminated the employment of 227 employees15 for participation in concerted actions in
violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code. The notice of termination
reads:

After a careful evaluation of the evidence on hand, and a thorough assessment of your explanation, TMP has
concluded that there are overwhelming reasons to terminate your services based on Article 282 of the Labor Code
and TMPs Code of Conduct.

Your repeated absences without permission on February 22 to 23, 2001 to participate in a concerted action against
TMP constitute abandonment of work and/or very serious misconduct under Article 282 of the Labor Code.

The degree of your offense is aggravated by the following circumstances:

1. You expressed to management that you will adopt the unions letter dated March 1, 2001, as your own
explanation to the charges contained in the Due Process Form dated February 27, 2001. It is evident from
such explanation that you did not come to work because you deliberately participated together with other
Team Members in a plan to engage in concerted actions detrimental to TMPs interest. As a result of your
participation in the widespread abandonment of work by Team Members from February 22 to 23, 2001, TMP
suffered substantial damage.

It is significant that the absences you incurred in order to attend the clarificatory hearing conducted by the
Bureau of Labor Relations were unnecessary because the union was amply represented in the said
hearings by its counsel and certain members who sought and were granted leave for the purpose. Your
reason for being absent is, therefore, not acceptable; and

2. Your participation in the organized work boycott by Team Members on February 22 and 23 led to work
disruptions that prevented the Company from meeting its production targets, resulting [in] foregone sales of
more than eighty (80) vehicles, mostly new-model Revos, valued at more than Fifty Million Pesos
(50,000,000.00).

The foregoing is also a violation of TMPs Code of Conduct (Section D, Paragraph 6) to wit:

"Inciting or participating in riots, disorders, illegal strikes or concerted actions detrimental to TMPs interest."

Based on the above, TMP Management is left with no other recourse but to terminate your employment
effective upon your receipt thereof.

[Sgd.]
JOSE MARIA ALIGADA

Deputy Division Manager16

In reaction to the dismissal of its union members and officers, the Union went on strike on March 17, 2001.
Subsequently, from March 28, 2001 to April 12, 2001, the Union intensified its strike by barricading the gates
of Toyotas Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for work from
entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated that:

3. On March 17, 2001, members of the Toyota Motor Philippines Corporation Workers Association
(TMPCWA), in response to the dismissal of some two hundred twenty seven (227) leaders and members of
TMPCWA and without observing the requirements mandated by the Labor Code, refused to report for work
and picketed TMPC premises from 8:00 a.m. to 5:00 p.m. The strikers badmouthed people coming in and
hurled invectives such as "bakeru" at Japanese officers of the company. The strikers likewise pounded the
officers vehicle as they tried to enter the premises of the company.
 4. On March 28, 2001, the strikers intensified their picketing and barricaded the gates of TMPCs Bicutan
and Sta. Rosa plants, thus, blocking the free ingress/egress to and from the premises. Shuttle buses and
cars containing TMPC employees, suppliers, dealers, customers and other people having business with the
company, were prevented by the strikers from entering the plants.

5. As a standard operating procedure, I instructed my men to take photographs and video footages of those
who participated in the strike. Seen on video footages taken on various dates actively participating in the
strike were union officers Emilio C. Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo.

6. Based on the pictures, among those identified to have participated in the March 28, 2001 strike were
Grant Robert Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto Bonavente,
Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito
Puno, Baldwin San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino,
Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy
Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon
Clemente, Dante Baclino, Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as
Annexes "1" to "18" are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants.

7. From March 29 to 31, 2001, the strikers continued to barricade the entrances to TMPCs two (2) plants.
Once again, the strikers hurled nasty remarks and prevented employees aboard shuttle buses from entering
the plants. Among the strikers were Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres,
Freddie Olit, Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie Oliveria,
Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar Espadilla, Domingo Javier,
Apollo Violeta and Elvis Tabinao.17

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary restraining
order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It sought free ingress to
and egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said petition, the NLRC, on April 5, 2001,
issued a TRO against the Union, ordering its leaders and members as well as its sympathizers to remove their
barricades and all forms of obstruction to ensure free ingress to and egress from the companys premises. In
addition, the NLRC rejected the Unions motion to dismiss based on lack of jurisdiction.18

Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which was docketed
as NLRC NCR (South) Case No. 30-04-01775-01, and prayed that the erring Union officers, directors, and members
be dismissed.19

On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an Order20 certifying
the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking workers to return to work at
their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to accept the returning employees under
the same terms and conditions obtaining prior to the strike or at its option, put them under payroll reinstatement. The
parties were also enjoined from committing acts that may worsen the situation. 1wphi1

The Union ended the strike on April 12, 2001. The union members and officers tried to return to work on April 16,
2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the DOLE Secretary.

In the meantime, the Union filed a motion for reconsideration of the DOLE Secretarys April 10, 2001 certification
Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution. Consequently, a
petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No. 64998.

In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary, docketed the
case as Certified Case No. 000203-01.

Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretarys certification Order,
several payroll-reinstated members of the Union staged a protest rally in front of Toyotas Bicutan Plant bearing
placards and streamers in defiance of the April 10, 2001 Order.

Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in front of the Bicutan
Plant. At the same time, some twenty-nine (29) payroll-reinstated employees picketed in front of the Santa Rosa
Plants main entrance, and were later joined by other Union members.

On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which was
docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the second notice of
strike to be subsumed in the April 10, 2001 certification Order.

In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their respective
position papers on June 8, 2001. The union, however, requested for abeyance of the proceedings considering that
there is a pending petition for certiorari with the CA assailing the validity of the DOLE Secretarys Assumption of
Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to submit
their respective position papers on or before June 2, 2001. The same Order also denied the Unions verbal motion
to defer hearing on the certified cases.

On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRCs June 19, 2001 Order, praying for the
deferment of the submission of position papers until its petition for certiorari is resolved by the CA.

On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again ordered the Union to
submit its position paper by July 19, 2001, with a warning that upon failure for it to do so, the case shall be
considered submitted for decision.

Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for certiorari in CA-G.R. SP No. 64998,
assailing the DOLE Secretarys April 10, 2001 Order.

Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper on July
19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position paper on the
scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for resolution based on the
evidence on record.

During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its position
paper. Later that day, the Union claimed it filed its position paper by registered mail.

Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the Union on February 21 to
23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads:

WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.

(2) Declared [sic] that the dismissal of the 227 who participated in the illegal strike on February 21-23, 2001
is legal.

(3) However, the Company is ordered to pay the 227 Union members, who participated in the illegal strike
severance compensation in an amount equivalent to one month salary for every year of service, as an
alternative relief to continued employment.

(4) Declared [sic] that the following Union officers and directors to have forfeited their employment status for
having led the illegal strikes on February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino Cruz,
Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo,
Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.21

SO ORDERED.22

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to comply with
the procedural requirements of a valid strike under Art. 263 of the Labor Code.

After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the Union again staged
strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of the Labor Code
which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the President or the DOLE
Secretary.

The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued the
assumption/certification Order, and ruled that the Union did not respect the DOLE Secretarys directive.

Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC denied in its September
14, 2001 Resolution.23 Consequently, both parties questioned the August 9, 2001 Decision24 and September 14,
2001 Resolution of the NLRC in separate petitions for certiorari filed with the CA, which were docketed as CA-G.R.
SP Nos. 67100 and 67561, respectively. The CA then consolidated the petitions.

In its February 27, 2003 Decision,25 the CA ruled that the Unions petition is defective in form for its failure to append
a proper verification and certificate of non-forum shopping, given that, out of the 227 petitioners, only 159 signed the
verification and certificate of non-forum shopping. Despite the flaw, the CA proceeded to resolve the petitions on the
merits and affirmed the assailed NLRC Decision and Resolution with a modification, however, of deleting the award
of severance compensation to the dismissed Union members.

In justifying the recall of the severance compensation, the CA

considered the participation in illegal strikes as serious misconduct. It defined serious misconduct as a transgression
of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. It cited Panay Electric Company, Inc. v. NLRC,26 where we revoked
the grant of separation benefits to employees who lawfully participated in an illegal strike based on Art. 264 of the
Labor Code, which states that "any union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have
lost his employment status."27

However, in its June 20, 2003 Resolution,28 the CA modified its February 27, 2003 Decision by reinstating
severance compensation to the dismissed employees based on social justice.

The Issues

Petitioner Union now comes to this Court and raises the following issues for our consideration:

I. Whether the mere participation of ordinary employees in an illegal strike is enough reason to warrant their
dismissal.

II. Whether the Union officers and members act of holding the protest rallies in front of the BLR office and
the Office of the Secretary of Labor and Employment on February 22 and 23, 2001 should be held as illegal
strikes. In relation hereto, whether the protests committed on May 23 and 28, 2001, should be held as illegal
strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order issued by the Secretary of
Labor and Employment.

III. Whether the dismissal of 227 Union officers and members constitutes unfair labor practice.

IV. Whether the CA erred in affirming the Decision of the NLRC which excluded the Unions Position Paper
which the Union filed by mail. In the same vein, whether the Unions right to due process was violated when
the NLRC excluded their Position Paper.

V. Whether the CA erred in dismissing the Unions Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:

I. Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially modifying its Decision
dated February 27, 2003, and awarding severance compensation to the dismissed Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and

(2) Whether separation pay should be awarded to the Union members who participated in the illegal strikes.

The Courts Ruling

The Union contends that the NLRC violated its right to due process when it disregarded its position paper in
deciding Toyotas petition to declare the strike illegal.

We rule otherwise.

It is entirely the Unions fault that its position paper was not considered by the NLRC. Records readily reveal that the
NLRC was even too generous in affording due process to the Union. It issued no less than three (3) orders for the
parties to submit its position papers, which the Union ignored until the last minute. No sufficient justification was
offered why the Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, it was
explained that a party cannot complain of deprivation of due process if he was afforded an opportunity to participate
in the proceedings but failed to do so. If he does not avail himself of the chance to be heard, then it is deemed
waived or forfeited without violating the constitutional guarantee.29 Thus, there was no violation of the Unions right
to due process on the part of the NLRC.

On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and posits that the
verification signed by 159 out of the 227 petitioners has already substantially complied with and satisfied the
requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court.

The Unions proposition is partly correct.

Sec. 4 of Rule 7 of the Rules of Court states:

Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true
and correct of his personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on "information and belief" or upon
"knowledge, information and belief," or lacks a proper verification, shall be treated as an unsigned pleading.

The verification requirement is significant, as it is intended to secure an assurance that the allegations in the
pleading are true and correct and not the product of the imagination or a matter of speculation.30 This requirement is
simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily
render it fatally defective. Indeed, verification is only a formal and not a jurisdictional requirement.31

In this case, the problem is not the absence but the adequacy of the Unions verification, since only 159 out of the
227 petitioners executed the verification. Undeniably, the petition meets the requirement on the verification with
respect to the 159 petitioners who executed the verification, attesting that they have sufficient knowledge of the truth
and correctness of the allegations of the petition. However, their signatures cannot be considered as verification of
the petition by the other 68 named petitioners unless the latter gave written authorization to the 159 petitioners to
sign the verification on their behalf. Thus, in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies
the formal requirements only with regard to the petitioner who signed the petition but not his co-petitioner who did
not sign nor authorize the other petitioner to sign it on his behalf.32 The proper ruling in this situation is to consider
the petition as compliant with the formal requirements with respect to the parties who signed it and, therefore, can
be given due course only with regard to them. The other petitioners who did not sign the verification and certificate
against forum shopping cannot be recognized as petitioners have no legal standing before the Court. The petition
should be dismissed outright with respect to the non-conforming petitioners.

In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling
in Loquiasand instead proceeded to decide the case on the merits.

The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants
constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:

(1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental
functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites
of a valid strike]; or

(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor
practice against non-union employees; or

(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-
strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or

(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued
by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or

(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration
clause.33

Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not within the
ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to peaceably
assemble and petition the government for redress of grievances. Mainly relying on the doctrine laid down in the case
of Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., Inc.,34 it argues that the
protest was not directed at Toyota but towards the Government (DOLE and BLR). It explains that the protest is not a
strike as contemplated in the Labor Code. The Union points out that in Philippine Blooming Mills Employees
Organization, the mass action staged in Malacaang to petition the Chief Executive against the abusive behavior of
some police officers was a proper exercise of the employees right to speak out and to peaceably gather and ask
government for redress of their grievances.

The Unions position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that of the
present case, the Union fails to realize one major difference: there was no labor dispute in Philippine Blooming Mills
Employees Organization. In the present case, there was an on-going labor dispute arising from Toyotas refusal to
recognize and negotiate with the Union, which was the subject of the notice of strike filed by the Union on January
16, 2001. Thus, the Unions reliance on Phililippine Blooming Mills Employees Organization is misplaced, as it
cannot be considered a precedent to the case at bar.

A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or
labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate
relation of the employer and the employee.35

In Bangalisan v. Court of Appeals, it was explained that "[t]he fact that the conventional term strike was not used by
the striking employees to describe their common course of action is inconsequential, since the substance of the
situation and not its appearance, will be deemed controlling."36 The term "strike" has been elucidated to encompass
not only concerted work stoppages, but also slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or
sabotage plant equipment and facilities, and similar activities.37

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the Union
officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right to assemble and
ask government for redress of their complaints, but are illegal strikes in breach of the Labor Code. The Unions
position is weakened by the lack of permit from the City of Manila to hold "rallies." Shrouded as demonstrations,
they were in reality temporary stoppages of work perpetrated through the concerted action of the employees who
deliberately failed to report for work on the convenient excuse that they will hold a rally at the BLR and DOLE offices
in Intramuros, Manila, on February 21 to 23, 2001. The purported reason for these protest actions was to safeguard
their rights against any abuse which the med-arbiter may commit against their cause. However, the Union failed to
advance convincing proof that the med-arbiter was biased against them. The acts of the med-arbiter in the
performance of his duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to
justify the February 2001 mass actions. What comes to the fore is that the decision not to work for two days was
designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and ultimate
goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining agent of the company.
This is not a legal and valid exercise of the right of assembly and to demand redress of grievance.

We sustain the CAs affirmance of the NLRCs finding that the protest rallies staged on February 21 to 23, 2001
were actually illegal strikes. The illegality of the Unions mass actions was succinctly elaborated by the labor
tribunal, thus:

We have stated in our questioned decision that such mass actions staged before the Bureau of Labor Relations on
February 21-23, 2001 by the union officers and members fall squarely within the definition of a strike (Article 212 (o),
Labor Code). These concerted actions resulted in the temporary stoppage of work causing the latter substantial
losses. Thus, without the requirements for a valid strike having been complied with, we were constrained to consider
the strike staged on such dates as illegal and all employees who participated in the concerted actions to have
consequently lost their employment status.

If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents without filing a notice
of strike, in effect we are giving license to all the unions in the country to paralyze the operations of their
companies/employers every time they wish to hold a demonstration in front of any government agency. While we
recognize the right of every person or a group to peaceably assemble and petition the government for redress of
grievances, the exercise of such right is governed by existing laws, rules and regulations.

Although the respondent union admittedly made earnest representations with the company to hold a mass protest
before the BLR, together with their officers and members, the denial of the request by the management should have
been heeded and ended their insistence to hold the planned mass demonstration. Verily, the violation of the
company rule cannot be dismissed as mere absences of two days as being suggested by the union [are but]
concerted actions detrimental to Petitioner Toyotas interest.38 (Emphasis supplied.)

It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without satisfying the prerequisites
for a valid strike under Art. 263 of the Labor Code. The Union failed to comply with the following requirements: (1) a
notice of strike filed with the DOLE 30 days before the intended date of strike, or 15 days in case of unfair labor
practice;39 (2) strike vote approved by a majority of the total union membership in the bargaining unit concerned
obtained by secret ballot in a meeting called for that purpose; and (3) notice given to the DOLE of the results of the
voting at least seven days before the intended strike. These requirements are mandatory and the failure of a union
to comply with them renders the strike illegal.40 The evident intention of the law in requiring the strike notice and the
strike-vote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy
objectives embodied in the law.41 As they failed to conform to the law, the strikes on February 21, 22, and 23, 2001
were illegal.

Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6 of Toyotas Code of
Conduct which prohibits "inciting or participating in riots, disorders, alleged strikes or concerted actions detrimental
to [Toyotas] interest." The penalty for the offense is dismissal. The Union and its members are bound by the
company rules, and the February 2001 mass actions and deliberate refusal to render regular and overtime work on
said days violated these rules. In sum, the February 2001 strikes and walk-outs were illegal as these were in
violation of specific requirements of the Labor Code and a company rule against illegal strikes or concerted actions.

With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the legal
requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of the Bicutan and
Sta. Rosa plants and blocked the free ingress to and egress from the company premises. Toyota employees,
customers, and other people having business with the company were intimidated and were refused entry to the
plants. As earlier explained, these strikes were illegal because unlawful means were employed. The acts of the
Union officers and members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably, the strikes
from March 28 to April 12, 2001 were illegal.

Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The Union asserts that the
rallies held on May 23 and 28, 2001 could not be considered strikes, as the participants were the dismissed
employees who were on payroll reinstatement. It concludes that there was no work stoppage.

This contention has no basis.

It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case for
compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of things as it was
before). The intended normalcy of operations is apparent from the fallo of the April 10, 2001 Order of then DOLE
Secretary Patricia A. Sto. Tomas, which reads:

WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at Toyota Motors
Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This Certification
covers the current labor cases filed in relation with the Toyota strike, particularly, the Petition for Injunction filed with
the National Labor Relations Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor
Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction Case No. 3401054-01;
Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Workers Association, et al., NLRC
NCR Case No. 3004-01775-01, and such other labor cases that the parties may file relating to the strike and its
effects while this Certification is in effect.

As provided under Article 2634(g) of the Labor Code, all striking workers are directed to return to work at their
regular shifts by April 16, 2001; the Company is in turn directed to accept them back to work under the same terms
and conditions obtaining prior to the work stoppage, subject to the option of the company to merely reinstate a
worker or workers in the payroll in light of the negative emotions that the strike has generated and the need to
prevent the further deterioration of the relationship between the company and its workers.

Further, the parties are hereby ordered to cease and desist from committing any act that might lead to the
worsening of an already deteriorated situation.42 (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain from engaging in any activity that might
exacerbate the tense labor situation in Toyota, which certainly includes concerted actions.

This was not heeded by the Union and the individual respondents who staged illegal concerted actions on May 23
and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should be undertaken by them to
aggravate the "already deteriorated situation."

While it may be conceded that there was no work disruption in the two Toyota plants, the fact still remains that the
Union and its members picketed and performed concerted actions in front of the Company premises. This is a
patent violation of the assumption of jurisdiction and certification Order of the DOLE Secretary, which ordered the
parties "to cease and desist from committing any act that might lead to the worsening of an already deteriorated
situation." While there are no work stoppages, the pickets and concerted actions outside the plants have a
demoralizing and even chilling effect on the workers inside the plants and can be considered as veiled threats of
possible trouble to the workers when they go out of the company premises after work and of impending disruption of
operations to company officials and even to customers in the days to come. The pictures presented by Toyota
undoubtedly show that the company officials and employees are being intimidated and threatened by the strikers. In
short, the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed by
the DOLE Secretarys Order. We do not find any compelling reason to reverse the NLRC findings that the pickets on
May 23 and 28, 2001 were unlawful strikes.

From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the March 17 to April 12,
2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes.

Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES

(a) x x x

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have
lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a replacement had been hired by the employer during
such lawful strike.

Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly
participates in the commission of illegal acts during a lawful strike.

It is clear that the responsibility of union officials is greater than that of the members. They are tasked with the duty
to lead and guide the membership in decision making on union activities in accordance with the law, government
rules and regulations, and established labor practices. The leaders are expected to recommend actions that are
arrived at with circumspection and contemplation, and always keep paramount the best interests of the members
and union within the bounds of law. If the implementation of an illegal strike is recommended, then they would
mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On the other hand, if the
strike is legal at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot
evade personal and individual liability for said acts.

The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the illegal strikes held
from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001. We uphold the
findings of fact of the NLRC on the involvement of said union officials in the unlawful concerted actions as affirmed
by the CA, thus:

As regards to the Union officers and directors, there is overwhelming justification to declare their termination from
service. Having instigated the Union members to stage and carry out all illegal strikes from February 21-23, 2001,
and May 23 and 28, 2001, the following Union officers are hereby terminated for cause pursuant to Article 264(a) of
the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma,
Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio
Borsigue, Bayani Manguil, Jr., and Mayo Mata.43

The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when affirmed by the
appellate court, are generally accorded great respect, even finality.44

Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in the absence of
clear showing that these were arbitrary and bereft of any rational basis.45 In the case at bench, the Union failed to
convince us that the NLRC findings that the Union officials instigated, led, and knowingly participated in the series of
illegal strikes are not reinforced by substantial evidence. Verily, said findings have to be maintained and upheld. We
reiterate, as a reminder to labor leaders, the rule that "[u]nion officers are duty bound to guide their members to
respect the law."46 Contrarily, if the "officers urge the members to violate the law and defy the duly constituted
authorities, their dismissal from the service is a just penalty or sanction for their unlawful acts."47

Members liability depends on participation in illegal acts

Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal act
"during a strike." While the provision is silent on whether the strike is legal or illegal, we find that the same is
irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be
terminated.48However, when union members merely participate in an illegal strike without committing any illegal act,
are they liable?

This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,49 where it was held that an ordinary
striking worker cannot be terminated for mere participation in an illegal strike. This was an affirmation of the rulings
in Bacus v. Ople50 and Progressive Workers Union v. Aguas,51 where it was held that though the strike is illegal, the
ordinary member who merely participates in the strike should not be meted loss of employment on the
considerations of compassion and good faith and in view of the security of tenure provisions under the Constitution.
In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), it was explained that a member is not
responsible for the unions illegal strike even if he voted for the holding of a strike which became illegal.52

Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a union
member in an illegal strike, starting with the "rule of vicarious liability," thus:

Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts of
individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the theory that
all the members are engaged in a general conspiracy, and the unlawful acts of the particular members are viewed
as necessary incidents of the conspiracy. It has been said that in the absence of statute providing otherwise, the
rule of vicarious liability applies.

Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious liability
concept. It expressly provided that:

No officer or member of any association or organization, and no association or organization participating or

interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual officers, members,
or agents, except upon proof of actual participation in, or actual authorization of, such acts or of ratifying of such
acts after actual knowledge thereof.

Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule.53

Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker
"knowingly participates in the commission of illegal acts during a strike" that he will be penalized with dismissal.

Now, what are considered "illegal acts" under Art. 264(a)?

No precise meaning was given to the phrase "illegal acts." It may encompass a number of acts that violate existing
labor or criminal laws, such as the following:

(1) Violation of Art. 264(e) of the Labor Code which provides that "[n]o person engaged in picketing shall
commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the
employers premises for lawful purposes, or obstruct public thoroughfares";

(2) Commission of crimes and other unlawful acts in carrying out the strike;54 and

(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection
with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.

As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws.

In the cases at bench, the individual respondents participated in several mass actions, viz:

(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;

(2) The strikes held on March 17 to April 12, 2001; and

(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants.

Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April 12, 2001,
and on May 23 and 28, 2001?

The answer is in the affirmative.

As we have ruled that the strikes by the Union on the three different occasions were illegal, we now proceed to
determine the individual liabilities of the affected union members for acts committed during these forbidden
concerted actions.

Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on the liability of the
union members:

Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: "[x x x] any worker [x x x]
who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his
employment status. [x x x]" It can be gleaned unerringly from the aforecited provision of law in point, however, that
an ordinary striking employee can not be terminated for mere participation in an illegal strike. There must be proof
that he committed illegal acts during the strike and the striker who participated in the commission of illegal
act[s] must be identified. But proof beyond reasonable doubt is not required. Substantial evidence available
under the circumstances, which may justify the imposition of the penalty of dismissal, may suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled "Not only must there be some evidence to support a
finding or conclusion, but the evidence must be substantial. Substantial evidence is more than a mere scintilla.
It means such relevant evidence that a reasonable mind might accept as sufficient to support a
conclusion."55 (Emphasis supplied.)

Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the
commission of illegal acts during the strikes.
After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22, and 23, 2001
rallies and refused to render overtime work or report for work. These rallies, as we earlier ruled, are in reality illegal
strikes, as the procedural requirements for strikes under Art. 263 were not complied with. Worse, said strikes were
in violation of the company rule prohibiting acts "in citing or participating in riots, disorders, alleged strikes or
concerted action detrimental to Toyotas interest."

With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of employees who
did not render overtime work on February 21, 2001 and who did not report for work on February 22 and 23, 2001 as
shown by Annex "I" of Toyotas Position Paper in NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute
at Toyota Motor Philippines Corp. The employees who participated in the illegal concerted actions were as follows:

1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7.
Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12. Arollado,
Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.;
18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23.
Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue,
Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug,
Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate,
Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43.
Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48. Completo,
Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53.
Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De
Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo;
63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio,
Rey; 68. Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag,
Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78.
Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco,
Melencio; 84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit,
Rodel; 90. Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95.
Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez,
Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105.
Jaen, Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110.
Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising,
Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120.
Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado,
Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan,
Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph Patrick;
133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang,
Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares, Alfred; 142. Manzanilla,
Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit;
148. Mendoza, Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson;
153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo;
158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163.
Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie;
169. Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin; 174.
Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald; 178. Piamonte, Melvin; 179.
Piamonte, Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184.
Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189.
Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago,
Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex;
199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio;
204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson Alexander; 207. Templo, Christopher; 208. Tenorio,
Roderick; 209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213.
Topaz, Arturo Sr.; 214. Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose
Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara, Allan; 222. Vergara,
Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and
227. Zamora, Dominador Jr.

Toyotas Position Paper containing the list of striking workers was attested to as true and correct under oath by Mr.
Jose Ma. Aligada, First Vice President of the Group Administration Division of Toyota. Mr. Emerito Dumaraos,
Assistant Department Manager of the Production Department of Toyota, likewise submitted a June 29, 2001
Affidavit56 confirming the low attendance of employees on February 21, 22, and 23, 2001, which resulted from the
intentional absences of the aforelisted striking workers. The Union, on the other hand, did not refute Toyotas
categorical assertions on the participation of said workers in the mass actions and their deliberate refusal to perform
their assigned work on February 21, 22, and 23, 2001. More importantly, it did not deny the fact of absence of the
employees on those days from the Toyota manufacturing plants and their deliberate refusal to render work. Their
admission that they participated in the February 21 to 23, 2001 mass actions necessarily means they were absent
from their work on those days.
Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal acts like acts of
coercion or intimidation and obstructing free ingress to or egress from the company premises. Mr. Eduardo Nicolas
III, Toyotas Security Chief, attested in his affidavit that the strikers "badmouthed people coming in and shouted
invectives such as bakeru at Japanese officers of the company." The strikers even pounded the vehicles of Toyota
officials. More importantly, they prevented the ingress of Toyota employees, customers, suppliers, and other
persons who wanted to transact business with the company. These were patent violations of Art. 264(e) of the Labor
Code, and may even constitute crimes under the Revised Penal Code such as threats or coercion among others.

On March 28, 2001, the following have committed illegal actsblocking the ingress to or egress from the two (2)
Toyota plants and preventing the ingress of Toyota employees on board the company shuttle at the Bicutan and
Sta. Rosa Plants, viz:

1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7.
Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry Gerola; 12. Roderick
Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18.
Roberto Gonzales

Photographs were submitted by Toyota marked as Annexes "1" through "18" of its Position Paper, vividly showing
the participation of the aforelisted employees in illegal acts.57

To further aggravate the situation, a number of union members committed illegal acts (blocking the ingress to and
egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant in Bicutan, to wit:

1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto

Pictures marked as Annexes "21" to "22" of Toyotas Position Paper reveal the illegal acts committed by the
aforelisted workers.58

On the next day, March 30, 2001, several employees again committed illegal acts (blocking ingress to and egress
from the plant) during the strike at the Bicutan plant, to wit:

1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7.
Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao

Pictures marked as Annexes "25" to "26" and "28" of Toyotas Position Paper show the participation of these
workers in unlawful acts.59

On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts (blocking ingress to and
egress from the plant) during the strike held at the Bicutan plant, to wit:

1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel
Borebor; and 7. Alberto Lomboy

The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes "32" and "33" of
Toyotas Position Paper.60

On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking ingress to and
egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant.61 Then, on April 9, 2001, Alvin
Paniterce, Dennis Apolinario, and Eduardo Miranda62 were identified to have committed illegal acts (blocking ingress
to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant and were validly dismissed by
Toyota.

Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001 and May 28, 2001 in
front of the Bicutan and Sta. Rosa plants. These workers acts in joining and participating in the May 23 and 28,
2001 rallies or pickets were patent violations of the April 10, 2001 assumption of jurisdiction/certification Order
issued by the DOLE Secretary, which proscribed the commission of acts that might lead to the "worsening of an
already deteriorated situation." Art. 263(g) is clear that strikers who violate the assumption/certification Order may
suffer dismissal from work. This was the situation in the May 23 and 28, 2001 pickets and concerted actions, with
the following employees who committed illegal acts:

a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel Berces; (3) Benny
Bering; (4) Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8) Herbert
Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13) Genaro
Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18)
Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23) Cornelio
Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel
Tagala.
Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a return-to-work order)
committed by the aforelisted strikers.63

b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis
Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter
Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15)
Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene
Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel Digma; (25) Aldrin Duyag;
(26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31)
Dante Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36)
Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41)
Valentin Magbalita; (42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas;
(46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio
Piamonte; (52) George Polutan; (53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo
Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten;
(62) Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.

Toyota presented photographs which show said employees conducting mass pickets and concerted actions.64

Anent the grant of severance compensation to legally dismissed union members, Toyota assails the turn-around by
the CA in granting separation pay in its June 20, 2003 Resolution after initially denying it in its February 27, 2003
Decision. The company asseverates that based on the CA finding that the illegal acts of said union members
constitute gross misconduct, not to mention the huge losses it suffered, then the grant of separation pay was not
proper.

The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor
Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the right to
termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is
entitled to "whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice"65 or under the Labor Code and
other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to
receive from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits
granted by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed
employees to the benefits depends on the stipulations of the CBA or the company rules and policies.

As in any rule, there are exceptions. One exception where separation pay is given even though an employee is
validly dismissed is when the court finds justification in applying the principle of social justice well entrenched in the
1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court elucidated why social justice
can validate the grant of separation pay, thus:

The reason is that our Constitution is replete with positive commands for the promotion of social justice, and
particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary
concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in
Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted
to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly
recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and
the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of
the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the
dismissal be for cause.66

In the same case, the Court laid down the rule that severance compensation shall be allowed only when the cause
of the dismissal is other than serious misconduct or that which reflects adversely on the employees moral character.
The Court succinctly discussed the propriety of the grant of separation pay in this wise:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving
moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of
social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the
erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the
separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who
steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will
commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found
out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own character.67

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social
justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral
character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay
when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than
serious misconduct.

A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified on any of
the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v. NLRC,68 we deleted the
award of separation pay to an employee who, while unprovoked, hit her co-workers face, causing injuries, which
then resulted in a series of fights and scuffles between them. We viewed her act as serious misconduct which did
not warrant the award of separation pay. In House of Sara Lee v. Rey,69 this Court deleted the award of separation
pay to a branch supervisor who regularly, without authorization, extended the payment deadlines of the companys
sales agents. Since the cause for the supervisors dismissal involved her integrity (which can be considered as
breach of trust), she was not worthy of compassion as to deserve separation pay based on her length of service.
In Gustilo v. Wyeth Phils., Inc.,70 this Court found no exceptional circumstance to warrant the grant of financial
assistance to an employee who repeatedly violated the companys disciplinary rules and regulations and whose
employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case of San Miguel v.
Lao,71 this Court reversed and set aside the ruling of the CA granting retirement benefits or separation pay to an
employee who was dismissed for willful breach of trust and confidence by causing the delivery of raw materials,
which are needed for its glass production plant, to its competitor. While a review of the case reports does not reveal
a case involving a termination by reason of the commission of a crime against the employer or his/her family which
dealt with the issue of separation pay, it would be adding insult to injury if the employer would still be compelled to
shell out money to the offender after the harm done.

In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal
recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful
intent or they reflected adversely on the moral character of the employees. We therefore find that in addition to
serious misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and
habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his
family, separation pay should not be conceded to the dismissed employee.

In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may opt to grant
separation pay anchored on social justice in consideration of the length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the employee and the like, using the guideposts
enunciated in PLDT on the propriety of the award of separation pay.

In the case at bench, are the 227 striking employees entitled to separation pay?

In the instant case, the CA concluded that the illegal strikes committed by the Union members constituted serious
misconduct.72

The CA ratiocinated in this manner:

Neither can social justice justify the award to them of severance compensation or any other form of financial
assistance. x x x

xxxx

Considering that the dismissal of the employees was due to their participation in the illegal strikes as well as
violation of the Code of Conduct of the company, the same constitutes serious misconduct. A serious misconduct is
a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v.
NLRC, the Supreme Court nullified the grant of separation benefits to employees who unlawfully participated in an
illegal strike in light of Article 264, Title VIII, Book V of the Labor Code, that, "any union officer who knowingly
participates in an illegal strike and any worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment status."

The constitutional guarantee on social justice is not intended only for the poor but for the rich as well. It is a policy of
fairness to both labor and management.73 (Emphasis supplied.)
In disposing of the Unions plea for reconsideration of its February 27, 2003 Decision, the CA however performed a
volte-face by reinstating the award of separation pay.

The CAs grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance Telephone Co. v.
NLRC that serious misconduct forecloses the award of separation pay. Secondly, the advertence to the alleged
honest belief on the part of the 227 employees that Toyota committed a breach of the duty to bargain collectively
and an abuse of valid exercise of management prerogative has not been substantiated by the evidence extant on
record. There can be no good faith in intentionally incurring absences in a collective fashion from work on February
22 and 23, 2001 just to attend the DOLE hearings. The Unions strategy was plainly to cripple the operations and
bring Toyota to its knees by inflicting substantial financial damage to the latter to compel union recognition. The
Union officials and members are supposed to know through common sense that huge losses would befall the
company by the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million
because of the willful desertion of company operations in February 2001 by the dismissed union members. In
addition, further damage was experienced by Toyota when the Union again resorted to illegal strikes from March 28
to April 12, 2001, when the gates of Toyota were blocked and barricaded, and the company officials, employees,
and customers were intimidated and harassed. Moreover, they were fully aware of the company rule on prohibition
against concerted action inimical to the interests of the company and hence, their resort to mass actions on several
occasions in clear violation of the company regulation cannot be excused nor justified. Lastly, they blatantly violated
the assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of law. These
acts indeed constituted serious misconduct.

A painstaking review of case law renders obtuse the Unions claim for separation pay. In a slew of cases, this Court
refrained from awarding separation pay or financial assistance to union officers and members who were separated
from service due to their participation in or commission of illegal acts during strikes. In the recent case of Pilipino
Telephone Corporation v. Pilipino Telephone Employees Association (PILTEA),74 this Court upheld the dismissal of
union officers who participated and openly defied the return-to-work order issued by the DOLE Secretary. No
separation pay or financial assistance was granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,75 this
Court declared that the union officers who participated in and the union members who committed illegal acts during
the illegal strike have lost their employment status. In this case, the strike was held illegal because it violated
agreements providing for arbitration. Again, there was no award of separation pay nor financial assistance.
In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,76 the strike was declared
illegal because the means employed was illegal. We upheld the validity of dismissing union members who
committed illegal acts during the strike, but again, without awarding separation pay or financial assistance to the
erring employees. In Samahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines,77 this Court upheld the
dismissal of union officers who participated in an illegal strike sans any award of separation pay. Earlier, in Grand
Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied Industries,78 we affirmed
the dismissal of the Unions officers who participated in an illegal strike without awarding separation pay, despite the
NLRCs declaration urging the company to give financial assistance to the dismissed employees.79 In Interphil
Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc.,80 this Court affirmed the dismissal of the union officers
who led the concerted action in refusing to render overtime work and causing "work slowdowns." However, no
separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v. NLRC,81 this Court affirmed
the dismissal of union officers who participated in the strike and the union members who committed illegal acts while
on strike, without awarding them separation pay or financial assistance. In 1996, in Allied Banking Corporation v.
NLRC,82 this Court affirmed the dismissal of Union officers and members, who staged a strike despite the DOLE
Secretarys issuance of a return to work order but did not award separation pay. In the earlier but more relevant
case of Chua v. NLRC,83 this Court deleted the NLRCs award of separation benefits to an employee who
participated in an unlawful and violent strike, which strike resulted in multiple deaths and extensive property
damage. In Chua, we viewed the infractions committed by the union officers and members as a serious misconduct
which resulted in the deletion of the award of separation pay in conformance to the ruling in PLDT. Based on
existing jurisprudence, the award of separation pay to the Union officials and members in the instant petitions
cannot be sustained.

One last point to considerit is high time that employer and employee cease to view each other as adversaries and
instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success
of the business. When they consider only their own self-interests, and when they act only with their own benefit in
mind, both parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The
employer wants the business to succeed, considering the investment that has been made. The employee in turn,
also wants the business to succeed, as continued employment means a living, and the chance to better ones lot in
life. It is clear then that they both have the same goal, even if the benefit that results may be greater for one party
than the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and
of balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation
between the employer and the employee. Even though strikes and lockouts have been recognized as effective
bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term solutions by
forcing concessions from one party; but staging such strikes would damage the working relationship between
employers and employees, thus endangering the business that they both want to succeed. The more progressive
and truly effective means of dispute resolution lies in mediation, conciliation, and arbitration, which do not increase
tension but instead provide relief from them. In the end, an atmosphere of trust and understanding has much more
to offer a business relationship than the traditional enmity that has long divided the employer and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R. Nos. 158798-99 are
GRANTED.

The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance
compensation is ANNULLED and SET ASIDE.

The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001
Decision of the NLRC but deleted the grant of severance compensation, is REINSTATED and AFFIRMED.

No costs.

SO ORDERED.
 [G.R. No. 152057. September 29, 2003]

PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION, petitioner, vs. COURT OF APPEALS,

NATIONAL LABOR RELATIONS COMMISSION, PT&T PROGRESSIVE WORKERS UNION-NAFLU-
KMU, CRISTINA RODIEL, JESUS PARACALE, ROMEO TEE, BENJAMIN LAKANDULA, AVELINO
ACHA, IGNACIO DELA CERNA and GUILLLERMO DOMEGILLO, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review filed by petitioner Philippine Telegraph and Telephone Corporation (PT&T) of
the Decision of the Court of Appeals in CA-G.R. SP No. 54346 promulgated on June 15, 2001 affirming the
[1]

resolution of the National Labor Relations Commission (NLRC) promulgated on May 31, 1999 reversing the
decision of the Labor Arbiter, and its Resolution dated February 6, 2002 denying the petitioners motion for
reconsideration.
The petitioner is a domestic corporation engaged in the business of providing telegraph and communication
services thru its branches all over the country. It employed various employees, among whom were the following:
1. Cristina Rodiel, initially as a Probationary Junior Counter- Clerk on July 1, 1995 at the Cabanatuan Branch, regularized on
November 28, 1995;
2. Jesus Paracale as a Probationary Junior CW Operator in Padada, Davao del Sur on November 16, 1988, regularized on
April 15, 1990, transferred to Malita, Davao Branch on November 16, 1990, to Makar, South Cotabato Branch on
September 1, 1994 and to Kiamba, South Cotabato Branch on April 1, 1995;
3. Romeo Tee as Counter-Clerk at the Zamboanga Branch on January 16, 1982, as a TTY Operator on November 16, 1986,
promoted as TTY Operator General on November 1, 1989 and designated as TRITY Operator Regions on July 1, 1997;
4. Benjamin Lakandula as a Counter-Clerk at the Iligan City Branch on January 16, 1982;
5. Avelino Acha as Probationary Junior Counter at the Naga City Branch, regularized on June 10, 1983, transferred to Legaspi
City Branch on November 16, 1989;
6. Ignacio Dela Cerna as a Probationary Junior CW-Operator in at the Pagadian City Branch regularized on March 15, 1986
and designated as TR/TTY Operator Regions on July 1, 1993 at the Pagadian City Branch, and
7. Guillermo Demigillo as Clerk.[2]

Sometime in 1997, after conducting a series of studies regarding the profitability of its retail operations, its
existing branches and the number of employees, the petitioner came up with a Relocation and Restructuring
Program designed to (a) sustain its (PT&Ts) retail operations; (b) decongest surplus workforce in some
branches, to promote efficiency and productivity; (c) lower expenses incidental to hiring and training new
personnel; and (d) avoid retrenchment of employees occupying redundant positions. [3]

On August 11, 1997, private respondents Cristina Rodiel, Jesus Paracale, Romeo Tee, Benjamin
Lakandula, Avelino Acha, Ignacio Dela Cerna and Guillermo Demigillo received separate letters from the
petitioner, giving them the option to choose the branch to which they could be transferred. Thereafter through
HRAG Bulletin No. 97-06-16, the private respondents and other petitioners employees were directed to relocate
to their new PT&T Branches. The affected employees were directed to report to their respective relocation
assignments in a Letter dated September 16, 1997.
The petitioner offered benefits/allowances to those employees who would agree to be transferred under its
new program, thus:
EXISTING SPECIAL RELOCATION FLAT RELOCATION MOVING
RELOCATION ALLOWANCE ALLOWANCE EXPENSES
ALLOWANCE (FREIGHT)
1. Temporary 2.1 Married employee
relocation per diem bringing along his
of P260.00/day family P17,500.00 P15,000

2. Permanent relocation 2.2 Married employee not

a flat monthly bringing along his
allowance of family P10,000.00 N/A
P5,100.00

2.3 Single employee

bringing along his
qualified dependent/s

P10,000.00 P15,000
 2.4 Single employee not
bringing along his
dependent/s P7,000.00 N/A
[4]

Moreover, the employees who would agree to the transfers would be considered promoted, thus:
FROM TO
NAME
POSITION/JG* WORK POSITION WORK
LOCATION LOCATION

1. ACHA, Jr. Counter-JG2 Legaspi (Br) Courier JG3 Romblon/

AVELINO Odiongan
(SL)

2. RODIEL, Jr. Counter Clerk- Cabanatuan Clerk-JG4 Baguio

CRISTINA JG2 (CL) (NWL)

3. DELA CERNA, Jr. CW Operator- Cotabato City Clerk-JG4 Kidapawan

IGNACIO JG2 (CM) (CM)

4. DEMIGILLO Jr. CW Operator- Midsayap North Courier-JG3 Lebak (CM)

GUILLERMO JG2

5. LAKANDULA, Counter-JG3 Iligan (NM) Clerk JG4 Butuan (EM)

BENJAMIN

6. PARACALE, Jr. CW Operator- Makar, Gen. Clerk JG4 Butuan (EM)

JESUS JG2 Santos (SM)

7. TEE, ROMEO TTY Operator- Zamboanga Clerk JG4 Jolo (WM) [5]

Gen. JG4 City (WM)

The private respondents rejected the petitioners offer. On October 2, 1997, the petitioner sent letters to the
private respondents requiring them to explain in writing why no disciplinary action should be taken against them
for their refusal to be transferred/relocated. [6]

In their respective replies to the petitioners letters, the private respondents explained that:

The transfers imposed by the management would cause enormous difficulties on the individual complainants. For one,
their new assignment involve distant places which would require their separation from their respective families. For
instance, in the case of Avelino Acha who would be coming from Bicol Region, he would have to take a boat in going to
his new assignment in Odiongan, Romblon. The voyage would take a considerable period of time and it would be
imperative for him to relocate to Romblon to be able to attend to his new assignment.

The same holds true with the other complainants. Romeo Tee for instance, will have to take an overnight boat trip from
his previous assignment in Zamboanga to his new assignment in Jolo, Sulu.He would have to part with his family and
resettle to Jolo in connection with his transfer. Cristina Rodiel on the other hand, would be transferred to Baguio City
which is quite distant from her previous workbase and residence at Cabanatuan. Jesus Paracale finds himself in the same
difficult situation as he would be transferred from General Santos City at the Southern tip of Mindanao to Butuan City,
almost a days travel by bus and located at the northernmost tip of the island. Benjamin Lakandula and Guillermo
Demigillo, are also in the same situation as their new assignments are quite distant from their previous places of work.
[7]

Dissatisfied with this explanation, the petitioner considered the private respondents refusal as
insubordination and willful disobedience to a lawful order; hence, the private respondents were dismissed from
work. They forthwith filed their respective complaints against the petitioner before the appropriate sub-regional
[8]

branches of the NLRC. [9]

Subsequently, the private respondents bargaining agent, PT&T Workers Union-NAFLU-KMU, filed a
complaint against the petitioner for illegal dismissal and unfair labor practice for and in behalf of the private
respondents, including Ignacio Dela Cerna, before the arbitration branch of the NLRC. [10]

In their position paper, the complainants (herein private respondents) declared that their refusal to transfer
could not possibly give rise to a valid dismissal on the ground of willful disobedience, as their transfer was
prejudicial and inconvenient; thus unreasonable. The complainants further asserted that since they were active
union members, the petitioner was clearly guilty of unfair labor practice especially considering their new work
[11]

stations:
1. Jesus Paracale, from General Santos Branch to Butuan City Branch;
2. Romeo Tee, from Zamboanga Branch to Jolo Branch;
 3. Benjamin Lakandula, from Iligan City to Butuan City;
4. Avelino Acha, from Legaspi City Branch to Odiongan Branch;
5. Ignacio Dela Cerna, from Pagadian City Branch to Butuan Branch; and
6. Guillermo Demigillo, from Midsayap to Lebak Cotabato Branch. [12]

For its part, the petitioner (respondent therein) alleged that the private respondents transfers were made in
the lawful exercise of its management prerogative and were done in good faith. The transfers were aimed at
decongesting surplus employees and detailing them to a more demanding branch.
In their reply to the petitioners position paper, the private respondents opined that since their respective
transfers resulted in their promotion, they had the right to refuse or decline the positions being offered to
them. Resultantly, the refusal to accept the transfer could not have amounted to insubordination or willful
disobedience to the lawful orders of the employer.
After the parties filed their respective pleadings, the Honorable Labor Arbiter Celenito N. Daing rendered a
Decision on September 25, 1998 dismissing the complaint for lack of merit. [13]

The labor arbiter ratiocinated that an employer, in the exercise of his management prerogative, may cause
the transfer of his employees provided that the same is not attended by bad faith nor would result in the demotion
of the transferred employees. The labor arbiter ruled in favor of the petitioner, finding that the aforesaid transfers
indeed resulted in the private respondents promotion, and that the complaint for unfair labor practice was not
fully substantiated and supported by evidence.
Aggrieved, the private respondents appealed that aforesaid decision to the NLRC.
On May 31, 1999, the NLRC issued a Resolution which reversed and set aside the decision of the labor
arbiter. The NLRC ruled that the petitioner illegally dismissed the private respondents, thus:

WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly, the Decision appealed from is
REVERSED and SET ASIDE and a new one entered declaring respondent-appellee guilty of illegal dismissal and
ordering Philippine Telegraph and Telephone Corporation to reinstate individual complainants-appellants to their former
positions without loss of seniority rights and other privileges and to pay them full backwages from the date of their
dismissal up to the date of their actual reinstatement, computed as follows [14]

The NLRC interpreted the said transfers of the respondents as a promotion; that the movement was not
merely lateral but of scalar ascent, considering the movement of the job grades, and the corresponding increase
in salaries. As such, the respondents had the right to accept or refuse the said promotions. The NLRC concluded
that in the exercise of their right to refuse the promotion given them, they could not be dismissed.
Without filing a motion for reconsideration, the petitioner filed a petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure before the Court of Appeals, assailing the May 31, 1999 Resolution of the
NLRC. The petitioner raised the following errors:
4.1
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN
IT RULED AGAINST PRIVATE RESPONDENTS DISMISSAL ON THE GROUND OF INSUBORDINATION FOR REFUSING
TO HEED TO THE TRANSFER ORDER OR THE PETITIONER.
4.2
PUBLIC RESPONDENT COMMITTEE GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN
IT SUSTAINED PRIVATE RESPONDENTS CONTENTION THAT THEY WERE IN FAC BEING PROMOTED AND NOT
TRANSFERRED, THUS RENDERING THE LATTERS DISOBEDIENCE JUSTIFIED.
PUBLIC RESPONDENTS (SIC) COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN IT RULED THAT PRIVATE RESPONDENTS ARE ENTITLED TO REINSTATEMENT WITHOUT LOSS OF SENIORITY
RIGHTS AND OTHER PRIVILEGES, AS WELL AS PAYMENT OF FULL BACKWAGES FROM DATE OF DISMISSAL UP TO
DATE OF ACTUAL REINSTATEMENT.[15]

On June 15, 2001, the Court of Appeals rendered a Decision affirming the resolution of the NLRC, the
dispositive portion of which reads:

WHEREFORE, finding no grave abuse of discretion on the part of the respondent commission, the petition is hereby
DISMISSED for lack of merit. The assailed May 31, 1999 Resolution of the National Labor Relations Commission, Third
Division is hereby AFFIRMED IN TOTO. [16]

The petitioner filed a motion for reconsideration. On February 6, 2002, the CA issued a Resolution denying
the motion. [17]

Dissatisfied, the petitioner filed its petition for review assailing the decision and resolution of the CA, insisting
that:
I
 PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE ORDERS DATED JUNE 15, 2001 AND
FEBRUAR 6, 2002 AFFIRMING THE ORDER DATED MAY 31, 1999 OF THE THIRD DIVISION OF THE
NATIONAL LABOR RELATIONS COMMISSION, CONSIDERING THAT:

a. THE ORDER DATED MAY 31, 1999 OF THE NATIONAL LABOR RELATIONS COMMISSION IS NOT
SUPPORTED BY SUBSTANTIAL EVIDENCE;

b. THE PETITIONER DID NOT ADMIT IN ITS POSITION PAPER FILED BEFORE THE LABOR ARBITER
THAT THE PRIVATE RESPONDENTS WERE BEING PROMOTED. ON THE CONTRARY, IT HAS
ALWAYS BEEN THE CONTENTION OF THE PETITIONER THAT THE PRIVATE RESPONDENTS WERE
SIMPLY ORDERED TRANSFERRED TO OTHER WORK STATIONS WITHOUT DEMOTION IN RANK
AND DIMINUTION IN SALARY;

c. THE PRIVATE RESPONDENTS WERE LEGALLY TERMINATED FOR JUST AND AUTHORIZED
CAUSE FOR WILFULL DISOBEDIENCE TO THE LAWFUL ORDERS OF THE PETITIONER (TRANSFER
ORDER PURSUANT TO ITS RELOCATION AND RESTRUCTURING PROGRAM), AFTER AFFORDING
THEM DUE PROCESS OF LAW AND THUS NOT ENTITLED TO REINSTATEMENT; AND

d. PETITIONER ACTED IN GOOD FAITH IN IMPLEMENTING ITS RELOCATION AND RESTRUCTUTING

PROGRAM WHICH RESULTED IN THE TERMINATION OF THE PRIVATE RESPONDENTS. AND AS
SUCH, THE PRIVATE RESPONDENTS ARE NOT ENTITLED TO THE PAYMENT OF ANY
BACKWAGES. [18]

In their Comment, the private respondents argue that the petition should be dismissed for the following
reasons: (a) that a petition for review under Ruler 45 is limited to questions of law; (b) the private respondents
were promoted and not only transferred as established by the evidence on record; and (b) private respondents
could not be penalized with dismissal for declining their promotions.
The petition is denied due course.
As has been enunciated in numerous cases, the issues that can be delved into a petition for review under
Rule 45 are limited to questions of law. Thus, the Court is not tasked to calibrate and assess the probative weight
of evidence adduced by the parties during trial all over again. The test of whether the question is one of law or
[19]

of fact is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence,
in which case, it is a question of law; otherwise, it is a question of fact. [20]

In the case at bar, the petitioner would want this Court to ascertain whether or not the findings of NLRC, as
affirmed by the CA, are substantiated by the evidence on record; hence, requiring a review involving questions
of facts. For this reason alone, this case should be dismissed.
Even if the Court were to review the instant case on its merits, the dismissal of the petition is inevitable.
Section 3, Rule V of the NLRC provides that:

Section 3. Submission of Position Papers/Memorandum Should the parties fail to agree upon an amicable settlement,
either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the matters taken
up and agree upon during the conferences and directing the parties to simultaneously file their respective verified position
papers.

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of
their respective witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be
allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in
the complaint or position papers. Without prejudice to the provisions of Section 2 of this Rule, the Labor Arbiter shall
direct both parties to submit simultaneously their position papers with supporting documents and affidavits within an
inextendible period of ten (10) days from notice of termination of the mandatory conciliation. mediation conference.

In its position with the labor arbiter, the petitioner adverted that when the private respondents were
transferred, they were also promoted, thus:

Clearly, the transfer of the complainants is not unreasonable nor does it involve demotion in rank. They are being moved
to branches where the complainants will function with maximum benefit to the company and they were in fact promoted
not demoted from a lower job-grade to a higher job-grade and receive even higher salaries than before. Thus, transfer of
the complainants would not also result in diminution in pay benefit and privilege since the salaries of the complainant
would be receiving a bigger salary if not the same salary plus additional special relocation package.Although the increase
in the pay is not significant this however would be translated into an increase rather than decrease in their salary because
the complainants who were transferred from the city to the province would greatly benefit because it is of judicial notice
that the cost of living in the province is much lower than in the city. This would mean a higher purchasing power of the
same salary previously being received by the complainants. [21]

Indeed, the increase in the respondents responsibility can be ascertained from the scalar ascent of their job
grades. With or without a corresponding increase in salary, the respective transfer of the private respondents
were in fact promotions, following the ruling enunciated in Homeowners Savings and Loan Association, Inc. v.
NLRC: [22]

[P]romotion, as we defined in Millares v, Subido, is the advancement from one position to another with an increase in
duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. Apparently, the
indispensable element for there to be a promotion is that there must be an advancement from one position to another or an
upward vertical movement of the employees rank or position. Any increase in salary should only be considered incidental
but never determinative of whether or not a promotion is bestowed upon an employee. This can be likened to the
upgrading of salaries of government employees without conferring upon the, the concomitant elevation to the higher
positions. [23]

The admissions of the petitioner are conclusive on it. An employee cannot be promoted, even if merely as
a result of a transfer, without his consent. A transfer that results in promotion or demotion, advancement or
reduction or a transfer that aims to lure the employee away from his permanent position cannot be done without
the employees consent. [24]

There is no law that compels an employee to accept a promotion for the reason that a promotion is in the
nature of a gift or reward, which a person has a right to refuse. Hence, the exercise by the private respondents
[25]

of their right cannot be considered in law as insubordination, or willful disobedience of a lawful order of the
employer. As such, there was no valid cause for the private respondents dismissal.
As the questioned dismissal is not based on any of the just or valid grounds under Article 282 of the Labor
Code, the NLRC correctly ordered the private respondents reinstatement without loss of seniority rights and the
payment of backwages from the time of their dismissal up to their actual reinstatement.
IN LIGHT OF THE ALL THE FOREGOING, the Decision of the Court of Appeals dated June 15, 2001 is
hereby AFFIRMED.
SO ORDERED.
G.R. No. L-51182 July 5, 1983

HELMUT DOSCH, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and NORTHWEST AIRLINES, INC., respondents.

Quasha, Asperilla, Ancheta, Valmonte, Pea & Marcos Law Office for petitioner.

The Solicitor General for respondent NLRC.

Sycip, Salazar, Feliciano, Hernandez & Castillo Law Office for private respondent.

GUERRERO, J.:

This is a petition for review seeking to set aside the decision of the National Labor Relations Commission in NLRC
Case No. RB-4220 reversing the award made by the Labor Arbiter ordering petitioner's reinstatement by private
respondent Northwest Airlines, Inc. with full backwages and other benefits decreed by law.

The antecedent facts of this case are as follows:

Petitioner Helmut Dosch an American citizen, married to a Filipina, was the resident Manager of Northwest Airlines,
Inc. (Northwest, for short) in the Philippines. He has to his credit eleven (11) years of continuous service with the
company, including nine (9) years as Northwest Manager with station at Manila. On August 18, 1975 he received an
inter-office communication from R.C. Jenkins, Northwest's Vice President for Orient Region based in Tokyo,
promoting him to the position of Director of International Sales and transferring him to Northwest's General Office in
Minneapolis, U.S.A., effective the same day. The full text of the inter-office communication is reproduced below:

NORTHWEST ORIENT Interoffice Communication

To: H. Dosch Manager-Philippines

From: Vice-President, Orient Region
Subject: Transfer
Date: August 18,1975
Location: Tokyo

Dear Helmut:

You have completed nine (9) years of service in the Orient, and in accordance with usual practice, it
is now the Company's intention to transfer you to the General Office in Minneapolis to broaden your
experience base considering that your assignment in the Philippines has continued for several years
longer than is normal for our overseas managers.

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

To implement the foregoing decision of the Company and in order to effect a smooth turnover, Mr.
L.J. Gilbert, Jr. shall, effective today, August 18, 1975, take over your functions and responsibilities
as Manager.

You are expected to report to your new assignment on September 15, 1975. You shall, however, be
afforded sufficient time, which in this case shall not extend beyond September 15, 1975, within
which to wind up your affairs in the Philippines. During this transition period, you will be on vacation
leave for ten (10) days and thereafter on travel and relocation status with pay. Please see that the
Company house you presently occupy will be made available to your successor by September 10,
1975.

We wish you success in your new assignment.

Very
truly
yours,
 (Sgd.)
R. C.
JENKI
NS

Petitioner, acknowledging receipt of the above memo of August 18, 1975, expressed appreciation for the promotion
and at the same time regretted that "for personal reasons and reasons involving my family, I am unable to accept a
transfer from the Philippines" in his letter dated August 28, 1975 which reads:

R. C. JENKINS V.P., O.R. August 28, 1975

H. DOSCH

TRANSFER

This is to acknowledge receipt of your memo of August 18, 1975, on the subject.

While I sincerely appreciate the company's confidence in my abilities as a manager, which reflects
itself in my promotion to the position of Director of International Sales, I regret that at this time, for
personal reasons and reasons involving my family, I am unable to accept a transfer from the
Philippines.

I would, therefore, prefer to remain in my position of Manager-Philippines until such time that my
services in that capacity are no longer required by Northwest Airlines.

(Sgd.)
H.
DOSC
H

Petitioner tried to resume his duties as Manager, through a memorandum to the Manila Staff which
reads:

MANILA STAFF Sept. 4, 1975

H. DOSCH MNL

RESUMPTION OF DUTIES Letter No. 454/75

It gives me great pleasure to announce that I advised Mr. Jenkins by letter dated August 28, 1975,
that, for personal reasons, I have declined to accept the promotion to the position of Director of
International Sales at the General Office.

Accordingly, upon return to work from an authorized vacation of ten working days, I am resuming my
duties and responsibilities as Manager-Philippines effective today, September 4, 1975.

I know you will join me in thanking Mr. L.J. Gilbert for taking my place as Acting Manager-Philippines
during my absence from the office.

(Sgd.)
H.
DOSC
H

Telegrams were also sent by petitioner to Mr. Nightingale, Director for Finance and to Mr. Jenkins,
clearly stating petitioner's desire to remain as Manager-Philippines of Northwest.

On September 9, 1975, the Vice-President for the Orient Region of Northwest advised petitioner that
"in view of the foregoing, your status as an employee of the company ceased on the close of
business on August 31, 1975" and "the company therefore considers your letter of August 28, 1975,
to be a resignation without notice."

On September 16, 1975, Northwest filed a Report on Resignation of Managerial Employee (Form
No. 74-3, Revised September 1974), i.e., Helmut Dosch before Regional Office No. IV (Manila)
Department of Labor, copy thereof furnished petitioner.

The Report was contested by the petitioner and the parties were conciliated by Regional Office No.
IV, Manila but failed to agree on a settlement. The case was thus certified to the Executive Labor
 Arbiter, National Labor Relations Commission, for compulsory arbitration, in the following wise and
manner:

Pursuant to P. D. 442, as amended, and its implementing rules and regulations (I) have the honor to
transmit complaint-Case No. R04- 10-(illegible)

COMPLAINANT/S HELMUT DOSCH

Address: c/o Atty. A.D. Valmonte

Don Pable Bldg.
114 Amorsolo St., Makati Rizal

RESPONDENT/S NORTHWEST AIRLINES, INC.

Address: 1020 Roxas Blvd., Manila

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

1. Illegal dismissal.

2. x x x

3. x x x

4. x x x

5. x x x

The following issue(s) have been settled-

1. x x x

2. x x x

3. x x x

4. x x x

Attached herewith is the record of the case consisting of THIRTY ONE (31) pages

Origina
l
Signed.

Officer-
In
Charge

February 3, 1976.

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

IN VIEW OF THE FOREGOING, respondent Northwest Airlines, Inc. of 1020 Roxas Boulevard,
Manila is hereby directed to reinstate complainant Helmut Dosch of Makati, Rizal c/o Atty. A. D.
Valmonte, Don Pablo Building, 114 Amorsolo Street, to his former position with full backwages
without deduction whatsoever from the time his salary was withheld by the respondent until actual
reinstatement, without loss of seniority rights and other benefits recognized by law, including
attorney's fees equivalent to 10% of the total monetary benefits the petitioner may recover, to take
effect 10 days from receipt of this Decision.

SO ORDERED.

Manila, Philippines, December 29, 1976.

Respondent Northwest appealed from the Labor Arbiter's decision to the National Labor Relations Commission
(hereinafter referred to as NLRC) assigning the following errors: (a) the Labor Arbiter erred in not holding that
petitioner had "resigned" from his employment; (b) assuming arguendo that petitioner "did not resign," the Labor
Arbiter erred in not holding that petitioner could be dismissed for failure/refusal to comply with the valid transfer
order and for the employer's loss of trust and confidence of his employee; (c) the Labor Arbiter erred in impliedly
holding that prior clearance was required to effect the termination of petitioner, a managerial employee; and (d)
Labor Arbiter erred in awarding reinstatement, backwages, and attorney's fees.

Petitioner filed his Reply to the appeal, supporting the findings of the Labor Arbiter and furthermore questioned the
propriety of raising for the first time on appeal the issue whether or not petitioner's refusal to comply with the transfer
order constitutes a just and sufficient cause to dismiss him.

The decision en banc of the NLRC reversed the Labor Arbiter's decision and dismissed the case for lack of merit,
holding that:

The hiring, firing, transfer, demotion and promotion of employees has been traditionally Identified as
a management prerogative. This is a function associated with the employer's inherent right to control
and manage effectively its enterprise. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied. This exercise finds support not only in actual
management practice but has become a part of our jurisprudence in labor relations law where, in a
number of cases brought before the Supreme Court, the highest tribunal ruled in one of these cases
(Roldan vs. Cebu Portland Cement Co., C.A. G.R. No. 24276-R, May 20, 1960, citing Gregorio
Araneta Employees Union vs, Roldan, G.R. No. L-6843, July 20, 1955; Philippine Steel Metal
Workers Union vs. CIR, G.R. No. L-3587, Dec. 11, 1951), pertinent portion of the decision reads as
follows:

... Questions affecting the direction and management of personnel are matters which the
management itself must resolve. Thus the Court has steadfastly held that the determination of the
qualifications and fitness of workers for hiring and firing, promotion or reassignment on rotation
system, are the exclusive prerogatives of management. The management has also the right to
discharge employees when there is need to reduce personnel because of the precarious condition of
the enterprise or as a result of that closing of a section therein' (Morabe, The Law on Dismissal,
1962 ed., p. 55 citing Pampanga Bus Co., Inc. v. Employees Association of the Pampanga Bus Co.,
Inc., Case No. 17-V, Decision, August 10, 1946).

xxx xxx xxx

In the light of all the foregoing, We find that petitioner's transfer and promotion is a valid exercise of
management's prerogative. It is our view, therefore, that respondent's decision to consider him
resigned from his job after he defined management's order to transfer and promote him to a new
position at the general office at Minnesota, U.S.A. is justified and warranted. x x x."

Petitioner now comes to Us for review of the decision.

With respect to the procedural error allegedly committed by the respondent Commission in taking cognizance of an
issue raised for the first time on appeal that of petitioner's alleged insubordination for refusing to comply with the
transfer order for him to assume the position of Director of International Sales at Minneapolis, U.S.A., which said
Commission sustained and ruled in favor of Northwest, reversing the Labor Arbiter's decision, the records disclose
that Northwest's theory from the inception of the case to the rendition of the Labor Arbiter's decision was that
petitioner was not dismissed, fired or terminated but that he resigned from Northwest. This is plain from Northwest's
verified " Report on Resignation of Managerial Employee" in DOL Form No. 74-3 filed on September 16, 1975 with
Regional Office No. IV, Department of Labor, wherein Northwest stated that the termination of employment of
"Helmut Dosch, Manager-Philippines" was due to "resignation". Petitioner contested this report claiming that he
never resigned from the company. In its " Position Paper" dated March 10, 1976 before Regional Branch No. IV,
Northwest emphasized that any issue other than resignation of petitioner is irrelevant, thus: "As allegations relative
to termination are immaterial in this case, petitioner has no basis to claim that 'there is no legitimate ground upon
which Northwest Airlines, Inc. could have terminated the services of Mr. Dosch' or that petitioner's resignation was 'a
circumvention of the law.' In truth petitioner caused his own dissociation from respondent."

We agree with the Labor Arbiter that "(i)n view of the overwhelming evidence to the effect that petitioner did not
resign or relinquish his position as Manager-Philippines, this Body is without any alternative, but to declare the sole
reason relied upon by respondent- resignation (Exh. 'Q') as baseless and devoid of truth." Indeed, the letter dated
August 28, 1975 sent by petitioner to R.C. Jenkins cannot be considered as a resignation as petitioner indicated
therein clearly that he preferred to remain as Manager-Philippines of Northwest.

Realizing that its "resignation" theory was weak and flimsy, Northwest abandoned it and contended for the first time
that petitioner was guilty of insubordination when he refused to comply with the transfer order. This change of theory
on appeal is improper; it is offensive to the basic rules of fair play and justice and violative of petitioner's
constitutional right to due process of law. Appellate courts may not entertain questions of law or fact not raised in the
lower courts (Sec. 18, Rule 46, Revised Rules of Court), for that would constitute a change of theory not permissible
on appeal (Toribio vs. Decasa, 55 Phil. 461).
 It is undoubtedly the law, that, where a cause has been tried upon the theory that the pleadings are
at issue, or that a particular issue is made by the pleadings, or where an issue is tacitly accepted by
all parties as properly presented for trial and as the only issue, the appellate court will proceed upon
the same theory. (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep. 504; Molina vs. Somes, 24 Phil.
Rep., 45.) it would be unjust and oppressive for the appellate court to adopt a theory at variance with
that on which the case was presented to and tried by the lower court. It would surprise the parties, to
take them unaware and off their guard, and would in effect, deprive them of their day in court.
(Limpangco Sons vs. Yangco Steamship Co., 34 Phil. 597, 605-609).

Since "resignation" was the particular cause alleged by Northwest in terminating petitioner's employment, Northwest
is restricted to the ground specified and may not invoke any other cause for the discharge. (56 CJS p. 452, citing
Georgia Coast and P.R. Co. vs. McFarland, 64 S.E. 897,132 Ga 639; 56 CJS p. 435, citing Vicknair vs. Southside
Plantation Co., 10 La. App. Orleans 43; Warner vs. Fabacher, 6 La. App. Orleans, 87).

As indicated earlier, Northwest on appeal to NLRC changed its stand and claimed that petitioner was guilty of
insubordination" when he refused to comply with the transfer order made by Vice President Jenkins dated August
18, 1975. And for such act of insubordination, Northwest claimed it lost confidence in the petitioner.

We must, however, rightly treat the Jenkins letter as directing the promotion of the petitioner from his position as
Philippine manager to Director of International Sales in Minneapolis, U.S.A. It is not merely a transfer order alone
but as the Solicitor General correctly observes, "it is more in the nature of a promotion that a transfer, the latter
being merely incidental to such promotion." The inter-office communication of Vice President Jenkins is captioned
"Transfer" but it is basically and essentially a promotion for the nature of an instrument is characterized not by the
title given to it but by its body and contents. (Cf. Shell Co. vs. Firemen's Insurance Co. of Newark, 100 Phil. 757;
Borromeo vs. Court of Appeals, L-22962, Sept. 28, 1972; American Rubber co. vs. Collector of Internal Revenue, L-
25965, June 29, 1975). The communication informed the petitioner that effective August 18, 1975, he was to
be promoted to the position of Director of International Sales, and his compensation would be upgraded and the
payroll accordingly adjusted. Petitioner was, therefore, advanced to a higher position and rank and his salary was
increased and that is a promotion. (People ex. rel. Campbell vs. Partridge, 85 N.Y.S. 833, 899 App. Div. 497; State
ex rel. Wolcott vs. Celebrezze, 49 N.E. 2d 948, 141 Ohio St. 627, Vol. 34 Words and Phrases, pp. 564, 565). It has
been held that promotion denotes a scalar ascent of an officer or an employee to another position, higher either in
rank or salary. (Millares vs. Subido, 20 SCRA 954).

In the Millares case above, the Supreme Court, speaking thru Acting Chief Justice J.B.L. Reyes, distinguished
between transfer and promotion as follows:

A transfer is a movement from one position to another of equivalent rank, level or salary, without
break in the service. Promotion, on the other hand, is the advancement from one position to another
with an increase in duties and responsibilities as authorized by law, and usually accompanied by an
increase in salary, Whereas, promotion denotes a scalar ascent of a senior officer or employee to
another position, higher either in rank or salary, transfer refers to lateral movement from one position
to another, of equivalent rank, level or salary. (p. 962)

There is no law that compels an employee to accept a promotion, as a promotion is in the nature of a gift or a
reward, which a person has a right to refuse. When petitioner refused to accept his promotion to Director of
International Sales, he was exercising a right and he cannot be punished for it as qui jure suo utitur neminem laedit.
He who uses his own legal right injures no one.

It cannot be said that petitioner's refusal to obey the transfer order was contumacious. For one, petitioner's refusal
was justified in that the position of Director of International Sales had been non-existent since 1965 and was
inexistent at the time of petitioner's promotion thereto on August 18, 1975, which fact is shown by Northwest's
Manual Policies and Procedures (Exhibit "X") and admitted by Northwest's witness, Richardson Sells, in his
testimony. Northwest has not even attempted to deny the non- existence of the position.

Assuming for the sake of argument that the communication or letter of Mr. Jenkins was basically a transfer, under
the particular and peculiar facts obtaining in the case at bar, petitioner's inability or his refusal to be transferred was
not a valid cause for dismissal.

While it may be true that the right to transfer or reassign an employee is an employer's exclusive right and the
prerogative of management, such right is not absolute. The right of an employer to freely select or discharge his
employee is limited by the paramount police power (Phil. Air Lines, Inc. vs. Phil. Airlines Employees Association, L-
24626, June 28, 1974, 57 SCRA 489) for the relations between capital and labor are not merely contractual but
impressed with public interest (Article 1700, New Civil Code). And neither capital nor labor shall act oppressively
against each other (Article 1701, New Civil Code).

There can be no dispute that the constitutional guarantee of security of tenure mandated under Section 9, Article 2,
1973 Constitution applies to all employees and laborers, whether in the government service or in the private sector.
The fact that petitioner is a managerial employee does not by itself exclude him from the protection of the
constitutional guarantee of security of tenure. Even a manager in a private concern has the right to be secure in his
position, to decline a promotion where, although the promotion carries an increase in his salary and rank but results
in his transfer to a new place of assignment or station and away from his family. Such an order constitutes removal
without just cause and is illegal. Nor can the removal be justified on the ground of loss of confidence as now claimed
by private respondent Northwest, insisting as it does that by petitioner's alleged contumacious refusal to obey the
transfer order, said petitioner was guilty of insubordination.

We cannot agree to Northwest's submission that petitioner was guilty of disobedience and insubordination which
respondent Commission sustained. The only piece of evidence on which Northwest bases the charge of
contumacious refusal is petitioner's letter dated August 28, 1975 to R. C. Jenkins wherein petitioner acknowledged
receipt of the former's memorandum dated August 18, 1975, appreciated his promotion to Director of International
Sales but at the same time regretted " that at this time for personal reasons and reasons of my family, I am unable
to accept the transfer from the Philippines" and thereafter expressed his preference to remain in his position, saying.
" I would, therefore, prefer to remain in my position of Manager-Philippines until such time that my services in that
capacity are no longer required by Northwest Airlines." From this evidence, We cannot discern even the slightest
hint of defiance, much less imply insubordination on the part of petitioner.

Neither is the other ground alleged by Northwest in dismissing petitioner which is loss of confidence, supported by
evidence. On the contrary, the fact that Northwest wanted to promote petitioner to Director of International Sales as
"the Company feels there is need for an executive of (his) experience to fill the position of Director of International
Sales" as well as its Manifestation dated March 23, 1976 that Northwest "offered to rehire petitioner as Director of
International Sales with office at Minneapolis, U.S.A." clearly indicate that Northwest had full confidence in
petitioner. And so We hold and rule that respondent Commission committed grave abuse of discretion in sustaining
the dismissal of petitioner on the ground of insubordination and loss of confidence.

Indeed, the outright dismissal of petitioner from his position as Manager-Philippines of Northwest Airlines is much
too severe, considering the length of service that petitioner has rendered for eleven (11) fruitful and loyal years, a
strong and vital factor that must be taken into account in labor law determinations which this Court, speaking thru
Chief Justice Fernando in Meracap vs. International Ceramics Manufacturing Co., Inc., L-48235-36, July 30, 1979,
92 SCRA 412 emphasized should not only be secundum rationem but also secundum caritatem, to wit:

It would imply at the very least that where a penalty less punitive would suffice, whatever missteps
may be committed by labor ought not to be visited with a consequence so severe. It is not only
because of the law's concern for the workingman. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. The
misery and pain attendant on the loss of jobs then could be avoided if there be acceptance of the
view that under all the circumstances of this case, petitioners should not be deprived of their means
of livelihood. Nor is this to condone what had been done by them. For all this to condone what had
been done by them. For all this while, since private respondent considered them separated from the
service, they had not been paid. For the strictly juridical standpoint, it cannot be too strongly
stressed, to follow Davis in his masterly work, Discretionary Justice, that where a decision may be
made to rest on informed judgment rather than rigid rules, all the equities of the case must be
accorded their due weight. Finally, labor law determinations, to quote from Bultmann, should be not
only secundum rationem but also secundum caritatem. (This excerpt was cited in Almira vs B.F.
Goodrich Philippines, Inc., 58 SCRA 120,131.)

The trend of recent decisions of this Court as pointed out by Chief Justice Fernando in the recent case of Johnny
Bustillos us. Amado Inciong and Cummins Diesel Sales and Service Corporation of the Philippines, G.R. 1,45396,
January 27, 1983 has been "to vitalize the constitutional mandate of security of tenure as an aspect of the protection
accorded labor. For its forceful and authoritative weight, We quote lengthily the careful and clear review of Our
decisions as follows:

1. Meracap v. International Ceramics Mfg- Co., Inc. explains why the appeal should be disposed in
that manner. Thus: 'In a number of decisions, Philippine Air Lines, Inc. v. Philippine Airlines
Employees Association, Almira v. B.F. Goodrich Philippines, Central Textile Mills v. National Labor
Relations Commission, and Genconsu Free Workers Union v. Inciong, this Court has sought to
vitalize the constitutional mandate of security of tenure as an aspect of the protection accorded
labor.' We do so again in this case.

2. The decision reached not only by a labor arbitrator who heard the case but also by the National
Labor Relations Commission was the reinstatement of petitioner with back pay. The challenged
order reversed it. Thus: 'In effect, complainant has no involvement in the alleged pilferage. However,
since complainant no longer enjoys the trust and confidence reposed upon him by respondent as a
Service Supervisor, and hence, a managerial employee, respondent has every right to terminate
him. Since the termination is not for a justifiable cause, complainant is entitled to separation pay.' No
case has gone that far. Moreover, the ruling in Central Textile Mills, Inc. v. National Relations
Commission is squarely in point. Thus: 'The weakness of the petition to repeat, is thus indisputable.
Petitioner, (management) however, would try to impart a semblance of plausibility by alleging that
even on the assumption that no theft was committed, still there was loss of confidence sufficient to
cause his dismissal In the Philippine Airlines decision referred to, the accusation that theft was
committed by the employee was likewise not borne out by the evidence. To justify a dismissal,
 management relied on the allegation that there was breach of trust, a ground analogous to loss of
confidence. The Court of Industrial Relations did not agree. Neither did this Court. Reinstatement
was ordered. So it must be in this case.' The above ruling is reinforced by a case decided last
December 15, 1982, Justice de Castro speaking for the Court in Acda v. Minister of Labor. Thus:
'The findings of the Labor Arbiter on this point, as upheld by the National Labor Relations
Commission, are quite clear, and We find no reversible error therein the same being substantiated
by evidence of record, aside from the fact that said findings had already attained the character of
finality by the non-perfection of a proper appeal.' The opinion goes on to state: 'With the charges
against petitioner found to be unsubstantiated, We are left with no other alternative but to hold that
the so-called 'loss of confidence' is without basis and may not be successfully invoked as ground for
dismissal which requires some basis therefor, such ground never having been intended to afford an
occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because
of its subjective nature, to dismiss employees in contravention with the 'protection of labor' clause of
the Constitution. It is this Constitutional guaranty that accords even to employees employed on a
probationary basis the protection that their services may be terminated only for a just cause or when
authorized by existing laws, or when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer.'

3. There is likewise this excerpt from Meracap which calls for the reversal of the assailed order of the
Secretary of Labor. Thus: 'In this suit for certiorari to review the dismissal of an appeal from a
decision of the then Acting Secretary of Labor Amado G. Inciong by respondent Ronaldo Zamora,
Presidential Assistant on Legal Affairs, ordering the dismissal of petitioner Faustino Meracap, the
relevance of such a provision becomes apparent. It was alleged by petitioner that while the
termination of his services was based on his unauthorized absences, the real reason was due to his
union activities. Respondent Zamora ruled otherwise. Such a finding of fact must be accorded
deference. Nonetheless, considering that petitioner Meracap has been in the employ of the
International Ceramics Manufacturing Company, Inc. for eighteen years, it would appear that the
punishment was much too severe. Dismissal was not warranted. Suspension would suffice. To that
extent, certiorari lies.' Dismissal as pointed out in the latest case in point, decided fourteen days after
Acda, in the ponencia of Justice Melencio- Herrera in Visperas v. Inciong, 'is too harsh a penalty. A
penalty less punitive should have been proper.' In this case, upon mere suspicion, later found to be
unsubstantiated, he was immediately suspended. A two-year suspension would have sufficed, not
the loss of his job. The length of service was accorded due consideration in decisions of this Tribunal
ordering reinstatement, twenty years in De Leon v. National Labor Relations Commission and Reyes
v. Philippine Duplicators and twenty-two years in Union of Supervisors v. Secretary of Labor. Here
he was in the service for eleven years when suspended.

Accordingly, We must emphasize here the long and faithful years of service that petitioner had rendered to
respondent company, eleven good years, nine of which as Manager with station at Manila. It is plainly abusive of the
company and oppressive to the petitioner that the latter is peremptorily dismissed on the shallow claim of "
resignation without notice," and thereafter converted to alleged loss of confidence. This unjustified dismissal of the
petitioner calls for Our specific ruling in the cited case of De Leon vs. National Labor Relations Commission, 100
SCRA 691, 700, wherein the Court speaking through Justice De Castro said:

While a Managerial employee may be dismissed merely on the ground of loss of confidence the
matter of determining whether the cause for dismissing an employee is justified on ground of loss of
confidence, cannot be left entirely to the employer. Impartial tribunals do not rely only on the
statement made by employer that there is 'loss of confidence' unless duly proved or sufficiently
substantiated. We find no reason to disturb the findings of the Labor Arbiter that the charges against
petitioner were not fully substantiated, and 'there can be no valid reason for said loss of confidence.
...

So must this Court re-enforce the constitutional protection afforded labor and assure the right of workers to security
of tenure. Justice and equity call for petitioner's reinstatement. It should be so not only secundum rationem but
also secundum caritatem.

One last point. We reject the holding of the respondent Commission that petitioner's act in accepting from the
respondent airline several pay checks relative to his pension fund and the cash value representing an adjustment in
the peso amount of his dollar base by reason of currency fluctuation constitutes an admission if not a conformity, of
his lawful separation from office on August 31, 1975. It appears indubitably that the several pay checks mentioned
by respondent NLRC were only refunds of petitioner's contribution to the pension fund of respondent airline. The
money refunded was petitioner's own money, that which he personally contributed to the retirement plan. If
petitioner accepted the cash value representing the adjustment in the peso amount of petitioner's dollar base, the
money was legitimately and legally due to the petitioner; they are not benefits or privileges granted by the airline to
the dismissed petitioner. There can be no estoppel against petitioner's acceptance of the refund of monies
legitimately his own, nor a waiver of his right to question the termination of his services. (Urgelio vs. Osmea, Jr., 10
SCRA 253). Even employees who receive their separation pay are not barred from contesting the legality of their
dismissal. The acceptance of those benefits would not amount to estoppel as held in the leading case of Mercury
Drug Company vs. CIR as aptly cited in the decision of the Labor Arbiter. (De Leon vs. NLRC, 100 SCRA 691).
In Cario vs. Agricultural Credit and Cooperative Financing Administration, 18 SCRA 183, the rationale of the
Court's ruling rejecting the argument that acceptance of separation pay and terminal leave benefits by the
employees illegally dismissed by their employer constitutes estoppel, is stated thus, which We re-echo as follows:

Acceptance of those benefits would not amount to estoppel The reason is plain. Employer and
employee, obviously, do not stand on the same footing. The employer drove the employee to the
wall The latter must have to get hold of money. Because, out of job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proferred. His, then, is a case
of adherence, not of choice. One thing sure, however, is that petitioner did not relent on their claim.
They pressed it. They are deemed not to have waived any of their rights. Renuntiatio non
praesumitur.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the National Labor Relations Commission in
Case No. RB-4220 is hereby REVERSED and SET ASIDE, and the decision of the Labor Arbiter dated December
29, 1976 in RB-IV-4220-76 ordering petitioner's reinstatement to his former position with full backwages for three (3)
years without loss of seniority rights and other benefits recognized by law, including attorney's fees equivalent to
10% of the total monetary benefits which the petitioner may recover, is hereby REINSTATED. Costs against the
respondent Northwest.

Petition granted.

SO ORDERED.
G.R. No. 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 Review1 under Rule 45 of the Rules of Court,
assailing the June 14, 2002 Decision2 and September 25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR
SP No. 68030. The assailed Decision disposed as follows:

"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."4

The challenged Resolution denied petitioner's 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:

"Board Res. No. 99-52

"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to familiarize bank
employees with the various phases of bank operations and further strengthen the existing internal control
system[,] all officers and employees are subject to reshuffle of assignments. Moreover, this resolution does
not preclude the transfer of assignment of bank officers and employees from the branch office to the head
office and vice-versa."

"Board Res. No. 95-53

"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new
assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser

ELMER L. MENDOZA Appraiser Clerk-Meralco Collection

CHONA R. MENDOZA Clerk-Meralco Collection Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of
the bank's Tayabas branch, to implement the reshuffle.6 The new assignments were to "be effective on May 1, 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: The recent reshuffle of employees as per
Board Resolution dated April 25, 1999

"Dear Sir:

"This is in connection with the aforementioned subject matter and which the undersigned received on April
25, 1999.

"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-
Meralco Collection is deemed to be a demotion without any legal basis. Before this action on your part[,] the
undersigned has been besieged by intrigues due to [the] malicious machination of a certain public official
who is bruited to be your good friend. These malicious insinuations were baseless and despite the fact that I
have been on my job as Appraiser for the past six (6) years in good standing and never involved in any
anomalous conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your
part as a prelude to my termination in due time. This will constitute an unfair labor practice.

"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason
[for] my being reshuffled is made clear.

"Your kind consideration on this request will be highly appreciated."8

On May 10, 1999, Daya replied:

"Dear Mr. Mendoza,

"Anent your undated letter expressing your resentment/comments on the recent management's decision to
reshuffle the duties of bank employees, please be informed that it was never the intention (of management)
to downgrade your position in the bank considering that your due compensation as Bank Appraiser is
maintained and no future reduction was intended.

"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also
afford management an effective tool in providing the bank a sound internal control system/check and
balance and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of
employees shall be made at the discretion of management which may include bank officers, if necessary as
expressed in Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties of
employees, their position title [may be] retained if requested formally.

"Being a standard procedure in maintaining an effective internal control system recommended by the
Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank
management."9

On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave
of absence from work:

"Dear Sir:

"I wish I could continue working but due to the ailment that I always feel every now and then, I have the
honor to apply for at least ten (10) days sick leave effective June 7, 1999.

"Hoping that this request [merits] your favorable and kind consideration and 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 arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of seniority
rights with full backwages from date of dismissal to actual reinstatement in the amount
of P55,000.00 as of June 30, 2000.
 3. Ordering the payment of separation pay if reinstatement is not possible in the amount
of P30,000.00 in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus
afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount
of P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of the
monetary award."13

On appeal, the NLRC reversed the labor arbiter.14 In its July 18, 2001 Resolution, it held:

"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its implementation
of its Board Resolution directing the reshuffle of employees at its Tayabas branch to positions other than
those they were occupying. While at first the employees thereby affected would experience difficulty in
adjusting to their new jobs, it cannot be gainsaid that the objective for the reshuffle is noble, as not only
would the employees obtain additional knowledge, they would also be more well-rounded in the operations
of the bank and thus help the latter further strengthen its already existing internal control system.

"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an appraiser
he was made to perform the work of a clerk in the collection of Meralco payments, which he may have
considered as beneath him and his experience, being a pioneer employee. But it cannot be discounted
either that other employees at the Tayabas branch were similarly reshuffled. The only logical conclusion
therefore is that the Board Resolution was not aimed solely at the [petitioner], but for all the other employees
of the x x x bank as well. Besides, the complainant has not shown by clear, competent and convincing
evidence that he holds a vested right to the position of Appraiser. x x x.

"How and by what manner a business concern conducts its affairs is not for this Commission to interfere
with, especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad faith
or ill-will. x x x."15

After the NLRC denied his Motion for Reconsideration,16 petitioner brought before the CA a Petition for
Certiorari17assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:

"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the reshuffling of
employees at the bank is but a figment of his imagination as there is no evidence extant on record which
substantiates the same. His alleged demotion, the 'cold shoulder' stance, the things about his chair and
table, and the alleged reason for the harassment are but allegations bereft of proof and are perforce
inadmissible as self-serving statements and can never be considered repositories of truth nor serve as
foundations of court decisions anent the resolution of the litigants' rights.

"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no
[diminution] of his salary benefits and rank. He could even retain his position title, had he only requested for
it pursuant to the reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the
reshuffle. There is, therefore, no cause to doubt the reasons which the bank propounded in support of its
move to reshuffle its employees, viz:

1. to 'familiarize bank employees with the various phases of bank operations,' and

2. to 'further strengthen the existing internal control system' of the bank.

"The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of
constructive dismissal.

"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify
that the bank has dismissed the former from its employ. Mendoza separated himself from the bank's employ
when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer for no
apparent reason at all."18

Hence, this Petition.19

 The Issues

Petitioner raises the following issues for our consideration:

"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or
abandoned his job when he filed his Complaint for constructive and consequently illegal dismissal;

"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith and cannot be
made as the basis of a finding of constructive dismissal, even as the [petitioner's] demotion in rank is
admitted by both parties;

"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department
Store (323 SCRA 445)] is applicable to the case at bar;

"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims, damages, and
unpaid salaries for the period July 1-30, 1999, although this was not disputed by the private respondent; and

"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a nullity
since the appeal filed by private respondent before the NLRC on August 5, 2000 was on the 15th day or five
(5) days beyond the reglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules of
Procedure."20

In short, the main issue is whether petitioner was constructively dismissed from his employment.

The Court's 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.21 Petitioner argues that
he was compelled to file an action for 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.22 He adds that
the reshuffling of employees was done in bad 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.24 Indeed, labor laws discourage interference in employers'
judgments concerning the conduct of their business.25 The law must protect not only the 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.26 This privilege is inherent in the right of employers to
control and manage their enterprise effectively.27 The right of employees to security of 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.29 The test for determining the validity of the transfer of employees was
explained in Blue Dairy Corporation v. NLRC30 as follows:

"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play.
Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be
used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer
must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the
employer fail to overcome this burden of proof, the employee's transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered impossible,
unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise,
constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has
 become so unbearable to the employee leaving him with no option but to forego with his continued
employment."31

Petitioner's 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

Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various
phases of bank operations and further strengthen the existing internal control system"33 of all officers and
employees. We 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.34 There appears
no justification 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 respondent's 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.35 Purely conjectural is his claim that the reshuffle of personnel
was a harassment in retaliation for an alleged falsification case filed by his relatives against a public official.36 While
the rules of evidence prevailing in courts of law are not controlling in proceedings before the NLRC,37 parties must
nonetheless submit evidence to support their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled therein that the lack of notice and
hearing made the dismissal of the employee ineffectual, but not necessarily illegal.39 Thus, the procedural infirmity
was remedied by ordering payment of his full back wages from the time of his dismissal.40 The absence of
constructive dismissal in the instant case precludes 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 respondent's appeal before
the NLRC had allegedly been filed beyond the reglementary period.41 A careful scrutiny of his Petition for
Review42with the 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.
G.R. No. 168159. August 19, 2005

NORKIS TRADING CO., INC., ATTY. NORBERTO QUISUMBING, JR., RACQUEL LICSI, EMMANUEL S.
TAMAYO and NICHOL JUDE THADDEUS JURIDICO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MA. ARLENE C. GNILO, Respondent.

RESOLUTION

CHICO-NAZARIO, J.:

For resolution is a petition for review of the Decision1 and Resolution of the Court of Appeals, dated 07 March 2005
and 18 May 2005, respectively, affirming the Resolution of the National Labor Relations Commission (NLRC) dated
26 March 2004, which, in turn, affirmed the Decision of Labor Arbiter Rolando L. Bobis, dated 06 November 2003,
finding petitioners guilty of illegal dismissal.

On 06 June 2005, petitioners filed before this Court a motion for extension of time to file petition for review. In our
resolution of 04 July 2005, we denied this motion due to lack of:

a) sufficient showing that petitioners have not lost the fifteen (15)-day reglementary period pursuant to Section 2,
Rule 45 of the 1997 Rules of Civil Procedure, as amended, in view of counsels failure to indicate whether the Court
of Appeals resolution dated 18 May 2005 is a denial/dismissal of the petition or a denial of the motion for
reconsideration thereof; and

b) service of a copy of the motion on the Court of Appeals in accordance with Section 4, Rule 13 in relation to
Section 2, Rule 45 of the Rules.2

In the same resolution, this Court noted petitioners manifestation dated 07 June 2005 "that copies of the motion
were served on the Court of Appeals and the Office of the Solicitor General on 7 June 2005 by registered mail."3

On 04 July 2005, petitioners filed their petition for certiorari raising the sole issue of

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DENYING THE PETITIONERS MOTION FOR
RECONSIDERATION THEREBY AFFIRMING THE DECISION OF THE NLRC AND LABOR ARBITER THAT
PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED AND THEREFORE ENTITLED TO
BACKWAGES, 13TH MONTH PAY, SERVICE INCENTIVE LEAVE PAY, MORAL DAMAGES, EXEMPLARY
DAMAGES AND ATTORNEYS FEES.4

The antecedent facts are exhaustively presented in the assailed decision of the Court of Appeals as follows:

Private respondent Ma. Arlene C. Gnilo started working for petitioner Norkis Trading Co., Inc. on March 8, 1990
when she was initially trained as administration and finance officer assigned to the companys branch at Calamba,
Laguna. She was subsequently appointed as Acting Administrative Finance Officer with assignment at Naga City
Branch, a position she held until she achieved regular employment status. On December 1, 1993, she was
appointed as Branch Bookkeeper/Cashier of Naga City Branch (Rank Category 4B). On January 24, 2001, she was
promoted as Acting Senior Branch Control Officer for Bicol Region.

During her stint as Senior BCO for Bicol Region, private respondent was instructed by her immediate superior Ms.
Marfi Ruiz to confirm transactions pertaining to collections and deposits of BCO Marivic Faura at Polangui. In a
memorandum dated May 22, 2002, private respondent was informed by Deputy Controller Ms. Rhea De Jesus
about a recent company audit which disclosed that she had disregarded the detailed instructions of her superior and
failed to perform her duties as a Senior Branch Control Officer. She was thus directed to explain in writing what
actually transpired during her assignment at Polangui. She complied by submitting her written explanation on May
25, 2002. An investigation by the companys Internal Audit Group ensued and private respondent was formally
charged with "Negligence Resulting to Material Loss." She was instructed to make herself available by reporting to
the Inquiry Assistance Panel (IAP) on June 20, 2002.

After the hearing of the IAP was concluded, private respondent made a written "Request for Re-assignment"
addressed to Ms. De Jesus to be assigned as Cashier of the Naga Branch which is vacant and considering that she
is a resident of Naga City and a mother. On July 29, 2002, she reiterated this request to be assigned anew in Naga
City while waiting for the resolution of her case, citing that she is a mother of three (3) growing kids and she wanted
to be with her family. In August and September 2002, private respondent also requested to be furnished a copy of
the minutes and/or audit report of the IAP investigation. The company did not accede to her requests and she
continued reporting at the main office performing whatever work assigned to her, such as monitoring of collections
at Cubao Branch for which she submitted an accomplishment report to Deputy Controller Emmanuel S. Tamayo.

For the period March 18 to April 1, 2003, the company withheld the Transportation and Travel Allowance ("TNT")
being received by private respondent amounting to P7,555.00, which prompted her to formally protest her
"questionable assignment" at the Home Office (HO) in Mandaluyong City which she insisted is against her
appointment as Senior BCO for Bicol Region and Samar. In a letter dated March 21, 2003, addressed to Deputy
Controller Emmanuel S. Tamayo, private respondent berated management for wanting to ease her out of the
company due to a labor case (constructive dismissal) filed by her husband, who also worked at Norkis for more than
thirteen (13) years, and such withdrawal of her travel allowances is calculated to cause suffering on her part. She
expressed that the situation has become unbearable for her so that she is constrained to report back to Naga City
effective March 24, 2003, there being no written order issued by management for her to stay in the main office.

Upon returning to Naga City, however, private respondent learned from a co-employee that Deputy Controller
Tamayo through a telephone call gave instruction to deny her entry to the branch premises and access to company
records. She caused this incident to be entered at the local police blotter. On April 2, 2003, she received a faxed
"Speedletter" from Deputy Managing Director Nichol Jude Thaddeus C. Juridico and Deputy Controller Emmanuel
S. Tamayo directing her to report back to the main office reminding her that her new assignment required her to
report to the main office pending issuance of a permanent assignment, and that she was instructed to monitor the
BCO of Porta Coeli Finance Corporation (PCFC) branches and to assist the BCO Accounting Manager Belen Yaun
in the meantime. She was ordered to explain in writing within forty-eight (48) hours why no disciplinary action should
be taken against her for abandonment of work, which under existing company policy, carries the penalty of
dismissal. She was also directed to refund the total amount of P123,685.00 of travel and transportation allowance
received by her during the period June 1, 2002 and March 17, 2003 because she is not entitled thereto while
assigned at the main office.

In her faxed reply, private respondent explained that she reported at the main office starting June 10, 2002 upon
assurance given by her former superior, Ms. Aurea De Jesus, that she shall be receiving her regular "TNT" package
as Senior BCO-Bicol Region and Samar since her stay in the main office would be just temporary as they will just
iron out the problem in Polangui Branch. There was hesitation on her part since being a permanent resident of Naga
City and mother of three (3) children, she will be dislocated and separated from her family. She insisted that it was
never clarified to her that her area of assignment is being changed and also denied that Deputy Controller Tamayo
specifically instructed her to monitor the BCOs of Porta Coeli Finance Corporation (PCFC) or assist Ms. Belen
Yaun, pointing out that if she ever assisted Ms. Yaun it was her initiative to get herself busy and if ever she had a
record of travel to a PCFC branch, it was done out of an emergency or her superior was just forced to. She asserted
that her assignment at the HO is a demotion intended to make her feel that her continued presence in the company
is no longer necessary because neither Mr. Tamayo nor Ms. Yaun have been talking to her. Were it not for her
monthly "TNT," she could not have stayed at the HO because her take-home pay amounted to only a little
over P2,500.00 every fifteen (15) days, and its subsequent withdrawal by the company constrained her to report
back to Naga City branch, her repeated requests to be returned to her post having been ignored for the reason that
top management was against it. She asserted that her "TNT" being a long and accepted company policy, may not
be arbitrarily withdrawn and that all her cash advances and liquidations have been previously approved by her
superiors including Mr. Tamayo. She deplored the mental anguish and social humiliation wrought to her by her
present predicament and sought understanding from the management, wanting to know the reasons behind their
instruction to deny her entry to the premises of the Naga City branch and access to company records as if she were
a thief.

In a memorandum dated April 9, 2003, management reiterated its directive to private respondent for her to report
back to the main office, reminding her that despite her denial regarding any instruction from Mr. Tamayo for her to
monitor the PCFC branches, records showed that she had complied based on reports she had submitted to the
office. Private respondent, however, maintained her position that she could no longer report to the Home Office after
the company withdrew her monthly "TNT." She asserted that considering her difficult situation, she had no choice
but to stick to her appointment as Senior BCO-Bicol Region and Samar there being no superseding memo changing
her assignment.

On April 14, 2003, private respondent received a memorandum from the IAP for an investigation on the charges of
abandonment of work, insubordination and refusal to report back to the place of work (Head Office), and directing
her to attend a hearing set on April 16, 2003 at the main office. On April 15, 2003, private respondent acknowledged
receipt of said memo but proposed that the hearing be held at Naga City or that she be allowed to make a cash
advance to defray her expenses in going to Mandaluyong City to attend the hearing and investigation by the IAP.
She failed to attend the IAP hearing on the scheduled date as she had been waiting for action from management
regarding the concerns she had communicated. On that same day, she found out that her salary for the period April
1 to 15, 2003 was withheld and failing to get an explanation from management, she again reported the matter to the
police. Thereupon, she faxed a letter addressed to HRD Manager Raquel Licsi that the situation had become
unbearable for her tantamount to constructive dismissal and consequently she will ventilate her case before the
NLRC.

On April 21, 2003, private respondent filed a complaint for constructive dismissal before the regional arbitration
branch at Naga City, with claims for nonpayment of salaries, service incentive leave pay, 13th month pay, and
praying for reinstatement with full back wages, and moral and exemplary damages, and attorneys fees (NLRC SUB
RUB V No. 05-04-00098-03). On April 24, 2003, private respondent received another memo on the rescheduled
date of IAP hearing that very same day, but in a handwritten reply she submitted to the Naga City Branch, she
manifested that she could not longer report at the HO in view of the case she had already instituted with the NLRC.
On April 30, 2003, the company terminated her services effective May 2, 2003.5
In his decision dated 06 November 2003, the Labor Arbiter found petitioners guilty of illegal dismissal. The
dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered finding respondents [petitioners herein] guilty of ILLEGAL DISMISSAL.
Consequently, the latter are hereby directed to reinstate the complainant [private respondent herein] to her former
position as Sr. BCO in her assignment in Bicol/Samar, within ten (10) days from receipt of this decision, without loss
of seniority and to pay her salary corresponding thereto. Further, respondents are hereby ordered to pay jointly and
severally complainant with the following:

A. Backwages computed from the date of her separation on April 16, 2003 up to the date of her actual
reinstatement, either physically or on payroll, at the option of the respondent, which as of the date of this decision
has already amounted to P69,911.14, based on the rate of P9,273.02 per month for seven (7) [months];

B. 13th Month Pay equivalent to P3,091.00;

C. Service Incentive Leave Pay for three (3) years amounting to P5,349.75 computed at the rate of P356.65/day of
five (5) days per year.

D. Moral Damages of P200,000.00;

E. Exemplary Damages of P100,000.00; and

F. Attorneys fees equivalent to 10% of the above-amount of P378,351.89 which is P37,835.18.

All other claims are hereby ordered DISMISSED for lack of merit.6

Petitioners thereafter filed their memorandum of appeal before the NLRC which, however, affirmed in toto the
decision of the Labor Arbiter.7 Petitioners motion for reconsideration was likewise denied.8

Petitioners seasonably filed their petition for review on certiorari before the Court of Appeals. In the decision9 now
impugned before us, the appellate court denied said petition and dismissed the same for lack of merit. In said
decision, the Court of Appeals also affirmed the NLRCs resolutions dated 26 March 2004 and 20 May 2004. The
dispositive portion of the Court of Appeals decision follows:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED for lack of merit. Consequently, the challenged Resolutions dated March 26, 2004 and May 20, 2004 of
the National Labor Relations Commission in NLRC CA No. 038611-04 (NLRC SRAB-V-0400098-03) are hereby
both affirmed.10

Petitioners moved for the reconsideration of this ruling but they were rebuffed by the appellate court.11

In this petition, petitioners argue, in the main, that the decision to transfer or re-assign private respondent from Naga
City to the head office in Manila was a legitimate exercise of petitioner corporations management prerogative. Thus,
private respondents refusal to report to work in Manila, coupled with her insistence that she be allowed to resume
her work in Naga City, constitutes insubordination and willful disobedience justifying the termination of her
employment.

We do not agree.

Concededly, employers are allowed, under the broad concept of management prerogative, to regulate all aspects of
personnel administration including hiring, work assignments, working methods, time, place and manner of work,
tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and the dismissal and recall of workers.12

Particularly on the matter of transfer of personnel, this Court, in the case of Philippine Japan Active Carbon
Corporation v. National Labor Relations Commission,13 held that:

It is the employers prerogative, based on its assessment and perception of its employees qualifications, aptitudes,
and competence, to move them around in the various areas of its business operations in order to ascertain where
they will function with maximum benefit to the company. An employees right to security of tenure does not give him
such a vested right in his position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to
him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the
employee may not complain that it amounts to a constructive dismissal.14

The managements right to transfer or re-assign its personnel, however, is not absolute as it is subject to limitations
imposed by law, collective bargaining agreements, and general principles of fair play and justice.15 The employer
must, therefore, muster the test for determining the validity of the transfer of employees as enunciated in the case
of Blue Dairy Corporation v. National Labor Relations Commission,16 to wit:

. . . The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which
that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. Should the employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him with no option but to forego with his continued
employment.17

In this case, petitioners failed to pass this test. In the words of the Court of Appeals

While petitioners invoke management prerogative in the transfer of private respondent to Manila, there is no
showing at all of any valid and legitimate reason (i.e., business necessity) for the verbal transfer order, as in fact
private respondent was not given work to do, only occasionally and constantly (sic) avoided by her superiors. Her
meek and desperate plea to be allowed to return to her former post in Naga City Branch was met with total silence
on managements end. Such insensitivity and disdain pervading her work environment became more intense when
her travel allowances were withdrawn and management demanded for refund of those amounts received by her on
the ground that she is not entitled thereto while posted in the main office, which realized such erroneous grant only
at a late stage after all the vouchers underwent routine approval by the concerned officers of the company. No other
conclusion is discernible from the attendant circumstances except to confirm private respondents sentiment
gleaned from what she had been hearing all along, that top management indeed wanted to "ease her out of the
company," as a consequence of her husbands filing of a similar illegal dismissal suit before the NLRC.18

Surely, petitioners cannot expect this Court to sustain its stance by the simple expedient of invoking its
"management prerogative." In the end, it is still up to them, as employers, to discharge the burden of proving the
validity of private respondents transfer to the head office. Having failed in this regard, we are constrained to sustain
the findings of the Court of Appeals as well as those of the NLRC.

We, likewise, rule in favor of private respondent with respect to her entitlement to moral and exemplary damages.
Moral damages may be recovered only where the dismissal of the employee was tainted by bad faith or fraud, or
where it constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or public
policy while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or
malevolent manner.19 These damages, however, are not intended to enrich private respondent such that, after
deliberations, we find the amount of P50,000.00 for moral damages and P50,000.00 for exemplary damages
sufficient to assuage the sufferings experienced by private respondent and by way of example or correction for the
public good.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Court of Appeals Decision
dated 07 March 2005 and its Resolution dated 18 May 2005 are hereby AFFIRMED with the following
MODIFICATIONS:1) the amount of backwages shall be computed from the date of private respondents illegal
dismissal until the finality of this judgment; and 2) the amount of moral and exemplary damages are reduced
to P50,000.00 each. With costs.

SO ORDERED.
G.R. No. 152689 October 12, 2005

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., ENRIQUE D. PEREZ, RICARDO R. ZARATE,
ISABELO A. FERIDO, JR. and RODOLFO R. SANTOS, Petitioners,
vs.
ALFREDO S. PAGUIO, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 154072

ALFREDO S. PAGUIO, Petitioner,

vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., ENRIQUE D. PEREZ, RICARDO R. ZARATE,
ISABELO A. FERIDO, JR. and RODOLFO R. SANTOS, Respondents.

DECISION

QUISUMBING, J.:

This petition for review on certiorari docketed as G.R. No. 152689, assails the Decision1 dated March 7, 2002 of the
Court of Appeals in CA-G.R. SP No. 61528. It is consolidated with the Motions for Reconsideration of this Courts
Decision2 dated December 3, 2002 in G.R. No. 154072.

The antecedent facts of the case are as follows:

Petitioner Philippine Long Distance Telephone Company, Inc. (PLDT) has 27 Exchanges in its Greater Metro Manila
(GMM) Network. Alfredo S. Paguio was the Head of the Garnet Exchange.

In 1994, PLDT assessed the performance of the 27 Exchanges comprising the GMM Network. Upon receipt of the
ratings, Paguio sent Rodolfo Santos, his immediate supervisor and the Assistant Vice-President of the GMM East
Center, a letter criticizing the PLDT criteria for performance rating as unfair because they depended on manpower.
He also suggested that the criteria failed to recognize that exchanges with new plants could easily meet the
objectives of GMM compared to those with old plants. Despite Paguios criticism, Garnet Exchange, the oldest plant
in GMM, obtained the top rating in the GMM. Nevertheless, Paguio reiterated his letter to Santos and objected to the
performance rating as it was based only on the attainment of objectives, without considering other relevant factors.

In June 1996, PLDT rebalanced the manpower of the East Center. Paguio wrote Santos and requested
reconsideration of the manpower rebalancing, claiming it was unfair to Garnet Exchange because as the oldest
exchange in the East Center, it was disallowed to use contractors for new installations and was not made
beneficiary of the cut-over bonus. After Santos denied his request, Paguio elevated the matter to respondent Isabelo
Ferido, Jr., the First Vice-President-GMM Network Services.

On January 17, 1997, Paguio was reassigned as Head for Special Assignment at the Office of the GMM East
Center and asked to turn over his functions as Garnet Exchange Head to Tessie Go. Believing that his transfer was
a disciplinary action, Paguio requested Ferido for a formal hearing of the charges against him and asked that his
reassignment be deferred. He also filed a complaint against Santos for grave abuse of authority and manipulation of
the East Center performance. As no action was taken by Ferido, Paguio elevated the matter to Enrique D. Perez,
the Senior Executive Vice-President and Chief Operating Officer of PLDT, who advised him to await the resolution
of his complaint.

Consequently, Ferido sent Paguio an inter-office memo stating that he found Paguios reassignment in order as it
was based on the finding that Paguio was not a team player and cannot accept decisions of management, which is
short of insubordination. Ferido advised Paguio to transfer to any group in the company that may avail of his
services. Likewise, Perez, thru an inter-office memo, informed Paguio that his transfer was not in the nature of a
disciplinary action that required investigation and that he agreed with the reasons of the transfer.

Aggrieved, Paguio filed, before the Regional Arbitration Branch of the National Labor Relations Commission
(NLRC), a complaint for illegal dismissal with prayer for reinstatement and damages. He later amended his
complaint to illegal demotion with prayer for reversion to old position, damages and attorneys fees. On November
27, 1998, the Labor Arbiter upheld the validity of Paguios transfer and dismissed the complaint.3

Paguio appealed to the NLRC, which reversed the Labor Arbiters decision. The NLRC found the transfer unlawful,
firstly, because Paguios comments were done in good faith to help his team see their strong and weak points.
According to the NLRC, this showed that he strove to improve his team and was, indeed, a team player. The NLRC
noted that the companys manual emphasized the importance of communication and what Paguio did was merely to
ventilate his opinions and observations. Secondly, Paguios transfer involved a diminution of his salary, benefits and
other privileges.4
PLDT moved for reconsideration but the same was denied by the NLRC.5 Consequently, PLDT filed a petition for
certiorari with the Court of Appeals. The appellate court affirmed the decision of the NLRC but deleted the monetary
award representing the 16% monthly salary increase.6

PLDT appealed directly to this Court. Its petition was docketed as G.R. No. 152689.

On the other hand, Paguio sought for partial reconsideration. Upon the appellate courts denial7 of his motion for
reconsideration, Paguio elevated the case to this Court where it was docketed as G.R. No. 154072. On December
3, 2002, the Court rendered judgment in G.R. No. 154072 and held that Paguio was not entitled to the monetary
award representing the 16% monthly salary increase. However, the Court awarded him moral and exemplary
damages and attorneys fees.8

Both Paguio and PLDT sought reconsideration. On February 26, 2003, the Court ordered the consolidation of G.R.
No. 152689 and the motions for reconsideration in G.R. No. 154072.9

In G.R. No. 152689, PLDT imputes the following errors to the appellate court:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN AFFIRMING THE NLRCS
DECISION AND RESOLUTION BY RULING THAT THE TRANSFER OR RE-ASSIGNMENT OF PRIVATE
RESPONDENT PAGUIO WAS UNLAWFUL AND ILLEGAL.

THE HONORABLE COURT OF APPEALS FINDING ON UNLAWFULNESS OF PAGUIOS TRANSFER OR

REASSIGNMENT CONSTITUTES A DRASTIC DEPARTURE OF THE INSTANCES CONSIDERED TO
CONSTITUTE AN ILLEGAL TRANSFER AS RULED IN SETTLED JURISPRUDENCE INVOLVING SIMILAR
CASES.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN CONSIDERING PETITIONERS ACT OF

CHANGING THE PRIVATE RESPONDENTS ASSIGNMENT ON LEGITIMATE GROUNDS AS TANTAMOUNT TO
AN ILLEGAL TRANSFER.

THE HONORABLE COURT OF APPEALS CONTRADICTED THE SETTLED JURISPRUDENCE ON THE MATTER
WHEN IT ORDERED THE REINSTATEMENT OF PAGUIO.10

In brief, the petitioner asks this Court to resolve now the legality of Paguios transfer.

PLDT contends that the appellate court erred in lending more weight to the factual findings of the NLRC over those
of the Labor Arbiter without stating its basis. Moreover, PLDT alleges that the NLRC ruling would allow a change of
cause of action since the complaint alleged "illegal demotion" while the decision involved "illegal transfer." PLDT
asserts that the reassignment of Paguio was not a demotion because it was merely a transfer to a position of
equivalent rank and salary. According to PLDT, transfer, as a rule is allowed by law unless it is vitiated by improper
motive or is used as a disguise to remove or punish the employee. It maintains that the appellate court failed to
ascribe any illicit or improper motive behind the transfer of Paguio. Lastly, PLDT claims that the reinstatement of
Paguio is no longer possible as his relationship with the company is already strained and that his position no longer
exists due to a company-wide reorganization.

Paguio argues that his transfer was a demotion since he was assigned to a functionless position with neither office
nor staff and deprived of the opportunity to be promoted as he would have no performance to speak of in his new
post.

Prefatorily, we note from the records that there has been no change of cause of action from "illegal demotion" to
"illegal transfer." Illegal demotion is a type of illegal transfer. Moreover, it is familiar and fundamental doctrine that it
is not the title of the action but the allegations in the pleading that determines the nature of the action.11

Now, on the crux of the matter, jurisprudence abounds that, except as limited by special laws, an employer is free to
regulate, according to his own discretion and judgment, all aspects of employment, including the transfer of
employees.12 It is the employers prerogative, based on its assessment and perception of its employees
qualifications, aptitudes, and competence, to deploy its employees in the various areas of its business operations in
order to ascertain where they will function with maximum benefit to the company. An employees right to security of
tenure does not give him such a vested right in his position as would deprive the company of its prerogative to
change his assignment or transfer him where he will be most useful.13

Nonetheless, as correctly pointed out by the Court of Appeals, there are limits to the management prerogative.
While it may be conceded that management is in the best position to know its operational needs, the exercise of
management prerogative cannot be utilized to circumvent the law and public policy on labor and social justice. That
prerogative accorded management should not defeat the very purpose for which our labor laws exist: to balance the
conflicting interests of labor and management. By its very nature, management prerogative must be exercised
always with the principles of fair play and justice.14 In particular, the employer must be able to show that the transfer
is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits.15 The employer bears the burden of proving that the transfer
of the employee has complied with the foregoing test.16

In the present case, we see no credible reason for Paguios transfer except his criticisms of the companys
performance evaluation methods. Based on the undisputed facts, Garnet Exchange was doing well and excelled in
the performance rating. In the same way, Paguios performance was consistently rated as outstanding. There was
also no proof that Paguio refused to comply with any management policy. Patently, his transfer could not be due to
poor performance. Neither was it because he was needed in the new post for the new assignment was functionless
and it was nothing but a title. Paguios transfer could only be caused by the managements negative reception of his
comments. It is prejudicial to Paguio because it left him out for a possible promotion as he was assigned to a
functionless position with neither office nor staff.

In the motion for reconsideration in G.R. No. 154072, Paguio maintains that it is speculation on the part of the Court
to rule that he would not maintain his outstanding performance. Thus, he prays for a monthly salary increase.

In its motion for reconsideration, PLDT points out that one reason for the award of damages and attorneys fees was
the Courts mistaken belief that the company failed to appeal the Court of Appeals decision. However, PLDT
contends that there was a pending appeal of the Court of Appeals finding of illegal transfer, particularly G.R. No.
152689.

We reiterate our decision in G.R. No. 154072 that awarding a monthly salary increase would be merely based on
speculation. A salary increase is conditioned on both the outstanding performance of the employee and high returns
for the company. It is not a demandable right but a benefit given by management, subject to the attainment of
specific goals. Paguios future performance could not be guaranteed to be excellent, with high returns to the
company, simply because in the past he did excel. That is the basic reason for a periodic performance rating.

Now, moral damages are recoverable upon sufficient proof of moral suffering, mental anguish, fright or serious
anxiety. The claimant should satisfactorily show the existence of the factual basis of damages.17 In the present case,
though Paguios transfer was found unlawful by the appellate court, our review of the records would show that there
is no factual basis for such an award.

No exemplary damages can be awarded in the absence of moral or actual damages. And where the awards for
moral and exemplary damages are eliminated, so must the award for attorneys fees.18

WHEREFORE, the petition in G.R. No. 152689 is DENIED. The Decision dated March 7, 2002 of the Court of
Appeals in CA-G.R. SP No. 61528 is AFFIRMED. The motion for reconsideration by Alfredo Paguio of
the Decisiondated December 3, 2002 in G.R. No. 154072 is DENIED. The motion for reconsideration of Philippine
Long Distance Telephone Company, Inc. is GRANTED IN PART by deleting the award in the Decision dated
December 3, 2002, for moral and exemplary damages and attorneys fees.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 164774 April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,

vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.

DECISION

PUNO, J.:

We are called to decide an issue of first impression: whether the policy of the employer banning spouses from
working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a
valid exercise of management prerogative.

At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R.
SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling
of the Labor Arbiter.

Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of paper products.
Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its
Managing Director.

The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and
Lorna E. Estrella (Estrella) were all regular employees of the company.1

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the
company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they
decide to get married, one of them should resign pursuant to a company policy promulgated in 1995,2 viz.:

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of
relationship, already employed by the company.

2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them should
resign to preserve the policy stated above.3

Simbol resigned on June 20, 1998 pursuant to the company policy.4

Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married
on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they
decide to get married. Comia resigned on June 30, 2000.5

Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated that
Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to
immorality but she opted to resign on December 21, 1999.6

The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money
and property accountabilities in the company and that they release the latter of any claim or demand of whatever
nature.7

Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily;
they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she
had a relationship with co-worker Zuiga who misrepresented himself as a married but separated man. After he got
her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at
the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but
she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the
personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being
dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one
(21) days and has not been given a chance to explain. The management asked her to write an explanation.
However, after submission of the explanation, she was nonetheless dismissed by the company. Due to her urgent
need for money, she later submitted a letter of resignation in exchange for her thirteenth month pay.8

Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorneys
fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code.
They also contended that they were dismissed due to their union membership.

On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived as management
prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment,
working method, time, place and manner of work, tools to be used, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate,
according to his own discretion and judgment all the aspects of employment.9 (Citations omitted.)

On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. 10

Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution11 dated August 8,
2002. They appealed to respondent court via Petition for Certiorari.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.:

WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor Relations Commission
is hereby REVERSED and SET ASIDE and a new one is entered as follows:

(1) Declaring illegal, the petitioners dismissal from employment and ordering private respondents to
reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time
of their dismissal until actual reinstatement; and

(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of the award and the
cost of this suit.13

On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:

1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and the
family of employees and of Article 136 of the Labor Code; and

2. x x x respondents resignations were far from voluntary.14

We affirm.

The 1987 Constitution15 states our policy towards the protection of labor under the following provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers
and promote their welfare.

xxx

Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers, recognizing the right
of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments,
and to expansion and growth.

The Civil Code likewise protects labor with the following provisions:

Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special
laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of
labor and similar subjects.

Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer.

The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article
136 of the Labor Code which provides:

Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment
that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.

Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear
to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first
paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the
right to choose who between them should resign. Further, they are free to marry persons other than co-employees.
Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out
its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of
management.16

It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature
of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons
based on their status as a relative, rather than upon their ability.17 These policies focus upon the potential
employment problems arising from the perception of favoritism exhibited towards relatives.

With more women entering the workforce, employers are also enacting employment policies specifically prohibiting
spouses from working for the same company. We note that two types of employment policies involve spouses:
policies banning only spouses from working in the same company (no-spouse employment policies), and those
banning all immediate family members, including spouses, from working in the same company (anti-nepotism
employment policies).18

Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are twenty state
statutes20 in the United States prohibiting marital discrimination. Some state courts21 have been confronted with the
issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination.

In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of
employment discrimination: the disparate treatment and the disparate impact. Under the disparate treatment
analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment
policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For
example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of
female employees, is discriminatory on its face.22

On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a
disproportionate effect on a particular class. For example, although most employment policies do not expressly
indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects
one sex.23

The state courts rulings on the issue depend on their interpretation of the scope of marital status discrimination
within the meaning of their respective civil rights acts. Though they agree that the term "marital status"
encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are
divided on whether the term has a broader meaning. Thus, their decisions vary.24

The courts narrowly25 interpreting marital status to refer only to a person's status as married, single, divorced, or
widowed reason that if the legislature intended a broader definition it would have either chosen different language or
specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and
not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned
policies and ruled that they did not violate the marital status discrimination provision of their respective state
statutes.

The courts that have broadly26 construed the term "marital status" rule that it encompassed the identity, occupation
and employment of one's spouse. They strike down the no-spouse employment policies based on the broad
legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status
provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual
effect on the individual's qualifications or work performance.27 These courts also find the no-spouse employment
policy invalid for failure of the employer to present any evidence of business necessity other than the general
perception that spouses in the same workplace might adversely affect the business.28 They hold that the absence of
such a bona fide occupational qualification29 invalidates a rule denying employment to one spouse due to the
current employment of the other spouse in the same office.30 Thus, they rule that unless the employer can prove that
the reasonable demands of the business require a distinction based on marital status and there is no better
available or acceptable policy which would better accomplish the business purpose, an employer may not
discriminate against an employee based on the identity of the employees spouse.31 This is known as the bona fide
occupational qualification exception.

We note that since the finding of a bona fide occupational qualification justifies an employers no-spouse rule, the
exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity
for which no alternative exists other than the discriminatory practice.32 To justify a bona fide occupational
qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the
essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly perform the duties of the job.33

The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard
of reasonableness of the company policy which is parallel to the bona fide occupational qualification requirement.
In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs and information from competitors. We considered the
prohibition against personal or marital relationships with employees of competitor companies upon Glaxos
employees reasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In
laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that
a competitor company will gain access to its secrets and procedures.35

The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise
of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company
v. NLRC.36 In said case, the employee was dismissed in violation of petitioners policy of disqualifying from work any
woman worker who contracts marriage. We held that the company policy violates the right against discrimination
afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.:

[A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground
of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature
would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.37(Emphases supplied.)

The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to
uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable
business necessity. The burden was successfully discharged in Duncan but not in PT&T.

We do not find a reasonable business necessity in the case at bar.

Petitioners sole contention that "the company did not just want to have two (2) or more of its employees related
between the third degree by affinity and/or consanguinity"38 is lame. That the second paragraph was meant to give
teeth to the first paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required
by the law.

It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were
asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a
Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its
business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,
then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we
uphold the questioned rule without valid justification, the employer can create policies based on an unproven
presumption of a perceived danger at the expense of an employees right to security of tenure.

Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to
marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor
Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass
judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The
failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of married persons working
together in one company.40

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the
petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw
inferences from the legislatures silence41 that married persons are not protected under our Constitution and declare
valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a
reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative.
Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and
academic.

As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation
letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The
respondent court failed to categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated
along with Simbol and Comia.

Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We
examined the records of the case and find Estrellas contention to be more in accord with the evidence. While
findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality,
this rule admits of exceptions,42 as in the case at bar.

Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral
conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter
in exchange for her thirteenth month pay.

The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man
and she could not stand being looked upon or talked about as immoral43 is incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for
illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is
compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing
an office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a
complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was
voluntary, Estrellas dismissal is declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004
is AFFIRMED. 1avvphil.net

SO ORDERED.
G.R. No. 163269 April 19, 2006

ROLANDO C. RIVERA, Petitioner,

vs.
SOLIDBANK CORPORATION, Respondent.

DECISION

CALLEJO, SR., J.:

Assailed in this Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
52235 as well as its Resolution2 denying the Motion for Partial Reconsideration of petitioner Rolando C. Rivera.

Petitioner had been working for Solidbank Corporation since July 1, 1977.3 He was initially employed as an Audit
Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant, and Assistant Manager. Prior to his
retirement, he became the Manager of the Credit Investigation and Appraisal Division of the Consumers Banking
Group. In the meantime, Rivera and his brother-in-law put up a poultry business in Cavite.

In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary Retirement
Program (ORP), under which an employee would receive 85% of his monthly basic salary multiplied by the number
of years in service; and (b) the Special Retirement Program (SRP), under which a retiring employee would receive
250% of the gross monthly salary multiplied by the number of years in service.4 Since Rivera was only 45 years old,
he was not qualified for retirement under the ORP. Under the SRP, he was entitled to receive P1,045,258.95 by way
of benefits.5

Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for retirement under the
SRP. Solidbank approved the application and Rivera was entitled to receive the net amount of P963,619.28. This
amount included his performance incentive award (PIA), and his unearned medical, dental and optical allowances in
the amount of P1,666.67, minus his total accountabilities to Solidbank amounting to P106,973.00.6 Rivera received
the amount and confirmed his separation from Solidbank on February 25, 1995.7

Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim, which was notarized
on March 1, 1995.8 Rivera acknowledged receipt of the net proceeds of his separation and retirement benefits and
promised that "[he] would not, at any time, in any manner whatsoever, directly or indirectly engage in any unlawful
activity prejudicial to the interest of Solidbank, its parent, affiliate or subsidiary companies, their stockholders,
officers, directors, agents or employees, and their successors-in-interest and will not disclose any information
concerning the business of Solidbank, its manner or operation, its plans, processes, or data of any kind."9

Aside from acknowledging that he had no cause of action against Solidbank or its affiliate companies, Rivera agreed
that the bank may bring any action to seek an award for damages resulting from his breach of the Release, Waiver
and Quitclaim, and that such award would include the return of whatever sums paid to him by virtue of his retirement
under the SRP.10 Rivera was likewise required to sign an undated Undertaking as a supplement to the Release,
Waiver and Quitclaim in favor of Solidbank in which he declared that he received in full his entitlement under the law
(salaries, benefits, bonuses and other emoluments), including his separation pay in accordance with the SRP. In this
Undertaking, he promised that "[he] will not seek employment with a competitor bank or financial institution within
one (1) year from February 28, 1995, and that any breach of the Undertaking or the provisions of the Release,
Waiver and Quitclaim would entitle Solidbank to a cause of action against him before the appropriate courts of
law.11 Unlike the Release, Waiver and Quitclaim, the Undertaking was not notarized.

On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers Banking Group.12 Upon discovering this, Solidbank First Vice-
President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a letter dated May 18, 1995, informing
Rivera that he had violated the Undertaking. She likewise demanded the return of all the monetary benefits he
received in consideration of the SRP within five (5) days from receipt; otherwise, appropriate legal action would be
taken against him.13

When Rivera refused to return the amount demanded within the given period, Solidbank filed a complaint for Sum of
Money with Prayer for Writ of Preliminary Attachment14 before the Regional Trial Court (RTC) of Manila on June 26,
1995. Solidbank, as plaintiff, alleged therein that in accepting employment with a competitor bank for the same
position he held in Solidbank before his retirement, Rivera violated his Undertaking under the SRP. Considering that
Rivera accepted employment with Equitable barely three months after executing the Undertaking, it was clear that
he had no intention of honoring his commitment under said deed.

Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus interests therein, and
attorneys fees, thus:

WHEREFORE, it is respectfully prayed that:

 1. At the commencement of this action and upon the filing of a bond in such amount as this Honorable Court
may fix, a writ of preliminary attachment be forthwith issued against the properties of the defendant as
satisfaction of any judgment that plaintiff may secure;

2. After trial, judgment be rendered ordering defendant to pay plaintiff the following sums: NINE HUNDRED
SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100 ONLY (P963,619.28) PESOS,
Philippine Currency, as of 23 May 1995, plus legal interest of 12% per annum until fully paid;

3. Such sum equivalent to 10% of plaintiffs claims plus P2,000.00 for every appearance by way of attorneys
fees; and

4. Costs of suit.

PLAINTIFF prays for other reliefs just and equitable under the premises.15

Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of the Release, Waiver and
Quitclaim and Undertaking which Rivera executed.16

In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary Attachment17 ordering Deputy Sheriff
Eduardo Centeno to attach all of Riveras properties not exempt from execution. Thus, the Sheriff levied on a parcel
of land owned by Rivera.

In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he received the net amount
of P963,619.28 as separation pay. However, the employment ban provision in the Undertaking was never conveyed
to him until he was made to sign it on February 28, 1995. He emphasized that, prior to said date, Solidbank never
disclosed any condition to the retirement scheme, nor did it impose such employment ban on the bank officers and
employees who had previously availed of the SRP. He alleged that the undertaking not to "seek employment with
any competitor bank or financial institution within one (1) year from February 28, 1995" was void for being contrary
to the Constitution, the law and public policy, that it was unreasonable, arbitrary, oppressive, discriminatory, cruel,
unjust, inhuman, and violative of his human rights. He further claimed that the Undertaking was a contract of
adhesion because it was prepared solely by Solidbank without his participation; considering his moral and economic
disadvantage, it must be liberally construed in his favor and strictly against the bank.

On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging therein that Rivera raised no
genuine issue as to any material fact in his Answer except as to the amount of damages. It prayed that the RTC
render summary judgment against Rivera. Solidbank alleged that whether or not the employment ban provision
contained in the Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It insisted that Rivera
signed the Undertaking voluntarily and for valuable consideration; and under the Release, Waiver and Quitclaim, he
was obliged to return the P963,619.28 upon accepting employment from a competitor bank within the one-year
proscribed period. Solidbank appended to its motion the Affidavit of Villarosa, where she declared that Rivera was
employed by Equitable on May 1, 1995 for the same position he held before his retirement from Solidbank.

Rivera opposed the motion contending that, as gleaned from the pleadings of the parties as well as Villarosas
Affidavit, there are genuine issues as to material facts which call for the presentation of evidence. He averred that
there was a need for the parties to adduce evidence to prove that he did not sign the Undertaking voluntarily. He
claimed that he would not have been allowed to avail of the SRP if he had not signed it, and consequently, his
retirement benefits would not have been paid. This was what Ed Nallas, Solidbank Assistant Vice-President for HRD
and Personnel, told him when he received his check on February 28, 1995. Senior Vice-President Henry Valdez, his
superior in the Consumers Banking Group, also did not mention that he would have to sign such Undertaking which
contained the assailed provision. Thus, he had no choice but to sign it. He insisted that the question of whether he
violated the Undertaking is a genuine issue of fact which called for the presentation of evidence during the hearing
on the merits of the case. He also asserted that he could not cause injury or prejudice to Solidbanks interest since
he never acquired any sensitive or delicate information which could prejudice the banks interest if disclosed.

Rivera averred that he had the right to adduce evidence to prove that he had been faithful to the provisions of the
Release, Waiver and Quitclaim, and the Undertaking, and had not committed any act or done or said anything to
cause injury to Solidbank.18

Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he had to sign the Undertaking
containing the employment ban provision, otherwise his availment of the SRP would not push through. There was
no truth to the banks allegation that, "in exchange for receiving the larger amount of P1,045,258.95 under the SRP,
instead of the very much smaller amount of P224,875.81 under the ORP, he agreed that he will not seek
employment in a competitor bank or financial institution within one year from February 28, 1995." It was the bank
which conceived the SRP to streamline its organization and all he did was accept it. He stressed that the decision
whether to allow him to avail of the SRP belonged solely to Solidbank. He also pointed out that the employment ban
provision in the Undertaking was not a consideration for his availment of the SRP, and that if he did not avail of the
retirement program, he would have continued working for Solidbank for at least 15 more years, earning more than
what he received under the SRP. He alleged that he intended to go full time into the poultry business, but after
about two months, found out that, contrary to his expectations, the business did not provide income sufficient to
support his family. Being the breadwinner, he was then forced to look for a job, and considering his training and
experience as a former bank employee, the job with Equitable was all he could find. He insisted that he had
remained faithful to Solidbank and would continue to do so despite the case against him, the attachment of his
family home, and the resulting mental anguish, torture and expense it has caused them.19

In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was the only kind of work he
knew. The ban was, in fact, practically absolute since it applied to all financial institutions for one year from February
28, 1995. He pointed out that he could not work in any other company because he did not have the qualifications,
especially considering his age. Moreover, after one year from February 28, 1995, he would no longer have any
marketable skill, because by then, it would have been rendered obsolete by non-use and rapid technological
advances. He insisted that the ban was not necessary to protect the interest of Solidbank, as, in the first place, he
had no access to any "secret" information which, if revealed would be prejudicial to Solidbanks interest. In any
case, he was not one to reveal whatever knowledge or information he may have acquired during his employment
with said bank.20

In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995 SRP is purely a
management prerogative. It was not for Rivera to question and decry the banks policy to protect itself from unfair
competition and disclosure of its trade secrets. The substantial monetary windfall given the retiring officers was
meant to tide them over the one-year period of hiatus, and did not prevent them from engaging in any kind of
business or bar them from being employed except with competitor banks/financial institutions.21

On December 18, 1995, the trial court issued an Order of Summary Judgment.22 The fallo of the decision reads:

WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and against defendant ordering the
latter to pay to plaintiff bank the amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of May 23, 1995, plus legal interest at 12%
per annum until fully paid, and the costs of the suit.

FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed to meet again and sit down
to find out how they can finally end this rift and litigation, all in the name of equity, for after all, defendant had worked
for the bank for some 18 years.23

The trial court declared that there was no genuine issue as to a matter of fact in the case since Rivera voluntarily
executed the Release, Waiver and Quitclaim, and the Undertaking. He had a choice not to retire, but opted to do so
under the SRP, and, in fact, received the benefits under it.

According to the RTC, the prohibition incorporated in the Undertaking was not unreasonable. To allow Rivera to be
excused from his undertakings in said deed and, at the same time, benefit therefrom would be to allow him to enrich
himself at the expense of Solidbank. The RTC ruled that Rivera had to return the P963,619.28 he received from
Solidbank, plus interest of 12% per annum from May 23, 1998 until fully paid.

Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002 partially granting the
appeal. The fallo of the decision reads:

WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is AFFIRMED with the
modification that the attachment and levy upon the family home covered by TCT No. 51621 of the Register of
Deeds, Las Pias, Metro Manila, is hereby SET ASIDE and DISCHARGED.

SO ORDERED.24

The CA declared that there was no genuine issue regarding any material fact except as to the amount of damages.
It ratiocinated that the agreement between Rivera and Solidbank was the law between them, and that the
interpretation of the stipulations therein could not be left upon the whims of Rivera. According to the CA, Rivera
never denied signing the Release, Waiver, and Quitclaim, including the Undertaking regarding the employment
prohibition. He even admitted joining Equitable as an employee within the proscribed one-year period. The alleged
defenses of Rivera, the CA declared, could not prevail over the admissions in his pleadings. Moreover, Riveras
1avvphil.net

justification for taking the job with Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in its execution. Having executed
the said deed and thereafter receiving the benefits under the SRP, he is deemed to have waived the right

to assail the same, hence, is estopped from insisting or retaining the said amount of P963,619.28.

However, the CA ruled that the attachment made upon Riveras family home was void, and, pursuant to the
mandate of Article 155, in relation to Article 153 of the Family Code, must be discharged.

Hence, this recourse to the Court.

Petitioner avers that

I.

THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE SUMMARY JUDGMENT
RENDERED BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF GENUINE ISSUES AS TO MATERIAL
FACTS WHICH CALL FOR THE PRESENTATION OF EVIDENCE IN A TRIAL ON THE MERITS.

II.

THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR EMPLOYMENT BAN IMPOSED BY
RESPONDENT SOLIDBANK UPON HEREIN PETITIONER NULL AND VOID FOR BEING UNREASONABLE AND
OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE WHICH VIOLATES PUBLIC POLICY AS
ENUNCIATED IN OUR CONSTITUTION AND LAWS.

III.

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION ORDERING HEREIN
RESPONDENT TO PAY SOLIDBANK THE AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL
INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.

IV.

MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE PORTION OF THE SUMMARY
JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL
FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25

The issues for resolution are: (1) whether the parties raised a genuine issue in their pleadings, affidavits, and
documents, that is, whether the employment ban incorporated in the Undertaking which petitioner executed upon his
retirement is unreasonable, oppressive, hence, contrary to public policy; and (2) whether petitioner is liable to
respondent for the restitution of P963,619.28 representing his retirement benefits, and interest thereon at 12% per
annum as of May 23, 1995 until payment of the full amount.

On the first issue, petitioner claims that, based on the pleadings of the parties, and the documents and affidavits
appended thereto, genuine issues as to matters of fact were raised therein. He insists that the resolution of the issue
of whether the employment ban is unreasonable requires the presentation of evidence on the circumstances which
led to respondent banks offer of the SRP and ORP, and petitioners eventual acceptance and signing of the
Undertaking on March 1, 1995. There is likewise a need to adduce evidence on whether the employment ban is
necessary to protect respondents interest, and whether it is an undue restraint on petitioners constitutional right to
earn a living to support his family. He further insists that respondent is burdened to prove that it sustained damage
or injury by reason of his alleged breach of the employment ban since neither the Release, Waiver and Quitclaim,
and Undertaking he executed contain any provision that respondent is automatically entitled to the restitution of
the P963,619.28. Petitioner points out that all the deeds provide is that, in case of breach thereof, respondent is
entitled to protection before the appropriate courts of law.

On the second issue, petitioner avers that the prohibition incorporated in the Release, Waiver and Quitclaim barring
him as retiree from engaging directly or indirectly in any unlawful activity and disclosing any information concerning
the business of respondent bank, as well as the employment ban contained in the Undertaking he executed, are
oppressive, unreasonable, cruel and inhuman because of its overbreath. He reiterates that it is against public policy,
an unreasonable restraint of trade, because it prohibits him to work for one year in the Philippines, ultimately
preventing him from supporting his family. He points out that a breadwinner in a family of four minor daughters who
are all studying, with a wife who does not work, one would have a very difficult time meeting the financial obligations
even with a steady, regular-paying job. He insists that the Undertaking deprives him of the means to support his
family, and ultimately, his childrens chance for a good education and future. He reiterates that the returns in his
poultry business fell short of his expectations, and unfortunately, the business was totally destroyed by typhoon
"Rosing" in November 1995.

Petitioner further maintains that respondents management prerogative does not give it a license to entice its
employees to retire at a very young age and prohibit them from seeking employment in a so-called competitor bank
or financial institution, thus prevent them from working and supporting their families (considering that banking is the
only kind of work they know). Petitioner avers that "managements prerogative must be without abuse of discretion.
A line must be drawn between management prerogative regarding business operations per se and those which
affect the rights of the employees. In treating its employees, management should see to it that its employees are at
least properly informed of its decision or modes of action."

On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement benefit which he earned
after serving the bank for 18 years. It was not a mere gift or gratuity given by respondent bank, without the latter
giving up something of value in return. On the contrary, respondent bank received "valuable consideration," that is,
petitioner quit his job at the relatively young age of 45, thus enabling respondent to effect its reorganization plan and
forego the salary, benefits, bonuses, and promotions he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of action against him before
the appropriate courts of law if he had violated the employment ban. He avers that respondent must prove its
entitlement to the P963,619.28. The Undertaking contains no provision that he would have to return the amount he
received under the SRP; much less does it provide that he would have to pay 12% interest per annum on said
amount. On the other hand, the Release, Waiver and Quitclaim does not contain the provision prohibiting him from
being employed with any competitor bank or financial institution within one year from February 28, 1995. Petitioner
insists that he acted in good faith when he received his retirement benefits; hence, he cannot be punished by being
ordered to return the sum of P963,619.28 which was given to him for and in consideration of his early retirement.

Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his retirement pay
of P963,619.28 from May 23, 1995, as it is improper and oppressive to him and his family. As of July 3, 2002, the
interest alone would amount to P822,609.67, thus doubling the amount to be returned to respondent bank under the
decision of the RTC and the CA. The imposition of interest has no basis because the Release, Waiver and
Quitclaim, and the Undertaking do not provide for payment of interest. The deeds only state that breach thereof
would entitle respondent to bring an action to seek damages, to include the return of the amount that may have
been paid to petitioner by virtue thereof. On the other hand, any breach of the Undertaking or the Release, Waiver
and Quitclaim would only entitle respondent to a cause of action before the appropriate courts of law. Besides, the
amount received by petitioner was not a loan and, therefore, should not earn interest pursuant to Article 1956 of the
Civil Code.

Finally, petitioner insists that he acted in good faith in seeking employment with another bank within one year from
February 28, 1995 because he needed to earn a living to support his family and finance his childrens education.
Hence, the imposition of interest, which is a penalty, is unwarranted.

By way of Comment on the petition, respondent avers that the Undertaking is the law between it and petitioner. As
such, the latter could not assail the deed after receiving the retirement benefit under the SRP. As gleaned from the
averments in his petition, petitioner admitted that he executed the Undertaking after having been informed of the
nature and consequences of his refusal to sign the same, i.e., he would not be able to receive the retirement benefit
under the SRP.

Respondent maintains that courts have no power to relieve parties of obligations voluntarily entered into simply
because their contracts turned out to be disastrous deeds. Citing the ruling of this Court in Eastern Shipping Lines,
Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged to pay 12% per annum interest of
the P963,619.28 from judicial or extrajudicial demand.

In reply, petitioner asserts that respondent failed to prove that it sustained damages, including the amount thereof,
and that neither the Release, Waiver and Quitclaim nor the Undertaking obliged him to pay interest to respondent.

The petition is meritorious.

Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:

Section 1. Summary judgment for claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim
or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.

xxxx

Sec. 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days before the time
specified for the hearing. The adverse party may serve opposing affidavits, depositions, or admissions at least three
(3) days before the hearing. After the hearing, the judgment sought shall be rendered forthwith if the pleadings,
supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

For a summary judgment to be proper, the movant must establish two requisites: (a) there must be no genuine issue
as to any material fact, except for the amount of damages; and (b) the party presenting the motion for summary
judgment must be entitled to a judgment as a matter of law.27 Where, on the basis of the pleadings of a moving
party, including documents appended thereto, no genuine issue as to a material fact exists, the burden to produce a
genuine issue shifts to the opposing party. If the opposing party fails, the moving party is entitled to a summary
judgment.28

A genuine issue is an issue of fact which requires the presentation of evidence as distinguished from an issue which
is a sham, fictitious, contrived or a false claim. The trial court can determine a genuine issue on the basis of the
pleadings, admissions, documents, affidavits or counteraffidavits submitted by the parties. When the facts as
pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to any fact and
summary judgment called for. On the other hand, where the facts pleaded by the parties are disputed or contested,
proceedings for a summary judgment cannot take the place of a trial.29 The evidence on record must be viewed in
light most favorable to the party opposing the motion who must be given the benefit of all favorable inferences as
can reasonably be drawn from the evidence.30
Courts must be critical of the papers presented by the moving party and not of the papers/documents in opposition
thereto.31 Conclusory assertions are insufficient to raise an issue of material fact.32 A party cannot create a genuine
dispute of material fact through mere speculations or compilation of differences.33 He may not create an issue of fact
through bald assertions, unsupported contentions and conclusory statements.34 He must do more than rely upon
allegations but must come forward with specific facts in support of a claim. Where the factual context makes his
claim implausible, he must come forward with more persuasive evidence demonstrating a genuine issue for trial.35

Where there are no disputed material facts, the determination of whether a party breached a contract is a question
of law and is appropriate for summary judgment.36 When interpreting an ambiguous contract with extrinsic evidence,
summary judgment is proper so long as the extrinsic evidence presented to the court supports only one of the
conflicting interpretations.37 Where reasonable men could differ as to the contentions shown from the evidence,
summary judgment might be denied.

In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals resolved the issue of whether a
summary judgment is proper in a breach of contract action involving the interpretation of such contract, and ruled
that:

[A] contract can be interpreted by the court on summary judgment if (a) the contracts terms are clear, or (b) the
evidence supports only one construction of the controverted provision, notwithstanding some ambiguity. x x x If the
court finds no ambiguity, it should proceed to interpret the contract and it may do so at the summary judgment
stage. If, however, the court discerns an ambiguity, the next step involving an examination of extrinsic evidence
becomes essential. x x x Summary judgment may be appropriate even if ambiguity lurks as long as the extrinsic
evidence presented to the court supports only one of the conflicting interpretations.39

In this case, there is no dispute between the parties that, in consideration for his availment of the SRP, petitioner
executed the Release, Waiver and Quitclaim, and the Undertaking as supplement thereto, and that he received
retirement pay amounting to P963,619.28 from respondent. On May 1, 1995, within the one-year ban and without
prior knowledge of respondent, petitioner was employed by Equitable as Manager of its Credit Investigation and
Appraisal Division, Consumers Banking Group. Despite demands, petitioner failed to return the P963,619.28 to
respondent on the latters allegation that he had breached the one-year ban by accepting employment from
Equitable, which according to respondent was a competitor bank.

We agree with petitioners contention that the issue as to whether the post-retirement competitive employment ban
incorporated in the Undertaking is against public policy is a genuine issue of fact, requiring the parties to present
evidence to support their respective claims.

As gleaned from the records, petitioner made two undertakings. The first is incorporated in the Release, Waiver and
Quitclaim that he signed, to wit:

4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any unlawful activity prejudicial to
the interest of the BANK, its parent, affiliate or subsidiary companies, their stockholders, officers, directors, agents
or employees, and their successors-in-interest and will not disclose any information concerning the business of the
BANK, its manner or operation, its plans, processes or data of any kind.40

The second undertaking is incorporated in the Undertaking following petitioners execution of the Release, Waiver
and Quitclaim which reads:

4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank on FEBRUARY 28, 1995, I
hereby expressly undertake that I will not seek employment with any competitor bank or financial institution within
one (1) year from February 28, 1995.41

In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring "an action for damages which
may include, but not limited to the return of whatever sums he may have received from respondent under said deed
if he breaks his undertaking therein."42 On the other hand, petitioner declared in the Undertaking that "any breach on
his part of said Undertaking or the terms and conditions of the Release, Waiver and Quitclaim will entitle respondent
to a cause of action against [petitioner] for protection before the appropriate courts of law."43

Article 1306 of the New Civil Code provides that the contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order or public policy. The freedom of contract is both a constitutional and statutory right.44 A contract is the
law between the parties and courts have no choice but to enforce such contract as long as it is not contrary to law,
morals, good customs and against public policy.

The well-entrenched doctrine is that the law does not relieve a party from the effects of an unwise, foolish or
disastrous contract, entered into with full awareness of what he was doing and entered into and carried out in good
faith. Such a contract will not be discarded even if there was a mistake of law or fact. Courts have no jurisdiction to
look into the wisdom of the contract entered into by and between the parties or to render a decision different
therefrom. They have no power to relieve parties from obligation voluntarily assailed, simply because their contracts
turned out to be disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of affording full protection to labor, must
be liberally construed in favor of the employee, it being the general rule that pension or retirement plans formulated
by the employer are to be construed against it.46 Retirement benefits, after all, are intended to help the employee
enjoy the remaining years of his life, releasing him from the burden of worrying for his financial support, and are a
form of reward for being loyal to the employer.47

In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in the United States and the
Philippines:

By "public policy," as defined by the courts in the United States and England, is intended that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or
against the public good, which may be termed the "policy of the law," or "public policy in relation to the
administration of the law." (Words & Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy is the
principle under which freedom of contract or private dealing is restricted by law for the good of the public. (Id., Id.) In
determining whether a contract is contrary to public policy the nature of the subject matter determines the source
from which such question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)

The foregoing is sufficient to show that there is no difference in principle between the public policy (orden publico) in
the two jurisdictions (the United States and the Philippine Islands) as determined by the Constitution, laws, and
judicial decisions.49

The Court proceeded to define "trade" as follows:

x x x In the broader sense, it is any occupation or business carried on for subsistence or profit. Andersons
Dictionary of Law gives the following definition: "Generally equivalent to occupation, employment, or business,
whether manual or mercantile; any occupation, employment or business carried on for profit, gain, or livelihood, not
in the liberal arts or in the learned professions." In Abbotts Law Dictionary, the word is defined as "an occupation,
employment or business carried on for gain or profit." Among the definitions given in the Encyclopaedic Dictionary is
the following: "The business which a person has learnt, and which he carries on for subsistence or profit;
occupation; particularly employment, whether manual or mercantile, as distinguished from the liberal arts or the
learned professions and agriculture." Bouvier limits the meaning to commerce and traffic, and the handicraft of
mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the broader meaning given by the
lexicographers.50

In the present case, the trial court ruled that the prohibition against petitioner accepting employment with a
competitor bank or financial institution within one year from February 28, 1995 is not unreasonable. The appellate
court held that petitioner was estopped from assailing the post-retirement competitive employment ban because of
his admission that he signed the Undertaking and had already received benefits under the SRP.

The rulings of the trial court and the appellate court are incorrect.

There is no factual basis for the trial courts ruling, for the simple reason that it rendered summary judgment and
thereby foreclosed the presentation of evidence by the parties to prove whether the restrictive covenant is
reasonable or not. Moreover, on the face of the Undertaking, the post-retirement competitive employment ban is
unreasonable because it has no geographical limits; respondent is barred from accepting any kind of employment in
any competitive bank within the proscribed period. Although the period of one year may appear reasonable, the
matter of whether the restriction is reasonable or unreasonable cannot be ascertained with finality solely from the
terms and conditions of the Undertaking, or even in tandem with the Release, Waiver and Quitclaim.

Undeniably, petitioner retired under the SRP and received P963,619.28 from respondent. However, petitioner is not
proscribed, by waiver or estoppel, from assailing the post-retirement competitive employment ban since under
Article 1409 of the New Civil Code, those contracts whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy are inexistent or void from the beginning. Estoppel cannot give validity to an
act that is prohibited by law or one that is against public policy.51

Respondent, as employer, is burdened to establish that a restrictive covenant barring an employee from accepting a
competitive employment after retirement or resignation is not an unreasonable or oppressive, or in undue or
unreasonable restraint of trade, thus, unenforceable for being repugnant to public policy. As the Court stated in
Ferrazzini v. Gsell,52 cases involving contracts in restraint of trade are to be judged according to their circumstances,
to wit:

x x x There are two principal grounds on which the doctrine is founded that a contract in restraint of trade is void as
against public policy. One is, the injury to the public by being deprived of the restricted partys industry; and the
other is, the injury to the party himself by being precluded from pursuing his occupation, and thus being prevented
from supporting himself and his family.

And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than
protection to the other party requires, the contract may be sustained. The question is, whether, under the particular
circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not,
unreasonable.53

In cases where an employee assails a contract containing a provision prohibiting him or her from accepting
competitive employment as against public policy, the employer has to adduce evidence to prove that the restriction
is reasonable and not greater than necessary to protect the employers legitimate business interests.54 The restraint
may not be unduly harsh or oppressive in curtailing the employees legitimate efforts to earn a livelihood and must
be reasonable in light of sound public policy.55

Courts should carefully scrutinize all contracts limiting a mans natural right to follow any trade or profession
anywhere he pleases and in any lawful manner. But it is just as important to protect the enjoyment of an
establishment in trade or profession, which its employer has built up by his own honest application to every day duty
and the faithful performance of the tasks which every day imposes upon the ordinary man. What one creates by his
own labor is his. Public policy does not intend that another than the producer shall reap the fruits of labor; rather, it
gives to him who labors the right by every legitimate means to protect the fruits of his labor and secure the
enjoyment of them to himself.56 Freedom to contract must not be unreasonably abridged. Neither must the right to
protect by reasonable restrictions that which a man by industry, skill and good judgment has built up, be denied.57

The Court reiterates that the determination of reasonableness is made on the particular facts and circumstances of
each case.58 In Esmerson Electric Co. v. Rogers,59 it was held that the question of reasonableness of a restraint
requires a thorough consideration of surrounding circumstances, including the subject matter of the contract, the
purpose to be served, the determination of the parties, the extent of the restraint and the specialization of the
business of the employer. The court has to consider whether its enforcement will be injurious to the public or cause
undue hardships to the employee, and whether the restraint imposed is greater than necessary to protect the
employer. Thus, the court must have before it evidence relating to the legitimate interests of the employer which
might be protected in terms of time, space and the types of activity proscribed.60

Consideration must be given to the employees right to earn a living and to his ability to determine with certainty the
area within which his employment ban is restituted. A provision on territorial limitation is necessary to guide an
employee of what constitutes as violation of a restrictive covenant and whether the geographic scope is co-
extensive with that in which the employer is doing business. In considering a territorial restriction, the facts and
circumstances surrounding the case must be considered.61

Thus, in determining whether the contract is reasonable or not, the trial court should consider the following factors:
(a) whether the covenant protects a legitimate business interest of the employer; (b) whether the covenant creates
an undue burden on the employee; (c) whether the covenant is injurious to the public welfare; (d) whether the time
and territorial limitations contained in the covenant are reasonable; and (e) whether the restraint is reasonable from
the standpoint of public policy.62

Not to be ignored is the fact that the banking business is so impressed with public interest where the trust and
interest of the public in general is of paramount importance such that the appropriate standard of diligence must be
very high, if not the highest degree of diligence.63

We are not impervious of the distinction between restrictive covenants barring an employee to accept a post-
employment competitive employment or restraint on trade in employment contracts and restraints on post-retirement
competitive employment in pension and retirement plans either incorporated in employment contracts or in collective
bargaining agreements between the employer and the union of employees, or separate from said contracts or
collective bargaining agreements which provide that an employee who accepts post retirement competitive
employment will forfeit retirement and other benefits or will be obliged to restitute the same to the employer. The
strong weight of authority is that forfeitures for engaging in subsequent competitive employment included in pension
and retirement plans are valid even though unrestricted in time or geography. The raison detre is explained by the
United States Circuit Court of Appeals in Rochester Corporation v. W.L. Rochester, Jr.:64

x x x The authorities, though, generally draw a clear and obvious distinction between restraints on competitive
employment in employment contracts and in pension plans. The strong weight of authority holds that forfeitures for
engaging in subsequent competitive employment, included in pension retirement plans, are valid, even though
unrestricted in time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the restraint
included in the employment contract, is not a prohibition on the employees engaging in competitive work but is
merely a denial of the right to participate in the retirement plan if he does so engage. A leading case on this point is
Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture provision similar to that here,
the Court said:

"A restriction in the contract which does not preclude the employee from engaging in competitive activity, but simply
provides for the loss of rights or privileges if he does so is not in restraint of trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the employer against competition by
former employees who may retire and obtain retirement or pension benefits and, at the same time, engage in
competitive employment.66

We have reviewed the Undertaking which respondent impelled petitioner to sign, and find that in case of failure to
comply with the promise not to accept competitive employment within one year from February 28, 1995, respondent
will have a cause of action against petitioner for "protection in the courts of law." The words "cause of action for
protection in the courts of law" are so broad and comprehensive, that they may also include a cause of action for
prohibitory and mandatory injunction against petitioner, specific performance plus damages, or a damage suit (for
actual, moral and/or exemplary damages), all inclusive of the restitution of the P963,619.28 which petitioner
received from respondent. The Undertaking and the Release, Waiver and Quitclaim do not provide for the automatic
forfeiture of the benefits petitioner received under the SRP upon his breach of said deeds. Thus, the post-retirement
competitive employment ban incorporated in the Undertaking of respondent does not, on its face, appear to be of
the same class or genre as that contemplated in Rochester.

It is settled that actual damages or compensatory damages may be awarded for breach of contracts. Actual
damages are primarily intended to simply make good or replace the loss covered by said breach.67 They cannot be
presumed. Even if petitioner had admitted to having breached the Undertaking, respondent must still prove that it
suffered damages and the amount thereof.68 In determining the amount of actual damages, the Court cannot rely on
mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best
evidence obtainable regarding the actual amount of losses.69 The benefit to be derived from a contract which one of
the parties has absolutely failed to perform is of necessity to some extent a matter of speculation of the injured
party.

On the assumption that the competitive employment ban in the Undertaking is valid, petitioner is not automatically
entitled to return the P963,619.28 he received from respondent. To reiterate, the terms of the Undertaking clearly
state that any breach by petitioner of his promise would entitle respondent to a cause of action for protection in the
courts of law; as such, restitution of the P963,619.28 will not follow as a matter of course. Respondent is still
burdened to prove its entitlement to the aforesaid amount by producing the best evidence of which its case is
susceptible.70

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional Trial Court of Manila for further
proceedings conformably with this decision of the Court.

SO ORDERED.
G.R. No. 164893 March 1, 2007

CONSTANCIA DULDULAO, Petitioner,

vs.
THE COURT OF APPEALS, and BAGUIO COLLEGES FOUNDATION, Respondents.

DECISION

TINGA, J.:

For the Courts adjudication is a petition for review under Rule 45, seeking to set aside the Decision1 of the Court of
Appeals in CA-G.R. SP No. 58291, which affirmed the 30 September 1999 Decision2 of the National Labor Relations
Commission (NLRC) in NLRC CASE RAB-CAR-02-0076-97, NLRC NCR CA NO. 018861-99.

The facts of the case, as culled from the records, follow.

Petitioner Constancia P. Duldulao was hired by respondent Baguio Colleges Foundation (BCF) as secretary/clerk-
typist and assigned to the College of Law sometime in June of 1987. In August 1996, a certain law student filed a
complaint against petitioner for alleged irregularities in the performance of her work. Petitioner was told to submit
her answer to the complaint and given several extensions within which to do so. However, despite the extensions,
she failed to submit her answer.

On 1 October 1996, Dean Honorato V. Aquino of the College of Law informed respondents President, Atty.
Edilberto B. Tenefrancia, of petitioners failure to file her answer and recommended the assignment of petitioner
outside the College of Law, not only because of such failure to answer but also her having admitted fraternizing with
students of the College. On the same day, respondents Vice President for Administration, Leonardo S. dela Cruz,
issued a Department Order3 which reads:

October 1, 1996

DEPARTMENT ORDER

To: Mrs. Constancia Duldulao

Re: Transfer of assignment

-------------------------------------------------------------------------------

1. Effective tomorrow 2 October 1996[,] you shall report at the office of the Principals of the High School and
Elementary Departments;

2. You shall render regular duty in those offices until further notice.

3. Please be guided accordingly.

On 3 October 1996, petitioner moved for reconsideration of the Department Order and requested another five (5)-
day extension within which to file her answer. Dean Aquino informed petitioner that he could no longer act on her
motion for reconsideration and motion for extension since the matter had already been elevated to respondents
Executive Board due to the delay in the submission of her answer. Petitioner eventually filed her answer on 7
October 1996.

Petitioner filed a case with the BCF Grievance Committee, citing her "unceremonious, capricious, whimsical and
arbitrary reassignment from her position as Secretary of the College of Law to the Elementary/High School
Departments," but the case was transferred to the Administrative Investigating Committee because petitioner is not
a member of the union. On 21 January 1997, the Committee found the Department Order appropriate since it was
intended to prevent the controversy between petitioner and the complaining student from adversely affecting a
harmonious relationship within the College of Law among all its constituents. It recommended that petitioner start
reporting to her new assignment.4 The recommendation was approved and adopted by President Tenefrancia on 7
February 1997.5

In the interim, upon the request of several students from the College of Law, respondent constituted a Fact-Finding
Committee to investigate the allegations concerning the administrative matters and policies in the College. On 26
May 1997, the Fact Finding Committee Report6 was submitted to the Dean. It contained, among others, a
pronouncement that while petitioner was not guilty of the specific charges against her, "the implementation by the
college secretary of the policies of the college, while oftentimes carrying the imprimatur of the Dean and of the
Faculty, had alienated some students due to the lack of circumspection which, when coupled with ingrained
perceptions, result in failure of communication."7
The Department Order notwithstanding, petitioner did not report for work and instead took a vacation leave and
several other leave of absences from October 1996 to January 1997. Finally, on 17 February 1997, petitioner filed a
complaint for constructive dismissal with prayer for moral and exemplary damages and attorneys fees before the
NLRC Regional Arbitration Branch-Cordillera Administrative Region (NLRC RAB-CAR). She claimed that she was
arbitrarily directed to report for work in a location far from her original place of assignment on account of which she
would be incurring additional expenses in transportation. In addition, she stated that aside from being tainted with
procedural lapses in violation of her right to due process, the transfer also amounted to her demotion in rank.

On 29 December 1998, Executive Labor Arbiter Jesselito B. Latoja ruled in favor of petitioner, ordering her
reinstatement to her former position and awarding her moral and exemplary damages, as well as attorneys fees.8

On appeal, the NLRC reversed the Executive Labor Arbiters decision, sustained petitioners transfer, and dismissed
the complaint for illegal dismissal for lack of merit.9 In the Decision, the Commission gave weight to the argument
that petitioner was neither demoted nor dismissed, as her salary, benefits and other privileges remained the same
despite her reassignment. Neither was there any violation of due process since petitioner was granted an initial
period and several extensions within which to file her answer to the complaint against her. Even as petitioner
continued to display a hostile attitude in work by refusing to report at her new assignment under the guise of leave of
absences, respondent did not impose any disciplinary action, the Commission added.

The Court of Appeals, in turn, upheld the decision of the NLRC. The appellate court ruled that petitioner was not
constructively dismissed, finding that petitioner was unable to point to any evidence that her reassignment was
prompted by the malevolence or ill-will of respondent. Besides, respondent did not intend petitioners transfer to be a
disciplinary sanction against her but merely a temporary measure to prevent controversy within the College of Law.10

In the instant petition, petitioner reiterates her posture that her transfer was a case of constructive dismissal, tainted
with bad faith and intended as punishment for an erring employee, whereupon she claims entitlement to backwages,
benefits and moral damages.

On the other hand, respondent asserts that petitioners temporary transfer from the Office of the Dean of the College
of Law to the Office of the Principals of the High School and Elementary Departments was premised on certain
considerations, namely: (i) the polarization of the students as a result of the controversy between petitioner and the
complaining student; (ii) petitioners failure to file her answer to the complaint against her; and (iii) petitioners having
expressly admitted her fraternization with some students.11 Respondent justifies its reassignment of petitioner as a
legitimate exercise of its management prerogative.12

Essentially, the issue in this case is whether petitioners transfer as secretary/clerk-typist from the College of Law to
the High School and Elementary Departments amounts to constructive dismissal.

The petition deserves rejection.

It is a well-settled rule that findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect
but at times even finality if such findings are supported by substantial evidence.13 This is especially so in this case,
where the findings of the NLRC were affirmed by the Court of Appeals. The findings of fact made therein can only
be set aside upon showing of grave abuse of discretion, fraud or error of law, none of which has been shown in this
case.

There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment.14 It exists where there is cessation of work because "continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay."15 The factual milieu in
this case is different. Thus, the NLRC and the Court of Appeals both ruled that the treatment accorded petitioner
does not constitute constructive dismissal.

At the onset, it must be stressed that petitioner has no vested right to the position of secretary/clerk-typist of the
College of Law that may operate to deprive respondent of its prerogative to change or transfer her assignment to
another department where she will be most useful in its

judgment. After all, petitioner was employed by respondent which is the BCF system itself, not the College of Law
only, which is but a component part of the system. Thus, to respondent belongs the prerogative to reassign
petitioner to any of its departments as it sees fit, provided that such reassignment is made in good faith.

We have long recognized the prerogative of management to transfer an employee from one office to another within
the same business establishment, as the exigency of the business may require, provided that the transfer does not
result in a demotion in rank or a diminution in salary, benefits and other privileges of the employee; or is not
unreasonable, inconvenient or prejudicial to the latter; or is not used as a subterfuge by the employer to rid himself
of an undesirable worker.16 In the case of Philippine Japan Active Carbon Corp. v. NLRC,17 the Court ruled:

It is the employers prerogative, based on its assessment and perception of its employees qualifications, aptitudes,
and competence, to move them around in the various areas of its business operations in order to ascertain where
they will function with maximum benefit to the company. An employees right to security of tenure does not give him
such a vested right in his position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to
him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the
employee may not complain that it amounts to a constructive dismissal.18

The Court does not see how petitioners transfer from the College of Law to the Office of the Principals of the
Elementary and High School Departments can be described as unreasonable, inconvenient, or prejudicial to her. In
her complaint, petitioner alleged that by reason of the transfer, she would incur additional transportation expenses,
be constrained to engage the services of a househelp, and suffer a demotion in rank and status. As explained by
respondent, the difference in traveling distance is not so large as to cause great inconvenience to petitioner as in
fact, by merely changing the route to take, the distance from petitioners house to the College of Law and that from
her house to her new assignment will almost be the same.19

Neither is the transfer equivalent to a demotion in rank and status. Petitioner was a secretary/clerk-typist of the
College of Law. As such secretary/clerk-typist, she would only have to perform the same duties in the Office of the
Principals of the High School and Elementary Departments.

Petitioner argues that she was denied her right to due process when she was transferred to another department
even before she was able to file her answer. Reassignments made by management pending investigation of
irregularities allegedly committed by an employee fall within the ambit of management prerogative.20 The transfer,
while

incidental to the pending charges against petitioner, was not meant to be a penalty, but rather a preventive measure
to avoid further damage to the College of Law. It was not designed to be the culmination of the then on-going
administrative case against petitioner. Hence, the order of transfer prior to the submission of her answer cannot be
deemed a violation of her right to due process.

This Court has, in several instances, upheld reassignments/transfers pending investigations of the irregularities
allegedly committed by employees, the rationale being that the purpose of reassignments is no different from that of
preventive suspension which management could validly impose as a measure of protection of the companys
property pending investigation of any malfeasance or misfeasance committed by the employee.21

The BCF system that is respondent is more than a business venture; it is, first and foremost, an educational
institution, engaged in the noble task of teaching and preparing our youth for the career paths they intend to take. In
the same way that an ordinary business cannot afford to put at risk its resources while there is a pending complaint
or investigation against a possible erring employee, respondent could not afford to have a discordant studentry, and
a college tainted with controversy. Surely, the harmony and integrity of its faculty, staff and students are as
important as, if not more important than, any of the properties of respondent.

Petitioner cannot claim constructive dismissal simply because her transfer to another department was against her
wishes and, in her view, amounts to a demotion. "Certainly, the Court cannot accept the proposition that when an
employee opposes his employers decision to transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the employees wishes that should be made to prevail."22 Mere
incidental inconvenience is not enough to warrant a claim of constructive dismissal.23

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.
G.R. No. 162419 July 10, 2007

PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.

DECISION

TINGA, J.:

At the heart of this case involving a contract between a seafarer, on one hand, and the manning agent and the
foreign principal, on the other, is this erstwhile unsettled legal quandary: whether the seafarer, who was prevented
from leaving the port of Manila and refused deployment without valid reason but whose POEA-approved
employment contract provides that the employer-employee relationship shall commence only upon the seafarers
actual departure from the port in the point of hire, is entitled to relief?

This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the Decision and Resolution of
the Court of Appeals dated 16 October 2003 and 19 February 2004, respectively, in CA-G.R. SP No. 68404.1

Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for about five (5) years.2On
3 February 1998, petitioner signed a new contract of employment with respondent, with the duration of nine (9)
months. He was assured of a monthly salary of US$515.00, overtime pay and other benefits. The following day or
on 4 February 1998, the contract was approved by the Philippine Overseas Employment Administration (POEA).
Petitioner was to be deployed on board the "MSV Seaspread" which was scheduled to leave the port of Manila for
Canada on 13 February 1998.

A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondents Vice President, sent a
facsimile message to the captain of "MSV Seaspread," which reads:

I received a phone call today from the wife of Paul Santiago in Masbate asking me not to send her husband
to MSV Seaspread anymore. Other callers who did not reveal their identity gave me some feedbacks that
Paul Santiago this time if allowed to depart will jump ship in Canada like his brother Christopher Santiago,
O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last December, 1997.

We do not want this to happen again and have the vessel penalized like the C.S. Nexus in Japan.

Forewarned is forearmed like his brother when his brother when he was applying he behaved like a Saint
but in his heart he was a serpent. If you agree with me then we will send his replacement.

Kindly advise.3

To this message the captain of "MSV Seaspread" replied:

Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for him to return to
Seaspread.4

On 9 February 1998, petitioner was thus told that he would not be leaving for Canada anymore, but he was
reassured that he might be considered for deployment at some future date.

Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against respondent and its foreign
principal, Cable and Wireless (Marine) Ltd.5 The case was raffled to Labor Arbiter Teresita Castillon-Lora, who ruled
that the employment contract remained valid but had not commenced since petitioner was not deployed. According
to her, respondent violated the rules and regulations governing overseas employment when it did not deploy
petitioner, causing petitioner to suffer actual damages representing lost salary income for nine (9) months and fixed
overtime fee, all amounting to US$7, 209.00.

The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29 January 1999 reads:

WHEREFORE, premises considered, respondent is hereby Ordered to pay complainant actual damages in
the amount of US$7,209.00 plus 10% attorney's fees, payable in Philippine peso at the rate of exchange
prevailing at the time of payment.

All the other claims are hereby DISMISSED for lack of merit.

SO ORDERED.6

On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that there is no employer-
employee relationship between petitioner and respondent because under the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels (POEA Standard Contract), the
employment contract shall commence upon actual departure of the seafarer from the airport or seaport at the point
of hire and with a POEA-approved contract. In the absence of an employer-employee relationship between the
parties, the claims for illegal dismissal, actual damages, and attorneys fees should be dismissed.7 On the other
hand, the NLRC found respondents decision not to deploy petitioner to be a valid exercise of its management
prerogative.8 The NLRC disposed of the appeal in this wise:

WHEREFORE, in the light of the foregoing, the assailed Decision dated January 29, 1999 is hereby
AFFIRMED in so far as other claims are concerned and with MODIFICATION by VACATING the award of
actual damages and attorneys fees as well as excluding Pacifico Fernandez as party respondent.

SO ORDERED.9

Petitioner moved for the reconsideration of the NLRCs Decision but his motion was denied for lack of merit.10 He
elevated the case to the Court of Appeals through a petition for certiorari.

In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an ambiguity in the NLRCs
Decision when it affirmed with modification the labor arbiters Decision, because by the very modification introduced
by the Commission (vacating the award of actual damages and attorneys fees), there is nothing more left in the
labor arbiters Decision to affirm.12

According to the appellate court, petitioner is not entitled to actual damages because damages are not recoverable
by a worker who was not deployed by his agency within the period prescribed in

the POEA Rules.13 It agreed with the NLRCs finding that petitioners non-deployment was a valid exercise of
respondents management prerogative.14 It added that since petitioner had not departed from the Port of Manila, no
employer-employee relationship between the parties arose and any claim for damages against the so-called
employer could have no leg to stand on.15

Petitioners subsequent motion for reconsideration was denied on 19 February 2004.16

The present petition is anchored on two grounds, to wit:

A. The Honorable Court of Appeals committed a serious error of law when it ignored [S]ection 10 of Republic
Act [R.A.] No. 8042 otherwise known as the Migrant Workers Act of 1995 as well as Section 29 of the
Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going
Vessels (which is deemed incorporated under the petitioners POEA approved Employment Contract) that
the claims or disputes of the Overseas Filipino Worker by virtue of a contract fall within the jurisdiction of the
Labor Arbiter of the NLRC.

B. The Honorable Court of Appeals committed a serious error when it disregarded the required quantum of
proof in labor cases, which is substantial evidence, thus a total departure from established jurisprudence on
the matter.17

Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules when it failed to deploy
him within thirty (30) calendar days without a valid reason. In doing so, it had unilaterally and arbitrarily prevented
the consummation of the POEA- approved contract. Since it prevented his deployment without valid basis, said
deployment being a condition to the consummation of the POEA contract, the contract is deemed consummated,
and therefore he should be awarded actual damages, consisting of the stipulated salary and fixed overtime
pay.18Petitioner adds that since the contract is deemed consummated, he should be considered an employee for all
intents and purposes, and thus the labor arbiter and/or the NLRC has jurisdiction to take cognizance of his claims.19

Petitioner additionally claims that he should be considered a regular employee, having worked for five (5) years on
board the same vessel owned by the same principal and manned by the same local agent. He argues that
respondents act of not deploying him was a scheme designed to prevent him from attaining the status of a regular
employee.20

Petitioner submits that respondent had no valid and sufficient cause to abandon the employment contract, as it
merely relied upon alleged phone calls from his wife and other unnamed callers in arriving at the conclusion that he
would jump ship like his brother. He points out that his wife had executed an affidavit21 strongly denying having
called respondent, and that the other alleged callers did not even disclose their identities to respondent.22 Thus, it
was error for the Court of Appeals to adopt the unfounded conclusion of the NLRC, as the same was not based on
substantial evidence.23

On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award petitioners monetary
claims. His employment with respondent did not commence because his deployment was withheld for a valid
reason. Consequently, the labor arbiter and/or the NLRC cannot entertain adjudication of petitioners case much
less award damages to him. The controversy involves a breach of contractual obligations and as such is cognizable
by civil courts.24 On another matter, respondent claims that the second issue posed by petitioner involves a
recalibration of facts which is outside the jurisdiction of this Court.25

There is some merit in the petition.

There is no question that the parties entered into an employment contract on 3 February 1998, whereby petitioner
was contracted by respondent to render services on board "MSV Seaspread" for the consideration of US$515.00
per month for nine (9) months, plus overtime pay. However, respondent failed to deploy petitioner from the port of
Manila to Canada. Considering that petitioner was not able to depart from the airport or seaport in the point of hire,
the employment contract did not commence, and no employer-employee relationship was created between the
parties.26

However, a distinction must be made between the perfection of the employment contract and the commencement of
the employer-employee relationship. The perfection of the contract, which in this case coincided with the date of
execution thereof, occurred when petitioner and respondent agreed on the object and the cause, as well as the rest
of the terms and conditions therein. The commencement of the employer-employee relationship, as earlier
discussed, would have taken place had petitioner been actually deployed from the point of hire. Thus, even before
the start of any employer-employee relationship, contemporaneous with the perfection of the employment contract
was the birth of certain rights and obligations, the breach of which may give rise to a cause of action against the
erring party. Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed
upon, he would be liable for damages.

Moreover, while the POEA Standard Contract must be recognized and respected, neither the manning agent nor the
employer can simply prevent a seafarer from being deployed without a valid reason.

Respondents act of preventing petitioner from departing the port of Manila and boarding "MSV Seaspread"
constitutes a breach of contract, giving rise to petitioners cause of action. Respondent unilaterally and unreasonably
reneged on its obligation to deploy petitioner and must therefore answer for the actual damages he suffered.

We take exception to the Court of Appeals conclusion that damages are not recoverable by a worker who was not
deployed by his agency. The fact that the POEA Rules27 are silent as to the payment of damages to the affected
seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions provided for non-
deployment do not end with the suspension or cancellation of license or fine and the return of all documents at no
cost to the worker. They do not forfend a seafarer from instituting an action for damages against the employer or
agency which has failed to deploy him.

The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It does not provide for
damages and money claims recoverable by aggrieved employees because it is not the POEA, but the NLRC, which
has jurisdiction over such matters.

Despite the absence of an employer-employee relationship between petitioner and respondent, the Court rules that
the NLRC has jurisdiction over petitioners complaint. The jurisdiction of labor arbiters is not limited to claims arising
from employer-employee relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:

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

Since the present petition involves the employment contract entered into by petitioner for overseas employment, his
claims are cognizable by the labor arbiters of the NLRC.

Article 2199 of the Civil Code provides that one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Respondent is thus liable to pay petitioner actual damages in the form of the
loss of nine (9) months worth of salary as provided in the contract. He is not, however, entitled to overtime pay.
While the contract indicated a fixed overtime pay, it is not a guarantee that he would receive said amount regardless
of whether or not he rendered overtime work. Even though petitioner was "prevented without valid reason from
rendering regular much less overtime service,"28 the fact remains that there is no certainty that petitioner will perform
overtime work had he been allowed to board the vessel. The amount of US$286.00 stipulated in the contract will be
paid only if and when the employee rendered overtime work. This has been the tenor of our rulings in the case
of Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations Commission29 where we discussed the
matter in this light:

The contract provision means that the fixed overtime pay of 30% would be the basis for computing the
overtime pay if and when overtime work would be rendered. Simply stated, the rendition of overtime work
and the submission of sufficient proof that said work was actually performed are conditions to be satisfied
before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the
 basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement
to such benefit must first be established. Realistically speaking, a seaman, by the very nature of his job,
stays on board a ship or vessel beyond the regular eight-hour work schedule. For the employer to give him
overtime pay for the extra hours when he might be sleeping or attending to his personal chores or even just
lulling away his time would be extremely unfair and unreasonable.30

The Court also holds that petitioner is entitled to attorneys fees in the concept of damages and expenses of
litigation. Attorney's fees are recoverable when the defendant's act or omission has compelled the plaintiff to incur
expenses to protect his interest.31 We note that respondents basis for not deploying petitioner is the belief that he
will jump ship just like his brother, a mere suspicion that is based on alleged phone calls of several persons whose
identities were not even confirmed. Time and again, this Court has upheld management prerogatives so long as
they are exercised in good faith for the advancement of the employers interest and not for the purpose of defeating
or circumventing the rights of the employees under special laws or under valid agreements.32 Respondents failure
to deploy petitioner is unfounded and unreasonable, forcing petitioner to institute the suit below. The award of
attorneys fees is thus warranted.

However, moral damages cannot be awarded in this case. While respondents failure to deploy petitioner seems
baseless and unreasonable, we cannot qualify such action as being tainted with bad faith, or done deliberately to
defeat petitioners rights, as to justify the award of moral damages. At most, respondent was being overzealous in
protecting its interest when it became too hasty in making its conclusion that petitioner will jump ship like his brother.

We likewise do not see respondents failure to deploy petitioner as an act designed to prevent the latter from
attaining the status of a regular employee. Even if petitioner was able to depart the port of Manila, he still cannot be
considered a regular employee, regardless of his previous contracts of employment with respondent. In Millares v.
National Labor Relations Commission,33 the Court ruled that seafarers are considered contractual employees and
cannot be considered as regular employees under the Labor Code. Their employment is governed by the contracts
they sign every time they are rehired and their employment is terminated when the contract expires. The exigencies
of their work necessitates that they be employed on a contractual basis.34

WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the Resolution dated 19
February 2004 of the Court of Appeals are REVERSED and SET ASIDE. The Decision of Labor Arbiter Teresita D.
Castillon-Lora dated 29 January 1999 is REINSTATED with the MODIFICATION that respondent CF Sharp Crew
Management, Inc. is ordered to pay actual or compensatory damages in the amount of US$4,635.00

representing salary for nine (9) months as stated in the contract, and attorneys fees at the reasonable rate of 10%
of the recoverable amount.

SO ORDERED.
G.R. No. 191491 December 14, 2011

JEBSENS MARITIME INC., represented by MS. ARLENE ASUNCION and/or ALLIANCE MARINE SERVICES,
LTD., Petitioners,
vs.
ENRIQUE UNDAG, Respondent.

DECISION

MENDOZA, J.:

This petition for review assails the September 16, 2009 Decision1 and the March 3, 2010 Resolution2 of the Court of
Appeals (CA), which set aside the October 17, 2005 and January 24, 2006 Resolutions of the National Labor
Relations Commission (NLRC), dismissing the complaint of respondent Enrique Undag (respondent) for disability
benefits.

Records bear out that respondent was hired as Lead Operator on board the vessel FPSO Jamestown owned by
Alliance Marine Services, Ltd. and managed by its local agent, Jebsens Maritime, Inc. (petitioners). Respondents
contract with petitioners was for a period of four (4) months with a basic salary of US$806.00 a month. He was
deployed on March 24, 2003 and eventually repatriated to the Philippines on July 18, 2003 after his contract with the
petitioners had expired.

On September 24, 2003, about two months after repatriation, he went to see a physician, Dr. Efren Vicaldo (Dr.
Vicaldo), for a physical check-up and was diagnosed to have "Hypertensive cardiovascular disease, Atrial
Fibrillation, Diabetes Mellitus II, Impediment Grade X (20.15%)." According to Dr. Vicaldo, respondent had a history
of hypertension and diabetes and was at risk of developing a stroke, coronary artery disease and congestive heart
failure. He likewise stated that respondents ailment was aggravated by his work as a seaman and that he was no
longer fit for work. For said reason, respondent requested for financial assistance from petitioners but the latter
denied his request.

Constrained, he filed a complaint for sickness benefits against petitioners before the NLRC, alleging that he had
been suffering from chest pains and difficulty of breathing since July 2003 when he was on board petitioners vessel.
Despite knowing his bad physical condition upon repatriation, the petitioners did not give him any financial
assistance. Thus, he prayed that petitioners be ordered to reimburse him for his medical expenses and pay him
sickness allowance amounting to US$3,224.00, including damages and attorneys fees.

Petitioners countered that respondent was not entitled to disability benefits because his repatriation was not due to
medical reasons but due to the expiration of his employment contract. Petitioners basically argued that, under the
POEA Standard Employment Contract (POEA-SEC), a seafarer was entitled to disability benefits only if he had
suffered a work-related illness during the term of his contract.

On June 30, 2005, after due hearing, the Labor Arbiter (LA) rendered a decision ordering petitioners to pay, jointly
and severally, respondent the Philippine peso equivalent of US$60,000.00 representing total permanent disability
compensation benefits for US$3,224.00 sickness allowance, and 10% attorneys fees.

On appeal, however, the NLRC reversed the LA decision and denied respondents claim for disability benefits. The
NLRC reasoned out that respondent failed to present substantial evidence proving that he had suffered any illness
while on board or after disembarking from petitioners vessel. Respondents motion for reconsideration was later
denied.

Not satisfied with the NLRC decision, respondent appealed before the CA. On September 16, 2009, the CA
rendered a decision setting aside the ruling of the NLRC. The appellate court stated that respondent was able to
prove by substantial evidence that his work as a seafarer caused his hypertensive cardiovascular disease or, at
least, was a relevant factor in contracting his illness. The CA explained that as Lead Operator, respondent
performed multi-tasking functions which required excessive physical and mental effort. Moreover, he was also
exposed to the perils of the sea and was made to endure unpredictable and extreme climate changes in the daily
performance of his job. The CA also took judicial notice of the fact that overseas workers suffer a great degree of
emotional strain while on duty on board vessels because of their being separated from their families for the duration
of their contract. The CA was of the strong view that the inherent difficulties in respondents job definitely caused his
illness. The CA added that because of the nature of his work, the illness suffered by respondent contributed to the
aggravation of his injury which was pre-existing at the time of his employment. Finally, the CA ruled that respondent
is entitled to claim total and permanent disability benefits because of the undisputed doctors findings that he "is now
unfit to resume work as a seaman in any capacity," which clearly constitutes a permanent and total disability as
defined by law.

Not in conformity with the CA decision, petitioners filed this petition for review praying for its reversal raising this lone

ISSUE
WHETHER OR NOT THE COURT OF APPEALS ERRED IN AWARDING FULL DISABILITY BENEFITS TO THE
PRIVATE RESPONDENT.

In advocacy of their position, petitioners argue that the CA committed a reversible error in awarding respondent
disability benefits on the principal ground that there are numerous substantial and competent evidence on record
which clearly establish the fact that respondent was guilty of fraudulent misrepresentation, hence, forfeiting his right
to any benefits under the POEA contract. For one, respondent intentionally lied when he declared that he was not
suffering from a previous medical condition in his pre-employment medical examination (PEME). Specifically, he
failed to disclose the fact that he was suffering from diabetes and heart problem, which is a clear case of
concealment.

Secondly, respondents illnesses were not acquired during the term of his contract with petitioners. He had no
evidence showing that he acquired the heart problem and hypertension while he was on board the vessel. The fact
that respondent passed his PEME does not automatically mean that he suffered his illness on board the vessel or
that the same was not pre-existing.

Third, the Labor Code provision on permanent disability is not applicable in a claim for disability benefits under the
POEA contract.

Respondents Position

Respondent counters that petitioners never raised the issue of fraudulent misrepresentation before the labor
tribunals despite being given the opportunity to do so. Hence, they are estopped from raising it for the first time on
appeal. At any rate, he claims that he did not commit any fraud or misrepresentation because he underwent a
stringent PEME, which included a blood and urine examination, conducted by the company-designated physician.
His illness, therefore, was not pre-existing. In any case, the pre-existence of an illness is not a bar for the
compensability of a seafarers illness. His non-compliance with the mandatory 3-day reporting upon signoff is
irrelevant because it only applies to a seafarer who has signed off from the vessel for medical reasons.

Moreover, respondent argues that a repatriation due to a finished contract does not preclude a seafarer from
recovery of benefits, as the only requirement is that the disease must be a consequence or a result of the work
performed. He has shown by substantial evidence that his cardiovascular disease was work-related. The strenuous
work conditions that he experienced while on sea duty coupled with his usual encounter with the unfriendly forces of
nature increased the risk of contracting his heart ailment.

Lastly, he asserts that his disability is permanent and total because he has been declared to be unfit for sea duty for
which he is entitled to recover attorneys fees and litigation costs under Article 2208.

THE COURTS RULING

>No substantial evidence that illness was work-related

Entitlement of seamen on overseas work to disability benefits is a matter governed, not only by medical findings, but
by law and by contract. The material statutory provisions are Articles 191 to 193 under Chapter VI (Disability
Benefits) of the Labor Code, in relation with Rule X of the Rules and Regulations Implementing Book IV of the Labor
Code. By contract, the POEA-SEC, as provided under Department Order No. 4, series of 2000 of the Department of
Labor and Employment, and the parties Collective Bargaining Agreement (CBA) bind the seaman and his employer
to each other.3

Deemed incorporated in every Filipino seafarers contract of employment, denominated as POEA-SEC or the
Philippine Overseas Employment Administration-Standard Employment Contract, is a set of standard provisions
established and implemented by the POEA, called the Amended Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels, which contain the minimum requirements
prescribed by the government for the employment of Filipino seafarers. Section 20(B), paragraph 6, of the 2000
Amended Standard Terms and Conditions provides:

SECTION 20. COMPENSATION AND BENEFITS

xxx

B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his contract
are as follows:

Xxx
6. In case of permanent total or partial disability of the seafarer caused by either injury or illness the seafarer shall
be compensated in accordance with the schedule of benefits enumerated in Section 32 of this Contract.
Computation of his benefits arising from an illness or disease shall be governed by the rates and the rules of
compensation applicable at the time the illness or disease was contracted.

Pursuant to the aforequoted provision, two elements must concur for an injury or illness to be compensable. First,
that the injury or illness must be work-related; and second, that the work-related injury or illness must have existed
during the term of the seafarers employment contract.

The 2000 POEA Amended Standard Terms and Conditions defines "work-related injury" as "injury(ies) resulting in
disability or death arising out of and in the course of employment" and "work-related illness" as "any sickness
resulting in disability or death as a result of an occupational disease listed under Section 32-A of this contract with
the conditions set therein satisfied." These are:

SECTION 32-A. OCCUPATIONAL DISEASES

For an occupational disease and the resulting disability or death to be compensable, all of the following conditions
must be satisfied:

1) The seafarers work must involve the risks described herein;

2) The disease was contracted as a result of the seafarers exposure to the described risks;

3) The disease was contracted within a period of exposure and under such other factors necessary to
contract it; and

4) There was no notorious negligence on the part of the seafarer.

Sec. 32-A(11) of the 2000 POEA Amended Standard Terms and Conditions explicitly considers a cardiovascular
disease as an occupational disease if the same was contracted under working conditions that involve any of the
following risks

a) If the heart disease was known to have been present during employment, there must be proof that an
acute exacerbation was clearly precipitated by the unusual strain by reasons of the nature of his work.

b) The strain of the work that brings about an acute attack must be sufficient severity and must be followed
within 24 hours by the clinical signs of cardiac insult to constitute causal relationship.

c) If a person who was apparently asymptomatic before being subjected to strain at work showed signs and
symptoms of cardiac injury during the performance of his work and such symptoms and signs persisted, it is
reasonable to claim a causal relationship.

Consequently, for cardiovascular disease to constitute an occupational disease for which the seafarer may claim
compensation, it is incumbent upon said seafarer to show that he developed the same under any of the three
conditions identified above.4

In labor cases as in other administrative proceedings, substantial evidence or such relevant evidence as a
reasonable mind might accept as sufficient to support a conclusion is required. The oft-repeated rule is that whoever
claims entitlement to the benefits provided by law should establish his or her right thereto by substantial
evidence.5Substantial evidence is more than a mere scintilla. The evidence must be real and substantial, and not
lawphi1

merely apparent; for the duty to prove work-causation or work-aggravation imposed by law is real and not merely
apparent.6

In this case, the Court is of the considered view that respondent failed to prove that his ailment was work-related
and was acquired during his 4-month sea deployment. Respondent claims that sometime in July 2003, he showed
manifestations of a heart disease when he suddenly felt chest pains, shortness of breath and fatigability.7 He,
however, never substantiated such claim. He never showed any written note, request or record about any medical
check-up, consultation or treatment. Similarly, he failed to substantiate his allegation that after his arrival in Manila
on July 18, 2003, he reported to petitioners office on July 31, 2003 to seek medical consultation for the discomfort
he was experiencing but petitioners ignored him.8 1avvphi1

He also alleged that on August 4, 2003, more or less sixteen (16) days after arriving in Manila, he underwent a
physical and laboratory examination at the Maritime Clinic for International Service, Inc. conducted by petitioners
where he was declared to be unfit for sea duty. Again, there is no record of this except his self-serving claim. What
is on record is that on September 24, 2003, respondent surfaced demanding payment of disability benefits.

Respondent failed to comply with the mandatory 3-day rule

More importantly, respondent failed to comply with the mandatory 3-day medical examination deadline provided in
Section 20(B), paragraph (3) of the 2000 Amended Standard Terms and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean-Going Vessels. As earlier stated, it was only on September 24, 2003, or more
than two (2) months after his arrival in Manila, that he sought a medical opinion from Dr. Vicaldo who declared him
unfit to work as a seaman due to "hypertensive cardiovascular disease, atrial fibrillation and diabetes mellitus
II."9Section 20(B), paragraph (3) of the 2000 Amended Standard Terms and Conditions Governing the Employment
of Filipino Seafarers on Board Ocean-Going Vessels, reads:

Section 20(B), paragraph (3) thereof states:

X x x.

3. Upon sign off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to
his basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the
company-designated physician but in no case shall this period exceed one-hundred twenty (120) days.

For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-
designated physician within three working days upon his return except when he is physically incapacitated to do so,
in which case a written notice to the agency within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall result in his forfeiture of the right to claim the
above benefits. [Emphases and underscoring supplied]

While the rule is not absolute, there is no credible explanation from respondent why he failed to comply with the
mandatory rule considering his claim that in July, 2003, he was suffering from chest pain, shortness of breath and
fatigue. An award of disability benefit to a seaman in this case, despite non-compliance with strict mandatory
requirements of the law, cannot be sustained. The rationale behind the rule can easily be divined. Within three days
from repatriation, it would be fairly easier for a physician to determine if the illness was work-related or not. After that
period, there would be difficulty in ascertaining the real cause of the illness.

To ignore the rule would set a precedent with negative repercussions because it would open the floodgates to a
limitless number of seafarers claiming disability benefits. It would certainly be unfair to the employer who would have
difficulty determining the cause of a claimants illness considering the passage of time. In such a case, the
employers would have no protection against unrelated disability claims.

Respondent claims that the 3-day mandatory rule is not applicable as it is only for those who were repatriated for
medical reasons. This could only mean that he had no medical reason then. In his pleadings, he claimed that
sometime in July 2003, he showed manifestations of a heart disease as he suddenly felt chest pains, shortness of
breath and fatigability.10 He, however, failed to disclose when exactly in July 2003 that he felt those manifestations
whether before or after his repatriation on July 18, 2003. If it was before the said date, he should have submitted
himself to a medical examination three days after repatriation.

The Courts ruling is not novel. In the past, the Court repeatedly denied the payment of disability benefits to seamen
who failed to comply with the mandatory reporting and examination requirement. Lately, in the recent case of Alex
C. Cootauco v. MMS Phil. Maritime Services, Inc.,11 it was written:

For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-
designated physician within three working days upon his return except when he is physically incapacitated to do
so, in which case a written notice to the agency within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall result in his forfeiture of the right to claim the
above benefits.

As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the company-designated
physician within three working days from arrival for diagnosis and treatment.

Applying the above provision of Section 20(B), paragraph (3), petitioner is required to undergo post-employment
medical examination by a company-designated physician within three working days from arrival, except when he is
physically incapacitated to do so, in which case, a written notice to the agency within the same period would suffice.

In Maunlad Transport, Inc. v. Manigo, Jr., this Court explicitly declared that it is mandatory for a claimant to be
examined by a company-designated physician within three days from his repatriation. The unexplained omission of
this requirement will bar the filing of a claim for disability benefits.

The NLRC and the Court of Appeals determined that petitioner did not observe the established procedure as there
is no proof at all that he reported to the office of the respondents. We see no reason to depart from their findings.
While petitioner remains firm that he reported to the office of the respondents for mandatory reporting, the records
are bereft of any proof to fortify his claim. The onus probandi falls on petitioner to establish or substantiate such
claim by the requisite quantum of evidence. There is absolutely no evidence on record to prove petitioners claim
that he reported to respondents office for mandatory reportorial requirement. Petitioner therefore failed to adduce
substantial evidence as basis for the grant of relief. [Emphasis and underscoring supplied]
The Court reiterated the same ruling in the case of Coastal Safeway Marine Services, Inc. vs. Elmer T.
Esguerra,12where it was written:

For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-
designated physician within three working days upon his return except when he is physically incapacitated to
do so, in which case, a written notice to the agency within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall result in his forfeiture of the right to claim the
above benefits.

If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between
the employer and the seafarer. The third doctor's decision shall be final and binding on both parties.

The foregoing provision has been interpreted to mean that it is the company-designated physician who is
entrusted with the task of assessing the seaman's disability, whether total or partial, due to either injury or
illness, during the term of the latter's employment. Concededly, this does not mean that the assessment of said
physician is final, binding or conclusive on the claimant, the labor tribunal or the courts. Should he be so minded, the
seafarer has the prerogative to request a second opinion and to consult a physician of his choice regarding his
ailment or injury, in which case the medical report issued by the latter shall be evaluated by the labor tribunal and
the court, based on its inherent merit. For the seamans claim to prosper, however, it is mandatory that he should be
examined by a company-designated physician within three days from his repatriation. Failure to comply with this
mandatory reporting requirement without justifiable cause shall result in forfeiture of the right to claim the
compensation and disability benefits provided under the POEA-SEC. [Emphases and underscoring supplied]

WHEREFORE, the petition is GRANTED. The September 16, 2009 Decision of the Court of Appeals and its March
3, 2010 Resolution are hereby REVERSED and SET ASIDE, and the October 17, 2005 and January 24, 2006
Resolutions of the National Labor Relations Commission are REINSTATED.

SO ORDERED.
G.R. No. 177948 March 14, 2008

FLOURISH MARITIME SHIPPING and LOLITA UY, Petitioners,

vs.
DONATO A. ALMANZOR, Respondent.

DECISION

NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision1 of the Court of
Appeals dated February 27, 2007 and its Resolution2 dated May 18, 2007 in CA-G.R. SP No. 95056. The assailed
Decision affirmed with modification the Decision3 of the National Labor Relations Commission (NLRC) dated April
28, 2006 in NLRC NCR CA NO. 046596-05 which, in turn, affirmed the Decision4 of Labor Arbiter Lutricia F.
Quitevis-Alconcel, dated October 7, 2005 in OFW NLRC CASE NO. (M) 05-01-0243-00.

The facts of the case are as follows:

Respondent Donato A. Almanzor entered into a two-year employment contract with Flourish Maritime Shipping as
fisherman, with a monthly salary of NT15,840.00 with free meals every day. It was, likewise, agreed that respondent
would be provided with suitable accommodations.5

On October 1, 2004, respondent was deployed to Taipei, Taiwan as part of the crew of a fishing vessel known as FV
Tsang Cheng 66. Respondent was surprised to learn that there were only five (5) crew members on board and he
had to buy his own food, contrary to the agreed stipulation of free food and accommodation.6

While on board, the master of the vessel gave respondent orders which he could not understand; thus, he failed to
obey him. Consequently, enraged at not being obeyed, the master struck him, hitting the right dorsal part of his
body. He then requested medical assistance, but the master refused.7 Hence, he sought the help of petitioner Lolita
Uy (the manning agency owner), who then talked to the master of the vessel.

While the vessel was docked at the Taipei port, respondent was informed that he would be repatriated. Upon his
arrival in the Philippines, he reported to petitioners and sought medical assistance after which he was declared "fit to
work." Petitioners promised that he would be redeployed, but it turned out that it was no longer possible because of
his age, for then he was already 49 years old.

Thus, respondent filed a complaint for illegal dismissal, payment for the unexpired portion of his employment
contract, earned wages, moral and exemplary damages plus attorneys fees.

Petitioners countered that respondent voluntarily resigned8 from his employment and returned to the Philippines on
the same day. They, likewise, sought the dismissal of the complaint for failure of respondent to comply with the
grievance machinery and arbitration clause embodied in the contract of employment. Lastly, they insisted that
respondent failed to discharge the burden to prove that he was illegally dismissed.9

On October 7, 2005, the Labor Arbiter rendered a Decision in favor of respondent, the dispositive portion of which
reads:

WHEREFORE, viewed from the foregoing, judgment is hereby rendered declaring respondents guilty of illegal
dismissal.

Respondents Flourish Maritime Shipping and Wang Yung Chin are hereby ordered to jointly and solidarily pay
complainant Donato A. Almanzor the amount of NT15,840.00 times six (6) months or a total of NT Ninety-Five
Thousand Forty (NT95,040.00). Respondents shall pay the total amount in its peso equivalent at the time of actual
payment plus legal interest.

All other claims herein sought and prayed for are hereby denied for lack of legal and factual bases.

SO ORDERED.10

On appeal to the NLRC, the Commission affirmed in toto the Labor Arbiters findings.

Unsatisfied, petitioners elevated the matter to the Court of Appeals on petition for certiorari.11 The appellate court
agreed with the Labor Arbiters conclusion (as affirmed by the NLRC) that respondent was illegally dismissed from
employment. It, however, modified the NLRC decision by increasing the monetary award due respondent in
accordance with its interpretation of Section 10 of Republic Act (R.A.) 8042.12

Both the Labor Arbiter and the NLRC Board of Commissioners awarded such amount equivalent to respondents
salary for six (6) months (3 months for every year of the unexpired term) considering that respondents employment
contract covered a two-year period and he was dismissed from employment after only 26 days of actual work. The
CA, however, disagreed with such interpretation. According to the CA, since respondent actually worked for 26 days
and was thereafter dismissed from employment, the unexpired portion of the contract is one (1) year, eleven (11)
months and four (4) days. For the unexpired one (second) whole year, the court awarded three months salary. As to
the 11 months and 4 days of the first year, the appellate court refused to apply the three-month rule. Instead, in
addition to three months (for the unexpired second year), it awarded full compensation corresponding to the whole
unexpired term of 11 months and 4 days. Thus, the CA deemed it proper to award a total amount equivalent to the
respondents salary for 14 months and 4 days.13

Petitioners now raise the following issues for resolution:

1. WHETHER OR NOT THE THREE LETTERS ARE RESIGNATION LETTERS OR QUITCLAIMS.

2. WHETHER OR NOT THE MODIFICATION OF THE NLRC DECISION BY THE COURT OF APPEALS IS
CONTRARY TO LAW.14

Simply stated, petitioners want this Court to resolve the issue of whether respondent was illegally dismissed from
employment and if so, to determine the correct award of compensation due respondent.

The Labor Arbiter concluded that petitioners, who had the burden of proof, failed to adduce any convincing evidence
to establish and substantiate its claim that respondent voluntarily resigned from employment.15 Likewise, the NLRC
held that petitioners failed to show that respondent was not physically fit to perform work due to his old age.
Moreover, the labor tribunal said that petitioners failed to prove that the employment contract indeed provided a
grievance machinery.16 Clearly, both labor tribunals correctly concluded, as affirmed by the Court of Appeals, that
respondent was not redeployed for work, in violation of their employment contract. Perforce, the termination of
respondents services is without just or valid cause.

We reiterate the dictum that this Court is not a trier of facts, and this doctrine applies with greater force in labor
cases. Factual questions are for the labor tribunals to resolve. In this case, the factual issues were resolved by the
Labor Arbiter and the NLRC. Their findings were affirmed by the Court of Appeals. Judicial review by this Court does
not extend to a reevaluation of the sufficiency of the evidence upon which the proper labor tribunal has based its
determination.17

On the amount of the award due respondent, Section 10 of R.A. 8042 provides:

SECTION 10. Money Claims. x x x

xxxx
In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

x x x x.

The correct interpretation of this provision was settled in Marsaman Manning Agency Inc. v. National Labor
Relations Commission18 where this Court held that "the choice of which amount to award an illegally dismissed
overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract, or three (3)
months salary for every year of the unexpired term, whichever is less," comes into play only when the employment
contract concerned has a term of at least one (1) year or more.19

The employment contract involved in the instant case covers a two-year period but the overseas contract worker
actually worked for only 26 days prior to his illegal dismissal. Thus, the three months salary rule applies. There is a
similar factual milieu between the case at bench and Olarte v. Nayona.20 The only difference lies in the length of the
subject employment contract: Olarte involved a one-year contract; while the employment in this case covers a two-
year period. However, they both fall under the three months salary rule since the term of the contract is "at least
one year or more." In Olarte, as well as in JSS Indochina Corporation v. Ferrer,21 we ordered the employer of an
illegally dismissed overseas contract worker to pay an amount equivalent to three (3) months salary.

We are not in accord with the ruling of the Court of Appeals that respondent should be paid his salaries for 14
months and 4 days. Records show that his actual employment lasted only for 26 days. Applying the above provision,
and considering that the employment contract covers a two-year period, we agree with the Labor Arbiters
disposition, as affirmed by the NLRC, that respondent is entitled to six (6) months salary. This is obviously what the
law provides. 1avv phi1

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals, dated February 27,
2007, and its Resolution dated May 18, 2007 in CA-G.R. SP No. 95056, are AFFIRMED with the MODIFICATION
that the monetary award to be paid the respondent shall be the amount set forth in the decision of the Labor Arbiter
as affirmed by the NLRC. SO ORDERED.
G.R. No. 170834 August 29, 2008

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ANTONIO NOGRA, accused-appellant.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is an appeal from the Decision1 dated August 31, 2005 of the Court of Appeals (CA) in CA-G.R. C.R. No.
00244 affirming the Judgment of the Regional Trial Court (RTC), Branch 19, Naga City in Criminal Case No. 98-7182,
convicting Antonio Nogra (appellant) of large scale illegal recruitment under Section 6(m) in relation to Section 7(b) of
Republic Act No. 8042 (R.A. No. 8042),2otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995."3

The inculpatory portion of the Information charging one Lorna G. Orciga and appellant with large scale illegal recruitment
reads as follows:

That sometime during the period of March 1997 to November, 1997 in the City of Naga, Philippines, and within
the jurisdiction of this Honorable Court, the above-named accused, being the General Manager and Operations
Manager of LORAN INTERNATIONAL OVERSEAS RECRUITMENT CO., LTD., with office at Concepcion
Grande, Naga City, conspiring, confederating together and mutually helping each other, representing themselves
to have the capacity to contract, enlist, hire and transport Filipino workers for employment abroad, did then and
there willfully, unlawfully and criminally, for a fee, recruit and promise employment/job placement to the herein
complaining witnesses RENATO ALDEN, OLIVER SARMIENTO, FE ZABALLA, TEOFILA LUALHATI, PILIPINA
MENDOZA and KERWIN DONACAO, but failed to actually deploy them without valid reason, as well as to
reimburse their documentation, placement and processing expenses for purposes of deployment despite their
repeated demands for the return of the same, to their damage and prejudice in the amounts as may be proven in
court.

CONTRARY TO LAW.4

Only appellant was brought to the jurisdiction of the trial court since Lorna G. Orciga was then and still is at large.
Arraigned with the assistance of counsel, appellant entered a plea of "NOT GUILTY" to the crime charged. Thereafter,
trial of the case ensued.

Of the six complainants, the prosecution was able to present five of them, namely: Renato Alden, Fe Zaballa, Teofila
Lualhati, Filipina Mendoza and Kerwin Donacao. Anaielyn Sarmiento, wife of complainant Oliver Sarmiento, also testified
for the prosecution.

The facts, as established by the prosecution, are aptly summarized by the Office of the Solicitor General (OSG), as
follows:

Appellant held office at Loran International Overseas Recruitment Co., (Loran) in Concepcion Grande, Naga City
(p. 4, TSN, October 19, 1998). A nameplate on his table prominently displayed his name and position as
operations manager (p. 11, TSN, November 17, 1998; p. 4, TSN, January 12, 1999; p. 21, TSN, November 19,
1998). The license of Loran also indicated appellant as the operations manager (p. 5, TSN, February 10, 1999).
The POEA files also reflect his position as operations manager of Loran (Exhibit L to L-4, pp. 5-9, TSN, November
19, 1998).

Sometime in December 1996, Renato Alden went to Loran to apply for a job as hotel worker for Saipan. He was
interviewed by appellant, who required Alden to submit an NBI clearance and medical certificate and to pay the
placement fee. Alden paid the amount of P31,000.00. The additional amount of P4,000.00 was to be paid prior to
his departure to Saipan (pp. 5-6, TSN, November 17, 1998). Appellant promised Alden that he would leave within
a period of three to four months. After one year of waiting Alden was not able to leave. Alden filed a complaint
with the NBI when he was not able to recover the amount and could no longer talk with appellant (p. 6, TSN,
November 17, 1998).

On April 18, 1997, Teofila Lualhati applied for employment as hotel worker for Saipan with Loran (pp. 1-3, 10,
TSN, November 19, 1998). Appellant required her to submit an NBI clearance and medical certificate and to pay
the processing fee in the amount of P35,000.00 so she could leave immediately. She paid the amount
of P35,000.00 to Loran's secretary in the presence of appellant. She was promised that within 120 days or 4
months she would be able to leave (pp. 11-13, TSN, November 19, 1998). Despite repeated follow-ups, Lualhati
was unable to work in Saipan. She demanded the refund of the processing fee. When the amount was not
returned to her, she filed a complaint with the NBI (pp. 14-15, TSN, November 19, 1998).

Sometime in April 1998, Filipina Mendoza went to Loran to apply for employment as hotel worker (p. 4, TSN, July
12, 1999). She paid the amount of P35,000.00 as placement fee. When she was not able to work abroad, she
went to Loran and sought the return of P35,000.00 from appellant (p. 7, TSN, January 21, 1999).
 Sometime in October 1997, Kerwin Donacao went to Loran to apply for employment as purchaser in Saipan (p. 4,
TSN, February 10, 1999). He was required to submit NBI clearance, police clearance, previous employment
certificate and his passport. He paid the placement fee of P35,000.00 (pp.4-5, TSN, February 10, 1999). After
paying the amount, he was told to wait for two to three months. When he was not able to leave for Saipan, he
demanded the return of the placement fee, which was not refunded (pp. 6-7, TSN, February 10, 1999).

During the first week of November 1997, Annelyn Sarmiento and her husband, Oliver Sarmiento, applied for
overseas employment. For the application of Oliver Sarmiento, they submitted his medical certificate and
certification of previous employment. They were also made to pay the amount of P27,000.00 as processing fee.
Oliver Sarmiento was promised that within 1 month, he would be able to leave. Initially, Oliver Sarmiento was told
that allegedly his visa was yet to be obtained. When he was not able to leave and what he paid was not refunded,
he filed a complaint with the NBI (pp. 4-6, TSN, April 23, 1999).

Sometime in May 1997, Fe Zaballa applied for overseas employment in Saipan with Loran (p. 4, TSN, May 21,
1999). She was required to submit her medical certificate, original copy of her birth certificate, NBI clearance and
police clearance. She was also required to pay the amount of P35,000.00 as placement fee. When she could not
be deployed, she sought to recover the amount she paid, which was not returned (pp. 7-8, TSN, May 2, 1999).5

On the other hand, appellant presented the following evidence:

The defense presented [appellant] Antonio Nogra and the agency's secretary and cashier, Maritess Mesina.

From their testimonies it was established that LORAN INTERNATIONAL OVERSEAS RECRUITMENT CO.,
LTD., (LORAN, for brevity) was owned by accused Lorna Orciga and Japanese national Kataru Tanaka (TSN,
September 30, 2000, p. 7). Sometime in July 1994, [appellant] Antonio Nogra read from outside the agency's
main office at Libertad, Mandaluyong City that it was in need of a liaison officer. He applied for the position. The
part-owner and co-accused, Lorna Orciga, hired him instead as Operations Manager as the agency was then still
in the process of completing the list of personnel to be submitted to the POEA. (TSN, January 31, 2001, p. 5).

[Appellant] Nogra started working with LORAN in October 1994. In 1995, he was transferred to Naga City when
the agency opened a branch office thereat. Although he was designated as the Operations Manager, [appellant]
Nogra was a mere employee of the agency. He was receiving a monthly salary of P5,000.00 and
additional P2,000.00 monthly meal allowance. He was in-charge of the advertisement of the company. He also
drove for the company. He fetched from the airport the agency's visitors and guests and drove them to hotels and
other places. (TSN, May 3, 2000, pp. 2-9).

Although part-owner Lorna Orciga was stationed in Manila, she, however, actually remained in control of the
branch office in Naga City. She conducted the final interview of the applicants and transacted with the foreign
employers. She also controlled the financial matters and assessment fees of the agency in Naga City (TSN,
September 20, 2000, pp. 8-9). The placement and processing fees collected by the agency in Naga City were all
deposited in the bank account of Lorna Orciga and not a single centavo went to the benefit of [appellant] Nogra
(TSN, January 10, 2000, pp. 14-22).6

On March 26, 2003, the RTC rendered Judgment7 finding appellant guilty beyond reasonable doubt of the crime charged.
The fallo of the decision reads:

WHEREFORE, the Court finds the accused ANTONIO NOGRA guilty beyond reasonable doubt of the crime of
Illegal Recruitment Committed in Large Scale defined under Sections 6(m) and 7(b) of RA 8042, otherwise known
as The Migrant Workers and Overseas Filipinos Act of 1995 and, accordingly, hereby imposes upon him the
penalty of life imprisonment and a fine of Five hundred thousand pesos (P500,000.00).

SO ORDERED.8

On April 10, 2003, appellant filed a Notice of Appeal.9 The RTC ordered the transmittal of the entire records of the case to
this Court.

Conformably to the ruling in People v. Mateo,10 the case was referred to the CA for intermediate review.11

On August 31, 2005, the CA rendered a Decision12 affirming the decision of the RTC. The CA held that being an
employee is not a valid defense since employees who have knowledge and active participation in the recruitment activities
may be criminally liable for illegal recruitment activities, based upon this Court's ruling in People v.
Chowdury13 and People v. Corpuz;14 that appellant had knowledge of and active participation in the recruitment activities
since all the prosecution witnesses pinpointed appellant as the one whom they initially approached regarding their plans
of working overseas and he was the one who told them about the fees they had to pay, as well as the papers that they
had to submit; that the mere fact that appellant was not issued special authority to recruit does not exculpate him from any
liability but rather strongly suggests his guilt; that appellant's invocation of non-flight cannot be weighed in his favor since
there is no established rule that non-flight is, in every instance, an indication of innocence.

A Notice of Appeal15 having been timely filed by appellant, the CA forwarded the records of the case to this Court for
further review.
In his Brief, appellant assigns as errors the following:

THE TRIAL COURT ERRED IN NOT FINDING THAT THE ACCUSED-APPELLANT WAS A MERE EMPLOYEE
OF THE RECRUITMENT AGENCY DESPITE HIS DESIGNATION AS ITS OPERATIONS MANAGER.

II

THE TRIAL COURT ERRED IN CONVICTING THE ACCUSED-APPELLANT OF THE OFFENSE-CHARGED

DESPITE THE FACT THAT UNDER THE LAW, HE WAS NOT CRIMINALY LIABLE FOR HIS AGENCY'S
TRANSACTIONS.16

Appellant argues that the agency was under the management and control of Orciga, and that he was a mere employee;
that he could not be held personally liable for illegal recruitment in the absence of any showing that he was validly issued
special authority to recruit workers, which was approved by the Philippine Overseas Employment Administration (POEA);
that his non-flight is indicative of his innocence.

Appellee, through the OSG, counters that appellant is not a mere clerk or secretary of Loran, but its Operations Manager
who directly participated in the recruitment scheme by promising private complainants work abroad, but failed to deploy
them and refused to reimburse the applicants' placement fees when demanded.

The appeal fails. The CA did not commit any error in affirming the decision of the RTC.

R.A. No. 8042 broadened the concept of illegal recruitment under the

Labor Code17 and provided stiffer penalties, especially those that constitute economic sabotage, i.e.,Illegal Recruitment in
Large Scale and Illegal Recruitment Committed by a Syndicate.

Section 6 of R.A. No. 8042 defined when recruitment is illegal:

SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract services, promising
or advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder
of authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any manner, offers
or promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise
include the following acts, whether committed by any person, whether a non-licensee, non-holder,
licensee or holder of authority:

xxxx

(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and

(m) Failure to reimburse expenses incurred by the workers in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be
considered as offense involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against three (3)
or more persons individually or as a group.

The persons criminally liable for the above offenses are the principals, accomplices, and accessories. In
case of juridical persons, the officers having control, management or direction of their business shall be
liable. (Emphasis and underscoring supplied)

In the present case, evidence for the prosecution showed that Loran

International Overseas Recruitment Co., Ltd. is a duly licensed recruitment agency with authority to establish a branch
office. However, under R.A. No. 8042, even a licensee or holder of authority can be held liable for illegal recruitment,
should he commit or omit to do any of the acts enumerated in Section 6.

Appellant was charged with illegal recruitment in large scale under Section 6 (l) and (m) of R.A. No. 8042. Section 6 (l)
refers to the failure to actually deploy without valid reason, as determined by the Department of Labor and Employment
(DOLE). Section 6 (m) involves the failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases in which the deployment does not actually take place
without the workers fault.
A thorough scrutiny of the prosecution's evidence reveals that it failed to prove appellant's liability under Section 6 (l) of
R.A. No. 8042. The law requires not only that the failure to deploy be without valid reason "as determined by the
Department of Labor and Employment." The law envisions that there be independent evidence from the DOLE to
establish the reason for non-deployment, such as the absence of a proper job order. No document from the DOLE was
presented in the present case to establish the reason for the accused's failure to actually deploy private complainants.
Thus, appellant cannot be held liable under Section 6 (l) of R.A. No. 8042.

As to Section 6 (m) of R.A. No. 8042, the prosecution has proven beyond reasonable doubt that private complainants
made payments to Loran, and appellant failed to reimburse the amounts paid by private complainants when they were not
deployed. The prosecution presented the receipts issued by Loran to private complainants evidencing payment of
placement fees ranging from P27,000.00 to P35,000.00.

Appellant does not dispute that private complainants were not deployed for overseas work, and that the placement fees
they paid were not returned to them despite demand. However, he seeks to exculpate himself on the ground that he is a
mere employee of Loran.

The Court is unswayed by appellant's contention.

The penultimate paragraph of Section 6 of R.A. No. 8042 explicitly states that those criminally liable are the "principals,
accomplices, and accessories. In case of juridical persons, the officers having control, management or direction of their
business shall be liable." Contrary to appellant's claim, the testimonies of the complaining witnesses and the documentary
evidence for the prosecution clearly established that he was not a mere employee of Loran, but its Operations Manager.
The license of Loran, the files of the POEA and the nameplate prominently displayed on his office desk reflected his
position as Operations Manager. As such, he received private complainants' job applications; and interviewed and
informed them of the agencys requirements prior to their deployment, such as NBI clearance, police clearance, medical
certificate, previous employment certificate and the payment of placement fee. He was also responsible for the radio
advertisements and leaflets, which enticed complaining witnesses to apply for employment with the agency. Clearly, as
Operations Manager, he was in the forefront of the recruitment activities.

The defense of being a mere employee is not a shield against his conviction for large scale illegal recruitment. In People
v. Gasacao18 and People v. Sagayaga,19 the Court reiterated the ruling in People v. Cabais,20 People v.
Chowdury21 and People v. Corpuz22 that an employee of a company or corporation engaged in illegal recruitment may be
held liable as principal by direct participation, together with its employer, if it is shown that he actively and consciously
participated in the recruitment process.

In the present case, it was clearly established that appellant dealt directly with the private complainants. He interviewed
and informed them of the documentary requirements and placement fee. He promised deployment within a three or four
month-period upon payment of the fee, but failed to deploy them and to reimburse, upon demand, the placement fees
paid.

The Court is not persuaded by appellant's argument that his non-flight is indicative of his innocence. Unlike the flight of an
accused, which is competent evidence against him tending to establish his guilt, non-flight is simply inaction, which may
be due to several factors. It may not be construed as an indication of innocence. 23

Of marked relevance is the absence of any showing that the private complainants had any ill motive against appellant
other than to bring him to the bar of justice to answer for the crime of illegal recruitment. Besides, for strangers to conspire
and accuse another stranger of a most serious crime just to mollify their hurt feelings would certainly be against human
nature and experience.24 Where there is nothing to show that the witnesses for the prosecution were actuated by improper
motive, their positive and categorical declarations on the witness stand under the solemnity of an oath deserve full faith
and credence.25

It is a settled rule that factual findings of the trial courts, including their assessment of the witnesses credibility, are
entitled to great weight and respect by the Supreme Court, particularly when the CA affirmed such findings.26 After all, the
trial court is in the best position to determine the value and weight of the testimonies of witnesses. 27 The absence of any
showing that the trial court plainly overlooked certain facts of substance and value that, if considered, might affect the
result of the case, or that its assessment was arbitrary, impels the Court to defer to the trial courts determination
according credibility to the prosecution evidence.

Under the last paragraph of Section 6 of R.A. No. 8042, illegal recruitment shall be considered an offense involving
economic sabotage if committed in large scale, viz, committed against three or more persons individually or as a group. In
the present case, five complainants testified against appellants acts of illegal recruitment, thereby rendering his acts
tantamount to economic sabotage. Under Section 7 (b) of R.A. No. 8042, the penalty of life imprisonment and a fine of not
less than P500,000.00 nor more than P1,000.000.00 shall be imposed if illegal recruitment constitutes economic
sabotage.

Thus, the RTC and the CA correctly found appellant guilty beyond reasonable doubt of large scale illegal recruitment.

WHEREFORE, the appeal is DISMISSED. The Decision dated August 31, 2995 of the Court of Appeals affirming the
conviction of appellant Antonio Nogra for large scale illegal recruitment under Sections 6 (m) and 7 (b) of Republic Act No.
8042 is AFFIRMED.

SO ORDERED.
G.R. No. 178204 August 20, 2008
[Formerly G.R. No. 156497]

THE PEOPLE OF THE PHILIPPINES, appellee,

vs.
MARCOS GANIGAN, appellant.

DECISION

TINGA, J.:

Before us for automatic review is the Decision1 dated 14 November 2006 of the Court of Appeals affirming the
judgment of conviction2 for the crime of illegal recruitment rendered by the Regional Trial Court (RTC) of
Malolos, Bulacan, Branch 21.3

In an Information filed before the RTC, accused Ruth, Monchito, Eddie, Avelin Sulaiman and Marcos
(appellant), all surnamed Ganigan, were charged with illegal recruitment committed as follows:

That sometime between the period from July and August 1998 in Plaridel, Bulacan and within the
jurisdiction of this Honorable Court, the above-named accused, representing themselves to have the
capacity to contract, enlist and transport workers for employment in New Zealand, conspiring,
confederating and mutually helping one another, did then and there willfully, unlawfully and feloniously
recruit for a fee the following persons namely: MAURO EUSEBIO, VALENTINO CRISOSTOMO and
LEONORA DOMINGO, all residents of Sto. Nio, Plaridel, Bulacan for employment in New Zealand,
without first obtaining the required license and/or authority from the Philippine Overseas Employment
Administration.

CONTRARY TO LAW.4

Only appellant was arrested. The other accused remained at large.

Appellant, assisted by counsel, pleaded not guilty on arraignment. Trial ensued.

The three private complainants, Leonora Domingo (Leonora), Mauro Reyes (Mauro), and Valentino
Crisostomo (Valentino), testified for the prosecution.

They narrated that they first met appellant in the house of Manolito Reyes in Plaridel, Bulacan in June 1998.
Appellant allegedly made representations to private complainants, among others, that his brother, Monchito,
and his sister-in-law, Ruth, had the capacity to recruit apple and grape pickers for employment in New
Zealand.5

On 5 July 1998, the group, composed of the three private complainants and 35 others,6 went to La Union
where they met with Monchito and Ruth. Ruth proceeded to explain their prospective employment with a
$1,200.00 monthly salary. Ruth also required the group to attend bible study sessions every Sunday because
their prospective employer is a devout Catholic. Pursuant to their desire to work in New Zealand, the group
attended bible study from 5 July to December 1998.7

Each member of the group was asked to pay P2,000.00 as assurance fee.8 Leonora paid an
additional P400.00 for her National Statistics Office-issued birth certificate,9 P500.00 for physical examination
and P320.00 for medical fee.10 Mauro gave an additional P320.00 for medical expenses11 whereas Valentino
shelled out P180.00 for pictures, P1,000.00 for bio-data and P350.00 for medical examination.12 The three
attested that appellant received their payment and a document was prepared by one of their companions as
evidence of the receipt.13 The exhibits submitted by the prosecution show that Monchito acknowledged having
received a total of P101,480.00 from various applicants.14 Other documents showed that appellant and Ruth
received payment from the applicants.15

Ruth and appellant allegedly promised them that they would leave for New Zealand before October 1998.
When they were unable to leave, however, they were told that their prospective employer would arrive in the
Philippines on 22 November 1998. On the designated date, they were informed that their prospective employer
fell down the stairway of the airplane. An interview was then scheduled on 29 December 1998 but on that day,
they were told that their prospective employer had been held up. This prompted the complainants to go to the
Philippine Overseas Employment Administration (POEA) to check on the background of the accused.

They learned that appellant, Ruth and Monchito do not have the authority to recruit workers for employment
abroad.16 Certifications to that effect were issued by the POEA.17
Appellant denied having recruited private complainants for work abroad. He claimed that he himself was also a
victim as he had also paid P3,000.00 for himself and P2,000.00 for his daughter. He likewise attended the bible
study sessions as a requirement for the overseas employment.18 He contended that he was merely implicated
in the case because he was the only one apprehended among the accused.19

The trial court rendered judgment convicting appellant of the crime of illegal recruitment. The dispositive
portion of the decision reads:

Wherefore, all premises considered, this Court finds and so holds that the prosecution was able to
establish by proof beyond reasonable doubt the criminal culpability of the accused Marcos Ganigan on
the offense charged against him. Accordingly, this Court finds him guilty of the crime of illegal
recruitment in large scale resulting in economic sabotage as defined under Section 6 and penalized
under Section 7(b) of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995. Accordingly, he is sentenced to suffer the penalty of life imprisonment and to pay
a fine of P500,000.00.

Accused Marcos Ganigan is also directed to pay complainants Leonora Domingo, Mauro Reyes and
Valentino Crisostomo the amounts of P2,400.00 each plus the sum of P500.00 for Leonora Domingo
for actual damages and P25,000.00 as and for moral damages.

With regard to accused Ruth Ganigan, Monchito Ganigan, Eddie Ganigan and Avelin Sulaiman
Ganigan, who remain at large until this time, the case against them is ordered archived. Let an alias
Warrant of arrest be issued for their apprehension.

SO ORDERED.20

The trial court found that all elements of illegal recruitment in large scale had been established through the
testimonial and documentary evidence of the prosecution.

In view of the penalty imposed, the case was elevated to this Court on automatic review. However, this Court
resolved to transfer the case to the Court of Appeals for intermediate review in light of our ruling in People v.
Mateo.21

On 14 November 2006, the Court of Appeals affirmed the trial court's decision.

Upon receipt of the unfavorable decision, appellant filed a notice of appeal. On 15 October 2007, this Court
resolved to accept the case and to require the parties to simultaneously submit their respective supplemental
briefs. The Office of the Solicitor General (OSG) filed a Manifestation and Motion 22stating that it would no
longer file any supplemental briefs and instead adopt its appellee's brief filed on 12 January 2006. Appellant
likewise manifested that he would merely adopt his appellant's brief.23

Appellant argues that the prosecution has failed to establish his guilt beyond reasonable doubt. He maintains
that he did not participate in any recruitment activity and that the alleged payments made by private
complainants were for membership in the Christian Catholic Mission, as shown by the fact that private
complainants have regularly attended bible study sessions from 5 July to November 1998. He also points out
that nothing on record would show that the necessary training or orientation seminar pertaining to the
supposed employment has ever been conducted.

Assuming arguendo that the Christian Catholic Mission was only a front to an illegal venture, appellant avers
that he was not part of the conspiracy because he was a victim himself as he in fact also paid assurance fees
for membership in the Christian Catholic Mission. He laments that aside from introducing private complainants
to Ruth, he has not done any other act tantamount to recruitment.

The OSG defended the decision of the trial court in giving full faith and credence to the testimonies of the
complaining witnesses. It contends that there is no showing that the victims were impelled by any ill motive to
falsely testify against appellant. It asserts that the collective testimony of the witnesses has categorically
established appellant's participation in the crime.24

The crime of illegal recruitment is committed when these two elements concur: (1) the offenders have no valid
license or authority required by law to enable them to lawfully engage in the recruitment and placement of
workers; and (2) the offenders undertake any activity within the meaning of recruitment and placement defined
in Article 13(b) or any prohibited practices enumerated in Article 34 of the Labor Code. In case of illegal
recruitment in large scale, a third element is added - that the accused commits the acts against three or more
persons, individually or as a group.25
Article 13(b) defines recruitment and placement as "any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring or procuring workers; and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not." In the simplest terms, illegal recruitment is committed
by persons who, without authority from the government, give the impression that they have the power to send
workers abroad for employment purposes.26

Since appellant, along with the other accused, made misrepresentations concerning their purported power and
authority to recruit for overseas employment, and in the process collected from private complainants various
amounts in the guise of placement fees, the former clearly committed acts constitutive of illegal recruitment. In
fact, this Court held that illegal recruiters need not even expressly represent themselves to the victims as
persons who have the ability to send workers abroad. It is enough that these recruiters give the impression that
they have the ability to enlist workers for job placement abroad in order to induce the latter to tender payment
of fees.27

It is clear from the testimonies of private complainants that appellant undertook to recruit them for a purported
employment in New Zealand and in the process collected various amounts from them as "assurance fees" and
other fees related thereto.

Private complainants testified in a clear, positive and straightforward manner. Leonora testified that appellant
recruited her to work in New Zealand as a fruit picker and was promised by Ruth a monthly salary of
$1,200.00. She was required to pay an assurance fee of P2,000.00. She later learned that appellant and his
cohorts had not been licensed by the POEA to recruit for overseas employment.28On cross-examination, she
confirmed that she turned over the amount of fees to appellant with the understanding that such payment was
for employment abroad.29

Mauro similarly recounted that he was introduced to Monchito and Ruth by appellant as an applicant for farm
work in New Zealand. He was told to prepare P2,000.00 as assurance fee, which he paid to appellant. When
he was unable to leave, he checked with the POEA and found out that appellant had no license to
recruit.30 During the cross-examination, Mauro was firm in his stance that he paid the amount of P2,000.00 as
assurance of employment in New Zealand. Furthermore, he regularly attended the bible study as a
requirement for said employment.31

Valentino's testimony corroborated that of Leonora and Mauro.32

The trial court found these testimonies credible and convincing.

Well-settled is the doctrine that great weight is accorded to the factual findings of the trial court particularly on
the ascertainment of the credibility of witnesses; this can only be discarded or disturbed when it appears in the
record that the trial court overlooked, ignored or disregarded some fact or circumstance of weight or
significance which if considered would have altered the result.33 In the present case, we find no reason to
depart from the rule.

Verily, we agree with the OSG that the testimonies of private complainants have adequately established the
elements of the crime, as well as appellant's indispensable participation therein. Appellant recruited at least
three persons, the private complainants in this case, giving them the impression that he and his relatives had
the capability of sending them to New Zealand for employment as fruit pickers. The OSG adds that appellant
went to Bulacan to invite the victims and accompanied them to a fellowship and briefing in La Union; that
appellant misrepresented that joining the religious group would ensure their overseas employment; and that
appellant without any license or authority to recruit, collected various amounts from private complainants.

Appellant miserably failed to convince this Court that the payments made by the complainants were actually for
their membership in the religious organization. He did not present any document to prove this allegation.

For their part, private complainants were adamant that the payments made to appellant were for purposes of
employment to New Zealand. They further explained that their participation in the bible study sessions was but
a requirement imposed by appellant because their prospective employer was also a member of the same
religious group.

Moreover, appellant has failed to rebut the evidence presented by the prosecution consisting of a receipt of
payment signed by him.34 His flimsy denial that the signature on the receipt was not his own does not merit
consideration in light of the trial court's contrary finding.

As between the positive and categorical testimonies of private complainants and the unsubstantiated denial
proffered by appellant, this Court is inclined to give more weight to the former.

In sum, appellant is correctly found guilty of large scale illegal recruitment tantamount to economic sabotage.
Under Section 7(b) of Republic Act No. 8042, the penalty of life imprisonment and a fine of not less
than P500,000.00 nor more than P1,000.000.00 shall be imposed if illegal recruitment constitutes economic
sabotage.

WHEREFORE, premises considered, the decision of the Court of Appeals in CA-G.R. CR-H.C. No. 00867
is AFFIRMED.

SO ORDERED.
G.R. No. 169076 January 23, 2007

PEOPLE OF THE PHILIPPINES, Appellee,

vs.
JOSEPH JAMILOSA, Appellant.

DECISION

CALLEJO, SR., J.:

This is an appeal from the Decision1 of the Regional Trial Court (RTC) of Quezon City in Criminal Case No. Q-97-
72769 convicting appellant Joseph Jamilosa of large scale illegal recruitment under Sections 6 and 7 of Republic
Act (R.A.) No. 8042, and sentencing him to life imprisonment and to pay a P500,000.00 fine.

The Information charging appellant with large scale illegal recruitment was filed by the Senior State Prosecutor on
August 29, 1997. The inculpatory portion of the Information reads:

That sometime in the months of January to February, 1996, or thereabout in the City of Quezon, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, representing to have the capacity, authority or license
to contract, enlist and deploy or transport workers for overseas employment, did then and there, willfully, unlawfully
and criminally recruit, contract and promise to deploy, for a fee the herein complainants, namely, Haide R. Ruallo,
Imelda D. Bamba, Geraldine M. Lagman and Alma E. Singh, for work or employment in Los Angeles, California,
U.S.A. in Nursing Home and Care Center without first obtaining the required license and/or authority from the
Philippine Overseas Employment Administration (POEA).

Contrary to law.2

On arraignment, the appellant, assisted by counsel, pleaded not guilty to the charge.

The case for the prosecution, as synthesized by the Court of Appeals (CA), is as follows:

The prosecution presented three (3) witnesses, namely: private complainants Imelda D. Bamba, Geraldine M.
Lagman and Alma E. Singh.

Witness Imelda D. Bamba testified that on January 17, 1996, she met the appellant in Cubao, Quezon City on board
an aircon bus. She was on her way to Shoemart (SM), North EDSA, Quezon City where she was working as a
company nurse. The appellant was seated beside her and introduced himself as a recruiter of workers for
employment abroad. The appellant told her that his sister is a head nurse in a nursing home in Los Angeles,
California, USA and he could help her get employed as a nurse at a monthly salary of Two Thousand US Dollars
($2,000.00) and that she could leave in two (2) weeks time. He further averred that he has connections with the US
Embassy, being a US Federal Bureau of Investigation (FBI) agent on official mission in the Philippines for one
month. According to the appellant, she has to pay the amount of US$300.00 intended for the US consul. The
appellant gave his pager number and instructed her to contact him if she is interested to apply for a nursing job
abroad.

On January 21, 1996, the appellant fetched her at her office. They then went to her house where she gave him the
photocopies of her transcript of records, diploma, Professional Regulatory Commission (PRC) license and other
credentials. On January 28 or 29, 1996, she handed to the appellant the amount of US$300.00 at the McDonalds
outlet in North EDSA, Quezon City, and the latter showed to her a photocopy of her supposed US visa. The
appellant likewise got several pieces of jewelry which she was then selling and assured her that he would sell the
same at the US embassy. However, the appellant did not issue a receipt for the said money and jewelry. Thereafter,
the appellant told her to resign from her work at SM because she was booked with Northwest Airlines and to leave
for Los Angeles, California, USA on February 25, 1996.

The appellant promised to see her and some of his other recruits before their scheduled departure to hand to them
their visas and passports; however, the appellant who was supposed to be with them in the flight failed to show up.
Instead, the appellant called and informed her that he failed to give the passport and US visa because he had to go
to the province because his wife died. She and her companions were not able to leave for the United States. They
went to the supposed residence of the appellant to verify, but nobody knew him or his whereabouts. They tried to
contact him at the hotel where he temporarily resided, but to no avail. They also inquired from the US embassy and
found out that there was no such person connected with the said office. Thus, she decided to file a complaint with
the National Bureau of Investigation (NBI).

Prosecution witness Geraldine Lagman, for her part, testified that she is a registered nurse by profession. In the
morning of January 22, 1996, she went to SM North EDSA, Quezon City to visit her cousin Imelda Bamba. At that
time, Bamba informed her that she was going to meet the appellant who is an FBI agent and was willing to help
nurses find a job abroad. Bamba invited Lagman to go with her. On the same date at about 2:00 oclock in the
afternoon, she and Bamba met the appellant at the SM Fast-Food Center, Basement, North EDSA, Quezon City.
The appellant convinced them of his ability to send them abroad and told them that he has a sister in the United
States. Lagman told the appellant that she had no working experience in any hospital but the appellant assured her
that it is not necessary to have one. The appellant asked for US$300.00 as payment to secure an American visa
and an additional amount of Three Thousand Four Hundred Pesos (P3,400.00) as processing fee for other
documents.

On January 24, 1996, she and the appellant met again at SM North EDSA, Quezon City wherein she handed to the
latter her passport and transcript of records. The appellant promised to file the said documents with the US
embassy. After one (1) week, they met again at the same place and the appellant showed to her a photocopy of her
US visa. This prompted her to give the amount of US$300.00 and two (2) bottles of Black Label to the appellant.
She gave the said money and liquor to the appellant without any receipt out of trust and after the appellant promised
her that he would issue the necessary receipt later. The appellant even went to her house, met her mother and
uncle and showed to them a computer printout from Northwest Airlines showing that she was booked to leave for
Los Angeles, California, USA on February 25, 1996.

Four days after their last meeting, Extelcom, a telephone company, called her because her number was appearing
in the appellants cellphone documents. The caller asked if she knew him because they were trying to locate him, as
he was a swindler who failed to pay his telephone bills in the amount of P100,000.00. She became suspicious and
told Bamba about the matter. One (1) week before her scheduled flight on February 25, 1996, they called up the
appellant but he said he could not meet them because his mother passed away. The appellant never showed up,
prompting her to file a complaint with the NBI for illegal recruitment.

Lastly, witness Alma Singh who is also a registered nurse, declared that she first met the appellant on February 13,
1996 at SM North EDSA, Quezon City when Imelda Bamba introduced the latter to her. The appellant told her that
he is an undercover agent of the FBI and he could fix her US visa as he has a contact in the US embassy. The
appellant told her that he could help her and her companions Haidee Raullo, Geraldine Lagman and Imelda Bamba
find jobs in the US as staff nurses in home care centers.

On February 14, 1996 at about 6:30 in the evening, the appellant got her passport and picture. The following day or
on February 15, 1996, she gave the appellant the amount of US$300.00 and a bottle of cognac as "grease money"
to facilitate the processing of her visa. When she asked for a receipt, the appellant assured her that there is no need
for one because she was being directly hired as a nurse in the United States.

She again met the appellant on February 19, 1996 at the Farmers Plaza and this time, the appellant required her to
submit photocopies of her college diploma, nursing board certificate and PRC license. To show his sincerity, the
appellant insisted on meeting her father. They then proceeded to the office of her father in Barrio Ugong, Pasig City
and she introduced the appellant. Thereafter, the appellant asked permission from her father to allow her to go with
him to the Northwest Airlines office in Ermita, Manila to reserve airline tickets. The appellant was able to get a ticket
confirmation and told her that they will meet again the following day for her to give P10,000.00 covering the half
price of her plane ticket. Singh did not meet the appellant as agreed upon. Instead, she went to Bamba to inquire if
the latter gave the appellant the same amount and found out that Bamba has not yet given the said amount. They
then paged the appellant through his beeper and told him that they wanted to see him. However, the appellant
avoided them and reasoned out that he could not meet them as he had many things to do. When the appellant did
not show up, they decided to file a complaint for illegal recruitment with the NBI.

The prosecution likewise presented the following documentary evidence:

Exh. "A" Certification dated February 23, 1998 issued by Hermogenes C. Mateo, Director II, Licensing Branch,
POEA.

Exh. "B" Affidavit of Alma E. Singh dated February 23, 1996.3

On the other hand, the case for the appellant, as culled from his Brief, is as follows:

Accused JOSEPH JAMILOSA testified on direct examination that he got acquainted with Imelda Bamba inside an
aircon bus bound for Caloocan City when the latter borrowed his cellular phone to call her office at Shoe Mart (SM),
North Edsa, Quezon City. He never told Bamba that he could get her a job in Los Angeles, California, USA, the truth
being that she wanted to leave SM as company nurse because she was having a problem thereat. Bamba called
him up several times, seeking advice from him if Los Angeles, California is a good place to work as a nurse. He
started courting Bamba and they went out dating until the latter became his girlfriend. He met Geraldine Lagman
and Alma Singh at the Shoe Mart (SM), North Edsa, Quezon City thru Imelda Bamba. As complainants were all
seeking advice on how they could apply for jobs abroad, lest he be charged as a recruiter, he made Imelda Bamba,
Geraldine Lagman and Alma Singh sign separate certifications on January 17, 1996 (Exh. "2"), January 22, 1996
(Exh. "4"), and February 19, 1996 (Exh. "3"), respectively, all to the effect that he never recruited them and no
money was involved. Bamba filed an Illegal Recruitment case against him because they quarreled and separated.
He came to know for the first time that charges were filed against him in September 1996 when a preliminary
investigation was conducted by Fiscal Daosos of the Department of Justice. (TSN, October 13, 1999, pp. 3-9 and
TSN, December 8, 1999, pp. 2-9)4
On November 10, 2000, the RTC rendered judgment finding the accused guilty beyond reasonable doubt of the
crime charged.5 The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered finding accused guilty beyond reasonable doubt of Illegal Recruitment
in large scale; accordingly, he is sentenced to suffer the penalty of life imprisonment and to pay a fine of Five
Hundred Thousand Pesos (P500,000.00), plus costs.

Accused is ordered to indemnify each of the complainants, Imelda Bamba, Geraldine Lagman and Alma Singh the
amount of Three Hundred US Dollars ($300.00).

SO ORDERED.6

In rejecting the defenses of the appellant, the trial court declared:

To counter the version of the prosecution, accused claims that he did not recruit the complainants for work abroad
but that it was they who sought his advice relative to their desire to apply for jobs in Los Angeles, California, USA
and thinking that he might be charged as a recruiter, he made them sign three certifications, Exh. "2," "3" and "4,"
which in essence state that accused never recruited them and that there was no money involved.

Accuseds contention simply does not hold water. Admittedly, he executed and submitted a counter-affidavit during
the preliminary investigation at the Department of Justice, and that he never mentioned the aforesaid certifications,
Exhibits 2, 3 and 4 in said counter-affidavit. These certifications were allegedly executed before charges were filed
against him. Knowing that he was already being charged for prohibited recruitment, why did he not bring out these
certifications which were definitely favorable to him, if the same were authentic. It is so contrary to human nature
that one would suppress evidence which would belie the charge against him.

Denials of the accused can not stand against the positive and categorical narration of each complainant as to how
they were recruited by accused who had received some amounts from them for the processing of their papers. Want
of receipts is not fatal to the prosecutions case, for as long as it has been shown, as in this case, that accused had
engaged in prohibited recruitment. (People v. Pabalan, 262 SCRA 574).

That accused is neither licensed nor authorized to recruit workers for overseas employment, is shown in the
Certification issued by POEA, Exh. "A."

In fine, the offense committed by the accused is Illegal Recruitment in large scale, it having been committed against
three (3) persons, individually.7

Appellant appealed the decision to this Court on the following assignment of error:

THE TRIAL COURT ERRED IN CONVICTING ACCUSED-APPELLANT OF THE CRIME OF ILLEGAL

RECRUITMENT IN LARGE SCALE DESPITE THE FACT THAT THE LATTERS GUILT WAS NOT PROVED
BEYOND REASONABLE DOUBT BY THE PROSECUTION.8

According to appellant, the criminal Information charging him with illegal recruitment specifically mentioned the
phrase "for a fee," and as such, receipts to show proof of payment are indispensable. He pointed out that the three
(3) complaining witnesses did not present even one receipt to prove the alleged payment of any fee. In its
eagerness to cure this "patent flaw," the prosecution resorted to presenting the oral testimonies of complainants
which were "contrary to the ordinary course of nature and ordinary habits of life [under Section 3(y), Rule 131 of the
Rules on Evidence] and defied credulity." Appellant also pointed out that complainants testimony that they paid him
but no receipts were issued runs counter to the presumption under Section [3](d), Rule 131 of the Rules on
Evidence that persons take ordinary care of their concern. The fact that complainants were not able to present
receipts lends credence to his allegation that it was they who sought advice regarding their desire to apply for jobs in
Los Angeles, California, USA. Thus, thinking that he might be charged as a recruiter, he made them sign three (3)
certifications stating that he never recruited them and there was no money involved. On the fact that the trial court
disregarded the certifications due to his failure to mention them during the preliminary investigation at the
Department of Justice (DOJ), appellant pointed out that there is no provision in the Rules of Court which bars the
presentation of evidence during the hearing of the case in court. He also pointed out that the counter-affidavit was
prepared while he was in jail "and probably not assisted by a lawyer."9

Appellee, through the Office of the Solicitor General (OSG), countered that the absence of receipts signed by
appellant acknowledging receipt of the money and liquor from the complaining witnesses cannot defeat the
prosecution and conviction for illegal recruitment. The OSG insisted that the prosecution was able to prove the guilt
of appellant beyond reasonable doubt via the collective testimonies of the complaining witnesses, which the trial
court found credible and deserving of full probative weight. It pointed out that appellant failed to prove any ill-motive
on the part of the complaining witnesses to falsely charge him of illegal recruitment.

On appellants claim that the complaining witness Imelda Bamba was his girlfriend, the OSG averred:
Appellants self-serving declaration that Imelda is his girlfriend and that she filed a complaint for illegal recruitment
after they quarreled and separated is simply preposterous. No love letters or other documentary evidence was
presented by appellant to substantiate such claim which could be made with facility. Imelda has no reason to
incriminate appellant except to seek justice. The evidence shows that Alma and Geraldine have no previous quarrel
with appellant. Prior to their being recruited by appellant, Alma and Geraldine have never met appellant. It is against
human nature and experience for private complainants to conspire and accuse a stranger of a most serious crime
just to mollify their hurt feelings. (People v. Coral, 230 SCRA 499, 510 [1994])10

The OSG posited that the appellants reliance on the certifications11 purportedly signed by the complaining
witnesses is misplaced, considering that the certifications are barren of probative weight.

On February 23, 2005, the Court resolved to transfer the case to the CA.12 On June 22, 2005, the CA rendered
judgment affirming the decision of the RTC.13

The OSG filed a Supplemental Brief, while the appellant found no need to file one.

The appeal has no merit.

Article 13(b) of the Labor Code of the Philippines defines recruitment and placement as follows:

(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring,
or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or
abroad, whether for profit or not. Provided, That any person or entity which, in any manner, offers or promises for a
fee employment to two or more persons shall be deemed engaged in recruitment and placement.

Section 6 of R.A. No. 8042 defined when recruitment is illegal:

SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of
authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any manner, offers or
promises for a fee employment abroad to two or more persons shall be deemed so engaged. x x x

Any recruitment activities to be undertaken by non-licensee or non-holder of contracts shall be deemed illegal and
punishable under Article 39 of the Labor Code of the Philippines.14 Illegal recruitment is deemed committed in large
scale if committed against three (3) or more persons individually or as a group.15

To prove illegal recruitment in large scale, the prosecution is burdened to prove three (3) essential elements, to wit:
(1) the person charged undertook a recruitment activity under Article 13(b) or any prohibited practice under Article
34 of the Labor Code; (2) accused did not have the license or the authority to lawfully engage in the recruitment and
placement of workers; and (3) accused committed the same against three or more persons individually or as a
group.16 As gleaned from the collective testimonies of the complaining witnesses which the trial court and the
appellate court found to be credible and deserving of full probative weight, the prosecution mustered the requisite
quantum of evidence to prove the guilt of accused beyond reasonable doubt for the crime charged. Indeed, the
findings of the trial court, affirmed on appeal by the CA, are conclusive on this Court absent evidence that the
tribunals ignored, misunderstood, or misapplied substantial fact or other circumstance.

The failure of the prosecution to adduce in evidence any receipt or document signed by appellant where he
acknowledged to have received money and liquor does not free him from criminal liability. Even in the absence of
money or other valuables given as consideration for the "services" of appellant, the latter is considered as being
engaged in recruitment activities.

It can be gleaned from the language of Article 13(b) of the Labor Code that the act of recruitment may be for profit or
not. It is sufficient that the accused promises or offers for a fee employment to warrant conviction for illegal
recruitment.17 As the Court held in People v. Sagaydo:18

Such is the case before us. The complainants parted with their money upon the prodding and enticement of
accused-appellant on the false pretense that she had the capacity to deploy them for employment abroad. In the
end, complainants were neither able to leave for work abroad nor get their money back.

The fact that private complainants Rogelio Tibeb and Jessie Bolinao failed to produce receipts as proof of their
payment to accused-appellant does not free the latter from liability. The absence of receipts cannot defeat a criminal
prosecution for illegal recruitment. As long as the witnesses can positively show through their respective testimonies
that the accused is the one involved in prohibited recruitment, he may be convicted of the offense despite the
absence of receipts.19
Appellants reliance on the certifications purportedly signed by the complaining witnesses Imelda Bamba, Alma
Singh and Geraldine Lagman20 is misplaced. Indeed, the trial court and the appellate court found the certifications
barren of credence and probative weight. We agree with the following pronouncement of the appellate court:

Anent the claim of the appellant that the trial court erred in not giving weight to the certifications (Exhs. "2," "3" & "4")
allegedly executed by the complainants to the effect that he did not recruit them and that no money was involved,
the same deserves scant consideration.

The appellant testified that he was in possession of the said certifications at the time the same were executed by the
complainants and the same were always in his possession; however, when he filed his counter-affidavit during the
preliminary investigation before the Department of Justice, he did not mention the said certifications nor attach them
to his counter-affidavit.
lavvphil.net

We find it unbelievable that the appellant, a college graduate, would not divulge the said certifications which would
prove that, indeed, he is not an illegal recruiter. By failing to present the said certifications prior to the trial, the
appellant risks the adverse inference and legal presumption that, indeed, such certifications were not genuine.
When a party has it in his possession or power to produce the best evidence of which the case in its nature is
susceptible and withholds it, the fair presumption is that the evidence is withheld for some sinister motive and that its
production would thwart his evil or fraudulent purpose. As aptly pointed out by the trial court:

"x x x These certifications were allegedly executed before charges were filed against him. Knowing that he was
already being charged for prohibited recruitment, why did he not bring out these certifications which were definitely
favorable to him, if the same were authentic. It is so contrary to human nature that one would suppress evidence
which would belie the charge against him." (Emphasis Ours)21

At the preliminary investigation, appellant was furnished with copies of the affidavits of the complaining witnesses
and was required to submit his counter-affidavit. The complaining witnesses identified him as the culprit who
"recruited" them. At no time did appellant present the certifications purportedly signed by the complaining witnesses
to belie the complaint against him. He likewise did not indicate in his counter-affidavit that the complaining witnesses
had executed certifications stating that they were not recruited by him and that he did not receive any money from
any of them. He has not come forward with any valid excuse for his inaction. It was only when he testified in his
defense that he revealed the certifications for the first time. Even then, appellant lied when he claimed that he did
not submit the certifications because the State Prosecutor did not require him to submit any counter-affidavit, and
that he was told that the criminal complaint would be dismissed on account of the failure of the complaining
witnesses to appear during the preliminary investigation. The prevarications of appellant were exposed by Public
Prosecutor Pedro Catral on cross-examination, thus:

Q Mr. Witness, you said that a preliminary investigation [was] conducted by the Department of Justice through State
Prosecutor Daosos. Right?

A Yes, Sir.

Q Were you requested to file your Counter-Affidavit?

A Yes, Sir. I was required.

Q Did you file your Counter-Affidavit?

A Yes, Sir, but he did not accept it.

Q Why?

A Because he said "never mind" because the witness is not appearing so he dismissed the case.

Q Are you sure that he did not accept your Counter-Affidavit, Mr. Witness?

A I dont know of that, Sir.

Q If I show you that Counter-Affidavit you said you prepared, will you be able to identify the same, Mr. Witness?

A Yes, Sir.

Q I will show you the Counter-Affidavit dated June 16, 1997 filed by one Joseph J. Jamilosa, will you please go over
this and tell if this is the same Counter-Affidavit you said you prepared and you are going to file with the
investigating state prosecutor?

A Yes, Sir. This the same Counter-Affidavit.

Q There is a signature over the typewritten name Joseph J. Jamilosa, will you please go over this and tell this
Honorable Court if this is your signature, Mr. Witness?

A Yes, Sir. This is my signature.

Q During the direct examination you were asked to identify [the] Certification as Exh. "2" dated January 17, 1996,
allegedly issued by Bamba, one of the complainants in this case, when did you receive this Certification issued by
Imelda Bamba, Mr. Witness?

A That is the date, Sir.

Q You mean the date appearing in the Certification.

A Yes, Sir.

Q Where was this handed to you by Imelda Bamba, Mr. Witness?

A At SM North Edsa, Sir.

Q During the direct examination you were also asked to identify a Certification Exh. "3" for the defense dated
February 19, 1996, allegedly issued by Alma Singh, one of the complainants in this case, will you please go over
this and tell us when did Alma Singh allegedly issue to you this Certification?

A On February 19, 1996, Sir.

Q And also during the direct examination, you were asked to identify a Certification which was already marked as
Exh. "4" for the defense dated January 22, 1996 allegedly issued by Geraldine M. Lagman, one of the complainants
in this case, will you please tell the court when did Geraldine Lagman give you this Certification?

A January 22, 1996, Sir.

Q During that time, January 22, 1996, January 17, 1996 and February 19, 1996, you were in possession of all these
Certification. Correct, Mr. Witness?

A Yes, Sir.

Q These were always in your possession. Right?

A Yes, Sir, with my papers.

Q Do you know when did the complainants file cases against you?

A I dont know, Sir.

Q Alright. I will read to you this Counter-Affidavit of yours, and I quote "I, Joseph Jamilosa, of legal age, married and
resident of Manila City Jail, after having duly sworn to in accordance with law hereby depose and states that: 1) the
complainants sworn under oath to the National Bureau of Investigation that I recruited them and paid me certain
sums of money assuming that there is truth in those allegation of this (sic) complainants. The charge filed by them
should be immediately dismissed for certain lack of merit in their Sworn Statement to the NBI Investigator; 2)
likewise, the complainants allegation is not true and I never recruited them to work abroad and that they did not give
me money, they asked me for some help so I [helped] them in assisting and processing the necessary documents,
copies for getting US Visa; 3) the complainant said under oath that they can show a receipt to prove that they can
give me sums or amount of money. That is a lie. They sworn (sic), under oath, that they can show a receipt that I
gave to them to prove that I got the money from them. I asked the kindness of the state prosecutor to ask the
complainants to show and produce the receipts that I gave to them that was stated in the sworn statement of the
NBI; 4) the allegation of the complainants that the charges filed by them should be dismissed because I never
[received] any amount from them and they can not show any receipt that I gave them," Manila City Jail, Philippines,
June 16, 1997. So, Mr. Witness, June 16, 1997 is the date when you prepared this. Correct?

A Yes, Sir.

Q Now, my question to you, Mr. Witness, you said that you have with you all the time the Certification issued by [the]
three (3) complainants in this case, did you allege in your Counter-Affidavit that this Certification you said you
claimed they issued to you?

A I did not say that, Sir.

Q So, it is not here in your Counter-Affidavit?

A None, Sir.

Q What is your educational attainment, Mr. Witness?

A I am a graduate of AB Course Associate Arts in 1963 at the University of the East.

Q You said that the State Prosecutor of the Department of Justice did not accept your Counter-Affidavit, are you
sure of that, Mr. Witness?

A Yes, Sir.

Q Did you receive a copy of the dismissal which you said it was dismissed?

A No, Sir. I did not receive anything.

Q Did you receive a resolution from the Department of Justice?

A No, Sir.

Q Did you go over the said resolution you said you received here?

A I just learned about it now, Sir.

Q Did you read the content of the resolution?

A Not yet, Sir. Its only now that I am going to read.

COURT

Q You said it was dismissed. Correct?

A Yes, Your Honor.

Q Did you receive a resolution of this dismissal?

A No, Your Honor.

FISCAL CATRAL

Q What did you receive?

A I did not receive any resolution, Sir. Its just now that I learned about the finding.

Q You said you learned here in court, did you read the resolution filed against you, Mr. Witness?

A I did not read it, Sir.

Q Did you read by yourself the resolution made by State Prosecutor Daosos, Mr. Witness?

A Not yet, Sir.

Q What did you take, if any, when you received the subpoena from this court?

A I was in court already when I asked Atty. Usita to investigate this case.

Q You said a while ago that your Affidavit was not accepted by State Prosecutor Daosos. Is that correct?

A Yes, Sir.

Q Will you please read to us paragraph four (4), page two (2) of this resolution of State Prosecutor Daosos.

(witness reading par. 4 of the resolution)

Alright. What did you understand of this paragraph 4, Mr. Witness?

A Probably, guilty to the offense charge.22

It turned out that appellant requested the complaining witnesses to sign the certifications merely to prove that he
was settling the cases:

COURT

Q These complainants, why did you make them sign in the certifications?

A Because one of the complainants told me to sign and they are planning to sue me.

Q You mean they told you that they are filing charges against you and yet you [made] them sign certifications in
your favor, what is the reason why you made them sign?

A To prove that Im settling this case.

Q Despite the fact that they are filing cases against you and yet you were able to make them sign certifications?

A Only one person, Your Honor, who told me and he is not around.

Q But they all signed these three (3) certifications and yet they filed charges against you and yet you made them
sign certifications in your favor, so what is the reason why you made them sign?

(witness can not answer)23

The Court notes that the trial court ordered appellant to refund US$300.00 to each of the complaining witnesses.
The ruling of the appellate court must be modified. Appellant must pay only the peso equivalent of US$300.00 to
each of the complaining witnesses.

IN LIGHT OF ALL THE FOREGOING, the appeal is DISMISSED. The Decision of the Court of Appeals affirming the
conviction of Joseph Jamilosa for large scale illegal recruitment under Sections 6 and 7 of Republic Act No. 8042 is
AFFIRMED WITH MODIFICATION. The appellant is hereby ordered to refund to each of the complaining witnesses
the peso equivalent of US$300.00. Costs against appellant.

SO ORDERED.
G.R. No. 176733 August 11, 2008

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
FUJITA ZENCHIRO, accused-appellant.

DECISION

CARPIO MORALES, J.:

Accused-appellant Fujita Zenchiro (Zenchiro), a Japanese national, and one Eva Regino (Eva) were, in an
Information filed before the Regional Trial Court (RTC) of Malolos, Bulacan where it was docketed as Criminal
Case No. 3261-M-2001, charged to have conspired in committing illegal recruitment in large scale as
follows:

Criminal Case No. 3261-M-2001:

xxxx

That in or about the month of January, 1999, in the municipality of Meycauayan, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring and helping each other, non-licensees or non-holders of authority from the
Department of Labor and Employment to recruit and/or place workers in employment either locally or
overseas, did then and there willfully, unlawfully and feloniously, with false pretenses, undertake illegal
recruitment and placement for a fee of Alberto M. Anatalio, Fredie1 P. Ocampoand Alicia A. Diaz for
overseas employment.2 (Underscoring supplied)

Zenchiro and Eva were, in Informations also filed before the same court where they were docketed as Criminal
Cases No. 3262-M-2001, 3263-M-2001, and 3264-M-2001, likewise charged to have conspired in committing
three counts of estafa under Article 315, paragraph 2 (a) of the Revised Penal Code as follows:

Criminal Case No. 3262-M-2001:

That on or about the 2nd day of February, 1999, in the municipality of Meycauayan, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring and helping each other, with intent of gain, did then and there willfully, unlawfully
and feloniously defraud Alberto M. Anatalio and Fredie P. Ocampo in the sum of P50,000.00 each, by
then and there misrepresenting that they have the power and qualification to recruit and employ the
said Alberto M. Anatalio and Fredie P. Ocampo as worker[s] or assist them in securing employment
abroad, more particularly in Japan, and could facilitate the processing and approval of the necessary
papers in connection therewith, when in truth and in fact, as they well knew, they did not have such
qualifications, that pursuant to such misrepresentation and defraudation, said accused demanded and
received from Alberto M. Anatalio and Fredie P. Ocampo the sum of P50,000.00 each; that said
accused failed and refused to comply with their aforementioned undertakings and instead,
misappropriated the sum of P50,000.00 each, for their benefit, to the damage and prejudice of the said
Alberto M. Anatalio and Fredie P. Ocampo, in the total amount of P100,000.00.3 (Underscoring
supplied)

Criminal Case No. 3263-M-2001:

That on or about the 10th of March, 1999, in the municipality of Meycauayan, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring and helping each other, with intent of gain, did then and there willfully, unlawfully
and feloniously defraud one Alicia A. Diaz in the sum of P10,000.00, by then and there misrepresenting
that they have the power and qualification to recruit and employ the said Alicia A. Diaz as worker or
assist her in securing employment abroad, more particularly in Japan, and could facilitate the
processing and approval of the necessary papers in connection therewith, when in truth and in fact, as
they well knew, they did not have such qualifications; that pursuant to such misrepresentation and
defraudation, said accused demanded and received from Alicia A. Diaz the sum of P10,000.00; that
said accused failed and refused to comply with their aforementioned undertakings and instead,
misappropriated the sum of P10,000.00 for their benefit, to the damage and prejudice of the said Alicia
A. Diaz in the said amount of P10,000.00.4 (Underscoring supplied)

Criminal Case No. 3264-M-2001:

 That on or about the 12th of March, 1999, in the municipality of Meycauayan, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring and helping each other, with intent of gain, did then and there willfully, unlawfully,
and feloniously defraud one Alicia A. Diaz in the sum of P40,000.00, by then and there misrepresenting
that they have the power and qualification to recruit and employ the said Alicia A. Diaz as worker or
assist her in securing employment abroad, more particularly in Japan, and could facilitate the
processing and approval of the necessary papers in connection therewith, when in truth and in fact, as
they well knew they did not have such qualifications, that pursuant to such misrepresentation and
defraudation, said accused demanded and received from Alicia A. Diaz the sum of P40,000.00; that
said accused failed and refused to comply with their aforementioned undertakings and instead,
misappropriated the sum of P40,000.00 for their benefit, to the damage and prejudice of the said Alicia
A. Diaz in the said amount of P40,000.00.5 (Underscoring supplied)

Zenchiro pleaded not guilty to all the charges on arraignment.6 Eva has remained at large.

From the testimonies of prosecution witnesses-private complainants Alberto Anatalio (Anatalio) and his cousin
Fredie Ocampo (Ocampo), the following version is gathered:7

In January 1999, Eva introduced private complainants to Zenchiro, telling them that Zenchiro could deploy
them to work in Japan. Speaking in "broken" Tagalog, Zenchiro told the two that he would take care of
everything because he knows many persons who could work on their papers, and that they would receive a
monthly salary of 30 lapad, a lapad being equivalent to P3,500.

Eva and Zenchiro charged P250,000 each of the private complainants who each gave him P50,000 on
February 2, 1999 as downpayment for the processing of their papers. Ocampo's sister, Florinda Cadorna, also
a prosecution witness, paid P400,000 representing the total balance of Anatalio and Ocampo. 8

On June 26, 1999, Anatalio and Ocampo, escorted by Zenchiro, went to Japan where they were met by Eva
who thereupon accompanied them to her aunt's house in Tokyo where they stayed.

Contrary, however, to Eva's promises that they would be hired at her sister's hanger factory, Anatalio and
Ocampo were idle for two months, and whenever they asked her and Zenchiro (who alternately stayed in
Japan for one month and the Philippines for another month) about why, Zenchiro and Eva would merely
converse with each other in Japanese.

In September 1999, Anatalio and Ocampo returned to the Philippines upon which they asked Zenchiro to
refund the amounts they paid him. Zenchiro did promise to refund them, but he welched thereon, prompting the
filing of complaints against him that led to the filing of the Informations.

Anatalio and Ocampo were later to learn that Zenchiro and Eva are neither licensed nor authorized to recruit
workers for overseas employment.

From the testimony of private complainant Alicia Diaz (Alicia),9 the following version is gathered:

Zenchiro offered Alicia a job at the hanger factory in Japan of Eva's sister for a P250,000 placement fee, he
undertaking to take care of the processing of all her travel documents. Alicia accepted the offer and thus paid
Zenchiro the amount in several installments for which she was issued receipts.

On January 12, 1999, Alicia, accompanied by Zenchiro, left for Japan where Eva met them. Eva at once
brought her to "Movara" where she stayed with Zenchiro and two Filipinos. After the lapse of a week, she was
transferred to Chiba but she remained jobless. Via overseas telephone call to Zenchiro who had gone back to
the Philippines, she asked him what they were doing to her, but he gave no answer. Eva even scolded her for
calling Zenchiro.

Alicia returned to the Philippines on March 16, 1999 and confronted Eva and Zenchiro who asked for
forgiveness, they promising to deploy her to work. The promise remained unfulfilled, however, hence, she
demanded the refund of her money, but Zenchiro refunded her only P50,000.10

Anatalio, Ocampo, and Alicia identified Zenchiro in open court.11

In addition to testimonial evidence, the prosecution presented documentary evidence consisting of private
complainants' sworn statements, a certification from the Philippine Overseas Employment Administration12 that
the accused are not licensed to recruit workers for employment overseas, receipts signed by Zenchiro
acknowledging receipt of payments for "replayment fee" to Japan,13receipts for "VISA ASSISTANCE GOING
TO JAPAN" signed by Eva,14 and receipt signed by Alicia, bearing Zenchiro's signature, acknowledging a
partial refund of P50,00015 from Zenchiro.
Upon the other hand, Zenchiro, denying having promised private complainants that he would deploy them for
work in Japan,16 claimed that his involvement in the transactions was limited to assistance in the processing of
their travel documents and escorting them to Japan;17 and that private complainants in fact landed on jobs in
Japan18 in support of which he presented certificates, worded in Japanese, issued by Yugengaisha P-I and
Kabushikigaisha Sekine Kagaku Kogyo, said to attest that Anatalio and Ocampo worked in Japan in July up to
September 1999.19

By Joint Decision20 of July 5, 2005, Branch 11 of the RTC of Malolos convicted Zenchiro in Criminal Case Nos.
3261-M-2001 (for illegal recruitment), 3263-M-2001 (for Estafa on complaint of Alicia ), and 3264-M-2001 (for
Estafa on complaint of Alicia). It dismissed Criminal Case No. 3262-M-2001 (for Estafa on complaint of
Anatalio and Ocampo) on the ground of double jeopardy.21

In arriving at its Joint Decision, the trial court noted the following findings:

When the three (3) complainants went to the residence of the Regino's at Sto. Nio, Meycauayan on
different occasions, in the early part of January 1999, and the matter of their supposed employment in
Japan was taken up Zenchiro was personally present. Regino did much of the talking but as testified to
by the complainants she talked with Zenchiro in Nippongo, every now and then ostensibly to apprise
him of what was being talked about. Foremost was the representation by Regino, which Zenchiro
appears to have acquiesced into, that he was in a position to find work for the complainants in Japan.
On this point, Zenchiro's own admission that he offered his own services to work for complainants'
Japanese visa was a dead giveaway on his part of his active involvement in the illicit recruitment of the
latter to work in Japan. xxx This coupled with the uncontroverted fact that he even escorted the
complainants in going to Japanin the months of June, 1999 and January 2000 even living under the
same house with Anatalio and Ocampo therein make a strong case against him for the offense
charged.

That the complainants were duped into shelling large amounts for fictitious employment in Japan has
been convincingly shown. All three (3) were categorical in their assertion that the accused demanded,
and received, from each of them the amount of P250,000.00 as placement fee, adducing receipts in
substantiation of these exactions. In the case of Anatalio and Ocampo, the two (2) were uncontradicted
in their claim that, on February 2, 1999, both gave P50,000.00 each to Regino as initial payment of their
supposed placement fee in the presence of Zenchiro, and on this occasion, the latter told them that he
would take care of their papers. Two (2) days later, before their departure to Japan or on June 24,
1999, Florinda "Bong" Cadorna handed over to Zenchiro P400,000.00 duly receipted by the latter who
even signed his name in Japanese character[s].

The same situation holds true with Diaz. In her case on March 10, 1999, she gave Regino the initial
amount of P10,000.00 in her place at Sto. Nio, Meycauayan, Bulacan and two (2) days later or on
March 12, 1999, she gave her the additional amount of P40,000.00 as downpayment for her
replacement fee. After her visa was issued, on December 20, 1999 she gave the amount of
P100,000.00 in cash and a check worth P100,000.00 to Zenchiro personally xxx to complete her
employment fee. xxx This transaction between Diaz and the accused is fully substantiated by the
receipt dated December 20, 1999 signed by Zenchiro again in Japanese characters. Although Zenchiro
made it appear in said receipt that the payment was for visa assistance, the enormity of the amount
does not warrant belief to such a pretension[.]

Zenchiro's attempt to show that complainants worked in different firms in Japan is futile. All that he has
to show to prove his point are purported certifications from dubious Japanese firmsattesting to their
supposed employment which from the mere fact that these are written in Japanese characters without
any official translation in English hardly deserve any evidentiary value[.]

With the Certification from the POEA that the accused are not licensed to recruit workers either for local
and foreign employment, both stand liable for qualified illegal recruitment in large scale under the
provisions of the Labor Code, the same having been committed against three (3) persons.22 (Citations
omitted; underscoring supplied)

The trial court thus disposed:

WHEREFORE, in Criminal Case No. 3261-M-2001, this Court finds the accused Fujita Zenchiro
GUILTY beyond reasonable doubt of the crime of Illegal Recruitment in Large Scale defined and
penalized under Article 38 (b) in relation to Articles 34 and 39 of the Labor Code of the Philippines, P.D.
No. 442, as amended and hereby sentences him to suffer the penalty of Life Imprisonment and a fine of
P100,000.00. Accused is likewise ordered to pay the private complainants the following amounts as
actual damages, to wit:

1. P250,000.00 to Alberto Anatalio;

 2. P250,000.00 to Freddie Ocampo; and

3. P250,000.00 to Alicia Diaz.

In Criminal Case No. 3263-M-2001, this Court finds the accused Fujita Zenchiro GUILTY beyond
reasonable doubt of Estafa under Art. 315, par. 2(a) of the Revised Penal Code, as amended and
hereby sentences him to a prison term ranging from four (4) months and Twenty (20) days of Arresto
Mayor, as minimum, up to Two (2) years, Eleven (11) months and Ten (10) days of prision correccional,
as maximum and to pay Alicia Diaz the amount of P10,000.00 as actual damages.

In Criminal Case No. 3264-M-2001, this Court finds the accused Fujita Zenchiro GUILTY beyond
reasonable doubt of Estafa under Art. 315 par. 2(a) of the Revised Penal Code, as amended and
hereby sentences him to a prision term ranging from Four (4) Years, Nine (9) months and Eleven (11)
days of prision correccional, as minimum, up to Six (6) years, Eight (8) months, and one (1) day of
prision mayor as maximum and to pay Alicia Diaz the amount of P40,000.00 as actual damages.

Criminal Case No. 3262-M-2001 is hereby DISMISSED.

The cases against Eva Regino are hereby ARCHIVED.

SO ORDERED.23 (Emphasis and underscoring supplied)

On appeal to the Court of Appeals, Zenchiro assigned to the trial court the following errors:

. . . CONVICTING THE ACCUSED-APPELLANT FOR THE CRIME OF LARGE SCALE ILLEGAL

RECRUITMENT DESPITE THE FAILURE OF THE PROSECUTION TO PROVE BEYOND
REASONABLE DOUBT THAT HIS ACT OF SECURING COMPLAINANTS' JAPANESE VISAS IS
UNDER THE TERM "RECRUITMENT AND PLACEMENT".

II

. . . FINDING THE ACCUSED-APPELLANT GUILTY FOR THE CRIME OF ESTAFA DESPITE

FAILURE OF THE PROSECUTION TO PROVE BEYOND REASONABLE DOUBT THAT THERE WAS
DECEPTION ON HIS PART.24

The Court of Appeals affirmed the trial court's decision,25 hence, Zenchiro's appeal to this Court.26

Zenchiro maintains that what he promised to private complainants was assistance in securing their visas, not
employment. And he argues that he is not guilty of estafa because there was no deceit, he not having
misrepresented that he could obtain jobs for them in Japan.

As a general rule, the factual findings of the trial court, especially when affirmed by the appellate court as in the
cases at bar, are binding and conclusive on the Supreme Court.27 The above-quoted portions of the trial court's
factual findings are supported by the evidence. More particularly, Zenchiro's claim that his involvement in the
transaction was limited to mere assistance in the processing of private complainants' travel documents is
negated by documentary evidence showing that he received "replayment" fees from them.

Zenchiro goes on to reiterate his argument that Eva promised employment to private complainants without his
knowledge, he being a Japanese national and could not understand the conversation in Tagalog between Eva
and the private complainants. The Court of Appeals' brushing aside such argument is well taken.

In the first place, appellant during his arraignment even assented to the reading of the information in
Filipino because according to his counsel it is a language known and understood by him. And as
testified to by the private complainants, appellant even spoke to them in broken Tagalog when he was
promising them employment in Japan upon payment of placement fee to him and his co-accused
Regino. Private complainant Diaz also testified that during their conversation regarding the proposed
employment in Japan, while it was Regino who was explaining things to them, Regino would first talk to
appellant in Japanese and hence appellant cannot feign ignorance of the dealings and undertakings by
Regino with private complainants. Appellant knew and cooperated in the misrepresentations and
fraudulent scheme of Regino as they both duped private complainants into shelling substantial amounts
of money for those promised jobs as factory workers in Japan.28 (Underscoring supplied)

In fine, Zenchiro's disclaimer of the charges fails.

Illegal recruitment is deemed committed in large scale if it is committed against three or more persons
individually or as a group.29 Clearly, Zenchiro committed illegal recruitment against the three private
complainants.

His conviction in Criminal Case Nos. 3261-M-2001, 3263-M-2001 must thus be affirmed. Section 7 (b) of the
Migrant Workers and Overseas Filipinos Act of 1995 imposes a fine of not less than P500,000 nor more
than P1,000,000 if illegal recruitment for overseas employment constitutes economic sabotage - illegal
recruitment committed by a syndicate or in large scale. Since Zenchiro's act was committed in large scale, the
fine of P100,000 imposed upon him in Criminal Case No. 3261-M-2001 must be increased to P500,000.

Considering that Zenchiro already gave Alicia a partial refund of P50,000, the actual damages awarded to her
in Criminal Case No. 3261-M-2001 is reduced to P200,000, and the awards of actual damages to Alicia in
Criminal Cases Nos. 3263-M-2001 and 3264-M-2001 are deleted.

Respecting the penalty imposed in Criminal Case No. 3264-M-2001, Article 315 of the Revised Penal Code
provides:

Article 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned
hereinbelow shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if
the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amounts
exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum
period, adding one year for each additional 10,000 pesos; but the total penalty which may be
imposed shall not exceed twenty years. In such cases, and in connection with the accessory
penalties which may be imposed and for the purpose of the other provisions of this Code, the penalty
shall be termed prision mayor or reclusion temporal, as the case may be. (Underscoring supplied)

Applying the Indeterminate Sentence Law, the minimum of the penalty should be taken from the range of the
penalty next lower in degree to that prescribed under the Revised Penal Code. In this case, the penalty next
lower in degree is prision correccional in its minimum and medium periods. This Court imposes a minimum
penalty of two years of prision correccional.

With regard to the maximum penalty in Criminal Case No. 3264-M-2001, since the amount involved exceeds
P22,000, the imposable penalty shall be taken from the maximum period of prision correccional maximum
period to prision mayor minimum period, which, when divided into three equal portions following Article 65 of
the Revised Penal Code, have the following periods:

Minimum period - four years, two months, and one day to five years, five months, and ten days.

Medium period - five years, five months, and 11 days to six years, eight months, and 20 days

Maximum period - six years, eight months and 21 days to eight years.30

Following the above-quoted portion of the provision of Article 315 of the Revised Penal Code, the maximum
term of the penalty imposed by the trial court in Criminal Case No. 3264-M-2001 should be increased by one
year.

Adding one year to the maximum period of the prescribed penalty, which is from six years, eight months and
21 days to eight years of prision mayor, the maximum penalty may be taken from seven years, eight months
and 21 days to nine years of prision mayor.31 Thus, the maximum penalty imposed by the trial court in Criminal
Case No. 3264-M-2001 is increased to seven years, eight months, and 21 days of prision mayor.

WHEREFORE, the October 23, 2006 Decision of the Court of Appeals is AFFIRMED with the MODIFICATION
that the fine in Criminal Case No. 3261-M-2001 is P500,000. In Criminal Case No. 20-M-2001, the minimum
term of the imprisonment imposed is two years of prision correccional and the maximum term of the
imprisonment imposed is Seven Years, Eight Months and 21 Days of prision mayor.

In all other aspects, the appellate court's decision is AFFIRMED.

SO ORDERED.
G.R. No. 171448 February 28, 2007

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
CHARLIE COMILA and AIDA COMILA, Accused-Appellants.

DECISION

GARCIA, J.:

On April 5, 1999, in the Regional Trial Court (RTC) of Baguio City, an Information1 for Illegal Recruitment committed
in large scale by a syndicate, as defined and penalized under Article 13(6) in relation to Articles 38(b), 34 and 39 of
Presidential Decree No. 442, otherwise known as the New Labor Code, as amended, was filed against Charlie
Comila, Aida Comila and one Indira Ram Singh Lastra, allegedly committed as follows:

That on or about the 7th day of September, 1998, in the City of Baguio, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, conspiring, confederating, and mutually aiding one another, did then
and there willfully, unlawfully and feloniously offer, recruit, and promise employment as contract workers in Italy, to
the herein complainants, namely: MARLYN ARO y PADCAYAN, ANNIE FELIX y BAKISAN, ELEONOR DONGGA-
AS y ANGHEL, ESPERANZA BACKIAN y LAD-EY, ZALDY DUMPILES y MALIKDAN, JOEL EDIONG y
CALDERON, RICKY WALDO y NICKEY, JEROME MONTAEZ y OSBEN, DOVAL DUMPILES y SAP-AY,
JONATHAN NGAOSI y DUMPILES, EDMUND DIEGO y SUBIANGAN and MARLON PETTOCO y SUGOT, without
said accused having first secured the necessary license or authority from the Department of Labor and Employment.

CONTRARY TO LAW.

The Information was docketed in the RTC as Crim. Case No. 16427-R and raffled to Branch 60 thereof.

On the same date April 5, 1999 and in the same court, twelve (12) separate Informations2 for Estafa were filed
against the same accused at the instance of the same complainants. Docketed as Criminal Case Nos. 16428-R to
16439-R and likewise raffled to the same branch of the court, the twelve (12) Informations for Estafa, varying only as
regards the names of the offended parties and the respective amounts involved, uniformly recite:

That on or about the 10th day of November, 1998, in the City of Baguio, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused, conspiring, confederating and mutually aiding one another did
then and there willfully, unlawfully and feloniously defraud one ZALDY DUMPILES Y MALIKDAN by way of false
pretenses, which are executed prior to or simultaneously with the commission of the fraud, as follows, to wit: the
accused knowing fully well that he/she/they is/are not AUTHORIZED job RECRUITERS for persons intending to
secure work abroad convinced said Zaldy Dumpiles y Malikdan and pretended that he/she/they could secure a job
for him/her abroad, for and in consideration of the sum of P25,000.00 and representing the placement and medical
fees when in truth and in fact could not; the said Zaldy Dumpiles y Malikdan deceived and convinced by the false
pretenses employed by the accused parted away the total sum of P25,000,00 in favor of the accused, to the
damage and prejudice of the said Zaldy Dumpiles y Malikdan in the aforementioned amount of TWENTY FIVE
THOUSAND PESOS (P25,000.00), Philippine currency.

CONTRARY TO LAW.

Of the three accused named in all the aforementioned two sets of Informations, only accused Aida Comila and
Charlie Comila were brought under the jurisdiction of the trial court, the third, Indira Ram Singh Lastra, being then
and still is at large.

Arraigned with assistance of counsel, accused Aida Comila and Charlie Comila entered a plea of "NOT GUILTY" not
only to the Information for Illegal Recruitment (Crim. Case No. 16427-R) but also to the twelve (12) Informations for
Estafa (Crim. Case Nos. 16428-R to 16439-R).

Thereafter, a joint trial of the cases ensued.

Of the twelve (12) complainants in both the illegal recruitment and estafa charges, the prosecution was able to
present only seven (7) of them, namely: Annie Felix y Bakisan; Ricky Waldo y Nickey; Jonathan Ngaosi y Dumpiles;
Marilyn Aro y Padcayan; Edmund Diego y Subiangan; Jerome Montaez y Osben; and Eleonor Dongga-as y
Anghel. A certain Jose Matias of the Philippine Overseas Employment Administration (POEA) was supposed to
testify for the prosecution but his testimony was dispensed after the defense agreed that he will merely testify to the
effect that as per POEA records, accused Aida Comila and Charlie Comila were not duly licensed or authorized to
recruit workers for overseas employment.

In a consolidated decision3 dated October 3, 2000, the trial court found both accused GUILTY beyond reasonable
doubt of the crimes of Illegal Recruitment committed in large scale by a syndicate, as charged in Crim. Case No.
16427-R, and of estafa, as charged in Crim. Case Nos. 16430-R; 16431-R, 16432-R, 16434-R, 16436-R, 16438-R,
and 16439-R. The other informations for estafa in Crim. Case Nos. 16428-R, 16429-R, 16433-R, 16435-R and
16437-R were, however, dismissed for lack of evidence. We quote the fallo of the trial courts decision:

WHEREFORE, premises considered, this court hereby finds the accused, Aida Comila and Charlie Comila:

1. In Criminal Case No. 16427-R, GUILTY beyond reasonable doubt of the crime of Illegal Recruitment in
Large Scale Committed by a Syndicate. They are hereby sentenced to each suffer the penalty of life
imprisonment and a fine of P100,000.00;

2. In Criminal Case No. 16430-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of
prision correccional, as minimum, to eight (8) years of prision mayor, as maximum. They shall also jointly
and severally pay the complainant, Marilyn Aro, the sum of P25,500.00 plus interest from the date this
Information was filed until it is fully paid;

3. In Criminal Case No. 16431-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of
prision correccional, as minimum, to ten (10) years of prision mayor, as maximum. They shall also jointly
and severally pay the complainant, Annie Felix, the sum of P50,000.00 plus interest from the date this
Information was filed until it is fully paid;

4. In Criminal Case No. 16432-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances, and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of
prision correccional, as minimum, to ten (10) years of prision mayor, as maximum. They shall also jointly
and severally pay the complainant, Eleanor Dongga-as, the sum of P50,000.00 plus interest from the date
this Information was filed until it is fully paid;

5. In Criminal Case No. 16434-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances and applying the provisions of Indeterminate Sentence Law, they
are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of prision
correccional, as minimum, to eight (8) years of prision mayor, as maximum. They shall also jointly and
severally pay the complainant, Edmund Diego, the sum of P25,000.00 plus interest from the date this
Information was filed until it is fully paid;

6. In Criminal Case No. 16436-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances, and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2)months of
prision correccional, as minimum, to eight (8) years of prision mayor, as maximum. They shall also jointly
and severally pay the complainant, Jonathan Ngaosi, the sum of P25,000.00 plus interest from the date this
Information was filed until it is fully paid;

7. In Criminal Case No. 16438-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances, and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of
prision correccional, as minimum, to eight (8) years of prision mayor as maximum. They shall also jointly and
severally pay the complainant, Ricky Waldo, the sum of P25,000.00 plus interest from the date this
Information was filed until it is fully paid;

8. In Criminal Case No. 16439-R, GUILTY beyond reasonable doubt of the crime of Estafa. There being no
mitigating and aggravating circumstances, and applying the provisions of the Indeterminate Sentence Law,
they are hereby sentenced to each suffer an indeterminate penalty of four (4) years and two (2) months of
prision correccional, as minimum to eight (8) years of prision mayor, as maximum. They shall also jointly and
severally pay the complainant, Jerome Montaez, the sum of P25,000.00 plus interest from the date this
Information was filed; and

9. Criminal Cases Nos. 16428-R; 16429-R; 16433-R; 16435-R and 16437-R are hereby DISMISSED for lack
of evidence.

In the service of the various prison terms herein imposed upon the accused Aida Comila and Charlie Comila, the
provisions of Article 70 of the Revised Penal Code shall be observed.

As to the accused, Indira Sighn Lastra, let all these cases be archived in the meantime until the said accused is
arrested.

SO ORDERED.
Pursuant to a Notice of Appeal4 filed by the two accused, the trial court forwarded the records of the cases to this
Court in view of the penalty of life imprisonment meted in Crim. Case No. 16427-R (Illegal Recruitment in large
scale). In its Resolution5 of October 3, 2001, the Court resolved to accept the appeal and the subsequent respective
briefs for the appellants6 and the appellee7 as well as the appellants reply brief.8

Thereafter, and consistent with its pronouncement in People v. Mateo,9 the Court, via its Resolution10 of September
22, 2004, transferred the cases to the Court of Appeals (CA) "for appropriate action and disposition." In the CA, the
cases were assigned one docket number and thereat docketed as CA-G.R. CR H.C. No. 01615.

In a decision11 promulgated on December 29, 2005, the appellate court affirmed that of the trial court, to wit: 1awphi1.net

WHEREFORE, premises considered, the Decision dated October 3, 2000 of the Regional Trial Court of Baguio City,
Branch 60, in Criminal Cases Nos. 16427-R to 16439-R finding accused-appellants guilty of (1) illegal recruitment
committed in large scale; and (2) seven (7) counts of estafa is hereby AFFIRMED and UPHELD.

With costs against the accused-appellants.

SO ORDERED.

The cases are again with this Court in view of the Notice of Appeal 12 interposed by the herein accused-appellants
from the aforementioned affirmatory CA decision.

Acting thereon, the Court required the parties to simultaneously submit their respective supplemental briefs, if they
so desire.

In their respective manifestations,13 the parties opted not to file any supplemental brief and instead merely reiterated
what they have said in their earlier appellants and appellee's briefs.

The Office of the Solicitor General, in the brief14 it filed for appellee People, summarizes the facts of the case in the
following manner:

Annie Felix was introduced by her sister-in-law, Ella Bakisan, to appellant Aida Comila in August 1998 (pp. 3, 24,
tsn, September 14, 1999). Ella Bakisan told her that appellant Aida Comila could help her find work abroad as she
was recruiting workers for a factory in Palermo, Italy (ibid.). Annie Felix then went to meet appellant Aida Comila at
the Jollibee outlet along Magsaysay Avenue, Baguio City in August, 1998 to inquire about the supposed work in Italy
(pp. 3-4, tsn, ibid.). There were other applicants, aside from Annie at the Jollibee outlet at the time, similarly inquiring
about the prospective jobs abroad (ibid.).

Annie met appellant again at the St. Theresas College on or about September 6 or 7, 1998 (p.11, ibid.). there were
around fifty (50) to sixty (60) applicants at that time (ibid.). Appellant introduced them to a certain Erlinda Ramos,
one of the agents of Mrs. Indira Lastra, a representative of the Far East Trading Corporation (p.4,11, ibid.).
Accordingly, Erlinda Ramos would be responsible for the processing of the applicants visas (ibid.). Erlinda Ramos
even showed them the copy of the job order from Italy (ibid.). Like Ramos, appellant likewise introduced herself to
Annie and the other applicants as an agent of Lastra (pp. 3-4, ibid.).

Annie submitted all her requirements to appellant, along with the amount of two thousand pesos (P2,000.00) as
processing fee (p.6, tsn, ibid.). She also paid a total of twenty three thousand (P23,000.00) as partial payment of her
placement fee of fifty thousand pesos (P50,000.00) on or about September 6 or 7, 1998. Appellant issued a
common receipt detailing the amounts she received not only from Annie Felix (23,000.00) but also for her fellow
applicants, Zaldy Dumpiles (P23,000.00), Joel Ediong (P25,000.00), and Ricky Baldo (P25, 000.00) (p. 8, tsn, ibid.).

Annie went to Manila several times to complete her medical examination as required (pp. 14-16, tsn, ibid.).
Considering appellant Aida Comilas pregnancy at that time, her husband Charlie Comila, also an agent of Lastra,
accompanied Annie and the other applicants during their medical check-up (pp. 22-24, ibid.).

On the last week of October, 1998, Annie again paid appellant the total amount of twenty five thousand pesos
(P25,000.00) to complete her placement fee of fifty thousand pesos (P50,000.00). Annie was told that her flight to
Italy was scheduled on September 14, 1998 (p. 20, ibid.). Later on, Erlinda Ramos told Annie that her flight to Italy
was re-scheduled to October, 1998 due to a typhoon (p.20, ibid.).

There were others like Annie Felix who were similarly enticed to apply for the promised job in Italy (pp. 4-5, tsn,
September 22, 1999). Among them were Ricky Waldo, Edmund Diego, Eleanor Donga-as, Jonathan Ngaosi,
Marilyn Aro and Jerome Montaez (pp. 4-5; 19-28, tsn, September 22, 1999, afternoon session).

In the briefing at St. Theresas College, Navy Road, Pacdal, Baguio City, (p. 7, tsn, September 22, 1999; pp. 29-30,
tsn, September 14, 1999) appellant briefed Ricky Waldo and the rest of the applicants on their application
requirements (pp. 7-8, tsn, Sept. 22, 1999). The briefing was conducted by appellants Aida Comila, Charlie Comila,
and Erlinda Ramos who alternately talked about the documents to be submitted for the processing of their
applications and the processing fee of fifty thousand pesos (P50,000.00) they have to pay (p.8, tsn, September 22,
1999). In the same briefing, they were also told that Erlinda Ramos was scheduled to go to Italy on September 14,
1998 and that whoever would pay P25,000.00 first, or half of the P50,000.00 processing fee would be able to go
with her to Italy (p. 8. tsn, September 22, 1999). Per the job order shown to Jonathan Ngaosi, for instance, male
workers were to receive a salary of two thousand three hundred dollars ($2,300.00) plus an additional eight dollars
($8.00) for overtime work (p.8, tsn, September 21, 1999, afternoon session).

After undergoing the required medical examination in Manila, applicants Ricky Waldo and company paid the
following amounts for their respective processing fees, which were duly receipted by appellant Aida Comila in three
separate documents, thus:

"8-23-98, received the amount of P14,000.00 from Ella Bakisan. Signed, Aida Comila. The second document again
is a piece of paper of which the following is written: 9-7-98. Received the amount of the following: Philip Waldo,
P20,000.00; Doval Dumpiles, P23,000.00 Edmund Diego, P25,000.00; Jerome Montaez, P25,000.00 Total-
P93,000.00. Received by A. Comila. The 3rd document is page of a yellow pad and it reads 9-7-98, received the
following amounts from Zaldy Dumpiles - P23,000.00; Joel Ediong - P25,000.00; Ricky Waldo- P25,000.00; Annie
Felix - P23,000.00; Marlon Tedoco P23,000.00. Total P119,000.00. Received by Aida Comila; witnesses Ella
Bakisan. (p.14, tsn, of witness Edmund Diego, September 22, 1999, morning session).

Considering the payments they made, Ricky Waldos flight to Italy was scheduled on September 14, 1999 while
those of Marilyn Aro, Edmund Diego, Jerome Montanez, Jonathan Ngaosi, and Eleanor Donga-as were scheduled
on October 27, 1999 (pp. 8-9, tsn, September 22, 1999; pp. 32-33, tsn, September 14, 1999; pp. 2-4, tsn,
September 15, 1999; p. 24, September 21, 1999; p.10, tsn, September 22, 1999, morning session; p. 27, tsn,
September 22, 1999, afternoon session).

Like Annie Felix, Ricky Waldos flight did not push through as scheduled on September 14, 1999 (pp. 32-34, tsn,
September 14, 1999; pp. 2-4, tsn, September 15, 1999). Appellant Aida Comila explained that the re-scheduling
was due to typhoon (ibid.). Rickys flight was then re-scheduled to October 7, 1999 but was again moved to October
27, 1999 as, according to appellant Aida Comila, there were some problems in his papers and that of the other
applicants (pp. 2-3, ibid.).

On October 25, 1998, appellant Aida Comila called the applicants for a briefing at the St. Therese Building at the
Navy Base, Baguio City (p.24, tsn, September 21, 1999). In the same briefing, Erlinda Ramos, as representative of
the supposed principal, Indira Lastra, explained to the applicants that their flight on October 27, 1999 was cancelled
but will be re-scheduled (ibid.). Appellant Aida Comila told them that they have to wait for the notice from the Italian
Embassy (ibid.).

On the first week of November, 1998, appellant Charlie Comila told Marilyn Aro and several other applicants that
their visas would be released (p. 25, September, 21, 1999). Appellant Charlie Comila accompanied them and the
others to the Elco Building at Shaw Boulevard, Pasig City purportedly to see Erlinda Ramos (p.25, tsn, September
21, 1999). When Erlinda Ramos arrived, she told Marilyn and the other applicants to wait for the release of their
visas, the following day (p.25, ibid.). Marilyn and the rest came back each day for one whole week but the promised
visas were not released to them (ibid.).

Marilyn and the other applicants complained to appellant Charlie Comila about the delay and told him of their doubts
about their application and the promised job in Italy (ibid.). At this point, appellant Charlie Comila assured them that
they should not worry and that everything will be alright (ibid). Appellant Charlie Comila then brought them to Indira
Lastra (p.26, ibid.).

Marilyn Aro, Annie Felix, and the rest were all shocked to find out that Indira Lastra was actually an inmate of Manila
(Quiapo) city jail. (p.26, ibid.; p. 13, tsn, September 14, 1999). They felt at once that they were, indeed, victims of
illegal recruitment (ibid.).When they demanded the return of their money from Indira Lastra, the latter told them to
withdraw their money from appellant Aida Comila (p.26. ibid.).

Upon their return to Baguio, Marilyns group proceeded to appellant Aida Comilas residence at Km. 6, La Trinidad,
Benguet to demand the return of their money (p. 27, tsn, ibid.). Appellant Aida Comila, however, told them to wait as
Indira Lastra will soon be out of jail and will personally process their papers at the Italian Embassy (ibid.). Marilyn
and the other applicants followed-up several times with appellant Aida Comila the return of the amounts of money
they paid for their supposed placement fee, but were simply told to wait (ibid.). the last time complainants visited
them, appellants Aida Comila and Charlie Comila were already in a Bulacan jail (p. 27, ibid.).

In April, 1999, Marilyn Aro, Edmund Diego, Annie Felix, Eleanor Donga-as, Jerome Montanez, Ricky Waldo and
Jonathan Ngaosi filed their complaint against appellants Aida Comila and Charlie Comila before the Criminal
Investigation Group (CIG).

In the same month of April 1999, separate Informations for estafa and illegal recruitment committed in large scale by
a syndicate or violation of Article 13 (b) in relation to Article 38 (b) 34, and 39 of P.D. No. 442, otherwise known as
the Labor Code of the Philippines were filed against appellants Charlie Comila, Aida Comila and Indira Lastra.
In their appellants brief, accused-appellants would fault the two courts below in (1) finding them guilty beyond
reasonable doubt of the crimes of illegal recruitment and estafa; and (2) totally disregarding the defense of denial
"honestly advanced" by them.

It is not disputed that accused-appellants Charlie Comila and Aida Comila are husband-and-wife. Neither is it
disputed that husband and wife knew and are well-acquainted with their co-accused, Indira Ram Singh Lastra, and
one Erlinda Ramos. It is their posture, however, that from the very beginning, appellant Aida Comila never
professed that she had the authority to recruit and made it clear to the applicants for overseas employment that it
was Erlinda Ramos who had such authority and who issued the job orders from Italy. Upon this premise, this
appellant contends that the subsequent transactions she had with the applicants negate the presence of deceit, an
essential element of estafa under paragraph 2(a) of Article 315 of the Revised Penal Code. On the charge of illegal
recruitment, this appellant argues that "she was merely trying to help the applicants to process their papers,
believing that Indira Ram Sighn Lastra and Erlinda Ramos would really send the applicants to Italy." With respect to
co-appellant Charlie Comila, the defense submits that the prosecution "miserably failed to prove his participation in
the illegal recruitment and estafa."

The appeal must fail.

After a careful and circumspect review of the records, we are fully convinced that both the trial and appellate courts
committed no error in finding both appellants guilty beyond moral certainty of doubt of the crimes charged against
them. Through the respective testimonies of its witnesses, the prosecution has satisfactorily established that both
appellants were then engaged in unlawful recruitment and placement activities. The combined testimonies of the
prosecution witnesses point to appellant Aida Comila as the one who promised them foreign employment and
assured them of placement overseas through the help of their co-accused Indira Ram Singh Lastra. For sure, it was
Aida herself who informed them of the existence of job orders from Palermo, Italy, and of the documents needed for
the processing of their applications. Aida, in fact, accompanied the applicants to undergo medical examinations in
Manila. And relying completely on Aidas representations, the applicants-complainants entrusted their money to her
only to discover later that their hopes for an overseas employment were but vain. In the words of the trial court:

Aida Comila cannot escape culpability by the mere assertion that the recruitment activities were done by Ella
Bakisan, Erlinda Ramos and Indira Lastra as if she was just a mere observer of the activities going on right under
her nose, especially so that the seven complainants who testified all pointed to her as their recruiter. She could not
adequately explain why: (1) she had to show and explain the job order and the work and travel requirements to the
complainants; (2) she had to meet the complainants at Jollibee, Magsaysay Ave., Baguio City and in her residence;
(3) she had to be present at the briefings for the applicants; (4) she received the placement fees even if she claims
that she received them from Ella Bakisan; (5) she had to go down to Manila and accompanied the complainants for
their medical examination; and (6) she had to go out of her way to do all these things even when she was pregnant
and was about to give birth. Certainly, she was not a social worker or a humanitarian who had all the time in this
world to go out of her way to render free services to other people whom she did not know or just met. To be sure,
Aida Comila had children to attend to and a husband who was unemployed to be able to conduct such time-
consuming charitable activities.15

Running in parallel vein is what the CA wrote in its appealed decision:16

As regards appellant Aida Comilas contention that she did not represent herself as a licensed recruiter, and that
she merely helped complainants avail of the job opportunity on the belief that Indira Lastra and Erlinda Ramos
would really send them to Italy, the same hardly deserves merit. The crime of illegal recruitment is committed when,
among other things, a person who, without being duly authorized according to law represents or gives the distinct
impression that he or she has the power or the ability to provide work abroad convincing those to whom the
representation is made or to whom the impression is given to thereupon part with their money in order to be assured
of that employment.

In fact, even if there is no consideration involved, appellant will still be deemed as having engaged in recruitment
activities, since it was sufficiently demonstrated that she promised overseas employment to private complainants.
To be engaged in the practice and placement, it is plain that there must at least be a promise or offer of an
employment from the person posing as a recruiter whether locally or abroad.

As regards appellant Charlie Comila, it is inconceivable for him to feign ignorance of the illegal recruitment activities
of his wife Aida, and of his lack of participation therein. Again, we quote with approval what the trial court has said in
its decision:17

Charlie Comila could not, likewise, feign ignorance of the illegal transactions. It is contrary to human experience,
hence, highly incredible for a husband not to have known the activities of his wife who was living with him under the
same roof. In fact, he admitted that when Aida gave birth, he had to accompany the complainants to Manila for their
medical examination and again, on another trip, to bring them to the office of Erlinda Ramos to follow-up their visas.
The fact that he knew the ins and outs of Manila was a desperate excuse or reason why he accompanied the
complainants to Manila considering that, as he and his wife claimed, they have nothing to do with the recruitment
activities. Furthermore, if he and his wife had nothing to do with the recruitment of the complainants, why did he
have to sign the letter and accommodate the request of Myra Daluca whom they have not really known. But
damning was his statement that he signed the letter because Aida was not there to sign it. Such a statement would
only show that they were indeed parties to these illegal transactions. Charlie Comila would even claim that he was
just an elementary graduate and so he did not understand what he was asked to sign. But his booking sheet
showed that he was a high school graduate. He was a conductor of a bus company who should know and
understand how to read and write. Furthermore, he was already a grown up man in his thirties who knew what was
right and wrong and what he should or should not do.

It is well established in jurisprudence that a person may be charged and convicted for both illegal recruitment and
estafa. The reason therefor is not hard to discern: illegal recruitment is malum prohibitum, while estafa is malum in
se. In the first, the criminal intent of the accused is not necessary for conviction. In the second, such an intent is
imperative. Estafa under Article 315, paragraph 2, of the Revised Penal Code, is committed by any person who
defrauds another by using fictitious name, or falsely pretends to possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions, or by means of similar deceits executed prior to or
simultaneously with the commission of fraud.18 Here, it has been sufficiently proven that both appellants represented
themselves to the complaining witnesses to have the capacity to send them to Italy for employment, even as they do
not have the authority or license for the purpose. Doubtless, it is this misrepresentation that induced the
complainants to part with their hard-earned money for placement and medical fees. Such act on the part of the
appellants clearly constitutes estafa under Article 315, paragraph (2), of the Revised Penal Code.

Appellants next bewail the alleged total disregard by the two courts below their defense of denial which, had it been
duly considered and appreciated, could have merited their acquittal.

The Court disagrees. The two courts below did consider their defense of denial. However, given the positive and
categorical testimonies of the complainants who were one in pointing to appellants, in cahoots with their co-accused
Indira Ram Singh Lastra, as having recruited and promised them with overseas employment, appellants defense of
denial must inevitably collapse.

All told, we rule and so hold that the two courts below committed no error in adjudging both appellants guilty beyond
reasonable doubt of the crimes of illegal recruitment committed by a syndicate in large scale and of estafa in seven
(7) counts. We also rule that the penalties imposed by the court of origin, as affirmed by the CA, accord with law and
jurisprudence.

IN VIEW WHEREOF, the instant appeal is DISMISSED and the appealed decision of the CA, affirmatory of that the
trial court, is AFFIRMED in toto.

Costs against appellants.

SO ORDERED.
G.R. No. 127195 August 25, 1999

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

vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO T. CAJERAS, respondents.

BELLOSILLO, J.:

MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its foreign principal DIAMANTIDES MARITIME, INC.
(DIAMANTIDES) assail the Decision of public respondent National Labor Relations Commission dated 16
September 1996 as well as its Resolution dated 12 November 1996 affirming the Labor Arbiter's decision finding
them guilty of illegal dismissal and ordering them to pay respondent Wilfredo T. Cajeras salaries corresponding to
the unexpired portion of his employment contract, plus attorney's fees.

Private respondent Wilfredo T. Cajeras was hired by petitioner MARSAMAN, the local manning agent of petitioner
DIAMANTIDES, as Chief Cook Steward on the MV Prigipos, owned and operated by DIAMANTIDES, for a contract
period of ten (10) months with a monthly salary of US$600.00, evidenced by a contract between the parties dated
15 June 1995. Cajeras started work on 8 August 1995 but less than two (2) months later, or on 28 September 1995,
he was repatriated to the Philippines allegedly by "mutual consent."

On 17 November 1995 private respondent Cajeras filed a complaint for illegal dismissal against petitioners with the
NLRC National Capital Region Arbitration Branch alleging that he was dismissed illegally, denying that his
repatriation was by mutual consent, and asking for his unpaid wages, overtime pay, damages, and attorney's
fees.1Cajeras alleged that he was assigned not only as Chief Cook Steward but also as assistant cook and
messman in addition to performing various inventory and requisition jobs. Because of his additional assignments he
began to feel sick just a little over a month on the job constraining him to request for medical attention. He was
refused at first by Capt. Kouvakas Alekos, master of the MV Prigipos, who just ordered him to continue working.
However a day after the ship's arrival at the port of Rotterdam, Holland, on 26 September 1995 Capt. Alekos
relented and had him examined at the Medical Center for Seamen. However, the examining physician, Dr. Wden
Hoed, neither apprised private respondent about the diagnosis nor issued the requested medical certificate allegedly
because he himself would forward the results to private respondent's superiors. Upon returning to the vessel, private
respondent was unceremoniously ordered to prepare for immediate repatriation the following day as he was said to
be suffering from a disease of unknown origin.1wphi1.nt

On 28 September 1995 he was handed his Seaman's Service Record Book with the following entry: "Cause of
discharge Mutual Consent."2 Private respondent promptly objected to the entry but was not able to do anything
more as he was immediately ushered to a waiting taxi which transported him to the Amsterdam Airport for the return
flight to Manila. After his arrival in Manila on 29 September 1995. Cajeras complained to MARSAMAN but to no
avail.3

MARSAMAN and DIAMANTIDES, on the other hand, denied the imputation of illegal dismissal. They alleged that
Cajeras approached Capt. Alekos on 26 September 1995 and informed the latter that he could not sleep at night
because he felt something crawling over his body. Furthermore, Cajeras reportedly declared that he could no longer
perform his duties and requested for repatriation. The following paragraph in the vessel's Deck Log was allegedly
entered by Capt. Alekos, to wit:

Cajeras approached me and he told me that he cannot sleep at night and that he feels something crawling
on his body and he declared that he can no longer perform his duties and he must be repatriated.4

Private respondent was then sent to the Medical Center for Seamen at Rotterdam where he was examined by Dr.
Wden Hoed whose diagnosis appeared in a Medical Report as "paranoia" and "other mental
problems."5Consequently, upon Dr. Hoed's recommendation, Cajeras was repatriated to the Philippines on 28
September 1995.

On 29 January 1996 Labor Arbiter Ernesto S. Dinopol resolved the dispute in favor of private respondent Cajeras
ruling that the latter's discharge from the MV Prigipos allegedly by "mutual consent" was not proved by convincing
evidence. The entry made by Capt. Alekos in the Deck Log was dismissed as of little probative value because it was
a mere unilateral act unsupported by any document showing mutual consent of Capt. Alekos, as master of the MV
Prigipos, and Cajeras to the premature termination of the overseas employment contract as required by Sec. H of
the Standard Employment Contract Governing the Employment of all Filipino Seamen on Board Ocean-Going
Vessels. Dr. Hoed's diagnosis that private respondent was suffering from "paranoia" and "other mental problems"
was likewise dismissed as being of little evidentiary value because it was not supported by evidence on how the
paranoia was contracted, in what stage it was, and how it affected respondent's functions as Chief Cook Steward
which, on the contrary, was even rated "Very Good" in respondent's Service Record Book. Thus, the Labor Arbiter
disposed of the case as follows:

WHEREFORE, judgment is hereby rendered declaring the repatriation and dismissal of complaint Wilfredo
T. Cajeras as illegal and ordering respondents Marsaman Manning Agency, Inc. and Diamantides Maritime,
Inc. to jointly and severally pay complainant the sum of USD 5,100.00 or its peso equivalent at the time of
 payment plus USD 510.00 as 10% attorney's fees it appearing that complainant had to engage the service
of counsel to protect his interest in the prosecution of this case.

The claims for nonpayment of wages and overtime pay are dismissed for having been withdrawn (Minutes,
December 18, 1995). The claims for damages are likewise dismissed for lack of merit, since no evidence
was presented to show that bad faith characterized the dismissal.6

Petitioners appealed to the NLRC.7 On 16 September 1996 the NLRC affirmed the appealed findings and
conclusions of the Labor Arbiter.8 The NLRC subscribed to the view that Cajeras' repatriation by alleged mutual
consent was not proved by petitioners, especially after noting that private respondent did not actually sign his
Seaman's Service Record Book to signify his assent to the repatriation as alleged by petitioners. The entry made by
Capt. Alekos in the Deck Log was not considered reliable proof that private respondent agreed to his repatriation
because no opportunity was given the latter to contest the entry which was against his interest. Similarly, the
Medical Report issued by Dr. Hoed of Holland was dismissed as being of dubious value since it contained only a
sweeping statement of the supposed ailment of Cajeras without any elaboration on the factual basis thereof.

Petitioners' motion for reconsideration was denied by the NLRC in its Resolution dated 12 November 1996.9 Hence,
this petition contending that the NLRC committed grave abuse of discretion: (a) in not according full faith and credit
to the official entry by Capt. Alekos in the vessel's Deck Log conformably with the rulings in Haverton Shipping
Ltd. v. NLRC 10 and Wallem Maritime Services, Inc. v. NLRC;11 (b) in not appreciating the Medical Report issued by
Dr. Wden Hoed as conclusive evidence that respondent Cajeras was suffering from paranoia and other mental
problems; (c) in affirming the award of attorney's fees despite the fact that Cajeras' claim for exemplary damages
was denied for lack of merit; and, (d) in ordering a monetary award beyond the maximum of three (3) months' salary
for every year of service set by RA 8042.

We deny the petition. In the Contract of Employment12 entered into with private respondent, petitioners convenanted
strict and faithful compliance with the terms and conditions of the Standard Employment Contract approved by the
POEA/DOLE13 which provides:

1. The employment of the seaman shall cease upon expiration of the contract period indicated in the Crew
Contract unless the Master and the Seaman, by mutual consent, in writing agree to an early termination . . . .
(emphasis our).

Clearly, under the foregoing, the employment of a Filipino seaman may be terminated prior to the expiration of the
stipulated period provided that the master and the seaman (a) mutually consent thereto and (b) reduce their
consent in writing.

In the instant case, petitioners do not deny the fact that they have fallen short of the requirement. No document
exists whereby Capt. Alekos and private respondent reduced to writing their alleged "mutual consent" to the
termination of their employment contract. Instead, petitioners presented the vessel's Deck Log wherein an
entry unilaterally made by Capt. Alekos purported to show that private respondent himself asked for his repatriation.
However, the NLRC correctly dismissed its evidentiary value. For one thing, it is a unilateral act which is vehemently
denied by private respondent. Secondly, the entry in no way satisfies the requirement of a bilateral documentation to
prove early termination of an overseas employment contract by mutual consent required by the Standard
Employment Contract. Hence, since the latter sets the minimum terms and conditions of employment for the
protection of Filipino seamen subject only to the adoption of better terms and conditions over and above the
minimum standards,14 the NLRC could not be accused of grave abuse of discretion in not accepting any thing less.

However petitioners contend that the entry should be considered prima facie evidence that respondent himself
requested his repatriation conformably with the rulings in Haverton Shipping Ltd. v. NLRC 15 and Abacast Shipping
and Management Agency, Inc. v. NLRC.16 Indeed, Haverton says that a vessel's log book is prima facie evidence of
the facts stated therein as they are official entries made by a person in the performance of a duty required by law.
However, this jurisprudential principle does not apply to win the case for petitioners. In Wallem Maritime
Services, Inc. v. NLRC 17 the Haverton ruling was not given unqualified application because the log book presented
therein was a mere typewritten collation of excerpts from what could be the log book.18 The Court reasoned that
since the log book was the only piece of evidence presented to prove just cause for the termination of respondent
therein, the log book had to be duly identified and authenticated lest an injustice would result from a blind adoption
of its contents which were but prima facie evidence of the incidents stated therein.

In the instant case, the disputed entry in the Deck Log was neither authenticated nor supported by credible
evidence. Although petitioners claim that Cajeras signed his Seaman's Service Record Book to signify his
conformity to the repatriation, the NLRC found the allegation to be actually untrue since no signature of private
respondent appeared in the Record Book.

Neither could the "Medical Report" prepared by Dr. Hoed be considered corroborative and conclusive evidence that
private respondent was suffering from "paranoia" and "other mental problems," supposedly just causes for his
repatriation. Firstly, absolutely no evidence, not even an allegation, was offered to enlighten the NLRC or this Court
as to Dr. Hoed's qualifications to diagnose mental illnesses. It is a matter of judicial notice that there are various
specializations in medical science and that a general practitioner is not competent to diagnose any and all kinds of
illnesses and diseases. Hence, the findings of doctors who are not proven experts are not binding on this
Court.19Secondly, the Medical Report prepared by Dr. Hoed contained only a general statement that private
respondent was suffering from "paranoia" and "other mental problems" without providing the details on how the
diagnosis was arrived at or in what stage the illness was. If Dr. Hoed indeed competently examined private
respondent then he would have been able to discuss at length the circumstances and precedents of his diagnosis.
Petitioners cannot rely on the presumption of regularity in the performance of official duties to make the Medical
Report acceptable because the presumption applies only to public officers from the highest to the lowest in the
service of the Government, departments, bureaus, offices, and/or its political subdivisions,20 which Dr. Wden Hoed
was not shown to be. Furthermore, neither did petitioners prove that private respondent was incompetent or
continuously incapacitated for the duties for which he was employed by reason of his alleged mental state. On the
contrary his ability as Chief Cook Steward, up to the very moment of his repatriation, was rated "Very Good" in his
Seaman's Service Record Book as correctly observed by public respondent.

Considering all the foregoing we cannot ascribe grave abuse of discretion on the part of the NLRC in ruling that
petitioners failed to prove just cause for the termination of private respondent's overseas employment. Grave abuse
of discretion is committed only when the judgment is rendered in a capricious, whimsical, arbitrary or despotic
manner, which is not true in the present case.21

With respect to attorney's fees, suffice it to say that in actions for recovery of wages or where an employee was
forced to litigate and thus incurred expenses to protect his rights and interests, a maximum award of ten percent
(10%) of the monetary award by way of attorney's fees is legally and morally justifiable under Art. 111 of the Labor
Code,22 Sec. 8, Rule VIII, Book III of its Implementing Rules,23 and par. 7, Art. 220824 of the Civil Code.25 The case
of Albenson Enterprises Corporation v. Court of Appeals26 cited by petitioners in arguing against the award of
attorney's fees is clearly not applicable, being a civil action for damages which deals with only one of the eleven (11)
instances when attorney's fees could be recovered under Art. 2208 of the Civil Code.

Lastly, on the amount of salaries due private respondent, the rule has always been that an illegally dismissed worker
whose employment is for a fixed period is entitled to payment of his salaries corresponding to the unexpired portion
of his employment.27 However on 15 July 1995, RA 8042 otherwise known as the "Migrant Workers and Overseas
Filipinos Act of 1995" took effect, Sec. 10 of which provides:

Sec. 10. In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired portion of the employment contract or
for three (3) months for every year of the unexpired term whichever is less (emphasis ours).

The Labor Arbiter, rationalizing that the aforesaid law did not apply since it became effective only one (1) month
after respondent's overseas employment contract was entered into on 15 June 1995, simply awarded private
respondent his salaries corresponding to the unexpired portion of his employment contract, i.e., for 8.6 months. The
NLRC affirmed the award and the Office of the Solicitor General (OSG) fully agreed. But petitioners now insist that
Sec. 10, RA 8042 is applicable because although private respondent's contract of employment was entered into
before the law became effective his alleged cause of action, i.e., his repatriation on 28 September 1995 without just,
valid or authorized cause, occurred when the law was already in effect. Petitioners' purpose in so arguing is to
invoke the law in justifying a lesser monetary award to private respondent, i.e., salaries for three (3) months only
pursuant to the last portion of Sec. 10 as opposed to the salaries for 8.6 months awarded by the Labor Arbiter and
affirmed by the NLRC.

We agree with petitioners that Sec. 10, RA 8042, applies in the case of private respondent and to all overseas
contract workers dismissed on or after its effectivity on 15 July 1995 in the same way that Sec. 34,28 RA 6715,29 is
made applicable to locally employed workers dismissed on or after 21 March 1989.30 However, we cannot subscribe
to the view that private respondent is entitled to three (3) months' salary only. A plain reading of Sec. 10 clearly
reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his
salaries for the unexpired portion of his employment contract or three (3) months' salary for every year of the
unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at
least one (1) year or more. This is evident from the words "for every year of the unexpired term" which follows the
words "salaries . . . for three months." To follow petitioners' thinking that private respondent is entitled to three (3)
months salary only simply because it is the lesser amount is to completely disregard and overlook some words used
in the statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word thereof be given effect31 since the law-making
body is presumed to know the meaning of the words employed in the statue and to have used them advisedly.32 Ut
res magis valeat quam pereat.33

WHEREFORE, the questioned Decision and Resolution dated 16 September 1996 and 12 November 1996,
respectively, of public respondent National Labor Relations Commission are AFFIRMED. Petitioners MARSAMAN
MANNING AGENCY, INC., and DIAMANTIDES MARITIME, INC., are ordered, jointly and severally, to pay private
respondent WILFREDO T. CAJERAS his salaries for the unexpired portion of his employment contract or
USD$5,100.00, reimburse the latter's placement fee with twelve percent (12%) interest per annum conformably with
Sec. 10 of RA 8042, as well as attorney's fees of ten percent (10%) of the total monetary award. Costs against
petitioners. SO ORDERED.
1
G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

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

DECISION

AUSTRIA-MARTINEZ, J.:

For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their
earnings have built houses, provided health care, equipped schools and planted the seeds of businesses. They
have woven together the world by transmitting ideas and knowledge from country to country. They have provided
the dynamic human link between cultures, societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts development, but how smart public policies can
magnify this effect.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act
(R.A.) No. 8042,2 to wit:

Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with
interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates
the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary
either for the unexpired portion of their employment contract "or for three months for every year of the unexpired
term, whichever is less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional
rights in that it impairs the terms of their contract, deprives them of equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004
Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause, entreating
this Court to declare the subject clause unconstitutional.

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

Duration of contract 12 months

Position Chief Officer

Basic monthly salary US$1,400.00

Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment
contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and
representation of respondents that he would be made Chief Officer by the end of April 1998.6

Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to stay on
as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at
the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-three (23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for
payment of his money claims in the total amount of US$26,442.73, broken down as follows:

May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90

June 01/30, 1998 2,590.00

July 01/31, 1998 2,590.00

August 01/31, 1998 2,590.00

Sept. 01/30, 1998 2,590.00

Oct. 01/31, 1998 2,590.00

Nov. 01/30, 1998 2,590.00

Dec. 01/31, 1998 2,590.00

Jan. 01/31, 1999 2,590.00

Feb. 01/28, 1999 2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00

--------------------------
--------------------------
--------------------------
--

25,382.23

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010

--------------------------
--------------------------
--------------------------
----------------

TOTAL CLAIM US$ 26,442.7311

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

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding
him monetary benefits, to wit:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the
complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are
hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the
rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED
SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months
of the unexpired portion of the aforesaid contract of employment. 1avvphi1

The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S.
DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the
 respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the
exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees
equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit.

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary
period of three months only -- rather than the entire unexpired portion of nine months and 23 days of
petitioner's employment contract - applying the subject clause. However, the LA applied the salary rate of
US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed
overtime pay, + US$490.00/month, vacation leave pay = US$2,590.00/compensation per month."14

Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the
LA that petitioner was illegally dismissed.

Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the
Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17 that in case of illegal
dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay
complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of
payment the following:

1. Three (3) months salary

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorneys fees 424.50

TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.19

The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable
salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the award of overtime
pay, which should be proven to have been actually performed, and for vacation leave pay."20

Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject
clause.21 The NLRC denied the motion.22

Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject
clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed
by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No.
151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary
rate; however, the CA skirted the constitutional issue raised by petitioner.25

His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the
following grounds:

I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision
of the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to three (3) months

II

In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of
Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to
discharge its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme
Court, particularly, the constitutional issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3)
months.

III

Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals
gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract
since under the contract they form part of his salary.28

On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical treatment and medication.29 Required to comment,
counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award
and, at the same time, praying that the constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the
petition mindful of the extreme importance of the constitutional question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise
not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is
only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.

Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate
of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00
awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his
salaries for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of
US$2,590.00.31

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to
negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed
salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino
workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of
illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared
illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two
groups;33and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights
and welfare of all Filipino workers, whether deployed locally or overseas.35

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing
jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this,
petitioner urges the Court to sort them out for the guidance of affected OFWs.36

Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but
to benefit local placement agencies. He marks the statement made by the Solicitor General in his
Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis
supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-
being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in
cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of
only three months of the unexpired employment contract while local employers are liable for the full lump-sum
salaries of their employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to the amount of backwages they have to give
their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the
matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the
maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.38

Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries
and other emoluments he is entitled to under his fixed-period employment contract.39

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained,
for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which
was when he filed an appeal before the NLRC.40

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not
have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract,
the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of
money claims, as this was not stipulated upon by the parties.42

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such
that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction,
or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor
Relations Commission43 and Millares v. National Labor Relations Commission,44 OFWs are contractual employees
who can never acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs;
that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject
clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.45

Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane conditions."46

The Court's Ruling

The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the
Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a
conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised by a proper
party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the
case,50otherwise the Court will dismiss the case or decide the same on some other ground.51

Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three
months only as provided under the subject clause.

The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue
be raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court,
such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial
and, if not considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the
CA.54Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining questions of fact to which the legislative policy of
R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the
law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity
of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's interposition of the
constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up
the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment
contract, and not just for a period of three months, strikes at the very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.

Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive57 is not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,58and
cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions are
read into contracts and deemed a part thereof.60 Thus, the non-impairment clause under Section 10, Article II is
limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the
State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the
noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be
employed.61Police power legislations adopted by the State to promote the health, morals, peace, education, good
order, safety, and general welfare of the people are generally applicable not only to future contracts but even to
those already in existence, for all private contracts must yield to the superior and legitimate measures taken by the
State to promote public welfare.62

Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the
equal protection of the law.

Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to
place of deployment, full protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic
security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all
monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws
which is enjoyed by, or spared the burden imposed on, others in like circumstances.65

Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system
of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it
is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing
conditions only; and 4) it applies equally to all members of the class.66

There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a
law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be
rationally related to serving a legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the
government must show that the challenged classification serves an important state interest and that the
classification is at least substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a
legislative classification which impermissibly interferes with the exercise of a fundamental right70 or operates to the
peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the government to
prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive
means to protect such interest.72

Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on race74 or
gender75 but not when the classification is drawn along income categories.76

It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc.
v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng
Pilipinas(BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees
under the Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been
exempted from the SSL by their respective charters. Finding that the disputed provision contained a suspect
classification based on salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its
review of the constitutionality of said provision. More significantly, it was in this case that the Court revealed the
broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded
recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops
where the classification violates a fundamental right, or prejudices persons accorded special protection by the
Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of
constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational
basis should not suffice.

Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter
judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and
authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support
many of our decisions. We should not place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to our own decisions through the employment of our
own endowments. We live in a different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of
law and justice. Our laws must be construed in accordance with the intention of our own lawmakers and such intent
may be deduced from the language of each law and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our
laws. And it need not be stressed that our public interest is distinct and different from others.

xxxx

Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective
judicial intervention.

Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims
"equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote
social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are
clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the
Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable
measure of equality.

Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less privilege in life should have more in
law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches
but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws
and the equalization of social and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated.

xxxx

Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be
based on the "rational basis" test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice
against persons favored by the Constitution with special protection, judicial scrutiny ought to be more
strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any
law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will
be struck down regardless of the character or nature of the actor.

xxxx

In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is
akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit
specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are
competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the
SSL while employees higher in rank - possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all,
the rank-and-file employees consist of people whose status and rank in life are less and limited, especially in terms
of job marketability, it is they - and not the officers - who have the real economic and financial need for the
adjustment . This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of
Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs
the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to
OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at
two levels:

First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts
of one year or more;

Second, among OFWs with employment contracts of more than one year; and

Third, OFWs vis--vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one
year or more

As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79(Second Division, 1999) that the Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed
overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or
three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1) year or more. This is evident from the
words "for every year of the unexpired term" which follows the words "salaries x x x for three months." To
follow petitioners thinking that private respondent is entitled to three (3) months salary only simply because it is the
lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some.
This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care should be taken
that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis
supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded
his salaries for the remaining 8 months and 6 days of his contract.

Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5).
One was Asian Center for Career and Employment System and Services v. National Labor Relations
Commission (Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment
contract, but was dismissed after working for one year and two months. The LA declared his dismissal illegal and
awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On
appeal, the Court reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser
value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized
cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private
respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.82

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-
month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half
months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired
portion of four and one-half months of her contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:

Case Title Contract Period of Unexpired Period Applied in

Period Service Period the Computation
of the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping 9 months 8 months 4 months 4 months

v. Reynaldo
Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87

Univan v. CA 88 12 months 3 months 9 months 3 months

Oriental v. 12 months more than 2 10 months 3 months

CA 89 months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days

JSS v.Ferrer92 12 months 16 days 11 months and 3 months

24 days

Pentagon v. 12 months 9 months and 2 months and 23 2 months and 23

Adelantar93 7 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et
al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each
Almanzor 95 year of contract
 Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3
Manpower v. months and and 28 days months for each
Villanos 96 28 days year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category
includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are
entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with
fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary
award equivalent to only 3 months of the unexpired portion of their contracts.

The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked
for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast,
the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts
were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved
in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract
of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15
months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the
same employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be
entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will
be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract,
instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser
amount.

The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the
effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of their
employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix
below speaks for itself:

Case Title Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98

Phil. Integrated 2 years 7 days 23 months 23 months and 23

v. NLRC99 and 23 days days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. 2 years 2 months 22 months 22 months

NLRC101

EDI v. NLRC, 2 years 5 months 19 months 19 months

et al.102

Barros v. 12 months 4 months 8 months 8 months

NLRC, et al.103

Philippine 12 months 6 months 5 months and 5 months and 18 days

Transmarine v. and 22 days 18 days
Carilla104

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof,
were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims
were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of
their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category
whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of
having their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired
contracts fall short of one year.

Among OFWs With Employment Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the
accuracy of the Marsaman interpretation.

The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is
less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term"
means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is
significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would
be no occasion for such unexpired term to be measured by every year; and second, the original term must be more
than one year, for otherwise, whatever would be the unexpired term thereof will not reach even a year.
Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months
for every year of the unexpired term, whichever is less" shall apply is not the length of the original contract period as
held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in
cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the
original contract period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods
are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be
entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one
year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited
to their salaries for three months only.

To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month.
OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least
12 months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject
clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to
US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion.

OFWs vis--vis Local Workers

With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally
dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term
employment.107

The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce
(1888),108 to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of
a fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of
said contract until the termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the
provisions contained in the following articles.

In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a
shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment.
The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-
term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which
provides:

Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or
manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in

which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally
dismissed employees for the entire unexpired portion of their employment contracts.

While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was replaced by
Art. 1586 of the Civil Code of 1889, to wit:

Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work
cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so
as to apply the provision to local workers who are employed for a time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine
and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586,
local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms
of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held:

The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the
contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of reducing the damages resulting from such
wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is
the amount which he would be entitled to had he continued in such employment until the termination of the period.
(Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115(Emphasis supplied)

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of
Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the
Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged.
However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on
the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the
new Civil Code was already in effect.118

More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v.
Ople,119involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National
Labor Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-period
employment contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract.
The Court arrived at the same ruling in Anderson v. National Labor Relations Commission,121 which involved a
foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired portion of his
contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security
officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he was
wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an OFW
whose 12-month contract was illegally cut short in the second month was declared entitled to his salaries for the
remaining 10 months of his contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged
were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for
the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of
the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment
contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no
such limitation is imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the computation of
the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on
the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims
of other OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now
subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest
through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution
and calibrated by history.124 It is akin to the paramount interest of the state125 for which some individual liberties must
give way, such as the public interest in safeguarding health or maintaining medical standards,126 or in maintaining
access to information on matters of public concern.127

In the present case, the Court dug deep into the records but found no compelling state interest that the subject
clause may possibly serve.

The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of
getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which
otherwise may be made to shoulder millions of pesos in "termination pay."128

The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed
and are employed under decent and humane conditions.129 (Emphasis supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state
interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill
No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the underlying
reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314
resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:

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

The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be
joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this
Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null and void.

Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the
responsible officials to any or all of the following penalties:

(1) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such
official may have incurred under other existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.

A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as
the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the
transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on
OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no
discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of
the subject clause.

In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against OFWs under the subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs
by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected.
There can never be a justification for any form of government action that alleviates the burden of one sector, but
imposes the same burden on another sector, especially when the favored sector is composed of private businesses
such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than
the Constitution commands. The idea that private business interest can be elevated to the level of a compelling
state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-
vistheir foreign principals, there are mechanisms already in place that can be employed to achieve that purpose
without infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers,
dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on
their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range
from temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary
measures against erring foreign employers.

Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement
agencies in enforcing the solidary liability of their foreign principals.

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and
other OFWs to equal protection. 1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the
subject clause from the lone perspective that the clause directly violates state policy on labor under Section
3,131Article XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which this Court
has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the nature of which,
this Court, in Agabon v. National Labor Relations Commission,134 has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in
the sense that these are automatically acknowledged and observed without need for any enabling legislation.
However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights
embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The
espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of
"full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the
broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to continued employment-a utopian notion,
doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector,
but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating
their own conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable
right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing.
As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative
enactments for their enforceability.135 (Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of
which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of
litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable
right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or
legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the
perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working
class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same
to strict judicial scrutiny.

The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied
Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal
protection clause, has no life or force of its own as elucidated in Agabon.

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to
substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid
governmental purpose.136

The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of
OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by
foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the
records of the deliberations leading to its enactment or the pleadings of respondent that would indicate that there is
an existing governmental purpose for the subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that
the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under
Section 1,137 Article III of the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine
months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A.
No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have been stipulated into his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is evidence that he performed work during those periods.
As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138

However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v.
National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions
to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of
the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established.

In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the
unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the
Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired
portion of his employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per
month.

No costs.

SO ORDERED.
G.R. No. 197528 September 5, 2012

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

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

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 assailing the decision2 dated May 9, 2011 and the
resolution3dated June 23, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 114353.

The Antecedents

On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez, Arsenio S. Lumanta, Jr., Robelito S.
Anipan, Virgilio R. Alcantara, Marino M. Era, Sandy O. Enjambre and Noel T. Ladea (respondents) filed a complaint
for illegal dismissal against the petitioner Pert/CPM Manpower Exponent Co., Inc. (agency), and its President
Romeo P. Nacino.

The respondents alleged that the agency deployed them between March 29, 2007 and May 12, 2007 to work as
aluminum fabricator/installer for the agencys principal, Modern Metal Solution LLC/MMS Modern Metal Solution
LLC (Modern Metal) in Dubai, United Arab Emirates.

The respondents employment contracts,4 which were approved by the Philippine Overseas Employment
Administration (POEA), provided for a two-year employment, nine hours a day, salary of 1,350 AED with overtime
pay, food allowance, free and suitable housing (four to a room), free transportation, free laundry, and free medical
and dental services. They each paid a P 15,000.00 processing fee.5

On April 2, 2007, Modern Metal gave the respondents, except Era, appointment letters6 with terms different from
those in the employment contracts which they signed at the agencys office in the Philippines. Under the letters of
appointment, their employment was increased to three years at 1,000 to 1,200 AED and food allowance of 200
AED.

The respondents claimed that they were shocked to find out what their working and living conditions were in Dubai.
They were required to work from 6:30 a.m. to 6:30 p.m., with a break of only one hour to one and a half hours.
When they rendered overtime work, they were most of the time either underpaid or not paid at all. Their housing
accommodations were cramped and were shared with 27 other occupants. The lodging house was in Sharjah,
which was far from their jobsite in Dubai, leaving them only three to four hours of sleep a day because of the long
hours of travel to and from their place of work; there was no potable water and the air was polluted.

When the respondents received their first salaries (at the rates provided in their appointment letters and with
deductions for placement fees) and because of their difficult living and working conditions, they called up the agency
and complained about their predicament. The agency assured them that their concerns would be promptly
addressed, but nothing happened.

On May 5, 2007, Modern Metal required the respondents to sign new employment contracts,7 except for Era who
was made to sign later. The contracts reflected the terms of their appointment letters. Burdened by all the expenses
and financial obligations they incurred for their deployment, they were left with no choice but to sign the contracts.
They raised the matter with the agency, which again took no action.

On August 5, 2007, despondent over their unbearable living and working conditions and by the agencys inaction,
the respondents expressed to Modern Metal their desire to resign. Out of fear, as they put it, that Modern Metal
would not give them their salaries and release papers, the respondents, except Era, cited personal/family problems
for their resignation.8 Era mentioned the real reason "because I dont (sic) want the company policy"9 for his
resignation.

It took the agency several weeks to repatriate the respondents to the Philippines. They all returned to Manila in
September 2007. Except for Ordovez and Enjambre, all the respondents shouldered their own airfare.

For its part, the agency countered that the respondents were not illegally dismissed; they voluntarily resigned from
their employment to seek a better paying job. It claimed that the respondents, while still working for Modern Metal,
applied with another company which offered them a higher pay. Unfortunately, their supposed employment failed to
materialize and they had to go home because they had already resigned from Modern Metal.

The agency further alleged that the respondents even voluntarily signed affidavits of quitclaim and release after they
resigned. It thus argued that their claim for benefits, under Section 10 of Republic Act No. (R.A.) 8042, damages
and attorneys fees is unfounded.
 The Compulsory Arbitration Rulings

On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a Decision10 dismissing the complaint, finding that the
respondents voluntarily resigned from their jobs. He also found that four of them Alcantara, Era, Anipan and
Lumanta even executed a compromise agreement (with quitclaim and release) before the POEA. He considered
the POEA recourse a case of forum shopping.

The respondents appealed to the National Labor Relations Commission (NLRC). They argued that the labor arbiter
committed serious errors in (1) admitting in evidence the quitclaims and releases they executed in Dubai, which
were mere photocopies of the originals and which failed to explain the circumstances behind their execution; (2)
failing to consider that the compromise agreements they signed before the POEA covered only the refund of their
airfare and not all their money claims; and (3) ruling that they violated the rule on non-forum shopping.

On May 12, 2009, the NLRC granted the appeal.11 It ruled that the respondents had been illegally dismissed. It
anchored its ruling on the new employment contracts they were made to sign in Dubai. It stressed that it is illegal for
an employer to require its employees to execute new employment papers, especially those which provide benefits
that are inferior to the POEA-approved contracts.

The NLRC rejected the quitclaim and release executed by the respondents in Dubai. It believed that the
respondents executed the quitclaim documents under duress as they were afraid that they would not be allowed to
return to the Philippines if they did not sign the documents. Further, the labor tribunal disagreed with the labor
arbiters opinion that the compromise agreement they executed before the POEA had effectively foreclosed the
illegal dismissal complaint before the NLRC and that the respondents had been guilty of forum shopping. It pointed
out that the POEA case involved pre-deployment issues; whereas, the complaint before the NLRC is one for illegal
dismissal and money claims arising from employment.

Consequently, the NLRC ordered the agency, Nacino and Modern Metal to pay, jointly and severally, the
respondents, as follows:

WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and SET ASIDE, a new Decision is hereby
issued ordering the respondents PERT/CPM MANPOWER EXPONENTS CO., INC., ROMEO NACINO, and
MODERN METAL SOLUTIONS, INC. to jointly and severally, pay the complainants the following:

Salary for
the
unexpired
Underpaid Placement Exemplary
Employee portion of
Salary fee Damages
the contract
(1350 x 6
months)

Vinuya,
150 x 6 = 900 AED USD 400 8100 AED P 20,000.00
ARMANDO

Alcantara
150 X 4 = 600 AED USD 400 8100 AED P 20,000.00
VIRGILIO

Era,
350 x 4 = 1400 AED USD 400 8100 AED P 20,000.00
MARINO

Ladea,
150 x 5 = 750 AED USD 400 8100 AED P 20,000.00
NOEL

Ordovez,
250 X 3 = 750 AED USD 400 8100 AED P 20,000.00
LOUIE

Anipan,
150 x 4 = 600 AED USD 400 8100 AED P 20,000.00
ROBELITO

Enjambre,
150 x 4 = 600 AED USD 400 8100 AED P 20,000.00
SANDY
 Lumanta,
250 x 5 = 1250 AED USD 400 8100 AED P 20,000.00
ARSENIO

TOTAL: 6,850 AED US$3,200 64,800 AED P 400,000.00

or their peso equivalent at the time of actual payment plus attorneys fees equivalent to 10% of the judgment
award.12

The agency moved for reconsideration, contending that the appeal was never perfected and that the NLRC gravely
abused its discretion in reversing the labor arbiters decision.The respondents, on the other hand, moved for partial
reconsideration, maintaining that their salaries should have covered the unexpired portion of their employment
contracts, pursuant to the Courts ruling in Serrano v. Gallant Maritime Services, Inc.13

The NLRC denied the agencys motion for reconsideration, but granted the respondents motion.14 It sustained the
respondents argument that the award needed to be adjusted, particularly in relation to the payment of their salaries,
consistent with the Courts ruling in Serrano. The ruling declared unconstitutional the clause, "or for three (3) months
for every year of the unexpired term, whichever is less," in Section 10, paragraph 5, of R.A. 8042, limiting the
entitlement of illegally dismissed overseas Filipino workers to their salaries for the unexpired term of their contract or
three months, whichever is less. Accordingly, it modified its earlier decision and adjusted the respondents salary
entitlement based on the following matrix:

Unexpired
Duration of
Employee Departure date Date dismissed portion of
Contract
contract

Vinuya, 19 months
2 years 29 March 2007 8 August 2007
ARMANDO and 21 days

Alcantara, 20 months
2 years 3 April 2007 8 August 2007
VIRGILIO and 5 days

Era, 21 months
2 years 12 May 2007 8 August 2007
MARINO and 4 days

Ladea, 19 months
2 years 29 March 2007 8 August 2007
NOEL and 21 days

Ordovez, 21 months
2 years 3 April 2007 26 July 2007
LOUIE and 23 days

Anipan, 20 months
2 years 3 April 2007 8 August 2007
ROBELITO and 5 days

Enjambre, 20 months
2 years 29 March 2007 26 July 2007
SANDY and 3 days

Lumanta, 19 months
2 years 29 March 2007 8 August 2007
ARSENIO and 21 days15
Again, the agency moved for reconsideration, reiterating its earlier arguments and, additionally, questioning the
application of the Serrano ruling in the case because it was not yet final and executory. The NLRC denied the
motion, prompting the agency to seek recourse from the CA through a petition for certiorari.

The CA Decision

The CA dismissed the petition for lack of merit.16 It upheld the NLRC ruling that the respondents were illegally
dismissed. It found no grave abuse of discretion in the NLRCs rejection of the respondents resignation letters, and
the accompanying quitclaim and release affidavits, as proof of their voluntary termination of employment.

The CA stressed that the filing of a complaint for illegal dismissal is inconsistent with resignation. Moreover, it found
nothing in the records to substantiate the agencys contention that the respondents resignation was of their own
accord; on the contrary, it considered the resignation letters "dubious for having been lopsidedly-worded to ensure
that the petitioners (employers) are free from any liability."17

The appellate court likewise refused to give credit to the compromise agreements that the respondents executed
before the POEA. It agreed with the NLRCs conclusion that the agreements pertain to the respondents charge of
recruitment violations against the agency distinct from their illegal dismissal complaint, thus negating forum
shopping by the respondents.

Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon being reminded by the respondents),
by adjusting the respondents salary award on the basis of the unexpired portion of their contracts, as enunciated in
the Serrano case.

The agency moved for, but failed to secure, a reconsideration of the CA decision.18

The Petition

The agency is now before the Court seeking a reversal of the CA dispositions, contending that the CA erred in:

1. affirming the NLRCs finding that the respondents were illegally dismissed;

2. holding that the compromise agreements before the POEA pertain only to the respondents charge of
recruitment violations against the agency; and

3. affirming the NLRCs award to the respondents of their salaries for the unexpired portion of their
employment contracts, pursuant to the Serrano ruling.

The agency insists that it is not liable for illegal dismissal, actual or constructive. It submits that as correctly found by
the labor arbiter, the respondents voluntarily resigned from their jobs, and even executed affidavits of quitclaim and
release; the respondents stated family concerns for their resignation. The agency posits that the letters were duly
proven as they were written unconditionally by the respondents. It, therefore, assails the conclusion that the
respondents resigned under duress or that the resignation letters were dubious.

The agency raises the same argument with respect to the compromise agreements, with quitclaim and release, it
entered into with Vinuya, Era, Ladea, Enjambre, Ordovez, Alcantara, Anipan and Lumanta before the POEA,
although it submitted evidence only for six of them. Anipan, Lumanta, Vinuya and Ladea signing one
document;19Era20 and Alcantara21 signing a document each. It points out that the agreement was prepared with the
assistance of POEA Conciliator Judy Santillan, and was duly and freely signed by the respondents; moreover, the
agreement is not conditional as it pertains to all issues involved in the dispute between the parties.

On the third issue, the agency posits that the Serrano ruling has no application in the present case for three
reasons. First, the respondents were not illegally dismissed and, therefore, were not entitled to their money claims.
Second, the respondents filed the complaint in 2007, while the Serrano ruling came out on March 24, 2009. The
ruling cannot be given retroactive application. Third, R.A. 10022, which was enacted on March 8, 2010 and which
amended R.A. 8042, restored the subject clause in Section 10 of R.A. 8042, declared unconstitutional by the Court.

The Respondents Position

In their Comment (to the Petition) dated September 28, 2011,22 the respondents ask the Court to deny the petition
for lack of merit. They dispute the agencys insistence that they resigned voluntarily. They stand firm on their
submission that because of their unbearable living and working conditions in Dubai, they were left with no choice but
to resign. Also, the agency never refuted their detailed narration of the reasons for giving up their employment.

The respondents maintain that the quitclaim and release affidavits,23 which the agency presented, betray its
desperate attempt to escape its liability to them. They point out that, as found by the NLRC, the affidavits are ready-
made documents; for instance, in Lumantas24 and Eras25 affidavits, they mentioned a certain G & A International
Manpower as the agency which recruited them a fact totally inapplicable to all the respondents. They contend
that they had no choice but to sign the documents; otherwise, their release papers and remaining salaries would not
be given to them, a submission which the agency never refuted.

On the agencys second line of defense, the compromise agreement (with quitclaim and release) between the
respondents and the agency before the POEA, the respondents argue that the agreements pertain only to their
charge of recruitment violations against the agency. They add that based on the agreements, read and considered
entirely, the agency was discharged only with respect to the recruitment and pre-deployment issues such as
excessive placement fees, non-issuance of receipts and placement misrepresentation, but not with respect to post-
deployment issues such as illegal dismissal, breach of contract, underpayment of salaries and underpayment and
nonpayment of overtime pay. The respondents stress that the agency failed to controvert their contention that the
agreements came about only to settle their claim for refund of their airfare which they paid for when they were
repatriated.

Lastly, the respondents maintain that since they were illegally dismissed, the CA was correct in upholding the
NLRCs award of their salaries for the unexpired portion of their employment contracts, as enunciated in Serrano.
They point out that the Serrano ruling is curative and remedial in nature and, as such, should be given retroactive
application as the Court declared in Yap v. Thenamaris Ships Management.26 Further, the respondents take
exception to the agencys contention that the Serrano ruling cannot, in any event, be applied in the present case in
view of the enactment of R.A. 10022 on March 8, 2010, amending Section 10 of R.A. 8042. The amendment
restored the subject clause in paragraph 5, Section 10 of R.A. 8042 which was struck down as unconstitutional in
Serrano.

The respondents maintain that the agency cannot raise the issue for the first time before this Court when it could
have raised it before the CA with its petition for certiorari which it filed on June 8, 2010;27 otherwise, their right to due
process will be violated. The agency, on the other hand, would later claim that it is not barred by estoppel with
respect to its reliance on R.A. 10022 as it raised it before the CA in CA-G.R. SP No. 114353.28 They further argue
that RA 10022 cannot be applied in their case, as the law is an amendatory statute which is, as a rule, prospective
in application, unless the contrary is provided.29 To put the issue to rest, the respondents ask the Court to also
declare unconstitutional Section 7 of R.A. 10022.

Finally, the respondents submit that the petition should be dismissed outright for raising only questions of fact, rather
than of law.

The Courts Ruling

The procedural question

We deem it proper to examine the facts of the case on account of the divergence in the factual conclusions of the
labor arbiter on the one hand, and, of the NLRC and the CA, on the other.30 The arbiter found no illegal dismissal in
the respondents loss of employment in Dubai because they voluntarily resigned; whereas, the NLRC and the CA
adjudged them to have been illegally dismissed because they were virtually forced to resign.

The merits of the case

We find no merit in the petition. The CA committed no reversible error and neither did it commit grave
abuse of discretion in affirming the NLRCs illegal dismissal ruling.

The agency and its principal, Modern Metal, committed flagrant violations of the law on overseas employment, as
well as basic norms of decency and fair play in an employment relationship, pushing the respondents to look for a
better employment and, ultimately, to resign from their jobs.

First. The agency and Modern Metal are guilty of contract substitution. The respondents entered into a POEA-
approved two-year employment contract,31 with Modern Metal providing among others, as earlier discussed, for a
monthly salary of 1350 AED. On April 2, 2007, Modern Metal issued to them appointment letters32 whereby the
respondents were hired for a longer three-year period and a reduced salary, from 1,100 AED to 1,200 AED, among
other provisions. Then, on May 5, 2007, they were required to sign new employment contracts33 reflecting the same
terms contained in their appointment letters, except that this time, they were hired as "ordinary laborer," no longer
aluminum fabricator/installer. The respondents complained with the agency about the contract substitution, but the
agency refused or failed to act on the matter.

The fact that the respondents contracts were altered or substituted at the workplace had never been denied by the
agency. On the contrary, it admitted that the contract substitution did happen when it argued, "as to their claim for
1wphi 1

underpayment of salary, their original contract mentioned 1350 AED monthly salary, which includes allowance while
in their Appointment Letters, they were supposed to receive 1,300 AED. While there was a difference of 50 AED
monthly, the same could no longer be claimed by virtue of their Affidavits of Quitclaims and Desistance."34

Clearly, the agency and Modern Metal committed a prohibited practice and engaged in illegal recruitment under the
law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for any individual, entity, licensee, or holder of authority:

xxxx

(i) To substitute or alter employment contracts approved and verified by the Department of Labor from the time of
actual signing thereof by the parties up to and including the periods of expiration of the same without the approval of
the Secretary of Labor.

Further, Article 38 of the Labor Code, as amended by R.A. 8042,35 defined "illegal recruitment" to include the
following act:

(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the
Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the
period of the expiration of the same without the approval of the Department of Labor and Employment.

Second. The agency and Modern Metal committed breach of contract. Aggravating the contract substitution
imposed upon them by their employer, the respondents were made to suffer substandard (shocking, as they put it)
working and living arrangements. Both the original contracts the respondents signed in the Philippines and the
appointment letters issued to them by Modern Metal in Dubai provided for free housing and transportation to and
from the jobsite. The original contract mentioned free and suitable housing.36 Although no description of the housing
was made in the letters of appointment except: "Accommodation: Provided by the company," it is but reasonable to
think that the housing or accommodation would be "suitable."

As earlier pointed out, the respondents were made to work from 6:30 a.m. to 6:30 p.m., with a meal break of one to
one and a half hours, and their overtime work was mostly not paid or underpaid. Their living quarters were cramped
as they shared them with 27 other workers. The lodging house was in Sharjah, far from the jobsite in Dubai, leaving
them only three to four hours of sleep every workday because of the long hours of travel to and from their place of
work, not to mention that there was no potable water in the lodging house which was located in an area where the
air was polluted. The respondents complained with the agency about the hardships that they were suffering, but the
agency failed to act on their reports. Significantly, the agency failed to refute their claim, anchored on the ordeal that
they went through while in Modern Metals employ.

Third. With their original contracts substituted and their oppressive working and living conditions unmitigated or
unresolved, the respondents decision to resign is not surprising. They were compelled by the dismal state of their
employment to give up their jobs; effectively, they were constructively dismissed. A constructive dismissal or
discharge is "a quitting because continued employment is rendered impossible, unreasonable or unlikely, as, an
offer involving a demotion in rank and a diminution in pay."37

Without doubt, the respondents continued employment with Modern Metal had become unreasonable. A
reasonable mind would not approve of a substituted contract that pays a diminished salary from 1350 AED a
month in the original contract to 1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED to 250
AED (not just 50 AED as the agency claimed) or an extended employment (from 2 to 3 years) at such inferior terms,
or a "free and suitable" housing which is hours away from the job site, cramped and crowded, without potable water
and exposed to air pollution.

We thus cannot accept the agencys insistence that the respondents voluntarily resigned since they personally
prepared their resignation letters38 in their own handwriting, citing family problems as their common ground for
resigning. As the CA did, we find the resignation letters "dubious,"39 not only for having been lopsidedly worded to
ensure that the employer is rendered free from any liability, but also for the odd coincidence that all the respondents
had, at the same time, been confronted with urgent family problems so that they had to give up their employment
and go home. The truth, as the respondents maintain, is that they cited family problems as reason out of fear that
Modern Metal would not give them their salaries and their release papers. Only Era was bold enough to say the real
reason for his resignation to protest company policy.

We likewise find the affidavits40of quitclaim and release which the respondents executed suspect. Obviously, the
affidavits were prepared as a follow through of the respondents supposed voluntary resignation. Unlike the
resignation letters, the respondents had no hand in the preparation of the affidavits. They must have been prepared
by a representative of Modern Metal as they appear to come from a standard form and were apparently introduced
for only one purpose to lend credence to the resignation letters. In Modern Metals haste, however, to secure the
respondents affidavits, they did not check on the model they used. Thus, Lumantas affidavit41 mentioned a G & A
International Manpower as his recruiting agency, an entity totally unknown to the respondents; the same thing is true
for Eras affidavit.42 This confusion is an indication of the employers hurried attempt to avoid liability to the
respondents.

The respondents position is well-founded. The NLRC itself had the same impression, which we find in order and
hereunder quote:

The acts of respondents of requiring the signing of new contracts upon reaching the place of work and requiring
employees to sign quitclaims before they are paid and repatriated to the Philippines are all too familiar stories of
despicable labor practices which our employees are subjected to abroad. While it is true that quitclaims are
generally given weight, however, given the facts of the case, We are of the opinion that the complainants-appellants
executed the same under duress and fear that they will not be allowed to return to the Philippines.43

Fourth. The compromise agreements (with quitclaim and release)44 between the respondents and the agency
before the POEA did not foreclose their employer-employee relationship claims before the NLRC. The respondents,
except Ordovez and Enjambre, aver in this respect that they all paid for their own airfare when they returned
home45 and that the compromise agreements settled only their claim for refund of their airfare, but not their other
claims.46 Again, this submission has not been refuted or denied by the agency.

On the surface, the compromise agreements appear to confirm the agencys position, yet a closer examination of
the documents would reveal their true nature. Copy of the compromise agreement is a standard POEA document,
prepared in advance and readily made available to parties who are involved in disputes before the agency, such as
what the respondents filed with the POEA ahead (filed in 2007) of the illegal dismissal complaint before the NLRC
(filed on March 5, 2008).

Under the heading "Post-Deployment," the agency agreed to pay Era47 and Alcantara48 P 12,000.00 each,
purportedly in satisfaction of the respondents claims arising from overseas employment, consisting of unpaid
salaries, salary differentials and other benefits, including money claims with the NLRC. The last document was
signed by (1) Anipan, (2) Lumanta, (3) Ladea, (4) Vinuya, (5) Jonathan Nangolinola, and (6) Zosimo Gatchalian (the
last four signing on the left hand side of the document; the last two were not among those who filed the illegal
dismissal complaint).49

The agency agreed to pay them a total of P 72,000.00. Although there was no breakdown of the entitlement for each
of the six, but guided by the compromise agreement signed by Era and Alcantara, we believe that the agency paid
them P 12,000.00 each, just like Era and Alcantara.

The uniform insubstantial amount for each of the signatories to the agreement lends credence to their contention
that the settlement pertained only to their claim for refund of the airfare which they shouldered when they returned to
the Philippines. The compromise agreement, apparently, was intended by the agency as a settlement with the
respondents and others with similar claims, which explains the inclusion of the two (Nangolinola and Gatchalian)
who were not involved in the case with the NLRC. Under the circumstances, we cannot see how the compromise
agreements can be considered to have fully settled the respondents claims before the NLRC illegal dismissal
and monetary benefits arising from employment. We thus find no reversible error nor grave abuse of discretion in
the rejection by the NLRC and the CA of said agreements.

Fifth. The agencys objection to the application of the Serrano ruling in the present case is of no moment. Its
argument that the ruling cannot be given retroactive effect, because it is curative and remedial, is untenable. It
points out, in this respect, that the respondents filed the complaint in 2007, while the Serrano ruling was handed
down in March 2009. The issue, as the respondents correctly argue, has been resolved in Yap v. Thenamaris Ships
Management,50 where the Court sustained the retroactive application of the Serrano ruling which declared
unconstitutional the subject clause in Section 10, paragraph 5 of R.A. 8042, limiting to three months the payment of
salaries to illegally dismissed Overseas Filipino Workers.

Undaunted, the agency posits that in any event, the Serrano ruling has been nullified by R.A. No. 10022, entitled
"An Act Amending Republic Act No. 8042, Otherwise Known as the Migrant Workers and Overseas Filipinos Act of
1995, As Amended, Further Improving the Standard of Protection and Promotion of the Welfare of Migrant Workers,
Their Families and Overseas Filipinos in Distress, and For Other Purposes."51 It argues that R.A. 10022, which
lapsed into law (without the Signature of the President) on March 8, 2010, restored the subject clause in the 5th
paragraph, Section 10 of R.A. 8042. The amendment, contained in Section 7 of R.A. 10022, reads as follows:

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
or any unauthorized deductions from the migrant workers salary, the worker shall be entitled to the full
reimbursement "of" his placement fee and the deductions made with interest at twelve percent (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.52 (emphasis ours)

This argument fails to persuade us. Laws shall have no retroactive effect, unless the contrary is provided.53 By its
very nature, the amendment introduced by R.A. 10022 restoring a provision of R.A. 8042 declared
unconstitutional cannot be given retroactive effect, not only because there is no express declaration of
retroactivity in the law, but because retroactive application will result in an impairment of a right that had accrued to
the respondents by virtue of the Serrano ruling - entitlement to their salaries for the unexpired portion of their
employment contracts.

All statutes are to be construed as having only a prospective application, unless the purpose and intention of the
legislature to give them a retrospective effect are expressly declared or are necessarily implied from the language
used.54 We thus see no reason to nullity the application of the Serrano ruling in the present case. Whether or not
R.A. 1 0022 is constitutional is not for us to rule upon in the present case as this is an issue that is not squarely
before us. In other words, this is an issue that awaits its proper day in court; in the meanwhile, we make no
pronouncement on it.

WHEREFORE, premises considered, the petition is DENIED. The assailed Decision dated May 9, 2011 and the
Resolution dated June 23, 2011 of the Court of Appeals in CA-G.R. SP No. 114353 are AFFIRMED. Let this
Decision be brought to the attention of the Honorable Secretary of Labor and Employment and the Administrator of
the Philippine Overseas Employment Administration as a black mark in the deployment record of petitioner
Pert/CPM Manpower Exponent Co., Inc., and as a record that should be considered in any similar future violations.

Costs against the petitioner.

SO ORDERED.
G.R. No. 94071 March 31, 1992

NEW LIFE ENTERPRISES and JULIAN SY, petitioners,

vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND
INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION, respondents.

REGALADO, J.:

This appeal by certiorari seeks the nullification of the decision 1 of respondent Court of Appeals in CA-G.R. CV No.
13866 which reversed the decision of the Regional Trial Court, Branch LVII at Lucena City, jointly deciding Civil Cases
Nos. 6-84, 7-84 and 8-84 thereof and consequently ordered the dismissal of the aforesaid actions filed by herein
petitioners.

The undisputed background of this case as found by the court a quo and adopted by respondent court, being
sustained by the evidence on record, we hereby reproduce the same with approval. 2

The antecedents of this case show that Julian Sy and Jose Sy Bang have formed a business
partnership in the City of Lucena. Under the business name of New Life Enterprises, the partnership
engaged in the sale of construction materials at its place of business, a two storey building situated
at Iyam, Lucena City. The facts show that Julian Sy insured the stocks in trade of New Life
Enterpriseswith Western Guaranty Corporation, Reliance Surety and Insurance. Co., Inc., and
Equitable Insurance Corporation.

On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the
amount of P350,000.00. This policy was renewed on May, 13, 1982.

On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No.
69135 inthe amount of P300,000.00 (Renewed under Renewal Certificate No. 41997) An additional
insurancewas issued by the same company on November 12, 1981 under Fire Insurance Policy No.
71547 in the amount of P700,000.00.

On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance Policy No. 39328 in the
amount of P200,000.00.

Thus when the building occupied by the New Life Enterprises was gutted by fire at about 2:00
o'clock inthe morning of October 19, 1982, the stocks in the trade inside said building were insured
against fire inthe total amount of P1,550,000.00. According to the certification issued by the
Headquarters, Philippine Constabulary /Integrated National Police,
Camp Crame, the cause of fire was electrical in nature.According to the plaintiffs,
the building and the stocks inside were burned. After the fire, Julian Sy wentto the agent of
Reliance Insurance whom he asked to accompany him to the
office of the company sothat he can file his claim. He averred that in support of his claim, he
submitted the fire clearance, the insurance policies and inventory of stocks. He further testified
that the three insurance companies are sister companies, and as a matter of fact when he was
following-up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance
Insurance and if said company agrees to pay, they would also pay. The same treatment was given
him by the other insurance companies. Ultimately, thethree insurance companies denied plaintiffs'
claim for payment.

In its letter of denial dated March 9, 1983, (Exhibit "C" No. 8-

84) Western Guaranty Corporationthrough Claims Manager Bernard S. Razon told the plaintiff that
his claim "is denied for breach of policyconditions." Reliance Insurance purveyed the same message
in its letter dated November 23, 1982and signed by Executive Vice-President Mary Dee
Co (Exhibit "C" No. 7-84) which said that "plaintiff's claim is denied for breach of policy conditions."
The letter of denial received by the plaintiff fromEquitable Insurance Corporation (Exhibit "C" No. 6-
84) was of the same tenor, as said letter dated February 22, 1983, and signed by Vice-President
Elma R. Bondad, said "we find that certain policyconditions were violated, therefore, we regret,
we have to deny your claim, as it is hereby denied in its entirety."

In relation to the case against Reliance Surety and Insurance Company, a certain Atty. Serafin
D.Dator, acting in behalf of the plaintiff, sent a letter dated February 13, 1983 (Exhibit "G-l" No 7-
84) toExecutive Vice-President Mary Dee Co asking that he be informed as to the specific policy
conditions allegedly violated by the plaintiff. In her reply-letter dated March 30, 1983, Executive Vice-
PresidentMary Dee Co informed Atty. Dator that Julian Sy violated Policy Condition No.
"3" which requires theinsured to give notice of any insurance or insurances already effected covering
the stocks in trade. 3
Because of the denial of their claims for payment by the three (3) insurance companies, petitioner filed separate
civilactions against the former before the Regional Trial Court of Lucena City, which cases were consolidated for
trial, and thereafter the court below rendered its decision on December 19, l986 with the following disposition:

WHEREFORE, judgment in the above-entitled cases is rendered in the following manner, viz:

1. In Civil Case No. 6-84, judgment is rendered for the plaintiff New Life Enterprises and against the
defendant Equitable Insurance Corporation ordering the latter to pay the former the sum of
TwoHundred Thousand (P200,000.00) Pesos and
considering that payment of the claim of the insured hasbeen unreasonably denied, pursuant to Sec.
244 of the Insurance Code, defendant is further ordered topay the plaintiff attorney's fees in the
amount of Twenty Thousand (P20,000.00) Pesos. All sums ofmoney to be paid by virtue
hereof shall bear interest at 12% per annum (pursuant to Sec. 244 of theInsurance Code) from
February 14, 1983, (91st day from November 16, 1982, when Sworn Statementof Fire Claim
was received from the insured) until they are fully paid;

2. In Civil Case No. 7-84, judgment is rendered for the plaintiff Julian Sy and against
the defendantReliance Surety and Insurance Co., Inc., ordering the latter to pay the former the sum
of P1,000,000.00(P300,000.00 under Policy No. 69135 and P700,000.00 under Policy No. 71547)
and considering thatpayment of the claim of the insured has been unreasonably denied, pursuant to
Sec. 244 of theInsurance Code, defendant is further ordered to pay the plaintiff the amount of
P100,000.00 as attorney's fees.

All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec.
244 of the Insurance Code) from February 14, 1983, (91st day from November 16,
1982 when SwornStatement of Fire Claim was received from the insured) until they are fully paid;

3. In Civil Case No. 8-84, judgment is rendered for

the plaintiff New Life Enterprises and against thedefendant Western Guaranty Corporation ordering
the latter to pay the sum of P350,000.00 to theConsolidated Bank and Trust Corporation,
Lucena Branch, Lucena City, as stipulated on the face ofPolicy No. 37201, and considering that
payment of the aforementioned sum of money has been
unreasonably denied, pursuant to Sec. 244 of the Insurance Code,
defendant is further ordered to pay the plaintiff attorney's fees in the amount of P35,000.00.

All sums of money to be paid by virtue hereof shall bear interest at 12% per annum (pursuant to Sec.
244 of the Insurance Code) from February 5, 1982, (91st day from 1st week of November
1983 when insured filed formal claim for full indemnity according to adjuster
Vetremar Dela Merced) until they are fully paid. 4

As aforestated, respondent Court of Appeals reversed said judgment of the trial court, hence this petition the
cruxwherein is whether or not Conditions Nos. 3 and 27 of
the insurance contracts were violated by petitioners thereby resulting in their forfeiture of all the benefits thereunder.

Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly contained
in all the aforestated insurance contracts of herein petitioners, as follows:

3. The insured shall give notice to the Company of any insurance or insurances already
effected, orwhich may subsequently be effected, covering any of the property or properties
consisting of stocks intrade, goods in process and/or inventories only hereby insured, and unless
such notice be given andthe particulars of such insurance or insurances be stated therein or
endorsed on this policy pursuant to Section 50 of the Insurance
Code, by or on behalf of the Company before the occurrence of any loss ordamage, all benefits
under this policy shall be deemed forfeited, provided however, that this condition shall not apply
when the total insurance or insurances in force at the time of loss or damage not morethan
P200,000.00. 5

Petitioners admit that the respective insurance policies issued by private respondents did not state or endorse
thereon the other insurance coverage obtained or subsequently effected on the same stocks in trade for the loss of
which compensation is claimed by petitioners. 6 The policy
issued by respondent Western Guaranty Corporation(Western) did not
declare respondent Reliance Surety and Insurance Co., Inc. (Reliance) and respondent Equitable Insurance
Corporation (Equitable) as co-insurers on the same stocks, while Reliance's Policies covering the same stocks didnot
likewise declare Western and Equitable as such co-insurers. It is further admitted by petitioners that Equitable's policy
stated "nil" in the space thereon requiring indication of any co-insurance although there were three (3) policies subsisting
on the same stocks in trade at the time of the loss, namely, that of Western in the amount of P350,000.00
and two (2) policies of Reliance in the total amount of P1,000,000.00. 7
In other words, the coverage by other insurance or co-insurance effected or subsequently arranged by petitioners
were neither stated nor endorsed in the policies of the three (3) private respondents, warranting forfeiture of all
benefits thereunder if we are to follow the express stipulation in the aforequoted Policy Condition No. 3.

Petitioners contend that they are not to be blamed for the omissions, alleging that insurance agent Leon Alvarez (for
Western) and Yap Kam Chuan (for Reliance and Equitable) knew about the existence of the additional
insurancecoverage and that they were not informed about the requirement that such other or additional insurance
should bestated in the policy, as they have not even read policies. 8 These contentions cannot pass judicial muster.

The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer
any other insurance and its particulars which he may have effected on the same subject matter. The knowledge of
such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that
would estop the insurers from denying the claim. Besides, the so-called theory of imputed knowledge, that is,
knowledge of the agent is knowledge of the principal, aside from being
of dubious applicability here has likewisebeen roundly refuted by respondent court whose factual findings we find
acceptable.

Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding
the co-insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of
the policies; that Yap Dam Chuan could not likewise have obtained such knowledge for the same reason, aside from
the fact that the insurance with Western was obtained before those of
Reliance and Equitable; and that theconclusion of the trial court that Reliance and Equitable are "sister
companies" is an unfounded conjecture drawnfrom the mere fact that Yap Kam Chuan was
an agent for both companies which also had the same insuranceclaims adjuster. Availment of the
services of the same agents and adjusters by different companies is a
commonpractice in the insurance business and such facts do not warrant the speculative conclusion of the trial
court.

Furthermore, when the words and language of documents are clear and plain or readily understandable by an
ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. 9 Courts are not
allowed to make contracts for the parties; rather, they will intervene only when the terms of the policy are ambiguous,
equivocal, or uncertain. 10 The parties must abide by the terms of the contract because such terms constitute the
measure ofthe insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from
the insurer. 11

While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally
infavor of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to
be construed according to the sense and meaning of the terms which
the parties themselves have used. If suchterms are clear and unambiguous, they must be taken and understood
in their plain, ordinary and popular sense. 12Moreover, obligations arising from contracts have the force of law between
the contracting parties and should be compliedwith in good faith. 13

Petitioners should be aware of the fact that a party is not relieved of the duty to exercise the ordinary care and
prudence that would be exacted in relation to other contracts. The conformity of the insured to the terms of the
policy is implied from his failure to express any disagreement with what is provided for. 14 It may be true that
themajority rule, as cited by petitioners, is that injured persons may accept policies without reading them, and that this is
not negligence per se. 15 But, this is not without any exception. It is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be
reasonably expected of him considering that he has been a businessman since 1965 16 and the contract concerns indemnity in case
of loss inhis money-making trade of which important consideration he could not have been unaware as it was pre-in case
of loss in his money-making trade of which important consideration he could not have been unaware as it was precisely
the reason for his procuring the same.

We reiterate our pronouncement in Pioneer Insurance and Surety Corporation vs. Yap: 17

...
And considering the terms of the policy which required the insured to declare other insurances, thest
atement in question must be deemed to be a statement (warranty) binding on both insurer and
insured, that there were no other insurance on the property. . . .

The annotation then, must be deemed to be a warranty that the property was not insured by any
other policy. Violation thereof entitled the insurer to rescind (Sec. 69, Insurance
Act). Such misrepresentation is fatal in the light of our views in Santa Ana vs. Commercial Union
Assurance Company, Ltd., 55 Phil. 329. The materiality of non-disclosure of other insurance policies
is not open to doubt.

xxx xxx xxx

The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus
avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured. According to Justice Story: "The insured
 has no right to complain, for he assents to comply with all the stipulations on
his side, in order to entitlehimself to the benefit of the contract, which, upon reason or principle, he
has no right to ask the court to dispense with the performance of his own part of the agreement, and
yet to bind the other party to obligations, which, but for those stipulations, would not have been
entered into."

Subsequently, in the case of Pacific Banking Corporation vs. Court of Appeals, et al., 18 we held:

It is not disputed that the insured failed to reveal before the loss three other insurances. As found by
the Court of Appeals, by reason of said unrevealed insurances, the insured had been guilty of a
falsedeclaration; a clear misrepresentation and a vital one because where
the insured had been asked to reveal but did not, that was deception. Otherwise stated, had the
insurer known that there were many co-insurances, it could have hesitated or plainly desisted from
entering into such contract. Hence, theinsured was guilty of clear fraud (Rollo, p. 25).

Petitioner's contention that the allegation of fraud is but a mere inference or suspicion is untenable.
In fact, concrete evidence of fraud or false declaration by the insured was furnished by the petitioner
itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and
"Other InsuranceClause" are materially different from the actual number of co-insurances taken over
the subjectproperty. Consequently, "the whole foundation of the contract fails, the
risk does not attach and thepolicy never becomes a contract between the
parties." Representations of facts are the foundation ofthe contract and if the foundation does not
exist, the superstructure does not arise. Falsehood in suchrepresentations is not shown to vary
or add to the contract, or to terminate a contract which has oncebeen made, but to
show that no contract has ever existed (Tolentino, Commercial Laws of thePhilippines, p.
991, Vol. II, 8th Ed.,) A void or inexistent contract is one which has no force and effectfrom the very
beginning, as if it had never been entered into, and which cannot be validated either bytime or by
ratification (Tongoy vs. C.A., 123 SCRA 99 (1983); Avila v. C.A., 145 SCRA, 1986).

As the insurance policy against fire expressly required that notice should be given by
the insured ofother insurance upon the same property, the total absence of such notice nullifies the
policy.

To further warrant and justify the forfeiture of the benefits under the insurance contracts involved, we need
merely toturn to Policy Condition No. 15 thereof, which reads in part:

15. . . . if any false declaration be made or used in support thereof, . . . all benefits under this Policy
shall be forfeited . . . . 19

Additionally, insofar as the liability of respondent Reliance is concerned, it is not denied that the complaint for
recovery was filed in court by petitioners only on January 31, 1984, or after more than one (1) year had
elapsedfrom petitioners' receipt of the insurers' letter of denial on November 29, 1982. Policy Condition No. 27 of
their insurance contract with Reliance provides:

27. Action or suit clause. If a claim be made and rejected and an action or suit be not commenced
either in the Insurance Commission or any court of competent jurisdiction of notice of such
rejection, orin case of arbitration taking place as provided herein, within twelve (12) months after due
notice of theaward made by the arbitrator or arbitrators or umpire, then the claim shall for all
purposes be deemedto have been abandoned and shall not thereafter be recoverable hereunder. 20

On this point, the trial court ruled:

. . . However, because of the peculiar circumstances of this case, we hesitate

in concluding thatplaintiff's right to ventilate his claim in court has been barred by reason of the time
constraint provided in the insurance contract. It is evident that after the plaintiff had received
the letter of denial, he stillfound it necessary to be informed of the specific causes or reasons for
the denial of his claim, reasonfor which his lawyer, Atty. Dator deemed it wise to send a
letter of inquiry to the defendant which wasanswered by defendant's Executive Vice-
President in a letter dated March 30, 1983, . . .
. Assuming,gratuitously, that the letter of Executive Vice-President Mary Dee Co dated March 30,
1983, was received by plaintiff on the same date, the period of limitation should
start to run only from said date in the spirit of fair play and equity. . . . 21

We have perforce to reject this theory of the court below for being contrary to what we have heretofore declared:

It is important to note the principle laid down by this Court in the case of Ang vs. Fulton Fire
Insurance Co. (2 SCRA 945 [1961]) to wit:
 The condition contained in an insurance policy that claims must be presented within
one year
after rejection is not merely a procedural requirement but an important matter
essential to a prompt settlement of claims against insurance companies as it
demandsthat insurance suits be brought by the insured while the evidence as to the
origin andcause of destruction have not yet disappeared.

In enunciating the above-cited principle, this Court had definitely settled the rationale for the
necessityof bringing suits against the Insurer within one year from the rejection of the claim. The
contention ofthe respondents that the one-year prescriptive period does
not start to run until the petition forreconsideration had been resolved by the insurer, runs counter to
the declared purpose for requiringthat an action or suit be filed in the Insurance
Commission or in a court of competent jurisdiction fromthe denial of the claim. To uphold
respondents' contention would contradict and defeat the very principle which this Court had
laid down. Moreover, it can easily be used by insured persons as a scheme or device to waste time
until any evidence which may be considered against them is destroyed.

xxx xxx xxx

While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "final rejection", the
samecannot be taken to mean the rejection of a petition for reconsideration as insisted by
respondents. Suchwas clearly not the meaning contemplated by this Court. The insurance policy in
said case providesthat the insured should file his claim first, with the carrier and then with the
insurer. The "final rejection"being referred to in said case is the rejection by the
insurance company. 22

Furthermore, assuming arguendo that petitioners felt the legitimate need to be clarified as to the policy condition
violated, there was a considerable lapse of time from their receipt of the insurer's clarificatory letter dated March 30,
1983, up to the time the complaint was filed in court on January 31, 1984. The one-year prescriptive period was yet
to expire on November 29, 1983, or about eight (8) months from the receipt of the clarificatory letter, but petitioners
let the period lapse without bringing their action in court. We accordingly find no "peculiar circumstances" sufficient
to relax the enforcement of the one-year prescriptive period and we, therefore, hold that petitioners' claim was
definitely filed out of time.

WHEREFORE, finding no cogent reason to disturb the judgment

of respondent Court of Appeals, the same ishereby AFFIRMED.

SO ORDERED.
G.R. No. 161757 January 25, 2006

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S. DINOPOL, in his
capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and DIVINA A.
MONTEHERMOZO,Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner, Sunace International Management Services (Sunace), a corporation duly organized and existing under
the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-
month contract effective February 1, 1997.1 The deployment was with the assistance of a Taiwanese broker,
Edmund Wang, President of Jet Crown International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer,
Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National Labor Relations
Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign
principal alleging that she was jailed for three months and that she was underpaid.

The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued Summons3 to the
Manager of Sunace, furnishing it with a copy of Divinas complaint and directing it to appear for mandatory
conference on February 28, 2000.

The scheduled mandatory conference was reset. It appears to have been concluded, however.

On April 6, 2000, Divina filed her Position Paper4 claiming that under her original one-year contract and the 2-year
extended contract which was with the knowledge and consent of Sunace, the following amounts representing
income tax and savings were deducted:

Year Deduction for Income Tax Deduction for Savings

1997 NT10,450.00 NT23,100.00

1998 NT9,500.00 NT36,000.00

1999 NT13,300.00 NT36,000.00;5

and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999 were not. On even
date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer and Position
Paper,6claiming as follows, quoted verbatim:

COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS SAVINGS

3. Complainant could not anymore claim nor entitled for the refund of her 24 months savings as she already took
back her saving already last year and the employer did not deduct any money from her salary, in accordance with
a Fascimile Message from the respondent SUNACEs employer, Jet Crown International Co. Ltd., a xerographic
copy of which is herewith attached as ANNEX "2" hereof;

COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND PAYMENT OF ATTORNEYS
FEES

4. There is no basis for the grant of tax refund to the complainant as the she finished her one year contract and
hence, was not illegally dismissed by her employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorneys fees as said reliefs are available only when the dismissal of a migrant
worker is without just valid or lawful cause as defined by law or contract.

The rationales behind the award of tax refund and payment of attorneys fees is not to enrich the complainant but to
compensate him for actual injury suffered. Complainant did not suffer injury, hence, does not deserve to be
compensated for whatever kind of damages.

Hence, the complainant has NO cause of action against respondent SUNACE for monetary claims, considering that
she has been totally paid of all the monetary benefits due her under her Employment Contract to her full satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the Taiwanese law, which respondent
SUNACE has no control and complainant has to obey and this Honorable Office has no authority/jurisdiction to
intervene because the power to tax is a sovereign power which the Taiwanese Government is supreme in its own
territory. The sovereign power of taxation of a state is recognized under international law and among sovereign
states.

7. That respondent SUNACE respectfully reserves the right to file supplemental Verified Answer and/or Position
Paper to substantiate its prayer for the dismissal of the above case against the herein respondent. AND BY WAY
OF -

x x x x (Emphasis and underscoring supplied)

Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an ". . . answer to complainants position
paper"7alleging that Divinas 2-year extension of her contract was without its knowledge and consent, hence, it had
no liability attaching to any claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of
Responsibility and an Affidavit of Desistance, copy of each document was annexed to said ". . . answer to
complainants position paper."

To Sunaces ". . . answer to complainants position paper," Divina filed a 2-page reply,8 without, however, refuting
Sunaces disclaimer of knowledge of the extension of her contract and without saying anything about the Release,
Waiver and Quitclaim and Affidavit of Desistance.

The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract for two more years was without its
knowledge and consent in this wise:

We reject Sunaces submission that it should not be held responsible for the amount withheld because her contract
was extended for 2 more years without its knowledge and consent because as Annex "B"9 shows, Sunace and
Edmund Wang have not stopped communicating with each other and yet the matter of the contracts extension
and Sunaces alleged non-consent thereto has not been categorically established.

What Sunace should have done was to write to POEA about the extension and its objection thereto, copy furnished
the complainant herself, her foreign employer, Hang Rui Xiong and the Taiwanese broker, Edmund Wang.

And because it did not, it is presumed to have consented to the extension and should be liable for anything that
resulted thereform (sic).10 (Underscoring supplied)

The Labor Arbiter rejected too Sunaces argument that it is not liable on account of Divinas execution of a Waiver
and Quitclaim and an Affidavit of Desistance. Observed the Labor Arbiter:

Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be reduced to
writing and signed by the parties and their respective counsel (sic), if any, before the Labor Arbiter.

The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily entered into by the
parties and after having explained to them the terms and consequences thereof.

A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom the case
is pending shall be approved by him, if after confronting the parties, particularly the complainants, he is satisfied that
they understand the terms and conditions of the settlement and that it was entered into freely voluntarily (sic) by
them and the agreement is not contrary to law, morals, and public policy.

And because no consideration is indicated in the documents, we strike them down as contrary to law, morals, and
public policy.11

He accordingly decided in favor of Divina, by decision of October 9, 2000,12 the dispositive portion of which reads:

Wherefore, judgment is hereby rendered ordering respondents SUNACE INTERNATIONAL SERVICES and its
owner ADELAIDA PERGE, both in their personal capacities and as agent of Hang Rui Xiong/Edmund Wang to
jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent
at the date of payment, as refund for the amounts which she is hereby adjudged entitled to as earlier discussed plus
10% thereof as attorneys fees since compelled to litigate, complainant had to engage the services of counsel.

SO ORDERED.13 (Underescoring supplied)

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14 affirmed the Labor Arbiters decision.

Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals which dismissed it outright by
Resolution of November 12, 2002,16 the full text of which reads:
The petition for certiorari faces outright dismissal.

The petition failed to allege facts constitutive of grave abuse of discretion on the part of the public respondent
amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiters finding that petitioner Sunace
International Management Services impliedly consented to the extension of the contract of private respondent
Divina A. Montehermozo. It is undisputed that petitioner was continually communicating with private respondents
foreign employer (sic). As agent of the foreign principal, "petitioner cannot profess ignorance of such extension as
obviously, the act of the principal extending complainant (sic) employment contract necessarily bound it."
Grave abuse of discretion is not present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17

SO ORDERED.

(Emphasis on words in capital letters in the original; emphasis on words in small letters and underscoring supplied)

Its Motion for Reconsideration having been denied by the appellate court by Resolution of January 14,
2004,18Sunace filed the present petition for review on certiorari.

The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that Sunace knew of and impliedly consented to
the extension of Divinas 2-year contract. It went on to state that "It is undisputed that [Sunace] was continually
communicating with [Divinas] foreign employer." It thus concluded that "[a]s agent of the foreign principal, petitioner
cannot profess ignorance of such extension as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it."

Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese brokerWang, not with the foreign employer Xiong.

The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a finding of
continuous communication, reads verbatim:

xxxx

Regarding to Divina, she did not say anything about her saving in police station. As we contact with her
employer, she took back her saving already last years. And they did not deduct any money from her
salary. Or she will call back her employer to check it again. If her employer said yes! we will get it back
for her.

Thank you and best regards.

(Sgd.)
Edmund Wang
President19

The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that Sunace
continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented to the
execution of the extension of the contract is misplaced. The message does not provide evidence that Sunace was
privy to the new contract executed after the expiration on February 1, 1998 of the original contract. That Sunace and
the Taiwanese broker communicated regarding Divinas allegedly withheld savings does not necessarily mean that
Sunace ratified the extension of the contract. As Sunace points out in its Reply20 filed before the Court of Appeals,

As can be seen from that letter communication, it was just an information given to the petitioner that the private
respondent had t[aken] already her savings from her foreign employer and that no deduction was made on her
salary. It contains nothing about the extension or the petitioners consent thereto.21

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent to
enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear on February 28,
2000 for a mandatory conference following Divinas filing of the complaint on February 14, 2000.

Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as obviously, the act of its
principal extending [Divinas] employment contract necessarily bound it,22

it too is a misapplication, a misapplication of the theory of imputed knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer
Xiong, not the other way around.23 The knowledge of the principal-foreign employer cannot, therefore, be imputed
to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year employment
contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be held solidarily liable for
any of Divinas claims arising from the 2-year employment extension. As the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.24

Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship with its
foreign principal when, after the termination of the original employment contract, the foreign principal directly
negotiated with Divina and entered into a new and separate employment contract in Taiwan. Article 1924 of the New
Civil Code reading

The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with
third persons.

thus applies.

In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of Desistance which
Divina executed in favor of Sunace is rendered unnecessary.

WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of Appeals are
hereby REVERSED and SET ASIDE. The complaint of respondent Divina A. Montehermozo against petitioner
is DISMISSED.

SO ORDERED.
G.R. No. 179469 February 15, 2012

C.F. SHARP & CO. INC. and JOHN J. ROCHA, Petitioners,

vs.
PIONEER INSURANCE & SURETY CORPORATION, WILFREDO C. AGUSTIN and HERNANDO G.
MINIMO,Respondents.

DECISION

PEREZ, J.:

Whether a local private employment agency may be held liable for breach of contract for failure to deploy a seafarer,
is the bone of contention in this case.

Assailed in this petition for review are the Decision1 dated 30 October 2003 and the 29 August 2007 Resolution of
the Court of Appeals in CA-G.R. CV No. 53336 finding petitioners C.F. Sharp Co. Inc. (C.F. Sharp) and John J.
Rocha (Rocha) liable for damages.

Responding to a newspaper advertisement of a job opening for sandblasters and painters in Libya, respondents
Wilfredo C. Agustin and Hernando G. Minimo applied with C.F. Sharp sometime in August 1990. After passing the
interview, they were required to submit their passports, seamans book, National Bureau of Investigation clearance,
employment certificates, certificates of seminars attended, and results of medical examination. Upon submission of
the requirements, a Contract of Employment was executed between respondents and C.F. Sharp. Thereafter,
respondents were required to attend various seminars, open a bank account with the corresponding allotment slips,
and attend a pre-departure orientation. They were then advised to prepare for immediate deployment and to report
to C.F. Sharp to ascertain the schedule of their deployment.

After a month, respondents were yet to be deployed prompting them to request for the release of the documents
they had submitted to C.F. Sharp. C.F. Sharp allegedly refused to surrender the documents which led to the filing of
a complaint by respondents before the Philippine Overseas Employment Administration (POEA) on 21 January
1991.

On 30 October 1991, POEA issued an Order finding C.F. Sharp guilty of violation of Article 34(k) of the Labor Code,
which makes it unlawful for any entity "to withhold or deny travel documents from applicant workers before
departure for monetary or financial considerations other than those authorized under this Code and its implementing
rules and regulations." Consequently, C.F. Sharps license was suspended until the return of the disputed
documents to respondents. POEA likewise declared that it has no jurisdiction to adjudicate the monetary claims of
respondents.

On 10 March 1995, respondents filed a Complaint for breach of contract and damages against C.F. Sharp and its
surety, Pioneer Insurance and Surety Corporation (Pioneer Insurance), before the Regional Trial Court (RTC) of
Pasay City. Respondents claimed that C.F. Sharp falsely assured them of deployment and that its refusal to release
the disputed documents on the ground that they were already bound by reason of the Contract of Employment,
denied respondents of employment opportunities abroad and a guaranteed income. Respondents also prayed for
damages. Pioneer Insurance filed a cross claim against C.F. Sharp and John J. Rocha, the executive vice-president
of C.F. Sharp, based on an Indemnity Agreement which substantially provides that the duo shall jointly and severally
indemnify Pioneer Insurance for damages, losses, and costs which the latter may incur as surety. The RTC
rendered judgment on 27 June 1996 favoring respondents, to wit:

WHEREFORE, plaintiffs causes of action having been proved with a preponderance of evidence, judgment is
hereby ordered as follows:

a. Declaring the non-deployment of plaintiffs and the refusal to release documents as breach of contract;

b. By way of compensatory damages, awarding $450 per month and $439 overtime per month, which should
have been received by plaintiffs from other employers, making a joint and solidary obligation on the part of
the two defendants C.F. Sharp and Pioneer for the period covered by the employment contracts;

c. Ordering each defendant to pay each plaintiff P50,000.00 as moral damages and another P50,000.00
each as exemplary damages;

d. Ordering defendants to share in the payment to plaintiffs of P50,000.00 attorneys fees;

e. Defendants to pay litigation expenses and costs of suit.2

The trial court ruled that there was a violation of the contract when C.F. Sharp failed to deploy and release the
papers and documents of respondents, hence, they are entitled to damages. The trial court likewise upheld the
cause of action of respondents against Pioneer Insurance, the former being the actual beneficiaries of the surety
bond.
On appeal, C.F. Sharp and Rocha raise a jurisdictional issue that the RTC has no jurisdiction over the instant
case pursuant to Section 4(a) of Executive Order No. 797 which vests upon the POEA the jurisdiction over all cases,
including money claims, arising out of or by virtue of any contract involving workers for overseas employment. C.F.
Sharp and Rocha refuted the findings of the trial court and maintained that the perfection and effectivity of the
Contract of Employment depend upon the actual deployment of respondents.

The Court of Appeals upheld the jurisdiction of the trial court by ruling that petitioners are now estopped from raising
such question because they have actively participated in the proceedings before the trial court. The Court of
Appeals further held that since there is no perfected employment contract between the parties, it is the RTC and not
the POEA, whose jurisdiction pertains only to claims arising from contracts involving Filipino seamen, which has
jurisdiction over the instant case.

Despite the finding that no contract was perfected between the parties, the Court of Appeals adjudged C.F. Sharp
and Rocha liable for damages, to wit:

WHEREFORE, the Appeal of C.F. Sharp Co Inc. and John J. Rocha is PARTIALLY GRANTED only insofar as We
declare that there is no breach of contract because no contract of employment was perfected. However, We find
appellants C.F. Sharp Co. Inc. and John J. Rocha liable to plaintiff-appellees for damages pursuant to Article 21 of
the Civil Code and award each plaintiff-appellees temperate damages amounting to P100,000.00, and moral
damages in the increased amount of P100,000.00. The award of exemplary damages and attorneys fees
amounting to P50,000.00, respectively, is hereby affirmed.3

The Court of Appeals limited the liability of Pioneer Insurance to the amount of P150,000.00 pursuant to the
Contract of Suretyship between C.F. Sharp and Pioneer Insurance.

Rocha filed the instant petition on the submission that there is no basis to hold him liable for damages under Article
21 of the Civil Code because C.F. Sharp has signified its intention to return the documents and had in fact informed
respondents that they may, at any time of the business day, withdraw their documents. Further, respondents failed
to establish the basis for which they are entitled to moral damages. Rocha refuted the award of exemplary damages
because the act of requiring respondents to sign a quitclaim prior to the release of their documents could not be
considered bad faith. Rocha also questions the award of temperate damages on the ground that the act of
withholding respondents documents could not be considered "chronic and continuing."4

Right off, insofar as Pioneer Insurance is concerned, the petition should be dismissed against it because the ruling
of the Court of Appeals limited its liability to P150,000.00 was not assailed by Rocha, hence the same has now
attained finality.

Before us, respondents maintain that they are entitled to damages under Article 21 of the Civil Code for C.F. Sharps
unjustified refusal to release the documents to them and for requiring them to sign a quitclaim which would
effectively bar them from seeking redress against petitioners. Respondents justify the award of other damages as
they suffered pecuniary losses attributable to petitioners malice and bad faith.

In his Reply, Rocha introduced a new argument, i.e., that he should not be held jointly liable with C.F. Sharp
considering that the company has a separate personality. Rocha argues that there is no showing in the Complaint
that he had participated in the malicious act complained. He adds that his liability only stems from the Indemnity
Agreement with Pioneer Insurance and does not extend to respondents.

Records disclose that Rocha was first impleaded in the case by Pioneer Insurance. Pioneer Insurance, as surety,
was sued by respondents together with C.F. Sharp. Pioneer Insurance in turn filed a third party complaint against
Rocha on the basis of an Indemnity Agreement whereby he bound himself to indemnify and hold harmless Pioneer
Insurance from and against any and all damages which the latter may incur in consequence of having become a
surety.5 The third party complaint partakes the nature of a cross-claim.

C.F. Sharp, as defendant-appellant and Rocha, as third-party defendant-appellant, filed only one brief before the
Court of Appeals essentially questioning the declaration of the trial court that non-deployment is tantamount to
breach of contract and the award of damages. The Court of Appeals found them both liable for damages. Both C.F.
Sharp and Rocha sought recourse before this Court via a Motion for Extension of Time (To File a Petition for
Review) on 19 September 2007.6 In the Petition for Review, however, C.F. Sharp was noticeably dropped as
petitioner. Rocha maintains essentially the same argument that he and C.F. Sharp were wrongfully adjudged liable
for damages.

It was only in its Reply dated 25 March 2008 that Rocha, through a new representation, suddenly forwarded the
argument that he should not be held liable as an officer of C.F. Sharp. It is too late in the day for Rocha to change
his theory. It is doctrinal that defenses not pleaded in the answer may not be raised for the first time on appeal. A
party cannot, on appeal, change fundamentally the nature of the issue in the case. When a party deliberately adopts
a certain theory and the case is decided upon that theory in the court below, he will not be permitted to change the
same on appeal, because to permit him to do so would be unfair to the adverse party.7 More so in this case, where
Rocha introduced a new theory at the Reply stage. Disingenuousness may even be indicated by the sudden
exclusion of the name of C.F. Sharp from the main petition even as Rocha posited arguments not just for himself
and also in behalf of C.F. Sharp.

The core issue pertains to damages.

The bases of the lower courts award of damages differ. In upholding the perfection of contract between
respondents and C.F. Sharp, the trial court stated that the unjustified failure to deploy and subsequently release the
documents of respondents entitled them to compensatory damages, among others. Differently, the appellate court
found that no contract was perfected between the parties that will give rise to a breach of contract. Thus, the
appellate court deleted the award of actual damages. However, it adjudged other damages against C.F. Sharp for
its unlawful withholding of documents from respondents.

We sustain the trial courts ruling.

On the issue of whether respondents are entitled to relief for failure to deploy them, the RTC ruled in this wise:

The contract of employment entered into by the plaintiffs and the defendant C.F. Sharp is an actionable document,
the same contract having the essential requisites for its validity. It is worthy to note that there are three stages of a
contract: (1) preparation, conception, or generation which is the period of negotiation and bargaining ending at the
moment of agreement of the parties. (2) Perfection or birth of the contract, which is the moment when the parties
come to agree on the terms of the contract. (3) Consummation or death, which is the fulfillment or performance of
the terms agreed upon in the contract.

Hence, it is imperative to know the stage reached by the contract entered into by the plaintiffs and C.F. sharp.
Based on the testimonies of the witnesses presented in this Court, there was already a perfected contract between
plaintiffs and defendant C.F. Sharp. Under Article 1315 of the New Civil Code of the Philippines, it states that:

xxxx

Thus, when plaintiffs signed the contract of employment with C.F. Sharp (as agent of the principal WB Slough)
consequently, the latter is under obligation to deploy the plaintiffs, which is the natural effect and consequence of
the contract agreed by them.8

We agree.

As correctly ruled at the trial, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and
consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the
contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when
the parties agree upon the essential elements of the contract. Consummation occurs when the parties fulfill or
perform the terms agreed upon in the contract, culminating in the extinguishment thereof.9

Under Article 1315 of the Civil Code, a contract is perfected by mere consent and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.10

An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its
terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b) object certain
which is the subject matter of the contract and (c) cause of the obligation.11

We have scoured through the Contract of Employment and we hold that it is a perfected contract of employment.
We reproduce below the terms of the Contract of Employment for easy reference:

WITNESSETH

That the Seafarer shall be employed on board under the following terms and conditions:

1.1 Duration of Contract: 3 month/s

1.2 Position: SANDBLASTER/PAINTER

1.3 Basic Monthly Salary: $450.00 per month

1.4 Living Allowances: $0.00 per month

1.5 Hours of Work: 48 per week

1.6 Overtime Rate: $439.00 per month

 1.7 Vacation Leave with Pay: 30.00 day/s per month on board

The terms and conditions of the Revised Employment Contract for seafarers governing the employment of all
Filipino seafarers approved by the POEA/DOLE on July 14, 1989 under Memorandum Circular No. 41 series of
1989 and amending circulars relative thereto shall be strictly and faithfully observed.

Any alterations or changes, in any part of this Contract shall be evaluated, verified, processed and approved by the
Philippine Overseas Employment Administration (POEA). Upon approval, the same shall be deemed an integral part
of the Standard Employment Contract (SEC) for seafarers.

All claims, complaints or controversies relative to the implementation and interpretation of this overseas employment
contract shall be exclusively resolved through the established Grievance Machinery in the Revised Employment
Contract for seafarers, the adjudication procedures of the Philippine Overseas Employment Administration and the
Philippine Courts of Justice, in that order.

Violations of the terms and conditions of this Contract with its approved addendum shall warrant the imposition of
appropriate disciplinary or administrative sanctions against the erring party.

The Employee hereby certifies that he had received, read or has had explained to him and fully understood this
contract as well as the POEA revised Employment Contract of 1989 and the Collective Bargaining Agreement (CBA)
and/or company terms and conditions of employment covering this vessel and that he is fully aware of and has head
or has had explained to him the terms and conditions including those in the POEA Employment Contract, the CBA
and this contract which constitute his entire agreement with the employer.

The Employee also confirms that no verbal or other written promises other than the terms and conditions of this
Contract as well as the POEA Revised Employment Contract, the CBA and/or company terms and conditions had
been given to the Employee. Therefore, the Employee cannot claim any additional benefits or wages of any kind
except those which have been provided in this Contract Agreement.12

By the contract, C.F. Sharp, on behalf of its principal, International Shipping Management, Inc., hired respondents
as Sandblaster/Painter for a 3-month contract, with a basic monthly salary of US$450.00. Thus, the object of the
contract is the service to be rendered by respondents on board the vessel while the cause of the contract is the
monthly compensation they expect to receive. These terms were embodied in the Contract of Employment which
was executed by the parties. The agreement upon the terms of the contract was manifested by the consent freely
given by both parties through their signatures in the contract. Neither parties disavow the consent they both
voluntarily gave. Thus, there is a perfected contract of employment.

The Court of Appeals agreed with the submission of C.F. Sharp that the perfection and effectivity of the Contract of
Employment depend upon the actual deployment of respondents. It based its conclusion that there was no perfected
contract based on the following rationale:

The commencement of the employer-employee relationship between plaintiffs-appellees and the foreign employer,
as correctly represented by C.F. Sharp requires that conditions under Sec. D be met. The Contract of Employment
was duly "Verified and approved by the POEA." Regrettably, We have painfully scrutinized the Records and find no
evidence that plaintiffs-appellees were cleared for travel and departure to their port of embarkation overseas by
government authorities. Consequently, non-fulfillment of this condition negates the commencement and existence of
employer-employee relationship between the plaintiffs-appellees and C.F. Sharp. Accordingly, no contract between
them was perfected that will give rise to plaintiffs-appellees right of action. There can be no breach of contract when
in the first place, there is no effective contract to speak of. For the same reason, and finding that the award of actual
damages has no basis, the same is hereby deleted.13

The Court of Appeals erred.

The commencement of an employer-employee relationship must be treated separately from the perfection of an
employment contract. Santiago v. CF Sharp Crew Management, Inc.,14 which was promulgated on 10 July 2007, is
an instructive precedent on this point. In said case, petitioner was hired by respondent on board "MSV Seaspread"
for US$515.00 per month for nine (9) months, plus overtime pay. Respondent failed to deploy petitioner from the
port of Manila to Canada. We made a distinction between the perfection of the employment contract and the
commencement of the employer-employee relationship, thus:

The perfection of the contract, which in this case coincided with the date of execution thereof, occurred when
petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as earlier discussed, would have taken place
had petitioner been actually deployed from the point of hire. Thus, even before the start of any employer-employee
relationship, contemporaneous with the perfection of the employment contract was the birth of certain rights and
obligations, the breach of which may give rise to a cause of action against the erring party.15
Despite the fact that the employer-employee relationship has not commenced due to the failure to deploy
respondents in this case, respondents are entitled to rights arising from the perfected Contract of Employment, such
as the right to demand performance by C.F. Sharp of its obligation under the contract.

The right to demand performance was a categorical pronouncement in Santiago which ruled that failure to deploy
constitutes breach of contract, thereby entitling the seafarer to damages:

Respondents act of preventing petitioner from departing the port of Manila and boarding "MSV Seaspread"
constitutes a breach of contract, giving rise to petitioners cause of action. Respondent unilaterally and unreasonably
reneged on its obligation to deploy petitioner and must therefore answer for the actual damages he suffered.

We take exception to the Court of Appeals conclusion that damages are not recoverable by a worker who was not
deployed by his agency. The fact that the POEA Rules are silent as to the payment of damages to the affected
seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions provided for non-
deployment do not end with the suspension or cancellation of license or fine and the return of all documents at no
cost to the worker. They do not forfend a seafarer from instituting an action for damages against the employer or
agency which has failed to deploy him.16

The appellate court could not be faulted for its failure to adhere to Santiago considering that the Court of Appeals
Decision was promulgated way back in 2003 while Santiago was decided in 2007. We now reiterate Santiago and,
accordingly, decide the case at hand.

We respect the lower courts findings that C.F. Sharp unjustifiably refused to return the documents submitted by
respondent. The finding was that C.F. Sharp would only release the documents if respondent would sign a quitclaim.
On this point, the trial court was affirmed by the Court of Appeals. As a consequence, the award by the trial court of
moral damages must likewise be affirmed.

Moral damages may be recovered under Article 2219 of the Civil Code in relation to Article 21. The pertinent
1wphi1

provisions read:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

xxxx

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

xxxx

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.

We agree with the appellate court that C.F. Sharp committed an actionable wrong when it unreasonably withheld
documents, thus preventing respondents from seeking lucrative employment elsewhere. That C.F. Sharp arbitrarily
imposed a condition that the documents would only be released upon signing of a quitclaim is tantamount to bad
faith because it effectively deprived respondents of resort to legal remedies.

Furthermore, we affirm the award of exemplary damages and attorneys fees. Exemplary damages may be awarded
when a wrongful act is accompanied by bad faith or when the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner which would justify an award of exemplary damages under Article 2232 of the
Civil Code. Since the award of exemplary damages is proper in this case, attorneys fees and cost of the suit may
also be recovered as provided under Article 2208 of the Civil Code.17

WHEREFORE, the petition is DENIED. The Decision dated 27 June 1996 of the Regional Trial Court of Pasay City
is REINSTATED. Accordingly, the Decision dated 30 October 2003 of the Court of Appeals is MODIFIED.

SO ORDERED.