You are on page 1of 103

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 71813

July 20, 1987

ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners,


vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and RICARDO DIONELE,
SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor and Employment
affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor of granting separation pay to private
respondents.
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde, Negros Occidental,
known as Hacienda Danao-Ramona, for a period of ten (10) years, renewable, at her option, for another ten (10)
years (Rollo, pp. 16-20).
On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private respondents. Private respondent Ricardo
Dionele, Sr. has been a regular farm worker since 1949 and he was promoted to Cabo in 1963. On the other hand,
private respondent Romeo Quitco started as a regular employee in 1968 and was promoted to Cabo in November of
the same year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents and turned over the hacienda
to the owners thereof on October 5, 1981, who continued the management, cultivation and operation of the farm
(Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner at the Ministry of Labor and
Employment, Bacolod City District Office, for overtime pay, illegal dismissal and reinstatement with backwages. After
the parties had presented their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a Decision dated July 16,
1982 (Ibid, pp. 29-31), ruled that the dismissal is warranted by the cessation of business, but granted the private
respondents separation pay. Pertinent portion of the dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by reason of business reverses or
losses. Accordingly, the award of termination pay in complainants' favor is warranted.
WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay at the rate of halfmonth salary for every year of service, a fraction of six (6) months being considered one (1) year. (Rollo pp.
29-30)
On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution dated April 8, 1985 (Ibid,
pp. 3940), affirmed the decision and dismissed the appeal for lack of merit.
On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same was denied in a
Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).
The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require the respondents to
comment (Ibid, p. 58). In compliance therewith, private respondents filed their Comment on October 23, 1985 (Ibid,
pp. 53-55); and the Solicitor General on December 17, 1985 (Ibid, pp. 71-73-B).

On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and public respondents
(Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due course to the petition;
and to require the parties to submit simultaneous memoranda (Ibid., p. 83). In compliance therewith, the Solicitor
General filed his Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96-194).
The petition is devoid of merit.
The sole issue in this case is
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.
Petitioner claims that since her lease agreement had already expired, she is not liable for payment of separation
pay. Neither could she reinstate the complainants in the farm as this is a complete cessation or closure of a
business operation, a just cause for employment termination under Article 272 of the Labor Code.
On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the private respondents is Batas
Pambansa Blg. 130, amending the Labor Code, Section 15 of which, specifically provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows:
xxx

xxx

xxx

Art. 284. 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 establisment or undertaking unless the closing is
for the purpose of circumventing the provisions of this title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended date thereof. 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 closure
or cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.
1avvphi1

There is no question that Article 284 of the Labor Code as amended by BP 130 is the law applicable in this case.
Article 272 of the same Code invoked by the petitioner pertains to the just causes of termination. The Labor Arbiter
does not argue the justification of the termination of employment but applied Article 284 as amended, which
provides for the rights of the employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the constitutional guarantee against impairment of
obligations and contracts, because when she leased Hacienda Danao-Ramona on June 27, 1960, neither she nor
the lessor contemplated the creation of the obligation to pay separation pay to workers at the end of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369 [1977]) where
the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute
and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the
details. The prohibition is not to read with literal exactness like a mathematical formula for it prohibits
unreasonable impairment only. In spite of the constitutional prohibition the State continues to possess
authority to safeguard the vital interests of its people. Legislation appropriate to safeguard said interest may
modify or abrogate contracts already in effect. For not only are existing laws read into contracts in order to fix
the obligations as between the parties but the reservation of essential attributes of sovereign power is also
read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is
subject to regulation under the police power must be understood as made in reference to the possible
exercise of that power. Otherwise, important and valuable reforms may be precluded by the simple device of
entering into contracts for the purpose of doing that which otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally impairs contract of obligations, no unchanging

yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be
measured or determined, has been fashioned, but every case must be determined upon its own
circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the means adopted must be legitimate, i.e. within the
scope of the reserved power of the state construed in harmony with the constitutional limitation of that power.
(Citing Basa vs. Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L27113], November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose employment is terminated
because of the closure of establishment and reduction of personnel. Without said law, employees like private
respondents in the case at bar will lose the benefits to which they are entitled for the thirty three years of service
in the case of Dionele and fourteen years in the case of Quitco. Although they were absorbed by the new
management of the hacienda, in the absence of any showing that the latter has assumed the responsibilities of the
former employer, they will be considered as new employees and the years of service behind them would amount to
nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of the parties with
reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment benefits to farm hands
who were not parties to petitioner's lease contract with the owner of Hacienda Danao-Ramona. That contract cannot
have the effect of annulling subsequent legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and
its implementing regulations, the workingman's welfare should be the primordial and paramount consideration.
(Volshel Labor Union v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is the kind of interpretation which gives
meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New
Labor Code which states that "all doubts in the implementation and interpretation of the provisions of this Code
including its implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the
applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v.
Employees Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees Compensation
Commission, 103 SCRA 329; Acosta v. Employees Compensation Commission, 109 SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982 Decision of the Labor
Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and Employment are hereby AFFIRMED.
SO ORDERED.
Teehankee, C.J., Yap, Fernando, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 75782 December 1, 1987
EURO-LINEA, PHILS., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JIMMY O. PASTORAL, respondents.

PARAS, J.:
This is a petition for review on certiorari seeking to reverse and set aside the resolution of public respondent,

* NLRC,
in Case No. RAB 111-2-1589-84 entitled "Jimmy O. Pastoral v. Euro-Linea Phils., Inc." affirming the decision of the Labor Arbiter ** which ordered the
reinstatement of complainant with six months backwages.

The facts as found by the Solicitor General are as follows:


On August 17, 1983, petitioner hired Pastoral as shipping expediter on a probationary basis for a period of six
months ending February 18, 1984. However, prior to hiring by petitioner, Pastoral had been employed by Fitscher
Manufacturing Corporation also as shipping expediter for more than one and a half years. Pastoral was absorbed by
petitioner but under a probationary basis.
On February 4, 1984, Pastoral received a memorandum dated January 31, 1984 terminating his probationary
employment effective also on February 4, 1984 in view of his failure ito meet the performance standards set by the
company." To contest his dismissal, Pastoral filed a complaint for illegal dismissal against petitioner on February 6,
1984 (Rollo, pp. 45-46). On July 19, 1985, the Labor Arbiter found petitioner guilty of illegal dismissal, the dispositive
portion of the decision reading:
WHEREFORE all things considered the respondent or its President and/or General Manager should be
as it is hereby ordered to reinstate complainant with six months backwages.
SO ORDERED.
San Fernando, Pampanga, Philippines, July 19,1985.
EMILIO TONGIO
Labor Arbiter
(Rollo, p. 32).
Petitioner appealed the decision to the NLRC on August 5, 1985 (Rollo, pp. 33-39) but the appeal was dismissed on
July 16, 1986 (Resolution; Rollo, p. 41).
Hence, this petition.
Petitioner raises the following errors of the NLRC (Rollo, p. 7):
a) The Labor Arbiter decided a question of law in a manner contrary to the spirit and purpose of the
law; and that
b) The Labor Arbiter gravely abused his discretion by ignoring the material and significant facts in favor
of employer.

In the resolution of October 29, 1986, the Second Division of the Court without giving due course to the petition
required the respondents to comment (Rollo, p. 42).
The Solicitor General submitted his comment on November 24, 1986 (Rollo, pp. 45-49), while petitioner through
counsel filed its reply to public respondent National Labor Relations Commission's comment in compliance with the
resolution of December 10, 1986 (Rollo, p. 50).
In the resolution of February 18, 1987 (Rollo, 58), the Court gave due course to the petition and required the parties
to file their respective memoranda.
The only issue is whether or not the National Labor Relations Commission acted with grave abuse of discretion
amounting to excess of jurisdiction in ruling against the dismissal of the respondent, a temporary or probationary
employee, by his employer (Petitioner).
Although a probationary or temporary employee has a limited tenure, he still enjoys the constitutional protection of
security of tenure. During his tenure of employment or before his contract expires, he cannot be removed except for
cause as provided for by law (Manila Hotel Corp. v. NLRC, 141 SCRA 169 [1986]).
This brings us to the issue of whether or not private respondent's dismissal was justifiable.
Petitioner claims that the dismissal is with cause, since respondent during his period of employment failed to meet
the performance standards set by the company; that employers should be given leeway in the application of his right
to choose efficient workers (Rollo, p. 6) and that the determination of compliance with the standards is the
prerogative of the employer as long as it is not whimsical; that it had terminated for cause the respondent before the
expiration of the probationary employment (Rollo, p. 70, Petitioner's Memorandum).
The records, however, reveal the contrary.
Petitioner not only failed to present sufficient evidence to substantiate the cause of private respondent's dismissal,
but likewise failed to cite particular acts or instances to show the latter's poor performance.
As correctly argued by the Solicitor General
There is no dispute that failure to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer is a ground to terminate an employee engaged on a
probationary basis (Art. 282, Labor Code; Bk. VI, Rule 1, Section 6(c), Implementing Rules, Labor
Code). In this case, petitioner alleged that Pastoral was dismissed because he failed to meet its
performance standard. However, petitioner did not bother to cite particular acts or instances in its
position paper which show that Pastoral was performing below par. ...
Petitioner's performance as shipping expediter can readily be gauged from specific acts as may be
gleaned from his duties enumerated by petitioner to include processing of export and import documents
for dispatch or release and talking to customs personnel regarding said documents. (p. 2, Annex "E "
Petition).
Furthermore, what makes the dismissal highly suspicious is the fact that while petitioner claims that respondent was
inefficient, it retained his services until the last remaining two weeks of the six months probationary employment.
No less important is the fact that private respondent had been a shipping expediter for more than one and a half
years before he was absorbed by petitioner. It therefore appears that the dismissal in question is without sufficient
justification.
It must be emphasized that the prerogative of management to dismiss or lay- off an employee must be done without
abuse of discretion, for what is at stake is not only petitioner's position but also his means of livelihood. (Remerco
Garments Manufacturing vs. Minister of Labor, 135 SCRA 137 [1985]). The right of an employer to freely select or
discharge his employees is subject to regulation by the State, basically in the exercise of its paramount police power
(PAL, Inc. vs. PALEA, 57 SCRA 489 [1974]). This is so because the preservation of the lives of the citizens is a
basic duty of the State, more vital than the preservation of corporate profits (Phil. Apparel Workers Union v. NLRC,
106 SCRA 444 [1981]; Manila Hotel Corp. v. NLRC, supra).
Finally, it is significant to note that in the interpretation of the protection to labor and social justice provisions of the
constitution and the labor laws and rules and regulations implementing the constitutional mandate, the Supreme
Court has always adopted the liberal approach which favors the exercise of labor rights. (Adamson & Adamson, Inc.
v. CIR, 127 SCRA 268 [1984]).

In the instant case, it is evident that the NLRC correctly applied Article 282 in the light of the foregoing and that its
resolution is not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion or lack of
jurisdiction (Rosario Brothers Inc. v. Ople, 131 SCRA 73 [1984]).
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the resolution of the NLRC is affirmed.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Footnotes
* Presiding Commissioner Guillermo C. Medina; Commissioners Gabriel M. Gatchalian and Miguel B.
Varela.
** Labor Arbiter Emilio G. Tongco.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78763 July 12,1989
MANILA ELECTRIC COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO M. SIGNO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Dominador Maglalang for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the resolution of the
respondent National Labor Relations Commission dated March 12, 1987 (p. 28, Rollo) in NLRC Case No. NCR-83808-83, entitled, "Apolinario M. Signo, Complainant, versus Manila Electric Company, Respondents", affirming the
decision of the Labor Arbiter which ordered the reinstatement of private respondent herein, Apolinario Signo, to his
former position without backwages.
The antecedent facts are as follows:
Private respondent Signo was employed in petitioner company as supervisor-leadman since January 1963 up to the
time when his services were terminated on May 18, 1983.
In 1981, a certain Fernando de Lara filed an application with the petitioner company for electrical services at his
residence at Peafrancia Subdivision, Marcos Highway, Antipolo, Rizal. Private respondent Signo facilitated the
processing of the said application as well as the required documentation for said application at the Municipality of
Antipolo, Rizal. In consideration thereof, private respondent received from Fernando de Lara the amount of
P7,000.00. Signo thereafter filed the application for electric services with the Power Sales Division of the company.
It was established that the area where the residence of de Lara was located is not yet within the serviceable point of
Meralco, because the place was beyond the 30-meter distance from the nearest existing Meralco facilities. In order
to expedite the electrical connections at de Lara's residence, certain employees of the company, including
respondent Signo, made it appear in the application that the sari-sari store at the corner of Marcos Highway, an
entrance to the subdivision, is applicant de Lara's establishment, which, in reality is not owned by the latter.
As a result of this scheme, the electrical connections to de Lara's residence were installed and made possible.
However, due to the fault of the Power Sales Division of petitioner company, Fernando de Lara was not billed for
more than a year.
Petitioner company conducted an investigation of the matter and found respondent Signo responsible for the said
irregularities in the installation. Thus, the services of the latter were terminated on May 18, 1983.
On August 10 1983, respondent Signo filed a complaint for illegal dismissal, unpaid wages, and separation pay.
After the parties had submitted their position papers, the Labor Arbiter rendered a decision (p. 79, Rollo) on April 29,
1985, which stated, inter alia:
Verily, complainant's act of inducing the Meralco employees to effectuate the installation on Engr. de
Lara's residence prejudiced the respondent, and therefore, complainant himself had indeed became a

participant in the transactions, although not directly, which turned out to be illegal, not to mention that
some of the materials used therein belongs to Meralco, some of which were inferior quality. . . .
While complainant may deny the violation, he cannot do away with company's Code on Employee
Discipline, more particularly Section 7, par. 8 and Section 6, par. 24 thereof However, as admitted by
the respondent, the infraction of the above cited Code is punishable by reprimand to dismissal."
... . And in this case, while considering that complainant indeed committed the above-cited infractions
of company Code of Employee Discipline, We shall also consider his records of uninterrupted twenty
(20) years of service coupled with two (2) commendations for honesty. Likewise, We shall take note
that subject offense is his first, and therefore, to impose the extreme penalty of dismissal is certainly
too drastic. A penalty short of dismissal is more in keeping with justice, and adherence to
compassionate society.
WHEREFORE, respondent Meralco is hereby directed to reinstate complainant Apolinario M. Signo to
his former position as Supervisor Leadman without backwages, considering that he is not at all
faultless. He is however, here warned, that commission of similar offense in the future, shall be dealt
with more severely.
SO ORDERED.
Both parties appealed from the decision to the respondent Commission. On March 12, 1987, the respondent
Commission dismissed both appeals for lack of merit and affirmed in toto the decision of the Labor Arbiter.
On June 23, 1987, the instant petition was filed with the petitioner contending that the respondent Commission
committed grave abuse of discretion in affirming the decision of the Labor Arbiter. A temporary restraining order was
issued by this Court on August 3, 1987, enjoining the respondents from enforcing the questioned resolution of the
respondent Commission.
The issue to resolve in the instant case is whether or not respondent Signo should be dismissed from petitioner
company on grounds of serious misconduct and loss of trust and confidence.
Petitioner contends that respondent Signo violated Sections 6 and 7 of the company's Code on Employee
Discipline, which provide:
Section 6, Par. 24Encouraging, inducing or threatening another employee to perform an act
constituting a violation of this Code or of company work, rules or an offense in connection with the
official duties of the latter, or allowing himself to be persuaded, induced or influenced to commit such
offense.
PenaltyReprimand to dismissal, depending upon the gravity of the offense.
Section 7, Par. 8Soliciting or receiving money, gift, share, percentage or benefits from any person,
personally or through the mediation of another, to perform an act prejudicial to the Company.
PenaltyDismissal. (pp. 13-14, Rollo)
Petitioner further argues that the acts of private respondent constituted breach of trust and caused the petitioner
company economic losses resulting from the unbilled electric consumption of de Lara; that in view thereof, the
dismissal of private respondent Signo is proper considering the circumstances of the case.
The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss or lay-off an
employee for just and authorized causes enumerated under Articles 282 and 283 of the Labor Code. However, the
right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise
of its paramount police power. This is so because the preservation of the lives of the citizens is a basic duty of the
State, more vital than the preservation of corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782,
December 1, 1987,156 SCRA 78).
There is no question that herein respondent Signo is guilty of breach of trust and violation of company rules, the
penalty for which ranges from reprimand to dismissal depending on the gravity of the offense. However, as earlier
stated, the respondent Commission and the Labor Arbiter found that dismissal should not be meted to respondent
Signo considering his twenty (20) years of service in the employ of petitioner, without any previous derogatory
record, in addition to the fact that petitioner company had awarded him in the past, two (2) commendations for
honesty. If ever the petitioner suffered losses resulting from the unlisted electric consumption of de Lara, this was
found to be the fault of petitioner's Power Sales Division.

We find no reason to disturb these findings. Well-established is the principle that findings of administrative agencies
which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality. Judicial review by this Court on labor cases does not go so far as to evaluate the
sufficiency of the evidence upon which the proper labor officer or office based his or its determination but is limited
to issues of jurisdiction or grave abuse of discretion (Special Events and Central Shipping Office Workers Union v.
San Miguel Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).
This Court has held time and again, in a number of decisions, that notwithstanding the existence of a valid cause for
dismissal, such as breach of trust by an employee, nevertheless, dismissal should not be imposed, as it is too
severe a penalty if the latter has been employed for a considerable length of time in the service of his employer.
(Itogon-Suyoc Mines, Inc. v. NLRC, et al., G.R. No. L- 54280, September 30,1982,117 SCRA 523; Meracap v.
International Ceramics Manufacturing Co., Inc., et al., G.R. Nos. L-48235-36, July 30,1979, 92 SCRA 412; Sampang
v. Inciong, G.R. No. 50992, June 19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056, October 30,1980,
100 SCRA 691; Philippine Airlines, Inc. v. PALEA, G.R. No. L-24626, June 28, 1974, 57 SCRA 489).
In a similar case, this Court ruled:
As repeatedly been held by this Court, an employer cannot legally be compelled to continue with the
employment of a person who admittedly was guilty of breach of trust towards his employer and whose
continuance in the service of the latter is patently inimical to its interest. The law in protecting the rights
of the laborers, authorized neither oppression nor self- destruction of the employer.
However, taking into account private respondent's 'twenty-three (23) years of service which
undisputedly is unblemished by any previous derogatory record' as found by the respondent
Commission itself, and since he has been under preventive suspension during the pendency of this
case, in the absence of a showing that the continued employment of private respondent would result in
petitioner's oppression or self-destruction, We are of the considered view that his dismissal is a drastic
punishment. ... .
xxx xxx xxx
The ends of social and compassionate justice would therefore be served if private respondent is
reinstated but without backwages in view of petitioner's obvious good faith. (Itogon- Suyoc Mines, Inc.
v. NLRC, et al., 11 7 SCRA 528)
Further, in carrying out and interpreting the Labor Code's provisions and its implementing regulations, the
workingman's welfare should be the primordial and paramount consideration. This kind of interpretation gives
meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New
Labor Code which states that "all doubts in the implementation and interpretation of the provisions of the Labor
Code including its implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No.
71812, July 30,1987,152 SCRA 140).
In view of the foregoing, reinstatement of respondent Signo is proper in the instant case, but without the award of
backwages, considering the good faith of the employer in dismissing the respondent.
ACCORDINGLY, premises considered, the petition is hereby DISMISSED and the assailed decision of the National
Labor Relations Commission dated March 12, 1987 is AFFIRMED. The temporary restraining order issued on
August 3, 1987 is lifted.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-58639 August 12, 1987
CEBU ROYAL PLANT (SAN MIGUEL CORPORATION), petitioner,
vs.
THE HONORABLE DEPUTY MINISTER OF LABOR and RAMON PILONES, respondents.

CRUZ, J.:
The private respondent was removed by the petitioner and complained to the Ministry of Labor. His complaint was
dismissed by the regional director, who was, however, reversed by the public respondent. Required to reinstate the
separated employee and pay him back wages, the petitioner has come to us, faulting the Deputy Minister with grave
abuse of discretion. We have issued in the meantime a temporary restraining order. 1
The public respondent held that Ramon Pilones, the private respondent, was already a permanent employee at the
time of his dismissal and so was entitled to security of tenure. The alleged ground for his removal, to wit, "pulmonary
tuberculosis minimal," was not certified as incurable within six months as to justify his separation. 2 Additionally, the
private respondent insists that the petitioner should have first obtained a clearance, as required by the regulations then in
force, for the termination of his employment.

The petitioner for its part claims that the private respondent was still on probation at the time of his dismissal and so
had no security of tenure. His dismissal was not only in conformity with company policy but also necessary for the
protection of the public health, as he was handling ingredients in the processing of soft drinks which were being sold
to the public. It is also argued that the findings of the regional director, who had direct access to the facts, should not
have been disturbed on appeal. For these same reasons, it contends, the employee's reinstatement as ordered by
the public respondent should not be allowed.
The original findings were contained in a one-page order 3 reciting simply that "complainant was employed on a
probationary period of employment for six (6) months. After said period, he underwent medical examination for qualification
as regular employee but the results showed that he is suffering from PTB minimal. Consequently, he was informed of the
termination of his employment by respondent." The order then concluded that the termination was "justified." That was all.

As there is no mention of the basis of the above order, we may assume it was the temporary payroll authority 4
submitted by the petitioner showing that the private respondent was employed on probation on February 16, 1978. Even
supposing that it is not self- serving, we find nevertheless that it is self-defeating. The six-month period of probation started
from the said date of appointment and so ended on August 17, 1978, but it is not shown that the private respondent's
employment also ended then; on the contrary, he continued working as usual. Under Article 282 of the Labor Code, "an
employee who is allowed to work after a probationary period shall be considered a regular employee." Hence, Pilones was
already on permanent status when he was dismissed on August 21, 1978, or four days after he ceased to be a probationer.

The petitioner claims it could not have dismissed the private respondent earlier because the x-ray examination was
made only on August 17, 1978, and the results were not immediately available. That excuse is untenable. We note
that when the petitioner had all of six months during which to conduct such examination, it chose to wait until exactly
the last day of the probation period. In the light of such delay, its protestations now that reinstatement of Pilones
would prejudice public health cannot but sound hollow and hypocritical. By its own implied admission, the petitioner
had exposed its customers to the employee's disease because of its failure to examine him before entrusting him
with the functions of a "syrup man." Its belated concern for the consuming public is hardly persuasive, if not clearly
insincere and self-righteous.
There is proof in fact that the private respondent was first hired not on February 16, 1978, but earlier in 1977. This is

the 1977 withholding tax statement 5 issued for him by the petitioner itself which it does not and cannot deny. The
petitioner stresses that this is the only evidence of the private respondent's earlier service and notes that he has not
presented any co-worker to substantiate his claim. This is perfectly understandable. Given the natural reluctance of many
workers to antagonize their employers, we need not wonder why none of them testified against the petitioner.

We are satisfied that whether his employment began on February 16, 1978, or even earlier as he claims, the private
respondent was already a regular employee when he was dismissed on August 21, 1978. As such, he could validly
claim the security of tenure guaranteed to him by the Constitution and the Labor Code.
The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI, of the Rules and
Regulations Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his coemployees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot be
cured within a period of six (6) months even with proper medical treatment. If the disease or ailment
can be cured within the period, the employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
The record does not contain the certification required by the above rule. The medical certificate offered by the
petitioner came from its own physician, who was not a "competent public health authority," and merely stated the
employee's disease, without more. We may surmise that if the required certification was not presented, it was
because the disease was not of such a nature or seriousness that it could not be cured within a period of six months
even with proper medical treatment. If so, dismissal was unquestionably a severe and unlawful sanction.
It is also worth noting that the petitioner's application for clearance to terminate the employment of the private
respondent was filed with the Ministry of Labor only on August 28, 1978, or seven days after his dismissal. 6 As the
NLRC has repeatedly and correctly said, the prior clearance rule (which was in force at that time) was not a "trivial
technicality." It required "not just the mere filing of a petition or the mere attempt to procure a clearance" but that "the said
clearance be obtained prior to the operative act of termination. 7

We agree that there was here an attempt to circumvent the law by separating the employee after five months'
service to prevent him from becoming a regular employee, and then rehiring him on probation, again without
security of tenure. We cannot permit this subterfuge if we are to be true to the spirit and mandate of social justice.
On the other hand, we have also the health of the public and of the dismissed employee himself to consider. Hence,
although we must rule in favor of his reinstatement, this must be conditioned on his fitness to resume his work, as
certified by competent authority.
We take this opportunity to reaffirm our concern for the lowly worker who, often at the mercy of his employers, must
look up to the law for his protection. Fittingly, that law regards him with tenderness and even favor and always with
faith and hope in his capacity to help in shaping the nation's future. It is error to take him for granted. He deserves
our abiding respect. How society treats him will determine whether the knife in his hands shall be a caring tool for
beauty and progress or an angry weapon of defiance and revenge. The choice is obvious, of course. If we cherish
him as we should, we must resolve to lighten "the weight of centuries" of exploitation and disdain that bends his
back but does not bow his head.
WHEREFORE, the petition is DISMISSED and the temporary restraining order of November 18, 1981, is LIFTED.
The Order of the public respondent dated July 14, 1981, is AFFIRMED, but with the modification that the backwages
shall be limited to three years only and the private respondent shall be reinstated only upon certification by a
competent public health authority that he is fit to return to work. Costs against the petitioner.
SO ORDERED.
Teehankee (Chairman), C.J., Narvasa, Paras and Gancayco, JJ., concur.

Footnotes
1 Rollo, pp. 37-39.
2 Ibid, p. 36.

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-2779

October 18, 1950

DANIEL SANCHEZ, ET AL., plaintiffs-appellees,


vs.
HARRY LYONS CONSTRUCTION, INC., ET AL., defendants-appellants.
Gibbs, Gibbs, Chuidian and Quasha for appellant Harry Lyons Construction, Inc.
Cecilio I. Lim and Antonio M. Castro for appellees.

MORAN, C. J.:
This case originated in the Municipal Court of Manila upon a complaint filed on March 9, 1948, by the herein
appellees as plaintiffs, against the herein appellants as defendants, for the sum of P2,210 plus interest, which
plaintiffs claimed as one month advance pat due them. On April 28, 1948, the parties entered into a stipulation of
facts upon which said municipal court rendered judgment for the plaintiffs. Upon denial of their motion for
reconsideration of this judgment, the defendants filed an appeal to the Court of First Instance of Manila, wherein the
parties submitted the case upon the same facts agreed upon in the Municipal Court. On October 2, 1948, the Court
of First Instance of Manila rendered its decision holding for plaintiffs, as follows:
Wherefore judgment is hereby rendered
1. Ordering defendant Material Distributors, Inc. to pay plaintiff Enrique Ramirez the sum of P360 and plaintiff
Juan Ramirez the sum of P250 with legal interest on each of the said sums from the date of the filing of the
complaint in the Municipal Court of Manila until the date of full payment thereof; and
2. Ordering defendant Harry Lyons Construction, Inc. to pay plaintiff Daniel Sanchez the sum of P250, and
plaintiff Mariano Javier, Venancio Diaz, Esteban Bautista, Faustino Aquillo, Godofredo Diamante, Marcial
Lazaro, Ambrosio de la Cruz, and Marcelino Maceda the sum of P150 each, with legal interest on each of the
said sums from the date of the filing of the complaint in the Municipal Court of Manila until the date of full
payment thereof.
One half of the costs is to be paid by Material Distributors, Inc. and the other half by Harry Lyons
Construction, Inc.
From this judgment, defendants filed an appeal with this court purely upon a question of law. The stipulation of facts
entered into by the parties on April 28, 1948, is as follows:
lawphil.net

STIPULATION OF FACTS.
Come now the plaintiffs and the defendants, by their respective undersigned attorneys and to this Honorable
Court, respectfully submit the following stipulation of facts:
1. That the plaintiffs were respectively employed as follows:
EMPLOYED BY DEFENDANT MATERIAL DISTRIBUTORS, INC.
Name Date of Position Salary
employment
Enrique Ramirez .............. 12/16/46 Warehouseman P450 a mo.

Juan Ramirez ................... do do 250 a mo.


NOTE. The salary of Enrique Ramirez was later reduced to P360 per month. This was the amount he was
receiving at the time of his dismissal.
EMPLOYED BY DEFENDANT HARRY LYONS CONSTRUCTION, INC.
Daniel Sanchez ................ 1/1/47 Carpenter- P250 a mo.
Foreman
Mariano Javier ................. ....do.................. Guard................. 5 a day
Venancio Diaz ................. ....do.................. do....................... 5 a day
Esteban Bautista ............ ....do.................. do....................... 5 a day
Faustino Aquillo ............ ....do.................. do....................... 5 a day
Godofredo Diamante ..... ....do.................. do....................... 5 a day
Marcial Lazaro ................ ....do.................. do....................... 5 a day
Ambrosio de la Cruz ..... ....do.................. do....................... 5 a day
Marcelino Macada ........ ....do.................. do....................... 5 a day
as per contracts of employment, copies of which are attached to defendants' answer marked Exhibits 1 to 11
inclusive
2. That in said contracts of employment the plaintiff agreed as follows:
"I accept the foregoing appointment, and in consideration thereof I hereby agree that such employment may
be terminated at any time, without previous notice, and I further agree that salary and wages, shall be
computed and paid at the rate specified up to the date of such termination.
"Also in consideration of such employment I hereby expressly waive the benefit of article 302 of the Code of
Commerce and that of any other law, ruling, or custom which might require notice of discharge or payment of
salary or wages after date of the termination of such employment."
3. That the plaintiffs were dismissed by the defendants on December 31, 1947 without one months' previous
notice.
4. That each of the plaintiffs demanded payment of one month's salary from the defendants and that the latter
refused to pay the same.
WHEREFORE, it is respectfully prayed that judgment on the foregoing stipulation of facts be rendered by this
Honorable Court.
The points in issue herein are: first, whether plaintiffs, both those paid on a monthly and daily basis, are entitled to
the benefit granted in article 302 of the Code of Commerce; and secondly, if they are so entitled, was their waiver of
such benefits legal and valid?
Article 302 of the Code of Commerce reads as follows:
ART. 302. In cases in which no special time is fixed in the contracts of service, any one of the parties thereto
may cancel it, advising the other party thereof one month in advance.
The factor or shop clerk shall be entitled, in such case, to the salary due for said month.
It is a clear doctrine, as gleaned from the provision of the law and settled jurisprudence,

1 that in a mercantile contract of


service in which no special time is fixed, any one of the parties may cancel said contract upon giving of a one-month notice, called a mesada, to the other party.
The law gives an added proviso that in the case of factors or shop clerks, these shall be entitled to salary during this one month of standing notice. In any case, the
one-month notice must be given to any employee, whether factor, shop clerk or otherwise, so long as the two conditions concur, namely, that no special time is
fixed in the contract of service, and that said employee is a commercial employee. And when such notice is not given under these conditions, not only the factor or
shop clerk but any employee discharged without cause, is entitled to indemnity which may be one month's salary. 2

In the instant case, there lies no doubt that plaintiffs are commercial employees of appellant corporations, rendering
service as warehousemen, carpenter-foreman and guards. There is likewise no doubt as can be seen from the
contracts of employment submitted as exhibits, that no special time has been fixed in the contracts of services
between plaintiffs-appellees and defendants-appellants. The stated computation or manner of payment, whether
monthly or daily, does not represent nor determine a special time of employment. Thus, a commercial employee
may be employed for one year and yet receive his salary on the daily or weekly or monthly or other basis.
Appellants allege that the use of the word "temporary" in the contracts of services of some of the plaintiffs shows
that their employment was with a term, and the term was "temporary, on a day to day basis." The record discloses

that this conclusion is unwarranted. The contracts simply say "You are hereby employed as temporary guard with
a compensation at the rate of P5 a day . . . ." The word "temporary" as used herein does not mean the special time
fixed in the contracts referred to in article 302 of the Code of Commerce. The daily basis therein stipulated is for the
computation of pay, and is not necessarily the period of employment. Hence, this Court holds that plaintiffsappellants come within the purview of article 302 of the Code of Commerce.
Now, as the second question, namely, the validity of plaintiffs' waiver of the benefits given them by said article 302.
This court holds that such a waiver, made in advance, is void as being contrary to public policy. Granting that the
"mesada" given in article 302 of the Code of Commerce, is for the bilateral benefit of both employer and employee,
nevertheless, this does not preclude the finding that a waiver of such "mesada" in advance by the employee is
contrary to public policy.
Public policy, with regard to labor, is clearly stated in article II, section 5, of the Philippine Constitution, which reads

The promotion of social justice to insure the well-being and economic security of all the people should be the
concern of the State.
and article XIV, section 6, which reads
The State shall afford protection to labor, especially to working women and minors, and shall regulate the
relations between land-owner and tenant, and between labor and capital in industry and in agriculture. . . .
Article 302 of the Code of Commerce must be applied in consonance with these provisions of our constitution. In the
matter of employment bargaining, there is no doubt that the employer stands on higher footing than the employee.
First of all, there is greater supply than demand for labor. Secondly, the need for employment by labor comes from
vital and even desperate, necessity. Consequently, the law must protect labor, at least, to the extent of raising him to
equal footing in bargaining relations with capital and to shield him from abuses brought about by the necessity for
survival. It is safe to presume therefore, that an employee or laborer who waives in advance any benefit granted him
by law does so, certainly not in his interest or through generosity but under the forceful intimidation of urgent need,
and hence, he could not have so acted freely and voluntarily.
For all the foregoing, this court hereby affirms the decision of the lower court, with costs against appellants.
Ozaeta, Paras, Feria, Pablo, Tuason, Bengzon and Reyes, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48926 December 14, 1987
MANUEL SOSITO, petitioner,
vs.
AGUINALDO DEVELOPMENT CORPORATION, respondent.

CRUZ, J.:
We gave due course to this petition and required the parties to file simultaneous memoranda on the sole question of
whether or not the petitioner is entitled to separation pay under the retrenchment program of the private respondent.
The facts are as follows:
Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging company, and was in charge of
logging importation, with a monthly salary of P675.00, 1 when he went on indefinite leave with the consent of the company on January 16,
1976. 2

On July 20, 1976, the private respondent, through its president, announced a retrenchment program and offered
separation pay to employees in the active service as of June 30, 1976, who would tender their resignations not later than July
31, 1976. The petitioner decided to accept this offer and so submitted his resignation on July 29, 1976, "to avail himself of the
gratuity benefits" promised. 3 However, his resignation was not acted upon and he was never given the separation pay he
expected. The petitioner complained to the Department of Labor, where he was sustained by the labor arbiter. 4 The
company was ordered to pay Sosito the sum of P 4,387.50, representing his salary for six and a half months. On appeal to
the National Labor Relations Commission, this decision was reversed and it was held that the petitioner was not covered by
the retrenchment program. 5 The petitioner then came to us.

For a better understanding of this case, the memorandum of the private respondent on its retrenchment program is
reproduced in full as follows:
July 20,
1976
Memorandum To: ALL EMPLOYEES
Re: RETRENCHMENT PROGRAM
As you are all aware, the operations of wood-based industries in the Philippines for the last two (2)
years were adversely affected by the worldwide decline in the demand for and prices of logs and wood
products. Our company was no exception to this general decline in the market, and has suffered
tremendous losses. In 1975 alone, such losses amounted to nearly P20,000,000.00.
The company has made a general review of its operations and has come to the unhappy decision of
the need to make adjustments in its manpower strength if it is to survive. This is indeed an unfortunate
and painful decision to make, but it leaves the company no alternative but to reduce its tremendous
and excessive overhead expense in order to prevent an ultimate closure.
Although the law allows the Company, in a situation such as this, to drastically reduce it manpower
strength without any obligation to pay separation benefits, we recognize the need to provide our
employees some financial assistance while they are looking for other jobs.
The Company therefore is adopting a retrenchment program whereby employees who are in the active

service as of June 30, 1976 will be paid separation benefits in an amount equivalent to the employee's
one-half (1/2) month's basic salary multiplied by his/her years of service with the Company. Employees
interested in availing of the separation benefits offered by the Company must manifest such intention
by submitting written letters of resignation to the Management not later than July 31, 1976. Those
whose resignations are accepted shall be informed accordingly and shall be paid their separation
benefits.
After July 31, 1976, this offer of payment of separation benefits will no longer be available. Thereafter,
the Company shall apply for a clearance to terminate the services of such number of employees as
may be necessary in order to reduce the manpower strength to such desired level as to prevent further
losses.
(SGD.) JOSE G. RICAFORT
President
N.B.
For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao. 6
It is clear from the memorandum that the offer of separation pay was extended only to those who were in the active
service of the company as of June 30, 1976. It is equally clear that the petitioner was not eligible for the promised
gratuity as he was not actually working with the company as of the said date. Being on indefinite leave, he was not
in the active service of the private respondent although, if one were to be technical, he was still in its employ. Even
so, during the period of indefinite leave, he was not entitled to receive any salary or to enjoy any other benefits
available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the expense of the private respondent. He
has insulated himself from the insecurities of the floundering firm but at the same time would demand the benefits it
offers. Being on indefinite leave from the company, he could seek and try other employment and remain there if he
should find it acceptable; but if not, he could go back to his former work and argue that he still had the right to return
as he was only on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on leave; on the contrary, the record
shows that he voluntarily sought the indefinite leave which the private respondent granted. It is strange that the
company should agree to such an open-ended arrangement, which is obviously one-sided. The company would not
be free to replace the petitioner but the petitioner would have a right to resume his work as and when he saw fit.
We note that under the law then in force the private respondent could have validly reduced its work force because of
its financial reverses without the obligation to grant separation pay. This was permitted under the original Article
272(a), of the Labor Code, 7 which was in force at the time. To its credit, however, the company voluntarily offered
gratuities to those who would agree to be phased out pursuant to the terms and conditions of its retrenchment program, in
recognition of their loyalty and to tide them over their own financial difficulties. The Court feels that such compassionate
measure deserves commendation and support but at the same time rules that it should be available only to those who are
qualified therefore. We hold that the petitioner is not one of them.

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 labor dispute will be automatically decided in favor of labor. Management also has its
own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, this Court has inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us 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.
WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, with costs against the
petitioner.
SO ORDERED.

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73681 June 30, 1988
COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,
vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

PARAS, J.:
Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent Minister of Labor and
Employment (MOLE) directly certifying private respondent as the recognized and duly-authorized collective
bargaining agent for petitioner's sales force and ordering the reinstatement of three employees of petitioner.
Acting on the petition for certiorari with prayer for temporary restraining order, this Court issued a Temporary
Restraining Order enjoining respondents from enforcing and/or carrying out the assailed order.
The antecedent facts are as follows:
On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor Relations (BLR) on ground
of unfair labor practice consisting of alleged refusal to bargain, dismissal of union officers/members; and coercing
employees to retract their membership with the union and restraining non-union members from joining the union.
After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition of petitioner assumed
jurisdiction over the dispute pursuant to Article 264 (g) of the Labor Code, Thereafter the case was captioned AJML3-142-85, BLR-3-86-85 "In Re: Assumption of Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines,
Inc." In its position paper, petitioner pointed out that
(a) There is no legal basis for the charge that the company refused to bargain collectively with the
union considering that the alleged union is not the certified agent of the company salesmen;
(b) The union's status as a legitimate labor organization is still under question because on 6 March
1985, a certain Monchito Rosales informed the BLR that an overwhelming majority of the salesmen are
not in favor of the Notice of Strike allegedly filed by the Union (Annex "C");
(c) Upon verification of the records of the Ministry of Labor and Employment, it appeared that a petition
for cancellation of the registration of the alleged union was filed by Monchito Rosales on behalf of
certain salesmen of the company who are obviously against the formation of the Colgate Palmolive
Sales Labor Union which is supposed to represent them;
(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador Reynante and Cornelio
Mejia, and their eventual dismissal from the employ of the company were carried out pursuant to the
inherent right and prerogative of management to discipline erring employees; that based on the
preliminary investigation conducted by the company, there appeared substantial grounds to believe that
Sayson, Reynante and Mejia violated company rules and regulations necessitating their suspension
pending further investigation of their respective cases;
(e) It was also ascertained that the company sustained damages resulting from the infractions
committed by the three salesmen, and that the final results of the investigation fully convinced the
company of the existence of just causes for the dismissal of the three salesmen;

(f) The formation of the union and the membership therein of Sayson, Reynante and Mejia were not in
any manner connected with the company's decision to dismiss the three; that the fact that their
dismissal came at a time when the alleged union was being formed was purely coincidental;
(g) The union's charge therefore, that the membership in the union and refusal to retract precipitated
their dismissal was totally false and amounted to a malicious imputation of union busting;
(h) The company never coerced or attempted to coerce employees, much less interferred in the
exercise of their right to self-organization; the company never thwarted nor tried to defeat or frustrate
the employees' right to form their union in pursuit of their collective interest, as long as that right is
exercised within the limits prescribed by law; in fact, there are at present two unions representing the
rank and file employees of the company-the factory workers who are covered by a CBA which expired
on 31 October 1985 (which was renewed on May 31, 1985) and are represented by Colgate Palmolive
Employees Union (PAFLU); whereas, the salaried employees are covered by a CBA which will expire
on 31 May 1986 represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office
Chapter. (pp. 4-6, Rollo)
The respondent Union, on the other hand, in its position paper, reiterated the issue in its Notice to Strike, alleging
that it was duly registered with the Bureau of Labor Relations under Registry No. 10312-LC with a total membership
of 87 regular salesmen (nationwide) out of 117 regular salesmen presently employed by the company as of
November 30, 1985 and that since the registration of the Union up to the present, more than 2/3 of the total
salesmen employed are already members of the Union, leaving no doubt that the true sentiment of the salesmen
was to form and organize the Colgate-Palmolive Salesmen Union. The Union further alleged that the company is
unreasonably delaying the recognition of the union because when it was informed of the organization of the union,
and when presented with a set of proposals for a collective bargaining agreement, the company took an adversarial
stance by secretly distributing a "survey sheet on union membership" to newly hired salesmen from the Visayas,
Mindanao and Metro Manila areas, purposely avoiding regular salesmen who are now members of the union; that in
the accomplishment of the form, District Sales Managers, and Sales Supervisors coerced salesmen from the
Visayas and Mindanao by requiring them to fill up and/or accomplish said form by checking answers which were
adverse to the union; that with a handful of the survey sheets secured by management through coercion, it now
would like to claim that all salesmen are not in favor of the organization of the union, which acts are clear
manifestations of unfair labor practices.
On August 9,1985, respondent Minister rendered a decision which:
(a) found no merit in the Union's Complaint for unfair labor practice allegedly committed by petitioner as
regards the alleged refusal of petitioner to negotiate with the Union, and the secret distribution of
survey sheets allegedly intended to discourage unionism,
(b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio Mejia "not without
fault" and that "the company 1 has grounds to dismiss above named salesmen"
and at the same time respondent Minister directly certified the respondent Union as the collective bargaining agent
for the sales force in petitioner company and ordered the reinstatement of the three salesmen to the company on
the ground that the employees were first offenders.
Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his assailed Order, dated
December 27, 1985. Petitioner now comes to Us with the following:
Assignment of Errors
I
Respondent Minister committed a grave abuse of discretion when he directly certified the Union solely
on the basis of the latter's self-serving assertion that it enjoys the support of the majority of the sales
force in petitioner's company.
II
Respondent Minister committed a grave abuse of discretion when, notwithstanding his very own finding
that there was just cause for the dismissal of the three (3) salesmen, he nevertheless ordered their
reinstatement. (pp. 7-8, Rollo)
Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case assumed by him
under Art. 264 (g) of the Labor Code but this power was exceeded when he certified respondent Union as the

exclusive bargaining agent of the company's salesmen since this is not a representation proceeding as described
under the Labor Code. Moreover the Union did not pray for certification but merely for a finding of unfair labor
practice imputed to petitioner-company.
The petition merits our consideration. The procedure for a representation case is outlined in Arts. 257-260 of the
Labor Code, in relation to the provisions on cancellation of a Union registration under Arts. 239-240 thereof, the
main purpose of which is to aid in ascertaining majority representation. The requirements under the law, specifically
Secs. 2, 5, and 6 of Rule V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the
certified bargaining representative is the true choice of the employees against all contenders. The Constitutional
mandate that the State shall "assure the rights of the workers to self-organization, collective bargaining, security of
tenure and just and humane conditions of work," should be achieved under a system of law such as the
aforementioned provisions of the pertinent statutes. When an overzealous official by-passes the law on the pretext
of retaining a laudable objective, the intendment or purpose of the law will lose its meaning as the law itself is
disregarded. When respondent Minister directly certified the Union, he in fact disregarded this procedure and its
legal requirements. There was therefore failure to determine with legal certainty whether the Union indeed enjoyed
majority representation. Contrary to the respondent Minister's observation, the holding of a certification election at
the proper time is not necessarily a mere formality as there was a compelling legal reason not to directly and
unilaterally certify a union whose legitimacy is precisely the object of litigation in a pending cancellation case filed by
certain "concerned salesmen," who also claim majority status. Even in a case where a union has filed a petition for
certification elections, the mere fact that no opposition is made does not warrant a direct certification. More so as in
the case at bar, when the records of the suit show that the required proof was not presented in an appropriate
proceeding and that the basis of the direct certification was the Union's mere allegation in its position paper that it
has 87 out of 117 regular salesmen. In other words, respondent Minister merely relied on the self-serving assertion
of the respondent Union that it enjoyed the support of the majority of the salesmen, without subjecting such
assertion to the test of competing claims. As pointed out by petitioner in its petition, what the respondent Minister
achieved in rendering the assailed orders was to make a mockery of the procedure provided under the law for
representation cases because:
(a) He has created havoc by impliedly establishing a procedural short-cut to obtaining a direct
certification-by merely filing a notice of strike.
(b) By creating such a short-cut, he has officially encouraged disrespect for the law.
(c) By directly certifying a Union without sufficient proof of majority representation, he has in effect
arrogated unto himself the right, vested naturally in the employees, to choose their collective bargaining
representative.
(d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose majority
representation is under serious question. This is highly irregular because while the Union enjoys the
blessing of the Minister, it does not enjoy the blessing of the employees. Petitioner is therefore under
threat of being held liable for refusing to negotiate with a union whose right to bargaining status has not
been legally established. (pp. 9-10, Rollo)
The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence
was sufficient to warrant the dismissal of the employees the law warrants their dismissal without making any
distinction between a first offender and a habitual delinquent. Under the law, respondent Minister is duly mandated
to equally protect and respect not only the labor or workers' side but also the management and/or employers' side.
The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. To
order the reinstatement of the erring employees namely, Mejia, Sayson and Reynante would in effect encourage
unequal protection of the laws as a managerial employee of petitioner company involved in the same incident was
already dismissed and was not ordered to be reinstated. As stated by Us in the case of San Miguel Brewery vs.
National Labor Union, 2 "an employer cannot legally be compelled to continue with the employment of a person who
admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the service of the
latter is patently inimical to his interest."

In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the dismissal of the employees to
the assumption order created a doubt as to whether their dismissal was really for just cause or due to their activities." 4

This is of no moment for the following reasons:


(a) Respondent Minister has still maintained in his assailed order that a just cause existed to justify the dismissal of
the employees.

(b) Respondent Minister has not made any finding substantiated by evidence that the employees were dismissed
because of their union activities.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the respondent
Minister, dated December 27, 1985 for grave abuse of discretion. However, in view of the fact that the dismissed
employees are first offenders, petitioner is hereby ordered to give them separation pay. The temporary restraining
order is hereby made permanent.
SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

Footnotes
1 Petitioner company.
2 97 Phil. 378.
3 Oceanic Commercial Employees and Labor Assn. v. Oceanic Commercial, Inc., case No. 5787 UCPCIR, Acting Secretary of Labor, December 9,1978.
4 P. 13, Rollo.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 155421

July 7, 2004

ELMER M. MENDOZA, petitioner,


vs.
RURAL BANK OF LUCBAN, respondent.

DECISION

PANGANIBAN, J.:
The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with
business judgments of employers, provided they do not violate the law, collective bargaining agreements, and
general principles of fair play and justice. The transfer of personnel from one area of operation to another is
inherently a managerial prerogative that shall be upheld if exercised in good faith -- for the purpose of advancing
business interests, not of defeating or circumventing the rights of employees.
The Case
The Court applies these principles in resolving the instant Petition for Review1 under Rule 45 of the Rules of Court,
assailing the June 14, 2002 Decision2 and September 25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR
SP No. 68030. The assailed Decision disposed as follows:
"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."4
The challenged Resolution denied petitioner's Motion for Reconsideration.
The Facts
On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution Nos. 99-52 and
99-53, which read:
"Board Res. No. 99-52
"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to familiarize bank
employees with the various phases of bank operations and further strengthen the existing internal control
system[,] all officers and employees are subject to reshuffle of assignments. Moreover, this resolution does
not preclude the transfer of assignment of bank officers and employees from the branch office to the head
office and vice-versa."
"Board Res. No. 95-53
"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new
assignments without changes in their compensation and other benefits.
NAME OF EMPLOYEES

PRESENT ASSIGNMENT

NEW ASSIGNMENT

JOYCE V. ZETA

Bank Teller

C/A Teller

CLODUALDO ZAGALA

C/A Clerk

Actg. Appraiser

ELMER L. MENDOZA

Appraiser

Clerk-Meralco Collection

CHONA R. MENDOZA

Clerk-Meralco Collection

Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of
the bank's Tayabas branch, to implement the reshuffle.6 The new assignments were to "be effective on May 1, 1999
without changes in salary, allowances, and other benefits received by the aforementioned employees."7
On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his opinion on the
reshuffle, as follows:
"RE: The recent reshuffle of employees as per
Board Resolution dated April 25, 1999
"Dear Sir:
"This is in connection with the aforementioned subject matter and which the undersigned received on April 25,
1999.
"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-Meralco
Collection is deemed to be a demotion without any legal basis. Before this action on your part[,] the
undersigned has been besieged by intrigues due to [the] malicious machination of a certain public official who
is bruited to be your good friend. These malicious insinuations were baseless and despite the fact that I have
been on my job as Appraiser for the past six (6) years in good standing and never involved in any anomalous
conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a
prelude to my termination in due time. This will constitute an unfair labor practice.
"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason
[for] my being reshuffled is made clear.
"Your kind consideration on this request will be highly appreciated."8
On May 10, 1999, Daya replied:
"Dear Mr. Mendoza,
"Anent your undated letter expressing your resentment/comments on the recent management's decision to
reshuffle the duties of bank employees, please be informed that it was never the intention (of management) to
downgrade your position in the bank considering that your due compensation as Bank Appraiser is
maintained and no future reduction was intended.
"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also
afford management an effective tool in providing the bank a sound internal control system/check and balance
and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of employees
shall be made at the discretion of management which may include bank officers, if necessary as expressed in
Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties of employees, their
position title [may be] retained if requested formally.
"Being a standard procedure in maintaining an effective internal control system recommended by the Bangko
Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank management."9
On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave
of absence from work:
"Dear Sir:
"I wish I could continue working but due to the ailment that I always feel every now and then, I have the honor
to apply for at least ten (10) days sick leave effective June 7, 1999.
"Hoping that this request [merits] your favorable and kind consideration and understanding."10

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for twenty days effective
on the same date.11
On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before Arbitration Branch No.
IV of the National Labor Relations Commission (NLRC). The Complaint -- for illegal dismissal, underpayment,
separation pay and damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and
its Tayabas branch manager, Briccio V. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.12
The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring respondents guilty of illegal dismissal.
2. Ordering respondents to reinstate complainant to his former position without loss of seniority rights
with full backwages from date of dismissal to actual reinstatement in the amount of P55,000.00 as of
June 30, 2000.
3. Ordering the payment of separation pay if reinstatement is not possible in the amount of P30,000.00
in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus afforded the
employees.
4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount of
P5,000.00
5. Ordering the payment of moral damages in the amount of P50,000.00.
6. Ordering the payment of exemplary damages in the amount of P25,000.00
7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of the monetary
award."13
On appeal, the NLRC reversed the labor arbiter.14 In its July 18, 2001 Resolution, it held:
"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its implementation of
its Board Resolution directing the reshuffle of employees at its Tayabas branch to positions other than those
they were occupying. While at first the employees thereby affected would experience difficulty in adjusting to
their new jobs, it cannot be gainsaid that the objective for the reshuffle is noble, as not only would the
employees obtain additional knowledge, they would also be more well-rounded in the operations of the bank
and thus help the latter further strengthen its already existing internal control system.
"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an appraiser
he was made to perform the work of a clerk in the collection of Meralco payments, which he may have
considered as beneath him and his experience, being a pioneer employee. But it cannot be discounted either
that other employees at the Tayabas branch were similarly reshuffled. The only logical conclusion therefore is
that the Board Resolution was not aimed solely at the [petitioner], but for all the other employees of the x x x
bank as well. Besides, the complainant has not shown by clear, competent and convincing evidence that he
holds a vested right to the position of Appraiser. x x x.
"How and by what manner a business concern conducts its affairs is not for this Commission to interfere with,
especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad faith or illwill. x x x."15
After the NLRC denied his Motion for Reconsideration,16 petitioner brought before the CA a Petition for Certiorari17
assailing the foregoing Resolution.
Ruling of the Court of Appeals
Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:
"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the reshuffling of
employees at the bank is but a figment of his imagination as there is no evidence extant on record which
substantiates the same. His alleged demotion, the 'cold shoulder' stance, the things about his chair and table,
and the alleged reason for the harassment are but allegations bereft of proof and are perforce inadmissible as

self-serving statements and can never be considered repositories of truth nor serve as foundations of court
decisions anent the resolution of the litigants' rights.
"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no
[diminution] of his salary benefits and rank. He could even retain his position title, had he only requested for it
pursuant to the reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the
reshuffle. There is, therefore, no cause to doubt the reasons which the bank propounded in support of its
move to reshuffle its employees, viz:
1. to 'familiarize bank employees with the various phases of bank operations,' and
2. to 'further strengthen the existing internal control system' of the bank.
"The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of
constructive dismissal.
"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify
that the bank has dismissed the former from its employ. Mendoza separated himself from the bank's employ
when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer for no
apparent reason at all."18
Hence, this Petition.19
The Issues
Petitioner raises the following issues for our consideration:
"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or
abandoned his job when he filed his Complaint for constructive and consequently illegal dismissal;
"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith and cannot be
made as the basis of a finding of constructive dismissal, even as the [petitioner's] demotion in rank is admitted
by both parties;
"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department
Store (323 SCRA 445)] is applicable to the case at bar;
"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims, damages, and
unpaid salaries for the period July 1-30, 1999, although this was not disputed by the private respondent; and
"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a nullity
since the appeal filed by private respondent before the NLRC on August 5, 2000 was on the 15th day or five
(5) days beyond the reglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules of
Procedure."20
In short, the main issue is whether petitioner was constructively dismissed from his employment.
The Court's Ruling
The Petition has no merit.
Main Issue:
Constructive Dismissal
Constructive dismissal is defined as an involuntary resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to the employee.21 Petitioner argues
that he was compelled to file an action for constructive dismissal, because he had been demoted from appraiser to
clerk and not given any work to do, while his table had been placed near the toilet and eventually removed.22 He
adds that the reshuffling of employees was done in bad faith, because it was designed primarily to force him to
resign.23
Management Prerogative
to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to
interfere in legitimate business decisions of employers.24 Indeed, labor laws discourage interference in employers'
judgments concerning the conduct of their business.25 The law must protect not only the welfare of employees, but
also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees
from one office or area of operation to another -- provided there is no demotion in rank or diminution of salary,
benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a
form of punishment or demotion without sufficient cause.26 This privilege is inherent in the right of employers to
control and manage their enterprise effectively.27 The right of employees to security of tenure does not give them
vested rights to their positions to the extent of depriving management of its prerogative to change their assignments
or to transfer them.28
Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and
general principles of fair play and justice.29 The test for determining the validity of the transfer of employees was
explained in Blue Dairy Corporation v. NLRC30 as follows:
"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play.
Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be
used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must
be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it
involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer
fail to overcome this burden of proof, the employee's transfer shall be tantamount to constructive dismissal,
which has been defined as a quitting because continued employment is rendered impossible, unreasonable
or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal
exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable
to the employee leaving him with no option but to forego with his continued employment."31
Petitioner's Transfer Lawful
The employer bears the burden of proving that the transfer of the employee has complied with the foregoing test. In
the instant case, we find no reason to disturb the conclusion of the NLRC and the CA that there was no constructive
dismissal. Their finding is supported by substantial evidence -- that amount of relevant evidence that a reasonable
mind might accept as justification for a conclusion.32
Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various
phases of bank operations and further strengthen the existing internal control system"33 of all officers and
employees. We have previously held that employees may be transferred -- based on their qualifications, aptitudes
and competencies -- to positions in which they can function with maximum benefit to the company.34 There appears
no justification for denying an employer the right to transfer employees to expand their competence and maximize
their full potential for the advancement of the establishment. Petitioner was not singled out; other employees were
also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges and other
benefits. This fact is clear in respondent's Board Resolutions, the April 30, 1999 letter of Bank President Daya to
Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no credence by both
lower tribunals was his bare and self-serving statement that he had been positioned near the comfort room, made to
work without a table, and given no work assignment.35 Purely conjectural is his claim that the reshuffle of personnel
was a harassment in retaliation for an alleged falsification case filed by his relatives against a public official.36 While
the rules of evidence prevailing in courts of law are not controlling in proceedings before the NLRC,37 parties must
nonetheless submit evidence to support their contentions.
Secondary Issues:
Serrano v. NLRC Inapplicable
Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled therein that the lack of notice and
hearing made the dismissal of the employee ineffectual, but not necessarily illegal.39 Thus, the procedural infirmity

was remedied by ordering payment of his full back wages from the time of his dismissal.40 The absence of
constructive dismissal in the instant case precludes the application of Serrano. Because herein petitioner was not
dismissed, then he is not entitled to his claimed monetary benefits.
Alleged Nullity of NLRC
and CA Proceedings
Petitioner argues that the proceedings before the NLRC and the CA were void, since respondent's appeal before the
NLRC had allegedly been filed beyond the reglementary period.41 A careful scrutiny of his Petition for Review42 with
the appellate court shows that this issue was not raised there. Inasmuch as the instant Petition challenges the
Decision of the CA, we cannot rule on arguments that were not brought before it. This ruling is consistent with the
due-process requirement that no question shall be entertained on appeal, unless it has been raised in the court
below.43
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002 Resolution of
the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes
1 Rollo, pp. 3-31.
2 Id., pp. 33-48. Fifteenth Division. Penned by Justice Oswaldo D. Agcaoili (chairman), with the concurrence

of Justices Eriberto U. Rosario Jr. and Danilo B. Pine (members).


3 Id., p. 50.
4 Assailed Decision, p. 15; rollo, p. 47.
5 Rollo, p. 119.
6 Assailed Decision, pp. 2-3; rollo, pp. 34-35.
7 Letter of Alejo B. Daya dated April 30, 1999; rollo, p. 120.
8 Rollo, p. 121.
9 Letter of Daya dated May 10, 1999; rollo, p. 122.
10 Letter of petitioner dated June 7, 1999; rollo, p. 123.
11 Letter of petitioner dated June 21, 1999; rollo, p. 124.
12 Assailed Decision, p. 6; rollo, p. 38.
13 Decision of Labor Arbiter Waldo Emerson R. Gan dated June 14, 2000, p. 5-6; rollo, pp. 145-146.
14 CA Decision dated June 14, 2002, pp. 11-12; rollo, pp. 43-44.
15 NLRC Resolution dated July 18, 2001, pp. 4-5; rollo, pp. 79-80.
16 Assailed Decision, p. 12; rollo, p. 44.
17 Rollo, pp. 51-74.
18 Assailed Decision, pp. 14-15; rollo, pp. 46-47.

Today is Monday, December 12, 2016

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 to
P2,441,375 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 for
P2.5MM. 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

P1.8 Million
.8

Far East Bank

2.0

MBTC

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 VicePresident 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 of
P836,637.08. 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

VIOLATIONS

PENALTIES
1st

2nd

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

3rd

4th

Dismissal*

* 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 of
P500,000 was approved by him without higher management approval. The respondent, likewise, admitted noncompliance 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, is
REINSTATED.
SO ORDERED.
Puno, Austria-Martinez, Tinga, and Chico-Nazario*, JJ., concur.
Footnotes
* On leave.
1 Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Eriberto U. Rosario, Jr. and

Danilo B. Pine, concurring; Rollo, pp. 69-90..


2 Rollo, p. 200.
3 Id. at 201-202.
4 Id. at 205.
5 Id. at 206.
6 Id. at 209-210.
7 CA Rollo, p. 145.
8 Id. at 148-152.
9 Id. at 237.
10 Rollo, pp. 69-90.
11 Id. at 89. (Citations omitted).
12 Id. at 92.
13 Id. at 45.
14 Bantolino v. Coca-Cola Bottlers Phils., Inc., 403 SCRA 699 (2003).
15 Rabago v. NLRC, 200 SCRA 158 (1991).
16 Columbus Philippines Bus Corp. v. NLRC, 364 SCRA 606 (2001).
17 Bantolino v. Coca-Cola Bottlers Phils., Inc., supra.
18 Id. at 704.
19 Ignacio v. Coca-Cola Bottlers Phils., Inc., 365 SCRA 418 (2001).

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,


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

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5


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

US$ 413.90

June 01/30, 1998

2,590.00

July 01/31, 1998

2,590.00

August 01/31, 1998

2,590.00

Sept. 01/30, 1998

2,590.00

Oct. 01/31, 1998

2,590.00

Nov. 01/30, 1998

2,590.00

Dec. 01/31, 1998

2,590.00

Jan. 01/31, 1999

2,590.00

Feb. 01/28, 1999

2,590.00

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

1,640.00
----------------------------------------------------------------------------25,382.23

Amount adjusted to chief mate's salary


(March 19/31, 1998 to April 1/30, 1998) +

1,060.5010
-------------------------------------------------------------------------------------------

TOTAL CLAIM

US$ 26,442.7311

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


The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding
him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the
complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are
hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the

rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED
SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months of
the unexpired portion of the aforesaid contract of employment.
1avvphi1

The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S.
DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the
exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees
equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period
of three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's
employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00,
consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, +
US$490.00/month, vacation leave pay = US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the
LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the
Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17 that in case of illegal
dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay
complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of
payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential

45.00

US$4,245.00
3. 10% Attorneys fees

424.50

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

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary
rate; however, the CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the
following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker
back wages equal to the unexpired portion of his contract of employment instead of limiting it to three
(3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely
erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the
petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment
of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court
of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical treatment and medication.29 Required to comment,
counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award
and, at the same time, praying that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the
petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise
not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is
only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of
US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00
awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his
salaries for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of
US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to
negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed
salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino
workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of
illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared
illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two groups;33
and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights and
welfare of all Filipino workers, whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing

jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this,
petitioner urges the Court to sort them out for the guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but
to benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum,
viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis
supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the wellbeing of OFWs. Not only that, the provision makes foreign employers better off than local employers because in
cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of
only three months of the unexpired employment contract while local employers are liable for the full lump-sum
salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they have to give
their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the
matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the
maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries
and other emoluments he is entitled to under his fixed-period employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained,
for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which
was when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not
have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract,
the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of
money claims, as this was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such
that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction,
or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor
Relations Commission43 and Millares v. National Labor Relations Commission,44 OFWs are contractual employees
who can never acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs;
that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject
clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the
Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a
conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised by a proper
party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case,50
otherwise the Court will dismiss the case or decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three
months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue
be raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court,
such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial
and, if not considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the CA.54
Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining questions of fact to which the legislative policy of
R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the
law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity
of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's interposition of the
constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up
the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment
contract, and not just for a period of three months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,58
and cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions
are read into contracts and deemed a part thereof.60 Thus, the non-impairment clause under Section 10, Article II is
limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the
State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the
noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61
Police power legislations adopted by the State to promote the health, morals, peace, education, good order, safety,
and general welfare of the people are generally applicable not only to future contracts but even to those already in

existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote
public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the
equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to
place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic
security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all
monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws
which is enjoyed by, or spared the burden imposed on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system
of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it
is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing
conditions only; and 4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a
law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be
rationally related to serving a legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the
government must show that the challenged classification serves an important state interest and that the
classification is at least substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a
legislative classification which impermissibly interferes with the exercise of a fundamental right70 or operates to the
peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the government to
prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive
means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on race74 or
gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc.
v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas
(BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the
Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from
the SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on
salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the
constitutionality of said provision. More significantly, it was in this case that the Court revealed the broad outlines of
its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded
recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops
where the classification violates a fundamental right, or prejudices persons accorded special protection by the
Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of
constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational
basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter
judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and
authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support
many of our decisions. We should not place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to our own decisions through the employment of our

own endowments. We live in a different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of
law and justice. Our laws must be construed in accordance with the intention of our own lawmakers and such intent
may be deduced from the language of each law and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our
laws. And it need not be stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective
judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims
"equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote
social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are
clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the
Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable
measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less privilege in life should have more in
law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches
but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws
and the equalization of social and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be
based on the "rational basis" test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice
against persons favored by the Constitution with special protection, judicial scrutiny ought to be more
strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any
law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will
be struck down regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is
akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit
specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are
competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the
SSL while employees higher in rank - possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all,
the rank-and-file employees consist of people whose status and rank in life are less and limited, especially in terms
of job marketability, it is they - and not the officers - who have the real economic and financial need for the
adjustment . This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of
Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs
the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to
OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at
two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of

one year or more;


Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one
year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations Commission79
(Second Division, 1999) that the Court laid down the following rules on the application of the periods prescribed
under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed
overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or
three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1) year or more. This is evident from the
words "for every year of the unexpired term" which follows the words "salaries x x x for three months." To
follow petitioners thinking that private respondent is entitled to three (3) months salary only simply because it is the
lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some.
This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care should be taken
that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis
supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded
his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5).
One was Asian Center for Career and Employment System and Services v. National Labor Relations Commission
(Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract, but
was dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him
SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized
cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private
respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half
months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired
portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation
of the Monetary
Award

Skippers v.
Maguad84

6 months

2 months

4 months

4 months

Bahia Shipping
v. Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial
Transmarine v.

9 months

4 months

5 months

5 months

dela Cruz l86


Talidano v.
Falcon87

12 months

3 months

9 months

3 months

Univan v. CA 88

12 months

3 months

9 months

3 months

Oriental v. CA

12 months

more than 2
months

10 months

3 months

PCL v. NLRC90

12 months

more than 2
months

more or less 9
months

3 months

Olarte v.
Nayona91

12 months

21 days

11 months and 9
days

3 months

JSS v.Ferrer92

12 months

16 days

11 months and
24 days

3 months

9 months and
7 days

2 months and 23
days

2 months and 23
days

89

Pentagon
Adelantar93

v. 12 months

Phil. Employ v.
Paramio, et
al.94

12 months

10 months

2 months

Unexpired portion

Flourish
Maritime v.
Almanzor 95

2 years

26 days

23 months and 4
days

6 months or 3
months for each
year of contract

Athenna
Manpower v.
Villanos 96

1 year, 10
months and
28 days

1 month

1 year, 9 months
and 28 days

6 months or 3
months for each
year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category
includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are
entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with
fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary
award equivalent to only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked
for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast,
the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts
were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in
Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract
of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15
months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the
same employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be
entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will
be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract,
instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser
amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the
effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of their
employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix
below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in the


Computation of the
Monetary Award

ATCI v. CA, et
al.98

2 years

2 months

22 months

22 months

Phil. Integrated
v. NLRC99

2 years

7 days

23 months
and 23 days

23 months and 23
days

JGB v. NLC100

2 years

9 months

15 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC,
et al.102

2 years

5 months

19 months

19 months

Barros v.
NLRC, et al.103

12 months

4 months

8 months

8 months

Philippine
Transmarine v.
Carilla104

12 months

6 months
and 22 days

5 months and
18 days

5 months and 18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof,
were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims
were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of
their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category
whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of
having their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired
contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the
accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is
less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term"
means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is
significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be
no occasion for such unexpired term to be measured by every year; and second, the original term must be more
than one year, for otherwise, whatever would be the unexpired term thereof will not reach even a year.
Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months for
every year of the unexpired term, whichever is less" shall apply is not the length of the original contract period as
held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in
cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the
original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods
are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be
entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one
year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited
to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month.
OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least
12 months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject

clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to
US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally
dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term
employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce
(1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of
a fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of
said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the
provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a
shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment.
The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixedterm employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which
provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or
manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally
dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was replaced
by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work
cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so
as to apply the provision to local workers who are employed for a time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine
and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586,
local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms
of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the
contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of reducing the damages resulting from such
wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is
the amount which he would be entitled to had he continued in such employment until the termination of the period.
(Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)115
(Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of

Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the
Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged.
However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on
the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the
new Civil Code was already in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople,119
involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor
Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-period
employment contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract.
The Court arrived at the same ruling in Anderson v. National Labor Relations Commission,121 which involved a
foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired portion of his
contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a
security officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he
was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an OFW
whose 12-month contract was illegally cut short in the second month was declared entitled to his salaries for the
remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged
were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for
the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of
the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment
contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no
such limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the computation of
the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on
the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims
of other OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now
subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest
through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution
and calibrated by history.124 It is akin to the paramount interest of the state125 for which some individual liberties
must give way, such as the public interest in safeguarding health or maintaining medical standards,126 or in
maintaining access to information on matters of public concern.127
In the present case, the Court dug deep into the records but found no compelling state interest that the subject
clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of
getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which
otherwise may be made to shoulder millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for
the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed
and are employed under decent and humane conditions.129 (Emphasis supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state
interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill
No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the underlying
reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314
resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of the complaint, the claim arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary
and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be
joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this
Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the
responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such
official may have incurred under other existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as
the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the
transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on
OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no
discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of
the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs
by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected.
There can never be a justification for any form of government action that alleviates the burden of one sector, but
imposes the same burden on another sector, especially when the favored sector is composed of private businesses
such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than
the Constitution commands. The idea that private business interest can be elevated to the level of a compelling
state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis
their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose
without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers,
dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on

their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range
from temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary
measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement
agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and
other OFWs to equal protection.
1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the
subject clause from the lone perspective that the clause directly violates state policy on labor under Section 3,131
Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which this Court
has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the nature of
which, this Court, in Agabon v. National Labor Relations Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in
the sense that these are automatically acknowledged and observed without need for any enabling legislation.
However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights
embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The
espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of
"full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the
broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to continued employment-a utopian notion,
doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector,
but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating
their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right
to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As
manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative
enactments for their enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of
which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of
litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable
right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or
legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the
perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working
class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same
to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied
Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal
protection clause, has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to
substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid
governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of
OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by

foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the
records of the deliberations leading to its enactment or the pleadings of respondent that would indicate that there is
an existing governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that
the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under
Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine
months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A.
No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is evidence that he performed work during those periods.
As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v.
National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions
to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of
the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the
unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042 is DECLARED
UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals
are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING
Associate Justice

CONSUELO YNARES-SANTIAGO
Associate Justice

ANTONIO T. CARPIO
Associate Justice

RENATO C. CORONA
Associate Justice

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50734-37 February 20, 1981
WALLEM PHILIPPINES SHIPPING, INC., petitioner,
vs.
THE HON. MINISTER OF LABOR, in his capacity as Chairman of the National Seamen Board Proper, JAIME
CAUNCA, ANTONIO CABRERA, EFREN GARCIA, JOSE OJEDA and RODOLFO PAGWAGAN, respondents.

DE CASTRO, J.:
Petition for certiorari with preliminary injunction with prayer that the Orders dated December 19, 1977 and April 3,
1979 of the National Seamen Board (NSB) be declared null and void. Private respondents were hired by petitioner
sometime in May 1975 to work as seamen for a period of ten months on board the M/V Woermann Sanaga, a Dutch
vessel owned and operated by petitioner's European principals. While their employment contracts were still in force,
private respondents were dismissed by their employer, petitioner herein, and were discharged from the ship on
charges that they instigated the International Transport Federation (ITF) to demand the application of worldwide ITF
seamen's rates to their crew.
Private respondents were repatriated to the Philippines on October 27, 1975 and upon their arrival in Manila, they
instituted a complaint against petitioner for illegal dismissal and recovery of wages and other benefits corresponding
to the five months' unexpired period of their shipboard employment contract.
In support of their complaint, private respondents submitted a Joint Affidavit 1 stating the circumstances surrounding
their employment and subsequent repatriation to the Philippines, material averments of which are herein below reproduced:

JOINTAFFIDAVIT
xxx xxx xxx
5. That aside from our basic monthly salary we are entitled to two (2) months vacation leave, daily
subsistence allowance of US$8.14 each, daily food allowance of US$2.50. as well as overtime pay
which we failed to receive because our Shipboard Employment Contract was illegally terminated;
6. That while we were in Rotterdam, on or about July 9, 1975, representative of the ITF boarded our
vessel and talked with the Ship's Captain;
7. That the following day, the representatives of the ITF returned and was followed by Mr. M.S.K. Ogle
who is the Company's Administrative Manager, again went to see the Captain;
8. That at around 7:00 in the evening all the crew members were called in the Mess Hall where the ITF
representatives informed us that they have just entered into a "Special Agreement" with the Wallem
Shipping Management, Ltd., represented by Mr. M.S.K. Ogle, Administrative Manager, wherein new
salary rates was agreed upon and that we were going to be paid our salary differentials in view of the
new rates;
9. That in the same meeting, Mr. M.S.K. Ogle also spoke where he told that a Special Agreement has
been signed and that we will be receiving new pay rate and enjoined us to work hard and be good
boys;
10. That the same evening we received our salary differentials based on the new rates negotiated for

us by the ITF.
11. That while we were in the Port Dubai, Saudi Arabia, we were not receiving our pay, since the Ship's
Captain refused to implement the world-wide rates and insisted on paying us the Far East Rate;
12. That the Port Dubai is one that is within the Worldwide rates sphere.
13. That on October 22, 1975, Mr. Greg Nacional Operation Manager of respondent corporation,
arrived in Dubai Saudi Arabia and boarded our ship;
14. That on October 23, 1975, Mr. Nacional called all the crew members, including us to a meeting at
the Mess Hall and there he explained that the Company cannot accept the worldwide rate. The Special
Agreement signed by Mr. Ogle in behalf of the Company is nothing but a scrap of paper. Mr. Jaime
Caunca then asked Mr. Nacional, in view of what he was saying, whether the Company will honor the
Special Agreement and Mr. Nacional answered "Yes". That we must accept the Far East Rates which
was put to a vote. Only two voted for accepting the Far East Rates;
15. That immediately thereafter Mr. Nacional left us;
16. That same evening, Mr. Nacional returned and threatened that he has received a cable from the
Home Office that if we do not accept the Far East Rate, our services will be terminated and there will
be a change in crew;
17. That when Mr. Nacional left, we talked amongst ourselves and decided to accept the Far East
Rates;
18. That in the meeting that evening because of the threat we informed Mr. Nacional we were
accepting the Far East Rate and he made us sign a document to that effect;
19. That we the complainants with the exception of Leopoldo Mamaril and Efren Garcia, were not able
to sign as we were at the time on work schedules, and Mr. Nacional did not bother anymore if we
signed or not;
20. That after the meeting Mr. Nacional cabled the Home Office, informing them that we the
complainants with the exception of Messrs. Mamaril and Garcia were not accepting the Far East Rates;
21. That in the meeting of October 25, 1975, Mr. Nacional signed a document whereby he promised to
give no priority of first preference in "boarding a vessel and that we are not blacklisted";
22. That in spite of our having accepted the Far East Rate, our services were terminated and advised
us that there was a change in crew;
23. That on October 27, 1975, which was our scheduled flight home, nobody attended us, not even our
clearance for our group travel and consequently we were not able to board the plane, forcing us to
sleep on the floor at the airport in the evening of October 27, 1975;
24. That the following day we went back to the hotel in Dubai which was a two hours ride from the
airport, where we were to await another flight for home via Air France;
25. That we were finally able to leave for home on November 2, 1975 arriving here on the 3rd of
November;
26. That we paid for all excess baggages;
27. That Mr. Nacional left us stranded, since he went ahead on October 27, 1975;
28. That immediately upon arriving in Manila, we went to respondent Company and saw Mr. Nacional,
who informed us that we were not blacklisted, however, Mr. Mckenzie, Administrative Manager did
inform us that we were all blacklisted;
29. That we were asking from the respondent Company our leave pay, which they refused to give, if we
did not agree to a US$100.00 deduction;
30. That with the exception of Messrs. Jaime Caunca Amado Manansala and Antonio Cabrera, we
received our leave pay with the US$100.00 deduction;

31. That in view of the written promise of Mr. Nacional in Dubai last October 23, 1975 to give us priority
and preference in boarding a vessel and that we were not blacklisted we have on several occasions
approached him regarding his promise, which up to the present he has refused to honor.
xxx xxx xxx
Answering the complaint, petitioner countered that when the vessel was in London, private respondents together
with the other crew insisted on worldwide ITF rate as per special agreement; that said employees threatened the
ship authorities that unless they agreed to the increased wages the vessel would not be able to leave port or would
have been picketed and/or boycotted and declared a hot ship by the ITF; that the Master of the ship was left with no
alternative but to agree; that upon the vessel's arrival at the Asian port of Dubai on October 22, 1975, a
representative of petitioner went on board the ship and requested the crew together with private respondents to
desist from insisting worldwide ITF rate and instead accept the Far East rate; that said respondents refused to
accept Far East ITF rates while the rest of the Filipino crew members accepted the Far East rates; that private
respondents were replaced at the expense of petitioner and it was prayed that respondents be required to comply
with their obligations under the contract by requiring them to pay their repatriation expenses and all other incidental
expenses incurred by the master and crew of the vessel.
After the hearing on the merits, the hearing Officer of the Secretariat rendered a decision 2 on March 14, 1977 finding
private respondents to have violated their contract of employment when they accepted salary rates different from their
contract verified and approved by the National Seamen Board. As to the issue raised by private respondents that the original
contract has been novated, it was held that:

xxx xxx xxx


For novation to be a valid defense, it is a legal requirement that all parties to the contract should give
their consent. In the instant case only the complainants and respondents gave their consent. The
National Seamen Board had no participation in the alleged novation of the previously approved
employment contract. It would have been different if the consent of the National Seamen Board was
first secured before the alleged novation of the approved contract was undertaken, hence, the defense
of novation is not in order.
xxx xxx xxx
The Hearing Officer likewise rules that petitioner violated the contract when its representative signed the Special
Agreement and he signed the same at his own risk and must bear the consequence of such act, and since both
parties are in paridelicto, complaint and counterclaim were dismissed for lack of merit but petitioner was ordered to
pay respondents Caunca and Cabrera their respective leave pay for the period that they have served M/V
Woermann Sanaga plus attorney's fees.
Private respondents filed a motion for reconsideration with the Board which modified the decision of the Secretariat
in an Order 3 of December 19, 1977 and ruled that petitioner is liable for breach of contract when it ordered the dismissal of
private respondents and their subsequent repatriation before the expiration of their respective employment contracts. The
Chairman of the Board stressed that "where the contract is for a definite period, the captain and the crew members may not
be discharged until after the contract shall have been performed" citing the case of Madrigal Shipping Co., Inc. vs. Ogilvie, et
al. (104 Phil. 748). He directed petitioner to pay private respondents the unexpired portion of their contracts and their leave
pay, less the amount they received as differentials by virtue of the special agreements entered in Rotterdam, and ten percent
of the total amounts recovered as attorney's fees.

Petitioner sought clarification and reconsideration of the said order and asked for a confrontation with private
respondents to determine the specific adjudications to be made. A series of conferences were conducted by the
Board. It was claimed by petitioner that it did not have in its possession the records necessary to determine the
exact amount of the judgment since the records were in the sole custody of the captain of the ship and demanded
that private respondents produce the needed records. On this score, counsel for respondents manifested that to
require the master of the ship to produce the records would result to undue delay in the disposition of the case to the
detriment of his clients, some of whom are still unemployed.
Under the circumstances, the Board was left with no alternative but to issue an Order dated April 3, 1979 4 fixing the
amount due private respondents at their three (3) months' salary equivalent without qualifications or deduction. Hence,the
instant petition before Us alleging grave abuse of discretion on the part of the respondent official as Chairman of the Board,
in issuing said order which allegedly nullified the findings of the Secretariat and premised adjudication on imaginary
conditions which were never taken up with full evidence in the course of hearing on the merits.

The whole controversy is centered around the liability of petitioner when it ordered the dismissal of herein private
respondents before the expiration of their respective employment contracts.

In its Order of December 19, 1977 5 the Board, thru its Chairman, Minister Blas F. Ople, held that there is no showing that
the seamen conspired with the ITF in coercing the ship authorities to grant salary increases, and the Special Agreement was
signed only by petitioner and the ITF without any participation from the respondents who, accordingly, may not be charged as
they were, by the Secretariat, with violation of their employment contract. The Board likewise stressed that the crew
members may not be discharged until after the expiration of the contract which is for a definite period, and where the crew
members are discharged without just cause before the contract shall have been performed, they shall be entitled to collect
from the owner or agent of the vessel their unpaid salaries for the period they were engaged to render the services, applying
the case of Madrigal Shipping Co., Inc. vs. Jesus Ogilivie et al. 6

The findings and conclusion of the Board should be sustained. As already intimated above, there is no logic in the
statement made by the Secretariat's Hearing Officer that the private respondents are liable for breach of their
employment contracts for accepting salaries higher than their contracted rates. Said respondents are not signatories
to the Special Agreement, nor was there any showing that they instigated the execution thereof. Respondents
should not be blamed for accepting higher salaries since it is but human for them to grab every opportunity which
would improve their working conditions and earning capacity. It is a basic right of all workingmen to seek greater
benefits not only for themselves but for their families as well, and this can be achieved through collective bargaining
or with the assistance of trade unions. The Constitution itself guarantees the promotion of social welfare and
protection to labor. It is therefore the Hearing Officer that gravely erred in disallowing the payment of the unexpired
portion of the seamen's respective contracts of employment.
Petitioner claims that the dismissal of private respondents was justified because the latter threatened the ship
authorities in acceeding to their demands, and this constitutes serious misconduct as contemplated by the Labor
Code. This contention is not well-taken. The records fail to establish clearly the commission of any threat. But even
if there had been such a threat, respondents' behavior should not be censured because it is but natural for them to
employ some means of pressing their demands for petitioner, who refused to abide with the terms of the Special
Agreement, to honor and respect the same. They were only acting in the exercise of their rights, and to deprive
them of their freedom of expression is contrary to law and public policy. There is no serious misconduct to speak of
in the case at bar which would justify respondents' dismissal just because of their firmness in their demand for the
fulfillment by petitioner of its obligation it entered into without any coercion, specially on the part of private
respondents.
On the other hand, it is petitioner who is guilty of breach of contract when they dismissed the respondents without
just cause and prior to the expiration of the employment contracts. As the records clearly show, petitioner voluntarily
entered into the Special Agreement with ITF and by virtue thereof the crew men were actually given their salary
differentials in view of the new rates. It cannot be said that it was because of respondents' fault that petitioner made
a sudden turn-about and refused to honor the special agreement.
In brief, We declare petitioner guilty of breach of contract and should therefore be made to comply with the
directives contained in the disputed Orders of December 19, 1977 and April 3, 1979.
WHEREFORE, premises considered, the decision dated March 14, 1977 of the Hearing Officer is SET ASIDE and
the Orders dated December 19, 1977 and April 3, 1979 of the National Seamen Board are AFFIRMED in toto. This
decision is immediately executory. Without costs.
SO ORDERED.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Teehankee (Chairman), J., concur in the result.

Footnotes
1 pp. 17-20, Rollo.
2 pp- 16-26, Rollo.
3 pp. 28-32, Rollo.
4 pp. 33-40, Rollo.
5 Order of December 19, 1977, pp, 29-32, Rollo.
6 104 Phil. 748.

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58011-12 July 20, 1982
VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROGELIO BISULA, RUBEN ARROZA, JUAN GACUTNO,
LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA, NEMESIO ADUG, SIMPLICIO BAUTISTA, ROMEO ACOSTA,
and JOSE ENCABO, respondents.
Maximo A. Savellano, Jr., for petitioner.
Solicitor General and Romeo M. Devera for respondents.

BARREDO, J.:
Petition for certiorari seeking the annulment or setting aside, on the grounds of excess of jurisdiction and grave abuse
of discretion, of the decision of the National Labor Relations Commission in consolidated NSB Cases Nos. 2250-79 and
2252-79 thereof, 1 the dispositive portion of which reads thus:
WHEREFORE, the Decision appealed from should be, as it is hereby modified in this wise:
Respondent Vir-jen Shipping and Marine Services, Inc., is hereby ordered to pay the following to the
complainant Seamen who have not withdrawn from the case, namely: Capt. Rogelio H. Bisula, Ruben
Arroza, Juan Gacutno, Leonilo Atok, Nilo Cruz, Alvaro Andrada, Nemesio Adug, Simplicio Bautista,
Romeo Acosta and Jose Encabo:
1. their earned wages corresponding to the period from 16 to 19 April 1979;
2. the wages corresponding to the unexpired portion of their contracts, as adjusted by the
respondent Company effective 1 March 1979;
3. the adjusted representation allowances of the complainant Seamen who served as officers
and who have not withdrawn from the case, namely: Capt. Rogelio Bisula, Ruben Arroza,
Juan Gacutno, Leonilo Atok and Nilo Cruz;
4. their vacation pay equivalent to one-half () month's pay after six (6) months of service
and another one-half () month's pay after the completion of the one-year contract;
5. their tanker service bonus equivalent to one-half () month's pay; and
6. their earned overtime pay from l to l9 April 1979.
The Secretariat of the National Seamen Board is also hereby directed to issue within five (5) days from
receipt of this Decision the necessary clearances to the suspended Seamen. (pp. 86-87, Record.)
The factual and legal background of these cases is related most comprehensively in the "Manifestation and Comment"
filed by the Solicitor General. It is as follows:
The records show that private respondents have a manning contract for a period of one (1) year with
petitioner in representation of its principal Kyoei Tanker Co. Ltd. The terms and conditions of said contract
were based on the standard contract of the NSB. The manning contract was approved by the NSB. Aware
of the problem that vessels not paying rates imposed by the International Transport Workers Federation

(ITF) would be detained or interdicted in foreign ports controlled by the ITF, petitioner and private
respondents executed a side contract to the effect that should the vessel M/T Jannu be required to pay
ITF rates when it calls on any ITF controlled foreign port, private respondents would return to petitioner the
amounts so paid to them.
On March 23, 1979, the master of the vessel who is one of the private respondents sent a cable to
petitioner, while said vessel was en route to Australia which is an ITF controlled port, stating that private
respondents were not contented with the salary and benefits stipulated in the manning contract, and
demanded that they be given 50% increase thereof, as the "best and only solution to solve ITF problem."
Apparently, reference to "ITF" in private respondents' cable made petitioner apprehensive since the vessel
at that time was en route to Australia, an ITF port, and would be interdicted and detained thereat, should
private respondents denounce the existing manning contract to the ITF and should petitioner refuse or be
unable to pay the ITF rates, which represent more than 100% of what is stipulated in the manning
contract. Placed under such situation, petitioner replied by cable dated March 24, 1979 to private
respondents, as follows:
... WE ARE SURPRISED WITH THIS SUDDEN CHANGE OF ATTITUDE AND DEMANDS
FOR WE HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS
PERTAINING TO YOUR PRESENT EMPLOYMENT AND BELIEVED THAT WE FULLY
UNDERSTOOD EACH OTHER ... WE SHALL SUFFER AND ABSORB CONSIDERABLE
AMOUNT OF LOSSES WITH YOUR DEMAND OF FIFTY PERCENT AS WE ARE ALREADY
COMMITTED TO PRINCIPALS THEREFORE TO MINIMIZE OUR LOSSES WE PROPOSE
AN INCREASE OF TWENTY FIVE PERCENT ON YOUR BASIC PAYS PLUS THE SPECIAL
COMPENSATION FOR THIS PARTICULAR VOYAGE ... (p. 7 Comment)
On March 26, 1979, petitioner wrote a letter to the NSB denouncing the conduct of private respondents as
follows:
This is to inform you that on March 24, 1979, we received a cable from Capt. Rogelio Bisula, Master of the
above-reference vessel reading as follows:
URINFO ENTIRE JANNU OFFICERS AND CREW NOT CONTENTED WITH PRESENT
SALARY BASED ON VOLUME OF WORK TYPE OF SHIP WITH HAZARDOUS CARGO
AND REGISTERED IN A WORLDWIDE TRADE STOP WHAT WE DEMAND IS ONLY FIFTY
PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS DEMAND THE
BEST AND ONLY SOLUTION TO SOLVE PROBLEM DUE YOUR PRESENT RATES
ESPECIALLY TANKERS VERY FAR IN COMPARISON WITH OTHER SHIPPING
AGENCIES IN MANILA.
to which we replied on March 24, 1979, as follows:
WE ARE SURPRISED WITH SUDDEN CHANGE, OF ATTITUDE AND DEMANDS FOR WE
HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS PERTAINING TO
YOUR PRESENT EMPLOYMENT AND BELIEVED THAT WE FULLY UNDERSTOOD EACH
OTHER STOP FRANKLY SPEAKING WE SHALL SUFFER AND ABSORB CONSIDERABLE
AMOUNT OF LOSSES WITH YOUR DEMAND OF FIFTY PERCENT AS WE ARE
COMMITTED TO PRINCIPALS THEREFORE TO MINIMIZE OUR LOSSES WE PROPOSE
AN INCREASE OF TWENTY FIVE PERCENT ON YOUR BASIC PAY STOP YOUR
UNDERSTANDING AND FULL COOPERATION WILL BE VERY MUCH APPRECIATED
STOP PLS CONFIRM SOONEST.
On March 25, 1979 we received the following communication from the Master of said vessel:
OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF FIFTY PERCENT
INCREASE BUT FOR THE GOOD AND HARMONIOUS RELATIONSHIP ON BOARD AND
RECONSIDERING YOUR SUPPOSED TO BE LOSSES IN CASE WE CONDITIONALLY
COOPERATE WITH YOUR PROPOSED INCREASE AND TWENTY FIVE PERCENT
BASED ON INDIVIDUAL BASIC PAY WITH THE FOLLOWING TERMS AND CONDITION
STOP EFFECTIVITY OF TWENTY FIVE PERCENT INCREASE MUST BE MARCH/79 STOP
INCREASE MUST BE COLLECTIBLE ON BOARD EFFECTIVE ABOVE DATE UNTIL
DISEMBARKATION STOP ALLOTMENT TO ALLOTEES REMAIN AS IS STOP
REASONABLE REPALLOWS FOR ALL OFFICERS BE GIVEN EFFECTIVE MARCH/79
STOP BONUS FOR 6 MONTHS SERVICES RENDERED BE COLLECTIBLE ON BOARD
STOP OFFICERS/CREW 30PCT O/T SHUD BE BASED NEW UPGRADED SALARY SCALE
STOP MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY YOUR
COMPANY PRIOR DEPARTURE MANILA REMAIN AS IS.

to which we replied on March 25, 1979, as follows:


WE AGREE ALL CONDITIONS AND CONFIRM IT SHALL BE PROPERLY ENFORCED
STOP WILL PREPARE ALL REQUIRED DOCUMENTS AND WILL BE DELIVERED ON
BOARD.
For your further information and guidance, the abovementioned demands of the officers and crew (25%
increase in basic pay, increase in overtime pay and increase in representation allowance) involve an
additional amount of US$3,096.50 per month, which our company is not in a position to shoulder.
We are, therefore, negotiating with our Principals, Messrs. Kyoei Tanker Company, Limited, for the
amendment of our agency agreement in the sense that our monthly fee be increased correspondingly. We
have sent our Executive Vice-President, Mr. Ericson M. Marquez, to Japan to represent us in said
negotiation and we will inform you of the results thereof. (Annex "E" of Petition)
In view of private respondents' conduct and breach of contract, petitioner's principal, Kyoei Tanker Co.,
Ltd. terminated the manning contract in a letter dated April 4, 1979, which reads in part;
This is with reference to your letter of March 26, 1979 and our conference with Mr. Ericson
Marquez in Tokyo on March 29, 1979, regarding the unexpected and unreasonable demand
for salary increase of your officers and crew on the above vessel.
Frankly speaking, we fully agree with you that this action taken by your officers and crew in
demanding increase in their salaries and overtime after being on board for only three months
was very unreasonable. Considering the circumstances when the demand was made, we
believe that their action was definitely abusive and plain blackmail.
We regret to advise you that since this vessel is only under our management, we also cannot
afford to grant your request for an increase of US$3,096.50 effective March 1, 1979, as
demanded by your crew. Your crew should respect their employment contracts which was
approved by your government and your National Seamen Board should make sure that all
seamen should follow their contracts.
For your information, we have discussed this matter with the owners of the vessel, particularly
the attitude and mentality of your crew on board. Our common and final decision is not to
grant your request but also to terminate our Manning Agreement effective upon crew's
change when the vessel arrives at Japan or at any possible port about end April, 1979.
We regret that we have to take this drastic step in order to protect ourselves from further
problem if we continue with your present officers and crew because if their demand is
granted, there is no guarantee that they will not demand further increase in salaries in the
future when they have chance. Also, as you know the present freight market is very bad and
we cannot afford an unexpected increase in cost of operations and more so with a
troublesome and unreliable crew that you have on board.
In view of the circumstances mentioned above, please consider this letter as our official
notice of cancellation of our Manning Agreement effective upon the date of crew's change.
(Annex "F" of Petition).
On April 6, 1979, petitioner wrote the NSB asking permission to cancel the manning contract with
petitioner, said letter reading as follows:
This is with reference to our letter of March 26, 1979, informing you of the sudden and
unexpected demands of the officers and crew of the above vessel for a twenty five percent
(25%) increase in their basic salaries and overtime, plus an increase of the officers'
representation allowances, involving a total of US$3,096.50 per month.
As we have advised in our afore-mentioned letter, we have negotiated with our Principals,
Messrs. Kyoei Tanker Co., Ltd., to amend our Agency Agreement by increasing our monthly
fee by US$3,096.50, and attached herewith is copy of our letter dated March 26, 1979 duly
received by our Principals on March 31, 1979.
In this connection, we wish to inform your good office that our Principals have refused to
consider our request for an increase and have also advised us of their final decision to
terminate our Manning Agreement effective upon vessel's arrival in Japan on or about April
17, 1979.

For your further information, we enclose herewith xerox copy of the Kyoei Tanker Co., Ltd.
letter dated April 4, 1979, which we just received today via airfreight.
This is the first time that a cancellation of this nature has been made upon us, and needless
to say, we feel very embarrassed and disappointed but we have no other alternative but to
accept the said cancellation.
In view of the foregoing, we respectfully request your authority to cancel our Contracts of
Employment and to disembark the entire officers and crew upon vessel's arrival in Japan on
or about 17th April, 1979. (Annex "G", of Petition).
On April 10, 1979, the NSB through its Executive Director Cresencio C. Dayao wrote petitioner authorizing
it to cancel the manning contract. The NSB letter to petitioner reads:
We have for acknowledgment your letter of 6 April 1979 in connection with the abovecaptioned subject.
Considering the circumstances enumerated in your letter under reply (and also in your letter
of March 1979), we authorize you to cancel your contracts of employment with the
crew/members of the M/T "Jannu" and you may now disembark the whole compliment upon
the vessel's arrival in Japan on or about April 17, 1979.
We trust that you will not encounter any difficulty in connection with the disembarkation of the
crew/members. (Annex "H" of Petition).
The seamen were accordingly disembarked in Japan and repatriated to Manila. They then filed a
complaint with the NSB for illegal dismissal and non-payment of wages. After trial, the NSB found that the
termination of the services of the seamen before the expiration of their employment contract was justified
"when they demanded and in fact received from the company wages over and above the contracted rates
which in effect was an alteration and modification of a valid and existing contract ..." (Annex "D", Petition).
The seamen appealed the decision to the NLRC which reversed the decision of the NSB and required the
petitioner to pay the wages and other monetary benefits corresponding to the unexpired portion of the
manning contract on the ground that the termination of the said contract by petitioner was without valid
cause. Hence, the present petition. (Pp. 2-9, Manifestation & Comment)
In its petition which contains practically the same facts and circumstances above-quoted, petitioner submits for Our
resolution the following issues:
I. That the respondent NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion
in said NSB Cases Nos. 2250-79 and 2252-79 when it adjudged the petitioner Vir-jen liable to the
respondents-seamen for terminating its employment contracts with them despite the fact that prior
authorization to terminate or cancel said employment contracts and to disembark the said respondents
was first secured from and was granted by, the National Seamen Board, the government agency primarily
charged with the supervision and discipline of seamen and the approval and enforcement of employment
contracts;
II. That the respondent NLRC acted with grave abuse of discretion, or without or in excess of its
jurisdiction, or contrary to law and the evidence when it concluded that "there is nothing on record to show
that respondents-seamen made any threat that they would complain or report to the ITF their low wage
rates if their demand or proposal for a wage increase was not met", despite the fact that in their cable of
March 23, 1979 to the petitioner, the said respondents made the following threats and impositions: "WHAT
WE DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS
DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEMS", that there are other
substantial and conclusive evidence to support the existence of such threats and intimidation which the
respondent NLRC failed and refused to consider; and that the evidence substantially and conclusively
shows that the petitioner Vir-jen was, in fact, threatened and intimidated into giving such salary increases
due to such cabled threats and intimidation of the private respondents;
III. That the respondent NLRC acted with grave abuse of discretion or without or in excess of jurisdiction
when it concluded, in effect, that the respondents-seamen acted within their rights when they imposed
upon their employer, the herein petitioner, their demands for salary and wages increases, in disregard of
their existing NSB-approved contracts of employment, notwithstanding the substantial and conclusive
findings of the NSB, the trier of facts which is in the best position to assess the special circumstances of
the case, that the said respondents breached their respective contracts of employment with the petitioner,
without securing the prior approval of the NSB as required by the New Labor Code, as amended, and with
the use of threats, intimidation and coercion, when they demanded and, in fact, received from the

petitioner salaries or wages over and above their contracted rates which the petitioner was "constrained to
make" in order "to prevent the vessel from being interdicted and/or detained by the ITF because at the
time the demand for salary increase was made the vessel was en route to Kwinana, Australia (via
Senipah, Indonesia), a port were the ITF is strong and militant," "for in the event the vessel would be
detained and/or interdicted the company (petitioner) would suffer more losses than paying the seamen 25
% increase of their salary";
IV. That respondent NLRC committed a grave abuse of discretion or exceeded its jurisdiction or acted
contrary to law when it failed and refused to admit and take into account the ADDENDUM AGREEMENT,
dated December 27, 1978, entered into between the petitioner and the private respondents, which would
have further enlightened the respondent NLRC on the "ITF PROBLEMS" insinuated by the private
respondents in their cable of March 23, 1979 to threaten and intimidate the petitioner into granting the
salary increases in question;
V. That respondent NLRC committed a grave abuse of discretion or acted without or in excess of its
jurisdiction or contrary to law when it ordered the petitioner Vir-jen to pay, among others, to the private
respondents their "wages corresponding to the unexpired portion of their contracts" the said petitioner
having already lost its trust and confidence on the private respondents; that the employer cannot be legally
compelled to continue with the employment of persons in whom it has already lost its trust and confidence;
that payment to the private respondents of their wages corresponding to the unexpired portion of their
contract would be tantamount to retaining their services after their employer, petitioner herein, had already
lost its faith and trust in them;
VI. That the respondent NLRC committed a grave abuse of discretion or exceeded its jurisdiction in still
including and considering ROMEO ACOSTA as one of the appellants in the two (2) aforementioned NSB
cases and making him a beneficiary of its decision, dated July 8, 1981, modifying the NSB decision, dated
July 2, 1980, despite the fact that way back on October 23, 1980, Acosta had already filed in said NSB
cases a pleading, entitled "SATISFACTION OF JUDGMENT" in which he manifested that he was not
appealing the NSB decision anymore as the judgment in his favor was already fully satisfied by the
petitioner Vir-jen;
VII. That the respondent NLRC had no more jurisdiction to entertain private respondents' appeal because
the NSB decision became final and executory for failure of said respondents to serve on he petitioner a
copy of their "APPEAL AND MEMORANDUM OF APPEAL" within the ten (10) day reglementary period for
appeal and even after the expiration of said period;
VIII. That the respondent NLRC had no jurisdiction to entertain the appeal by the private respondents
based on the supposedly verified "APPEAL AND MEMORANDUM OF APPEAL" because the supposed
signature of the person purportedly verifying the same is forged; and that the new counsel appearing for
the private respondents on appeal was not even authorized by some of the private respondents to appear
for them;
IX. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of
jurisdiction or contrary to law when it misconstrued, misinterpreted and misapplied to the instant case the
ruling of this Honorable Supreme Court in Wallem Philippines Shipping, Inc. vs. The Hon. Minister of
Labor, et al., G.R No. 50734, prom. February 20, 1981, despite distinct and fundamental differences in
facts between the Wallem Case and the instant case;
X. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of its
jurisdiction or acted contrary to law when it failed and refused to consider and pass upon the substantial
issues of jurisdiction, law and facts and matters of public interests raised by the petitioner in its URGENT
MOTION/APPELLEE'S MEMORANDUM ON APPEAL, dated April 24, 1981, and in its MOTION FOR
RECONSIDERATION AND/OR NEW TRIAL, dated July 20, 1981, filed in the two (2) cases;
XI. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of
jurisdiction or contrary to law when it failed and refused to reconsider and set aside its decision subjectmatter of this petition for certiorari, considering Chat if allowed to stand, the said decision will open the
floodgates for Filipino seamen to disregard NSB-approved contracts of employment with impunity, leading
to the destruction of the Philippine manning industry, which is a substantial source of revenue for the
Philippine government, as well as the image of the Filipino seamen who will undoubtedly become known
far and wide as one prone to violate the solemnity of employment contracts, compounded with the use of
threats, intimidation and blackmail, thereby necessitating a policy decision by this Honorable Supreme
Court on the matter for the survival of the manning industry. (Pp. 5-9, Record.)
We shall deal first with the jurisdictional issue (No. VII above) to the effect that the appeal of private respondents from
the decision of the National Seamen's Board against them was filed out of time, considering that copy of said decision

was received by them on July 9, 1980 and they filed their memorandum of appeal only on July 23, 1980 or fourteen
(14) days later, whereas under article 223 of the Labor Code which governs appeals from the National Seamen's Board
to the National Labor Relations Commission per Article 20(b) of the Code provides that such appeals must be made
within ten (10) days.
In this connection, it is contended in the comment of private respondents that petitioner has overlooked that under
Section 7, Rule XIII,, Book V of the Implementing Rules of the Labor Code, the ten-day period specified in Article 223
refers to working days and that this Court has already upheld such construction and manner of computation in Fabula
vs. NLRC, G.R. No. 54247, December 19, 1980. Now, computing the number of working days from July 9 to July 23,
1980 We find that there were exactly ten (10) days, hence, if We adhere to Fabula, the appeal in question must be held
to have been made on time.
But petitioner herein maintains that the Minister of Labor may not, under the guise of issuing implementing rules of a
law as authorized by the law itself, go beyond the clear and unmistakable language of the law and expand it at his
discretion. In other words, since Article 223 of the Labor Code literally provides thus:
Appeal. Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of the parties within ten (10) days from
receipt of such awards, orders, or decisions. Such appeal may be entertained only on any of the following
grounds:
(a) If there is a prima facie evidence of abuse of discretion on the part of the labor Arbiter or compulsory
arbitrator;
(b) If the decision, order, or award was secured through fraud or coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or
injury to the appellant.
To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose reasonable
penalty, including fines or censures, upon the erring parties.
the implementing rules may not provide that the said period should be computed on the basis of working days. This,
indeed, is a legal issue not brought up nor passed upon squarely in Fabula, and petitioner prays that this Court rule on
the point once and for all.
After mature and careful deliberation, We have arrived at the conclusion that the shortened period of ten (10) days fixed
by Article 223 contemplates calendar days and not working days. We are persuaded to this conclusion, if only because
We believe that it is precisely in the interest of labor that the law has commanded that labor cases be promptly, if not
peremptorily, dispose of. Long periods for any acts to be done by the contending parties can be taken advantage of
more by management than by labor. Most labor claims are decided in their favor and management is generally the
appellant. Delay, in most instances, gives the employers more opportunity not only to prepare even ingenious defenses,
what with well-paid talented lawyers they can afford, but even to wear out the efforts and meager resources of the
workers, to the point that not infrequently the latter either give up or compromise for less than what is due them.
All the foregoing notwithstanding, and bearing in mind the peculiar circumstances of this case, particularly, the fact that
private respondents must have been misled by the implementing rules aforementioned. We have opted to just the same
pass on the merits of the substantial issues herein, even as We admonish all concerned to henceforth act in
accordance with our foregoing view. Verily, the Minister of Labor has no legal power to amend or alter in any material
sense whatever the law itself unequivocally specifies or fixes.
We need not ponder long on the contention of petitioner regarding the alleged forgery of the signature of respondent
Rogelio Bisula and the alleged lack of authority of the new counsel of respondents, Atty. B. C. Gonzales, to appear for
them. Resolution of these minor points, considering their highly controversial nature, so much so that they could
rationally to our mind, be decided either way, may be dispensed with in order that We may go to the more
transcendentally important main issues before Us.
As far as issue No. VI above regarding the inclusion of Romeo Acosta among the beneficiaries of the decision herein in
question, there can be no reason why petitioner should not be sustained. It is undenied that Acosta has filed a formal
satisfaction of judgment. Indeed, it is quite relevant to mention at this point that originally, there were twenty-eight (28)
claimants against petitioner, This number was first reduced to fifteen (15) then to ten (10) and finally to nine (9) now, by
withdrawal of the claimants themselves. These series of withdrawals lend no little degree to added enlightenment of the
discussion hereunder of the adverse positions of the remaining claimants, on the one hand, and the petitioner, on the
other.

To begin with, let it be borne in mind that seamen's contracts of the nature We have before Us now are not ordinary
ones. There are specie, laws and rules governing them precisely due to the peculiar circumstances that surround them.
Relatedly, We quote from the Manifestation and Comment of the Solicitor General:
The employment contract in question is unlike any ordinary contract of employment, for the reason that a
manning contract involves the interests not only of the signatories thereto, such as the local Filipino
recruiting agent (herein petitioner), the foreign owner of the vessel, and the Filipino crew members (private
respondents), but also those of other Filipino seamen in general as well as the country itself. Accordingly,
Article 12 of the Labor Code provides that it is the policy of the State not only "to insure and regulate the
movement of workers in conformity with the national interest" but also "to insure careful selection of
Filipino workers for overseas employment in order to protect the good name of the Philippines abroad".
The National Seamen Board (NSB), which is the agency created to implement said state policies, is thus
empowered pursuant to Article 20 of the Labor Code "to secure the best possible terms and conditions of
employment for seamen, and to insure compliance thereof" not only on the part of the owners of the
vessel but also on the part of the crew members themselves.
Conformably to the power vested in the NSB, the law requires that all manning contracts shall be
approved by said agency. It likewise provides that "it shall be unlawful to substitute or alter any previously
approved and certified employment contract without the approval of NSB" (Section 35, Rules and
Regulations in the recruitment and placement of Filipino seamen aboard foreign going ships) and
authorizes the employer or owner of the vessel to terminate such contract for just causes (Section 32,
Ibid). Among such just causes for termination are "bad conduct and unwanted presence prejudicial to the
safety of the ship" (Guidebook for shipping employers, page 8) and material breach of said contract.
The stringent rules governing Filipino seamen aboard foreign, going ships are dictated by national interest.
There are about 120,000 registered seamen with the NSB. Only about 50,000 of them are employed and
70,000 or so are still hoping to be employed. Those Filipino seamen already employed on board foreigngoing ships should accordingly conduct themselves with utmost propriety and abide strictly with the terms
and conditions of their employment contract, and the NSB should see to that, in order that owners of
foreignowned vessels will not only be encouraged to renew their employment contract but will moreover be
induced to hire other Filipino seamen as against other competing foreign sailors. (Pp. 15-17, Manifestation
& Comment of the Solicitor General)
Pertinently, the Labor Code of the Philippines provides for the creation of a National Seamen Board (NSB) thus:
ART. 20. National Seamen Board.(a) A National Seamen Board is hereby created which shall developed
and maintain a comprehensive program for Filipino seamen employed overseas. It shall have the power
and duty:
(1) To provide free placement services for seamen;
(2) To regulate and supervise the activities of agents or representatives of shipping
companies in the hiring of seamen for overseas employment; and secure the best possible
terms of employment for contract seamen workers and secure compliance therewith; and
(3) To maintain a complete registry of all Filipino seamen.
(b) The Board shall have original and exclusive jurisdiction over all matters or cases including money
claims, involving employer-employee relations, arising out of or by virtue of any law or contracts involving
Filipino seamen for overseas employment. The decision of the Board shall be appealable to the National
Labor Relations Commission upon the same grounds provided in Article 223 hereof. The decisions of the
National Labor Relations Commission shall be final and inappealable.
The finality and unappealability of the decisions of the National Labor Relations Commission conferred by the above
provisions in cases of the nature now before Us necessarily limits Our power in the premises to the exercise of Our
plenary certiorari jurisdiction. And under the scheme of said Article 20, in relation to Article 223 of the same Code, the
reviewing authority of the Commission is limited only to the following instances:
Appeal.Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators are final and
executory unless appealed to the Commission by any or both of the parties within ten (10) days from
receipt of such awards, orders, or decisions. Such appeal may be entertained only on any of the following
grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter or compulsory
arbitrator;

(b) If the decision, order or award was secured through fraud or coercion, including graft and corruption;
(c) If made purely on questions of law;and
(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or
injury to the appellant.
To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose reasonable
penalty, including fines or censures, upon the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum of appeals to the other party who shall
file an answer not later than ten (10) days from receipt thereof.
xxx xxx xxx
In the light of the foregoing perspective of law and policy, all the other issues raised by petitioner may be disposed of
together. Anyway they revolve basically around the following questions:
1. In the event of conflict in the conclusions of the National Seamen Board, on the one hand, and the National Labor
Relations Commission on the other, on a matter that is fundamentally an issue of fact, which one should prevail?
2. Under the facts of this case, was it legally proper for the Commission to disregard the permission granted by the NSB
to the petitioner to disembark and discontinue the employment of herein respondents?
3. As a matter of fact, did respondent breach their contract with petitioner, so as to entitle the latter to take the punitive
action herein complained of?
4. Was the conformity of petitioner to pay respondents additional compensation of 25% secured by said respondents
thru threats of grave injury to petitioner who, therefore, acceded to such increase involuntarily?
We feel that the resolution of the instant controversy hinges on whether or not it was violative of law and policy in the
light of the peculiar nature of the contracts in question as already explained at the outset of this opinion, for the
respondents to make the demand for an increase of 50% of their respective wages stipulated in their NSB approved
contracts while they were already in the midst of the voyage to Kwinana, Australia (an ITF controlled post), pointedly
mentioning in their cablegram that such "demand (was) the best and only solution to solve ITF problem"?
On these questions, the NSB found and held:
1. Whether or not the Seamen breached their respective employment contracts;
2. Whether or not the Seamen were illegally dismissed by the Company;
3. Whether or not the monetary claims of the seamen are valid and meritorious;
4. Whether or not the monetary claims of the Company are valid and meritorious;
5. Whether or not disciplinary action should be taken against the Seamen.
With respect to the first issue, the Board believes that the answer should be in the affirmative. This is so
for the Seamen demanded and in fact received from the Company wages over and above their contracted
rates, which in effect is an alteration or modification of a valid and subsisting contract; and the same not
having been done thru mutual consent and without the prior approval of the Board the alteration or
modification is contrary to the provisions of the New Labor Code, as amended, more particularly Art. 34 (i)
thereof which states that:
Art. 34. Prohibited practices.It shall be unlawful for any individual, entity, licensee or holder of authority:
xxx xxx xxx
(i) To substitute or alter employment contracts approved and verified by the Department of Labor from the
time of actual signing thereof by the parties up to and including the period of expiration of the same without
the approval of the Department of Labor;
xxx xxx xxx
The revision of the contract was not done thru mutual consent for the Company did not voluntarily agree to
an increase of wage, but was only constrained to make a counter-proposal of 25% increase to prevent the
vessel from being interdicted and/or detained by the ITF because at the time the demand for salary

increase was made the vessel was enroute to Kwinana, Australia (via Senipah, Indonesia), a port where
the ITF is strong and militant. However, a perusal of the Cables (Exhs. "D" & "F", "3" & "5") coming from
the Seamen addressed to the Company would show the threatening manner by which the desire for a
salary increase was manifested, contrary to their claim that it was merely a request. Aforesaid cables are
hereby quoted for ready reference:
RYCV-11-12-13-14 RECEIVED URINFO ENTIRE JANNU OFFICERS AND CREW NOT AGREEABLE
WITH YOUR SUGGESTIONS THEY ARE NOT CONTENTED WITH PRESENT SALARY BASED IN
VOLUME OF WORKS TYPE OF SHIP WITH HAZARDOUS CARGO AND REGISTERED IN A WORLD
WIDE TRADE STOP REGARDING URCABV-14 OFFICERS AND CREW NOT INTERESTED IN ITF
MEMBERSHIP IF NOT ACTUALLY PAID WITH ITF RATE STOP WHAT WE DEMAND IS ONLY 50
PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS DEMAND THE BEST AND
ONLY SOLUTION TO SOLVE ITF PROBLEM DUE YOUR PRESENT RATE ESPECIALLY IN TANKERS
VERY FAR IN COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA STOP LET US SHARE
EQUALLY THE FRUITS OF LONELINESS SACRIFICES AND HARDSHIP WE ARE ENCOUNTERING
ON BOARD WE REMAIN ...
REURVIR-JEN-15 OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF 50
PERCENT INCREASE BUT FOR GOOD AND HARMONIOUS RELATIONSHIP ONBOARD
AND RECONSIDERING YOUR SUPPOSE TO BE LOSSES IN CASE WE CONDITIONALLY
COOPERATE WITH YOUR PROPOSE INCREASE OF 25 PERCENT BASED ON
INDIVIDUAL MONTHLY BASIC PAY WITH FOLLOWING TERMS AND CONDITIONS AA
EFFECTIVITY OF 25 PERCENT INCREASE MUST BE MARCH/79 PLUS SPECIAL
COMPENSATION MENTIONED URCAB VIRJEN-14 BB NEW COMPANY CIRCULAR ON
UPGRADED NEW SALARY SCALE DULY SIGNED AND APPROVED BE FORWARDED
KWINANA AUSTRALIA OR HANDCARRIED BY YOUR REPRESENTATIVE TO DISCUSS
MATTERS OFFICIALLY CC 25 PERCENT INCREASE MUST BE COLLECTABLE
ONBOARD EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION STOP ALLOTMENT TO
ALLOTTEES REMAIN AS IS DD REASONABLE REPALLOWS FOR ALL OFFICERS BE
GIVEN EFFECTIVE MARCH/79 EE BONUS FOR 6 MONTHS SERVICE RENDERED BE
COLLECTIBLE ONBOARD FF OFFICERS/CREW 30 PERCENT' OT SHOULD BE BASED
NEW UPGRADED SALARY SCALE GG MASTER/CHENGR/CHMATE SPECIAL
COMPENSATION GIVE BY YOUR COMPANY PRIOR DEPARTURE MANILA BE REMAIN
AS IS STOP THE ABOVE TERMS AND CONDITIONS SHOULD BE PROPERLY ENFORCE
AND DOCUMENTED ALSO COPIES AND FORWARDED ONBOARD ON ARRIVAL
KWINANA AUSTRALIA CONFIRM ...
While the Board recognizes the rights of the Seamen to seek higher wages provided the increase is
arrived at thru mutual consent, it could not however, sanction the same if the consent of the employer is
secured thru threats, intimidation or force. In the case at bar, the Company was compelled to accede to
the demand of the Seamen for a salary increase to forestall the possibility of the vessel being interdicted
by the ITF at Kwinana, Australia, for in the event the vessel would be detained and/or interdicted the
Company would suffer more losses than paying the Seamen 25% increase of their
With respect to the second issue, the Board believes that the termination of the services of the Seamen
was legal and in accordance with the provisions of their respective employment contracts. Considering the
findings of the Board that the Seamen breached their contracts, their subsequent repatriation was justified.
While it may be true that the Seamen were hired for a definite period their services could be terminated
prior to the completion of the fun term thereof for a just and valid cause.
It may be stated in passing that Vir-jen Shipping & Marine Services, Inc., despite the fact that it was
compelled to accede to a 25% salary increase for the Seamen, tried to convince its principal Kyoei Tanker,
Ltd. to an adjustment in their agency fee to answer for the 25% increase, but the latter not only denied the
request but likewise terminated their Manning, Agreement. The Seamen's breach of their employment
contracts and the subsequent termination of the Manning Agreement of Vir-jen Shipping & Marine
Services, Inc. with the Kyoei Tanker, Ltd., justified the termination of the Seamen's services.
With respect to the third issue the following are the findings of the Board:
As regards the claim of the Seamen for the payment of their salaries for the unexpired portion of their
employment contracts the same should be denied. This is so because of the findings of the Board that
their dismissal was legal and for a just cause. Awards of this nature is proper only in cases where a
seafarer is illegally dismissed. (Pp. 148-151, Record)
Disagreeing with the foregoing findings of the NSB, the NLRC held:

The more important issue to be resolved in this case, however, is the question of whether the Seamen
violated their employment contracts when they demanded or proposed and in fact accepted wages over
and above their contracted rates. Stated otherwise, could the Seamen rightfully demand or propose the
revision of their employment contracts? While they concede that they are bound by their contracts, the
Seamen claim that their cable asking for the revision of their contract rates was a valid exercise of their
right to grievance.
The right to grievance is recognized in this jurisdiction even if there is a valid and subsisting contract,
especially where there are supervening facts or events of which a party to the contract was not apprised at
the time of its conclusion. As pointed out by the Supreme Court in the Wallem case, supra, it "is a basic
right of all working men to seek greater benefits not only for themselves but for their families as well ..."
and the "Constitution itself guarantees the promotion of social welfare and protection to labor." In this care,
records show that it was impressed on the Seamen that their vessel would be trading only in Caribbean
ports. This was admitted by the Company in its cable to the Seamen on 10 January 1979. After the
conclusion of their contracts, however, and after they had boarded the vessel, the principals of the
Company directed the vessel to can at different ports or to engage in "worldwide trade" which is admittedly
more difficult and hazardous than trading in only one maritime area. This is a substantial change in the
original understanding of the parties. Thus, in their cable asking for a wage increase, the Seamen
expressed their dissatisfaction by informing the Company that they were "not contented with (their) present
salary based on volume of work, type of ship with hazardous cargo and registered in world wide trade."
(emphasis supplied.) With such change in the original agreement of the parties, we find that the Seamen
were well within their rights in demanding for the revision of their contract rates.
We also note that the Company was not exactly in good faith in contracting the service of the Seamen.
During his briefing in Manila, the Company instructed the master of the vessel, complainant Bisula, to
prepare two (2) sets of payrolls, one set reflecting the actual salary rates of the Seamen and the other
showing higher rates based on Panamanian Shipping articles which approximate those prescribed by ITF
for its member seafarers. In compliance with this instruction, Bisula prepared the latter payrolls. These
payrolls were intended for the consumption of ITF if and when the vessel called on ports where ITF rates
were operational, the evident purpose being to show ITF that the Company was paying the same rates
prescribed by said labor federation and thereby prevent the interdiction of the vessel. And when the vessel
was en route to Australia, an ITF-controlled port, the Company arranged for the Seamen's membership
with ITF and actually paid their membership fees without their knowledge and consent, thereby exposing
them to the danger of being disciplined by the NSB Secretariat for having affiliated with ITF. All these have
to be mentioned here to better understand the feelings of the Seamen when they asked for the revision of
their wage rates. 2 (Pp. 83-85, Record)
Comparing these two decisions, We do not hesitate to hold that the NLRC overstepped the boundaries of its reviewing
authority and was overlenient. Whether or not respondents had breached their contract wit petitioner is a factual issue,
the peculiar nuances of which were better known to the NSB, the fact-finding authority. Indeed, even if it was nothing
more than the interpretation of the cablegram sent by respondents to petitioner on March 23, 1979 that were the only
question to be resolved, that is, whether or not it carried with it or connoted a threat which naturally panicked petitioner,
which, to be sure, could be a question of law, still, as We see it, the conclusion of the NLRC cannot be justified.
The NLRC ruled that in the exercise of their right to present any grievances they had and in their desire to alleviate their
condition, it was but well and proper for respondents to make a proposal for increase of their wages, which petitioner
could accept or reject. We do not see it that way.
Definitely, the reference in the cablegram to the conformity of petitioner to respondents' demand was "the best and only
solution to ITF problem" had an undertone which naturally placed petitioner hardly in a position to answer them with a
flat denial. It would be the acme of naivete for Us to go along with the contention that the cablegram of March 23, 1979
was a mere proposal and had no trace nor tint of threat at all. Indeed, it is alleged in the petition and there is no denial
thereof that on April 23, 1979, Chief Mate Jacobo Catabay of the M/T Jannu, who was among the claimants at first,
revealed that:
On April 23, 1979, Chief Mate Jacobo H. Catabay of the M/T Jannu, in a signed statement-report to the
petitioner, marked and admitted in evidence as Exh. "10-A" during the trial stated, as follows:
On our departure at Keelung, we did not have destination until three (3) days later that
Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at
Kwinana , Australia. Captain told everyone that if only we stayed so long with the ship, he will
report to ITF personally in order to get back wages. In view that we only worked for three
months so the back wages is so small and does not worth. From that time on, Chief Engr. and
Captain have a nightly closed door conference they arrived at the conclusion to ask for 50%
salary increase and they have modified a certain platforms. They certainly believe that Vir-jen

have no choice because the vessel is going to ITF port so they called a general meeting
conducted at the bridge during my duty hours in the afternoon. All engine and deck personnel
were present in that meeting. (Pp. 19-20, Record.)
Well taken, indeed, is the Solicitor General's observation that:
Private respondents'conduct is uncalled for. While employees may be free to request their employers to
increase their wages, they should not use threat of such a nature and in such a situation as to put the
employer at their complete mercy and with no choice but to accede to their demands or to face
bankruptcy. This is what private respondents did, which is an act of bad conduct prejudicial to the vessel,
and a material breach of the existing manning contract. It has adverse consequences that led not only to
the termination of the existing manning contract but to the rejection by Kyoei Tanker Co. Ltd. of petitioner's
offer to supply crew members to three other vessels, thereby depriving unemployed Filipino seamen of the
opportunity to work on said vessels. Thus, in a letter dated May 17, 1979, Kyoei Tanker Co. Ltd. wrote
petitioner as follows:
This is with reference to your letter of Feb. 23, 1979, submitting your manning offers on our three (3)
managed vessels for delivery as follows:
1. M/V "Maya" crew,delivery end May, 1979,
2. M/T "Cedar" 28 crew, delivery end June, 1979,
3. M/T "Global Oath" 30 crew, delivery end, June 1979.
In this connection, we wish to advise you that, as a result of our unpleasant experience with your crew on
the M/T "Jannu", owners have decided to give the manning contracts on the above three vessels to other
foreign crew instead of your company.
We deeply regret that although your crew performance on our other four (4) vessels have been
satisfactory, we were unable to persuade owners to consider your Philippine crew because of the bad
attitude and actuation of your crew manned on board M/T "Jannu".
As we have already advised you, owners have spent more than US$30,000.00 to replace the crew of M/T
"Jannu" in Japan last April 19, 1979 which would have been saved if your crew did not violate their
employment contracts.(Annex "K"of Petition),
In the light of all the foregoing and the law and policy on the matter, it is submitted that there was valid
justification on the part of petitioner and/or its principal to terminate the manning contract. (Pp. 12-14,
Manifestation and Comment of the Solicitor General.)
At first glance it might seem that the judgment of the NLRC should have more weight than that of NSB. Having in view,
however, the set up and relationship of these two entities framed by the Labor Code, the NSB is not only charged
directly with the administration of shipping companies in the hiring of seamen for overseas employment by seeing to it
that our seamen "secure the best possible terms of employment for contract seamen workers and secure compliance
therewith." Its composition as of the time this controversy arose is worth notingfor it is made up of the Minister of
Labor as Chairman, the Deputy Minister as Vice Chairman, and a representative each of the Ministries of Foreign
Affairs, National Defense, Education and Culture, the Central Bank, the Bureau of Employment Service, a worker's
organization and an employee's organization and the Executive Director of the Overseas Employment Development
Board. (Article 23, Labor Code) It is such a board that has to approve all contracts of Filipino seamen (Article 18, Labor
Code). And after such approval, the contract becomes unalterable, it being "unlawful" under Article 34 of the Code "for
any individual, entity, licensee or holder of authority: (i) to substitute or alter employment contracts approved and
verified by Department of Labor from the time of actual signing thereof by the parties up to and including the period of
expiration of the same without the approval of the Department of Labor." In other words, it is not only that contracts may
not be altered or modified or amended without mutual consent of the parties thereto; it is further necessary to have the
change approved by the Department, otherwise, the guilty parties would be penalized.
The power of the NLRC in relation to the works and actuations of the NSB is only appellate, according to Article 20 (b),
read in relation to Article 223, principally, over questions of law, since as to factual matters, it may exercise such
appellate jurisdiction only "if errors in the findings of fact are raised which would cause grave or irreparable damage or
injury to the appellant." (par. d)
The NLRC has noted in its decision that respondents were originally made to believe that their ship would go only to the
Caribbean ports and yet after completing trips to Inchon, Korea and Kuwait and Keelung, Taiwan, it was suddenly
directed to call at Kwinana, Australia, an ITF controlled port. The record shows that this imputation is more apparent
than real, for respondents knew from the very moment they were hired that world-wide voyages or destinations were

contemplated in their agreement. So much so that corresponding steps had to be taken to avoid interference of or
trouble about the ITF upon the ship's arrival at ITF controlled ports. As already stated earlier, the ITF requires the
seamen working on any vessel calling at ports controlled by them to be paid the rates fixed by the ITF which are much
higher than those provided in the contract's signed here, to the extent of causing tremendous loss if not bankruptcy of
the employer.
And so, as revealed to the NLRC later, in anticipation precisely of such peril to the employer and ultimate
unemployment of the seamen, in the instant case, the usual procedure undeniably known to respondents of having two
payroll's, one containing the actually agreed rates and the other ITF rates, the latter to be shown to the ITF in order that
the ship may not be detained or interdicted in Kwinana, was followed. But according to the NLRC, this practice
constitutes deception and bad faith, and worse, it is an effect within the prohibition against alteration of contracts
approved by the NSB, considering there is nothing to show that NSB was made aware of the so-called addendum or
side agreement to the effect that should the ship manned by respondents be made to call an any ITF controlled port,
the contract with ITF rates would be shown and, if for any reason, the respondents are required to be actually paid
higher rates and they are so paid, the excess over the rates agreed in the NSB contract shall be returned to petitioner
later.
It is of insubstantial moment that the side agreement or addendum was not made known to or presented as evidence
before the NSB. We are persuaded that more or less the NSB knows that the general practice is to have such side
contracts. More importantly, the said side contracts are not meant at all to alter or modify the contracts approved by the
NSB. Rather, they are precisely purported to enforce them to the letter, making it clearer that even if the ships have to
call at ITF controlled ports, the same shall remain to be the real and binding agreement between the parties, in
intentional disregard of whatever the ITF may exact.
We hold that there was no bad faith in having said side contracts, the intent thereof being to put into effect the NSB
directed arrangements that would protect the ship manning industry from unjust and ruinning effects of ITF intervention.
Indeed, examining the said side agreements, it is not correct to say that the respondents were caught unaware, or by
surprise when they were advised that the ship would proceed to Kwinana, Australia, even assuming they had been
somehow informed that they would sail to the Caribbean. Said side agreements textually provide:
KNOW ALL MEN BY THESE PRESENTS:
This Addendum Agreement entered into by and between KYOEI TANKER CO., LTD., Principals, of the
vessel M.T. "JANNU", represented herein by VIR-JEN SHIPPING & MARINE SERVICES, INC., Manila,
Philippines, as Manning Agents (hereinafter referred to as the Company),
and
The herein-mentioned officers and crew, and engaged by the Company as crewmembers of the vessel
M/T "JANNU" with their positions, seaman certificate numbers and signatures (hereinafter referred to as
the Crewmember), hereunder shown:
W I T N E S S E T H that:
1. WHEREAS, the Crewmember is hired and recruited as a member of the crew on board the vessel M/T
"JANNU" with the corresponding Contracts of Employment submitted to, verified and duly approved by the
National Seamen Board; that the employment contract referred to, has clearly defined the rate of salary,
wages, and/or employment benefits for a period of one (1) year (or twelve (12) months), and any extension
thereof.
2. WHEREAS, the parties hereby further agree and covenant that should the above-mentioned vessel
enter, dock or drop anchor in ports of other countries, the Crewmember shall not demand, ask or receive,
and the Company shall have no obligation to pay the Crewmember, salaries,, wages and/or benefits over
and above those provided for in the employment contract submitted to, verified and approved by the
National Seamen Board, which shall remain in full force and effect between the parties. The Company as
well as the Owners,, Charterers, Agents shall neither be held accountable nor liable for any amount other
than what is agreed upon and stipulated in the aforesaid NSB-approved Contracts of Employment.
3. WHEREAS, the parties likewise agree that should the vessel enter, dock or drop anchor in any foreign
port, and in the event that the Company (and/or its Owners, Charterers, Agents), are forced, pressured,
coerced or compelled, in any way and for whatever cause or reason, to pay the Crewmember either
directly or thru their respective allottees or other persons, salaries and benefits higher than those rates
imposed in the NSB-approved contract, the Crewmember hereby agrees and binds himself to receive the
said payment in behalf of, and in trust for, the Company (and/or its Owners, Charterers, Agents), and to
return the said amount in full to the Company or to its agent/s in Manila, Philippines immediately upon his
and/or his allottees receipt thereof; the Crewmember hereby waives formal written demand by the

Company or its agent/s for the return thereof. The Crewmember hereby fully understands that failure or
refusal by him to return to the Company the said amount, will render him criminally liable for Estafa, as
provided for in the Revised Penal Code of the Philippines, and in such case, the parties hereby agree that
any criminal and/or civil action in connection therewith shall be within the exclusive jurisdiction of
Philippine Courts.
4. WHEREAS, if, in order to avoid delays to the vessels, the Company is forced, pressured, coerced or
compelled to sign a Collective Bargaining Agreement or any other Agreement with any foreign union,
particularly ITF or ITF affiliated unions, and to sign new crews' contract of employment stipulating higher
wages, salaries or benefits than the NSB-approved contract, the said agreements and contracts shall be
void from the beginning and the Crewmember shall be deemed to have automatically waived the
increased salaries and benefits stipulated in the said agreements and employment contracts unto and in
favor of the Company, and shall remain unalterably bound by the rates, terms, and conditions of the NSBapproved contract.
5. WHEREAS, the parties also agree that should the Company, as a precautionary or anticipatory
measure for the purpose of avoiding costly delays to the vessel prejudicial to its own interest, decide to
negotiate and/or enter into any agreement in advance with any foreign based union, particularly ITF or ITF
affiliated unions, in any foreign port where the vessel involved herein may enter, dock or drop anchor,
whatever increases in salaries or benefits to the Crewmember that the Company may be compelled to
give, over and above those stipulated in the NSB-approved employment contracts of the Crewmember,
shag, likewise, be deemed ineffective or void from the beginning as far as the Crewmember is concerned,
and any such increases in salaries or benefits which the Crewmember shall receive pursuant thereto shall
be held by the Crewmembers in trust for the Company with the obligation to return the same immediately
upon receipt thereof, at the Company's or its agent's office at Manila, Philippines. It is fully understood that
the rates of pay and all other terms and conditions embodied in the NSB-approved employment contracts
shall be of continuing validity and effectivity between the parties, irrespective of the countries or ports
where the said vessel shall enter, dock or drop anchor, and irrespective of any agreement which the
Company may enter or may have entered into with any union, particularly ITF or ITF affiliated unions.
6. WHEREAS, it is likewise agreed that any undertaking made by the Company and/or the National
Seamen Board upon the request of the Company, imposed by any foreign union, particularly ITF or ITF
affiliated unions, which will negate or render in effective any provisions of this agreement, shall also be
considered null and void from the beginning.
7. WHEREAS, lastly, this Addendum Agreement is entered into for the mutual interest of both parties in
line with the Company's desire to continue the service of the Filipino crewmembers on board their vessel
and the Crewmembers'desire to keep their employment on board the subject vessel, thus maintaining the
good image of the Filipino seamen and contributing to the development of the Philippine manning industry.
8. That both the Company and the Crewmember agree and bind themselves that this Agreement shall be
considered an addendum to, or as part of, the NSB-approved employment contract entered into by the
Company and the Crewmember.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this December 28, 1978 at Manila,
Philippines.
THE COMPANY
VIR-JEN SHIPPING & MARINE SERVICES, INC.
By:
(SGD.) CAPT. RUBEN R. BALTAZAR
Operations Dept.
THE CREWMEMBERS
Position

SC#

Signature

2nd Mate

104728

SGD.

Name

1.

Ruben
Arroza

2.

Cresenciano
Abrazaldo

3rd Mate

91663

SGD.

3.

Salvador
Caunan

Third
Engr.

84995

SGD.

4.

Nilo Cruz

4th Engr.

157762

SGD.

5.

Pacifico
Labios

A/B

139045

SGD.

6.

Ramon
Javier

A/B

170545

SGD.

7.

Joaquin
Cordero

A/B

96556

SGD.

8.

Rodolfo
Crisostomo

O/S

162121

SGD.

9.

Renato
Oliveros

O/S

137132

SGD.

10.

Rogelio
Saraza

O/S

149635

SGD.

11.

Nemesio
Adug

Pumpman

157215

SGD.

12.

Francisco
Benemerito

Oiler

89467

SGD.

13.

Rufino
Gutierrez

Oiler

173663

SGD.

14.

Juol
Maul

Oiler

84934

SGD.

15.

Steve
Mario

Wiper

146096

SGD.

16.

Simplicio
Bautista

Chief
Cook

169142

SGD.

17.

Romeo
Acosta

Second
Cook

159960

SGD.

18.

Delfin
Dagohoy

Messman

144096

SGD.

19.

Jose

Messman

179551

SGD.

Ram

Encabo

(Pp. 99-103, Annex D-1 of Petition)


The NLRC has cited Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No. 50734-37, February 20, 1981
(102 SCRA 835). No less than the Solicitor General maintains that said cited case is not controlling:
A careful examination of Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No. 50734-37,
February, 20, 1981 shows that the same is dissimilar to the case at bar. In the Wallem case, there was an
express agreement between the employer and the ITF representative, under which said employer bound
itself to pay the crew members salary rates similar to those of ITF. When the crew members in the Wallem
case demanded that they be paid ITF rates, they were merely asking their employer to comply with what
had been agreed upon with the ITF representative, which conduct on their part cannot be said to be a
violation of contract but an effort to urge performance thereof. Such is not the situation in the case at bar.
In the case at bar, petitioner and private respondents had a side agreement, whereby private respondents
agreed to return to petitioner whatever amounts petitioner would be required to pay under ITF rates. In
other words, petitioner and private respondents agreed that petitioner would not pay the ITF rate. When
private respondents used ITF as threat to secure increase in salary, they violated the manning contract.
Moreover, in the case at bar, petitioner terminated the manning contract only after the NSB authorized it to
do so, after it found the grounds therefor to be valid. On the other hand, the termination of the manning
contract in the Wallem case was without prior authorization from the NSB.
It will be noted that private respondents sent a cable to petitioner demanding an increase of 50% of their
basic salary as the only solution to the ITF problem at a time when the vessel M/T JANNU was enroute to
Australia, an ITF port. The fact that private respondents mentioned ITF in their cable clearly shows that if
petitioner would not accede to their demands, they would denounce petitioner to ITF. Thus, Chief Mate
Jacobo Catabay in his report dated April 23, 1979 (Exh. 10-A) stated:
On our departure at Keelung, we did not have destination until three days later that Harman
cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at Kwinana,
Australia. Captain told everyone that if only we stayed so long with the ship, he will report to
ITF personally in order to get back wages. In view that we only worked for three months so
the back wages is so small and does not worth. From that time on, Chief Engr. and Captain
have a nightly closed door conference until they arrived at the conclusion to ask for 50%
salary increase and they have modified a certain platforms. They certainly believe that Vir-jen
have no choice because the vessel is going to ITF port so they called a general meeting
conducted at the bridge during my duty hours in the afternoon. All engines and deck
personnel were present in that meeting. (Emphasis supplied)
Reporting the wage scheme to the ITF would mean that the vessel would be interdicted and detained in
Australia unless petitioner pay the ITF rates, which represent more than 100% of what is stipulated in the
manning contract. Petitioner was thus forced to grant private respondents an increase of 25% in their
basic salary. That such grant of a 25% increase was not voluntary is shown by the fact that petitioner
immediately denounced the seamen's conduct to NSB and subsequently asked said agency authority to
terminate the manning contract. (Pp. 10-12, Manifestation & Comment of Solicitor General)
Summarizing, We are convinced that since the NSB, considering its official role in matters like those now before Us, is
the fact-finding body, and there is no sufficient cogency in the NLRC's finding that there was no threat employed by
respondents on petitioner, and, it appearing further that the well prepared Manifestation and Comment of the Solicitor
General supports the decision of the NSB, which body, to Our mind, was in a better position than the NLRC to appraise
the relevant nuances of the actuations of both parties, We are of the considered view that the decision of the NLRC
under question constitutes grave abuse of discretion and should be set aside in favor of the NSB's decision.
In El Hogar Filipino Mutual Building and Loan Association vs. Building Employees Inc., 107 Phil. 473, citing San Miguel
Brewery vs. National Labor Union, 97 Phil. 378, We emphasized:
Much as we should expand beyond economic orthodoxy, we hold that an employer cannot be legally
compelled to continue with the employment of a person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical
to his interest. The law in protecting the rights of the laborer, authorizes neither the oppression nor selfdestruction of the employer. (Page 3, Record) (Emphasis supplied)
It is timely to add here in closing that situations wherein employers are practically laid in ambush or placed in a position
not unlike those in a highjack whether in the air, land or midsea must be considered to be what they really are: acts of
coercion, threat and intimidation against which the victim has generally no recourse but to yield at the peril of

irreparable loss. And when such happenings affect the national economy, as pointed out by the Solicitor General, they
must be treated to be in the nature of economic sabotage. They should not be tolerated. This Court has to be careful
not to sanction them.
WHEREFORE, the petition herein is granted and the decision of the NLRC complained of hereby set aside; the
decision of the NSB should stand.
No costs.
Concepcion, Jr., Guerrero, Abad Santos, De Castro and Escolin, JJ., concur.
Aquino, J., concur in the result.

Footnotes
1 NSB Case No. 2250-79 is a complaint for illegal dismissal and non-payment of earned wages filed by 27
officers and crew/members of the vessel M/T "Jannu" against herein petitioner while NSB2252-79 is a
complaint for breach of contract and recovery of excess salaries, overtime pay filed by petitioner against
the complainants in the other case.
2 Please see clarification of the point that respondents were misled as to whether they were hired for
worldwide voyages or not in the latter part of this opinion.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 109808 March 1, 1995


ESALYN CHAVEZ, petitioner,
vs.
HON. EDNA BONTO-PEREZ, HON. ROGELIO T. RAYALA, HON. DOMINGO H. ZAPANTA, HON. JOSE N.
SARMIENTO, CENTRUM PROMOTIONS PLACEMENT CORPORATION, JOSE A. AZUCENA, JR., and TIMES
SURETY & INSURANCE COMPANY, INC. respondents.

PUNO, J.:
One of the anguished cries in our society today is that while our laws appear to protect the poor, their interpretation
is sometimes anti-poor. In the case at bench, petitioner, a poor, uncounselled entertainment dancer signed a
contract with her Japanese employer calling for a monthly salary of One Thousand Five Hundred U.S. Dollars
(US$1,500) but later had to sign an immoral side agreement reducing her salary below the minimum standard set by
the POEA. Petitioner invoked the law to collect her salary differentials, but incredibly found public respondent
straining the seams of our law to disfavor her. There is no greater disappointment to the poor like petitioner than to
discover the ugly reality behind the beautiful rhetoric of laws. We will not allow this travesty.
This is a petition for certiorari to review the Decision of the National Labor Relations Commission (NLRC), 1 dated
December 29, 1992, which affirmed the Decision of public respondent Philippine Overseas Employment Agency (POEA)
Administrator Jose N. Sarmiento, dated February 17, 1992, dismissing petitioner's complaint for unpaid salaries amounting to
Six Thousand Dollars (US$6,000.00).

The facts are undisputed.


On December 1, 1988, petitioner, an entertainment dancer, entered into a standard employment contract for
overseas Filipino artists and entertainers with Planning Japan Co., Ltd., 2 through its Philippine representative, private
respondent Centrum Placement & Promotions Corporation. The contract had a duration of two (2) to six (6) months, and
petitioner was to be paid a monthly compensation of One Thousand Five Hundred Dollars (US$1,5000.00). On December 5,
1888, the POEA approved the contract. Subsequently, petitioner executed the following side agreement with her Japanese
employer through her local manager, Jaz Talents Promotion:

Date: Dec. 10, 1988


SUBJECT: Salary Deduction
MANAGERIAL COMMISSION
DATE OF DEPARTURE: _________________
ATTENTION: MR. IWATA
I, ESALYN CHAVEZ, DANCER, do hereby with my own free will and voluntarily have the honor to
authorize your good office to please deduct the amount of TWO HUNDRED FIFTY DOLLARS ($250)
from my contracted monthly salary of SEVEN HUNDRED FIFTY DOLLARS ($750) as monthly
commission for my Manager, Mr. Jose A. Azucena, Jr.
That, my monthly salary (net) is FIVE HUNDRED DOLLARS ($500).

(sgd. by petitioner) 3
On December 16, 1988, petitioner left for Osaka, Japan, where she worked for six (6) months, until June 10, 1989.
She came back to the Philippines on June 14, 1989.
Petitioner instituted the case at bench for underpayment of wages with the POEA on February 21, 1991. She prayed
for the payment of Six Thousand U.S. Dollars (US$6,000.00), representing the unpaid portion of her basic salary for
six months. Charged in the case were private respondent Centrum Promotions and Placement Corporation, the
Philippine representative of Planning Japan, Co., Inc., its insurer, Times Surety and Insurance Co., Inc., and Jaz
Talents Promotion.
The complaint was dismissed by public respondent POEA Administrator on February 17, 1992. He ratiocinated, inter
alia:
. . . Apparently and from all indications, complainant (referring to petitioner herein) was satisfied and did
not have any complaint (about) anything regarding her employment in Japan until after almost two (2)
years (when) she filed the instant complaint on February 21, 1991. The records show that after signing
the Standard Employment Contract on December 1, 1988, she entered into a side agreement with the
Japanese employer thru her local manager, Jaz Talents Promotion consenting to a monthly salary of
US$750.00 which she affirmed during the conference of May 21, 1991. Respondent agency had no
knowledge nor participation in the said agreement such that it could not be faulted for violation of the
Standard Employment Contract regarding the stipulated salary. We cannot take cognizance of such
violation when one of the principal party (sic) thereto opted to receive a salary different from what has
been stipulated in their contract, especially so if the contracting party did not consent/participate in such
arrangement. Complainant (petitioner) cannot now demand from respondent agency to pay her the
salary based (on) the processed Employment Contract for she is now considered in bad faith and
hence, estopped from claiming thereto thru her own act of consenting and agreeing to receive a salary
not in accordance with her contract of employment. Moreover, her self-imposed silence for a long
period of time worked to her own disadvantage as she allowed laches to prevail which barred
respondent from doing something at the outset. Normally, if a person's right (is) violated, she/he would
immediately react to protect her/his rights which is not true in the case at bar.
The term laches has been defined as one's negligence or failure to assert his right in due time or within
reasonable time from the accrual of his cause of action, thus, leading another party to believe that there
is nothing wrong with his own claim. This resulted in placing the negligent party in estoppel to assert or
enforce his right. . . . Likewise, the Supreme Court in one case held that not only is inaction within
reasonable time to enforce a right the basic premise that underlies a valid defense of laches but such
inaction evinces implied consent or acquiescence to the violation of the right . . .
Under the prevailing circumstances of this case, it is outside the regulatory powers of the
Administration to rule on the liability of respondent Jaz Talents Promotions, if any, (it) not being a
licensed private agency but a promotion which trains entertainers for abroad.
xxx xxx xxx
(Citations omitted.)
On appeal, the NLRC upheld the Decision, thus:
We fail to see any conspiracy that the complainant (petitioner herein) imputes to the respondents. She
has, to put it bluntly, not established and/or laid the basis for Us to arrive at a conclusion that the
respondents have been and should be held liable for her claims.
The way We see it, the records do not at all indicate any connection between respondents Centrum
Promotion & Placement Corporation and Jaz Talents Promotion.
There is, therefore, no merit in the appeal. Hence, We affirmed. 4
Dissatisfied with the NLRC's Decision, petitioner instituted the present petition, alleging that public respondents
committed grave abuse of discretion in finding: that she is guilty of laches; that she entered into a side contract on
December 10, 1988 for the reduction of her basic salary to Seven Hundred Fifty U.S. Dollars (US$750.00) which
superseded, nullified and invalidated the standard employment contract she entered into on December 1, 1988; and
that Planning Japan Co., Ltd. and private respondents are not solidarily liable to her for Six Thousand US Dollars
(US$6,000.00) in unpaid wages. 5

The petition is meritorious.


Firstly, we hold that the managerial commission agreement executed by petitioner to authorize her Japanese
Employer to deduct Two Hundred Fifty U.S. Dollars (US$250.00) from her monthly basic salary is void because it is
against our existing laws, morals and public policy. It cannot supersede the standard employment contract of
December 1, 1988 approved by the POEA with the following stipulation appended thereto:
It is understood that the terms and conditions stated in this Employment Contract are in conformance
with the Standard Employment Contract for Entertainers prescribed by the POEA under Memorandum
Circular No. 2, Series of 1986. Any alterations or changes made in any part of this contract without
prior approval by the POEA shall be null and void; 6 (Emphasis supplied.)
The stipulation is in line with the provisions of Rule II, Book V and Section 2(f), Rule I, Book VI of the 1991 Rules
and Regulations Governing Overseas Employment, thus:
Book V, Rule II
Sec. 1. Employment Standards. The Administration shall determine, formulate and review employment
standards in accordance with the market development and welfare objectives of the overseas
employment program and the prevailing market conditions.
Sec. 2. Minimum Provisions for Contract. The following shall be considered the minimum requirements
for contracts of employment:
a. Guaranteed wages for regular working hours and overtime pay for services rendered
beyond regular working hours in accordance with the standards established by the
Administration;
xxx xxx xxx
Sec. 3. Standard Employment Contract. The administration shall undertake development and/or
periodic review of region, country and skills specific employment contracts for landbased workers and
conduct regular review of standard employment contracts (SEC) for seafarers. These contracts shall
provide for minimum employment standards herein enumerated under Section 2, of this Rule and shall
recognize the prevailing labor and social legislations at the site of employment and international
conventions. The SEC shall set the minimum terms and conditions of employment. All employers and
principals shall adopt the SEC in connection with the hiring of workers without prejudice to their
adoption of other terms and conditions of employment over and above the minimum standards of the
Administration. (Emphasis supplied.)
and
BOOK VI, RULE I
Sec. 2. Grounds for suspension/cancellation of license.
xxx xxx xxx
f. Substituting or altering employment contracts and other documents approved and verified by the
Administration from the time of actual signing thereof by the parties up to and including the period of
expiration of the same without the Administration's approval.
xxx xxx xxx
(Emphasis supplied.)
Clearly, the basic salary of One Thousand Five Hundred U.S. Dollars (US$1,500.00) guaranteed to petitioner under
the parties' standard employment contract is in accordance with the minimum employment standards with respect to
wages set by the POEA, Thus, the side agreement which reduced petitioner's basic wage to Seven Hundred Fifty
U.S. Dollars (US$750.00) is null and void for violating the POEA's minimum employment standards, and for not
having been approved by the POEA. Indeed, this side agreement is a scheme all too frequently resorted to by
unscrupulous employers against our helpless overseas workers who are compelled to agree to satisfy their basic
economic needs.
Secondly. The doctrine of laches or "stale demands"' cannot be applied to petitioner. Laches has been defined as

the failure or neglect for an unreasonable and unexplained length time to do that which, by exercising due diligence,
could or should have been done earlier, 7 thus giving rise to a presumption that the party entitled to assert it either has
abandoned or declined to assert it. 8 It is not concerned with mere lapse of time; the fact of delay, standing alone, is
insufficient to constitute laches. 9

The doctrine of laches is based upon grounds of public policy which requires, for the peace of society, the
discouragement of stale claims, and is principally a question of the inequity or unfairness of permitting a right or
claim to be enforced or asserted. 10 There is no absolute rule as to what constitutes laches; each case is to be determined
according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since
it is an equitable doctrine, its application is controlled by equitable considerations. It cannot be worked to defeat justice or to
perpetrate fraud and injustice. 11

In the case at bench, petitioner filed her claim well within the three-year prescriptive period for the filing of money
claims set forth in Article 291 of the Labor Code. 12 For this reason, we hold the doctrine of laches inapplicable to
petitioner. As we ruled in Imperial Victory Shipping Agency v. NLRC, 200 SCRA 178 (1991):

. . . Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of
law not courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal
right. We have ruled in Arsenal v. Intermediate Appellate Court . . . that it is a long standing principle
that equity follows the law. Courts exercising equity jurisdiction are bound by rules of law and have no
arbitrary discretion to disregard them. In Zabat, Jr. v. Court of Appeals . . ., this Court was more
emphatic upholding the rules of procedure. We said therein:
As for equity, which has been aptly described as a "justice outside legality," this applied
only in the absence of, and never against, statutory law or, as in this case, judicial rules of
procedure. Aequetas nunguam contravenit legis. The pertinent positive rules being
present here, they should pre-empt and prevail over all abstract arguments based only on
equity.
Thus, where the claim was filed within the three-year statutory period, recovery therefore cannot be
barred by laches. Courts should never apply the doctrine of laches earlier than the expiration of time
limited for the commencement of actions at law.
xxx xxx xxx
(Emphasis supplied. Citations omitted.)
Thirdly, private respondents Centrum and Times as well as Planning Japan Co., Ltd. the agency's foreign
principal are solidarily liable to petitioner for her unpaid wages. This is in accordance with stipulation 13.7 of the
parties' standard employment contract which provides:
13.7. The Employer (in this case, Planning Japan Co., Ltd. ) and its locally (sic)
agent/promoter/representative (private respondent Centrum Promotions & Placement Corporation)
shall be jointly and severally responsible for the proper implementation of the terms and conditions in
this Contract. 13 (Emphasis supplied.)
This solidary liability also arises from the provisions of Section 10(a)(2), Rule V, Book I of the Omnibus Rules
Implementing the Labor Code, as amended, thus:
Sec. 10. Requirement before recruitment. Before recruiting any worker, the private employment
agency shall submit to the Bureau the following documents:
a) A formal appointment or agency contract executed by a foreign-based employer in favor of the
license holder to recruit and hire personnel for the former . . . . Such formal appointment or recruitment
agreement shall contain the following provisions, among others:
xxx xxx xxx
2. Power of the agency to sue and be sued jointly and solidarily with the principal or foreign based
employer for any of the violations of the recruitment agreement and the contracts of employment.
xxx xxx xxx
(Emphasis supplied.)

Our overseas workers constitute an exploited class. Most of them come from the poorest sector of our society. They
are thoroughly disadvantaged. Their profile shows they live in suffocating slums, trapped in an environment of crime.
Hardly literate and in ill health, their only hope lies in jobs they can hardly find in our country. Their unfortunate
circumstance makes them easy prey to avaricious employers. They will climb mountains, cross the seas, endure
slave treatment in foreign lands just to survive. Out of despondence, they will work under sub-human conditions and
accept salaries below the minimum. The least we can do is to protect them with our laws in our land. Regretfully,
respondent public officials who should sympathize with the working class appear to have a different orientation.
IN VIEW WHEREOF, the petition is GRANTED. The Decisions of respondent POEA Administrator and NLRC
Commissioners in POEA Case No. Adj. 91-02-199 (ER), respectively dated February 17 and December 29, 1992,
and the Resolution of the NLRC, dated March 23, 1993, are REVERSED and SET ASIDE. Private respondents are
held jointly and severally liable to petitioner for the payment of SIX THOUSAND US DOLLARS (US$6,000.00) in
unpaid wages. Costs against private respondents.
SO ORDERED.
Narvasa, C.J., Bidin, Regalado and Mendoza, JJ., concur.

Footnotes
1 Through its Second Division, composed of public respondents Presiding Commissioner Edna BontoPerez, Commissioner Rogelio I. Rayala, ( ponente), and Commissioner Domingo H. Zapanta.
2 Owned and operated by Iwata International Management Co., Ltd.
3 Exh. "C" of Petition; Rollo, p. 17.
4 The Second Division also denied petitioner's Motion for Reconsideration in a minute resolution, dated
March 23, 1993.
5 See Petition, pp. 5-6; Rollo, pp. 6-7.
6 Exh. "A" of Petition, p. 1; Rollo, p. 10.
7 La Campana Food Products, Inc. v. Court of Appeals, 223 SCRA 151 (1993); Radio Communications
of the Philippines, Inc. v. National Labor Relations Commission, 223 SCRA 656 (1993); Marcelino v.
Court of Appeals, 210 SCRA 444 (1992).
8 Bergado v. Court of Appeals, 173 SCRA 497 (1989).
9 See Donato v. Court of Appeals, 217 SCRA 196 (1993).
10 Bergado v. Court of Appeals, op cit.
11 Jimenez v. Fernandez, 184 SCRA 190 (1990).
12 Art. 291. Money claims. All money claims arising from employer-employee relations accruing
during the effectivity of this code shall be filed within three (3) years from the time the cause of action
accrued; otherwise, they shall be forever barred. . . .
13 Exh. "A" of Petition, p. 4; Rollo, p. 13.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 77279 April 15, 1988
MANUELA S. CATAN/M.S. CATAN PLACEMENT AGENCY, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION and FRANCISCO D. REYES, respondents.
Demetria Reyes, Merris & Associates for petitioners.
The Solicitor General for public respondents.
Bayani G. Diwa for private respondent.

CORTES, J.:
Petitioner, in this special civil action for certiorari, alleges grave abuse of discretion on the part of the National Labor
Relations Commission in an effort to nullify the latters resolution and thus free petitioner from liability for the
disability suffered by a Filipino worker it recruited to work in Saudi Arabia. This Court, however, is not persuaded
that such an abuse of discretion was committed. This petition must fail.
The facts of the case are quite simple.
Petitioner, a duly licensed recruitment agency, as agent of Ali and Fahd Shabokshi Group, a Saudi Arabian firm,
recruited private respondent to work in Saudi Arabia as a steelman.
The term of the contract was for one year, from May 15,1981 to May 14, 1982. However, the contract provided for its
automatic renewal:
FIFTH: The validity of this Contract is for ONE YEAR commencing from the date the SECOND PARTY
assumes hill port. This Contract is renewable automatically if neither of the PARTIES notifies the other
PARTY of his wishes to terminate the Contract by at least ONE MONTH prior to the expiration of the
contractual period. [Petition, pp. 6-7; Rollo, pp. 7-8].
The contract was automatically renewed when private respondent was not repatriated by his Saudi employer but
instead was assigned to work as a crusher plant operator. On March 30, 1983, while he was working as a crusher
plant operator, private respondent's right ankle was crushed under the machine he was operating.
On May 15, 1983, after the expiration of the renewed term, private respondent returned to the Philippines. His ankle
was operated on at the Sta. Mesa Heights Medical Center for which he incurred expenses.
On September 9, 1983, he returned to Saudi Arabia to resume his work. On May 15,1984, he was repatriated.
Upon his return, he had his ankle treated for which he incurred further expenses.
On the basis of the provision in the employment contract that the employer shall compensate the employee if he is
injured or permanently disabled in the course of employment, private respondent filed a claim, docketed as POEA
Case No. 84-09847, against petitioner with respondent Philippine Overseas Employment Administration. On April
10, 1986, the POEA rendered judgment in favor of private respondent, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the complainant and against the respondent,

ordering the latter to pay to the complainant:


1. SEVEN THOUSAND NINE HUNDRED EIGHTY-FIVE PESOS and 60/100 (P7,985.60), Philippine
currency, representing disability benefits;
2. TWENTY-FIVE THOUSAND NINETY-SIX Philippine pesos and 20/100 (29,096.20) representing
reimbursement for medical expenses;
3. Ten percent (10%) of the abovementioned amounts as and for attorney's fees. [NLRC Resolution, p.
1; Rollo, p. 16].
On appeal, respondent NLRC affirmed the decision of the POEA in a resolution dated December 12, 1986.
Not satisfied with the resolution of the POEA, petitioner instituted the instant special civil action for certiorari, alleging
grave abuse of discretion on the part of the NLRC.
1. Petitioner claims that the NLRC gravely abused its discretion when it ruled that petitioner was liable to private
respondent for disability benefits since at the time he was injured his original employment contract, which petitioner
facilitated, had already expired. Further, petitioner disclaims liability on the ground that its agency agreement with
the Saudi principal had already expired when the injury was sustained.
There is no merit in petitioner's contention.
Private respondents contract of employment can not be said to have expired on May 14, 1982 as it was
automatically renewed since no notice of its termination was given by either or both of the parties at least a month
before its expiration, as so provided in the contract itself. Therefore, private respondent's injury was sustained
during the lifetime of the contract.
A private employment agency may be sued jointly and solidarily with its foreign principal for violations of the
recruitment agreement and the contracts of employment:
Sec. 10. Requirement before recruitment. Before recruiting any worker, the private employment
agency shall submit to the Bureau the following documents:
(a) A formal appointment or agency contract executed by a foreign-based employer in favor of the
license holder to recruit and hire personnel for the former ...
xxx xxx xxx
2. Power of the agency to sue and be sued jointly and solidarily with the principal or
foreign-based employer for any of the violations of the recruitment agreement and the
contracts of employment. [Section 10(a) (2) Rule V, Book I, Rules to Implement the Labor
Code].
Thus, in the recent case of Ambraque International Placement & Services v. NLRC [G.R. No. 77970, January
28,1988], the Court ruled that a recruitment agency was solidarily liable for the unpaid salaries of a worker it
recruited for employment in Saudi Arabia.
Even if indeed petitioner and the Saudi principal had already severed their agency agreement at the time private
respondent was injured, petitioner may still be sued for a violation of the employment contract because no notice of
the agency agreement's termination was given to the private respondent:
Art 1921. If the agency has been entrusted for the purpose of contra with specified persons, its
revocation shall not prejudice the latter if they were not given notice thereof. [Civil Code].
In this connection the NLRC elaborated:
Suffice it to state that albeit local respondent M. S. Catan Agency was at the time of complainant's
accident resulting in his permanent partial disability was (sic) no longer the accredited agent of its
foreign principal, foreign respondent herein, yet its responsibility over the proper implementation of
complainant's employment/service contract and the welfare of complainant himself in the foreign job
site, still existed, the contract of employment in question not having expired yet. This must be so,
because the obligations covenanted in the recruitment agreement entered into by and between the
local agent and its foreign principal are not coterminus with the term of such agreement so that if either
or both of the parties decide to end the agreement, the responsibilities of such parties towards the

contracted employees under the agreement do not at all end, but the same extends up to and until the
expiration of the employment contracts of the employees recruited and employed pursuant to the said
recruitment agreement. Otherwise, this will render nugatory the very purpose for which the law
governing the employment of workers for foreign jobs abroad was enacted. [NLRC Resolution, p. 4;
Rollo, p. 18]. (Emphasis supplied).
2. Petitioner contends that even if it is liable for disability benefits, the NLRC gravely abused its discretion when it
affirmed the award of medical expenses when the said expenses were the consequence of private respondent's
negligence in returning to work in Saudi Arabia when he knew that he was not yet medically fit to do so.
Again, there is no merit in this contention.
No evidence was introduced to prove that private respondent was not medically fit to work when he returned to
Saudi Arabia. Exhibit "B", a certificate issued by Dr. Shafquat Niazi, the camp doctor, on November 1, 1983, merely
stated that private respondent was "unable to walk properly, moreover he is still complaining [of] pain during walking
and different lower limbs movement" [Annex "B", Reply; Rollo, p. 51]. Nowhere does it say that he was not medically
fit to work.
Further, since petitioner even assisted private respondent in returning to work in Saudi Arabia by purchasing his
ticket for him [Exhibit "E"; Annex "A", Reply to Respondents' Comments], it is as if petitioner had certified his fitness
to work. Thus, the NLRC found:
Furthermore, it has remained unrefuted by respondent that complainant's subsequent departure or
return to Saudi Arabia on September 9, 1983 was with the full knowledge, consent and assistance of
the former. As shown in Exhibit "E" of the record, it was respondent who facilitated the travel papers of
complainant. [NLRC Resolution, p. 5; Rollo, p. 19].
WHEREFORE, in view of the foregoing, the petition is DISMISSED for lack of merit, with costs against petitioner.
SO ORDERED.
Fernan, (Chairman), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 78085 October 16, 1989
ROYAL CROWN INTERNATIONALE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSI0N and VIRGILIO P. NACIONALES, respondents.
Ceferino Padua Law Office for petitioner.
Acosta & Rico Law Offices for private respondent.

CORTES, J.:
Petitioner Royal Crown Internationale seeks the nullification of a resolution of the National Labor Relations
Commission (NLRC) which affirmed a decision of the Philippine Overseas Employment Administration (POEA)
holding it liable to pay, jointly and severally with Zamel-Turbag Engineering and Architectural Consultant (ZAMEL),
private respondent Virgilio P. Nacionales' salary and vacation pay corresponding to the unexpired portion of his
employment contract with ZAMEL.
In 1983, petitioner, a duly licensed private employment agency, recruited and deployed private respondent for
employment with ZAMEL as an architectural draftsman in Saudi Arabia. On May 25, 1983, a service agreement was
executed by private respondent and ZAMEL whereby the former was to receive per month a salary of US$500.00
plus US$100.00 as allowance for a period of one (1) year commencing from the date of his arrival in Saudi Arabia.
Private respondent departed for Saudi Arabia on June 28,1983.
On February 13, 1984, ZAMEL terminated the employment of private respondent on the ground that his
performance was below par. For three (3) successive days thereafter, he was detained at his quarters and was not
allowed to report to work until his exit papers were ready. On February 16, 1984, he was made to board a plane
bound for the Philippines.
Private respondent then filed on April 23, 1984 a complaint for illegal termination against petitioner and ZAMEL with
the POEA, docketed as POEA Case No. (L) 84-04-401.
Based on a finding that petitioner and ZAMEL failed to establish that private respondent was terminated for just and
valid cause, the Workers' Assistance and Adjudication Office of the POEA issued a decision dated June 23, 1986
signed by Deputy Administrator and Officer-in-Charge Crescencio M. Siddayao, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of the complainant and against respondents,
ordering the latter to pay, jointly and severally, to complainant the following amounts:
1. TWO THOUSAND SIX HUNDRED FORTY US DOLLARS (US$2,640.00) or its equivalent in
Philippine currency at the time of payment, representing the salaries corresponding to the unexpired
portion of complainant's contract;
2. SIX HUNDRED US DOLLARS (US$ 600.00) less partial payment of FIVE HUNDRED FIFTY-EIGHT
SAUDI RIYALS (SR558), or its equivalent in Philippine currency at the time of actual payment,
representing the unpaid balance of complainant's vacation pay;
3. THREE HUNDRED FIFTY US DOLLARS (US$350.00) or its equivalent in Philippine currency at the

time of actual payment representing reimbursement of salary deductions for return travel fund;
4. Ten percent (10%) of the above-stated amounts, as and for attorney's fees.
Complainant's claim for legal and transportation expenses are hereby DISMISSED for lack of merit.
SO ORDERED.
[POEA Decision, p. 5; Rollo, p. 34.]
On July 18, 1986, petitioner filed thru its new counsel a motion for reconsideration which was treated as an appeal
to the NLRC by the POEA. Petitioner alleged that the POEA erred in holding it solidarity liable for ZAMEL's violation
of private respondent's service agreement even if it was not a party to the agreement.
In a resolution promulgated on December 11, 1986, the NLRC affirmed the POEA decision, holding that, as a duly
licensed private employment agency, petitioner is jointly and severally liable with its foreign principal ZAMEL for all
claims and liabilities which may arise in connection with the implementation of the employment contract or service
agreement [NLRC Decision, pp. 3-4; Rollo, pp. 26-27].
On March 30, 1987, the NLRC denied for lack of merit petitioner's motion for reconsideration.
Hence, petitioner filed the present petition captioned as "Petition for Review".
At this point, it is not amiss to note that the filing of a "Petition for Review" under Rule 45 of the Rules of Court is not
the proper means by which NLRC decisions are appealed to the Supreme Court. It is only through a petition for
certiorari under Rule 65 that NLRC decisions may be reviewed and nullified on the grounds of lack of jurisdiction or
grave abuse of discretion amounting to lack or excess of jurisdiction. Nevertheless, in the interest of justice, this
Court opted to treat the instant petition as if it were a petition for certiorari. Thus, after the filing of respondents'
comments, petitioner's joint reply thereto, and respondents' rejoinders, the Court resolved to consider the issues
joined and the case submitted for decision.
The case at bar involves two principal issues, to wit:
I. Whether or not petitioner as a private employment agency may be held jointly and severally liable
with the foreign-based employer for any claim which may arise in connection with the implementation of
the employment contracts of the employees recruited and deployed abroad;
II. Whether or not sufficient evidence was presented by petitioner to establish the termination of private
respondent's employment for just and valid cause.
I.
Petitioner contends that there is no provision in the Labor Code, or the omnibus rules implementing the same, which
either provides for the "third-party liability" of an employment agency or recruiting entity for violations of an
employment agreement performed abroad, or designates it as the agent of the foreign-based employer for purposes
of enforcing against the latter claims arising out of an employment agreement. Therefore, petitioner concludes, it
cannot be held jointly and severally liable with ZAMEL for violations, if any, of private respondent's service
agreement.
Petitioner's conclusion is erroneous. Petitioner conveniently overlooks the fact that it had voluntarily assumed
solidary liability under the various contractual undertakings it submitted to the Bureau of Employment Services. In
applying for its license to operate a private employment agency for overseas recruitment and placement, petitioner
was required to submit, among others, a document or verified undertaking whereby it assumed all responsibilities for
the proper use of its license and the implementation of the contracts of employment with the workers it recruited and
deployed for overseas employment [Section 2(e), Rule V, Book 1, Rules to Implement the Labor Code (1976)]. It
was also required to file with the Bureau a formal appointment or agency contract executed by the foreign-based
employer in its favor to recruit and hire personnel for the former, which contained a provision empowering it to sue
and be sued jointly and solidarily with the foreign principal for any of the violations of the recruitment agreement and
the contracts of employment [Section 10 (a) (2), Rule V, Book I of the Rules to Implement the Labor Code (1976)].
Petitioner was required as well to post such cash and surety bonds as determined by the Secretary of Labor to
guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms and conditions of
employment as appropriate [Section 1 of Pres. Dec. 1412 (1978) amending Article 31 of the Labor Code].
These contractual undertakings constitute the legal basis for holding petitioner, and other private employment or
recruitment agencies, liable jointly and severally with its principal, the foreign-based employer, for all claims filed by

recruited workers which may arise in connection with the implementation of the service agreements or employment
contracts [See Ambraque International Placement and Services v. NLRC, G.R. No. 77970, January 28, 1988, 157
SCRA 431; Catan v. NLRC, G.R. No. 77279, April 15, 1988, 160 SCRA 691; Alga Moher International Placement
Services v. Atienza, G.R. No. 74610, September 30, 1988].
In a belated attempt to bolster its position, petitioner contends in its joint reply that the omnibus rules implementing
the Labor Code are invalid for not having been published in the Official Gazette pursuant to the Court's
pronouncements in the cases of Tanada v. Tuvera [G.R. No. 63915, April 25, 1985, 136 SCRA 27; December 29,
1986, 146 SCRA 446]. Petitioner further contends that the 1985 POEA Rules and Regulations, in particular Section
1, Rule I of Book VII** quoted in the NLRC decision, should not have been retroactively applied to the case at bar.
But these contentions are irrelevant to the issues at bar. They proceed from a misapprehension of the legal basis of
petitioner's liabilities as a duly licensed private employment agency. It bears repeating that the basis for holding
petitioner jointly and severally liable with the foreign-based employer ZAMEL is the contractual undertakings
described above which it had submitted to the Bureau of Employment Services. The sections of the omnibus rules
implementing the Labor Code cited by this Court merely enumerate the various documents or undertakings which
were submitted by petitioner as applicant for the license to operate a private employment agency for overseas
recruitment and placement. These sections do not create the obligations and liabilities of a private employment
agency to an employee it had recruited and deployed for work overseas. It must be emphasized again that petitioner
assumed the obligations and liabilities of a private employment agency by contract. Thus, whether or not the
omnibus rules are effective in accordance with Tanada v. Tuvera is an issue the resolution of which does not at all
render nugatory the binding effect upon petitioner of its own contractual undertakings.
The Court, consequently, finds it unnecessary to pass upon both the implications of Tanada v. Tuvera on the
omnibus rules implementing the Labor Code as well as the applicability of the 1985 POEA Rules and Regulations.
Petitioner further argues that it cannot be held solidarily liable with ZAMEL since public respondent had not acquired
jurisdiction over ZAMEL through extra-territorial service of summons as mandated by Section 17, Rule 14 of the
Rules of Court.
This argument is untenable. It is well-settled that service upon any agent of a foreign corporation, whether or not
engaged in business in the Philippines, constitutes personal service upon that corporation, and accordingly,
judgment may be rendered against said foreign corporation [Facilities Management Corporation v. De la Osa, G.R.
No. L-38649, March 26, 1979, 89 SCRA 131]. In the case at bar, it cannot be denied that petitioner is an agent of
ZAMEL. The service agreement was executed in the Philippines between private respondent and Milagros G.
Fausto, the General Manager of petitioner, for and in behalf of ZAMEL [Annex "D" of Petition, p. 3; Rollo, p. 37].
Moreover, one of the documents presented by petitioner as evidence, i.e., the counter-affidavit of its General
Manager Ms. Fausto, contains an admission that it is the representative and agent of ZAMEL [See Paragraph No. 1
of Annex "H" of Petition; Rollo. p. 43].
Considering the foregoing, the Court holds that the NLRC committed no grave abuse of discretion amounting to lack
or excess of jurisdiction in declaring petitioner jointly and severally liable with its foreign principal ZAMEL for all
claims which have arisen in connection with the implementation of private respondent's employment contract.
II.
Petitioner asserts that the NLRC failed to consider the overwhelming evidence it had presented before the POEA
which establishes the fact that private respondent was terminated for just and valid cause in accordance with his
service agreement with ZAMEL.
This assertion is without merit. The NLRC upheld the POEA finding that petitioner's evidence was insufficient to
prove termination from employment for just and valid cause. And a careful study of the evidence thus far presented
by petitioner reveals to this Court that there is legal basis for public respondent's conclusion.
It must be borne in mind that the basic principle in termination cases is that the burden of proof rests upon the
employer to show that the dismissal is for just and valid cause, and failure to do so would necessarily mean that the
dismissal was not justified and, therefore, was illegal [Polymedic General Hospital v. NLRC, G.R. No. 64190,
January 31, 1985,134 SCRA 420; and also Article 277 of the Labor Code]. And where the termination cases involve
a Filipino worker recruited and deployed for overseas employment, the burden naturally devolves upon both the
foreign-based employer and the employment agency or recruitment entity which recruited the worker, for the latter is
not only the agent of the former, but is also solidarily liable with its foreign principal for any claims or liabilities arising
from the dismissal of the worker.
In the case at bar, petitioner had indeed failed to discharge the burden of proving that private respondent was
terminated from employment for just and valid cause. Petitioner's evidence consisted only of the following

documents:
(1) A letter dated May l5, 1984 allegedly written by an official of ZAMEL, stating that a periodic
evaluation of the entire staff was conducted; that the personnel concerned were given a chance to
improve; that complainant's performance was found below par; and that on February 13,1984, at about
8:30 AM, complainant was caught on the way out of the office to look for another job during office hours
without the permission of his supervisor;
(2) A telex message allegedly sent by employees of ZAMEL, stating that they have not experienced
maltreatment, and that the working conditions (in ZAMEL) are good;
(3) The signatures of fifteen (15) persons who allegedly sent the telex message;
(4) A receipt dated February 16, 1984 signed by complainant, stating that he was paid SR915
representing his salary and SR558, representing vacation pay for the month of February 1984;
(5) The counter-affidavit of Milagros G. Fausto, the General Manager of Royal Crown, stating that
complainant was dismissed because of poor performance, acts of dishonesty and misconduct, and
denying complainant's claim that his salary and leave pay were not paid, and that he was maltreated
[See POEA Decision, p. 3; Rollo, p. 32, See also Annexes "E", "F", "F-1 ", "G" and "H" of Petition;
Rollo, pp. 38-43].
Certainly, the telex message supposedly sent by the employees of ZAMEL is not relevant in the determination of the
legality of private respondent's dismissal. On the other hand, the receipt signed by private respondent does not
prove payment to him of the salary and vacation pay corresponding to the unexpired portion of his contract.
More importantly, except for its allegation that private respondent was caught on February 13,1984 on his way out of
the office compound without permission, petitioner had failed to allege and to prove with particularity its charges
against private respondent. The letter dated May 15, 1984 allegedly written by the Actg. Project Architect and the
counter-affidavit of petitoner's General Manager merely stated that the grounds for the employee's dismissal were
his unsatisfactory performance and various acts of dishonesty, insubordination and misconduct. But the particular
acts which would indicate private respondent's incompetence or constitute the above infractions were neither
specified nor described therein. In the absence of any other evidence to substantiate the general charges hurled
against private respondent, these documents, which comprise petitioner's evidence in chief, contain empty and selfserving statements insufficient to establish just and valid cause for the dismissal of private respondent [See EuroLines, Phils., Inc. v. NLRC, G.R. No. 75782, December 1, 1987,156 SCRA 78; Ambraque International Placement
and Services v. NLRC, supra].
The Court is aware of the document attached in petitioner's manifestation and joint reply which is purportedly a
xerox copy of a statement executed on December 13, 1987 in Saudi Arabia by private respondent claiming that the
latter had settled the case with ZAMEL and had "received all [his] benefits that is salary, vacation pay, severance
pay and all other bonuses before [he] left the kingdom of Saudi Arabia on 13 Feb. 1984 and hereby indemnify
[ZAMEL] from any claims or liabilities, [he] raised in the Philippine Courts" [Annex "A" of petitioner's Manifestation
with Motion to hold in Abeyance; Rollo, p. 82. And also Annex "A" of petitioner's Joint Reply; Rollo, p. 111].
But the veracity of the contents of the document is precisely disputed by private respondent. He claims that he was
made to sign the above statement against his will and under threat of deportation [See Telex of private respondent
received by the Supreme Court of the Philippines on January 14,1988; Rollo, p. 83. And also private respondent's
Rejoinder, pp. 1-3; Rollo, pp. 139-141].
Petitioner finally contends that inasmuch as clause no. 13 of the service agreement provided that the law under
which the agreement shall be regulated was the laws of Saudi Arabia [Annex "D" of Petition, p. 2; Rollo, p. 36],
public respondent should have taken into account the laws of Saudi Arabia and the stricter concept of morality
availing in that jurisdiction for the determination of the legality of private respondent's dismissal.
This contention is patently erroneous. The provisions of the Labor Code of the Philippines, its implementing rules
and regulations, and doctrines laid down in jurisprudence dealing with the principle of due process and the basic
right of all Filipino workers to security of tenure, provide the standard by which the legality of the exercise by
management of its prerogative to dismiss incompetent, dishonest or recalcitrant employees, is to be determined.
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic
public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. For the State assures
the basic rights of all workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3,

Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which
states that laws "which have for their object public order, public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country."
Needless to say, the laws of Saudi Arabia which were, incidentally, neither pleaded nor proved by petitioner, have
absolutely no bearing whatsoever to the case at bar.
The Court holds, therefore, that the NLRC committed no grave abuse of discretion amounting to lack or excess of
jurisdiction in upholding the POEA's finding of insufficiency of evidence to prove termination for just and valid cause.
WHEREFORE, the Court Resolved to DISMISS the instant petition.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin, JJ., concur
Gutierrez, Jr., J., is on leave.

Footnotes
** Section 1.... Agencies or entities shall be responsible for the faithful compliance by their foreign
principal of all obligations under the employment contract and shall therefore, be liable for any and all
violations of the contract...
The Lawphil Project - Arellano Law Foundation

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. Nos. 182978-79

April 7, 2009

BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,


vs.
SPOUSES SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter, Jasmin G. Cuaresma),
WHITE FALCON SERVICES, INC. and JAIME ORTIZ (President,White Falcon Services, Inc.), Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 184298-99

April 7, 2009

SPOUSES SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter, Jasmin G. Cuaresma),
Petitioners,
vs.
WHITE FALCON SERVICES, INC. and BECMEN SERVICE EXPORTER AND PROMOTION, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
These consolidated petitions assail the Amended Decision1 of the Court of Appeals dated May 14, 2008 in CA-G.R.
SP No. 80619 and CA-G.R. SP No. 81030 finding White Falcon Services, Inc. and Becmen Service Exporter and
Promotion, Inc. solidarily liable to indemnify spouses Simplicio and Mila Cuaresma the amount of US$4,686.73 in
actual damages with interest.
On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion, Inc.2
(Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia (KSA), for a contract
duration of three years, with a corresponding salary of US$247.00 per month.
Over a year later, she died allegedly of poisoning.
Jessie Fajardo, a co-worker of Jasmin, narrated that on June 21, 1998, Jasmin was found dead by a female cleaner
lying on the floor inside her dormitory room with her mouth foaming and smelling of poison.3
Based on the police report and the medical report of the examining physician of the Al-Birk Hospital, who conducted
an autopsy of Jasmins body, the likely cause of her death was poisoning. Thus:
According to letter No. 199, dated 27.2.1419H, issued by Al-Birk Police Station, for examining the corpse of Jasmin
Cuaresma, 12.20 P.M. 27.2.1419H, Sunday, at Al-Birk Hospital.
1. The Police Report on the Death
2. The Medical Diagnosis
Sex: Female Age: 25 years Relg: Christian
The said person was brought to the Emergency Room of the hospital; time 12.20 P.M. and she was
unconscious, blue, no pulse, no respiration and the first aid esd undertaken but without success.
3. Diagnosis and Opinion: Halt in blood circulation respiratory system and brain damage due to an apparent
poisoning which is under investigation.4

Name

: Jasmin Cuaresma

Sex

: Female

Marital Status : Single Nationality: Philipino (sic)


Religion

: Christian

Profession

: Nurse

Address

: Al-Birk Genrl. Hospital Birth Place: The Philippines

On 27.2.1419H, Dr. Tariq Abdulminnem and Dr. Ashoki Komar, both have examined the dead body of Jasmin
Cuaresma, at 12.20 P.M., Sunday, 22.2.14189H, and the result was:
1. Report of the Police on the death
2. Medical Examination: Blue skin and paleness on the Extrimes (sic), total halt to blood circulation and
respiratory system and brain damage. There were no external injuries. Likely poisoning by taking poisonous
substance, yet not determined. There was a bad smell in the mouth and unknown to us.5 (Emphasis
supplied)
Jasmins body was repatriated to Manila on September 3, 1998. The following day, the City Health Officer of
Cabanatuan City conducted an autopsy and the resulting medical report indicated that Jasmin died under violent
circumstances, and not poisoning as originally found by the KSA examining physician. The City Health Officer found
that Jasmin had abrasions at her inner lip and gums; lacerated wounds and abrasions on her left and right ears;
lacerated wounds and hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intramuscular hemorrhage at the anterior chest; rib fracture; puncture wounds; and abrasions on the labia minora of the
vaginal area.6
On March 11, 1999, Jasmins remains were exhumed and examined by the National Bureau of Investigation (NBI).
The toxicology report of the NBI, however, tested negative for non-volatile, metallic poison and insecticides.7
Simplicio and Mila Cuaresma (the Cuaresmas), Jasmins parents and her surviving heirs, received from the
Overseas Workers Welfare Administration (OWWA) the following amounts: P50,000.00 for death benefits;
P50,000.00 for loss of life; P20,000.00 for funeral expenses; and P10,000.00 for medical reimbursement.
On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA, Rajab &
Silsilah Company (Rajab), claiming death and insurance benefits, as well as moral and exemplary damages for
Jasmins death.8
In their complaint, the Cuaresmas claim that Jasmins death was work-related, having occurred at the employers
premises;9 that under Jasmins contract with Becmen, she is entitled to "iqama insurance" coverage; that Jasmin is
entitled to compensatory damages in the amount of US$103,740.00, which is the sum total of her monthly salary of
US$247.00 per month under her employment contract, multiplied by 35 years (or the remaining years of her
productive life had death not supervened at age 25, assuming that she lived and would have retired at age 60).
The Cuaresmas assert that as a result of Jasmins death under mysterious circumstances, they suffered sleepless
nights and mental anguish. The situation, they claim, was aggravated by findings in the autopsy and exhumation
reports which evidently show that a grave injustice has been committed against them and their daughter, for which
those responsible should likewise be made to pay moral and exemplary damages and attorneys fees.
In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior unsuccessful suicide
attempt sometime in March or April 1998 and relying on the medical report of the examining physician of the Al-Birk
Hospital. They likewise deny liability because the Cuaresmas already recovered death and other benefits totaling
P130,000.00 from the OWWA. They insist that the Cuaresmas are not entitled to "iqama insurance" because this
refers to the "issuance" not insurance of iqama, or residency/work permit required in the KSA. On the issue of
moral and exemplary damages, they claim that the Cuaresmas are not entitled to the same because they have not
acted with fraud, nor have they been in bad faith in handling Jasmins case.
While the case was pending, Becmen filed a manifestation and motion for substitution alleging that Rajab terminated
their agency relationship and had appointed White Falcon Services, Inc. (White Falcon) as its new recruitment agent
in the Philippines. Thus, White Falcon was impleaded as respondent as well, and it adopted and reiterated
Becmens arguments in the position paper it subsequently filed.

On February 28, 2001, the Labor Arbiter rendered a Decision10 dismissing the complaint for lack of merit. Giving
weight to the medical report of the Al-Birk Hospital finding that Jasmin died of poisoning, the Labor Arbiter
concluded that Jasmin committed suicide. In any case, Jasmins death was not service-connected, nor was it shown
that it occurred while she was on duty; besides, her parents have received all corresponding benefits they were
entitled to under the law. In regard to damages, the Labor Arbiter found no legal basis to warrant a grant thereof.
On appeal, the National Labor Relations Commission (Commission) reversed the decision of the Labor Arbiter.
Relying on the findings of the City Health Officer of Cabanatuan City and the NBI as contained in their autopsy and
toxicology report, respectively, the Commission, via its November 22, 2002 Resolution11 declared that, based on
substantial evidence adduced, Jasmin was the victim of compensable work-connected criminal aggression. It
disregarded the Al-Birk Hospital attending physicians report as well as the KSA police report, finding the same to be
inconclusive. It declared that Jasmins death was the result of an "accident" occurring within the employers
premises that is attributable to her employment, or to the conditions under which she lived, and thus arose out of
and in the course of her employment as nurse. Thus, the Cuaresmas are entitled to actual damages in the form of
Jasmins lost earnings, including future earnings, in the total amount of US$113,000.00. The Commission, however,
dismissed all other claims in the complaint.
Becmen, Rajab and White Falcon moved for reconsideration, whereupon the Commission issued its October 9,
2003 Resolution12 reducing the award of US$113,000.00 as actual damages to US$80,000.00.13 The NLRC
likewise declared Becmen and White Falcon as solidarily liable for payment of the award.
Becmen and White Falcon brought separate petitions for certiorari to the Court of Appeals.14 On June 28, 2006, the
appellate court rendered its Decision,15 the dispositive portion of which reads, as follows:
WHEREFORE, the subject petitions are DENIED but in the execution of the decision, it should first be enforced
against White Falcon Services and then against Becmen Services when it is already impossible, impractical and
futile to go against it (White Falcon).
SO ORDERED.16
The appellate court affirmed the NLRCs findings that Jasmins death was compensable, the same having occurred
at the dormitory, which was contractually provided by the employer. Thus her death should be considered to have
occurred within the employers premises, arising out of and in the course of her employment.
Becmen and White Falcon moved for reconsideration. On May 14, 2008, the appellate court rendered the assailed
Amended Decision, the dispositive portion of which reads, as follows:
WHEREFORE, the motions for reconsideration are GRANTED. Accordingly, the award of US$80,000.00 in actual
damages is hereby reduced to US$4,686.73 plus interest at the legal rate computed from the time it became due
until fully paid. Petitioners are hereby adjudged jointly and solidarily liable with the employer for the monetary
awards with Becmen Service Exporter and Promotions, Inc. having a right of reimbursement from White Falcon
Services, Inc.
SO ORDERED.17
In the Amended Decision, the Court of Appeals found that although Jasmins death was compensable, however,
there is no evidentiary basis to support an award of actual damages in the amount of US$80,000.00. Nor may lost
earnings be collected, because the same may be charged only against the perpetrator of the crime or quasi-delict.
Instead, the appellate court held that Jasmins beneficiaries should be entitled only to the sum equivalent of the
remainder of her 36-month employment contract, or her monthly salary of US$247.00 multiplied by nineteen (19)
months, with legal interest.
Becmen filed the instant petition for review on certiorari (G.R. Nos. 182978-79). The Cuaresmas, on the other hand,
moved for a reconsideration of the amended decision, but it was denied. They are now before us via G.R. Nos.
184298-99.
On October 6, 2008, the Court resolved to consolidate G.R. Nos. 184298-99 with G.R. Nos. 182978-79.
In G.R. Nos. 182978-79, Becmen raises the following issues for our resolution:
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT GAVE MORE CREDENCE AND WEIGHT
TO THE AUTOPSY REPORT CONDUCTED BY THE CABANATUAN CITY HEALTH OFFICE THAN
THE MEDICAL AND POLICE REPORTS ISSUED BY THE MINISTRY OF HEALTH OF KINGDOM OF
SAUDI ARABIA AND AL-BIRK HOSPITAL.

(THE COURT OF APPEALS) GRAVELY ERRED WHEN ON THE BASIS OF THE POSITION PAPERS
AND ANNEXES THERETO INCLUDING THE AUTOPSY REPORT, IT CONCLUDED THAT THE
DEATH OF JASMIN CUARESMA WAS CAUSED BY CRIMINAL AGGRESSION.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD THAT THE DEATH OF JASMIN
CUARESMA WAS COMPENSABLE PURSUANT TO THE RULING OF THE SUPREME COURT IN
TALLER VS. YNCHAUSTI, G.R. NO. 35741, DECEMBER 20, 1932, WHICH IT FOUND TO BE STILL
GOOD LAW.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE FOR THE DEATH
OF JASMIN CUARESMA NOTWITHSTANDING ITS ADMISSIONS THAT "IQAMA INSURANCE" WAS
A TYPOGRAPHICAL ERROR SINCE "IQAMA" IS NOT AN INSURANCE.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT CONCLUDED THAT THE DEATH OF
JASMIN WAS WORK RELATED.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO JASMINS
BENEFICIARIES FOR THE REMAINDER OF HER 36-MONTH CONTRACT COMPUTED IN THIS
MANNER: MONTHLY SALARY OF US$246.67 MULTIPLIED BY 19 MONTHS, THE REMAINDER OF
THE TERM OF JASMINS EMPLOYMENT CONTRACT, IS EQUAL TO US$4,686.73.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO PAY
INTEREST AT THE LEGAL RATE FROM THE TIME IT WAS DUE UNTIL FULLY PAID.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN AND WHITE FALCON
JOINTLY AND SEVERALLY LIABLE WITH THE EMPLOYER NOTWITHSTANDING THE
ASSUMPTION OF LIABILITY EXECUTED BY WHITE FALCON IN FAVOR OF BECMEN.
On the other hand, in G.R. Nos. 184298-99, the Cuaresmas raise the following issues:
(THE COURT OF APPEALS) GRAVELY ERRED IN APPLYING THE PROVISIONS OF THE CIVIL
CODE CONSIDERED GENERAL LAW DESPITE THE CASE BEING COVERED BY E.O. 247, R.A.
8042 AND LABOR CODE CONSIDERED AS SPECIAL LAWS.
(THE COURT OF APPEALS) GRAVELY ERRED IN NOT APPLYING THE DECEASEDS FUTURE
EARNINGS WHICH IS (AN) INHERENT FACTOR IN THE COMPUTATION OF DEATH BENEFITS OF
OVERSEAS FILIPINO CONTRACT WORKERS.
(THE COURT OF APPEALS) GRAVELY ERRED IN REDUCING THE DEATH BENEFITS AWARDED
BY NLRC CONSIDERED FINDINGS OF FACT THAT CANNOT BE DISTURBED THROUGH
CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.
The issue for resolution is whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages,
for the death of their daughter Jasmin.
The terms and conditions of Jasmins 1996 Employment Agreement which she and her employer Rajab freely
entered into constitute the law between them. As a rule, stipulations in an employment contract not contrary to
statutes, public policy, public order or morals have the force of law between the contracting parties.18 An
examination of said employment agreement shows that it provides for no other monetary or other benefits/privileges
than the following:
1. 1,300 rials (or US$247.00) monthly salary;
2. Free air tickets to KSA at the start of her contract and to the Philippines at the end thereof, as well as for
her vacation at the end of each twenty four-month service;
3. Transportation to and from work;
4. Free living accommodations;
5. Free medical treatment, except for optical and dental operations, plastic surgery charges and lenses, and
medical treatment obtained outside of KSA;
6. Entry visa fees will be shared equally between her and her employer, but the exit/re-entry visa fees, fees
for Iqama issuance, renewal, replacement, passport renewal, sponsorship transfer and other liabilities shall

be borne by her;
7. Thirty days paid vacation leave with round trip tickets to Manila after twenty four-months of continuous
service;
8. Eight days public holidays per year;
9. The indemnity benefit due her at the end of her service will be calculated as per labor laws of KSA.
Thus, the agreement does not include provisions for insurance, or for accident, death or other benefits that the
Cuaresmas seek to recover, and which the labor tribunals and appellate court granted variably in the guise of
compensatory damages.
However, the absence of provisions for social security and other benefits does not make Jasmins employment
contract infirm. Under KSA law, her foreign employer is not obliged to provide her these benefits; and neither is
Jasmin entitled to minimum wage unless of course the KSA labor laws have been amended to the opposite effect,
or that a bilateral wage agreement has been entered into.
Our next inquiry is, should Jasmins death be considered as work-connected and thus compensable? The evidence
indicates that it is not. At the time of her death, she was not on duty, or else evidence to the contrary would have
been adduced. Neither was she within hospital premises at the time. Instead, she was at her dormitory room on
personal time when she died. Neither has it been shown, nor does the evidence suggest, that at the time she died,
Jasmin was performing an act reasonably necessary or incidental to her employment as nurse, because she was at
her dormitory room. It is reasonable to suppose that all her work is performed at the Al-birk Hospital, and not at her
dormitory room.
We cannot expect that the foreign employer should ensure her safety even while she is not on duty. It is not fair to
require employers to answer even for their employees personal time away from work, which the latter are free to
spend of their own choosing. Whether they choose to spend their free time in the pursuit of safe or perilous
undertakings, in the company of friends or strangers, lovers or enemies, this is not one area which their employers
should be made accountable for. While we have emphasized the need to observe official work time strictly,19 what
an employee does on free time is beyond the employers sphere of inquiry.
While the "employers premises" may be defined very broadly not only to include premises owned by it, but also
premises it leases, hires, supplies or uses,20 we are not prepared to rule that the dormitory wherein Jasmin stayed
should constitute employers premises as would allow a finding that death or injury therein is considered to have
been incurred or sustained in the course of or arose out of her employment. There are certainly exceptions,21 but
they do not appear to apply here. Moreover, a complete determination would have to depend on the unique
circumstances obtaining and the overall factual environment of the case, which are here lacking.
But, did Jasmin commit suicide? Rajab, Becmen and White Falcon vehemently insist that she did; thus, her heirs
may not claim benefits or damages based on criminal aggression. On the other hand, the Cuaresmas do not believe
so.
The Court cannot subscribe to the idea that Jasmin committed suicide while halfway into her employment contract. It
is beyond human comprehension that a 25-year old Filipina, in the prime of her life and working abroad with a
chance at making a decent living with a high-paying job which she could not find in her own country, would simply
commit suicide for no compelling reason.
The Saudi police and autopsy reports which state that Jasmin is a likely/or apparent victim of poisoning are
patently inconclusive. They are thus unreliable as evidence.
On the contrary, the autopsy report of the Cabanatuan City Health Officer and the exhumation report of the NBI
categorically and unqualifiedly show that Jasmin sustained external and internal injuries, specifically abrasions at
her inner lip and gums; lacerated wounds and abrasions on her left and right ears; lacerated wounds and
hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intra-muscular
hemorrhage at the anterior chest; a fractured rib; puncture wounds; and abrasions on the labia minora of
the vaginal area. The NBI toxicology report came up negative on the presence of poison.
All these show that Jasmin was manhandled and possibly raped prior to her death.
Even if we were to agree with the Saudi police and autopsy reports that indicate Jasmin was poisoned to death, we
do not believe that it was self-induced. If ever Jasmin was poisoned, the assailants who beat her up and possibly
raped her are certainly responsible therefor.

We are not exactly ignorant of what goes on with our OFWs. Nor is the rest of the world blind to the realities of life
being suffered by migrant workers in the hands of some foreign employers. It is inconceivable that our Filipina
women would seek employment abroad and face uncertainty in a foreign land, only to commit suicide for
unexplained reasons. Deciding to leave their family, loved ones, and the comfort and safety of home, to work in a
strange land requires unrivaled strength and courage. Indeed, many of our women OFWs who are unfortunate to
end up with undesirable employers have been there more times than they care to, beaten up and broken in body
yet they have remained strong in mind, refusing to give up the will to live. Raped, burned with cigarettes, kicked in
the chest with sharp high-heeled shoes, starved for days or even weeks, stabbed, slaved with incessant work,
locked in their rooms, forced to serve their masters naked, grossly debased, dehumanized and insulted, their spirits
fought on and they lived for the day that they would once again be reunited with their families and loved ones. Their
bodies surrendered, but their will to survive remained strong.
It is surprising, therefore, that Rajab, Becmen and White Falcon should insist on suicide, without even lifting a finger
to help solve the mystery of Jasmins death. Being in the business of sending OFWs to work abroad, Becmen and
White Falcon should know what happens to some of our OFWs. It is impossible for them to be completely unaware
that cruelties and inhumanities are inflicted on OFWs who are unfortunate to be employed by vicious employers, or
upon those who work in communities or environments where they are liable to become victims of crime. By now
they should know that our women OFWs do not readily succumb to the temptation of killing themselves even when
assaulted, abused, starved, debased and, worst, raped.
Indeed, what we have seen is Rajab and Becmens revolting scheme of conveniently avoiding responsibility by
clinging to the absurd theory that Jasmin took her own life. Abandoning their legal, moral and social obligation (as
employer and recruiter) to assist Jasmins family in obtaining justice for her death, they immediately gave up on
Jasmins case, which has remained under investigation as the autopsy and police reports themselves indicate.
Instead of taking the cudgels for Jasmin, who had no relative or representative in the KSA who would naturally
demand and seek an investigation of her case, Rajab and Becmen chose to take the most convenient route to
avoiding and denying liability, by casting Jasmins fate to oblivion. It appears from the record that to this date, no
follow up of Jasmins case was ever made at all by them, and they seem to have expediently treated Jasmins death
as a closed case. Despite being given the lead via the autopsy and toxicology reports of the Philippine authorities,
they failed and refused to act and pursue justice for Jasmins sake and to restore honor to her name.
Indeed, their nonchalant and uncaring attitude may be seen from how Jasmins remains were repatriated. No official
representative from Rajab or Becmen was kind enough to make personal representations with Jasmins parents, if
only to extend their condolences or sympathies; instead, a mere colleague, nurse Jessie Fajardo, was designated to
accompany Jasmins body home.
Of all lifes tragedies, the death of ones own child must be the most painful for a parent. Not knowing why or how
Jasmins life was snuffed out makes the pain doubly unbearable for Jasmins parents, and further aggravated by
Rajab, Becmen, and White Falcons baseless insistence and accusation that it was a self-inflicted death, a mortal
sin by any religious standard.
Thus we categorically hold, based on the evidence; the actual experiences of our OFWs; and the resilient and
courageous spirit of the Filipina that transcends the vilest desecration of her physical self, that Jasmin did not
commit suicide but a victim of murderous aggression.
Rajab, Becmen, and White Falcons indifference to Jasmins case has caused unfathomable pain and suffering upon
her parents. They have turned away from their moral obligation, as employer and recruiter and as entities laden with
social and civic obligations in society, to pursue justice for and in behalf of Jasmin, her parents and those she left
behind. Possessed with the resources to determine the truth and to pursue justice, they chose to stand idly for the
sake of convenience and in order that they may avoid pecuniary liability, turning a blind eye to the Philippine
authorities autopsy and toxicology reports instead of taking action upon them as leads in pursuing justice for
Jasmins death. They have placed their own financial and corporate interests above their moral and social
obligations, and chose to secure and insulate themselves from the perceived responsibility of having to answer for
and indemnify Jasmins heirs for her death.
Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas Filipinos Act of 1995,22 the State
shall, at all times, uphold the dignity of its citizens whether in country or overseas, in general, and Filipino migrant
workers, in particular.23 The State shall provide adequate and timely social, economic and legal services to Filipino
migrant workers.24 The rights and interest of distressed25 overseas Filipinos, in general, and Filipino migrant
workers, in particular, documented or undocumented, are adequately protected and safeguarded.26
Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to abide by the provisions of
R.A. 8042. Recruitment agencies are expected to extend assistance to their deployed OFWs, especially those in

distress. Instead, they abandoned Jasmins case and allowed it to remain unsolved to further their interests and
avoid anticipated liability which parents or relatives of Jasmin would certainly exact from them. They willfully refused
to protect and tend to the welfare of the deceased Jasmin, treating her case as just one of those unsolved crimes
that is not worth wasting their time and resources on. The evidence does not even show that Becmen and Rajab
lifted a finger to provide legal representation and seek an investigation of Jasmins case. Worst of all, they
unnecessarily trampled upon the person and dignity of Jasmin by standing pat on the argument that Jasmin
committed suicide, which is a grave accusation given its un-Christian nature.
We cannot reasonably expect that Jasmins parents should be the ones to actively pursue a just resolution of her
case in the KSA, unless they are provided with the finances to undertake this herculean task. Sadly, Becmen and
Rajab did not lend any assistance at all in this respect. The most Jasmins parents can do is to coordinate with
Philippine authorities as mandated under R.A. 8042, obtain free legal assistance and secure the aid of the
Department of Foreign Affairs, the Department of Labor and Employment, the POEA and the OWWA in trying to
solve the case or obtain relief, in accordance with Section 2327 of R.A. 8042. To our mind, the Cuaresmas did all
that was within their power, short of actually flying to the KSA. Indeed, the Cuaresmas went even further. To the best
of their abilities and capacities, they ventured to investigate Jasmins case on their own: they caused another
autopsy on Jasmins remains as soon as it arrived to inquire into the true cause of her death. Beyond that, they
subjected themselves to the painful and distressful experience of exhuming Jasmins remains in order to obtain
another autopsy for the sole purpose of determining whether or not their daughter was poisoned. Their quest for the
truth and justice is equally to be expected of all loving parents. All this time, Rajab and Becmen instead of
extending their full cooperation to the Cuaresma family merely sat on their laurels in seeming unconcern.
In Interorient Maritime Enterprises, Inc. v. NLRC,28 a seaman who was being repatriated after his employment
contract expired, failed to make his Bangkok to Manila connecting flight as he began to wander the streets of
Bangkok aimlessly. He was shot to death by Thai police four days after, on account of running amuck with a knife in
hand and threatening to harm anybody within sight. The employer, sued for death and other benefits as well as
damages, interposed as defense the provision in the seafarer agreement which provides that "no compensation
shall be payable in respect of any injury, incapacity, disability or death resulting from a willful act on his own life by
the seaman." The Court rejected the defense on the view, among others, that the recruitment agency should have
observed some precautionary measures and should not have allowed the seaman, who was later on found to be
mentally ill, to travel home alone, and its failure to do so rendered it liable for the seamans death. We ruled therein
that
The foreign employer may not have been obligated by its contract to provide a companion for a returning employee,
but it cannot deny that it was expressly tasked by its agreement to assure the safe return of said worker. The
uncaring attitude displayed by petitioners who, knowing fully well that its employee had been suffering from
some mental disorder, nevertheless still allowed him to travel home alone, is appalling to say the least.
Such attitude harks back to another time when the landed gentry practically owned the serfs, and disposed
of them when the latter had grown old, sick or otherwise lost their usefulness.29 (Emphasis supplied)
Thus, more than just recruiting and deploying OFWs to their foreign principals, recruitment agencies have equally
significant responsibilities. In a foreign land where OFWs are likely to encounter uneven if not discriminatory
treatment from the foreign government, and certainly a delayed access to language interpretation, legal aid, and the
Philippine consulate, the recruitment agencies should be the first to come to the rescue of our distressed OFWs
since they know the employers and the addresses where they are deployed or stationed. Upon them lies the primary
obligation to protect the rights and ensure the welfare of our OFWs, whether distressed or not. Who else is in a
better position, if not these recruitment agencies, to render immediate aid to their deployed OFWs abroad?
Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith. Article 21 of the Code states
that any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage. And, lastly, Article 24 requires that in all contractual,
property or other relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.
Clearly, Rajab, Becmen and White Falcons acts and omissions are against public policy because they undermine
and subvert the interest and general welfare of our OFWs abroad, who are entitled to full protection under the law.
They set an awful example of how foreign employers and recruitment agencies should treat and act with respect to
their distressed employees and workers abroad. Their shabby and callous treatment of Jasmins case; their
uncaring attitude; their unjustified failure and refusal to assist in the determination of the true circumstances
surrounding her mysterious death, and instead finding satisfaction in the unreasonable insistence that she
committed suicide just so they can conveniently avoid pecuniary liability; placing their own corporate interests above
of the welfare of their employees all these are contrary to morals, good customs and public policy, and constitute

taking advantage of the poor employee and her familys ignorance, helplessness, indigence and lack of power and
resources to seek the truth and obtain justice for the death of a loved one.
Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to protect Rajab and
Becmens material interest despite evidence to the contrary is against the moral law and runs contrary to the
good custom of not denouncing ones fellowmen for alleged grave wrongdoings that undermine their good name
and honor.30
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic
public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws which have for their object public order,
public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determinations or conventions agreed upon in a foreign country.31
The relations between capital and labor are so impressed with public interest,32 and neither shall act oppressively
against the other, or impair the interest or convenience of the public.33 In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for the laborer.34
The grant of moral damages to the employee by reason of misconduct on the part of the employer is sanctioned by
Article 2219 (10)35 of the Civil Code, which allows recovery of such damages in actions referred to in Article 21.36
Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral damages, which Becmen
and White Falcon are jointly and solidarily liable to pay, together with exemplary damages for wanton and
oppressive behavior, and by way of example for the public good.
Private employment agencies are held jointly and severally liable with the foreign-based employer for any violation
of the recruitment agreement or contract of employment. This joint and solidary liability imposed by law against
recruitment agencies and foreign employers is meant to assure the aggrieved worker of immediate and sufficient
payment of what is due him.37 If the recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages.38
White Falcons assumption of Becmens liability does not automatically result in Becmens freedom or release from
liability. This has been ruled in ABD Overseas Manpower Corporation v. NLRC.39 Instead, both Becmen and White
Falcon should be held liable solidarily, without prejudice to each having the right to be reimbursed under the
provision of the Civil Code that whoever pays for another may demand from the debtor what he has paid.40
WHEREFORE, the Amended Decision of the Court of Appeals dated May 14, 2008 in CA-G.R. SP No. 80619 and
CA-G.R. SP No. 81030 is SET ASIDE. Rajab & Silsilah Company, White Falcon Services, Inc., Becmen
Service Exporter and Promotion, Inc., and their corporate directors and officers are found jointly and solidarily
liable and ORDERED to indemnify the heirs of Jasmin Cuaresma, spouses Simplicio and Mila Cuaresma, the
following amounts:
1) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as moral damages;
2) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as exemplary damages;
3) Attorneys fees equivalent to ten percent (10%) of the total monetary award; and,
4) Costs of suit.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
CONCHITA CARPIO MORALES
Associate Justice

Today is Monday, December 12, 2016

Search

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 152642

November 13, 2012

HON. PATRICIA A. STO.TOMAS, ROSALINDA BALDOZ and LUCITA LAZO, Petitioners,


vs.
REY SALAC, WILLIE D. ESPIRITU, MARIO MONTENEGRO, DODGIE BELONIO, LOLIT SALINEL and BUDDY
BONNEVIE, Respondents.
x-----------------------x
G.R. No. 152710
HON. PATRICIA A. STO. TOMAS, in her capacity as Secretary of Department of Labor and Employment
(DOLE), HON. ROSALINDA D. BALDOZ, in her capacity as Administrator, Philippine Overseas Employment
Administration (POEA), and the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION GOVERNING
BOARD, Petitioners,
vs.
HON. JOSE G. PANEDA, in his capacity as the Presiding Judge of Branch 220, Quezon City, ASIAN
RECRUITMENT COUNCIL PHILIPPINE CHAPTER, INC. (ARCOPHIL), for itself and in behalf of its members:
WORLDCARE PHILIPPINES SERVIZO INTERNATIONALE, INC., STEADFAST INTERNATIONAL
RECRUITMENT CORP., VERDANT MANPOWER MOBILIZATION CORP., BRENT OVERSEAS PERSONNEL,
INC., ARL MANPOWER SERVICES, INC., DAHLZEN INTERNATIONAL SERVICES, INC., INTERWORLD
PLACEMENT CENTER, INC., LAKAS TAO CONTRACT SERVICES LTD. CO., SSC MULTI-SERVICES, DMJ
INTERNATIONAL, and MIP INTERNATIONAL MANPOWER SERVICES, represented by its proprietress,
MARCELINA I. PAGSIBIGAN, Respondents.
x-----------------------x
G.R. No. 167590
REPUBLIC OF THE PHILIPPINES, represented by the HONORABLE EXECUTIVE SECRETARY, the
HONORABLE SECRETARY OF LABOR AND EMPLOYMENT (DOLE), the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA), the OVERSEAS WORKERS WELFARE ADMINISTRATION
(OWWA), the LABOR ARBITERS OF THE NATIONAL LABOR RELATIONS COMMISSION (NLRC), the
HONORABLE SECRETARY OF JUSTICE, the HONORABLE SECRETARY OF FOREIGN AFFAIRS and the
COMMISSION ON AUDIT (COA), Petitioners,
vs.
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC. (P ASEI), Respondent.
x-----------------------x
G.R. Nos. 182978-79
BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,
vs.
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of daughter, Jasmin G. Cuaresma), WHITE
FALCON SERVICES, INC., and JAIME ORTIZ (President of White Falcon Services, Inc.), Respondents.
x-----------------------x
G.R. Nos. 184298-99

SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of deceased daughter, Jasmin G. Cuaresma),
Petitioners,
vs.
WHITE FALCON SERVICES, INC. and BECMEN SERVICES EXPORTER AND PROMOTION, INC., Respondents.
DECISION
ABAD, J.:
These consolidated cases pertain to the constitutionality of certain provisions of Republic Act 8042, otherwise
known as the Migrant Workers and Overseas Filipinos Act of 1995.
The Facts and the Case
On June 7, 1995 Congress enacted Republic Act (R.A.) 8042 or the Migrant Workers and Overseas Filipinos Act of
1995 that, for among other purposes, sets the Governments policies on overseas employment and establishes a
higher standard of protection and promotion of the welfare of migrant workers, their families, and overseas Filipinos
in distress.
G.R. 152642 and G.R. 152710
(Constitutionality of Sections 29 and 30, R.A. 8042)
Sections 29 and 30 of the Act1 commanded the Department of Labor and Employment (DOLE) to begin
deregulating within one year of its passage the business of handling the recruitment and migration of overseas
Filipino workers and phase out within five years the regulatory functions of the Philippine Overseas Employment
Administration (POEA).
On January 8, 2002 respondents Rey Salac, Willie D. Espiritu, Mario Montenegro, Dodgie Belonio, Lolit Salinel, and
Buddy Bonnevie (Salac, et al.) filed a petition for certiorari, prohibition and mandamus with application for temporary
restraining order (TRO) and preliminary injunction against petitioners, the DOLE Secretary, the POEA Administrator,
and the Technical Education and Skills Development Authority (TESDA) Secretary-General before the Regional Trial
Court (RTC) of Quezon City, Branch 96.2
Salac, et al. sought to: 1) nullify DOLE Department Order 10 (DOLE DO 10) and POEA Memorandum Circular 15
(POEA MC 15); 2) prohibit the DOLE, POEA, and TESDA from implementing the same and from further issuing
rules and regulations that would regulate the recruitment and placement of overseas Filipino workers (OFWs); and
3) also enjoin them to comply with the policy of deregulation mandated under Sections 29 and 30 of Republic Act
8042.
On March 20, 2002 the Quezon City RTC granted Salac, et al.s petition and ordered the government agencies
mentioned to deregulate the recruitment and placement of OFWs.3 The RTC also annulled DOLE DO 10, POEA MC
15, and all other orders, circulars and issuances that are inconsistent with the policy of deregulation under R.A.
8042.
Prompted by the RTCs above actions, the government officials concerned filed the present petition in G.R. 152642
seeking to annul the RTCs decision and have the same enjoined pending action on the petition.
On April 17, 2002 the Philippine Association of Service Exporters, Inc. intervened in the case before the Court,
claiming that the RTC March 20, 2002 Decision gravely affected them since it paralyzed the deployment abroad of
OFWs and performing artists. The Confederated Association of Licensed Entertainment Agencies, Incorporated
(CALEA) intervened for the same purpose.4
On May 23, 2002 the Court5 issued a TRO in the case, enjoining the Quezon City RTC, Branch 96, from enforcing
its decision.
In a parallel case, on February 12, 2002 respondents Asian Recruitment Council Philippine Chapter, Inc. and others
(Arcophil, et al.) filed a petition for certiorari and prohibition with application for TRO and preliminary injunction
against the DOLE Secretary, the POEA Administrator, and the TESDA Director-General,6 before the RTC of Quezon
City, Branch 220, to enjoin the latter from implementing the 2002 Rules and Regulations Governing the Recruitment
and Employment of Overseas Workers and to cease and desist from issuing other orders, circulars, and policies that
tend to regulate the recruitment and placement of OFWs in violation of the policy of deregulation provided in
Sections 29 and 30 of R.A. 8042.

On March 12, 2002 the Quezon City RTC rendered an Order, granting the petition and enjoining the government
agencies involved from exercising regulatory functions over the recruitment and placement of OFWs. This prompted
the DOLE Secretary, the POEA Administrator, and the TESDA Director-General to file the present action in G.R.
152710. As in G.R. 152642, the Court issued on May 23, 2002 a TRO enjoining the Quezon City RTC, Branch 220
from enforcing its decision.
On December 4, 2008, however, the Republic informed7 the Court that on April 10, 2007 former President Gloria
Macapagal-Arroyo signed into law R.A. 94228 which expressly repealed Sections 29 and 30 of R.A. 8042 and
adopted the policy of close government regulation of the recruitment and deployment of OFWs. R.A. 9422
pertinently provides:
xxxx
SEC. 1. Section 23, paragraph (b.1) of Republic Act No. 8042, otherwise known as the "Migrant Workers and
Overseas Filipinos Act of 1995" is hereby amended to read as follows:
(b.1) Philippine Overseas Employment Administration The Administration shall regulate private sector participation
in the recruitment and overseas placement of workers by setting up a licensing and registration system. It shall also
formulate and implement, in coordination with appropriate entities concerned, when necessary, a system for
promoting and monitoring the overseas employment of Filipino workers taking into consideration their welfare and
the domestic manpower requirements.
In addition to its powers and functions, the administration shall inform migrant workers not only of their rights as
workers but also of their rights as human beings, instruct and guide the workers how to assert their rights and
provide the available mechanism to redress violation of their rights.
In the recruitment and placement of workers to service the requirements for trained and competent Filipino workers
of foreign governments and their instrumentalities, and such other employers as public interests may require, the
administration shall deploy only to countries where the Philippines has concluded bilateral labor agreements or
arrangements: Provided, That such countries shall guarantee to protect the rights of Filipino migrant workers; and:
Provided, further, That such countries shall observe and/or comply with the international laws and standards for
migrant workers.
SEC. 2. Section 29 of the same law is hereby repealed.
SEC. 3. Section 30 of the same law is also hereby repealed.
xxxx
On August 20, 2009 respondents Salac, et al. told the Court in G.R. 152642 that they agree9 with the Republics
view that the repeal of Sections 29 and 30 of R.A. 8042 renders the issues they raised by their action moot and
academic. The Court has no reason to disagree. Consequently, the two cases, G.R. 152642 and 152710, should be
dismissed for being moot and academic.
G.R. 167590
(Constitutionality of Sections 6, 7, and 9 of R.A. 8042)
On August 21, 1995 respondent Philippine Association of Service Exporters, Inc. (PASEI) filed a petition for
declaratory relief and prohibition with prayer for issuance of TRO and writ of preliminary injunction before the RTC of
Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for being unconstitutional. (PASEI also sought to annul a
portion of Section 10 but the Court will take up this point later together with a related case.)
Section 6 defines the crime of "illegal recruitment" and enumerates the acts constituting the same. Section 7
provides the penalties for prohibited acts. Thus:
SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-license or non-holder of
authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, That such non-license or non-holder, who, in any manner, offers or
promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include
the following acts, whether committed by any person, whether a non-licensee, non-holder, licensee or holder of
authority:

xxxx
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less than six
(6) years and one (1) day but not more than twelve (12) years and a fine not less than two hundred thousand
pesos (P200,000.00) nor more than five hundred thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five hundred thousand pesos (P500,000.00)
nor more than one million pesos (P1,000,000.00) shall be imposed if illegal recruitment constitutes economic
sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if the person illegally recruited is less than eighteen
(18) years of age or committed by a non-licensee or non-holder of authority.10
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising from "illegal recruitment" before the RTC
of the province or city where the offense was committed or where the offended party actually resides at the time of
the commission of the offense.
The RTC of Manila declared Section 6 unconstitutional after hearing on the ground that its definition of "illegal
recruitment" is vague as it fails to distinguish between licensed and non-licensed recruiters11 and for that reason
gives undue advantage to the non-licensed recruiters in violation of the right to equal protection of those that
operate with government licenses or authorities.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTCs finding,
actually makes a distinction between licensed and non-licensed recruiters. By its terms, persons who engage in
"canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers" without the appropriate
government license or authority are guilty of illegal recruitment whether or not they commit the wrongful acts
enumerated in that section. On the other hand, recruiters who engage in the canvassing, enlisting, etc. of OFWs,
although with the appropriate government license or authority, are guilty of illegal recruitment only if they commit any
of the wrongful acts enumerated in Section 6.
The Manila RTC also declared Section 7 unconstitutional on the ground that its sweeping application of the
penalties failed to make any distinction as to the seriousness of the act committed for the application of the penalty
imposed on such violation. As an example, said the trial court, the mere failure to render a report under Section 6(h)
or obstructing the inspection by the Labor Department under Section 6(g) are penalized by imprisonment for six
years and one day and a minimum fine of P200,000.00 but which could unreasonably go even as high as life
imprisonment if committed by at least three persons.
Apparently, the Manila RTC did not agree that the law can impose such grave penalties upon what it believed were
specific acts that were not as condemnable as the others in the lists. But, in fixing uniform penalties for each of the
enumerated acts under Section 6, Congress was within its prerogative to determine what individual acts are equally
reprehensible, consistent with the State policy of according full protection to labor, and deserving of the same
penalties. It is not within the power of the Court to question the wisdom of this kind of choice. Notably, this legislative
policy has been further stressed in July 2010 with the enactment of R.A. 1002212 which increased even more the
duration of the penalties of imprisonment and the amounts of fine for the commission of the acts listed under Section
7.
Obviously, in fixing such tough penalties, the law considered the unsettling fact that OFWs must work outside the
countrys borders and beyond its immediate protection. The law must, therefore, make an effort to somehow protect
them from conscienceless individuals within its jurisdiction who, fueled by greed, are willing to ship them out without
clear assurance that their contracted principals would treat such OFWs fairly and humanely.
As the Court held in People v. Ventura,13 the State under its police power "may prescribe such regulations as in its
judgment will secure or tend to secure the general welfare of the people, to protect them against the consequence of
ignorance and incapacity as well as of deception and fraud." Police power is "that inherent and plenary power of the
State which enables it to prohibit all things hurtful to the comfort, safety, and welfare of society."14
The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that allowing the offended parties to file the
criminal case in their place of residence would negate the general rule on venue of criminal cases which is the place
where the crime or any of its essential elements were committed. Venue, said the RTC, is jurisdictional in penal laws
and, allowing the filing of criminal actions at the place of residence of the offended parties violates their right to due
process. Section 9 provides:

SEC. 9. Venue. A criminal action arising from illegal recruitment as defined herein shall be filed with the Regional
Trial Court of the province or city where the offense was committed or where the offended party actually resides at
the time of the commission of the offense: Provided, That the court where the criminal action is first filed shall
acquire jurisdiction to the exclusion of other courts: Provided, however, That the aforestated provisions shall also
apply to those criminal actions that have already been filed in court at the time of the effectivity of this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of Section 6 of
R.A. 8042 that differs from the venue established by the Rules on Criminal Procedure. Indeed, Section 15(a), Rule
110 of the latter Rules allows exceptions provided by laws. Thus:
SEC. 15. Place where action is to be instituted. (a) Subject to existing laws, the criminal action shall be instituted
and tried in the court of the municipality or territory where the offense was committed or where any of its essential
ingredients occurred. (Emphasis supplied)
xxxx
Section 9 of R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that laws
declared policy15 of providing a criminal justice system that protects and serves the best interests of the victims of
illegal recruitment.
G.R. 167590, G.R. 182978-79,16 and G.R. 184298-9917
(Constitutionality of Section 10, last sentence of 2nd paragraph)
G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent spouses Simplicio and Mila Cuaresma
(the Cuaresmas) filed a claim for death and insurance benefits and damages against petitioners Becmen Service
Exporter and Promotion, Inc. (Becmen) and White Falcon Services, Inc. (White Falcon) for the death of their
daughter Jasmin Cuaresma while working as staff nurse in Riyadh, Saudi Arabia.
The Labor Arbiter (LA) dismissed the claim on the ground that the Cuaresmas had already received insurance
benefits arising from their daughters death from the Overseas Workers Welfare Administration (OWWA). The LA
also gave due credence to the findings of the Saudi Arabian authorities that Jasmin committed suicide.
On appeal, however, the National Labor Relations Commission (NLRC) found Becmen and White Falcon jointly and
severally liable for Jasmins death and ordered them to pay the Cuaresmas the amount of US$113,000.00 as actual
damages. The NLRC relied on the Cabanatuan City Health Offices autopsy finding that Jasmin died of criminal
violence and rape.
Becmen and White Falcon appealed the NLRC Decision to the Court of Appeals (CA).18 On June 28, 2006 the CA
held Becmen and White Falcon jointly and severally liable with their Saudi Arabian employer for actual damages,
with Becmen having a right of reimbursement from White Falcon. Becmen and White Falcon appealed the CA
Decision to this Court.
On April 7, 2009 the Court found Jasmins death not work-related or work-connected since her rape and death did
not occur while she was on duty at the hospital or doing acts incidental to her employment. The Court deleted the
award of actual damages but ruled that Becmens corporate directors and officers are solidarily liable with their
company for its failure to investigate the true nature of her death. Becmen and White Falcon abandoned their legal,
moral, and social duty to assist the Cuaresmas in obtaining justice for their daughter. Consequently, the Court held
the foreign employer Rajab and Silsilah, White Falcon, Becmen, and the latters corporate directors and officers
jointly and severally liable to the Cuaresmas for: 1) P2,500,000.00 as moral damages; 2) P2,500,000.00 as
exemplary damages; 3) attorneys fees of 10% of the total monetary award; and 4) cost of suit.
On July 16, 2009 the corporate directors and officers of Becmen, namely, Eufrocina Gumabay, Elvira Taguiam,
Lourdes Bonifacio and Eddie De Guzman (Gumabay, et al.) filed a motion for leave to Intervene. They questioned
the constitutionality of the last sentence of the second paragraph of Section 10, R.A. 8042 which holds the corporate
directors, officers and partners jointly and solidarily liable with their company for money claims filed by OFWs
against their employers and the recruitment firms. On September 9, 2009 the Court allowed the intervention and
admitted Gumabay, et al.s motion for reconsideration.
The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042, which
holds the corporate directors, officers, and partners of recruitment and placement agencies jointly and solidarily
liable for money claims and damages that may be adjudged against the latter agencies, is unconstitutional.
In G.R. 167590 (the PASEI case), the Quezon City RTC held as unconstitutional the last sentence of the 2nd

paragraph of Section 10 of R.A. 8042. It pointed out that, absent sufficient proof that the corporate officers and
directors of the erring company had knowledge of and allowed the illegal recruitment, making them automatically
liable would violate their right to due process of law.
The pertinent portion of Section 10 provides:
SEC. 10. Money Claims. x x x
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be
a condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and
damages. (Emphasis supplied)
But the Court has already held, pending adjudication of this case, that the liability of corporate directors and officers
is not automatic. To make them jointly and solidarily liable with their company, there must be a finding that they were
remiss in directing the affairs of that company, such as sponsoring or tolerating the conduct of illegal activities.19 In
the case of Becmen and White Falcon,20 while there is evidence that these companies were at fault in not
investigating the cause of Jasmins death, there is no mention of any evidence in the case against them that
intervenors Gumabay, et al., Becmens corporate officers and directors, were personally involved in their companys
particular actions or omissions in Jasmins case.
As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment and deployment of OFWs.
It aims to curb, if not eliminate, the injustices and abuses suffered by numerous OFWs seeking to work abroad. The
rule is settled that every statute has in its favor the presumption of constitutionality. The Court cannot inquire into the
wisdom or expediency of the laws enacted by the Legislative Department. Hence, in the absence of a clear and
unmistakable case that the statute is unconstitutional, the Court must uphold its validity.
WHEREFORE, in G.R. 152642 and 152710, the Court DISMISSES the petitions for having become moot and
academic.
1wphi1

In G.R. 167590, the Court SETS ASIDE the Decision of the Regional Trial Court ofManila dated December 8, 2004
and DECLARES Sections 6, 7, and 9 of Republic Act 8042 valid and constitutional.
In G.R. 182978-79 and G.R. 184298-99 as well as in G.R. 167590, the Court HOLDS the last sentence of the
second paragraph of Section 10 of Republic Act 8042 valid and constitutional. The Court, however, RECONSIDERS
and SETS ASIDE the portion of its Decision in G.R. 182978-79 and G.R. 184298-99 that held intervenors Eufrocina
Gumabay, Elvira Taguiam, Lourdes Bonifacio, and Eddie De Guzman jointly and solidarily liable with respondent
Becmen Services Exporter and Promotion, Inc. to spouses Simplicia and Mila Cuaresma for lack of a finding in
those cases that such intervenors had a part in the act or omission imputed to their corporation.
SO ORDERED.
ROBERTO A. ABAD
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR.


Associate Justice

TERESITA J. LEONARDO-DE CASTRO


Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

MARTIN S. VILLARAMA, JR.

Today is Monday, December 12, 2016

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38649 March 26, 1979
FACILITIES MANAGEMENT CORPORATION, J. S. DREYER, and J. V. CATUIRA, petitioners,
vs.
LEONARDO DE LA ROSA AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS, respondents.
Sycip, Salazar, Feliciano & Associates for petitioners.
Benjamin M. Mendoza for respondent Court.

MAKASIAR, J:
Petition for review on certiorari of the decision of the Court of Industrial Relations, dated February 14, 1972, ordering
petitioners herein to pay private respondent Leonardo de la Osa his overtime compensation, as wen as his swing
shift and graveyard shift premiums at the rate of fifty (50%) per cent of his basic sa (Annex E, p. 31, rollo).
The aforesaid decision was based on a report submitted by the Hearing Examiner, CIR (Dagupan City Branch), the
pertinent portions of which are quoted hereinbelow:::
In a petition filed on July 1, 1967, Leonardo dela Osa sought his reinstatement. with full backwages, as
well as the recovery of his overtime compensation, swing shift and graveyard shift differentials.
Petitioner alleged that he was employed by respondents as follows: (1) painter with an hourly rate of
$1.25 from March, 1964 to November, 1964, inclusive; (2) houseboy with an hourly rate of $1.26 from
December, 1964 to November, 1965, inclusive; (3) houseboy with an hourly rate of $1.33 from
December, 1965 to August, 1966, inclusive; and (4) cashier with an hourly rate of $1.40 from August,
1966 to March 27, 1967, inclusive. He further averred that from December, 1965 to August, 1966,
inclusive, he rendered overtime services daily and that this entire period was divided into swing and
graveyard shifts to which he was assigned, but he was not paid both overtime and night shift premiums
despite his repeated demands from respondents.
Respondents filed on August 7, 1967 their letter- answer without substantially denying the material
allegations of the basic petition but interposed the following special defenses, namely: That
respondents Facilities Management Corporation and J. S. Dreyer are domiciled in Wake Island which is
beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though an
employee of respondent corporation presently stationed in Manila, is without power and authority of
legal representation; and that the employment contract between petitioner and respondent corporation
carries -the approval of the Department of Labor of the Philippines.
Subsequently on May 3, 1968. respondents filed a motion to dismiss the subject petition on the ground
that this Court has no Jurisdiction over the instant case, and on May 24, 1968, petitioner interposed an
opposition thereto. Said motion was denied by this Court in its Order issued on July 12, 1968
sustaining jurisdiction in accordance with the prevailing doctrine of the Supreme Court in similar cases.
xxx xxx xxx
But before we consider and discuss the foregoing issues, let us first ascertain if this Court could
acquire jurisdiction over the case at bar, it having been contended by respondents that they are
domiciled in Wake Island which is beyond the territorial jurisdiction of the Philippine Government. To
this incidental question, it may be stated that while it is true the site of work is Identified as Wake Island,

it is equally true the place of hire is established in Manila (See Section B, Filipino Employment
Contract, Exhibit '1'). Moreover, what is important is the fact that the contract of employment between
the parties litigant was shown to have been originally executed and subsequently renewed in Manila,
as asserted by petitioner and not denied by respondents. Hence, any dispute arising therefrom should
necessarily be determined in the place or venue where it was contracted.
xxx xxx xxx
From the evidence on hand, it has been proven beyond doubt that petitioner canvas assigned to and
performed work in respondent company at slight time which consisted of two different schedules,
namely, swing shift and graveyard shifts, particularly during his tenure as houseboy for the second
period and as cashier. Petitioner's testimony to this effect was not contradicted, much less rebutted, by
respondents, as revealed by the records. Since petitioner actually rendered night time services as
required by respondents, and considering the physical, moral and sociological effects arising from the
performance of such nocturnal duties, we think and honestly believe that petitioner should be
compensated at least fifty percent (50%) more than his basic wage rate. This night shift premium pay
would indeed be at par with the overtime compensation stipulated at one and one-half (1 ) times of
the straight time rate.
xxx xxx xxx (pp. 31-36, rollo).
Apropos before this Court were filed three (3) other cases involving the same petitioner, all of which had been finally
dispoded of, as follows:
G.R. No Date of Filing Disposition
1. L-37117 July 30, 1973 Petition denied for
lack of merit on Sept.
13, 1973. Motion for
Reconsideration
denied lack of
merit, Nov. 20,1973.
2. L-38781 June 17,1974 Petition denied for
lack of merit on June
21,1974.
3. L-39111-12 Sept. 2,1974 Case dismissed on Feb.
6, 1976, pursuant to
voluntary manifesta
tion of private respon
dent Inocente R. Riel
that his claims had all
been settled to his entire
satisfaction.
Incidentally, in connection with G.R. No. L-39111-12 (No. 3 above), WE found strong evidence that petitioner therein,
which is also the petitioner in the case at bar, "twisted the arm" of private respondent, when the latter in his
Manifestation dated July 3, 1975, stated:
3. ... Furthermore, since petitioner FMC is a foreign corporation domiciled in California, U.S.A. and has
never been engaged in business in the Philippines, nor does it have an agent or an office in this
country, there exists no valid reason for me to participate in the continuation and/or prosecution of this
case (p. 194, rollo).
as if jurisdiction depends on the will of the parties to a case. At any rate, considering that petitioner paid the
claims of private respondent, the case had become moot and academic. Besides, the fact of such payment amounts
to an acknowledgment on the part of petitioner of the jurisdiction of the court over it.
WE have also noted that the principal question involved in each of the above-numbered three (3) cases is more or
less Identical, to wit: Is the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own
use abroad, in law doing business in the Philippines?
In the case at bar, which was filed with this Court on June 3, 1974, petitioners presented, inter alia, the following
issue: ... can the CIR validly affirm a judgment against persons domiciled outside and not doing business in the

Philippines, and over whom it did not acquire jurisdiction')


While it is true that the issues presented in the decided cases are worded differently from the principal issue raised
in the case at bar, the fact remains that they all boil down to one and the same issue, which was aptly formulated
and ably resolved by Mr. Justice Ramon C. Fernandez, then with the Court of Appeals and now a member of this
Court, in CA-G.R. No. SP-01485-R, later elevated to this Court on appeal by certiorari in Case G.R. No. L-37117 this
case, the majority opinion of the Court of Appeals, which was penned by Justice Fernandez and which WE hereby
adopt, runs as follows:
The principal issue presented in this special civil action is whether petitioner has been 'doing business
in the Philippines' so that the service of summons upon its agent in the Philippines vested the Court of
First Instance of Manila with jurisdiction.
From the facts of record, the petitioner may be considered as doing busuness un the Philippines within
the the scope of Section 14, Rule 14 of the Rules of the Court which provide:
SEC 14. Service upon private foreign corporations. If the defendant is a foreign
corporation or a non-resident joint stock company or association: doing business in the
Philippines, service may be made on its resident agent designated in accordance with law
for that purpose or, if there be no such agent, on the government official designated by law
to that effect, or on any of its officers or agents within the Philippines.
Indeed, the petitioner, in compliance with Act 2486 as implemented by Department of Labor Order No.
IV dated May 20, 1968 had to appoint Jaime V. Catuira, 1322 A. Mabini, Ermita, Manila as agent for
FMC with authority to execute Employment Contracts and receive, in behalf of that corporation, legal
services from and be bound by processes of the Philippine Courts of Justice, for as long as he remains
an employee of FMC (Annex 'I', rollo, p. 56). It is a fact that when the summons for the petitioner was
served on Jaime V. Catuira he was still in the employ of the FMC.
In his motion to dismiss Annex B', p. 19, Rollo), petitioner admits that Mr. Catuira represented it in this
country 'for the purpose of making arrangements for the approval by the Department of Labor of the
employment of Filipinos who are recruited by the Company as its own employees for assignment
abroad.' In effect, Mr. Catuira was a on officer representing petitioner in the Philippines.
Under the rules and regulations promulgated by the Board of Investments which took effect Feb. 3,
1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business'
has been exemption with illustrations, among them being as follows:
xxx xxx xxx
(f) the performance within the Philippines of any act or combination of acts enumerated in
section l(l) of the Act shall constitute 'doing business' therein. in particular, 'doing business
includes:
(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific
solicitations by a foreign firm, not acting independently of the foreign firm amounting to
negotiation or fixing of the terms and conditions of sales or service contracts, regardless of
whether the contracts are actually reduced to writing, shall constitute doing business even
if the enterprise has no office or fixed place of business in the Philippines. xxx
(2) Appointing a representative or distributor who is dociled in the Philippines, unless said
representative or distributor has an independent status, i.e., it transacts business in its
name and for its own account, and not in the name or for the account of the principal.
xxx xxx xxx
(4) Opening offices, whether called 'liaison'offices, agencies or branches, unless proved
otherwise.
xxx xxx xxx
(10) Any other act or acts that imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works, or the exercise of some
of the functions normally incident to, or in the progressive prosecution of, commercial gain
or of the purpose and objective of the business organization (54 O.G. 53).

Recently decided by this Court again thru Mr. Justice Ramon C. Fernandez which is similar to the case at bar,
is G.R. No. L-26809, entitled Aetna Casualty & Curety Company, plaintiff- appellant versus Pacific Star Line, the
Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc., defendants-appellees." The case is
an appeal from the decision of the Court of First Instance of Manila, Branch XVI, in its Civil Case No. 53074, entitled
Aetna Casualty & Surety Company vs. Pacific Star Lines, The Bradman Co., Inc., Manila Port Service and/or Manila
Railroad Company, Inc." dismissing the complaint on the ground that the plaintiff has no legal capacity to bring the
suit.
It appears that on February 11, 1963, Smith Bell & Co. (Philippines), Inc. and Aetna Casualty & Surety Co., Inc., as
subrogee instituted Civil Case No. 53074 in the Court of First Instance of Manila against Pacific Star Line, The
Bradman Co., Inc., Manila Port Service and/or Manila Railroad Company, Inc. to recover the amount of
US$2,300.00 representing the value of stolen and damaged cargo plus litigation expenses and exemplary damages
in the amounts of P1,000.00 and P2,000.00, respectively, with legal interest thereon from the filing of the suit and
costs.
After all the defendants had filed their answer, the defendants Manila Port Service and Manila Railroad Company,
Inc. amended their answer to allege that the plaintiff, Aetna Casualty & Surety Company, is a foreign corporation not
duly licensed to do business in the Philippines and, therefore, without capacity to sue and be sued.
After the parties submitted a partial stipulation of facts and additional documentary evidence, the case was
submitted for decision of the trial court, which dismissed the complaint on the ground that the plaintiff insurance
company is subject to the requirements of Sections 68 and 69 of Act 1459, as amended, and for its failure to comply
therewith, it has no legal capacity to bring suit in this jurisdiction. Plaintiff appealed to this Court.
The main issue involved in the appeal is whether or not the plaintiff appellant has been doing business in the
Philippines, considering the fact that it has no license to transact business in the Philippines as a foreign
corporation. WE ruled:
The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign corporation
from performing single acts, but to prevent it from acquiring a domicile for the purpose of business
without taking the steps necessary to render it amenable to suit in the local courts. It was never the
purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order
for business from the Philippines, from securing redress in the Philippine courts (Marshall Co. vs. Elser
& Co., 46 Phil 70,75).
In Mentholatum Co., Inc., et al vs- M Court rules thatNo general rule or governing principle can be laid down as to what constitutes 'doing' or
'engaging in' or 'transacting' business. Indeed, each case must be judged in the light of its
peculiar environmental circumstances. The true test, however, seems to be whether the
foreign corporation is continuing the body or substance of the business or enterprise for
which it was organized or whether it has substantially retired from it and turned it over to
another. (Traction Cos. v. Collectors of Int Revenue [C.C.A Ohio], 223 F. 984, 987). The
term implies a continuity of commercial dealings and arrangements, and contemplates, to
that extent, the performance of acts or works or the exercise of some of the functions
normally incident to, and in progressive prosecution of, the purpose and object of its
organization (Griffin v. Implement Dealers' Mut. Fire Ins. Co., 241 N.W. 75, 77; Pauline Oil
& Gas Co. v. Mutual Tank Line Co., 246 P. 851, 852, 118 Okl. III; Automotive Material Co.
vs. American Standard Metal Products Corp., 158 N.E. 698, 703, 327 III. 367)'. 72 Phil.
524, 528-529.
And in Eastboard Navigation, Ltd., et al. vs. Juan Ysmael & Co., Inc., this Court held:
(d) While plaintiff is a foreign corporation without license to transact business in the
Philippines, it does not follow that it has no capacity to bring the present action. Such
license is not necessary because it is not engaged in business in the Philippines. In fact,
the transaction herein involved is the first business undertaken by plaintiff in the
Philippines, although on a previous occasion plaintiff's vessel was chartered by the
National Rice and Corn Corporation to carry rice cargo from abroad to the Philippines.
These two isolated transactions do not constitute engaging in business in the Philippines
within the purview of Sections 68 and 69 of the Corporation Law so as to bar plaintiff from
seeking redress in our courts. (Marshall Wens Co. vs. Henry W. Elser & Co. 49 Phil., 70;
Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R. No. L-7917, April 29, 1955)'.
102 Phil., pp. 1, 18.

Based on the rulings laid down in the foregoing cases, it cannot be said that the Aetna Casualty &
Surety Company is transacting business of insurance in the Philippines for which it must have a
license. The Contract of insurance was entered into in New York, U.S.A., and payment was made to
the consignee in its New York branch. It appears from the list of cases issued by the Clerk of Court of
the Court of First Instance of Manila that all the actions, except two (2) cases filed by Smith, Beer &
Co., Inc. against the Aetna Casualty & Surety Company, are claims against the shipper and the
arrastre operators just like the case at bar.
Consequently, since the appellant Aetna Casualty & Surety Company is not engaged in the business of
insurance in the Philippines but is merely collecting a claim assigned to it by the consignee, it is not
barred from filing the instant case although it has not secured a license to transact insurance business
in the Philippines.
Indeed, if a foreign corporation, not engaged in business in the Philippines, is not banned from seeking redress from
courts in the Philippines, a fortiori, that same corporation cannot claim exemption from being sued in Philippine
courts for acts done against a person or persons in the Philippines.
WHEREFORE, THE PETITION IS HEREBY DENIED WITH COSTS AGAINST THE PETITIONERS.
SO ORDERED.
Teehankee (Chairman), Fernandez, Guerrero, De Castro, and Melencio Herrera, JJ., concur.
The Lawphil Project - Arellano Law Foundation