Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

170734 May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent. DECISION TINGA, J.: This treats of the Petition for Review1 of the Resolution2 and Decision3 of the Court of Appeals dated 9 December 2005 and 29 September 2005, respectively in CA-G.R. SP No. 85089 entitled Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,4 which ruled that the 13th month pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they rendered within a year. Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of petitioners rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less than a full twelve (12) months. The employees were: 1. Rante Lamadrid 2. Alberto Gamban 3. Rodelio Collantes Sickness Suspension Sickness 27 August 2003 to 27 February 2004 10 June 2003 to 1 July 2003 August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the payment of the same benefits to seven (7) employees who had not served for the full 12 months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary arbitration. The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the contested benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the benefit was a mere error. He also interpreted the phrase "for each year of service" found in the pertinent CBA provisions to mean that an employee must have rendered one year of service in order to be entitled to the full benefits provided in the CBA.5 Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals, imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of prorated payments of leave benefits to covered employees. The appellate court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits

in full to its employees, thereby rejecting the claim that petitioner erred in paying full benefits to its seven employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not presented any evidence in support of its position that it has no voluntary practice of granting the contested benefits in full and without regard to the service actually rendered within the year. It also questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The dispositive portion of the courts decision reads: WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual service rendered within a year.7 Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition. Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, the prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor Code.8 The petition ultimately fails. First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing law. We agree with petitioner on the first issue. The applicable CBA provisions read: ARTICLE XIV-VACATION LEAVE Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every 1st Saturday of December of each year. However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday, the management will give the cash conversion of leaves in November 29. Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid proportionately to his days of service rendered during the year. ARTICLE XV-SICK LEAVE Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to sixteen (16) days of sick leave with pay for each year of service. Unused sick leave shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every 1st Saturday of December of each year. Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or by a licensed physician. Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation. ARTICLE XVI EMERGENCY LEAVE, ETC. Section 1. The Company shall grant six (6) days emergency leave to employees covered by this agreement

and if unused shall be converted into cash and become due and payable on the 1st Saturday of December each year. Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employees legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be deemed in compliance with the law on the same. Section 3. Maternity leaves for married female employees shall be in accordance with the SSS Law plus a cash grant of P1,500.00 per month. xxx ARTICLE XVIII- 13TH MONTH PAY & BONUS Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement. The basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and shall become due and payable every 1st Saturday of December. Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on the 2nd Saturday of December. Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.9 (Underscoring ours) There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat that the CBA provisions did not give any meaning different from that given by the law, thus it should be computed at 1/12 of the total compensation which an employee receives for the whole calendar year. The bonus is also equivalent to the amount of the 13th month pay given, or in proportion to the actual service rendered by an employee within the year. On the second issue, however, petitioner founders. As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.10 The rule, however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary arbitrator. Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus: Name 1. Percival Bernas 2. Cezar Montero 3. Wilson Sayod 4. Nomer Becina Reason Sickness Sickness Sickness Suspension Duration July 1992 to November 1992 21 Dec. 1992 to February 1993 May 1994 to July 1994 1 Sept. 1996 to 5 Oct. 1996

5. Ronnie Licuan 6. Guilbert Villaruel 7. Melandro Moque

Sickness Sickness Sickness

8 Nov. 1999 to 9 Dec. 1999 23 Aug. 2002 to 4 Feb. 2003 29 Aug. 2003 to 30 Sept. 200311

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not constitute voluntary employer practice. It points out that the payments had been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that the accounting department discovered the error "when there were already three (3) employees involved with prolonged absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA."12 It adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion of one employee concerned (per year) vis vis the 170 employees of the company. Petitioner describes the situation as a "clear oversight" which should not be taken against it.13 To further bolster its case, petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced over a long period of time and must be shown to be consistent, deliberate and intentional, which is not what happened in this case. Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate the giving of full benefits regardless of the length of service, proof that the grant has not ripened into company practice. We disagree. Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by the employer.14 The principle of non-diminution of benefits is founded on the Constitutional mandate to "protect the rights of workers and promote their welfare,"15 and "to afford labor full protection."16 Said mandate in turn is the basis of Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations shall be rendered in favor of labor." Jurisprudence is replete with cases which recognize the right of employees to benefits which were voluntarily given by the employer and which ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.17 where an employer had freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law, we held that the act which was favorable to the employees though not conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana,18 we ruled that the employers act of including non-basic benefits in the computation of the 13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,19 the Court ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that said workers had received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA provisions. We held that the employer cannot unilaterally withdraw the existing privilege of commutation or conversion to cash given to said workers, and as also noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers. In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and consistently granting full benefits to its employees regardless of the length of service rendered. True, there were only a total of seven employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years within which a company practice must be exercised in order to constitute voluntary company practice.20 Thus, it can be six (6) years,21three (3) years,22 or even as short as two (2) years.23 Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and emergency leave are computed and paid in full to employees who rendered services to the company for the entire year and proportionately to those employees who rendered service to the company for a period less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto. 6. It was never the intention much less the policy of the management to grant the aforesaid benefits to the employees in full regardless of whether or not the employee has rendered services to the company for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other employees as well.24 In cases involving money claims of employees, the employer has the burden of proving that the employees did receive the wages and benefits and that the same were paid in accordance with law. 25 Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs, such as the names of other employees who did not fully serve for one year and thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom achieved. There must have been other employees who had reported for work less than a full year and who, as a consequence received only prorated benefits. This could have easily bolstered petitioners theory of mistake/error, but sadly, no evidence to that effect was presented. IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 148256 November 17, 2004

ADELINO FELIX, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC) 3RD DIVISION and REPUBLIC ASAHI GLASS CORPORATION, respondents.

DECISION

CARPIO MORALES, J.: From the Court of Appeals Decision1 of May 21, 2001 affirming that of the National Labor Relations Commission which dismissed petitioner Adelino Felix's complaint for illegal dismissal against Republic Asahi Glass Corporation (the company), petitioner comes to this Court on a petition for review on certiorari. Petitioner was hired by the company on October 1, 1980 as a Cadet Engineer. In 1983 he became a supervisor, a position he held until January 1992.2 In January 1992, he was designated as Marketing Officer II, a position at the company's Fabricated Glass Division Marketing (FGD Marketing).3 FGD Marketing promotes market expansion, solicits purchase orders, monitors inventory and update of records, finds sources of automotive laminated glass products, regularly visits customers' warehouse and production line, receives customers' complaints, and initiates the return of vacated wooden crates in customers' warehouses.4 It likewise coordinates with other departments of the company including the Production Planning Control Department for the scheduling of tempered glass production, the Logistics Department for delivery requirements and schedule, and the Credit and Collection Department for establishment of credit lines and terms for new customers.5 Sometime in 1992, petitioner was offered a chance to train and qualify for the position of Assistant Manager but as he was content with his position as Marketing Officer II, he declined and waived the opportunity to the one who was nextin-line.6 As Marketing Officer II of the FGD Marketing, the bulk of petitioner's functions related to sales, which required him to perform his duties away from the principal place of business of the company.7 He handled the accounts of Philippine Automotive Manufacturing Corporation (PAMCOR), Universal Motors Corporation (UMC), Honda Cars Philippines, Inc., and Francisco Motors Corporation (FMC) and reported directly to the Manager of FGD Marketing, Ms. Marilyn Encinares.8 By petitioner's claim, sometime in July 1994, he was asked by certain officers of the company, particularly Ms. Encinares and Mr. Roberto G. Agustin, Assistant Vice President, Manpower Technical Services, to resign and accept a separation package, failing which he would be terminated for loss of confidence.9

Petitioner, however, refused to resign and accept separation benefits, drawing the officers of the company to, by his claim, start harassing him.10 Thus, he was not given work11 and another employee, Mr. Elmer Tacata, was assigned to take over his post and function.12 And one morning, he found on his desk a newspaper clipping of a job opening for a "Tempering Glass Supervisor" in the Middle East.13 Unable to withstand the manner by which he was being treated by the company, he, through his lawyer, warned it by letter of August 16, 1994 about the illegality of its actions. The letter reads: Gentlemen: I am writing in behalf of my client, MR. ADELINO L. FELIX, your Marketing Officer, Fabricated Glass Division. It appears that you have been unlawfully compelling him to voluntarily resign with a separation package otherwise you will terminate him due to alleged loss of trust and confidence. I have also been informed that no formal charges have been officially furnished him which constitute[s] your alleged grounds for termination. My client is also being subjected to undue mental torture because you deliberately refuse to assign any tasks to him these past few weeks despite his being always present at work. I need not tell you that what you have been doing to my client is illegal and malicious. You are hereby put on notice that unless the necessary rectifications are made to the wrong done to my client, we shall file the necessary legal action/s against you for the redress of his grievances, impleading in the intended case/s your responsible officers.14 Upon receipt of petitioner's letter also on August 16, 1994, the company transferred him from his position as Marketing Officer II of the FGD Marketing to Supervisor IV of the Technical Services Division (TSD).15 And replying to petitioner's letter, the company emphasized that given the series of irresponsible and inefficient acts he had committed which justified the initiation of an administrative proceeding against him,16 it instead offered him a separation package upon his resignation in order to give him an opportunity to opt for a graceful exit17. The company went on to declare that it had finally decided to initiate disciplinary action against him in view of, in the main, his irresponsibility in sending the August 16, 1994 letter which pre-empted management prerogatives.18 Thus the company, by letter of September 27, 1994, directed petitioner to explain in writing within 48 hours from receipt thereof why his services should not be terminated for loss of trust and confidence, viz: Dear Mr. Felix: At the outset, you are reminded that you held a position of trust and confidence as a Marketing Officer of the Fabricated Glass Division. On various dates and occasions, you breached the trust reposed in you by the Management in that you committed, among other(s), the following: 1. Absence Without Leave (AWOL) for six (6) working days from May 29 to June 5, 1992. 2. Lingering unnecessarily or killing time at the place of customers. Worse, engaging employees and officers of [the] customers in argument[s] and quarrel[s] to the extent that you were interfering in their functions and antagonizing them. 3. Going to or visiting UMC (Mandaluyong) only when called upon to do so. 4. Always not attending the regular morning meetings at FGD Production Office.

The over-all assessment of customers you have dealt with is that you are an irresponsible and ineffective representative of the Company. As a customary management functions (sic), and considering that you are an officer, your case has been discussed, and necessarily your transfer or even your voluntary resignation and other probabilities were mentioned unofficially and informally. In other words, by your own acts, you constrained Management to evaluate you at this stage. Management then expected you to act as an officer. Instead you wrote that letter dated 12 August 1994 and followed by the letter of your lawyer dated 16 August 1994. These letters are both premature and designed to pre-empt Management prerogative. This merely confirms your irresponsibility. Your action is unworthy of being a trusted officer of the company. Management has come to the conclusion that you can no longer be vested with functions that are central to the effective operations of the Company. In short, it has lost its confidence in you. You are hereby directed to explain in writing within 48 hours from receipt hereof why your services should not be terminated for loss of trust and confidence and therefore, for cause. You may engage the advice of your counsel, if you desire, in preparing your explanation. Your failure to submit your explanation in writing within the period required shall be construed as a waiver on your part and the Management will proceed to act accordingly.19 (Underscoring and emphasis supplied) By letter of September 28, 1994, petitioner denied the charges against him. He explained that his absence for 6 days from May 29 to June 5, 1992 was occasioned by some problems at home which he had to personally attend to, information for which absence he relayed to his office; and that upon reporting for work, he submitted a written explanation to Ms. Encinares who accepted it as shown by her signature on his admission slip.20 On the charge that he was "lingering unnecessarily or killing time at the place of customers," he, denying the same, proffered that he valued his work and would not do anything to jeopardize his employment in the company which had given him a good source of income for the past 14 years.21 Likewise denying the charge that he visited the UMC plant only when called upon to do so, petitioner proffered that he made it a point to regularly visit the plant, and when technical problems arose, he attended to them immediately. 22 On the charge that he had not attended the daily 3 minutes meeting23 at the FGD Production Office, petitioner, denying the same, explained that the Warehouse and Production Department preferred to talk to only one person and if there were matters or concerns that needed to be addressed by the FGD Marketing, he coursed them through Engr. Raymond Santayana who was chosen to act as the representative during those meetings.24 Petitioner attributed the company's harassment against him to his being a member of the supervisory union then being formed.25 The company subsequently terminated petitioner's services for loss of trust and confidence by letter of September 30, 1994 reading: Dear Mr. Felix: We received on 29 September your letter explanation dated 28 September 1994. A perusal of your letter-explanation shows that you have not actually clarified much less satisfied management why it should not lose its trust and confidence reposed in you as an officer of the company. You did not even respond to the

finding of Management that you were "irresponsible and ineffective representative of the Company" which is disappointing to say the least. It is amusing but also disappointing that you, like an ordinary rank and filer (sic), is now trying to hide under the skirt of "unionism" to cover your shortcomings. We are not aware of the formation of any such supervisory union. The stand of the Company in unionism is clear. Unionism has nothing to do with your case and you know that. We regret to advise you therefore that the Company is terminating your services for loss of trust and confidence and therefore for cause effective upon receipt hereof. You are further directed to turn over all papers, documents and other property of the Company to your department head. For your compliance.26 (Underscoring supplied) Petitioner thus lodged on October 10, 1994 a complaint for illegal dismissal.27 Petitioner claims that he was terminated because of his active participation in the formation of a supervisory union, and that the so-called "due process" afforded to him was a sham because the company had decided to terminate his employment before his receipt of the September 27, 1994 show-cause letter.28 To support his claim, petitioner referred to a circular dated August 15, 1994 sent by the company to its clients, informing them that petitioner had been relieved of his position as Marketing Officer II effective August 1, 1994.29 On the other hand, the company denied that it harassed petitioner and that he was dismissed for his union activities,30 it maintaining that aside from the 4 grounds it stated in its September 27, 1994 show-cause letter to him, he had incurred frequent absences as early as in 1991 which were not due to emergency reasons but to his personal endeavors such as attending to his duties as barangay kagawad, or to his "palayan" or piggery or "palaisdaan."31 Additionally, it complained that petitioner did not utilize company time effectively as he would go home directly after making calls on customers even if there remained 3 or 4 hours of company time.32 To substantiate its claim that petitioner was dismissed for cause, the company submitted the following documentary evidence. 1. A letter sent to petitioner by M.S. Encinares dated June 16, 1992 regarding the six (6) days vacation leave from May 29 to June 5, 1992.33 2. A memorandum dated March 11, 1994 prepared by M.S. Encinares regarding petitioner's absence in the daily three (3) minute meeting of the Marketing Associates and Staff with the Production Group.34 3. A report dated August 18, 1994 submitted by M.S. Encinares on a meeting held by Francisco Motors Corp. (FMC) with its suppliers including Republic Glass Asahi Company, citing the report35 of Elmer Tacata, the company's representative to the meeting, that FMC complained of delayed deliveries and irregular visits of the company representative.36 4. A report dated September 19, 1994 prepared by N.B. Galpa on his trip to Nissan Motors, FMC, Universal Motors, PAMCOR and Honda Cars Philippines about some of its products being rejected and returned due to scratches, distortion, "chipping and no-hole," mispacking and handling procedure.37 5. Affidavit of M.S. Encinares dated November 15, 1995 on petitioner's work ethics and behavior.38 Relying on the documentary evidence submitted by the company, the Labor Arbiter, by Decision of October 16, 1996, dismissed petitioner's complaint in this wise:

In the present case, sufficient factual basis has been established to justify the dismissal of complainant on the ground of loss of trust and confidence, Complainant's six-day absence without official leave had been properly documented by the Company in a letter dated 16 June 1992 (Annex "B", Respondent's Position Paper). Complainant's negative attitude towards the daily 3-minute meetings among the FGD Staff was likewise documented in a memorandum dated 11 March 1994 prepared by M.S. Encinares (Annex "C", Position Paper). His inefficiency and lack of sense of responsibility in relation to customer service have likewise been documented in several inter-office reports on problems and complaints from accounts handled by complainant. In a report dated 18 August 1994 submitted by M.S. Encinares regarding the account of Francisco Motors Corporation ("FMC") which was the responsibility of complainant, FMC's complaints about delayed deliveries and irregular visits of RAGC representative were put on record (Annex "B" Reply Position Paper). The aforementioned report dated 18 August 1994 is based on the minutes of a meeting of suppliers which includes the Company, held on 17 August 1994 called by FMC to discuss said problems of delayed deliveries and irregular visits (Annex "C", Reply Position Paper). As to the other accounts handled by complainant, complaints on these accounts, regarding rejected glasses and returns due to scratches, distortion, chipping and no-hole, mispacking and handling procedure, were documented in a report dated 19 September 1994 prepared by N.B. Galpa (Annex "D", Reply Position Paper). The said reports were further substantiated by Marilyn S. Encinares, Manager, Fabricated Glass DivisionMarketing in her affidavit executed on 15 November 1995.39 (Underscoring supplied) On appeal, the National Labor Relations Commission (NLRC), quoting extensively from the Decision of the Labor Arbiter, dismissed petitioner's complaint for lack of merit by Decision40 of March 20, 1998. Petitioner moved for reconsideration of the decision, but it was denied in a resolution41 of May 7, 1998. Undaunted, petitioner filed a petition for certiorari with this Court which referred it to the Court of Appeals in accordance with St. Martin Funeral Homes v. NLRC42 By Decision of May 21, 2001, the Court of Appeals upheld the dismissal of petitioner's complaint, it holding that petitioner performed the function of a salesman and in the position he was holding, loss of trust and confidence is a valid cause for dismissal. Hence, the present petition. The issue boils down to whether the company's loss of trust and confidence in petitioner is founded on facts established by substantial and competent evidence.43 The petition is impressed with merit. Undoubtedly, the rule is that high respect is accorded to the findings of fact of quasi-judicial agencies, more so in the case at bar where both the Labor Arbiter and the NLRC share the same findings. The rule is not, however, without exceptions one of which is when the findings of fact of the labor officials on which the conclusion was based are not supported by substantial evidence.44 The same holds true when it is perceived that far too much is concluded, inferred or deduced from bare facts adduced in evidence.45 It is noted that petitioner's appeal to the NLRC raised serious errors in the findings of fact of the Labor Arbiter. The NLRC failed, however, to address them, it rendering an 8-page decision 7 pages of which quoted in full the decision of the Labor Arbiter. Unlike in other cases where the complainant has the burden of proof to discharge its allegations, the burden of establishing facts as bases for an employer's loss of confidence in an employee facts which reasonably generate belief by the employer that the employee was connected with some misconduct and the nature of his participation therein is such as to render him unworthy of trust and confidence demanded of his position is on the employer.46 Should the

employer fail in discharging this onus, the dismissal of the employee cannot be sustained. This is consonant with the constitutional guarantee of security of tenure, as implemented in what is now Sec. 279 of the Labor Code, as amended.47 The employer's evidence, although not required to be of such degree as that required in criminal cases, i.e., proof beyond reasonable doubt, must be substantial it must clearly and convincingly establish the facts upon which loss of confidence in the employee may be made to rest.48 In the case at bar, the company failed to discharge this burden. The company complained of petitioner having incurred 6 days of absence without leave from May 29 to June 5, 1992. This complaint had earlier been the subject of a letter49 addressed to petitioner dated June 16, 1992 wherein Ms. Encinares advised him that communicating through the telephone of a leave of absence is inappropriate. While petitioner's written explanation for his absence discloses a conflict of interest between his employment with the company and his operation of his rice plantation, he therein made a commitment to improve his over-all performance and reporting habits, drawing the company to conditionally approve his 6 days leave and charge the same to his vacation leave.50 The records do not disclose that petitioner incurred any further absences without leave. More importantly, except for that incident in 1992, the company failed to show that there were instances during the 14 years that petitioner had been employed that he incurred absences without leave. The propriety of petitioner's 6 days of absence having priorly been threshed out by the parties, the company may no longer ask petitioner to, more than two years later by letter of September 27, 1994, re-explain his absence and use the same to justify his dismissal. As for the charge that petitioner had not been attending the daily 3 minutes meeting of the FGD Marketing, the interoffice correspondence dated March 11, 1994 shows that "the deliberate failure of [petitioner] in attending the meeting could be attributed to that argument between [him and] AAN (A.A. Naval) . . . that occurred last January 28, 1994 over the present system of PAMCOR in handling local development of glass components."51 It bears noting, however, that the company took no action on the matter, nor warned petitioner that his attendance in the meetings was mandatory. It was several months later or on September 27, 1994 when the company first called his attention to it and used it as a basis for dismissing him. It is thus deemed to have overlooked his absence in the daily meetings. A company is expected to call the attention of an employee to any undesirable act or omission within a reasonable time. In the case at bar, the failure of the company to timely take any disciplinary action against petitioner undermines its claim that petitioner's continued absence in the meetings rendered him unfit for continued employment with it. That the company hastily dismissed petitioner is clearly apparent. As petitioner argued, he was not given adequate time to prepare for his defense, but was peremptorily dismissed, even without any formal investigation or hearing.52 It is settled that where the employee denies the charges against him, a hearing is necessary to thresh out any doubt. The failure of the company to give petitioner, who denied the charges against him, the benefit of a hearing and an investigation before his termination constitutes an infringement of his constitutional right to due process. So Roche (Philippines) v. National Labor Relations Commission53 instructs: In denying that they have deprived the right of Villareal to due process, the petitioners pointed out that he was informed of the charges against him and he was given the opportunity to explain his side. Citing Associated Citizen's Bank v. Ople [103 SCRA 130 (1981)], the petitioners attempted to substantiate their argument by mentioning that this Court had previously done away with the holding of a hearing in order to comply with the constitutional requirement of due process.

However, the circumstances obtaining in the above-cited case bears no resemblance to the case at bar. The former contemplates a situation where the employee admits his guilt and all his admissions are corroborated by documentary evidence. Such is not the case in the present controversy where Villareal never admitted the commission of the offense he was being charged of. The records do not indubitably show that Villareal was actually in Cebu City on that day. A hearing was, therefore, necessary to thresh out all doubts as to the conflicting allegations of De la Cruz and Villareal. The failure of petitioner to give private respondent the benefit of a hearing and an investigation before his termination constitutes an infringement of his constitutional right to due process of law [BLTB Bus Co. v. Court of Appeals, 71 SCRA 470 (1976); see also Batas Pambansa Blg. 130].54 (Underscoring supplied) As for the other two charges that petitioner as a field officer unnecessarily lingered or killed time at the place of clients and engaged them in arguments and quarrels, and that he visited UMC (Mandaluyong) only when called upon to do so the company failed to substantiate the same. Except for the mere allegation of petitioner's manager55 that its clients have been complaining of petitioner's work attitude and performance, there is no concrete evidence to show the same. The inter-office memoranda relied upon by the Labor Arbiter were accomplished only after petitioner's counsel sent the August 16, 1994 cautioning the company that petitioner could not be legally compelled to voluntarily resign and accept a separation package. It bears emphasis that the matter of determining whether the cause for dismissing an employee is justified on the ground of loss of confidence cannot be left entirely to the employer. Impartial tribunals do not rely only on the statement made by the employer that there is "loss of confidence" unless duly proved or sufficiently substantiated.56 The report57 of Ms. Encinares dated August 18, 1994, citing a report58 of Elmer Tacata, that FMC had been complaining about lack of visiting company representative and delayed deliveries for the month of August cannot be attributed to petitioner. As explained by petitioner, during the later part of July 1994, right after he refused to resign, he was not given work. He could not thus transact business with clients since another employee, Tacata, was assigned to take over his post and function.59 In his report, Tacata stated that "FMC noted that some suppliers fail to obtain their Delivery Authorization causing delays in their deliveries."60 He hastened to add, however, that the suppliers who attended the FMC meeting included other companies like Transworld Rubber and UE Automotive Manufacturing.61 Tacata's statement that "Arnel Deunida [Supply Superintendent of FMC] requested that our customer service and QA Staffs resume their regular visits to FMC to inspect and evaluate glass rejects"62 in fact gives credence to the allegation of petitioner that he regularly visited his client and it was only in late July 1994 that he could no longer do so, Tacata having taken over his position. Instead of exercising prudence in examining the evidence, the Labor Arbiter hastily attributed fault to petitioner, viz: xxx As to the other accounts handled by complainant, complaints on these accounts, regarding rejected glasses and returns due to scratches, distortion, chipping and no-hole, mispacking and handling procedure, were documented in a report dated 19 September 1994 prepared by N.B. Galpa (Annex "D" Reply Position Paper).63 Nowhere, however, in the report64 submitted by N.B. Galpa on his trip to the companies whose accounts were formerly handled by petitioner (Nissan Motors, FMC, Universal Motors, PAMCOR and Honda Cars) is it shown that petitioner was directly responsible for the rejected or rejected other glasses and items. The report shows that the alleged defects in the returned items, like those returned to PAMCOR, consisted of scratches 12 pcs., distortion 2, chipping 1, and no hole

 1; for Honda Cars, deep scratch (WS) 1 pc., no bolt (SR3 FD) 1 pc., broken (SR4 FD) 1pc.65 These defects are not, however, uncommon in a business dealing in glasses. To attribute these product returns to petitioner and conclude that he is inefficient and irresponsible is unfounded. For as of September 19, 1994, when N.B. Galpa submitted his report, petitioner had long been divested of responsibility over these accounts. In any event, even if the returned items were part of those previously delivered during the period when petitioner was still handling those accounts, the complaints pertain to the quality of the goods delivered or defects caused by mishandling. These complaints should then have been properly directed to the Production Planning and Control Department or the Logistics Department which were tasked to manage product quality and delivery. As admitted by the company, petitioner's function at the FGD Marketing was confined to sales. That the N.B. Galpa report66 which was accomplished a month after petitioner was officially transferred from the FGD Marketing to the Technical Services Division, still contained a complaint by FMC that the company "has not been in constant contact with FMC, and in fact [was] ignoring [its] request to settle the issue about F-1300 RQ (deep double curve, but within Specs). . ."67 indicates that it was directed against the company. Such notwithstanding, the Labor Arbiter regarded all the complaints contained in the report as proof of petitioner's inefficiency and irresponsibility. Absent any standard of performance upon which petitioner was rated on the job, loss of confidence has no basis. Ms. Encinares' accusatory affidavits and inter-office memoranda are then not only self-serving but baseless. Accusation cannot take the place of proof.68 At all events, even if all the allegations-charges set forth in the September 27, 1994 letter of the company to petitioner are true, they are not of such nature which merit the penalty of dismissal, given petitioner's service for 14 years. Dismissal is unduly harsh and grossly disproportionate to the charges. This rule on proportionality that the penalty imposed should be commensurate to the gravity of his offense has been observed in a number of cases.69 In labor-management relations, there can be no higher penalty than dismissal from employment. Dismissal severs employment ties and could well be the economic death sentence of an employee. Dismissal prejudices the socioeconomic well being of the employee's family and threatens the industrial peace. Due to its far reaching implications, our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes. The overly concern of our laws for the welfare of employees is in accord with the social justice philosophy of our Constitution.70 (Underscoring supplied) While Article 282 of the Labor Code provides that an employer may terminate an employee based on fraud or willful breach of the trust reposed in him by his employer or duly authorized representative, loss of trust and confidence as a just cause for dismissal was never intended to provide employers with a carte blanche for terminating employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given imprimatur by this Court, could readily reduce to barren the constitutional guarantee of security of tenure.71 As explained in Dela Cruz v. NLRC:72 It is of course settled that an employee may terminate the services of an employee due to loss of trust and confidence. However, the loss must be based not on ordinary breach by the latter of the trust reposed in him by the former, but, in the language of Article 28[2]c of the Labor Code, on willful breach. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. Elsewhere stated, it must rest on substantial grounds and not on the employer's arbitrariness, whims, caprice or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated; nor should it appear as a mere afterthought to justify earlier action taken in bad faith or a subterfuge for causes which are improper, illegal of unjustified. It has never been intended to afford an occasion for

abuse because of its subjective nature. There must therefore be an actual breach of duty committed by the employee which must be established by substantial evidence.73 (Citations omitted; Emphasis and underscoring supplied) There being no basis in law or in fact justifying petitioner's dismissal on the basis of loss of trust and confidence, his dismissal was illegal. WHEREFORE, the petition is GRANTED. The challenged decision of the appellate court is hereby SET ASIDE and a new one entered: (1) DECLARING illegal and void petitioner's dismissal from the service of the company, and (2) ORDERING the company to pay petitioner full back wages from the time he was dismissed from the service until the finality of this decision; and separation pay, equivalent to one month salary for every year of service, computed from the time petitioner was first employed and until the finality of this decision, reinstatement being no longer possible due to strained relations of the parties. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 156515 October 19, 2004

CHINA BANKING CORPORATION, petitioner, vs. MARIANO M. BORROMEO, respondent. DECISION CALLEJO, SR., J.: Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking the reversal of the Decision1 dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365, remanding to the Labor Arbiter for further hearings the complaint for payment of separation pay, mid-year bonus, profit share and damages filed by respondent Mariano M. Borromeo against the petitioner Bank. Likewise, sought to be reversed is the appellate courts Resolution dated January 6, 2003, denying the petitioner Banks motion for reconsideration. The factual antecedents of the case are as follows: Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager assigned at the latters Regional Office in Cebu City. He then had the rank of Manager Level I. Subsequently, the respondent was laterally transferred to Cagayan de Oro City as Branch Manager of the petitioner Banks branch thereat. For the years 1989 and 1990, the respondent received a "highly satisfactory" performance rating and was given the corresponding profit sharing/p>erformance bonus. From 1991 up to 1995, he consistently received a "very good" performance rating for each of the said years and again received the corresponding profit sharing/p>erformance bonus. Moreover, in 1992, he was promoted from Manager Level I to Manager Level II. In 1994, he was promoted to Senior Manager Level I. Then again, in 1995, he was promoted to Senior Manager Level II. Finally, in 1996, with a "highly satisfactory" performance rating, the respondent was promoted to the position of Assistant Vice-President, Branch Banking Group for the Mindanao area effective October 16, 1996. Each promotion had the corresponding increase in the respondents salary as well as in the benefits he received from the petitioner Bank. However, prior to his last promotion and then unknown to the petitioner Bank, the respondent, without authority from the Executive Committee or Board of Directors, approved several DAUD/BP accommodations amounting toP2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety. DAUD/BP is the acronym for checks "Drawn Against Uncollected Deposits/Bills Purchased." Such checks, which are not sufficiently funded by cash, are generally not honored by banks. Further, a DAUD/BP accommodation is a credit accommodation granted to a few and select bank clients through the withdrawal of uncollected or uncleared check deposits from their current account. Under the petitioner Banks standard operating procedures, DAUD/BP accommodations may be granted only by a bank officer upon express authority from its Executive Committee or Board of Directors. As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7 PCIB checks and 3 UCPB checks) of various dates amounting to P2,441,375 were returned unpaid from September 20, 1996 to October 17, 1996. Each of the returned checks was stamped with the notation "Payment Stopped/Account Closed."

On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks senior management requesting for the grant of a P2.4 million loan to Maniwan. The memorandum stated that the loan was "to regularize/liquidate subjects (referring to Maniwan) DAUD availments." It was only then that the petitioner Bank came to know of the DAUD/BP accommodations in favor of Maniwan. The petitioner Bank further learned that these DAUD/BP accommodations exceeded the limit granted to clients, were granted without proper prior approval and already past due. Acting on this information, Samuel L. Chiong, the petitioner Banks First Vice- President and Head-Visayas Mindanao Division, in his Memorandum dated November 19, 1996 for the respondent, sought clarification from the latter on the following matters: 1) When DAUD/BP accommodations were allowed, what efforts, if any, were made to establish the identity and/or legitimacy of the alleged broker or drawers of the checks accommodated? 2) Did the branch follow and comply with operating procedure which require that all checks accommodated for DAUD/BP should be previously verified with the drawee bank and history if not outright balances determined if enough to cover the checks? 3) How did the accommodations reach P2,441,375.00 when our records indicate that the borrowers B/p>-DAUD line is only for P500,000.00? When did the accommodations start exceeding the limit of P500,000.00 and under whose authority? 4) When did the accommodated checks start bouncing? 5) What is the status of these checks now and what has the branch done so far to protect/ensure collectibility of the returned checks? 6) What about client Joel Maniwan and surety Edmund Ramos, what steps have they done to pay the checks returned?2 In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing queries in seriatim and explained, thus: 1. None 2. No 3. The accommodations reach P2.4 million upon the request of Mr. Edmund Ramos, surety, and this request was subsequently approved by undersigned. The excess accommodations started in July 96 without higher management approval. 4. Checks started bouncing on September 20, 1996. 5. Checks have remained unpaid. The branch sent demand letters to Messrs. Maniwan and Ramos and referred the matter to our Legal Dept. for filing of appropriate legal action. 6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention to settle by Feb. 1997. Justification for lapses committed (Item nos. 1 to 3). The account was personally endorsed and referred to us by Mr. Edmund Ramos, Branch Manager of Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA account was opened jointly as &/or (Maniwan &/or Ramos). Mr. Ramos gave us his full assurance that the checks that we intend to purchase are the same drawee that Metrobank has been purchasing for the past one (1) year already. He even disclosed that these checks were verified by his own branch accountant and that Mr. Maniwans loan account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin

of CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan forP2.5MM. Corollary to this, Mr. Ramos applied for a loan with us mortgaging his house, lot and duplex with an estimated market value of P4.508MM. The branch, therefore, is not totally negligent as officer to officer bank checking was done. In fact, it is also for the very same reason that other banks granted DAUD to subject account and, likewise, the checks returned unpaid, namely: Solidbank Allied Bank Far East Bank MBTC P1.8 Million .8 2.0 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further to this, undersigned conferred with the acting BOH VSYap if these checks are legitimate 3rd party checks. On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped by a broker in the total amount of P10.00 Million. Undersigned accepts full responsibility for committing an error in judgment, lapses in control and abuse of discretion by relying solely on the word, assurance, surety and REM of Mr. Edmund Ramos, a friend and a co-bank officer. I am now ready to face the consequence of my action.3 In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign from the petitioner Bank and apologized "for all the trouble I have caused because of the Maniwan case."4 The respondent, however, vehemently denied benefiting therefrom. In his Letter dated April 30, 1997, the respondent formally tendered his irrevocable resignation effective May 31, 1997.5 In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the petitioner Banks Senior Vice-President and Head-Branch Banking Group, informed the former that his approval of the DAUD/BP accommodations in favor of Maniwan without authority and/or approval of higher management violated the petitioner Banks Code of Ethics. As such, he was directed to restitute the amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the petitioner Bank. However, in view of his resignation and considering the years of service in the petitioner Bank, the management earmarked only P836,637.08 from the respondents total separation benefits or pay. The memorandum addressed to the respondent stated: After a careful review and evaluation of the facts surrounding the above case, the following have been conclusively established: 1. The branch granted various BP/DAUD accommodations to clients Joel Maniwan/Edmundo Ramos in excess of approved lines through the following out-of-town checks which were returned for the reason "Payment Stopped/Account Closed": 1. PCIB Cebu Check No. 86256 P251,816.00 2. PCIB Cebu Check No. 86261 235,880.00 3. PCIB Cebu Check No. 8215 241,443.00 4. UCPB Tagbilaran Check No. 277,630.00

5. PCIB Bogo, Cebu Check No. 6117 267,418.00 6. UCPB Tagbilaran Check No. 216070 197,467.00 7. UCPB Tagbilaran Check No. 216073 263,920.00 8. PCIB Bogo, Cebu Check No. 6129 253,528.00 9. PCIB Bogo, Cebu Check No. 6122 198,615.00 10. PCIB Bogo, Cebu Check No. 6134 253,658.00 2. The foregoing checks were accommodated through your approval which was in excess of your authority. 3. The branch failed to follow the fundamental and basic procedures in handling BP/DAUD accommodations which made the accommodations basically flawed. 4. The accommodations were attended by lapses in control consisting of failure to report the exception and failure to cover the account of Joel Maniwan with the required Credit Line Agreement. Since the foregoing were established by your own admissions in your letter explanation dated 5 December 1996, and the Audit Report and findings of the Region Head, Management finds your actions in violation of the Banks Code of Ethics: Table 6.2., no. 1: Compliance with Standard Operating Procedures - "Infraction of Bank procedures in handling any bank transactions or work assignment which results in a loss or probable loss." Table 6.3., no. 6: Proper Conduct and Behavior "Willful misconduct in the performance of duty whether or not the bank suffers a loss," and/or Table 6.5., no. 1: Work Responsibilities "Dereliction of duty whether or not the Bank suffers a loss," and/or Table 6.6., no. 2: Authority and Subordination "Failure to carry out lawful orders or instructions of superiors." Your approval of the accommodations in excess of your authority without prior authority and/or approval from higher management is a violation of the above cited Rules. In view of these, you are directed to restitute the amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the Bank as your proportionate share. However, in light of your voluntary separation from the Bank effective May 31, 1997, in view of the years of service you have given to the Bank, management shall earmark and segregate only the amount of P836,637.08 from your total separation benefits/p>ay. The Bank further directs you to fully assist in the effort to collect from Joel Maniwan and Edmundo Ramos the sums due to the Bank.6 In the Letter dated May 26, 1997 addressed to the respondent, Remedios Cruz, petitioner Banks Vice-President of the Human Resources Division, again informed him that the management would withhold the sum of P836,637.08 from his separation pay, mid-year bonus and profit sharing. The amount withheld represented his proportionate share in the

accountability vis--vis the DAUD/BP accommodations in favor of Maniwan. The said amount would be released upon recovery of the sums demanded from Maniwan in Civil Case No. 97174 filed against him by the petitioner Bank with the Regional Trial Court in Cagayan de Oro City. Consequently, the respondent, through counsel, made a demand on the petitioner Bank for the payment of his separation pay and other benefits. The petitioner Bank maintained its position to withhold the sum ofP836,637.08. Thus, the respondent filed with the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the complaint for payment of separation pay, mid-year bonus, profit share and damages against the petitioner Bank. The parties submitted their respective position papers to the Labor Arbiter. Thereafter, the respondent filed a motion to set case for trial or hearing. Acting thereon, the Labor Arbiter, in the Order dated January 29, 1999, denied the same stating that: ... This Branch views that if complainant finds the necessity to controvert the allegations in the respondents pleadings, then he may file a supplemental position paper and adduce thereto evidence and additional supporting documents, the soonest possible time. All the evidence will be evaluated by the Branch to determine whether or not a clarificatory hearing shall be conducted.7 On February 26, 1999, the Labor Arbiter issued another Order submitting the case for resolution upon finding that he could judiciously pass on the merits without the necessity of further hearing. On even date, the Labor Arbiter promulgated the Decision8 dismissing the respondents complaint. According to the Labor Arbiter, the respondent, an officer of the petitioner Bank, had committed a serious infraction when, in blatant violation of the banks standard operating procedures and policies, he approved the DAUD/BP accommodations in favor of Maniwan without authorization by senior management. Even the respondent himself had admitted this breach in the letters that he wrote to the senior officers of the petitioner Bank. The Labor Arbiter, likewise, made the finding that the respondent offered to assign or convey a property that he owned to the petitioner Bank as well as proposed the withholding of the benefits due him to answer for the losses that the petitioner Bank incurred on account of unauthorized DAUD/BP accommodations. But even if the respondent had not given his consent, the Labor Arbiter held that the petitioner Banks act of withholding the benefits due the respondent was justified under its Code of Ethics. The respondent, as an officer of the petitioner Bank, was bound by the provisions of the said Code. Aggrieved, the respondent appealed to the National Labor Relations Commission. After the parties had filed their respective memoranda, the NLRC, in the Decision dated October 20, 1999, dismissed the appeal as it affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC preliminarily ruled that the Labor Arbiter committed no grave abuse of discretion when he decided the case on the basis of the position papers submitted by the parties. On the merits, the NLRC, like the Labor Arbiter, gave credence to the petitioner Banks allegation that the respondent offered to pledge his property to the bank and proposed the withholding of his benefits in acknowledgment of the serious infraction he committed against the bank. Further, the NLRC concurred with the Labor Arbiter that the petitioner Bank was justified in withholding the benefits due the respondent. Being a responsible bank officer, the respondent ought to know that, based on the petitioner Banks Code of Ethics, restitution may be imposed on erring employees apart from any other penalty for acts resulting in loss or damage to the bank. The decretal portion of the NLRC decision reads: WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal is Dismissed for lack of merit. SO ORDERED.9

The respondent moved for a reconsideration of the said decision but the NLRC, in the Resolution of December 20, 1999, denied his motion. The respondent then filed a petition for certiorari with the Court of Appeals alleging that the NLRC committed grave abuse of discretion when it affirmed the findings and conclusions of the Labor Arbiter. He vehemently denied having offered to pledge his property to the bank or proposed the withholding of his separation pay and other benefits. Further, he argued that the petitioner Bank deprived him of his right to due process because it unilaterally imposed the penalty of restitution on him. The DAUD/BP accommodations in favor of Maniwan allegedly could not be considered as a "loss" to the bank as the amounts may still be recovered. The respondent, likewise, maintained that the Labor Arbiter should not have decided the case on the basis of the parties position papers but should have conducted a full-blown hearing thereon. On July 19, 2002, the CA rendered the Decision10 now being assailed by the petitioner Bank. The CA found merit in the respondents contention that he was deprived of his right to due process by the petitioner Bank as no administrative investigation was conducted by it prior to its act of withholding the respondents separation pay and other benefits. The respondent was not informed of any charge against him in connection with the Maniwan DAUD/BP accommodations nor afforded the right to a hearing or to defend himself before the penalty of restitution was imposed on him. This, according to the appellate court, was contrary not only to the fundamental principle of due process but to the petitioner Banks Code of Ethics as well. The CA further held that the Labor Arbiter, likewise, failed to afford the respondent due process when it denied his motion to set case for trial or hearing. While the authority of the Labor Arbiter to decide a case based on the parties position papers and documents is indubitable, the CA opined that factual issues attendant to the case, including whether or not the respondent proposed the withholding of his benefits or pledged the same to the petitioner Bank, necessitated the conduct of a full-blown trial. The appellate court explained that: Procedural due process, as must be remembered, has two main concerns, the prevention of unjustified or mistaken deprivation and the promotion of participation and dialogue by affected individuals in the decision-making process. Truly, the magnitude of the case and the withholding of Borromeos property as well as the willingness of the parties to conciliate, make a hearing imperative. As manifested by the bank, it did not contest Borromeos motion for hearing or trial inasmuch as the bank itself wanted to fully ventilate its side.11 Accordingly, the CA set aside the decision of the NLRC and ordered that the records of the case be remanded to the Labor Arbiter for further hearings on the factual issues involved. The petitioner Bank filed a motion for reconsideration of the said decision but the CA, in the assailed Resolution of January 6, 2003, denied the same as it found no compelling ground to warrant reconsideration.12 Hence, its recourse to this Court alleging that the assailed CA decision is contrary to law and jurisprudence in that: I. THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE NATIONAL LABOR RELATIONS COMMISSION ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD HAVE BEEN ACCORDED RESPECT AND FINALITY BY THE COURT OF APPEALS IN ACCORDANCE WITH GOVERNING JURISPRUDENCE. II. AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE REQUIREMENTS OF DUE PROCESS IN THE PROCEEDINGS A QUO.

III. THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENTS RIGHT TO DUE PROCESS AS NO ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE CONDUCTED ON HIS ADMITTED MISCONDUCT.13 The petitioner Bank posits that the sole factual issue that remained in dispute was whether the respondent pledged his benefits as guarantee for the losses the bank incurred resulting from the unauthorized DAUD/BP accommodations in favor of Maniwan. On this issue, both the Labor Arbiter and the NLRC found that the respondent had indeed pledged his benefits to the bank. According to the petitioner Bank, this factual finding should have been accorded respect by the CA as the same is supported by the evidence on record. By ordering the remand of the case to the Labor Arbiter, the CA allegedly unjustifiably analyzed and weighed all over again the evidence presented. The petitioner Bank insists that the Labor Arbiter acted within his authority when he denied the respondents motion to set case for hearing or trial and instead decided the case on the basis of the position papers and evidence submitted by the parties. Due process simply demands an opportunity to be heard and the respondent was not denied of this as he was even given the opportunity to file a supplemental position paper and other supporting documents, but he did not do so. The petitioner Bank takes exception to the findings of the appellate court that the respondent was not afforded the right to a hearing or to defend himself by the petitioner Bank as it did not conduct an administrative investigation. The petitioner Bank points out that it was poised to conduct one but was preempted by the respondents resignation. In any case, respondent himself in his Letter dated December 5, 1996, in reply to the clarificatory queries of Chiong, admitted that the DAUD/BP accommodations were granted "without higher management approval" and that he (the respondent) "accepts full responsibility for committing an error of judgment, lapses in control and abuse of discretion ..." Given the respondents admission, the holding of a formal investigation was no longer necessary. For his part, the respondent, in his Comment, maintains that the DAUD/BP accommodations in favor of Maniwan were approved, albeit not expressly, by the senior management of the petitioner Bank. He cites the regular reports he made to Chiong, his superior, regarding the DAUD/BP transactions made by the branch, including that of Maniwan, and Chiong never called his attention thereto nor stopped or reprimanded him therefor. These reports further showed that he did not conceal these transactions to the management. The respondent vehemently denies having offered the withholding of his benefits or pledged the same to the petitioner Bank. The findings of the Labor Arbiter and the NLRC that what he did are allegedly not supported by the evidence on record. The respondent is of the view that restitution is not proper because the petitioner Bank has not, as yet, incurred any actual loss as the amount owed by Maniwan may still be recovered from him. In fact, the petitioner Bank had already instituted a civil case against Maniwan for the recovery of the sum and the RTC rendered judgment in the petitioner Banks favor. The case is still pending appeal. In any case, the respondent argues that the petitioner Bank could not properly impose the accessory penalty of restitution on him without imposing the principal penalty of "Written Reprimand/Suspension" as provided under its Code of Ethics. He, likewise, vigorously avers that, in contravention of its own Code of Ethics, he was denied due process by the petitioner Bank as it did not conduct any administrative investigation relative to the unauthorized DAUD/BP accommodations. He was not informed in writing of any charge against him nor was he given the opportunity to defend himself. The petition is meritorious.

The Court shall first resolve the procedural issue raised in the petition, i.e., whether the CA erred in remanding the case to the Labor Arbiter. The Court rules in the affirmative. It is settled that administrative bodies like the NLRC, including the Labor Arbiter, are not bound by the technical niceties of the law and procedure and the rules obtaining in courts of law.14 Rules of evidence are not strictly observed in proceedings before administrative bodies like the NLRC, where decisions may be reached on the basis of position papers.15 The holding of a formal hearing or trial is discretionary with the Labor Arbiter and is something that the parties cannot demand as a matter of right.16 As a corollary, trial-type hearings are not even required as the cases may be decided based on verified position papers, with supporting documents and their affidavits.17 Hence, the Labor Arbiter acted well within his authority when he issued the Order dated February 26, 1999 submitting the case for resolution upon finding that he could judiciously pass on the merits without the necessity of further hearing. On the other hand, the assailed CA decisions directive requiring him to conduct further hearings constitutes undue interference with the Labor Arbiters discretion. Moreover, to require the conduct of hearings would be to negate the rationale and purpose of the summary nature of the proceedings mandated by the Rules and to make mandatory the application of the technical rules of evidence.18 The appellate court, therefore, committed reversible error in ordering the remand of the case to the Labor Arbiter for further hearings. Before delving on the merits of the case, it is well to remember that factual findings of the NLRC affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in matters within their jurisdiction, when sufficiently supported by evidence on record, are accorded respect, if not finality, and are considered binding on this Court.19 As long as their decisions are devoid of any arbitrariness in the process of their deduction from the evidence proffered by the parties, all that is left is for the Court to stamp its affirmation.20 In this case, the factual findings of the Labor Arbiter and those of the NLRC concur on the following material points: the respondent was a responsible officer of the petitioner Bank; by his own admission, he granted DAUD/BP accommodations in excess of the authority given to him and in violation of the banks standard operating procedures; the petitioner Banks Code of Ethics provides that restitution/forfeiture of benefits may be imposed on the employees for, inter alia, infraction of the banks standard operating procedures; and, the respondent resigned from the petitioner Bank on May 31, 1998. These factual findings are amply supported by the evidence on record. Indeed, it had been indubitably shown that the respondent admitted that he violated the petitioner Banks standard operating procedures in granting the DAUD/BP accommodations in favor of Maniwan without higher management approval. The respondents replies to the clarificatory questions propounded to him by way of the Memorandum dated November 19, 1996 were particularly significant. When the respondent was asked whether efforts were made to establish the identity and/or legitimacy of the drawers of the checks before the DAUD/BP accommodations were allowed,21 he replied in the negative.22 To the query "did the branch follow and comply with operating procedure which require that all checks accommodated for DAUD/BP should be previously verified with the drawee bank and history, if not outright balances, determined if enough to cover the checks?"23 again, the respondent answered "no."24 When asked under whose authority the excess DAUD/BP accommodations were granted,25 the respondent expressly stated that they were "approved by undersigned (referring to himself)" and that the excess accommodation was granted "without higher management approval."26 More telling, however, is the respondents statement that he "accepts full responsibility for committing an error in judgment, lapses in control and abuse of discretion by relying solely on the word, assurance, surety and REM of Mr. Edmundo Ramos."27 The respondent added that he was "ready to face the consequence of [his] action."28 The foregoing sufficiently establish that the respondent, by his own admissions, had violated the petitioner Banks standard operating procedures. Among others, the petitioner Banks Code of Ethics provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES PENALTIES VIOLATIONS 1st 2nd 3rd 4th

1. Infraction of Written Suspension/ Dismissal* Dismissal* Bank procedures Reprimand/ in handling any Suspension* Bank transaction or work assignment which results in a loss or probable loss
*

With restitution, if warranted.

Further, the said Code states that: 7.2.5. Restitution/Forfeiture of Benefits Restitution may be imposed independently or together with any other penalty in case of loss or damage to the property of the Bank, its employees, clients or other parties doing business with the Bank. The Bank may recover the amount involved by means of salary deduction or whatever legal means that will prompt offenders to pay the amount involved. But restitution shall in no way mitigate the penalties attached to the violation or infraction. Forfeiture of benefits/p>rivileges may also be effected in cases where infractions or violations were incurred in connection with or arising from the application/availment thereof. It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and valid on the parties and must be complied with until finally revised or amended unilaterally or preferably through negotiation or by competent authority.29 Moreover, management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations.30 With more reason should these truisms apply to the respondent, who, by reason of his position, was required to act judiciously and to exercise his authority in harmony with company policies.31 Contrary to the respondents contention that the petitioner Bank could not properly impose the accessory penalty of restitution on him without imposing the principal penalty of "Written Reprimand/Suspension," the latters Code of Ethics expressly sanctions the imposition of restitution/forfeiture of benefits apart from or independent of the other penalties. Obviously, in view of his voluntary separation from the petitioner Bank, the imposition of the penalty of reprimand or suspension would be futile. The petitioner Bank was left with no other recourse but to impose the ancillary penalty of restitution. It was certainly within the petitioner Banks prerogative to impose on the respondent what it considered the appropriate penalty under the circumstances pursuant to its company rules and regulations. Anent the issue that the respondents right to due process was violated by the petitioner Bank since no administrative investigation was conducted prior to the withholding of his separation benefits, the Court rules that, under the circumstances obtaining in this case, no formal administrative investigation was necessary. Due process simply demands an opportunity to be heard and this opportunity was not denied the respondent.32

Prior to the respondents resignation, he was furnished with the Memorandum33 dated November 19, 1996 in which several clarificatory questions were propounded to him regarding the DAUD/BP accommodations in favor of Maniwan. Among others, the respondent was asked whether the banks standard operating procedures were complied with and under whose authority the accommodations were granted. From the tenor thereof, it could be reasonably gleaned that the said memorandum constituted notice of the charge against the respondent. Replying to the queries, the respondent, in his Letter34 dated December 5, 1996, admitted, inter alia, that he approved the DAUD/BP accommodations in favor of Maniwan and the amount in excess of the credit limit ofP500,000 was approved by him without higher management approval. The respondent, likewise, admitted non-compliance with the banks standard operating procedures, specifically, that which required that all checks accommodated for DAUD/BP be previously verified with the drawee bank and history, if not outright balances determined if enough to cover the checks. In the same letter, the respondent expressed that he "accepts full responsibility for committing an error in judgment, lapses in control and abuse of discretion" and that he is "ready to face the consequence of his action." Contrary to his protestations, the respondent was given the opportunity to be heard and considering his admissions, it became unnecessary to hold any formal investigation.35 More particularly, it became unnecessary for the petitioner Bank to conduct an investigation on whether the respondent had committed an "[I]nfraction of Bank procedures in handling any Bank transaction or work assignment which results in a loss or probable loss" because the respondent already admitted the same. All that was needed was to inform him of the findings of the management36 and this was done by way of the Memorandum37 dated May 23, 1997 addressed to the respondent. His claim of denial of due process must perforce fail. Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor Arbiter stressed in his decision, "the separation benefits due the complainant (the respondent herein) were merely withheld."38 The NLRC made the same conclusion and was even more explicit as it opined that the respondent "is entitled to the benefits he claimed in pursuance to the Collective Bargaining Agreement but, in the meantime, such benefits shall be deposited with the bank by way of pledge."39 Even the petitioner Bank itself gives "the assurance that as soon as the Bank has satisfied a judgment in Civil Case No. 97174, the earmarked portion of his benefits will be released without delay."40 It bears stressing that the respondent was not just a rank and file employee. At the time of his resignation, he was the Assistant Vice- President, Branch Banking Group for the Mindanao area of the petitioner Bank. His position carried authority for the exercise of independent judgment and discretion, characteristic of sensitive posts in corporate hierarchy.41 As such, he was, as earlier intimated, required to act judiciously and to exercise his authority in harmony with company policies.42 On the other hand, the petitioner Banks business is essentially imbued with public interest and owes great fidelity to the public it deals with.43 It is expected to exercise the highest degree of diligence in the selection and supervision of their employees.44 As a corollary, and like all other business enterprises, its prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations must be respected.45 The law, in protecting the rights of labor, authorized neither oppression nor self-destruction of an employer company which itself is possessed of rights that must be entitled to recognition and respect.46 WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the Court of Appeals and its Resolution dated January 6, 2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The Resolution dated October 20, 1999 of the NLRC, affirming the Decision dated February 26, 1999 of the Labor Arbiter, isREINSTATED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 163091 October 6, 2010

COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner, vs. ANGEL U. DEL VILLAR, Respondent. DECISION LEONARDO-DE CASTRO, J.: Petitioner Coca-Cola Bottlers Philippines, Inc. (the Company) filed this Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeking the reversal of (1) the Decision1 dated October 30, 2003 of the Court of Appeals in CA-G.R. SP No. 53815, which reversed and set aside the Decision2 dated February 26, 1999 of the National Labor Relations Commission (NLRC) in NLRC CN. NCR-00-12-07634-96; and (2) the Resolution3 dated March 29, 2004 of the appellate court in the same case, which denied for lack of merit the Motion for Reconsideration of the Company. The antecedent facts are as follows: The Company, one of the leading and largest manufacturers of beverages in the country, initially hired respondent Angel U. del Villar (Del Villar) on May 1, 1990 as Physical Distribution Fleet Manager with a job grade of S-7 and monthly salary of P50,000.00, aside from the use of a company car, gasoline allowance, and annual foreign travel, among other benefits. In 1992, as part of the reorganization of the Company, Del Villar became the Transportation Services Manager, under the Business Logistic Directorate, headed by Director Edgardo I. San Juan (San Juan). As Transportation Services Manager, Del Villar prepares the budget for the vehicles of the Company nationwide. While serving as Transportation Services Manager, Del Villar submitted a Report dated January 4, 1996 to the Company President, Natale J. Di Cosmo (Di Cosmo), detailing an alleged fraudulent scheme undertaken by certain Company officials in conspiracy with local truck manufacturers, overpricing the trucks purchased by the Company by as much as P70,000.00 each. In the same Report, Del Villar implicated San Juan and Jose L. Pineda, Jr. (Pineda), among other Company officials, as part of the conspiracy. Pineda then served as the Executive Assistant in the Business Logistic Directorate in charge of the Refrigeration Services of the Company. In 1996, the Company embarked on a reorganization of the Business Logistic Directorate. As a result, the functions related to Refrigeration were assigned to the Transportation Services Manager, which was renamed the Transportation and Refrigeration Services Manager. Mr. Nathaniel L. Evangelista, the Physical Distribution Superintendent of the Zamboanga Plant, was appointed the Corporate Transportation and Refrigeration Services Manager, replacing both Del Villar and Pineda, who were in charge of the Transportation Services and Refrigeration Services of the Company, respectively. Pineda was then appointed as the Corporate Purchasing and Materials Control Manager, while Del Villar as Pinedas Staff Assistant. These new appointments took effect on May 1, 1996.4 On July 8, 1996, seven months after the submission of his Report on the fraudulent scheme of several company officials, Del Villar received a Memorandum5 from San Juan. Through said Memorandum, San Juan informed Del Villar that (1) Del Villar was designated as Staff Assistant to the Corporate Purchasing and Materials Control Manager, with a job grade of NS-VII; (2) with Del Villars new assignment, he ceased to be entitled to the benefits accruing to an S-7 position under

existing company rules and policies; and (3) Del Villar was to turn over the vehicle assigned to him as Transportation Services Manager to Pineda by July 10, 1996. Although as the Staff Assistant of the Corporate Purchasing and Materials Control Manager, Del Villar continued to receive the same salary as Transportation Services Manager, but his car and other privileges were withdrawn and he spent his time at his new post sitting "at a desk with no meaningful work whatsoever."6 Del Villar believed that he was demoted by the Company to force him to resign. Unable to endure any further the harassment, Del Villar filed with the Arbitration Branch of the NLRC on November 11, 1996 a complaint against the Company for illegal demotion and forfeiture of company privileges. Del Villar also impleaded in his complaint Company President Di Cosmo, Vice-President and General Manager Jaime G. Oracion (Oracion), Senior Vice-President and Human Resources Director Rosa Maria Chua (Chua), San Juan, and Pineda. The complaint was docketed as NLRC CN. NCR-00-12-07634-96, assigned to Labor Arbiter Felipe Pati. The Company failed to appear, despite due notice, at the scheduled preliminary conference before the NLRC Arbitration Branch. Del Villar filed his Position Paper, supported by his Complaint Affidavit. The Company filed a Motion to Dismiss, instead of a position paper, praying for the dismissal of Del Villars complaint on the ground that Del Villar had no cause of action. The Company reasoned that in appointing Del Villar as the Staff Assistant of the Corporate Purchasing and Materials Control Manager, from his former position as Transportation Services Manager, the Company was merely exercising its inherent management prerogative to transfer an employee from one position to another. The Company also contended that Del Villar had no vested right to the privileges he previously enjoyed as Transportation Services Manager. In an Order dated July 24, 1997, the Labor Arbiter deferred action on the Motion to Dismiss until after submission by the Company of its Position Paper within 15 days from receipt of said order. The Company filed on October 13, 1997 a Manifestation in which it stated that it was adopting its Motion to Dismiss as its Position Paper. Thereafter, NLRC CN. NCR-00-12-07634-96 was submitted for resolution. On March 3, 1998, the Labor Arbiter rendered a Decision in Del Villars favor. The Labor Arbiter held that the allegations in Del Villars complaint sufficiently presented a cause of action against the Company. The Company, in filing a Motion to Dismiss, hypothetically admitted the truth of the facts alleged in the complaint, and the failure of the Company to deny or rebut Del Villars allegations of bad faith on the part of the Company, gave rise to the presumption against the latter. The Labor Arbiter proceeded to rule: The issue as to whether or not [the Company] acted illegally in demoting [Del Villar] is, therefore, answered in the affirmative. This office is inclined to believe and so holds that the reorganization of [the Company] appears to have been done sans the necessary requisite of good faith, after [Del Villar] had filed his complaint to the company President detailing the scam involving the purchase of the truck fleet of 1996. [Del Villar] was not outrightly dismissed; instead, he was removed from his former position as Transportation Services Manager, and demoted to Staff Assistant to the Corporate Purchasing and Materials Control Manager. Furthermore, as "Staff Assistant" [Del Villar] allegedly receives his usual salary but his car privileges, gasoline allowances, and foreign travel were withdrawn and he now sits at a desk "with no meaningful work whatsoever."

[Del Villar] appears to have been singled out or discriminated upon due to his having reported the 1996 truck scam, and his present isolation can be seen as a punishment for acting in a righteous and forthright manner. Otherwise, as a "Staff Assistant" [Del Villar] should have been given some meaningful or responsible work appurtenant to the job designation. xxxx This Office finds and so holds that in all the foregoing rulings, the concept of management prerogative is limited or otherwise qualified. Procedurally and substantively, [the Company] through its named officers appears to have acted illegally and in bad faith in its purported "reorganization", in demoting [Del Villar] and in removing [Del Villars] company privileges. Had [Del Villar] resigned under the circumstances, he could be said to have been constructively discharged because a constructive discharge is defined as "a quitting because continued employment is rendered impossible, unreasonable and unlikely, as an offer involving demotion in rank and a diminution in pay". (Philippine Japan Active Carbon Corporation and Tukuichi Satofuka vs. NLRC, G.R. 83239, Mar. 1989).7 For demoting Del Villar without justifiable cause, the Labor Arbiter ruled that the Company was liable for the following: As a consequence of [the Companys] acts [Del Villar] suffered the effects of humiliation, a besmirched repurtation, serious anxiety and sleepless nights which justify an award of moral damages. In order to serve as an example to other companies who may be so inclined as to emulate [the Companys] act of punishing their employees honesty and sense of fair play, [the Company] must per force be assessed exemplary damages. In order to protect and vindicate his rights under the Labor Code, [Del Villar] was constrained to retain counsel for which [the Company] should be assessed attorneys fees of not less than ten percent (10%) of the awarded sum. In the matter of the unlawful withdrawal of [Del Villars] car, gasoline allowance and foreign travel by [the Company], it is obligated to rectify the withdrawal of privileges by returning to [Del Villar] the said Toyota car, and if that is not possible, its value as of the time said car was withdrawn including the value of the gasoline allowance and foreign travel due him.8 In the end, the Labor Arbiter decreed: WHEREFORE, premises considered judgment is hereby rendered against [the Company and the impleaded Company officials] and in favor of [Del Villar] ordering [the Company] to (1) reinstate [Del Villar] to his former job level; (2) to return the car to [Del Villar] or to compensate [Del Villar] for the loss of his privileges such as the value of the Toyota car as of the time of taking including the value of the gasoline allowance and the foreign travel due [Del Villar]; (3) indemnify [Del Villar] moral damages of P1,000,000.00 Pesos and exemplary damages ofP1,000,000.00 Pesos, aside from attorneys fees of 10% of sums herein awarded.9 The Company expectedly appealed to the NLRC. While the case was still pending appeal before the NLRC, Del Villar received a letter dated April 28, 1998, signed by one Virgilio B. Jimeno for the Company, which read: Dear Mr. Del Villar: Presently, the Company is implementing various programs to ensure the accomplishment of its corporate goals and objectives, and to increase the productivity of its workforce.

Since the various programs will affect some of its employees, the Company has initiated a special program called "Project New Start". This program is intended to assist employees whose positions will be declared redundant with the implementation of new distribution systems, utilization of improved operational processes and functional reorganizations. Your position has been determined as no longer necessary due to the reorganization of the Business Logistics Directorate. The Transportation and Refrigeration Services Department of the Technical Operations Directorate has absorbed your function and our efforts to transfer you to a similar position within the organization have not been successful. Thus, you are considered separated from [the Company] effective May 31, 1998. Thank you for your kind understanding. We wish you success and Gods blessings in all your future undertakings.10 In a Decision dated February 26, 1999, the NLRC reversed the Labor Arbiter, reasoning that: Contrary to the Labor Arbiters pronouncement that [the Company] should have rebutted allegations of bad faith and malice, we are more inclined to apply the presumption of good faith. Mere conclusions of fact and law should not be used as bases for an automatic finding of bad faith. As it is, we do not even see any disclosure of the scam and his alleged demotion. If indeed the so-called "great grandmother of Coca cola scams of 1996" were true, the logical consequence of such disclosure is for the president of the company to dismiss the erring employees and officers for their highly irregular acts and not to penalize [Del Villar] for making such disclosure. This is amply supported by the fact that the [the Company] conducted a thorough investigation of the reported scam and even obtained the services of an independent auditor to determine whether the alleged anomalous transactions were actually irregular and/or questionable. This manifests that [Del Villars] disclosure was taken seriously contrary to his claims of discrimination. Accordingly, it cannot be said that the act of the [Company] was retaliatory or penal in nature nor tainted with bad faith and/or malice. Otherwise, [the Company] would not have given grave attention to the disclosure of [Del Villar]. On the issue of whether there was a demotion, we are of the view that it was improper to conclude that [Del Villars] movement from the position of Transportation Services Manager to Staff Assistant to the Corporate Purchasing and Materials Control Manager necessarily indicated a demotion. The records show that there was no diminution of salary. While it appears that his transportation benefits were withheld, it does not follow that his position as Staff Assistant is inferior to that of a Transportation Services Manager. We take notice of the fact that certain positions in a company involve traveling from one place to another, hence the necessity to provide for a car, and related benefits like allowances for gasoline and maintenance. A company cannot, however, be reasonably expected to provide the same benefits to an employee whose position for example, requires that he stays in the office during working hours. Benefits, privileges and perquisites that attach to a certain position do not provide sufficient bases for determining the superiority or inferiority of the position so held.11 Hence, the NLRC concluded: In fine We find that [Del Villar] was not demoted and that the [Company] has not acted in bad faith or with malice. WHEREFORE, in view of the foregoing, the Decision dated March 3, 1998 rendered by Labor Arbiter Felipe R. Pati is hereby REVERSED and SET ASIDE and a new one rendered DISMISSING the complaint for lack of merit.12 Del Villar moved for the reconsideration of the foregoing NLRC Decision, but the NLRC denied such motion for lack of merit in a Resolution dated April 26, 1999.13 Unsatisfied, Del Villar brought his case before the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 53815.

On October 30, 2003, the Court of Appeals promulgated its Decision favoring Del Villar. According to the Court of Appeals, the NLRC committed grave abuse of discretion by turning a blind eye on several indicia that clearly showed Del Villar was demoted without any lawful reason: (1) the very nomenclature used by the Company designating Del Villars new job: from Transportation Services Manager, Del Villar was suddenly designated as staff assistant to another manager; (2) the diminution in the benefits being enjoyed by Del Villar prior to his transfer, such as the use of the company car, gasoline allowance, and annual foreign travel; and (3) Del Villars new post in the Company did not require him to perform any meaningful work, a far cry from his previous responsibilities as Transportation Services Manager which include the preparation of the budget of the Company for all of its vehicles nationwide. The Court of Appeals also made a finding of bad faith against the Company: It is true that Labor Arbiters cannot dictate business owners on how to run their enterprises. Concededly, employers and their managers have all the leeway to make the necessary adjustments in their organizations. But the prerogative is not absolute. It must be accompanied by good faith. x x x. xxxx We have reasonable ground to believe that the reorganization theory poised by [the Company] was a mere afterthought. If indeed [Del Villar] was a casualty of a valid reorganization, officials of [the Company] could have easily told him in the several memos they issued to [Del Villar]. Edgardo San Juan, in a memo dated April 29, 1996, merely informed [Del Villar] the name of his replacement as Transportation Services Manager (Rollo, p. 53). In his second memo dated May 8, 1996, San Juan informed [Del Villar] that he would be "under the direct supervision of Mr. Jose L. Pineda, Jr. until an assignment, if any, would have been determined" for [Del Villar]. Two (2) subsequent memos were received by [Del Villar] but still no hint on the reason behind his relief. Rosa Marie Chua, in a memo dated June 11, 1996, simply ordered [Del Villar] to return the company car (Rollo, p. 56). Again, Chua sent a memo dated June 17, 1996, telling [Del Villar] that the car was part of "perquisites" of a Transportation Services Manager and must be returned as he was already relieved of his position (Rollo, 56). In all four (4) memos, officials of [the Company] never once attributed to company reorganization as the reason behind [Del Villars] relief as Transportation Services Manager. Instead, [the Company] waited for [Del Villar] to file a complaint before it declared publicly its reason for relieving him from his post. It is unfortunate enough for [the Company] to give San Juan, the very person charged by [Del Villar] of committing fraud against the company, the free hand to deal with his accuser. And whatever remains of [the Companys] tattered claim to good faith towards [Del Villar] evaporated by its absence of forthrightness to the latter. [The Companys] lack of candor clearly lends support to a conclusion that [Del Villars] relief was occasioned by a reason alien to an alleged company reorganization. The evidence presented by [Del Villar] tend to show that he was demoted, not because of company reorganization, but because of his authorship of the report about the fraud being committed by certain officials of [the Company].14 Just like the Labor Arbiter, the Court of Appeals held the Company liable for the following but in reduced amounts: Albeit We are inclined to reinstate the decision dated March 3, 1998 of the Labor Arbiter, We feel, however, that the amount of moral and exemplary damages thereunder awarded to [Del Villar] to the tune of P1 million each was excessive. To Our mind, the liability of [the Company] is mitigated when it continued providing [Del Villar] despite his demotion with the salary he was receiving as Transportation Services Manager. The moral and exemplary damages should thus be reduced to the reasonable amount of P500,000.00, for each item.15 The dispositive portion of the assailed Decision of the appellate court stated:

WHER[E]FORE, the instant petition is hereby GRANTED. Accordingly, the assailed Decision dated February 26, 1999 and Resolution dated April 26, 1999 of the National Labor Relations Commission are hereby SET ASIDE. Subject to the modification reducing to P500,000.00 the amount of moral damages and to P500,000.00 the amount of exemplary damages, the decision dated March 3, 1998 of the Labor Arbiter is hereby REINSTATED.16 Del Villar filed on November 20, 2003 a Motion for Partial Reconsideration of the above-mentioned decision of the appellate court, praying for the award of backwages to be reckoned from May 31, 1998, the day he had been dropped from the payroll. The Company also moved for the reconsideration of the same judgment, asserting, among other arguments, that Del Villars Petition for Certiorari in CA-G.R. SP No. 53815, was filed out of time and should have been dismissed. In its Resolution dated March 29, 2004, the Court of Appeals denied the Motions for Reconsideration of both parties for lack of merit.17 In this Petition for Review, the Company raises three grounds for consideration of this Court: A. THE HONORABLE COURT OF APPEALS GAVE DUE COURSE TO THE PETITION DESPITE THE FACT THAT IT WAS CLEARLY FILED BEYOND THE REGLEMENTARY PERIOD PRESCRIBED BY LAW. B. THE HONORABLE COURT OF APPEALS GAVE DUE COURSE TO THE [Court of Appeals] PETITION DESPITE THE FACT THAT [Del Villar] FAILED TO ESTABLISH THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN RENDERING THE 26 FEBRUARY 1999 DECISION AND 26 APRIL 1999 RESOLUTION. C. THE HONORABLE COURT OF APPEALS EFFECTIVELY DIRECTED [Del Villars] REINSTATEMENT TO HIS FORMER JOB LEVEL DESPITE ITS IMPOSSIBILITY SINCE HE HAD ALREADY BEEN VALIDLY SEPARATED FROM SERVICE.18 The Company avers that the Court of Appeals erred in giving due course to Del Villars Petition for Certiorari in CA-G.R. SP No. 53815 as the said remedy was filed out of time. Rule 65, Section 4 of the Rules of Court, as amended by Supreme Court Circular No. 39-98 on September 1, 1998, provided: Sec. 4. Where and when petition to be filed. The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals. If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution, the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. (Emphases ours.) The Company points out that Del Villar received a copy of the NLRC Decision dated February 26, 1999 on March 17, 1999. Twelve days later, on March 29, 1999, Del Villar filed a Motion for Reconsideration, thus, interrupting the 60-day reglementary period for filing a petition for certiorari. The NLRC denied Del Villars Motion for Reconsideration in a Resolution dated April 26, 1999, a copy of which Del Villar received on May 21, 1999. From May 21, 1999, Del Villar only had 48 days more, or until July 8, 1999, within which to file his petition for certiorari; but he only did so 60 days later, on

July 20, 1999. Clearly, Del Villars Petition for Certiorari in CA-G.R. SP No. 53815 was filed 12 days late and way beyond the reglementary period as provided under the Rules of Court. We do not agree. While CA-G.R. SP No. 53815 was pending before the Court of Appeals, Section 4 of Rule 65 of the Rules of Court was amended anew by Supreme Court Circular No. 56-2000, which took effect on September 1, 2000, to read: Sec. 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of the said motion. The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in the aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals. No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days. (Emphases ours.) It is clear that under Supreme Court Circular No. 56-2000, in case a motion for reconsideration of the judgment, order, or resolution sought to be assailed has been filed, the 60-day period to file a petition for certiorari shall be computed from notice of the denial of such motion. The crucial question now is whether Supreme Court Circular No. 56-2000 should be applied retroactively to Del Villars Petition in CA-G.R. SP No. 53815. We answer affirmatively. As we explained in Perez v. Hermano19: Under this amendment, the 60-day period within which to file the petition starts to run from receipt of notice of the denial of the motion for reconsideration, if one is filed. In Narzoles v. National Labor Relations Commission [G.R. No. 141959, 29 September 2000, 341 SCRA 533-538], we described this latest amendment as curative in nature as it remedied the confusion brought about by Circular No. 39-98 because, "historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from receipt of the order denying the motion for reconsideration to file a petition for certiorari." Curative statutes, which are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain legal requirements, by their very essence, are retroactive and, being a procedural rule, we held in Sps. Ma. Carmen and Victor Javellana v. Hon. Presiding Judge Benito Legarda(G.R. No. 139067, 23 November 2004] that "procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent."20 In the instant case, Del Villar filed a Motion for Reconsideration of the NLRC Decision dated February 26, 1999. Del Villar received a copy of the NLRC Resolution dated April 26, 1999, denying his Motion for Reconsideration, on May 21, 1999. As already settled by jurisprudence, Del Villar had a fresh period of 60 days from May 21, 1999 within which to file his Petition for Certiorari before the Court of Appeals. Keeping in mind the rule that in computing a period, the first day shall be excluded and the last day included,21 exactly 60 days had elapsed from May 21, 1999 when Del Villar filed his

Petition with the appellate court on July 20, 1999. Hence, without a doubt, Del Villars Petition for Certiorari in CA-G.R. SP No. 53815 was seasonably filed. We now turn our attention to the merits of the case. The Company asserts that the Court of Appeals should not have issued a writ of certiorari in Del Villars favor as there was no grave abuse of discretion on the part of the NLRC in finding that Del Villar was not demoted and that the Company had not acted in bad faith or with malice. The issue of whether the Company, in transferring Del Villar from the position of Transportation Services Manager to Staff Assistant to the Corporate Purchasing and Materials Control Manager, validly exercised its management prerogative or committed constructive dismissal, is a factual matter. It is a settled rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality. Moreover, in a petition for review on certiorari under Rule 45 of the Rules of Court, the Supreme Court reviews only errors of law and not errors of facts. However, where there is divergence in the findings and conclusions of the NLRC, on the one hand, from those of the Labor Arbiter and the Court of Appeals, on the other, the Court is constrained to examine the evidence,22 to determine which findings and conclusion are more conformable with the evidentiary facts. Hence, in the instant Petition, we embark on addressing not only the legal, but the factual issues as well. Jurisprudence recognizes the exercise of management prerogative. For this reason, courts often decline to interfere in legitimate business decisions of employers. In fact, labor laws discourage interference in employers judgment concerning the conduct of their business.23 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. 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.24 Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.25 In the case of Blue Dairy Corporation v. National Labor Relations Commission,26 we described in more detail the limitations on the right of management to transfer employees: But, 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.27 In the case at bar, there is no dispute that Del Villar was transferred by the Company from the position of Transportation Services Manager to the position of Staff Assistant to the Corporate Purchasing and Materials Control Manager. The burden thus falls upon the Company to prove that Del Villars transfer was not tantamount to constructive dismissal.

After a careful scrutiny of the records, we agree with the Labor Arbiter and the Court of Appeals that the Company failed to discharge this burden of proof. The Company and its officials attempt to justify the transfer of Del Villar by alleging his unsatisfactory performance as Transportation Services Manager. In its Petition, the Company disclosed that: 4.1. As Transportation Services Manager, [Del Villar] displayed an utterly woeful performance. He was unable to submit basic data as to type and brand of vehicles with highest/lowest maintenance cost as requested. [Del Villar] could not even update the records of his office. He never complied with his commitments on submission of reports and his claims of the availability of such reports were never substantiated. 4.2. [Del Villar] could not work with minimum or no supervision. His activities needed to be closely and constantly monitored by his superiors. [Del Villar] lacked initiative and had to be constantly reminded of what to do. The work he performed and/or submitted, more often than not, had to be redone. In his Performance and Potential Evaluation Sheet for 1995, [Del Villar] merited a mediocre grade of 2 in a scale of one (1) to five (5), the latter number being the highest grade. Copies of the Affidavit of Edgardo I. San Juan ["San Juan"], the Companys then Business Logistic Director, and respondents Performance and Potential Evaluation Sheet for 1995 are attached as Annexes "B" and "C", respectively.28 San Juan averred in his Affidavit that Del Villar was inept and incompetent as Transportation Services Manager; and was even more unqualified to take over the new position of Transportation and Refrigeration Services Manager, which involved additional functions related to Refrigeration. It was for this reason that Del Villar was transferred to the position of Staff Assistant to the Corporate Purchasing and Materials Control Manager. In his Counter-Affidavit submitted before the NLRC, Pineda, the Corporate Purchasing and Materials Control Manager, claimed that: 3. As his evaluation would show, Mr. del Villar was not a well-motivated employee. He could not perform his job well and promptly with minimum or no supervision and follow-up from his superiors. He repeatedly failed to observe the deadlines which I set for the submission of his reports and often procrastinates. His work product likewise suffered from accuracy and thoroughness. Despite several admonitions and guidance from me as his immediate superior, he simply refused to change his work attitude.29 We are unconvinced. The dismal performance evaluations of Del Villar were prepared by San Juan and Pineda after Del Villar already implicated his two superiors in his Report dated January 4, 1996 in an alleged fraudulent scheme against the Company. More importantly, we give weight to the following instances establishing that Del Villar was not merely transferred from the position of Transportation Services Manager to the position of Staff Assistant to the Corporate Purchasing and Materials Control Manager; he was evidently demoted. A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in 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. Conversely, demotion involves a situation where an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.30 First, as the Court of Appeals observed, Del Villars demotion is readily apparent in his new designation. Formerly, he was the Transportation Services Manager; then he was made a Staff Assistant a subordinate to another manager, particularly, the Corporate Purchasing and Materials Control Manager.

Second, the two posts are not of the same weight in terms of duties and responsibilities. Del Villars position as Transportation Services Manager involved a high degree of responsibility, he being in charge of preparing the budget for all of the vehicles of the Company nationwide. As Staff Assistant of the Corporate Purchasing and Materials Control Manager, Del Villar contended that he was not assigned any meaningful work at all. The Company utterly failed to rebut Del Villars contention. It did not even present, at the very least, the job description of such a Staff Assistant. The change in the nature of work resulted in a degrading work condition and reduction of duties and responsibility constitute a demotion in rank. In Globe Telecom, Inc. v. Florendo-Flores,31 we found that there was a demotion in rank even when the respondent therein continued to enjoy the rank of a supervisor, but her function was reduced to a mere house-tohouse or direct sales agent. Third, while Del Villars transfer did not result in the reduction of his salary, there was a diminution in his benefits. The Company admits that as Staff Assistant of the Corporate Purchasing and Materials Control Manager, Del Villar could no longer enjoy the use of a company car, gasoline allowance, and annual foreign travel, which Del Villar previously enjoyed as Transportation Services Manager. Fourth, it was not bad enough that Del Villar was demoted, but he was even placed by the Company under the control and supervision of Pineda as the latters Staff Assistant. To recall, Pineda was one of the Company officials who Del Villar accused of defrauding the Company in his Report dated January 4, 1996. It is not too difficult to imagine that the working relations between Del Villar, the accuser, and Pineda, the accused, had been strained and hostile. The situation would be more oppressive for Del Villar because of his subordinate position vis--vis Pineda. Fifth, all the foregoing caused Del Villar inconvenience and prejudice, so unbearable for him that he was constrained to seek remedy from the NLRC. The Labor Arbiter was correct in his observation that had Del Villar resigned immediately after his "transfer," he could be said to have been constructively dismissed. There is constructive dismissal when there is a demotion in rank and/or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.32 Eventually, however, the Company actually terminated Del Villars services effective May 31, 1998, as his position was no longer necessary or was considered redundant due to the reorganization of the Business Logistic Directorate. Redundancy is one of the authorized causes for the dismissal of an employee. It is governed by Article 283 of the Labor Code, which reads: ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. Redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of

workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.33 The determination that the employee's services are no longer necessary or sustainable and, therefore, properly terminable for being redundant is an exercise of business judgment of the employer. The wisdom or soundness of this judgment is not subject to discretionary review of the Labor Arbiter and the NLRC, provided there is no violation of law and no showing that it was prompted by an arbitrary or malicious act. In other words, it is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees.34 We mentioned in Panlilio v. National Labor Relations Commission35 that an employer may proffer "new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring" as evidence of redundancy. We further explained in AMA Computer College Inc. v. Garcia36 what constitutes substantial evidence of redundancy: ACC attempted to establish its streamlining program by presenting its new table of organization. ACC also submitted a certification by its Human Resources Supervisor, Ma. Jazmin Reginaldo, that the functions and duties of many rank and file employees, including the positions of Garcia and Balla as Library Aide and Guidance Assistant, respectively, are now being performed by the supervisory employees. These, however, do not satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate to support a conclusion. As they are, they are grossly inadequate and mainly self-serving. More compelling evidence would have been a comparison of the old and new staffing patterns, a description of the abolished and newly created positions, and proof of the set business targets and failure to attain the same which necessitated the reorganization or streamlining.37 (Emphases ours.) In this case, other than its own bare and self-serving allegation that Del Villars position as Staff Assistant of Corporate Purchasing and Materials Control Manager had already become redundant, no other evidence was presented by the Company. Neither did the Company present proof that it had complied with the procedural requirement in Article 283 of prior notice to the Department of Labor and Employment (DOLE) of the termination of Del Villars employment due to redundancy one month prior to May 31, 1998. The notice to the DOLE would have afforded the labor department the opportunity to look into and verify whether there is truth as to the claim of the Company that Del Villars position had become redundant "with the implementation of new distribution systems, utilization of improved operational processes, and functional reorganization" of the Company. Compliance with the required notices would have also established that the Company abolished Del Villars position in good faith.38 Del Villars poor employee performance is irrelevant as regards the issue on redundancy.1avvphi1 Redundancy arises because there is no more need for the employees position in relation to the whole business organization, and not because the employee unsatisfactorily performed the duties and responsibilities required by his position.39 There being no authorized cause for the termination of Del Villars employment, then he was illegally dismissed. An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement. If reinstatement is not viable, separation pay is awarded to the employee. In awarding separation pay to an illegally dismissed employee, in lieu of reinstatement, the amount to be awarded shall be equivalent to one month salary for every year of service.40 Under Republic Act No. 6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time their actual compensation was withheld from them up to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the decision. We note that Del Villars reinstatement is no longer possible because the position he previously occupied no

longer exists, per San Juans Affidavit dated October 15, 1998.41 Also, Del Villar had already received his separation pay sometime in October 1998.42 Because of his unjustified dismissal, we likewise award in Del Villars favor moral and exemplary damages. Award of moral and exemplary damages for an illegally dismissed employee is proper where the employee had been harrassed and arbitrarily terminated by the employer. Moral damages may be awarded to compensate one for diverse injuries such as mental anguish, besmirched reputation, wounded feelings, and social humiliation occasioned by the employers unreasonable dismissal of the employee. We have consistently accorded the working class a right to recover damages for unjust dismissals tainted with bad faith; where the motive of the employer in dismissing the employee is far from noble. The award of such damages is based not on the Labor Code but on Article 220 of the Civil Code.43 These damages, however, are not intended to enrich the illegally dismissed employee, such that, after deliberations, we find the amount of P100,000.00 for moral damages andP50,000.00 for exemplary damages sufficient to assuage the sufferings experienced by Del Villar and by way of example or correction for the public good. WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Decision dated October 30, 2003 and Resolution dated March 29, 2004 of the Court of Appeals in CA-G.R. SP No. 53815 are herebyAFFIRMED with the following MODIFICATIONS: 1) the amount of backwages shall be computed from the date of Del Villars illegal dismissal until the finality of this judgment; and 2) the amount of moral and exemplary damages are reduced to P100,000.00 and P50,000.00, respectively. For this purpose, the case is hereby REMANDED to the Labor Arbiter for the computation of the amounts due Angel U. del Villar. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 73053 September 15, 1989 DR. CARMELITA U. CRUZ, petitioner, vs. HON. GUILLERMO C. MEDINA, HON. GABRIEL M. GATCHALIAN and ROOSEVELT COLLEGES, INC., respondents.

FERNAN, C.J.: Petitioner, by way of a special civil action for certiorari, seeks to annul and set aside the resolution of the National Labor Relations Commission (NLRC) affirming the decision of the Labor Arbiter, dismissing petitioner's complaint for illegal dismissal from employment and for damages. Petitioner Dr. Carmelita U. Cruz is a 1968 mathematics graduate of the University of the Philippines. She earned a doctoral degree in Mathematics Education from Centro Escolar University in 1977. She wrote several books in mathematics and statistics and likewise attended numerous seminars, workshops and conferences, either as a delegate, resource person or consultant. She rose from the ranks, starting out as a high school teacher in 1958 to college instructor and eventually Dean, until her services were terminated in 1984 by her employer and herein private respondent, Roosevelt Colleges, Inc. The whole controversy started when in October 1983, Agro-Industrial Management and Consultancy, Inc. (AIMCON) submitted a proposal to Roosevelt Colleges, Inc., to start a Distance Study Program leading to a Degree of Master of Arts in Education Teaching Elementary Agriculture (MAETEA). Roosevelt Colleges, Inc., in accepting the proposal, designated petitioner, being the Dean of the Institute of Education and Graduate School, to head the committee to work for the approval of the program with the Ministry of Education, Culture & Sports (MECS). The program which is a joint venture between AIMCON and Roosevelt Colleges, will have its own operational budget and a Board of Trustees composed of two representatives from Roosevelt Colleges, the College President and one other person. In view of this, petitioner was offered the post of Deputy Director as well as the second seat allotted to Roosevelt Colleges in the Program's Board of Trustees. The Ministry of Education however, issued the authority to operate the Program on the condition that such shall only be an extension of the Graduate School of Roosevelt Colleges. The masteral degree was changed to Master of Arts in Education, Major in Elementary Agriculture (MEAMEA). Considering that she was already the Dean of Graduate School, a post higher than the Program's director, the offer to make petitioner as Deputy Director did not push through. During that time petitioner was receiving P4,330.50, including P1,747.50 representing remuneration for six (6) teaching loads. 1 On September 26, 1984, pursuant to Resolution No. 5 of the Board of Trustees, the President of Roosevelt Colleges, Romeo P. de la Paz, sent petitioner a letter informing her, as follows: ... the issue concerning the amount of remuneration or honorarium to be added to what you are presently receiving in view of the institution of the Agro-Forestry Program in the Institute of Education was discussed by the board yesterday. The final decision is given below:

1) You will be given monthly honorarium equivalent to the amount you are now receiving for teaching 6 loads. 2) This amount is chargeable to the Agro-Forestry Program and to be drawn from the Cashier's Office in Sumulong. 3) This shall take effect as soon as the monthly remuneration you are receiving for teaching 6 loads ends. 4) Effective the second semester of SY 84-85 you are not allowed to accept teaching assignment be it in the undergraduate or graduate programs. 5) It is expected that you will devote more time to effective and efficient administration and supervision of the Institute of Education including the Agro-Forestry Program. ... 2 In response to the above letter, petitioner Dr. Cruz sent a letter dated October 1, 1984, stating that: ... with a few considerations to reckon with, I think it would be better that I, much to my regret, be no longer involved in the Agro-Forestry Program. ... 3 In addition, she expressed her wish to retain her teaching loads citing professional reasons as well as her desire to be in constant contact with her students. On October 8, 1984, President de la Paz informed Dr. Cruz of the Resolution of the Board, to wit: (a) that Dr. Cruz be required to appear in its next meeting to be held on 30 October 1984; (b) that Dr. Cruz is expected to continue functioning as Dean of Education including the new Agro-Forestry Program under the Institute of Education; and (c) that Dr. Cruz be directed to send to the Board within twenty-four (24) hours upon receipt of this communication her reply to these resolutions. 4 Dr. Cruz manifested her willingness to appear before the Board. In the meanwhile, President de la Paz informed the Board that he will go on leave until the issue in connection with Dr. Cruz shall have been resolved. The Board held several meetings to thresh out this problem. During these meetings, Dr. Cruz reiterated her desire to retain her teaching loads in lieu of handling the Agro-Forestry Program. The Board on the other hand, remained firm on its stand to enforce Resolution No. 5. Several attempts were made to amicably settle the issue, but to no avail. A deadlock occurred. On October 19, 1984, the Board issued Dr. Cruz a letter terminating her services, the text to wit: Even before the receipt of your letter of October 16, 1984, the Board was aware of your intractable stand not to be involved in the Agro-forestry Program unless your teaching loads are retained. The Board has been too patient with you aside from the fact that Dr. Isidro was unofficially designated to talk to you and clarify things to avoid misunderstanding. You are aware that the course of Master of Arts in Education in Teaching Elementary Agriculture is a part of the Graduate School of Education including the Institute of Education wherein you are the Dean. Your refusal to accept involvement in the said program, unavoidable as it is, is a defiant disregard of the Board's action, and leaves us no other recourse except to terminate your relationship with the school effective immediately. 5 On November 16, 1984, Dr. Cruz filed a complaint for illegal dismissal in the National Labor Relations Commission (NLRC), National Capital Region. This case was assigned to Labor Arbiter Apolinar L. Sevilla. The parties were required to submit their respective position papers, supplemental pleadings and supporting documents, after which the case was deemed submitted for decision. On Mach 19, 1985, Labor Arbiter Sevilla rendered a decisions6 finding petitioner guilty of insubordination and thus dismissed petitioner's complaint for illegal dismissal for lack of merit. Dr. Cruz appealed to the National Labor Relations Commission which on June 26, 1985 promulgated a Resolution 7 dismissing petitioner's appeal and affirming the Labor Arbiter's decision in toto. Not satisfied, petitioner filed a Motion for Reconsiderations 8 on September 30, 1985 which was likewise denied on October 3, 1985. 9 Petitioner then filed a

special civil action for certiorari 10 before Us on December 13, 1985. This was dismissed for lack of merit by the First Division in a Court resolution 11 dated July 7, 1986. Still not satisfied, petitioner filed a Motion for Reconsideration 12 on August 8, 1986. On October 27, 1986, the Second Division to which the case was raffled on August 29, 1986 granted the motion for reconsideration and gave due course to the petition. 13 Said Second Division eventually became the present Third Division. Petitioner raises the following issues: 1) Whether or not the June 26, 1985 Resolution of the NL RC is replete with factual findings unsupported by substantial and credible evidence; and, therefore, not binding on and subject to review by the Honorable Supreme Court; 2) Whether or not the 26 years of petitioner's continuous, efficient and devoted service to the private respondent should be taken into account in deciding the case; 3) Whether or not the alleged loss of trust and confidence on the petitioner was validly justified so as to warrant her dismissal vis-a-vis her recent promotion and manifestation to handle the Program even without pay; 4) Whether or not the petitioner could be dismissed from her position as Professor III, an ordinary employee when the basis of her dismissal was loss of trust and confidence on her as a Dean or managerial employee; 5) Whether or not the petitioner was guilty of insubordination; 6) Whether or not the petitioner is entitled to a writ of certiorari, annulling the NLRC Resolutions, and 7) Whether or not the petitioner is entitled to damages and for how much. 14 The primordial issue in this case is whether or not petitioner is guilty of insubordination resulting in loss of confidence sufficient to warrant a dismissal. Before attempting to resolve this issue, the employment status of petitioner must first be looked into. Petitioner contends that she was divested of her Deanship of the Graduate School and retained as Dean in the Institute of Education. This is of no moment. The fact remains that she was a Dean, a position which is on the managerial level. In the case of Metro Drug Corporation v. NLRC, 15 this Court held that managerial personnel and other employees occupying positions of trust and confidence are entitled to security of tenure, fair standards of employment and the protection of labor laws. While it is true that the decision to dismiss or lay-off an employee is management's prerogative, it must be made without abuse of discretion, for what is at stake is not only the employee's position but also his means of livelihood. 16 However, the rules on termination of employment, penalties for infractions and resort to concerted actions in so far as managerial employees are concerned are not necessarily the same as those for ordinary employees. 17Employers, generally, are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those of similar rank performing functions which by their nature require the employer's trust and confidence, than in the case of ordinary rank and file employees. 18 With these principles in mind, we find no grave abuse of discretion committed by public respondents in ruling petitioner's dismissal legal. Considering the fact that she was holding a managerial position, her refusal to abide by the lawful orders of her employers would lead to the erosion of the trust and confidence reposed on her. Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt is not required. All that is needed is for the employer to establish a sufficient basis for the dismissal of an employee. The grant of teaching loads was only a privilege since as Dean, her first and primary function was to administer the particular college under her care and

authority. Hence, the decision of Roosevelt Colleges to take away her six (6) teaching loads so that she can handle the Agro-Forestry Program, with the same pay is found to be reasonable and lawful. In the case of Philippine Japan Active Carbon Corporation and Tokuichi Satofuka v. NLRC & Olga Quinanola, 19We held that: It is the employer's 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 employee's 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, or 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. While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every dispute will be automatically decided in favor of labor. Management also has rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although the Supreme Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 20 But considering that petitioner Cruz had spent the best years of her professional life in the service of the employer and that her work as a Dean and teacher was, as manifested by the Faculty Evaluation Results By Students," 21beyond reproach, the ends of social and compassionate justice would be served if she will be given some equitable relief. The grant of equitable relief in the form of separation pay finds support in a number of decisions promulgated by this Court. In the case of Eduardo V. Reyes v. Minister of Labor and PACWOOD, Inc., 22 this Court adopted the ruling in Baby Bus, Inc. vs. Minister of Labor, 23 to wit: ... it does not necessarily follow that if there is no illegal dismissal, then no award of separation pay may be made. and in the case of San Miguel Corporation v. Deputy Minister of Labor and Employment 24 where this Court held that: ... the trust and confidence in the private respondent having been lost, the respondent Regional Director acted correctly in allowing termination of employment but with retirement or separation benefits. Furthermore, in the case of Soco v. Mercantile Corporation of Davao, 25 We held that: Where an employee who had been dismissed for violation of company rules had been employed for 18 years, he may be afforded some equitable relief due to the past services rendered by him by granting him separation pay equivalent to one month salary for his every year of service to the company. WHEREFORE, the decision of the National Labor Relations Commission (NLRC) is hereby affirmed with the modification that petitioner, Dr. Carmelita U. Cruz is hereby adjudged entitled to separation pay equivalent to one (1) month latest salary for every year of service. No pronouncement as to costs. SO ORDERED.