G.R. No.

217345

July 12, 2017

WILMER 0. DE ANDRES, Petitioner

vs.
DIAMOND H MARINE SERVICES & SHIPPING AGENCY, INC., WU CHUN HUA and
RUBEN J. TURINGAN, Respondents

MENDOZA, J.:

FACTS:

Petitioner Wilmer O. De Andres (De Andres) was hired by respondent agency Diamond H
Marine Services & Shipping Agency, Inc. (Diamond H) for and in behalf of its Taiwanese
principal, Wu Chun Hua. He entered into an Employment Contract,5 wherein it was stipulated
that he would be working in the fishing vessel, Yi Man En No. 2; that he would receive a
monthly salary of NT$17 ,280.00; and that the duration of the contract was for two years.

De Andres claimed that before he departed for Taiwan, he was made to sign a Contract of
Agreement.6 At the vessel, he was tasked to work as a wiper, messman and bosun, and was also
required to throw the fishnet, dive in the sea, and repair the nets. De Andres added that he and
his Filipino crewmates were made to work for almost twenty-four hours a day. They later
discovered that the document they signed before leaving for Taiwan set aside the POEA-
approved contract. He averred that this agreement reduced their salaries, increased their
workload, and showed that the Filipino crewmates were abused and taken advantage of.

On February 27, 2009, at around 10:00 o'clock in the evening, De Andres was tasked by the
master to lower the nets for the shipping operation. While he was lowering the nets, he was
accidentally hit by big waves, which caused him to be thrown out of the vessel together with
the fishing nets. While struggling from the big waves, De Andres was pulled by the moving
vessel with his left leg entangled by the fishing nets. As a consequence, he sustained an open
fracture of the distal tibia and fibula.

After twenty (20) days of confinement at the Keelong Hospital, De Andres was transferred to
the nearest lodge. On March 23, 2009, he was brought to Zueifang Hospital due to pain and
swelling over his left leg. Moreover, his exterior fixator had to be readjusted.

De Andres averred that after the operation, he was placed in a dormitory, instead of a hospital.
There, he was left alone with no one to assist him in his recovery. On February 4, 2010, almost a
year after his accident, De Andres was informed by the respondents that he was free to go
home.1âwphi1 He was surprised by this decision because he had been requesting for his
repatriation since his injury. De Andres later discovered that his repatriation was not due to his
medical condition, but due to the expiration of his employment contract.
Before he was repatriated, De Andres was made to sign a Memorandum of
Agreement8 (MOA), stipulating that the respondents agreed to pay him NT$40,000.00 and gave
him a plane ticket back to the Philippines, and that, in return, he would not file any complaint
against the respondents in the future. De Andres claimed, however, that he was forced to sign
the agreement as he would not be able to return to the Philippines if he would not sign it.

On February 8, 2010, the next working day, De Andres reported to Diamond H where he was
met by Ellen Purification (Purification), Operations Manager. He averred that Purification
invited him to go to the nearest fast-food restaurant to discuss his predicament. There, she told
him that Diamond H would not entertain any claim and that he should find a lawyer instead.
De Andres could not believe what he heard from Purification because the company could not
simply declare that he had no claim against them consequently, he filed this instant case.

ISSUES:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT

DISMISSED THE PETITION ON THE GROUND THAT THE PETITIONER FAILED TO
COMPLY WITH THE REPORTORIAL REQUIREMENT PROVIDED UNDER THE POEA
CONTRACT.

II

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT

DISMISSED THE PETITION ON THE GROUND THAT THE PETITIONER WAIVE[D] HIS
RIGHT BY RECEIVING THE SUM OF NT$40,000 (MORE OR LESS PHP 50,000 IN PHILIPPINE
CURRENCY) WHICH IS HIGHLY UNCONSCIONABLE AND UNREASONABLE
COMPARED TO US$60,000 WHICH HE [WAS] SUPPOSED TO RECEIVE UNDER THE POEA
CONTRACT.

LAW APPLICABLE:

2000 Amended POEA Standard Terms and Conditions Governing the Employment of Filipino
Seafarers On-Board Ocean-Going Vessels (Section 20 (B) (3)), which was incorporated in the
POEA-SEC

CASE HISTORY:

The LA Ruling

The LA ruled in favor of De Andres. It explained that even though his contract expired, the
respondents still had the obligation to provide medical attention because he suffered permanent
and total disability. The LA was of the view that De Andres was forced to sign the MOA so he
could be repatriated. Hence, there was no valid quitclaim. The LA likewise awarded De Andres
insurance compensation based on the terms of the employment contract; sickness allowance
because the respondents did not pay the same; salary differential due to the smaller amount of
salary received in Taiwan; and 10% attorney's fees.

The NLRC Ruling

The NLRC reversed and set aside the LA ruling. It stated that De Andres failed to comply with
the mandatory reportorial requirement. The NLRC observed that although he went to Diamond
H on the next working day of his repatriation, he did not submit himself to the medical
examination of the company-designated physician. Thus, the NLRC concluded that he was
barred from demanding disability benefits. The other awards granted by the LA were also
deleted by the NLRC due to insufficient basis.

The CA Ruling

The CA affirmed the NLRC ruling. It wrote that De Andres indeed failed to comply with the
mandatory reportorial requirement. The CA stressed that the failure of the seafarer to report to
the company-designated physician within three (3) working days upon return shall forfeit his
right to claim any benefit. It also opined that the MOA, wherein De Andres waived all claims
against the respondents, was valid and binding because it was duly explained and notarized by
the MECO to him.

RULING ON THE FIRST ISSUE:

The petition is meritorious.

A seafarer claiming disability benefits is required to submit himself to a post-employment

medical examination by a company-designated physician within three (3) working days from
repatriation. Failure to comply with such requirement results in the forfeiture of the seafarer's
claim for disability benefits. There are, however, exceptions to the rule: (1) when the seafarer is
incapacitated to report to the employer upon his repatriation; and (2) when the employer
inadvertently or deliberately refused to submit the seafarer to a post-employment medical
examination by a company-designated physician. The LA upheld the position of De Andres;
while the NLRC and the CA sided with the respondents. As the findings of fact are conflicting,
the Court can entertain a question of fact.

The Court is of the view that the account of De Andres is more credible. The fact that he
reported to Diamond H on the next working day from his repatriation and met Purification
show that he was sincere in asserting his claim against the respondents for disability benefits.
Before he could even commence the procedure laid down under Section 20 (B) (3), however,
Purification pre-empted him and bluntly told him that Diamond H would not entertain any of
his claims and that he should find a lawyer instead. Thus, De Andres was no longer given an
opportunity to submit himself to a post-employment medical examination by a company-
designated physician.

The assertion of the respondents that De Andres merely reported to Diamond H but did not
submit himself to a post-employment medical examination is highly dubious. It is quite absurd
for a seafarer, who has a legitimate disability claim, to immediately report to his employer
within three (3) working days from repatriation, only to leave the said place without any
demand and without even requesting a referral from a company-designated physician.
Evidently, the purpose of De Andres' reporting to Diamond H was to seek medical examination
and treatment from the company-designated physician in order to initiate his claim for
disability benefits. As stated in Apines, it is illogical that a seafarer would seek treatment from
other doctors immediately after his disembarkation when he could avail of the services of the
company-designated physician.

Moreover, the onus of establishing that the seafarer was referred to a company-designated
physician is on the employer. The Court in Apines declared that the burden to prove with
evidence whether the seafarer was referred to a company-designated doctor rests on the
employer as the latter has custody of the documents, and not the seafarer. Here, the
respondents could have easily presented proof that they referred De Andres to a company-
designated physician, but they did not. Interestingly, they could not even cite the name of their
company-designated physician who would have assessed the medical condition of De Andres.
Thus, it is clear that it was the respondents who prevented the submission of De Andres to a
postemployment medical examination.

Indeed, De Andres did his part when he immediately reported to Diamond H within three (3)
working days from repatriation. Consequently, it was the duty of the employer to refer him to a
company-designated physician for a post-employment medical examination knowing fully well
that he had a claim for disability benefits. The respondents, however, failed to do so. Instead,
they outrightly denied his claims because of the quitclaim he signed. The validity of the said
quitclaim shall be discussed infra.

In fine, the exception to the reportorial requirement applies in this case because the seafarer was
prevented by the employer from submitting himself to a post-employment medical examination
by a company-designated physician. Thus, the disability claim of De Andres is not forfeited.

RULING ON THE SECOND ISSUE:

The quitclaim presented by

the respondents is invalid

To be valid, a Deed of Release, Waiver and/or Quitclaim must meet the following
requirements: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the
consideration for the quitclaim is sufficient and reasonable; and (3) that the contract is not
contrary to law, public order, public policy, morals or good customs, or prejudicial to a third
person with a right recognized by law. Courts have stepped in to invalidate questionable
transactions, especially where there is clear proof that a waiver, for instance, was obtained from
an unsuspecting or a gullible person, or where the agreement or settlement was unconscionable
on its face. A quitclaim is ineffective in barring recovery of the full measure of a worker's rights,
and the acceptance of benefits therefrom does not amount to estoppel. Moreover, a quitclaim in
which the consideration is scandalously low and inequitable cannot be an obstacle to the
pursuit of a worker's legitimate claim.

First, the MOA had an unreasonable consideration which was greatly disproportionate to the
injury that De Andres suffered. To recall, he sustained an open fracture injury on his left lower
leg with an 8 cm in size open wound which had bone exposure and active bleeding. Due to the
seriousness of his injury, he was subjected to three (3) separate operations. The gravity of his
injury left him incapacitated for almost a year until he was repatriated on February 5, 2010.
Even in the Philippines, De Andres continued to suffer from his injury and his physician of
choice, Dr. Runas, concluded that he was permanently unfit for sea duty.

In spite of the severity and prolonged injury of De Andres, the respondents gave him only
NT$40,000.00, or its equivalent of ₱57,000.00.29 The said amount is even smaller than the lowest
disability benefit granted to a seafarer under the POEA-SEC in the amount of US$ l,870.00, or its
equivalent of ₱87,220.15.30 Manifestly, the meager consideration provided by the MOA is not
commensurate to the grave and protracted injury endured by De Andres.

Second, De Andres was not given any other option aside from signing the MOA. He claims that
he was required to execute the MOA; otherwise, he would not be allowed to return home. On
the other hand, the respondents did not categorically state that De Andres could return to the
Philippines even without signing the MOA. They could not argue that the execution of the
MOA was optional and that De Andres had the bargaining power to disregard the agreement or
any provisions therein. In other words, he was not given any freedom to decline the execution
of the MOA, and he could not be faulted for signing it as it was the only way for him to go
home. Thus, the execution of the MOA was a precondition before De Andres could be
repatriated.

Lastly, the respondents claim that the MOA was explained to De Andres by a MECO
representative and was duly notarized therein. A reading of the MOA, however, reveal that the
same merely contained a stamp at the blank space provided for the MECO.31 The one (1) page
document did not bear any signature or the name of the alleged MECO representative. In
addition, there was nothing in the MOA which stated that the contents thereof had been
explained to De Andres. Alone in the dormitory, De Andres was guileless as to the contents of
the MOA and he had no other option but to sign the same. Again, this renders suspect the
legitimacy of its execution.

Accordingly, the MOA cannot be considered as a valid quitclaim because it lacks a reasonable
consideration; De Andres was not given any freedom to reject it; and the document was not
properly explained and notarized by any Philippine government representative. The present
case is similar with Interorient where the employer declined to refer the seafarer to the company-
designated physician upon repatriation due to a quitclaim which was declared null and void by
the Court.
It is a time-honored rule that, in controversies between a laborer and his master, doubts
reasonably arising from the evidence or in the interpretation of agreements and writings should
be resolved in the former's favor.

OPINION

This student agrees with the decision of the High Court. Under that law, when the employer
inadvertently or deliberately refused to submit the seafarer to a post-employment medical
examination by a company-designated physician it is not anymore a mandatory requirement
for a seaferer to submit himself to a post-employment medical examination by a company-
designated physician within three (3) working days from repatriation. Based on the foregoing
facts, there is a clear showing that employer deliberately refused to submit De Andres from
medical examination by a company-designated physician. Also, the High Court is correct in
their observation that it is quite absurd for a seafarer, who has a legitimate disability claim, to
immediately report to his employer within three (3) working days from repatriation, only to
leave the said place without any demand and without even requesting a referral from a
company-designated physician contrary to the claim of the respondent. Lastly, it is an
elementary rule, that when the law is clear there is no need for its interpretation but only a need
for its implementation.

As regards to the second issue, this student also agrees with the decision of the High Court. It is
clear based on the foregoing facts, that the consent of De Andres is vitiated when he signed the
MOA. It is correct to say that De Andres was only forced to sign the MOA otherwise, he would
not be allowed to return home. Also, the indemnity given to De Andres was unconscionable
which also makes the second element of valid waiver absent. Finally, since all the elements of a
valid waiver were not met it is all correct to say that De Andres may still claim for damages and
other reliefs as may be given by the Court.

June 21, 2017

G.R. No. 224099

ROMMEL M. ZAMBRANO, et al.

Petitioners

vs.

PHILIPPINE CARPET MANUFACTURING CORPORATION/ PACIFIC CARPET

MANUFACTURING CORPORATION, DAVIDE. T. LIM, and EVELYN LIM FORBES,
Respondents

DECISION

MENDOZA, J.:

FACTS:
The petitioners averred that they were employees of private respondent Philippine Carpet
Manufacturing Corporation (Phil Carpet). On January 3, 2011, they were notified of the
termination of their employment effective February 3, 2011 on the ground of cessation of
operation due to serious business losses. They were of the belief that their dismissal was
without just cause and in violation of due process because the closure of Phil Carpet was a mere
pretense to transfer its operations to its wholly owned and controlled corporation, Pacific
Carpet Manufacturing Corporation (PacificCarpet). They claimed that the job orders of some
regular clients of PhilCarpet were transferred to Pacific Carpet; and that from October to
November 2011, several machines were moved from the premises of Phil Carpet to Pacific
Carpet. They asserted that their dismissal constituted unfair labor practice as it involved the
mass dismissal of all union officers and members of the Philippine Carpet Manufacturing
Employees Association (PHILCEA).

In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations
because there had been a steady decline in the demand for its products due to global recession,
stiffer competition, and the effects of a changing market.The termination of the petitioners'
employment was effective as of the close of office hours on February 3, 2011. Phil Carpet
likewise faithfully complied with the requisites for closure or cessation of business under the
Labor Code. The petitioners and the Department of Labor and Employment (DOLE) were
served written notices one (1) month before the intended closure of the company. The
petitioners ·were also paid their separation pay and they voluntarily executed their respective
Release and Quitclaim before the DOLE officials.

ISSUES:

1. WHETHER THE PETITIONERS WERE DISMISSED FROM EMPLOYMENT FOR A

LAWFUL CAUSE

2. WHETHER THE PETITIONERS' TERMINATION FROM EMPLOYMENT CONSTITUTES

UNFAIR LABOR PRACTICE

3. WHETHER THE QUITCLAIMS SIGNED BY THE PETITIONERS ARE VALID AND

BINDING

LAW APPLICABLE:

Article 298 (formerly Article 283) of the Labor Code, closure or cessation of operation of the
establishment is an authorized cause for terminating an employee

Article 259 (formerly Article 248) of the Labor Code enumerates the unfair labor practices of
employers
CASE HISTORY:

The LA Ruling

The Labor Arbiter (LA) dismissed the complaints for illegal dismissal and unfair labor practice.
It ruled that the termination of the petitioners' employment was due to total cessation of
manufacturing operations of Phil Carpet because it suffered continuous serious business losses
from 2007 to 2010. The LA added that the closure was truly dictated by economic necessity as
evidenced by its audited financial statements. It observed that written notices of termination
were served on the DOLE and on the petitioners at least one (1) month before the intended date
of closure. The LA further found that the petitioners voluntarily accepted their separation pay
and other benefits and eventually executed their individual release and quitclaim in favor of the
company. Finally, it declared that there was no showing that the total closure of operations was
motivated by any specific and clearly determinable union activity of the employees. The
dispositive portion reads:

The NLRC Ruling

The NLRC affirmed the findings of the LA. It held that the Audited Financial Statements show
that Phil Carpet continuously incurred net losses starting 2007 leading to its closure in the year
2010. The NLRC added that Phil Carpet complied with the procedural requirements of effecting
the closure of business pursuant to the Labor Code.

The CA Ruling

The CA ruled that the total cessation of Phil Carpet's manufacturing operations was not made
in bad faith because the same was clearly due to economic necessity. It determined that there
was no convincing evidence to show that the regular clients of Phil Carpet secretly transferred
their job orders to Pacific Carpet; and that Phil Carpet's machines were not transferred to Pacific
Carpet but were actually sold to the latter after the closure of business as shown by the several
sales invoices and official receipts issued by Phil Carpet. The CA adjudged that the dismissal of
the petitioners who were union officers and members of PHILCEA did not constitute unfair
labor practice because Phil Carpet was able to show that the closure was due to serious business
losses.

The petitioners moved for reconsideration, but their motion was denied by the CA in its
assailed resolution.

RULING ON THE FIRST ISSUE:

The petition is bereft of merit.

The petitioners were terminated from employment for an authorized cause

Under Article 298 (formerly Article 283) of the Labor Code, closure or cessation of operation of
the establishment is an authorized cause for terminating an employee, viz.:

Article 298. 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 operations of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of Labor
and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor-saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least 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 at least
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 as one (1) whole year. [Emphases
supplied]

Closure of business is the reversal of fortune of the employer whereby there is a complete
cessation of business operations and/or an actual locking-up of the doors of establishment,
usually due to financial losses. Closure of business, as an authorized cause for termination of
employment, aims to prevent further financial drain upon an employer who cannot pay
anymore his employees since business has already stopped. In such a case, the employer is
generally required to give separation benefits to its employees, unless the closure is due to
serious business losses.

Further, in Industrial Timber Corporation v. Ababon, the Court held:

A reading of the foregoing law shows that a partial or total closure or cessation of operations of
establishment or undertaking may either be due to serious business losses or financial reverses
or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its
allegation of substantial losses, while under the second kind, the employer can lawfully close
shop anytime as long as cessation of or withdrawal from business operations was bona fide in
character and not impelled by a motive to defeat orcircumvent the tenurial rights of employees,
and as long as he pays his employees their termination pay in the amount corresponding to
their length of service. Just as no law forces anyone to go into business, no law can compel
anybody to continue the same. It would be stretching the intent and spirit of the law if a court
interferes with management's prerogative to close or cease its business operations just because
the business is not suffering from any loss or because of the desire to provide the workers
continued employment.

In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid
cessation of business operations: (a) service of a written notice to the employees and to the
DOLE at least one month before the intended date thereof; (b) the cessation of business must be
bona fide in character; and (c) payment to the employees of termination pay amounting to one
month pay or at least one-half month pay for every year of service, whichever is higher.
[citations omitted]
In this case, the LA's findings that Phil Carpet suffered from serious business losses which
resulted in its closure were affirmed in toto by the NLRC, and subsequently by the CA. It is a
rule that absent any showing that the findings of fact of the labor tribunals and the appellate
court are not supported by evidence on record or the judgment is based on a misapprehension
of facts, the Court shall not examine anew the evidence submitted by the parties. In Alfaro v.
Court of Appeals, 17 the Court explained the reasons therefor, to wit:

The Supreme Court is not a trier of facts, and this doctrine applies with greater force in labor
cases. Factual questions are for the labor tribunals to resolve. In this case, the factual issues have
already been determined by the labor arbiter and the National Labor Relations Commission.
Their findings were affirmed by the CA. Judicial review by this Court does not extend to a
reevaluation of the sufficiency of the evidence upon which the proper labor tribunal has based
its determination.

RULING ON THE SECOND ISSUE

The dismissal of the petitioners did not amount to unfair labor practice

Article 259 (formerly Article 248) of the Labor Code enumerates the unfair labor practices of
employers.

Unfair labor practice refers to acts that violate the workers' right to organize. There should be
no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the
workers' right to self-organization. Thus, an employer may only be held liable for unfair labor
practice if it can be shown that his acts affect in whatever manner the right of his employees to
self-organize.

The general principle is that one who makes an allegation has the burden of proving it.
Although there are exceptions to this general rule, in the case of unfair labor practice, the
alleging party has the burden of proving it.

In order to show that the employer committed ULP under the Labor Code, substantial evidence
is required to support the claim.

Moreover, good faith is presumed and he who alleges bad faith has the duty to prove the same.

The petitioners miserably failed to discharge the duty imposed upon them. They did not
identify the acts of Phil Carpet which, they claimed, constituted unfair labor practice. They did
not even point out the specific provisions which Phil Carpet violated. Thus, they would have
the Court pronounce that Phil Carpet committed unfair labor practice on the ground that they
were dismissed from employment simply because they were union officers and members. The
constitutional commitment to the policy of social justice, however, cannot be understood to
mean that every labor dispute shall automatically be decided in favor of labor.

RULING ON THE THIRD ISSUE:

The quitclaims were valid and binding upon the petitioners

Where the person making the waiver has done so voluntarily, with a full understanding thereof,
and the consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as being a valid and binding undertaking. Not all quitclaims are per se invalid or
against policy, except (1) where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on
their face; in these cases, the law will step in to annul the questionable transactions.

In this case, the petitioners question the validity of the quitclaims they signed on the ground
that Phil Carpet's closure was a mere pretense. As the closure of Phil Carpet, however, was
supported by substantial evidence, the petitioners' reason for seeking the invalidation of the
quitclaims must necessarily fail. Further, as aptly observed by the CA, the contents of the
quitclaims, which were in Filipino, were clear and simple, such that it was unlikely that the
petitioners did not understand what they were signing.45 Finally, the amount they received
was reasonable as the same complied with the requirements of the Labor Code.

OPINION

This student agrees with the decision of the High Court. Under Article 283 of the Labor Code,
three requirements are necessary for a valid cessation of business operations: (a) service of a
written notice to the employees and to the DOLE at least one month before the intended date
thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to one month pay or at least one-half month pay for
every year of service, whichever is higher. [citations omitted]

In this case, the Phil Carpet proved that they suffer from serious business losses which opted
them to close the business. It is already a settled rule that closure of business, is an authorized
cause for termination of employment. Closure aims to prevent further financial drain upon an
employer who cannot pay anymore his employees since business has already stopped. In such a
case, the employer is generally required to give separation benefits to its employees, unless the
closure is due to serious business losses. Just as no law forces anyone to go into business, no law
can compel anybody to continue the same.

As to the second issue, this student also agrees with the decision of the High Court petitioners
failed to show Unfair that respondent violates their right to organize. It is already a setteled rule
that not all violation of the Labor Code constitutes Unfair Labor Practice. Unfair Labor Practice
comes into play when a person violates the right of a worker to organize as guaranteed by the
Constitution.

Lastly with regard the third issue, this student also agrees with the decision of the High Court
the waiver signed by the petitioners are valid because all the elements for a waiver to be valid
are existing. To be valid, a Deed of Release, Waiver and/or Quitclaim must meet the following
requirements: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the
consideration for the quitclaim is sufficient and reasonable; and (3) that the contract is not
contrary to law, public order, public policy, morals or good customs, or prejudicial to a third
person with a right recognized by law. Based on the foregoing facts, it was shown by the
respondents that the waiver was signed voluntarily, with a full understanding thereof, by the
petitioners. Also, the consideration for the quitclaim is credible and reasonable which makes
more the waiver valid and binding among the parties.

G.R. No. 221493

STERLING PAPER PRODUCTS ENTERPRISES, INC., Petitioner,

vs.
KMM-KATIPUNAN and RAYMOND Z. ESPONGA, Respondents,

FACTS:

Sterling Paper Products Enterprises, Inc. (Sterling) hired respondent Raymond Z.

Esponga (Esponga), as machine operator.

Sterling imposed a 20-day suspension on several employees including Esponga, for allegedly
participating in a wildcat strike. The Notice of Disciplinary Action contained a warning that a
repetition of a similar offense would compel the management to impose the maximum penalty
of termination of services.

Sterling averred that their supervisor Mercy Vinoya (Vinoya), found Esponga and his co-
employees about to take a nap on the sheeter machine. She called their attention and prohibited
them from taking a nap thereon for safety reasons.

Esponga and his co-employees then transferred to the mango tree near the staff house. When
Vinoya passed by the staff house, she heard Esponga utter, "Huwag maingay, puro bawal. " She
then confronted Esponga, who responded in a loud and disrespectful tone, "Pura kayo bawal,
bakit bawal ba magpahinga.? ,9

When Vinoya turned away, Esponga gave her the "dirty finger" sign in front of his co-
employees and said "Wala ka pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin. " The
incident was witnessed by Mylene Pesimo (Pesimo), who executed a handwritten account
thereon.10 Later that day, Esponga was found to have been not working as the machine assigned
to him was not running from 2:20 to 4:30 in the afternoon.

Instead, he was seen to be having a conversation with his co-employees, Bobby Dolor and Ruel
Bertulfo. Additionally, he failed to submit his daily report from June 21 to June 29, 2010.11

Hence, a Notice to Explain, requiring him to submit his written explanation and to attend the
administrative hearing.

Esponga submitted his written explanation denying the charges against him. He claimed that he
did not argue with Vinoya as he was not in the area where the incident reportedly took place.
Esponga further reasoned that during the time when he was not seen operating the machine
assigned to him, he was at the Engineering Department and then he proceeded to the comfort
room.
Notice to Explain, however, indicated a wrong date when the incident allegedly happened.
Thus, an amended Notice to Explain, was issued to Esponga requiring him to submit his
written explanation and to attend the administrative hearing. Esponga, however, failed to
submit his written explanation and he did not attend the hearing.

In view of Esponga's absence, the administrative hearing was rescheduled. The hearing was
reset several more times because of his failure to appear. The hearing was finally set on October
4, 2010. Esponga and his counsel, however, still failed to attend.

Having found Esponga guilty of gross and serious misconduct, gross disrespect to superior and
habitual negligence, Sterling sent a termination notice, dated November 15, 2010. This
prompted Esponga and KMMKatipunan (respondents) to file a complaint for illegal dismissal,
unfair labor practice, damages, and attorney's fees against Sterling.

ISSUE:

WHETHER THE CAUSE OF ESPONGA'S DISMISSAL AMOUNTS TO SERIOUS

MISCONDUCT

LAW APPLICABLE:

Article 282 (a) of the Labor Code, serious misconduct by the employee justifies the employer in
terminating his or her employment.

CASE HISTORY

The LA Ruling

LA ruled that Esponga was illegally dismissed. It held that Sterling failed to discharge the
burden of proof for failure to submit in evidence the company's code of conduct, which was
used as basis to dismiss Esponga.

The NLRC Ruling

NLRC reversed and set aside the LA ruling. It declared that Esponga's dismissal was valid. The
NLRC observed that as a result of the June 26, 2010 incident, Esponga no longer performed his
duties and simply spent the remaining working hours talking with his co-workers.

It opined that Esponga intentionally did all these infractions on the same day to show his
defiance and displeasure with Vinoya, who prohibited him from sleeping on the sheeter
machine. It concluded that these were all violations of the Company Code of Conduct and
Discipline, and constituted a valid cause for termination of employment under the Labor Code.
The NLRC disposed the case in this wise:

The CA Ruling
CA reinstated the LA ruling. It held that the utterances and gesture did not constitute serious
misconduct. The CA stated that Esponga may have committed an error of judgment in uttering
disrespectful and provocative words against his superior and in making a lewd gesture, but it
could not be said that his actuations were motivated by a wrongful intent. It adjudged that
Esponga's utterances and gesture sprung from the earlier incident which he perceived as
unfairly preventing him from taking a rest from work. As such, the CA ruled that Esponga's
actuations could only be regarded as simple misconduct.

Sterling moved for reconsideration, but the CA denied its motion. Hence, this petition for
review.

RULING:

The petition is meritorious.

Dismissal from employment on

the ground of serious misconduct

Under Article 282 (a) of the Labor Code, serious misconduct by the employee justifies the
employer in terminating his or her employment.

Misconduct is defined as an improper or wrong conduct. It is a transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful in character,
and implies wrongful intent and not mere error in judgment. To constitute a valid cause for the
dismissal within the text and meaning of Article 282 of the Labor Code, the employee's
misconduct must be serious, i.e., of such grave and aggravated character and not merely trivial
or unimportant.22

Additionally, the misconduct must be related to the performance of the employee's duties
showing him to be unfit to continue working for the employer. Further, and equally important
and required, the act or conduct must have been performed with wrongful intent.24

In the case at bench, the charge of serious misconduct is duly substantiated by the evidence on
record.

Primarily, in a number of cases, the Court has consistently ruled that the utterance of obscene,
insulting or offensive words against a superior is not only destructive of the morale of his co-
employees and a violation of the company rules and regulations, but also constitutes gross
misconduct.

It is well-settled that accusatory and inflammatory language used by an employee towards his
employer or superior can be a ground for dismissal or termination.

Further, Esponga's assailed conduct was related to his work. Vinoya did not prohibit him from
taking a nap. She merely reminded him that he could not do so on the sheeter machine for
safety reasons. Esponga's acts reflect an unwillingness to comply with reasonable management
directives.
Finally, contrary to the CA' s pronouncement, the Court finds that Esponga was motivated by
wrongful intent. To reiterate, Vinoya prohibited Esponga from sleeping on the sheeter machine.
Later on, when Vinoya was passing by, Esponga uttered "Huwag main gay, puro bawal. " When
she confronted him, he retorted "Pura kayo bawal, bakit bawal ba magpahinga?" Not contented,
Esponga gave her supervisor the "dirty finger" sign and said "Wala ka pala eh, puro ka dakdak.
Baka pag ako nagsalita hindi mo kayanin. " It must be noted that he committed all these acts in front
of his co-employees, which evidently showed that he intended to disrespect and humiliate his
supervisor.

"An aggrieved employee who wants to unburden himself of his disappointments and
frustrations in his job or relations with his immediate superior would normally approach said
superior directly or otherwise ask some other officer possibly to mediate and discuss the
problem with the end in view of settling their differences without causing ferocious conflicts.
No matter how the employee dislikes his employer professionally, and even if he is in a
confrontational disposition, he cannot afford to be disrespectful and dare to talk with an
unguarded tongue and/or with a baleful pen."

Time and again, the Court has put emphasis on the right of an employer to exercise its
management prerogative in dealing with its affairs including the right to dismiss its erring
employees. It is a general principle of labor law to discourage interference with an employer's
judgment in the conduct of his business. As already noted, even as the law is solicitous of the
welfare of the employees, it also recognizes the employer's exercise of management
prerogatives. As long as the company's exercise of judgment is in good faith to advance its
interest and not for the purpose of defeating or circumventing the rights of employees under
the laws or valid agreements, such exercise will be upheld.

OPINION:

This student agrees with the decision of the High Court. It is already a settled rule that
accusatory and inflammatory language used by an employee towards his employer or superior
can be a ground for dismissal or termination. The demeanors of Esponga clearly show his
disrespect towards his superior and co-employees. Such conducts should not be countenanced
because respect towards your superior, co-employees and workplace is one of the important
values that all employees should have.

G.R. No. 220617

NESTLE PHILIPPINES, INC., Petitioner,

vs.
BENNY A. PUEDAN, JR. Et al., Respondents.

DECISION

PERLAS-BERNABE, J.:

FACTS:
Respondents alleged that on various dates, ODSI and NPI hired them to sell various NPI
products in the assigned covered area. After some time, respondents demanded that they be
considered regular employees of NPI, but they were directed to sign contracts of employment
with ODSI instead. When respondents refused to comply with such directives, NPI and ODSI
terminated them from their position. Thus, they were constrained to file the complaint,
claiming that: (a) ODSI is a labor-only contractor and, thus, they should be deemed regular
employees of NPI; and (b) there was no just or authorized cause for their dismissal.

For its part, ODSI averred that it is a company engaged in the business of buying, selling,
distributing, and marketing of goods and commodities of every kind and it enters into all kinds
of contracts for the acquisition thereof. ODSI admitted that on various dates, it hired
respondents as its employees and assigned them to execute the Distributorship Agreement10 it
entered with NPI.

However, the business relationship between NPI and ODSI turned sour when the former' s
sales department badgered the latter regarding the sales targets. Eventually, NPI downsized its
marketing and promotional support from ODSI which resulted to business reverses and in the
latter's filing of a petition for corporate rehabilitation and, subsequently, the closure of its Nestle
unit due to the termination of the Distributorship Agreement and the failure of rehabilitation.
Under the foregoing circumstances, ODSI argued that respondents were not dismissed but
merely put in floating status.

On the other hand, NPI did not file any position paper or appear in the scheduled conferences.

ISSUES:

Whether or not the CA correctly ruled that: (a) NPI was accorded due process by the tribunals a
quo; and (b) ODSI is a labor-only contractor of NPI, and consequently, NPI is respondents' true
employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary
claims.

LAW APPLICABLE:

CASE HISTORY

The Labor Arbiter Ruling

The Labor Arbiter (LA) dismissed the complaint for lack of merit, but nevertheless,
ordered, inter alia, ODSI and NPI to pay respondents nominal damages. The LA found that: (a)
respondents were unable to prove that they were NPI employees; and (b) respondents were not
illegally dismissed as ODSI had indeed closed down its operations due to business losses.

The NLRC Ruling

The NLRC reversed and set aside the LA ruling and, accordingly, ordered ODSI and NPI to pay
each of the respondents. Contrary to the LA's findings, the NLRC found that while ODSI indeed
shut down its operations, it failed to prove that such closure was due to serious business losses
as it did not present evidence, e.g., financial statements, to corroborate its claims. As such, it
ruled that respondents are entitled to separation pay. In this relation, the NLRC also found that
since ODSI failed to notify respondents of such closure, the latter are likewise entitled to
nominal damages.

Further, the NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI
had no substantial capitalization or investment; (b) respondents performed activities directly
related to NPI's principal business; and (c) the fact that respondents' employment depended on
the continuous supply of NPI products shows that ODSI had not been carrying an independent
business according to its own manner and method.23

Consequently, the NLRC deemed NPI to be respondents' true employer, and thus, ordered it
jointly and severally liable with ODSI to pay the monetary claims of respondents. 24

The CA Ruling

The CA affirmed the NLRC ruling. The CA ruled that despite ODSI and NPI's contract being
denominated as a "Distributorship Agreement," it contained provisions demonstrating a labor-
only contracting arrangement between them, as well as NPI' s exercise of control over the
business of ODSI. Moreover, the CA pointed out that: (a) there was nothing in the records
which showed that ODSI had substantial capital to undertake an independent business;
and (b) respondents performed tasks essential to NPI's business. Undaunted, NPI moved for
reconsideration, which was, however, denied in a Resolution dated September 17, 2015; hence,
this petition.

RULING:

The Court finds that the CA was correct in ruling that the labor tribunals a quo gave NPI an
opportunity to be heard. However, it erred in not ascribing grave abuse of discretion on the
NLRC's finding that ODSI is a labor-only contractor of NPI and, thus, the latter is the
respondents' true employer, and jointly and severally liable with ODSI for respondents'
monetary claims. As will be explained hereunder, such finding by the NLRC is not supported
by substantial evidence.

A closer examination of the Distributorship Agreement reveals that the relationship of NPI and
ODSI is not that of a principal and a contractor (regardless of whether labor-only or
independent), but that of a seller and a buyer/re-seller. As stipulated in the Distributorship
Agreement, NPI agreed to sell its products to ODSI at discounted prices,52 which in turn will be
re-sold to identified customers, ensuring in the process the integrity and quality of the said
products based on the standards agreed upon by the parties. 53 As aptly explained by NPI, the
goods it manufactures are distributed to the market through various distributors, e.g., ODSI,
that in turn, re-sell the same to designated outlets through its own employees such as the
respondents. Therefore, the reselling activities allegedly performed by the respondents properly
pertain to ODSI, whose principal business consists of the "buying, selling, distributing, and
marketing goods and commodities of every kind" and "[entering] into all kinds of contracts for
the acquisition of such goods [and commodities]."54

Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship
Agreement hardly demonstrate control on the part of NPI over the means and methods by
which ODSI performs its business, nor were they intended to dictate how ODSI shall conduct
its business as a distributor. Otherwise stated, the stipulations in the Distributorship Agreement
do not operate to control or fix the methodology on how ODSI should do its business as a
distributor of NPI products, but merely provide rules of conduct or guidelines towards the
achievement of a mutually desired result55 - which in this case is the sale of NPI products to the
end consumer. In Steelcase, Inc. v. Design International Selections, Inc., 56 the Court held that the
imposition of minimum standards concerning sales, marketing, finance and operations are
nothing more than an exercise of sound business practice to increase sales and maximize profits,
to wit:

Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by
Steelcase of its distributors to prove that DISI was not functioning independently from Steelcase
because the same imposed certain conditions pertaining to business planning, organizational
structure, operational effectiveness and efficiency, and financial stability. It is actually logical to
expect that Steelcase, being one of the major manufacturers of office systems furniture, would
require its dealers to meet several conditions for the grant and continuation of a distributorship
agreement. The imposition of minimum standards concerning sales, marketing, finance and
operations is nothing more than an exercise of sound business practice to increase sales and
maximize profits for the benefit of both Steelcase and its distributors. For as long as these
requirements do not impinge on a distributor's independence, then there is nothing wrong
with placing reasonable expectations on them. 57 (Emphasis and underscoring supplied)

Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers
of foods and grocery products worldwide - to require its distributors, such as ODSI, to meet
various conditions for the grant and continuation of a distributorship agreement for as long as
these conditions do not control the means and methods on how ODSI does its distributorship
business, as shown in this case. This is to ensure the integrity and quality of the products which
will ultimately fall into the hands of the end consumer.

Thus, the foregoing circumstances show that ODSI was not a labor-only contractor of NPI;
hence, the latter cannot be deemed the true employer of respondents. As a consequence, NPI
cannot be held jointly and severally liable to ODSI's monetary obligations towards respondents.

OPINION:

This student agrees with the decision of the High Court. The High Court is correct in classifying
the relationship between NPI and ODSI as buyer and seller. Based on the parties
Distributorship Agreement,. Respondents failed to prove that their is control to the means and
methods on how ODSI does its distributorship business. NPI agreed to sell its products to ODSI
at discounted prices, which in turn will be re-sold to identified customers, ensuring in the
process the integrity and quality of the said products based on the standards agreed upon by
the parties. Therefore, the reselling activities allegedly performed by the respondents properly
pertain to ODSI, whose principal business consists of the "buying, selling, distributing, and
marketing goods and commodities of every kind" and "[entering] into all kinds of contracts for
the acquisition of such goods [and commodities] only shows a buyer and seller relationship.