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G.R. No. 118432 May 23, 1997 (Sgd.

CONRADO COSICO, JR., petitioner, Lewis Chang
vs. Deputy Senior Vice President
and ALLEN SOONG, respondents.
Respondent Eva Air, likewise, offered to pay the petitioner separation pay equivalent
Through this special civil action for certiorari, petitioner seeks the reversal and nullification of to one (1) month salary and proportionate 13th month pay for his six (6) months and
the August 31, 1994 and the December 15, 1994 resolutions of respondent National Labor eleven (11) days service to the company.
Relations Commission (NLRC) in NLRC NCR-CA Case No. 005304-93 for having been issued with
grave abuse of discretion. Petitioner rejected the offer and instead filed a complaint for illegal dismissal, underpayment
of wages and moral and exemplary damages against respondents Eva Air and its officers, Lewis
The relevant antecedents are as follows: Chang and Alien Soong. The case was docketed as NLRC NCR Case No. 00-10-05891-92.

Petitioner Conrado Cosico, Jr. was hired by respondent Eva Airways Corporation (Eva Air) On June 9, 1993, Labor Arbiter Ernesto Dinopal rendered a decision, the dispositive portion of
through its General Sales Agent, Don Tim Air Service, Inc., on April 4, 1992 as Assistant Station which reads:
Manager for the Manila office for a mutually agreed monthly salary of P30,000.00.
WHEREFORE, decision is hereby rendered declaring the dismissal of
As Assistant Station Manager, petitioner was tasked, among others, to supervise the complainant CONRADO COSICO, JR. by respondents EVA AIRWAYS
construction of respondent Eva Air's office in a space reserved for the purpose at the Ninoy CORPORATION and LEWIS CHANG as illegal and without justifiable cause
Aquino International Airport (NAIA) and to see to it that respondent Eva Air's target of flying and ordering them to reinstate complainant Cosico, Jr. to his former
at least sixty (60) passengers per flight be realized in order to maintain the company's overhead position without loss of seniority rights and other privileges and pay him,
operations. jointly and severally, the following sums:

After five (5) months of operation, a performance audit of respondent Eva Air's Manila office Backwages from October 9, 1992 up to the date of
was undertaken and the same yielded the finding that the airline had only an average of reinstatement, either actually or by payroll, which if
twenty-five (25) passengers per flight, way below its targeted passenger load. After evaluating computed as of June 9, 1993 amounts to
the situation further, respondent Eva Air decided to implement measures to make the Manila
office cost-efficient. It was decided that the position of Assistant Station Manager be (P30,000.00 x 8 months) P 240,000.00
Thirteenth Month Pay 30,000.00
On September 24, 1992, petitioner was advised of respondent Eva Air's decision in a letter
which reads in full:
Moral Damages 1,000,000.00

In view of this, it is Management's decision to abolish the position of the

Exemplary Damages 1,000,000.00
Asst. Station Manager and also keep the position of Station Manager
vacant. In the meantime, the EVA TAIPEI REP in Manila is given charge of
the operation of the Manila Station. He will handle the day to day activities 10% attorney's fees 227,000.00
and operations of the Airline. ——————
TOTAL P 2,497,000.00
You are therefore given notice that your position is hereby abolish (sic) and
your services terminated on account thereof 15 days upon receipt of this Respondent ALLEN SOONG is declared free from any liability it appearing
notice. Please effect the necessary turnover within the said 15 days period. that he had no active participation in complainant's illegal dismissal.

Thank you and we hope you will understand the position taken by the SO ORDERED. 2
Respondents Eva Air and Lewis Chang elevated their case to respondent NLRC where they filed
Very truly yours, their appeal memorandum and posted a surety bond in the amount of Two Hundred Seventy
Thousand Pesos (P270,00000). Petitioner filed a motion to dismiss the appeal on the ground
that the supersedeas bond posted by private respondents was insufficient as it did not cover
the award of moral and exemplary damages as well as attorney's fees.
Respondent NLRC denied the motion and instead gave due course to the appeal. On August Inceptively, petitioner asseverates that respondent NLRC gravely abused its discretion in giving
31, 1994, it issued a resolution setting aside the decision of the labor arbiter, disposing thusly: due course to the appeal of private respondents albeit the latter's failure to post the correct
supersedeas bond which is supposed to be equivalent to the monetary award in the judgment.
WHEREFORE, in view of the foregoing premises, the Appeal is hereby given
due course and the decision of Labor Arbiter, Ernesto Dinopol dated June Article 223 of the Labor Code, as amended by Republic Act No. 6715 (Herrera-Veloso Law),
09, 1993, is hereby set aside. However, respondents are ordered to pay provides:
complainant full separation benefits equivalents (sic) to one (1) month for
every year of service and thirteenth month pay for 1992. Art. 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
SO ORDERED. 3 calendar days from receipt of such decisions, awards, or orders. . . .

Petitioner moved to reconsider the resolution but the same was denied on December 15, 1994 xxx xxx xxx
in a resolution which reads:
In case of a judgment involving a monetary award, an appeal by the employer may
After due consideration of the Motion for Reconsideration filed by be perfected only upon the posting of a cash or surety bond issued by a reputable
complainant on September 16, 1994, from the Resolution of August 31, bonding company duly accredited by the Commission in the amount equivalent to
1994, the Commission (Second Division) RESOLVED to deny the same for the monetary award in the judgment appealed from.
lack of merit. 4
xxx xxx xxx
Hence, this petition predicated on the following grounds for consideration, to wit:
For the proper guidance of lawyers and litigants and pursuant to the provisions of Article
I 218 6 of the Labor Code, the NLRC adopted and promulgated its New Rules of Procedure on
August 31, 1990. The Rules were published in the Manila Bulletin and the Philippine Daily
THE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT GAVE PRIVATE Inquirer on September 24, 1990 and became effective fifteen (15) days thereafter. Section 6,
THE CORRECT SUPERSEDEAS BOND IN AN AMOUNT EQUIVALENT TO THE Sec. 6. Bond. — In case the decision of a Labor Arbiter involves a monetary
MONETARY AWARD. award, an appeal by the employer shall be perfected only upon the posting
of a cash or surety bond issued by a reputable bonding company duly
II accredited by the Commission or the Supreme Court in an amount
equivalent to the monetary award.
DECISION OF LABOR ARBITER ERNESTO (sic) DINOPOL AND INSTEAD The Commission, may, in meritorious cases and upon Motion of the
RULED THAT COMPLAINANT WAS NOT ILLEGALLY DISMISSED. Appellant, reduce the amount of the bond. However, an appeal is deemed
perfected upon posting of the bond equivalent to the monetary award
exclusive of moral and exemplary damages as well as attorney's fees.

Nothing herein however, shall be construed as extending the period of

appeal. (Emphasis ours.)

Said provision was amended on May 21, 1991 per Resolution No. 5-01-91 which became
effective ten (10) days after its publication in the Philippine Daily Inquirer and the Philippine
Star on June 2, 1991. It was again amended on November 7, 1991 in Resolution No. 11-01-91
THE NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT PETITIONER which became effective ten (10) days after its publication in the Manila Bulletin and the
IS NOT ENTITLED TO DAMAGE (sic). 5 Philippine Star on January 5, 1992. The amended provision reads:

The petition is devoid of merit. Sec. 6. Bond. — In case the decision of a Labor Arbiter involves a monetary award,
an appeal by the employer shall be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly accredited by the . . . (S)tatutes should receive a sensible construction, such as will give effect
Commission or the Supreme Court in an amount equivalent to the monetary award. to the legislative intention and so as to avoid an unjust or an absurd
The Commission may, in meritorious cases and upon Motion of the Appellant, reduce EVITATUR INCONVENIENS ET ABSURDUM. Where there is ambiguity, such
the amount of the bond. (However, an appeal is deemed perfected upon the posting interpretation as will avoid inconvenience and absurdity is to be adopted.
of the bond equivalent to the monetary award exclusive of moral and exemplary ....7
damages as well as attorney's fees. [Deleted, effective on Jan. 14, 1992])
In the case at bar, the backwages and thirteenth month pay awarded to petitioner amounted
Nothing herein however, shall be construed as extending the period of appeal. only to P270,000.00, but the moral and exemplary damages, plus 10% attorney's fees, totalled
P2,497,000.00. In other words, the moral and exemplary damages and attorney's fees are
almost ten (10) times greater than the basic monetary judgment. Private respondents posted
On November 5, 1993, said provision was further amended by Resolution No. 11-01-93 which
a supersedeas bond of P270,000.00, obviously, on the honest belief that the amount was
became effective ten (10) days after its publication in the Philippine Star and the Manila Times
sufficient. At the very least, therefore, there was substantial compliance with the requirement
on November 20, 1993. The latest amended provision reads:
of appeal bond. For to rule otherwise would negate the interest of justice and deviate from
the mandate of the Labor Code that the rules of procedure should be liberally construed, thus:
Sec. 6. Bond. — In case the decision of a Labor Arbiter POEA Administrator and
Regional Director or his duly authorized hearing officer involves a monetary award,
Sec. 2. CONSTRUCTION. — These Rules shall be liberally construed to carry
an appeal by the employer shall be perfected only upon the posting of a cash or
out the objectives of the Constitution and the Labor Code of the Philippines
surety bond issued by a reputable bonding company duly accredited by the
and to assist the parties in obtaining a just, expeditious and inexpensive
Commission or the Supreme Court in an amount equivalent to the monetary
settlement of labor disputes.
award, exclusive of moral and exemplary damages and attorney's fees.

In Ruga v. NLRC, 8 we held:

The employer as well as counsel shall submit a joint declaration under oath attesting
that the surety bond posted is genuine and that it shall be in effect until final
disposition of the case. Fundamental considerations of substantial justice persuade Us to decide
the instant case on the merits rather than to dismiss it on a mere
technicality. In so doing, we exercise the prerogative accorded to this Court
The Commission may, in meritorious cases and upon Motion of the Appellant, reduce
enunciated in Firestone Filipinas Employees Association, et al. v. Firestone
the amount of the bond. (As amended by Nov. 5, 1993) (Emphasis ours.)
Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the
well-settled doctrine is that in labor cases before this Tribunal, no undue
As can be seen from the foregoing pertinent provisions, the phrase "exclusive of moral and sympathy is to be accorded to any claim of a procedural misstep, the idea
exemplary damages and attorney's fees" with reference to the computation of the cash or being that its power be exercised according to justice and equity and
surety bond to be posted by an employer who wishes to appeal was originally contained in the substantial merits of the controversy."
new Rules. It was later deleted sometime in 1991 and 1992, then restored on November 20,
Since private respondents filed a bond which they honestly believed sufficient for purposes of
their appeal, respondent NLRC should have called their attention that the bond was
The successive changes in the Rules only mirror the fact that respondent NLRC in the inadequate, which it did not.
performance of its rule-making power had considered seriously and judiciously the
ramifications of the law and came out ultimately with the correct rule excluding from the
In YBL (Your Bus Line) v. NLRC, 9 we had occasion to rule that:
monetary award moral and exemplary damages, as well as attorney's fees, for purposes of
computing the amount of the appeal bond..
The Court finds that while Article 223 of the Labor Code, as amended by
Republic Act No. 6715, requiring a cash or surety bond in the amount
It may be noted that while respondent NLRC in its Resolution No. 11-01-91 dated November
equivalent to the monetary award in the judgment appealed from for the
7, 1991 deleted the phrase "exclusive of moral and exemplary damages as well as attorney's
appeal to be perfected, may be considered a jurisdictional requirement,
fees" in the determination of the amount of the bond, it provided a safeguard against the
nevertheless, adhering to the principle that substantial justice is better
imposition of excessive bonds by providing that "(T)he Commission may, in meritorious cases
served by allowing the appeal on the merits threshed out by the NLRC, the
and upon Motion of the Appellant, reduce the amount of the bond."
Court finds and so holds that the foregoing requirement of the law should
be given a liberal interpretation.
Moreover, the latest amendment is more in consonance with the right of appeal given to the
employer, which is actually a statutory right. An unreasonable and excessive amount of bond
would be oppressive and unjust and would have the effect of depriving a party of his right to
appeal. It is a well-settled rule in statutory construction that:
In Star Angel Handicraft v. NLRC, 10 we likewise declared that the provisions of the Labor Code of one department the duties performed by the
on requiring a bond on appeals involving monetary awards must be given liberal interpretation employees of the other department, thus rendering
in line with the desired objective of resolving controversies on the merits. 11 unnecessary the job of the latter, the service of the
employees whose functions are not being performed
Consequently, respondent NLRC conformably took cognizance of the appeal filed by private by the others may be validly terminated on the ground
respondents. of redundancy.

We turn then to the issue of petitioner's separation from employment. We therefore, find and so hold that respondent company's action was
justified in exercising its management prerogative in abolishing the
position of complainant without any abuse of discretion resulting in a
Petitioner claims that the position he was occupying was not duly abolished, hence, his
malicious and arbitrary manner constituting bad faith. 13
employment was illegally terminated.

Given the preceding factual and legal milieu, petitioner's claim for moral and exemplary
We do not agree. It is a management prerogative to abolish a position which it deems no longer
damages falls to naught. Moral and exemplary damages are recoverable only where the
necessary and this Court, absent any findings of malice and arbitrariness on the part of
dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive
management, will not efface such privilege if only to protect the person holding that
to labor, or was done in a manner contrary to morals, good customs or public policy. 14 Since
office. 12 In the present case, the position of Assistant Station Manager was deemed a
none of the circumstances warranting the grant of moral and exemplary damages obtains
superfluity as the functions of the said office could be performed by trained personnel already
here, the same cannot be awarded.
in the company's employ. Moreover, the abolition of the position was seen as a cost-effective
measure to cut operational expenses so as not to incur further losses already suffered by the
company's Manila office on account of low passenger yield. Certainly, the position was not WHEREFORE, the petition for certiorari is hereby DISMISSED, and the challenged resolutions
abolished because the petitioner was the occupant thereof but because the functions of the of respondent National Labor Relations Commission are hereby AFFIRMED.
position had become redundant and unnecessary. Verily, therefore, the deletion of the
petitioner's position should be accepted and validated as a valid exercise of management SO ORDERED.

We quote with favor public respondent's ratiocination on the point:

Complainant Conrado Cosico, Jr., occupied a managerial position prior to

the abolition of his position and as such had a limited tenure of office
because the company has the prerogative to abolish managerial and
confidential positions or create new ones as the necessity for them
43835, MARCH 31, 1981, 103 SCRA 599). A managerial position must be
distinguished from the case of ordinary rank and file employees whose
termination on the basis of this same grounds requires a higher proof of
involvement in the events in question. Unfortunately, the Labor Arbiter
applied the rule for rank and file employees in this particular case.

The Supreme Court, in the case of CAFFCO INTERNATIONAL LIMITED

the occasion to differentiate between redundancy and retrenchment in

When an employer decides to reduce the number of

its personnel in order to prevent further losses, he is
exercising his right to retrench employees to prevent
losses in his business operations. On the other hand,
where for purposes of economy, a company decides to
reorganize its departments by imposing on employees
BUSTAMANTE ET AL VS. NLRC This method caused undue delay in the disposition of illegal dismissal cases. Cases are usually held up in
G.R. No. 111651 March 15, 1996 the determination of whether or not the computation of the award of backwages is correct.
Mercury Drug Rule . In order prevent undue delay in the disposition of illegal dismissal cases, the SC found
FACTS: Respondent company is engaged in the business of producing high grade bananas in its occasion in the case of Mercury Drug Co vs. CIR, 1974, to rule that a fixed amount of backwages without
further qualifications should be awarded to an illegally dismissed employee.
plantation in Davao del Norte. Petitioners Paulino Bantayan, Fernando Bustamante, Mario
Sumonod and Osmalik Bustamante were employed as laborers and harvesters while petitioner In subsequent cases (adopting the proposal of Justice Teehankee), backwages equivalent to three years
(unless the case is not terminated sooner) was made the base figure for such awards without deduction,
Sabu Lamaran was employed as a laborer and sprayer in respondent company’s plantation. All subject to deduction where there are mitigating circumstances in favor of the employer but subject to
the petitioners signed contracts of employment for a period of six (6) months from 2 January increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or
1990 to 2 July 1990, but they had started working sometime in September 1989. Previously, dilatory appeals) on the employer’s part.
they were hired to do the same work for periods lasting a month or more, from 1985 to 1989. On 1 November 1974, the Labor Code of the Philippines took effect. Article 279 of the said code provides:
Before the contracts of employment expired on 2 July 1990, petitioners’ employments were “[…] An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
terminated on 25 June 1990 on the ground of poor performance on account of age, as not one seniority rights and to his back wages computed from the time his compensation was was withheld from
of them was allegedly below forty (40) years old. him up to the time of his reinstatement.”
The above provision nothwithstanding, the rule generally applied by the Court after the promulgation of
Petitioners filed a complaint for illegal dismissal. the Mercury Drug case, and during the effectivity of P.D. No. 442 was still the Mercury Drug rule. In effect,
this qualified the provision under P.D. No. 442 by limiting the award of backwages to 3 years.
“Deduction of Earnings Elsewhere” Rule. When RA 6715 took effect on 21 March 1989, the pertinent
ISSUE: Whether or not private respondent exercises its power to terminate in good faith so as portion of Article 279 of the Labor Code was amended to read as follows:
to make the award of backwages improper in this case.
“[…] An employee who unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
RULING: We do not sustain public respondent’s theory that private respondent should not be benefits or their monetary equivalent computed from the time his compensation was withheld from him
made to compensate petitioners for backwages because its termination of their employment up to the time of his actual reinstatement.”
was not made in bad faith. The act of hiring and re-hiring the petitioners over a period of time In accordance with the above provision, an illegally dismissed employee is entitled to his full backwages
without considering them as regular employees evidences bad faith on the part of private from the time of his illegal dismissal up to the time of his actual reinstatement.
respondent. The public respondent made a finding to this effect when it stated that the Despite the amendment, however, in a subsequent case, Pines City Educational Center vs. NLRC, 1993, the
subsequent rehiring of petitioners on a probationary status “clearly appears to be a convenient Court returned to the rule prior to the Mercury Drug rule that the total amount derived from employment
subterfuge on the part of management to prevent complainants (petitioners) from becoming elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be
deducted from backwages.
regular employees.”
The rationale for such ruling was that, the earning derived elsewhere by the dismissed employee while
litigating the legality of his dismissal, should be deducted from the full amount of backwages which the
In the case at bar, there is no valid cause for dismissal. The employees (petitioners) have not law grants him upon reinstatement, so as not to unduly or unjustly enrich the employee at the expense of
performed any act to warrant termination of their employment. Consequently, petitioners are the employer.
entitled to their full backwages and other benefits from the time their compensation was Issue
withheld from them up to the time of their actual reinstatement.
Whether or not the income derived by the employee elsewhere during the period of his illegal dismissal
should be deducted from the award of backwages.
Significance of the Case
In this landmark case, the Supreme Court (SC) ruled that backwages due an employee on Conformably with the evident legislative intent of RA 6715, backwages to be awarded to an illegally
account of his illegal dismissal should not be diminished or reduced by the earnings derived by dismissed employee, should not, as a general rule, be diminished or reduced by the earnings derived by
him elsewhere during the period of his illegal dismissal. him elsewhere during the period of his illegal dismissal.
This case finally abandoned the “Mercury Drug” rule and “deduction of earnings elsewhere” The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his
rule then prevailing at that time. dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing his employee.
Historical Backdrop
The clear legislative intent of the amendment in RA 6715 is to give more benefits to workers than was
Prior to the present case, SC had applied different methods in the computation of backwages. previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule.
Backwages under RA 875. Under RA 875, the Court of Industrial Relations (CIR) was given wide discretion Thus, a closer adherence to the legislative policy behind RA 6715 points to “full backwages” as meaning
to grant or disallow payment of backpay (backwages) to an employee, it also had the implied power of exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned
reducing the backpay where backpay was allowed. In the exercise of its jurisdiction, the CIR can increase employee during the period of his illegal dismissal. In other words, the provision calling for “full
or diminish the award of backpay, depending on several circumstances, among them, the good faith of the backwages” to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must
employer, the employee’s employment in other establishments during the period of illegal dismissal, or be applied without attempted or strained interpretation. Index animi sermo est (literally “speech is the
the probability that the employee could have realized net earnings from outside employment if he had index of intention”).
exercised due diligence to search for outside employment.
Manahan v. ECC the provisions of the Workmen’s Compensation Act in this case, the
GR L-44899, 22 April 1981 (104 SCRA 198) presumption of compensability subsists in favor of the claimant.
First Division, Fernandez (p): 4 concurring.
The Supreme Court set aside the decision of the ECC and ordered the GSIS
Facts: Maria E. Manahan, the petitioner, is the widow of Nazario Manahan, to pay the petitioner the amount of P6,000.00 as death compensation
Jr., who died of “Enteric Fever” while employed as classroom teacher in Las benefit and P600.00 as attorney’s fees, to reimburse the petitioner’s
Piñas Municipal High School, Las Piñas, Rizal, on 8 May, 1975. The deceased expenses incurred for medical services, hospitalization and medicines of the
was in perfect health when he entered government service on 20 July 1969, deceased Nazario Manahan, Jr., duly supported by proper receipts, and to
and that in the course of his employment in 1974, he was treated for pay administrative fees.
epigastric pain. He succumbed to enteric fever on May 8, 1975. Thus, the
Villavert v. ECC
petitioner filed a claim with the Government Service Insurance System
GR L-48605, 14 December 1981 (110 SCRA 233)
(GSIS) for death benefit under Presidential Decree 626. In a letter dated 19
First Division, Fernandez (p): 4 concurring
June 1975, the GSIS denied the claim on a finding that the ailment of
Nazario Manahan, Jr., typhoid fever, is not an occupational disease,
Facts: Domina N. Villavert, the petitioner, is the mother of the late
and that enteric fever or paratyphoid is similar in effect to typhoid fever, in
Marcelino N. Villavert who died of acute hemorrhagic pancreatitis on 12
the sense that both are produced by Salmonella organisms.
December 1975 employed as a Code Verifier in the Philippine Constabulary.
The deceased also performed the duties of a computer operator and clerk
The petitioner appealed to the Employees Compensation Commission (ECC),
typist. On 11 December 1975, the deceased reported as usual to the
which affirmed the decision of the GSIS on a finding that the ailment of the
Constabulary Computer Center in Camp Crame. He performed his duties not
deceased, enteric fever, was not induced by or aggravated by the nature of
only as Code Verifier but also handled administrative functions, computer
the duties of Nazario Manahan, Jr. as a teacher. Thus, the appeal.
operation and typing jobs due to shortage of civilian personnel. Although he
Issue: Whether the Workmen’s Compensation should be resolved in favor was complaining of chest pain and headache late in the afternoon of said
of the worker day, he was required to render overtime service until late in the day, typing
voluminous classified communications, computing allowances and preparing
Held: The Transitory and Final Provisions of the New Labor Code provides checks for the salary of PC-INP personnel throughout the country for
that all actions and claims accruing prior to the effectivity of this Code shall distribution on or before 15 December 1975. Gasping for breath, perspiring
be determined in accordance with the laws in force at the time of their profusely, and mumbling incoherent words while asleep, and when he was
accrual and under the third paragraph of Article 292, Title II (Prescription of not able to regain consciousness, he was rushed to the University of the
Offenses and Claims), workmen’s compensation claims accruing prior to the East-Ramon Magsaysay (UERM) Memorial Hospital where he died at 5:30
effectivity of this Code and during the period from 1 November 1974 up to am. The NBI stated that the exact cause of acute hemorrhagic pancreatitis
31 December 1974 shall be processed and adjudicated in accordance with is still unknown, although most research data agree that physical and
the laws and rules at the time their causes of action accrued Hence, this mental stresses are strong causal factors in the development of the disease.
Court applied the provisions of the Workmen’s Compensation Act, as
amended, on passing upon petitioner’s claim.. The illness that claimed the On 18 March 1976, she filed a claim for income benefits for the death of her
life of the deceased may had its onset before 10 December 1974, thus, his son under PD 626, as amended, with the Government Service Insurance
action accrued before 10 December 1974. Still, In any case, and case of System (GSIS). GSIS denied the claim on the ground that acute
doubt, the same should be resolved in favor of the worker, and that social hemorrhagic pancreatitis is not an occupational disease and that the
legislations — like the Workmen’s Compensation Act and the Labor Code — petitioner had failed to show that there was a causal connection between
should be liberally construed to attain their laudable objective, i.e., to give the fatal ailment of Marcelino N. Villavert and the nature of his employment.
relief to the workman and/or his dependents in the event that the former The petitioner appealed to the Employees Compensation
should die or sustain an injury. Pursuant to such doctrine and applying now Commission (ECC). On 31 May 1978, the ECC affirmed the decision of GSIS
denying the claim. Hence, the petition.
Issue: Whether the petitioner is entitled to her son’s death benefits. Security Agency on the ground that the petitioner is an indirect employer
pursuant to Articles 106 and 107. Hence, the appeal. The petitioner
Held: The Medico Legal Officer of the NBI stated that the exact cause of contended that NLRC erred in giving due course to the appeal despite the
acute hemorrhagic pancreatitis (acute inflammation with hemorrhagic fact that it was not under oath and the required appeal fee was not paid; in
necrosis of the pancreas) is still unknown despite extensive researches in holding it jointly and severally liable with the Security Agency; and in
this field, although most research data are agreed that physical and mental refusing to give due course to its Motion for Reconsideration.
stresses are strong causal factors in the development of the disease. There
is no evidence at all that Marcelino N. Villavert had a “bout of alcoholic Issue(s):
intoxication” shortly before he died, neither is there a showing that he used
drugs; negating the association provided by Principles of Internal Medicine  Whether the formal defects of the appeal of the security agency
(by Harrison 7th Edition, p. 1571). From the foregoing facts of record, it is invalidate the appeal.
clear that Marcelino N. Villavert died of acute hemorrhagic pancreatitis which  Whether the security guards from the agency are entitled to benefits
was directly caused or at least aggravated by the duties he performed as claimed from the company
code verifier, computer operator and clerk typist of the Philippine
Constabulary. Further, Article 4 of the Labor Code of the Philippines, as
amended, provides that “all doubts in the implementation and interpretation Held: The formal defects in the appeal of the Security Agency were not fatal
of this Code, including its implementing rules and regulations shall be defects. The lack of verification could have been easily corrected by
resolved in favor of labor.” requiring an oath. The appeal fee had been paid although it was delayed.
Failure to pay the docketing fees does not automatically result in the
The Supreme Court set aside the decision of the ECC and ordered the GSIS dismissal of the appeal. Dismissal is discretionary with the Appellate Court
to pay the petitioner death benefits in the amount of P6,000.00. and discretion must be exercised wisely and prudently, never capriciously,
with a view to substantial justice. Failure to pay the appeal docketing fee
Del Rosario & Sons v. NLRC confers a directory and not a mandatory power to dismiss an appeal and
GR L-64204, 31 May 1985 (135 SCRA 669) such power must be exercised with sound discretion and with a great deal
First Division, Melencio-Herrera (p): 5 concurring, 1 on leave of circumspection, considering all attendant circumstances.” Moreover, as
provided for by Article 221 of the Labor Code “in any proceeding before the
Facts: On 1 February 1978, Del Rosario and Sons Logging Enterprises, Inc. Commission or any of the Labor Arbiters, the rules of evidence prevailing in
entered into a “Contract of Services” with Calmar Security Agency whereby Courts of law or equity shall not be controlling and it is the spirit and
the latter undertook to supply the former with security guards at the rate of intention of this Code that the Commission and its members and the Labor
P300.00 per month for each guard. Thereafter, Paulino Mabuti, Napoleo Arbiters shall use every and all reasonable means to ascertain the facts in
Borata and Silvino Tudio filed a Complaint against the Security Agency and each case speedily and objectively and without regard to technicalities of
petitioner, for underpayment of salary, non-payment of living allowance, law or procedure, all in the interest of due process.
and 13th month pay. Thereafter, five other guards filed their complaint for
the same causes of action. Petitioner contended that complainants have no Further, Articles 106 of the Labor Code provides that “in the event that the
cause of action against it due to absence of employer-employee relationship contractor or subcontractor fails to pay the wages of his employees in
between them. They also denied liability alleging that due to the inadequacy accordance with this Code, the employer shall be jointly and severally liable
of the amounts paid to it under the Contract of Services, it could not possibly with his contractor or subcontractor to such employees to the extent of the
comply with the payments required by labor laws. work performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him,” and Article 107 provides
Assigned for compulsory arbitration, the Labor Arbiter rendered a decision that “the provisions of the immediately preceding Article shall likewise apply
dismissing the complaint for want of employer-employee relationship. When to any person, partnership, association or corporation which, not being an
the case was appealed to the NLRC, the decision was modified by holding employer, contracts with an independent contractor for the performance of
that petitioner is liable to pay complainants, jointly and severally, with the any work, task, job or project.” In the case at bar, petitioner became an
indirect employer of respondents-complainants when petitioner entered into
a Contract of Services with the Security Agency and the latter hired the
complainants to work as guards for the former. However, the petitioner’s
liability should be without prejudice to a claim for reimbursement against
the Security Agency for such amounts as petitioner may have to pay to
complainants. The Security Agency may not seek exculpation by claiming
that petitioner’s payments to it were inadequate. As an employer, it is
charged with knowledge of labor laws and the adequacy of the compensation
that it demands for contractual services is its principal concern and not any

The Supreme Court affirmed the judgment under review, without prejudice
to petitioner’s right to seek reimbursement from Calmar Security Agency for
such amounts as petitioner may have to pay to complainants. Costs against Calanoc vs. Court of Appeals, 98 Phil. 79 [1955]
the private respondent.
Facts: Melencio Basilio, a watchman and, secured a life insurance policy
from the Philippine American Insurance Company in the amount of P2,000
which had a supplemental contract covering death by accident. He later died
from a gunshot wound on the occasion of a robbery committed;

his widow was paid P2,000 for the face value of the policy but the company
refused to give the other 2000 for the death by accident because the
deceased died by murder during the robbery and while making an arrest as
an officer of the law which were expressly excluded in the contract. The
Court of Appeals upheld the Company and said that the circumstances
surrounding Basilio’s death was caused by one of the risks excluded by the
supplementary contract which exempts the company from liability.

Issue: Is the Philippine American Life Insurance Co. liable to the petitioner
for the amount covered by the supplemental contract?

Held: Yes.

The circumstances of Basilio’s death cannot be taken as purely intentional

on the part of Basilio to expose himself to the danger. No proof that his
death was the result of intentional killing because there is the possibility
that the malefactor had fired the shot merely to scare away the people

The terms and phraseology of the exception clause should be clearly

expressed within the understanding of the insured. Art. 1377 of the New
Civil Code provides that in case ambiguity in the terms of the contract, it
will be construed against the party who caused such obscurity.

Therefore ambiguous or obscure terms in the insurance policy are to be

construed strictly against the insurer and liberally in favor of the insured
party to ensure the protection of the insured since these insurance contracts
are usually arranged and employed by experts and legal advisers acting
exclusively in the interest of the insurance company.