STAT CON chapter 4

Significance of the Case

In this landmark case, the Supreme Court (SC) ruled that backwages due an employee on account of his
illegal dismissal should not be diminished or reduced by the earnings derived by him elsewhere during
the period of his illegal dismissal.
This case finally abandoned the “Mercury Drug” rule and “deduction of earnings elsewhere” rule then
prevailing at that time.

Historical Backdrop
Prior to the present case, SC had applied different methods in the computation of backwages.
Backwages under RA 875. Under RA 875, the Court of Industrial Relations (CIR) was given wide
discretion to grant or disallow payment of backpay (backwages) to an employee, it also had the implied
power of reducing the backpay where backpay was allowed. In the exercise of its jurisdiction, the CIR
can increase or diminish the award of backpay, depending on several circumstances, among them, the
good faith of the employer, the employee’s employment in other establishments during the period of
illegal dismissal, or the probability that the employee could have realized net earnings from outside
employment if he had exercised due diligence to search for outside employment.
This method caused undue delay in the disposition of illegal dismissal cases. Cases are usually held up in
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 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.
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,
subject to deduction where there are mitigating circumstances in favor of the employer but subject to
increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or
dilatory appeals) on the employer’s part.
On 1 November 1974, the Labor Code of the Philippines took effect. Article 279 of the said code
provides:

“[...] An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and to his back wages computed from the time his compensation was was withheld from
him up to the time of his reinstatement.”

The above provision nothwithstanding, the rule generally applied by the Court after the promulgation of
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
portion of Article 279 of the Labor Code was amended to read as follows:

“[...] 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
benefits or their monetary equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.”
In accordance with the above provision, an illegally dismissed employee is entitled to his full backwages
from the time of his illegal dismissal up to the time of his actual reinstatement.
Despite the amendment, however, in a subsequent case, Pines City Educational Center vs. NLRC, 1993,
the Court returned to the rule prior to the Mercury Drug rule that the total amount derived from
employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any,
should be deducted from backwages.
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
law grants him upon reinstatement, so as not to unduly or unjustly enrich the employee at the expense of
the employer.

Issue
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.

Ruling
Conformably with the evident legislative intent of RA 6715, backwages to be awarded to an illegally
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.
The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his
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.
The clear legislative intent of the amendment in RA 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule.
Thus, a closer adherence to the legislative policy behind RA 6715 points to “full backwages” as meaning
exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal. In other words, the provision calling for “full
backwages” to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must
be applied without attempted or strained interpretation. Index animi sermo est (literally “speech is the
index of intention”).

Commendador vs. De Villa

Facts: The petitioners in G.R. Nos. 93177 and 96948 who are officers of the AFP were directed to appear
in person before the Pre-Trial Investigating Officers for the alleged participation the failed coup on
December 1 to 9, 1989. Petitioners now claim that there was no pre-trial investigation of the charges as
mandated by Article of War 71. A motion for dismissal was denied. Now, their motion for
reconsideration. Alleging denial of due process.

In G.R. No. 95020, Ltc Jacinto Ligot applied for bail on June 5, 1990, but the application was denied by
GCM No.14. He filed with the RTC a petition for certiorari and mandamus with prayer for provisional
liberty and a writ of preliminary injunction. Judge of GCM then granted the provisional liberty. However
he was not released immediately. The RTC now declared that even military men facing court martial
proceedings can avail the right to bail.
The private respondents in G.R. No. 97454 filed with SC a petition for habeas corpus on the ground that
they were being detained in Camp Crame without charges. The petition was referred to RTC. Finding
after hearing that no formal charges had been filed against the petitioners after more than a year after their
arrest, the trial court ordered their release.

Issues:
(1) Whether or Not there was a denial of due process.

(2) Whether or not there was a violation of the accused right to bail.

Held: NO denial of due process. Petitioners were given several opportunities to present their side at the
pre-trial investigation, first at the scheduled hearing of February 12, 1990, and then again after the denial
of their motion of February 21, 1990, when they were given until March 7, 1990, to submit their counter-
affidavits. On that date, they filed instead a verbal motion for reconsideration which they were again
asked to submit in writing. They had been expressly warned in the subpoena that "failure to submit
counter-affidavits on the date specified shall be deemed a waiver of their right to submit controverting
evidence." Petitioners have a right to pre-emptory challenge. (Right to challenge validity of members of
G/SCM)

It is argued that since the private respondents are officers of the Armed Forces accused of violations of
the Articles of War, the respondent courts have no authority to order their release and otherwise interfere
with the court-martial proceedings. This is without merit. * The Regional Trial Court has concurrent
jurisdiction with the Court of Appeals and the Supreme Court over petitions for certiorari, prohibition or
mandamus against inferior courts and other bodies and on petitions for habeas corpus and quo warranto.

The right to bail invoked by the private respondents has traditionally not been recognized and is not
available in the military, as an exception to the general rule embodied in the Bill of Rights. The right to a
speedy trial is given more emphasis in the military where the right to bail does not exist.

On the contention that they had not been charged after more than one year from their arrest, there was
substantial compliance with the requirements of due process and the right to a speedy trial. The AFP
Special Investigating Committee was able to complete the pre-charge investigation only after one year
because hundreds of officers and thousands of enlisted men were involved in the failed coup.

Accordingly, in G.R. No. 93177, the petition is dismissed for lack of merit. In G.R. No. 96948, the
petition is granted, and the respondents are directed to allow the petitioners to exercise the right of
peremptory challenge under article 18 of the articles of war. In G.R. Nos. 95020 and 97454, the petitions
are also granted, and the orders of the respondent courts for the release of the private respondents are
hereby reversed and set aside. No costs
Facts of the case:Co Kim Chan had a pending civil case, initiatedduring the Japanese occupation,with the
Court of First Instance of Manila. After the Liberation of the Manila andthe American occupation, Judge
ArsenioDizon refused to continue hearings onthe case, saying that a proclamation issued by General
Douglas MacArthur hadinvalidated and nullified all judicial proceedings and judgments of the courts
of the Philippines and, without an enabling law, lower courts have no jurisdiction totake cognizance of
and continue judicial proceedings pending in the courts of thedefunct Republic of the Philippines (the
Philippine government under theJapanese).
The court resolved three issues:1. Whether or not judicial proceedings and decisions made during the
Japaneseoccupation were valid and remained valid even after the American occupation;2. Whether or not the
October 23, 1944 proclamation MacArthur issued in whichhe declared that all laws, regulations and processes of
any other government inthe Philippines than that of the said Commonwealth are null and void andwithout legal effect
in areas of the Philippines free of enemy occupation andcontrol invalidated all judgments and judicial
acts and proceedings of thecourts;3. And whether or not if they were notinvalidated by MacArthur s
proclamation,those courts could continue hearing the cases pending before them.
Ratio: Political and international law recognizes that all acts and proceedings of ade facto government are
good and valid. The Philippine Executive Commissionand the Republic of the Philippines under the
Japanese occupation may beconsidered de facto governments, supported by the military force and
derivingtheir authority from the laws of war.Municipal laws and private laws, however, usually remain
in force unlesssuspended or changed by the conqueror. Civil obedience is expected even duringwar, for
the existence of a state of insurrection and war did not loosen thebonds of society, or do away with civil
government or the regular administrationof the laws. And if they were not valid, then it would not have
been necessaryfor MacArthur to come out with a proclamation abrogating them.The second question, the
court said, hinges on the interpretation of the phrase processes of any other government and whether
ornot he intended it to annulall other judgments and judicial proceedings of courts during
the Japanesemilitary occupation.IF, according to international law, non-political judgments and
judicialproceedings of de facto governments are valid and remain valid even after theoccupied territory
has been liberated, then it could not have been MacArthur sintention to refer to judicial processes, which
would be in violation of internationallaw. A well-known rule of statutory construction is: A statute
ought never to beconstrued to violate the law of nations if any other possible construction
Co Kim Chan v Valdez Tan Keh

G.R. No. 88979 February 7, 1992

Lydia O. Chua

Vs.

The Civil Service Commission, the National Irrigation Administration and the Department of
Budget and Management.

Facts:
In line with the policy of streamlining and trimming the bureaucracy, R.A.6683 was enacted to provide
for the early retirement and voluntary separation of government employees affected due to reorganization,
those who may avail were regular, casual, temporary and emergency employees, with rendered service
minimum of two years.
Petitioner Lydia Chua was hired by the National Irrigation Administration Authoruty (NIA) for over 15
years as a coterminous employee of 4 successive NIA projects. She availed of the above mentioned law
only to be denied as the CSC who deemed her unqualified, being a coterminous employee. She was
instead offered a severance of ½ monthly basic pay for each year of service.
Issue:
Whether or not petitioner was entitled to avail of the early retirement benefit as a coterminous employee.
Held:
It was stated that a coterminous employee is a non-career civil servant like casual and emergency
employees, because of that they are entitled to the same benefits as long as they complied with the
requirements of the law, which in this case, was done by Linda Chua. On that note, the court believes that
the denial of petitioner’s application for early retirement benefits by the NIA and CSC is unreasonable,
unjustified and oppressive due to the fact that she is entitled to the benefits of the same law because she
served the government not only for two (2) years which is the minimum requirement under the law but for
fifteen (15) years. In four (4) governmental projects.
Wherefore, the petition is granted.
-Statutory Construction-