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AGRIPINO V. MOLINA, Petitioner, vs.PACIFIC PLANS, INC., Respondent. G.R.

Since Metro Manila VI was consistently on top in terms of nationwide sales and
No. 165476 March 10, 2006 productivity, Molina was promoted Assistant Vice-President with the same functions
as those of a regional manager of the same sales region.10
Pacific Plans, Inc. (PPI) is a domestic corporation engaged in the business of selling
pre-need plans, such as educational, pension, and memorial plans.4 It maintains Caritas Health Shield, Inc. (Caritas for brevity), a health maintenance organization
regional offices throughout the Philippines. At the time material to this case, Metro (HMO) engaged in selling health and hospitalization plans, was established on
Manila regional offices were divided into two sales divisions - the South Sales Division December 16, 1998. Geoffrey Martinez resigned as Executive Vice-President of PPI
and the North Sales Division. Metro Manila VI was part of the North Sales and became the President and Chief Executive Officer of Caritas.11 Among the
Division.5 Among the corporate officers of PPI were Geoffrey Martinez, Executive incorporators and members of the Board of Directors were Luciano Abia and Atty.
Vice-President for Finance; Luciano Abia, Senior Assistant Vice-President, Metro Manuel Reyes.12 Molina was hired as Assistant Vice-President and Marketing Head of
Manila Marketing Division; and Atty. Manuel Reyes, the Head of the Legal Area 10. His wife, Fe Molina, was the head of a sales agency of Caritas.
Department.6 Roy Padiernos then occupied the position of Regional Manager of Metro
Manila VI.7 In the meantime, from February 2000, there was a considerable decrease in the sales
output production of PPI’s Metro Manila Region VI.13
PPI solicited subscribers and buyers of its pre-need plans through clusters of sales
associates. One of them was Ruth Padiernos, wife of Roy Padiernos.8 On March 21, 2000, Molina received a Memorandum from PPI, through its Senior
Assistant Vice-President for Human Relations, Patricio A. Picazo, informing him that,
Sometime in October 1994, PPI hired Agripino Molina as Regional Manager of Metro based on written reports, he committed the following: 1) recruiting and pirating
Manila VI, replacing Roy Padiernos who was promoted as First Vice-President for activities in favor of Caritas, in particular, initiating talks and enticing associates to
Marketing Operations. As Regional Manager, Molina performed both administrative join Caritas, and a number of associates have already signed up; 2) he called for a
and marketing functions, whose duties and responsibilities included the following: meeting with his associates sometime in November 1999, and solicited contributions
from them for the bill but later asked for reimbursement from the company; and 3)
a. formulating and recommending short and long range marketing plans for the acts of misdemeanor on several occasions, such as coming to the office under the
Region and executing approved plans; influence of liquor, initiating a smear campaign against PPI, and other acts inimical to
b. generating new and conserving existing pre-need plan businesses; the company’s interest.14 Molina was also required to submit, on March 23, 2000, a
c. motivating, training, and developing a dedicated and effective counselor force; written explanation why he should not be held administratively liable for said acts
d. conducting researches to determine sales potentials and share of the market, which, it opined, might constitute conduct unbecoming of an officer, conflict of
pricing, and profitability of Company's products, competition and the directing of interest, and breach of trust and confidence. Molina was also informed that he was
product development for the Region;
e. hiring and terminating counselors, unit managers or group managers in accordance
preventively suspended pending formal investigation effective immediately until April
with policies previously laid out; 24, 2000.15
f. recommending the creation of additional positions or termination of services of any
employee within the Region; In a letter addressed to Picazo dated March 22, 2000, Molina categorically denied the
g. recommending promotions or changes in salaries of personnel within the Region acts attributed to him. He, however, requested that he be furnished with copies of
and lateral shifts of supervisor, their assistants, understudies of positions of equal
the alleged written reports to enable him to prepare the required written
rank;
h. training and developing understudies for each position within the Region to provide explanation.16 However, instead of acceding to the request of copies of the written
immediate replacement whenever vacated; reports, Picazo wrote a letter dated April 3, 2000, citing the particulars of the charges
i. changing methods and procedures not affecting the other Regions, provided, against Molina, thus:
however, that radical changes should first be cleared with [the] superior;
j. controlling the operations of the Region and establishing a system of periodic work I. Conflict of Interest
reporting; 1. Recruiting and pirating activities in favor of Caritas Health Shield, Inc.
k. coordinating the Region’s activities with those of the other Regions; * You have acted as conduit for Caritas in recruiting/pirating Mr.
l. keeping [the] superior informed of [the] Region's activities and specially of [the] Restie Acosta on March 04, 2000 and Ms. Eppie Acosta on March
decision on matters for which he may be held responsible; 06, 2000.
m. realizing the Company’s objective for service, growth, and profit; *Your failure to stop and/or tolerating your wife's activities in
n. establishing and maintaining harmonious and dignified relationship with plan recruiting for Caritas Ms. Lennie Gatmaitan who belongs to Ms.
holders, counselors, employees, the public, government instrumentalities, other pre- Celeste Villena, a PPI GA.
need plan companies; [and] II. Misappropriation of Funds
o. further enhancing the prestige of the Company and maintaining its position of 1. Solicitation of associates' personal funds in the amount of P200.00 per
leadership in its field.9 person, to which 12 persons contributed for a total P2,400.00, for payment
of official function during the meeting held at Barrio Fiesta last November relationship. The trial court denied the motion as well as PPI’s motion for
27, 1999. Amount solicited was subsequently reimbursed from the company reconsideration.27
but not returned to the associates concerned.
III. Dereliction of Duties
1. You failed to prevent associates from leaving the company in favor of Meanwhile, in letter dated June 13, 2000, Molina was notified of the termination of
competitors, thus causing demoralization among your sales associates. administrative investigation. PPI considered his failure to submit a written explanation
2. You even encouraged associates to transfer to Caritas. as a waiver of his right to be heard, and as such, the investigating committee had
IV. Conduct unbecoming of a Company Officer evaluated the evidence at hand and submitted its recommendations to the "higher
1. Often reporting to office under the influence of liquor. management" for decision. Also, it confirmed the denial of his Motion to Suspend
2. Sowing intrigue in the case of Vilma del Rosario which almost caused her
Proceedings.28
early retirement from the company and transfer to Caritas.
3. Sowing intrigues between Mr. Roy Padiernos and Mr. Abia.
4. Showing disrespect to immediate superior, Mr. Roy Padiernos, by On June 23, 2000, the trial court issued an Order granting Molina's prayer for
shouting at him and walking out in one of the meetings called by him after temporary restraining order, which was later made permanent per its Order dated
the retirement of Atty. Haceta.17 July 12, 2000. The motion for reconsideration filed by PPI on July 26, 2000 was
During the investigation the following day, April 4, 2000, Molina reiterated his request likewise denied. Thereafter, it filed a petition for certiorari before the CA, assailing the
to be provided with a copy of the written reports.18 Picazo denied the request in a writ of preliminary injunction issued by the RTC and its order denying the motion to
Memorandum dated April 6, 2000, and reiterated his order for Molina to submit his dismiss the complaint. On July 16, 2001, the CA rendered judgment in favor of PPI
written explanation on April 11, 2000, and to address his concerns during the and nullified the writ of preliminary injunction issued by the RTC as well as the order
investigation scheduled on April 14, 2000.19 Molina failed to submit any written denying the motion of PPI for the dismissal of the complaint.29
explanation. On April 24, 2000, PPI issued a Memorandum advising Molina that he
would be reinstated in the payroll effective April 25, 2000 without requiring him to
On July 30, 2001, PPI resolved to dismiss Molina from employment on its finding that
report for work during the pendency of his investigation.20
the latter violated its standard operating procedure.30

Molina filed a "Motion to Dismiss Complaints and Motion for Full Reinstatement" on
Molina forthwith filed a complaint with the NLRC against PPI and Alfredo C. Antonio,
May 2, 2000.21 He asserted that the charges should be dismissed since he was
Patricio A. Picazo, and Certerio B. Uy, in their capacity as President, Senior Assistant
compelled to prepare a written explanation on the basis of "summarized specific
Vice-President of Human Resources Development, and Division Head, respectively, for
acts," denying him the right to be informed of the exact charges and to confront
illegal dismissal and illegal suspension with claim for monetary benefits.
those who made written reports against him. As to the issue of reinstatement, he
alleged that he should be allowed to report for work, conformably with Rule XIV,
Section 4 of the Implementing Rules of the Labor Code.22 In his Position Paper,31 Molina principally argued that he was denied the right to due
process due to the failure of PPI to furnish him a copy of the written reports of the
sales associates and co-employees, the basis of the accusations against him. Since an
On May 11, 2000, Picazo wrote Molina that his motion to dismiss the charges would
OIC for his position was already appointed even before all his pending motions were
be resolved after the investigation. He was warned that his non-appearance at the
resolved, he surmised that there were really no such reports, and that the alleged
investigation would be considered a waiver of his right to be heard.23
accusations were merely concocted in order to replace him with someone close to
Picazo. Molina maintained that since he was denied the opportunity to dispute the
On the same day, May 11, 2000, Abia issued an inter-office Memorandum announcing authenticity and substantive contents of the reports, his alleged violations of
the appointment of Sercy F. Picache as the Officer-In-Charge (OIC) for Metro VI and company rules and policies were hearsay and, therefore, lacked probative value.
XVI effective May 6, 2000.24 Besides, the termination of his employment was made without the 30-day prior
notice; his dismissal from employment took effect immediately, only six days after PPI
Molina and his counsel attended the May 19, 2000 investigation and filed a Motion to received the CA decision decreeing that the NLRC has the rightful jurisdiction over the
Suspend Proceedings,25praying that the administrative investigation be deferred until case. Thus, he prayed for the following relief:
the resolution of the "prejudicial" issues raised in his previous motion.26
1. Total Money Claims
When Picazo failed to respond, Molina filed, on June 1, 2000, a complaint for a) Salary with (overriding) commission from March 21 to April 24,
damages with a prayer for a temporary restraining order and preliminary injunction 2000 - suspended w/o pay - P45,000.00 (P25,000[.00] mo. salary
based on Article 19 of the New Civil Code. PPI filed a Motion to Dismiss, maintaining & P20,000[.00] [overriding])
that the courts have no jurisdiction over matters arising from employee-employer b) Unpaid (overriding) commission from April 25, 2000 to present -
P400,000[.00]
c) Unpaid salary from August 1, 2001 to present - P125,000[.00] each of the employees of PPI during their luncheon meeting was a voluntary
d) One mo. salary for every yr. of service in lieu of reinstatement - contribution, and that they spent P4,000.00, more than the amount collected from
7 years = P175,000.00 the employees. He contended that he had no motive to recruit sales associates or
2. Leave Credits - P100,000.00 for 7 years employees of PPI to be employed by Caritas because the depletion of sales associates
3. Profit Bonus for Year 2000 & 2001 - P400,000.00 would diminish his effectiveness as an area manager, including his overriding
4. Moral Damages - P300,000.00 commission, profit bonus and fringe benefits. He admitted that he may have raised
5. Exemplary Damages - P500,000.00 his voice in the heat of arguing a point during meetings, but averred that it should
6. Actual Damages - for lifetime medical attendance and medicines at 16 not be considered as disrespect or misdemeanor.
more years life expectancy - P1,249,384.00
7. Attorney's Fees - P300,000.00 Molina further emphasized that Caritas was not a competitor of PPI, as the former
8. Amount debited from complainant's ATM [as partial payment for was engaged in selling health care and is supervised by the Department of Health
hospitalization expenses incurred by him which PPI had advanced] - (DOH), while the latter is into the business of selling pre-need plans and supervised
P12,000.00 by the Securities and Exchange Commission (SEC). Finally, he averred that the so-
9. Retention of complainant's car, as additional penalty for illegal dismissal.32 called "associates" of PPI were not actually employees but "independent journeymen"
For its part, PPI stressed that Caritas was its competitor in the pre-need plans who derived income on commission basis, free to engage in any kind of selling
business, and that Molina and his wife recruited and enticed some of the sales activities not in direct competition with PPI.
associates of PPI to work for Caritas, in violation of its policy against conflict of
interest. Some of these sales associates were the spouses Eppie and Restie Acosta,
Molina admitted having had drinking sessions with Certerio Uy, Ilustre Acosta and
Lenita Gatmaitan, Lolita Casaje, Lydia Magalso, Lydia San Miguel, and Alice Halili, and
Reynaldo Villena, who provided the hard liquor and pulutan, but only after office
including Vilma del Rosario, the secretary of Roy Padiernos. PPI, likewise, averred
hours. He claimed that his officemates mistook him for being drunk when he went to
that Molina had the habit of coming to the office under the influence of liquor; he
his office even after office hours because of his "mestizo complexion."
constantly shouted to lady employees and solicited money from his sales associates in
connection with an official company function without returning the same after PPI
reimbursed him for the expenses incurred; disseminated intrigues and created In its response, PPI averred that, based on the sales data, the acts of Molina caused
divisiveness among the employees and PPI’s senior officers; and disrespected demoralization of the sales associates, resulting in a sudden decrease of the region's
Padiernos, his superior, by shouting at him during one of the meetings with other output from P343,009,643.00 in 1998 to P263,099,773.00 in 1999,
senior officers, and walked out of the meeting afterwards. Supporting its claims that and P228,752,090.00 in 2000.37 PPI insisted that he should be held liable for not less
Molina committed breach of trust, serious misconduct, fraud, and gross neglect of than P507,348.00, P2,000,000, and P1,000,000 as actual, moral and exemplary
duty by reason thereof, PPI appended to its position paper the statements/affidavits damages, and attorney's fees, respectively, and P273,600.00 which was the balance
of Marivic Uy, Ruth and Roy Padiernos, Eppie and Restie Acosta, Celeste Villena, and on his car plan agreement with PPI.38
Vilma del Rosario.33
In his Rejoinder39 and Sur-Rejoinder40 Molina submitted the affidavit of Geoffrey
On the claim of Molina that he was denied due process, PPI averred that he was Martinez, who belied the reports of Uy, Villena, Del Rosario, and the spouses
given sufficient opportunity to present his personal submissions before finally issuing Padiernos and Acosta.41 He also appended the affidavits of Natividad
the notice of dismissal but Molina persistently refused to submit his explanation.34 PPI Gatchalian,42 San Miguel,43 Gatmaitan,44 and Magalso,45 who all disputed, in one way
further argued that he was not entitled to the payment of 13th and 14th month or another, Molina's alleged violations. To counter the imputations of conflict of
salaries, overriding commission, profit bonus, actual, moral or exemplary damages, interest, Molina also alleged that Abia and Atty. Reyes were incorporators of
and attorney’s fees. PPI maintained that, under Article 217(a) of the Labor Code, as Caritas,46 and that Villena had in her possession a license to sell Caritas
amended, and the ruling of this Court in Bañez v. Valdevilla,35 Molina should be held products.47 With regard to the declining sales output of his region, Molina attributed
liable for P1,000,000 as moral damages and an amount not less than P428,400.00 for the same to the Asian regional crisis that hit the Philippines sometime in 1997. He
the salary he received during the time when the restraining order/ writ of injunction noted, however, that the same records revealed that despite the financial bane,
was erroneously enforced.36 Metro VI still managed to be on top from 1998 up to 2000 in terms of its sales
relative to the other regions.
In his Reply, Molina averred that the affidavits submitted by PPI were antedated since
he was never furnished copies of said reports/affidavits despite demands. PPI even Molina denied any liability for the car plan, claiming that he already settled the
failed to present the reports/affidavits before the RTC where his complaint for obligation when PPI demanded full payment as, in fact, all the papers related thereto,
damages against PPI and its officers was pending. He and Roy Padiernos had been at including the Release of Mortgage, were already in his possession.
odds because the latter appointed his brother and wife as agency manager and group
manager of PPI to which he objected. Molina averred that the P200.00 collected from
In its Sur-Rejoinder,48 PPI stressed its claim that Caritas was a business competitor, actual reinstatement, and other accrued monetary benefits. However, the NLRC
as may be inferred from the benefits available under its health care agreement and denied all other claims for damages.52
the pre-need contract of PPI. Particularly with regard to the pension plan contract, it
noted the following similarities: (a) Caritas also provides Term Life Insurance, According to the NLRC, the charges of coming to the office under the influence of
Accidental Death Insurance, Credit Life Insurance, and Waiver of Installment Due to liquor and making PPI reimburse the expenses already paid by Molina's co-employees
Disability; (b) there are similarities in the provisions on contract price, grace period, were not supported by the records. The "loss of trust and confidence" had no factual
cancellation, reinstatement, and transfer and termination; and (c) unlike other health basis since the alleged acts of Molina did not result to any loss in favor of PPI.
care programs that provide a one-year coverage, renewable every year thereafter,
Caritas offers a continuous five year coverage and sells the same in units payable in
Anent Molina’s recruitment activities, the NLRC ratiocinated that PPI failed to show
five-year installment basis, with maturity period and guaranteed return of investment
that Caritas was a competitor of PPI. Caritas caters to the health care needs of its
in the form of Full-Term Medical Expense Fund computed at P10,000.00 for every
clients while PPI to the pre-need (pension, educational, and memorial) requirements
unit purchased with increment of 10% yearly after the maturity period, which may be
of its plan holders. Any similarity between PPI and Caritas’ extra features like term life
withdrawn in cash by its member. It stressed that this was similar to the pension
insurance, accidental death insurance, credit life insurance, and waiver of installment
program offered by PPI which was also sold in per unit basis, payable by installment
due to disability, did not ipso facto make Caritas a competitor of PPI. Thus, there was
in certain number of years or lump sum payment, and upon maturity also
no conflict of interest in Molina’s act of trying to recruit counselors for Caritas to help
gives P10,000.00 pension benefit per unit purchased by the plan holder. With respect
his wife. Moreover, PPI failed to establish that recruiting for Caritas affected Molina’s
to the alleged interest of Atty. Reyes with Caritas, PPI adduced in evidence a Deed of
decisions in the performance of his duties with PPI. According to the NLRC, the drop
Sale to prove that as early as February 1999 he had already divested his
in the sales and productivity of complainant’s area of responsibility may be due to
stockholdings in Caritas.49
market forces and depressed economic condition at that time; absent any clear and
convincing proof, it cannot be attributed to the alleged acts of Molina which
On November 18, 2002, Labor Arbiter Roma C. Asinas rendered a constituted willful breach of trust or confidence.53
Decision50 dismissing the complaint and the counterclaims for lack of merit. The labor
arbiter ruled that Molina was lawfully dismissed from his employment for serious
PPI filed a motion for reconsideration, and appended a Letter dated June 13, 2002
misconduct in office and fraud or willful breach of trust and confidence. It declared
from the SEC to Caritas, indicating that its HMO Plan was similar to the previous plans
that Molina’s mere denial of the charges against him did not overthrow the
offered by pre-need companies, hence, under the regulatory suspension of the
overwhelming evidence against him tending to show that he committed the
SEC;54 another letter of SEC ordering Caritas to immediately desist from selling its
allegations against him. Moreover, his wife was then an agency manager of Caritas,
HMO plan with the full term medial expense fund;55 and the letter of Caritas, through
and some PPI sales associates were with Caritas because they were recruited by
counsel, endorsing the objectionable features of the HMO plan.56
Molina. The labor arbiter also ruled that other employees of respondent attested to
the fact that they were being recruited and enticed by the complainant to join
Caritas. This act of pirating constituted serious misconduct in office, fraud or willful The NLRC, however, was not persuaded, and resolved to deny PPI’s motion in its
breach of trust and confidence, which are just causes for termination of employment Order dated September 30, 2003.57 On November 19, 2003, the NLRC declared its
under Article 282 of the Labor Code, as amended. As such, PPI could not legally be Decision final and executory as of November 14, 2003.58
compelled to continue Molina’s employment due to breach of trust.
PPI filed a Petition for Certiorari with the CA for the nullification of the decision and
The labor arbiter likewise held that Molina was afforded his right to due process, but resolution of the NLRC and the reinstatement of the decision of the Labor Arbiter.59
that he refused to give an answer to the charges leveled against him, and instead
insisted that he be furnished a copy of the alleged reports against him. Since he was On August 13, 2004, the CA rendered a decision reversing the Decision and
given ample opportunity to answer the charges and explain his side during the Resolution of the NLRC, and reinstating the November 18, 2002 Decision of the Labor
investigation, and a formal or trial-type hearing is not at all times essential, Molina’s Arbiter.60 Later, the CA denied Molina’s Motion for Reconsideration61 in its Resolution
right to due process was not violated. The labor arbiter stressed that the dated September 27, 2004.62
requirements of due process are satisfied where the parties are afforded fair and
reasonable opportunity to explain their side of the controversy at hand.51
The issues for resolution are the following: whether the decision of the NLRC was
already final and executory when PPI filed its petition for certiorari in the CA; and
Molina appealed the decision to the NLRC, which rendered judgment in his favor. The whether the NLRC committed grave abuse of discretion amounting to excess or lack
NLRC reversed the decision of the Labor Arbiter and ordered Molina’s immediate of jurisdiction in issuing the assailed decision and resolution.
reinstatement to his former position as Assistant Vice President without demotion in
rank and salary; and the payment of his backwages from August 1, 2001 up to his
On the first issue, we find and so hold that the decision of the NLRC had become final Art. 282. Termination by employer. – An employer may terminate an employment for
and executory when PPI filed its Petition for Certiorari in the CA. PPI received a copy any of the following causes:
of the NLRC Decision on July 11, 2003 and filed the Motion for Reconsideration
thereof on July 18, 2003, which motion was denied on September 30, 2003. Under a. Serious misconduct or willful disobedience by the employee of the lawful
Rule VII, Section 2 of the NLRC Omnibus Rules of Procedure, the decision of the orders of his employer or representative in connection with his work;
NLRC becomes final and executory after ten (10) calendar days from receipt of the b. Gross and habitual neglect by the employee of his duties;
same. PPI received a copy of the NLRC decision on November 30, 2003; hence, such c. Fraud or willful breach by the employee of his duties of the trust reposed
decision became final and executory on December 3, 2003. Nonetheless, the Court in him by his employer or duly authorized representative;
ruled in St. Martin Funeral Home v. NLRC63 that, although the 10-day period for d. Commission of a crime or offense by the employee against the person of
finality of the NLRC decision may have elapsed as contemplated in the last paragraph his employer or any immediate member of his family or his duly authorized
of Section 223 of the Labor Code, the CA may still take cognizance of and resolve a representative; and
petition for certiorari for the nullification of the decision of the NLRC on jurisdictional e. Other causes analogous to the foregoing.
and due process considerations. Indeed, the remedy of the aggrieved party from an Misconduct has been defined as improper or wrong conduct; the transgression of
adverse decision of the NLRC is to timely file a motion for reconsideration as a some established and definite rule of action; a forbidden act, a dereliction of duty,
precondition for any further or subsequent remedy, and if the motion is denied, such unlawful in character and implies wrongful intent and not mere error of judgment.
party may file a special civil action in accordance with law and jurisprudence The misconduct to be serious must be of such grave and aggravated character and
considering that these matters are inseparable in resolving the main issue of whether not merely trivial and unimportant. Such misconduct, however, serious, must
the NLRC committed grave abuse of discretion. nevertheless, be in connection with the employee’s work to constitute just cause for
his separation.67
The Labor Arbiter and the NLRC act in quasi-judicial capacity in resolving cases after
hearing and on appeal, respectively. On the presumption that they have already The loss of trust and confidence, in turn, must be based on the willful breach of the
acquired expertise in their jurisdiction, which is confined on specific matters, their trust reposed in the employee by his employer. Ordinary breach will not suffice. A
findings of facts are oftentimes accorded not only with respect but even finality if breach of trust is willful if it is done intentionally, knowingly and purposely without
supported by substantial evidence. However, in spite of the statutory provision justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
making "final" the decision of the NLRC, the Court has taken cognizance of petitions heedlessly or inadvertently.68
challenging such decision where there is a clear showing that there is want of
jurisdiction, grave abuse of discretion, violation of due process, denial of substantial
The Court has laid down the guidelines for the application of the doctrine for loss of
justice, or erroneous interpretation of law.64
confidence, thus:

In this case, the Labor Arbiter declared that there is substantial evidence on record
1. the loss of confidence must not be simulated;
warranting the dismissal of petitioner as Assistant Vice President for serious
2. it should not be used as a subterfuge for causes which are illegal,
misconduct in office, fraud or willful breach of trust and confidence. The NLRC
improper or unjustified;
disagreed with the Labor Arbiter and reversed the latter’s findings. The CA, for its
3. it may not be arbitrarily asserted in the face of overwhelming evidence to
part, concurred with the findings of the Labor Arbiter. In view of the discordance
the contrary;
between the findings of the Labor Arbiter and the CA on one hand, and the NLRC on
4. it must be genuine, not a mere afterthought, to justify earlier action taken
the other, there is a need for the Court to review the factual findings and the
in bad faith; and
conclusions based on the said findings. As this Court held in Diamond Motors
5. the employee involved holds a position of trust and confidence.69
Corporation v. Court of Appeals:65
In Samson v. Court of Appeals,70 the Court enumerated the conditions for one to be
considered a managerial employee:
A disharmony between the factual findings of the Labor Arbiter and the National (1) Their primary duty consists of the management of the establishment in
Labor Relations Commission opens the door to a review thereof by this Court. Factual which they are employed or of a department or subdivision thereof;
findings of administrative agencies are not infallible and will be set aside when they (2) They customarily and regularly direct the work of two or more
fail the test of arbitrariness. Moreover, when the findings of the National Labor employees therein;
Relations Commission contradict those of the labor arbiter, this Court, in the exercise (3) They have the authority to hire or fire other employees of lower rank; or
of its equity jurisdiction, may look into the records of the case and reexamine the their suggestions and recommendations as to the hiring and firing and as to
questioned findings.66 the promotion or any other change of status of other employees are given
particular weight.71
Article 282 of the Labor Code of the Philippines provides:
As a general rule, employers are allowed wide latitude of discretion in terminating the present.77 Petitioner admitted having had drinking sessions with Certerio Uy, the
employment of managerial personnel.72 The mere existence of a basis for believing husband of Marivic Uy, Ilustre Acosta and Reynaldo Villena, the husband of Celeste
that such employee has breached the trust and confidence of his employer would Villena, and who, according to petitioner, provided the hard liquor and the
suffice for his dismissal.73 pulutan.78 He, however, denied reporting to office drunk and insisted that he reported
for work sober.
In this case, petitioner was not a mere employee of respondent. He was the Assistant
Vice-President with the same functions of a regional manager of the same sales We are inclined to give credence to petitioner’s claim, noting that in her handwritten
region, Metro Manila VI. Taking into account his job description, he was one of the letter-report to Norman Gonzales dated March 10, 2000, Villena made no mention of
top managers of the respondent, tasked to perform key and sensitive functions in the the petitioner going to office drunk.79 It was only in her affidavit dated January 16,
interest of his employer and, thus, bound by the more exacting work ethic. 2002 that Villena made such declaration.80 Villena did not explain her failure to report
the matter to Gonzales on March 10, 2000, and why she made the charge for the first
We find, however, that the charge of misappropriation of funds was not proven with time in her Affidavit dated January 16, 2002. Uy is the wife of no less than Certerio
substantial evidence. As gleaned from the handwritten statement of Ilustre Acosta, Uy, the Senior Vice-President of the Manila North Sales Division of respondent. If
the General Manager of the Springs and Blessings General Agency under Metro petitioner’s "drinking problem" had any ring of truth, she should have immediately
Manila VI, it appears that, aside from him and petitioner, there were 10 other reported the matter to her husband or to other officials concerned. Uy’s unexplained
attendees during the luncheon conference on November 27, 1999 at the Barrio silence until March 10, 2000 thus renders her report implausible.
Fiesta, Cubao, Quezon City. Petitioner received the amount of only P2,386.00 from
respondent to pay for the cost of the luncheon for the conference, based on Petty Respondent avers that petitioner served directly as agent of Caritas, a business
Cash Voucher signed by petitioner,74 but the conferees spent more than P4,000.00. competitor of the respondent, when he connived with his wife in recruiting Sales
Upon petitioner’s suggestion, the conferees agreed to contribute P200.00 each, or the Associates of the Metro Sales Division VI to transfer to Caritas as sales associates.
total amount of P2000.00 to answer for the difference. Petitioner had no obligation to Respondent claims that, by his acts, petitioner failed to dedicate his full time on the
return the contributions of the conferees, nor was he liable for said amount. job with respondent and prevented said sales associates from doing the same. Aside
Significantly, except for Ilustre Acosta, the other attendees in the conference never from violating its policy against conflict of interest, petitioner’s acts adversely affected
complained against petitioner or requested him to return their respective his decisions in the performance of his duties and obligations to respondent.81
contributions of P200.00.
Loyalty of an employee to his employer consists of certain very basic and common
Regarding the charge that the petitioner peddled false and malicious informations sense obligations. An employee must not, while employed, act contrary to the
against Abia and Padiernos, Abia has not executed any affidavit to confirm paragraph employer’s interest.82 The scope of the duty of loyalty that an employee owes to his
9 of the affidavit of Roy Padiernos. As admitted by del Rosario, the informations employer may vary with the nature of their relationship. Employees occupying a
allegedly relayed to her by the petitioner pertaining to Roy Padiernos were confirmed position of trust and confidence owe a higher duty than those performing low-level
by Zita Domingo.75 tasks. Assisting an employee’s competitor can even constitute a breach of the
employee’s duty of loyalty. An employee’s self-dealing may breach that
The petitioner does not deny having had a heated exchange of words with Roy duty.83However, it has been ruled that
Padiernos in the course of a meeting. However, such incident does not constitute
proof that the petitioner thereby showed disrespect to Roy Padiernos, nor a valid A reality of contemporary life is that many families will consist of two wage earners,
cause for petitioner’s dismissal. It does happen that in the course of exchange of one wage earner with two jobs, or both. For some employees, particularly those
views during a meeting, participants may become so assertive to the point of being earning low or modest incomes, second sources of income are an economic
overbearing or unyielding and in the process lose their temper, on their sincere belief necessity. For them, a second job or "moonlighting" is the only way to make ends
of being right. There is no evidence on record that petitioner committed the same or meet. Conversely, employers need the assurance that employees will not disserve
similar acts thereafter. them by furthering their own interests or those of competitors at the employers’
expense.84
To prove its charge of conduct unbecoming of a company officer, more specifically of
drinking alcoholic beverages within the premises of the company during office hours A slight assistance to a direct competitor could constitute a breach of the employee’s
or going to work drunk, respondent relied on the statement/affidavit of Celeste duty of loyalty. However, when competition is indirect or minimal, the employer may
Villena, the Agency Manager of the Wondrous and Miraculous General Agency under be required to show that the employee received substantial assistance from the
Metro Manila VI;76 and Marivic Uy, the General Manager of the D’MBP General Agency competitor. If an employee usurped a corporate opportunity or secretly profited from
under Metro Manila VI. Both claimed that they always saw petitioner drunk during a competitive activity, the employer may receive the value of the lost opportunity or
office hours, most especially during cut-offs when many sales counselors were the secret profit.85
An employee’s skill, aptitude, and other subjective knowledge obtained in the course Respondent relied on the declarations of Ruth Padiernos, Spouses Eppie and Ilustre
of employment are not the property of his employer.86 However, an employee Acosta, Celeste Villena, and Marivic Uy to prove its charge that Fe Molina pirated
occupying a managerial position or office is obliged to protect the trade secret of his sales associates working for respondent and that petitioner tolerated the actuations
employer consisting of formula, process, device or compilation which it uses in its of his wife and even connived with her.
business and gives it an opportunity to obtain an advantage over competitors who do
not know of such trade secret. However, the rule does not apply to a matter of public The Court finds, however, that the evidence adduced by respondent insufficient to
knowledge or of general knowledge within the industry.87 Moreover, an employer has warrant the petitioner’s dismissal from employment.
a protectible interest in the customer relationships of its former employee established
and/or nurtured while employed by the employer, and is entitled to protect itself from
Ruth Padiernos, wife of Roy Padiernos, averred in her written statement dated March
the risk that a former employee might appropriate customers by taking unfair
8, 2000, that as far back as July 1999, she had a conference with her husband and
advantage of the contract developed while working for the employer.88 While acting
Abia where she reported that petitioner connived with his wife in pirating sales
as an agent of his employer, an employee owes the duty of fidelity and loyalty. Being
associates. She was assured that something would be done to arrest the
a fiduciary, he cannot act inconsistently with his agency or trust. He cannot solicit his
problem.90 However, Ruth Padiernos failed to name any such sales associate who was
employer’s customers or co-employees for himself or for a business competitor of his
recruited by Fe Molina. There is likewise no evidence that Abia ever confronted
employer. If such employee or officer connives with and induces another to betray his
petitioner relative to the charge. Roy Padiernos confronted petitioner, but the latter
employer in favor of a business competitor of his employer, he is held accountable for
denied the charge. Since then, no further action was taken against the petitioner by
his mischief.89
respondent, until the letter of Picazo dated March 21, 2000 was sent to him. Roy
Padiernos did not explain why he executed his affidavit regarding the matter almost
In this case, we are not persuaded that Caritas is the business competitor of three years later, only on January 18, 2002. In an Affidavit dated January 18, 2002, it
respondent. The evidence on record shows that while Abia, the Senior Vice-President was made to appear that Ruth Padiernos claimed that petitioner’s wife, the Unit
of respondent’s Metro Manila Marketing, is one of the incorporators of Caritas and is Manager of the Ark Group under Metro Manila Sales Group VI and also an Agency
even a member of the Board of Directors, respondent did not dismiss him from Manager of Caritas, recruited sales associates under respondent to work for Caritas,
employment. The Head of the Legal Division of the respondent, Atty. Reyes, was also and that petitioner did the same; and that she (Padiernos) learned that almost all the
an incorporator of Caritas and a member of its Board of Directors, and although he productive Sales Associates in Metro Manila VI were already connected with Caritas,
appears to have sold his shares to Herminigildo C. Belen for P127,312.34, he only did using "different names."91 Although notarized, the affidavit has no probative weight
so on March 7, 1999. There is no evidence on record whether the transfer of such because it was unsigned.
shares of stocks has already been reflected in the books of Caritas. Celeste Villena,
one of the Sales Associates of respondent, is herself licensed by Caritas to sell plans
Celeste Villena, for her part, declared in her handwritten statement dated March 10,
for the latter. Villena has likewise not been prohibited from selling pre-need plans for
2000 that Fe Molina recruited Lenie Gatmaitan to join Caritas and that she confronted
Caritas. Fe Molina, who is the head of a sales agency of Caritas, is also a sales
petitioner.92 In her Affidavit dated January 16, 2002, she alleged that petitioner and
agency head of respondent. Petitioner, his wife, and Villena were not charged nor
his wife, Fe Molina, recruited Gatmaitan to join Caritas.93 However, the signature of
meted any sanction by the respondent for conflict of interest. Petitioner was the
the notary public does not appear in said affidavit. For his part, Ilustre Acosta,
Assistant Vice-President, Marketing Head, Area 10, of Caritas, and for a while, without
averred in his handwritten statement dated March 11, 2000, that on March 4, 2000,
any protest from respondent. If Caritas is a business competitor of the respondent, it
petitioner informed him that Geoffrey Martinez called petitioner to inquire if petitioner
should have meted sanctions not only on petitioner but also on Abia, Reyes, Fe
would have no objection for him (Ilustre) to be with Caritas and that petitioner
Molina and Villena as well.
replied that he had no objection if that was Ilustre’s decision.94 Ilustre maintained this
claim in his Affidavit dated January 16, 2002.95Eppie Acosta, the wife of Ilustre
The truth of the matter is that, as averred by Caritas President Geoffrey Martinez, Acosta, averred in her handwritten statement of March 12, 2000, that on March 6,
Caritas is engaged in health care and hospitalization package, whereas respondent 2000, petitioner commented about their low sales production, and she retorted that
sells educational, pension, and pre-need plans. Caritas is an HMO and is directly he was the cause, hence, may have grudges against him. Petitioner replied that he
supervised by the DOH, while respondent is under the supervision of the SEC. The and his wife did not interfere with each other’s business dealings, and that petitioner
so-called sales associates of the respondent are non-salaried employees and are paid even declared "Mare, for all you know, ikaw na lang ang hindi nag-ca-Caritas." She
on commission basis only. Their commissions are based on their individual initiative reiterated her claim in her affidavit dated January 16, 2000.96 Marivic Uy averred that
and industry. That the contracts executed by the beneficiaries of both corporations the wife of petitioner had been pirating sales associates of respondent since 1999 to
have similar provisions regarding contract price, grace period, cancellation, join Caritas and that she tried to recruit Morena Siasoco, one of the Group Managers.
reinstatement, transfer and termination, do not constitute proof that Caritas and Petitioner failed to stop his wife, but rather tolerated her actuations.97 She reiterated
respondent are business competitors. There is also no proof that the two corporations her claim in her Affidavit dated January 16, 2002.98
compete with each other in the same or similar business; in fact, the business of
Caritas and that of the respondent complement each other.
However, there is no evidence on record to prove that respondent expressly sewing and zigzagger machines. Garcia averred he was in the Toolroom Section to
prohibited its Sales Associates from selling for Caritas. Neither is there evidence on inquire where he could take the Trackster’s tire for vulcanizing.
record to prove that Caritas prohibited its sales associates from selling pre-need plans
of respondent. On October 9, 1995, petitioners were dismissed for violation of Chapter II, Section 6,
Article 46 (Violation of Law/Government Regulations) and Chapter II, Section 6,
Respondent likewise failed to present the affidavits of Siasoco, Casaje, Magalso, San Article 48 (Prohibited Drugs) of the PAL Code of Discipline.5 Both simultaneously filed
Miguel and Halili. In contrast to the evidence of respondent, Gatchalian, San Miguel, a case for illegal dismissal and damages.
Siasoco, and Gatmaitan executed their respective affidavits declaring that neither
petitioner nor his wife ever recruited them.99 They admitted that they sold plans for In the meantime, the Securities and Exchange Commission (SEC) placed PAL under
Caritas, but without any prodding from petitioner and his wife. Geoffrey Martinez an Interim Rehabilitation Receiver due to severe financial losses.On January 11, 1999,
declared, in his affidavit, that Siasoco, San Miguel, Casaje, Magalso, and Halili joined the Labor Arbiter rendered a decision6 in petitioners’ favor:
Caritas voluntarily and individually, through him, and he was not aware that
petitioner and his wife recommended them to Caritas. Lenita Gatmaitan called him
WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding
and inquired if she could join Caritas, and he replied in the affirmative. He never
the respondents guilty of illegal suspension and illegal dismissal and ordering them to
called petitioner concerning Ilustre Acosta; on the contrary, it was the latter who
reinstate complainants to their former position without loss of seniority rights and
called to inquire if he was entitled to a discount if he purchased a Caritas health plan.
other privileges. Respondents are hereby further ordered to pay jointly and severally
He talked to Vilma Del Rosario and convinced her to apply as Branch Manager of
unto the complainants
Caritas, which she did, but backed out later on.

Respondents are directed to immediately comply with the reinstatement aspect of


IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The
this Decision. However, in the event that reinstatement is no longer feasible,
August 13, 2004 Decision and September 27, 2004 Resolution of the Court of Appeals
respondent[s] are hereby ordered, in lieu thereof, to pay unto the complainants their
are REVERSED AND SET ASIDE. The decision and resolution of the NLRC are
separation pay computed at one month for [e]very year of service.SO ORDERED.7
reinstated.SO ORDERED.

Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent
JUANITO A. GARCIA and ALBERTO J. DUMAGO, vs PHILIPPINE AIRLINES,
Rehabilitation Receiver.
INC., G.R. No. 164856, August 29, 2007

On appeal, the NLRC reversed the Labor Arbiter’s decision and dismissed the case for
Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent
lack of merit.8Reconsideration having been denied, an Entry of Judgment9 was issued
Philippine Airlines, Inc. (PAL) as Aircraft Furnishers Master "C" and Aircraft Inspector,
on July 13, 2000.
respectively. They were assigned in the PAL Technical Center.

On October 5, 2000, the Labor Arbiter issued a Writ of Execution10 commanding the
On July 24, 1995, a combined team of the PAL Security and National Bureau of
sheriff to proceed:x x x x
Investigation (NBI) Narcotics Operatives raided the Toolroom Section – Plant
Equipment Maintenance Division (PEMD) of the PAL Technical Center. They found
petitioners, with four others, near the said section at that time. When the PAL 1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village,
Security searched the section, they found shabu paraphernalia inside the company- Makati City or to any of its Offices in the Philippines and cause reinstatement
issued locker of Ronaldo Broas who was also within the vicinity. The six employees of complainants to their former position and to cause the collection of the
were later brought to the NBI for booking and proper investigation. amount of [₱]549,309.60 from respondent PAL representing the backwages
of said complainants on the reinstatement aspect;
On July 26, 1995, a Notice of Administrative Charge4 was served on petitioners. They
were allegedly "caught in the act of sniffing shabu inside the Toolroom Section," then 2. In case you cannot collect from respondent PAL for any reason, you shall
placed under preventive suspension and required to submit their written explanation levy on the office equipment and other movables and garnish its deposits
within ten days from receipt of the notice. with any bank in the Philippines, subject to the limitation that equivalent
amount of such levied movables and/or the amount garnished in your own
judgment, shall be equivalent to [₱]549,309.60. If still insufficient, levy
Petitioners vehemently denied the allegations and challenged PAL to show proof that
against immovable properties of PAL not otherwise exempt from execution.x
they were indeed "caught in the act of sniffing shabu." Dumago claimed that he was
x x x11
in the Toolroom Section to request for an allen wrench to fix the needles of the
Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter Rehabilitation Receiver. The pertinent law on this matter, Section 5(d) of Presidential
issued a Notice of Garnishment12 addressed to the President/Manager of the Allied Decree (P.D.) No. 902-A, as amended, provides that:
Bank Head Office in Makati City for the amount of ₱549,309.60.
SECTION 5. In addition to the regulatory and adjudicative functions of the Securities
PAL moved to lift the Notice of Garnishment while petitioners moved for the release and Exchange Commission over corporations, partnerships and other forms of
of the garnished amount. PAL opposed petitioners’ motion. It also filed an Urgent associations registered with it as expressly granted under existing laws and decrees,
Petition for Injunction which the NLRC resolved as follows: it shall have original and exclusive jurisdiction to hear and decide cases involving:x x
xx
WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly,
the Writ of Execution dated October 5, 2000 and related [N]otice of Garnishment d) Petitions of corporations, partnerships or associations to be declared in the state of
[dated October 25, 2000] are DECLARED valid. However, the instant action is suspension of payments in cases where the corporation, partnership or association
SUSPENDED and REFERRED to the Receiver of Petitioner PAL for appropriate possesses property to cover all of its debts but foresees the impossibility of meeting
action.SO ORDERED.13 them when they respectively fall due or in cases where the corporation, partnership
or association has no sufficient assets to cover its liabilities, but is under the
PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ [management of a rehabilitation receiver or] Management Committee created
of execution and the notice of garnishment valid, the NLRC gave petitioners undue pursuant to this Decree.
advantage and preference over PAL’s other creditors and hampered the task of the
Permanent Rehabilitation Receiver; and (2) there was no longer any legal or factual The same P.D., in Section 6(c) provides that:
basis to reinstate petitioners as a result of the reversal by the NLRC of the Labor
Arbiter’s decision. SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall
possess the following powers:x x x x
The appellate court ruled that the Labor Arbiter issued the writ of execution and the
notice of garnishment without jurisdiction. Hence, the NLRC erred in upholding its c) To appoint one or more receivers of the property, real or personal, which is the
validity. Since PAL was under receivership, it could not have possibly reinstated subject of the action pending before the Commission in accordance with the pertinent
petitioners due to retrenchment and cash-flow constraints. The appellate court provisions of the Rules of Court in such other cases whenever necessary in order to
declared that a stay of execution may be warranted by the fact that PAL was under preserve the rights of the parties-litigants and/or protect the interest of the investing
rehabilitation receivership. The dispositive portion of the decision reads: public and creditors:…Provided, finally, That upon appointment of a management
committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions
WHEREFORE, premises considered and in view of the foregoing, the instant petition is for claims against corporations, partnerships or associations under management or
hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution, as well receivership pending before any court, tribunal, board or body shall be suspended
as the January 28, 2002 Resolution of public respondent National Labor Relations accordingly.x x x x
Commission is hereby ANNULLED and SET ASIDE for having been issued with
grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all actions
the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are for claims against the corporation pending before any court, tribunal or board shall
hereby likewise ANNULLED and SET ASIDE.SO ORDERED.14 ipso jure be suspended. The purpose of the automatic stay of all pending actions for
claims is to enable the rehabilitation receiver to effectively exercise its/his powers free
Simply put, however, there are really two issues for our consideration: (1) Are from any judicial or extra-judicial interference that might unduly hinder or prevent the
petitioners entitled to their wages during the pendency of PAL’s appeal to the NLRC? rescue of the corporation.16
and (2) In the light of new developments concerning PAL’s rehabilitation, are
petitioners entitled to execution of the Labor Arbiter’s order of reinstatement even if More importantly, the suspension of all actions for claims against the corporation
PAL is under receivership? embraces all phases of the suit, be it before the trial court or any tribunal or before
this Court.17 No other action may be taken, including the rendition of judgment during
We shall first resolve the issue of whether the execution of the Labor Arbiter’s order the state of suspension. It must be stressed that what are automatically stayed or
is legally possible even if PAL is under receivership. suspended are the proceedings of a suit and not just the payment of claims during
the execution stage after the case had become final and executory.18
We note that during the pendency of this case, PAL was placed by the SEC first,
under an Interim Rehabilitation Receiver and finally, under a Permanent
Furthermore, the actions that are suspended cover all claims against the corporation The arbiter found that under the Contract to Sell, ASBDC should have delivered the
whether for damages founded on a breach of contract of carriage, labor cases, property to Sobrejuanite in December 1999; that the latter had fully paid their
collection suits or any other claims of a pecuniary nature.19 No exception in favor of obligations except the P50,000.00 which should be paid upon completion of the
labor claims is mentioned in the law.201avvphi1 construction; and that rescission of the contract with damages is proper.

This Court’s adherence to the above-stated rule has been resolute and steadfast as The dispositive portion of the Decision reads:
evidenced by its oft-repeated application in a plethora of cases involving PAL, the
most recent of which is Philippine Airlines, Inc. v. Zamora.21 WHEREFORE, in view of the foregoing judgment is rendered ordering the rescission
of the contracts to sell between the parties, and further ordering the respondent
Since petitioners’ claim against PAL is a money claim for their wages during the [ASBDC] to pay the complainants [Sobrejuanite]
pendency of PAL’s appeal to the NLRC, the same should have been suspended
pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the The HLURB Board of Commissioners3 affirmed the ruling of the arbiter that the
Court of Appeals should have abstained from resolving petitioners’ case for illegal approval of the rehabilitation plan and the appointment of a rehabilitation receiver by
dismissal and should instead have directed them to lodge their claim before PAL’s the SEC did not have the effect of suspending the proceedings before the HLURB.
receiver.22 The board held that the HLURB could properly take cognizance of the case since
whatever monetary award that may be granted by it will be ultimately filed as a claim
However, to still require petitioners at this time to re-file their labor claim against PAL before the rehabilitation receiver. The board also found that ASBDC failed to deliver
under the peculiar circumstances of the case – that their dismissal was eventually the property to Sobrejuanite within the prescribed period. The dispositive portion of
held valid with only the matter of reinstatement pending appeal being the issue – this the Decision reads:
Court deems it legally expedient to suspend the proceedings in this case.
Wherefore the petition for review is denied and the decision of the office below is
WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant affirmed. It shall be understood that all monetary awards shall still be filed as claims
proceedings herein are SUSPENDED until further notice from this Court. Accordingly, before the rehabilitation receiver.4
respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the
Court as to the status of its ongoing rehabilitation. No costs.SO ORDERED. ASBDC filed an appeal5 before the Office of the President which was dismissed6 for
lack of merit. Hence, ASBDC filed a petition7 under Section 1, Rule 43 of the Rules of
SPOUSES EDUARDO SOBREJUANITE and FIDELA SOBREJUANITE, vs.ASB Court before the Court of Appeals, docketed as CA-G.R. SP No. 79420.
DEVELOPMENT CORPORATION, G.R. No. 165675 September 30, 2005
On June 29, 2004, the Court of Appeals rendered its assailed Decision,8 the
The antecedent facts show that on March 7, 2001, spouses Eduardo and Fidela dispositive portion of which reads:
Sobrejuanite (Sobrejuanite) filed a Complaint1 for rescission of contract, refund of
payments and damages, against ASB Development Corporation (ASBDC) before the WHEREFORE, premises considered, the instant petition is GRANTED. The impugned
Housing and Land Use Regulatory Board (HLURB). decision dated June 27, 2003 of the Office of the President is hereby REVERSED AND
SET ASIDE. No pronouncement as to costs.SO ORDERED.9
Sobrejuanite alleged that they entered into a Contract to Sell with ASBDC over a
condominium unit and a parking space in the BSA Twin Tower-B Condominum The Court of Appeals held that the approval by the SEC of the rehabilitation plan and
located at Bank Drive, Ortigas Center, Mandaluyong City. They averred that despite the appointment of the receiver caused the suspension of the HLURB proceedings.
full payment and demands, ASBDC failed to deliver the property on or before The appellate court noted that Sobrejuanite’s complaint for rescission and damages is
December 1999 as agreed. They prayed for the rescission of the contract; refund of a claim under the contemplation of Presidential Decree (PD) No. 902-A or the SEC
payments amounting to P2,674,637.10; payment of moral and exemplary damages, Reorganization Act and A.M. No. 00-8-10-SC or the Interim Rules of Procedure on
attorney’s fees, litigation expenses, appearance fee and costs of the suit. Corporate Rehabilitation,because it sought to enforce a pecuniary demand. Therefore,
jurisdiction lies with the SEC and not HLURB. It also ruled that ASBDC was obliged to
ASBDC filed a motion to dismiss or suspend proceedings in view of the approval by deliver the property in December 1999 but its financial reverses warranted the
the Securities and Exchange Commission (SEC) on April 26, 2001 of the rehabilitation extension of the period.
plan of ASB Group of Companies, which includes ASBDC, and the appointment of a
rehabilitation receiver. The HLURB arbiter however denied the motion and ordered Sobrejuanite’s motion for reconsideration was denied10 hence the instant petition
the continuation of the proceedings. which raises the following issues:
1. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND GRAVELY Thus, in order to resolve whether the proceedings before the HLURB should be
ABUSED ITS DISCRETION IN RULING THAT THE SEC, NOT THE HLURB, HAS suspended, it is necessary to determine whether the complaint for rescission of
JURISDICTION OVER PETITIONER’S COMPLAINT, IN CONTRAVENTION TO LAW AND contract with damages is a claim within the contemplation of PD No. 902-A.
THE RULING OF THIS HONORABLE COURT IN THE ARRANZA CASE.
In Finasia Investments and Finance Corp. v. Court of Appeals,15 we
2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND GRAVELY construed claim to refer only to debts or demands pecuniary in nature. Thus:
ABUSED ITS DISCRETION WHEN IT RULED THAT THE APPROVAL OF THE
CORPORATE REHABILITATION PLAN AND THE APPOINTMENT OF A RECEIVER HAD [T]he word ‘claim’ as used in Sec. 6(c) of P.D. 902-A refers to debts or demands of a
THE EFFECT OF SUSPENDING THE PROCEEDING IN THE HLURB, AND THAT THE pecuniary nature. It means "the assertion of a right to have money paid. It is used in
MONETARY AWARD GIVEN BY THE HLURB COULD NOT [BE] FILED IN THE SEC FOR special proceedings like those before administrative court, on insolvency."
PROPER DISPOSITION, NOT BEING IN ACCORDANCE WITH LAW AND
JURISPRUDENCE.
The word "claim" is also defined as:

3. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND GRAVELY


Right to payment, whether or not such right is reduced to judgment, liquidated,
ABUSED ITS DISCRETION IN RULING THAT RESPONDENT "IS JUSTIFIED IN
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
EXTENDING THE AGREED DATE OF DELIVERY BY INVOKING AS GROUND THE
equitable, secured, or unsecured; or right to an equitable remedy for breach of
FINANCIAL CONSTRAINTS IT EXPERIENCED," BEING CONTRARY TO LAW AND IN
performance if such breach gives rise to a right to payment, whether or not such
EEFECT AN UNLAWFUL NOVATION OF THE AGREEMENT OF THE DATE OF DELIVERY
right to an equitable remedy is reduced to judgment, fixed, contingent, matured,
ENTERED INTO BY PETITIONERS AND RESPONDENT.11
unmatured, disputed, undisputed, secured, unsecured.

The petition lacks merit.


In conflicts of law, a receiver may be appointed in any state which has jurisdiction
over the defendant who owes a claim.
Section 6(c) of PD No. 902-A empowers the SEC:
As used in statutes requiring the presentation of claims against a decedent’s estate,
c) To appoint one or more receivers of the property, real and personal, which is the "claim" is generally construed to mean debts or demands of a pecuniary nature which
subject of the action pending before the Commission … whenever necessary in order could have been enforced against the deceased in his lifetime and could have been
to preserve the rights of the parties-litigants and/or protect the interest of the reduced to simple money judgments; and among these are those founded upon
investing public and creditors: … Provided, finally, That upon appointment of a contract.
management committee, rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or
In Arranza v. B.F. Homes, Inc.,16 claim is defined as referring to actions involving
associations under management or receivership pending before any court,
monetary considerations.
tribunal, board or body shall be suspended accordingly. [Emphasis added]

The purpose for the suspension of the proceedings is to prevent a creditor from
Finasia Investments and Finance Corp. v. Court of Appeals and Arranza v. B.F.
obtaining an advantage or preference over another and to protect and preserve the
Homes, Inc. were promulgated prior to the effectivity of the Interim Rules of
rights of party litigants as well as the interest of the investing public or
Procedure on Corporate Rehabilitation on December 15, 2000. The interim rules
define a claim as referring to all claims or demands, of whatever nature or
creditors.12 Such suspension is intended to give enough breathing space for the
management committee or rehabilitation receiver to make the business viable again,
character against a debtor or its property, whether for money or otherwise. The
definition is all-encompassing as it refers to all actions whether for money or
without having to divert attention and resources to litigations in various fora.13 The
otherwise. There are no distinctions or exemptions.
suspension would enable the management committee or rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra-judicial interference
that might unduly hinder or prevent the "rescue" of the debtor company. To allow Incidentally, although the petition for rehabilitation with prayer for suspension of
such other action to continue would only add to the burden of the management actions and proceedings was filed before the SEC on May 2, 2000,17 or prior to the
committee or rehabilitation receiver, whose time, effort and resources would be effectivity of the interim rules, the same would still apply pursuant to Section 1, Rule
wasted in defending claims against the corporation instead of being directed toward 1 thereof which provides:
its restructuring and rehabilitation.14
Section 1. Scope – These Rules shall apply to petitions for rehabilitation filed by The claim therein was for specific performance to enforce the homeowners’ rights as
corporations, partnerships, and associations pursuant to Presidential Decree No. 902- regards right of way, open spaces, road and perimeter wall repairs, and security.
A, as amended. However, it can also be deduced therefrom that if the claim was for monetary
awards, the proceedings before the HLURB should be suspended during the
Clearly then, the complaint filed by Sobrejuanite is a claim as defined under rehabilitation. Thus:
the Interim Rules of Procedure on Corporate Rehabilitation. Even under our rulings
in Finasia Investments and Finance Corp. v. Court of Appeals and Arranza v. B.F. No violation of the SEC order suspending payments to creditors would result as far as
Homes, Inc., the complaint for rescission with damages would fall under the category petitioners’ complaint before the HLURB is concerned. To reiterate, what petitioners
of claimconsidering that it is for pecuniary considerations. seek to enforce are respondent’s obligations as a subdivision developer. Such claims
are basically not pecuniary in nature although it could incidentally involve monetary
In their complaint, Sobrejuanite pray for the rescission of the contract and the refund considerations. All that petitioners’ claims entail is the exercise of proper subdivision
of P2,674,637.10 representing their total payments to ASBDC; P200,000.00 as moral management on the part of the SEC-appointed Board of Receivers towards the end
damages; P100,000.00 as exemplary damages; P100,000.00 as attorney’s fees; that homeowners shall enjoy the ideal community living that respondent portrayed
P50,000.00 as litigation expenses; P1,500.00 per hearing as appearance fees; and they would have when they bought real estate from it.
costs of the suit.
Neither may petitioners be considered as having "claims" against respondent within
In the decision of the HLURB arbiter, ASBDC was ordered to pay P2,674,637.10 plus the context of the following proviso of Section 6 (c) of P.D. No. 902-A, …to warrant
12% interest from the date of actual payment of each amortization, representing the suspension of the HLURB proceedings..…
refund of all the amortization payments made by Sobrejuanite; P200,000.00 as moral
damages; P100,000.00 as exemplary damages; P100,000.00 as attorney’s fees; and In this case, under the complaint for specific performance before the HLURB,
P50,000.00 as litigation expenses. petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement
should be viewed in the light of respondent’s alleged failure to observe its statutory
As such, the HLURB arbiter should have suspended the proceedings upon the and contractual obligations to provide petitioners a "decent human settlement" and
approval by the SEC of the ASB Group of Companies’ rehabilitation plan and the "ample opportunities for improving their quality of life." The HLURB, not the SEC, is
appointment of its rehabilitation receiver. By the suspension of the proceedings, the equipped with the expertise to deal with that matter.21
receiver is allowed to fully devote his time and efforts to the rehabilitation and
restructuring of the distressed corporation. Finally, we agree with the Court of Appeals that under the Contract to Sell, ASBDC
was obliged to deliver the property to Sobrejuanite on or before December 1999.
It is well to note that even the execution of final judgments may be held in abeyance Nonetheless, the same was deemed extended due to the financial reverses
when a corporation is under rehabilitation.18 Hence, there is more reason in the experienced by the company. Section 7 of the Contract to Sell allows the developer to
instant case for the HLURB arbiter to order the suspension of the proceedings as the extend the period of delivery on account of causes beyond its control, such as
motion to suspend was filed soon after the institution of the complaint. By allowing financial reverses.
the proceedings to proceed, the HLURB arbiter unwittingly gave undue preference to
Sobrejuanite over the other creditors and claimants of ASBDC, which is precisely the WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals
vice sought to be prevented by Section 6(c) of PD 902-A. Thus: dated June 29, 2004 in CA-G.R. SP No. 79420 and its Resolution dated October 18,
2004, are AFFIRMED.
As between creditors, the key phrase is "equality is equity." When a corporation
threatened by bankruptcy is taken over by a receiver, all the creditors should stand
on equal footing. Not anyone of them should be given any preference by paying one
or some of them ahead of the others. This is precisely the reason for the suspension
of all pending claims against the corporation under receivership. Instead of creditors
vexing the courts with suits against the distressed firm, they are directed to file their
claims with the receiver who is a duly appointed officer of the SEC.19

Petitioners’ reliance on Arranza v. B.F. Homes, Inc.20 is misplaced. In that case, we


held that the HLURB retained its jurisdiction despite the rehabilitation proceedings
since the claim filed by the homeowners did not involve pecuniary considerations.