168. Bustamante et al vs NLRC, GR No.
111651, Nov 28, 1996 from backwages the earnings derived elsewhere by the concerned employee during
DOCTRINE: Backwages to be awarded to an illegally dismissed employee should not
be diminished or reduced by the earnings derived by him elsewhere during the period
of his illegal dismissal.
FACTS: On 15 March 1996, the Supreme Court promulgated a decision in this case,
the dispositive part of which states: "WHEREFORE, the resolution of the NLRC is
modified in that its deletion of the award for backwages in favor of petitioners, is SET
ASIDE. The decision of the LA is AFFIRMED with the modification that backwages
shall be paid to petitioners from the time of their illegal dismissal up to the date of
their reinstatement. If reinstatement s no longer feasible, a one-month salary shall
be paid the petitioners as ordered in the labor arbiter's decision, in addition to the
adjudged backwages.
Private respondent now moves to reconsider the decision on ground that the salary
earned elsewhere (during the period of illegal dismissal) should be deducted from the
award of backwages.
ISSUE: Whether or not salary earned elsewhere should be deducted from the award
of such backwages? No
HELD: In Mercury Drug v. CIR, 1974 (Mercury Drug rule) 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 the backwages. The rationale
for such ruling was that, the eraning 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.
But in 1989, RA 6715 took effect, amending the Labor Code. Article 279 thereof
states in part: "ART. 279. Security of Tenure.- . . . 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."
The Court deems it appropriate to reconsider the Mercury Drug rule, by now holding
that conformably with the evident legislative intent as expressed in RA 6715,
backwages to be awarded to an illegally dismissed employee, should not 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
the period of his illegal dismissal.
169. Pioneer Texturizing et al vs NLRC
GR No. 118651, Oct 16, 1997
DOCTRINE: An award or order for reinstatement is self-executory.
FACTS: Lourdes De Jesus filed a complaint for illegal dismissal against petitioners.
The LA held petitioners guilty of illegal dismissal. Petitioners were accordingly ordered
to reinstate de Jesus to her previous position without loss of seniority rights and with
full backwages. Petitioners appealed to the NLRC. The NLRC declared that the status
quo between them should be maintained and affirmed the LA's order of
reinstatement. Hence this petition anchored substantially on the alleged NLRC's error
in holding that de Jesus is entitled to reinstatement. Petitioners' theory is that an
order for reinstatement is not self-executory. They stress that there must be a writ of
execution which may be issued by the NLRC or by the LA.
ISSUE: Whether or not an order for reinstatement needs a writ of execution? No
HELD: Article 223 of the Labor Code, as amended by R.A. No. 6715, pertinently
provides: "In an event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the
payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement provided herein.”
Prior to the enactment of R.A. No. 6715, Article 223 contains no provision dealing
with the reinstatement of an illegally dismissed employee. The amendment
introduced by R.A. No. 6715 is an innovation and a far departure from the old law
indicating thereby the legislature's unequivocal intent to insert a new rule that will
govern the reinstatement aspect of a decision or resolution in any given labor
dispute. In fact, the law as now worded employs the phrase "shall immediately be
executory" without qualification emphasizing the need for prompt compliance. As a
rule, "shall" in a statute commonly denotes an imperative obligation and is
inconsistent with the idea of discretion and that the presumption is that the word
"shall", when used in a statute, is mandatory. An appeal or posting of bond, by plain
mandate of the law, could not even forestall nor stay the executory nature of an
order of reinstatement.
To require the application for and issuance of a writ of execution as prerequisites for
the execution of a reinstatement award would certainly betray and run counter to the
very object and intent of Article 223, i. e., the immediate execution of a
reinstatement order. The reason is simple. An application for a writ of execution and
its issuance could be delayed for numerous reasons. A mere continuance or
postponement of a scheduled hearing, for instance, or an inaction on the part of the
Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting
at naught the strict mandate and noble purpose envisioned by Article 223.
170. Pizza Inn vs NLRC and Fontanilla
G.R. No. 74531 June 28, 1988
DOCTRINE: Reinstatement pre-supposes that the previous position from which one
had been removed still exists or that there is an unfilled position more or less of
similar nature as the one previously occupied by the employee. Admittedly, no such
position is available. Reinstatement therefore becomes a legal impossibility.
FACTS: Fontanilla was employed by petitioner in its Quad Carpark Makati outlet on a
probationary status. Before the expiration of the 6-month probationary period, she
resigned. Claiming that she was forced to resign by the petitioner, the former filed a
complaint against the latter. Due to the finality of the judgment in this case, the LA
issued a second alias Writ of Execution. The records show that the Pizza-Inn Quad
Carpark outlet ceased its business operations due to poor business sales of pizzas.
Subsequently, its only two other remaining outlets were also closed and its franchise
surrendered to Pizza-Inn Texas, U.S.A. Hence, Pizza Inn maintains that the closure of
the business rendered the reinstatement of Fontanilla to her previous position
impossible.
ISSUE: Whether Pizza Inn may be ordered to reinstate Fontanilla? No
HELD: Where an employer suffered business recession, as in the case at bar, such
that its commercial or financial circumstances have changed forcing it to close one
outlet or branch (and subsequently all other outlets also closed shop), the NLRC,
assuming that petitioner was guilty of unfair labor practice, cannot compel the
employer to reinstate Fontanilla if such reinstatement may exceed the petitioner's
needs under the altered conditions. Normally each outlet had only a sufficient number
of employees who served pizzas. It has its own "plantilla" and by accommodating
complainant, it might prejudice and displace other employees. Reinstatement pre-
supposes that the previous position from which one had been removed still exists or
that there is an unfilled position more or less of similar nature as the one previously
occupied by the employee. Admittedly, no such position is available. Reinstatement
therefore becomes a legal impossibility. The law cannot exact compliance with what
is impossible. Moreover, an employer is privileged to go out of business by closing the
same regardless of his reasons especially if done in good faith and due to causes
beyond his control like heavy business losses. To deprive him of such privilege would
be oppressive and inhuman. In such cases, the dismissed employee can no longer be
reinstated.
171. Serrano vs NLRC
G.R. No. 117040 January 27, 2000
Doctrine: Not all notice requirements are requirements of due process. Some are
simply part of a procedure to be followed before a right granted to a party can be
exercised. Others are simply an application of the Justinian precept, embodied in the
Civil Code, to act with justice, give everyone his due, and observe honesty and good
faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this
precept is to make him liable in damages, not to render his act (dismissal or
resignation, as the case may be) void. The measure of damages is the amount of
wages the employee should have received were it not for the termination of his
employment without prior notice. If warranted, nominal and moral damages may also
be awarded.
Facts: Petitioner was hired by private respondent Isetann Department Store as a
security checker to apprehend shoplifters and prevent pilferage of
merchandise. Initially hired on October 4, 1984 on contractual basis, petitioner
eventually became a regular employee on April 4, 1985. In 1988, he became head of
the Security Checkers Section of private respondent. Sometime in 1991, as a cost-
cutting measure, private respondent decided to phase out its entire security section
and engage the services of an independent security agency. A case was filed in the
LA finding there was illegal dismissal for failure to substantiate. Upon appeal to the
NLRC the same was reversed finding there was valid retrenchment and valid use of
management prerogative to use an independent contractor, but separation pay and
other benefits must be paid.
Issue: Whether or not the dismissal is valid?
Ruling: Yes, the dismissal is valid.
The need is for a rule which, while recognizing the employee's right to notice before
he is dismissed or laid off, at the same time acknowledges the right of the employer
to dismiss for any of the just causes enumerated in Art. 282 or to terminate
employment for any of the authorized causes mentioned in Arts. 283-284. If the
Wenphil rule imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring employer
violations of the notice requirement, the remedy is not to declare the dismissal void if
there are just or valid grounds for such dismissal or if the termination is for an
authorized cause. That would be to uphold the right of the employee but deny the
right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the
court finds that the dismissal was for a just cause. But, otherwise, his dismissal must
be upheld and he should not be reinstated. This is because his dismissal is
ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-
284, i.e., installation of a labor-saving device, but the employer did not give him and
the DOLE a 30-day written notice of termination in advance, then the termination of
his employment should be considered ineffectual and he should be paid backwages.
However, the termination of his employment should not be considered void but he
should simply be paid separation pay as provided in Art. 283 in addition to
backwages.
The refusal to look beyond the validity of the initial action taken by the employer to
terminate employment either for an authorized or just cause can result in an injustice
to the employer. For not giving notice and hearing before dismissing an employee,
who is otherwise guilty of, say, theft, or even of an attempt against the life of the
employer, an employer will be forced to keep in his employ such guilty employee.
This is unjust.
It is true the Constitution regards labor as "a primary social economic force." But so
does it declare that it "recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investment." The
Constitution bids the State to "afford full protection to labor." But it is equally true
that "the law, in protecting the right's of the laborer, authorizes neither oppression
nor self-destruction of the employer." And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in
operation when it is not economically in his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown
that the termination of employment was due to an authorized cause, then the
employee concerned should not be ordered reinstated even though there is failure to
comply with the 30-day notice requirement. Instead, he must be granted separation
pay in accordance with Art. 283. If the employee's separation is without cause,
instead of being given separation pay, he should be reinstated. In either case,
whether he is reinstated or only granted separation pay, he should be paid full
backwages if he has been laid off without written notice at least 30 days in advance.
172. Acesite Corp vs NLRC
G.R. No. 152308 January 26, 2005
Doctrine: In illegal dismissal cases, reinstatement to an illegally dismissed
employee’s former position may be excused on the ground of "strained relations."
This may be invoked against employees whose positions demand trust and
confidence, or whose differences with their employer are of such nature or degree as
to preclude reinstatement.
Facts: Leo A. Gonzales (Gonzales) was hired on October 18, 1993 as Chief of
Security of Manila Pavillion Hotel. On January 1, 1995, Acesite Corporation (Acesite)
took over the operations of Manila Pavillion and renamed it Holiday Inn Manila (the
hotel). Acesite retained Gonzales as Chief of Security of the hotel. On March 25,
1998, Gonzales took a 4-day sick leave and took emergency leave on March 30,
1998. On April 16-29, 1998, he again took a 12-day vacation leave, thereby using up
all leaves that he was entitled for the year. Gonzales again, filed an application for
emergency leave for 10 days commencing on April 30 up to May 13, 1998. The
application was not, however, approved. By Acesite’s claim, he received a
telegram informing him of the disapproval and asking him to report back for work on
April 30, 1998. Gonzales did not report for work on April 30, 1998. On the same day,
he received a telegram from Acesite advising provide a written explanation within the
next 24 hours why he was not reporting for work. At the same time, he was required
to report for work the following day or on May 1, 1998. On May 2, 1998, Gonzales’
father Anacleto sent a telegram to Acesite stating that he was still recovering from
severe stomach disorder and would. A medical certificate dated May 3, 1998 issued
by a Dr. Laureano C. Gonzales, Jr. stating that Gonzales was under his care from April
30 – May 3, 1998 was presented to prove that he indeed was treated from such
sickness.
On May 4, 1998, around lunchtime, Gonzales reported for work and presented
himself to Johann Angerbauer, then Resident Manager of the hotel. Angerbauer
claims that when Gonzales went to him, he asked him to explain why he had been
absent despite orders for him to report back for work to which he (Gonzales) replied
that it was necessary for him to go home to his province in Abra. Gonzales, on the
other hand, claims that when he conferred with Angerbauer, he requested for leave
without pay from May 5-9, 1998 which was provisionally approved on condition that
he (Gonzales) would be sending his explanation through e-mail behind his absences
on April 30, 1998 and May 2, 1998 so that Angerbauer could send it to the hotel
General Manager Phil Kennedy who was then out of the country.
Gonzales explained his side to Angerbauer. The latter asked that he be present as
there were meetings and matters that require his immediate attention as there was a
turnover of the outgoing security agency. Gonzales, who claims to have received the
May 5, 1998 telegram only in the afternoon of May 7, 1998, immediately repaired
back to Manila on May 8, 1998 only to be "humiliatingly and ignominiously barred by
the guard (a subordinate of [Gonzales]) from entering the premises."
It appears that on May 7, 1998, Angerbauer issued the following Notice of
Termination through an inter-office memo. Gonzales filed a case for Illegal dismissal
but the same was dismissed. Upon appeal to the NLRC, the same was reversed.
hence, the appeal.
Issue: Whether or not there was illegal dismissal?
Ruling: Yes, there was illegal dismissal.
This Court finds no reason to depart from the findings of the Court of Appeals.
Indeed, there appears to have been no just cause to dismiss Gonzales from
employment. As correctly ruled by the Court of Appeals, Gonzales cannot be
considered to have willfully disobeyed his employer. Willful disobedience entails the
concurrence of at least two (2) requisites: the employee’s assailed conduct has been
willful or intentional, the willfulness being characterized by a "wrongful and perverse
attitude;" and the order violated must have been reasonable, lawful, made known to
the employee and must pertain to the duties which he had been engaged to
discharge. In Gonzales’ case, his assailed conduct has not been shown to have been
characterized by a perverse attitude, hence, the first requisite is wanting. His receipt
of the telegram disapproving his application for emergency leave starting April 30,
1998 has not been shown. And it cannot be said that he disobeyed the May 5, 1998
telegram since he received it only on May 7, 1998. On the contrary, that he
immediately hied back to Manila upon receipt thereof negates a perverse attitude.
As to Gonzales’ alleged concealment of his candidacy (for provincial board member)
as a ground for Acesite’s loss of trust and confidence in him, the same is not
impressed with merit. It should be noted that Acesite’s ground for terminating the
services of Gonzales as stated in the Notice of Termination is his alleged acts of
insubordination/disobedience. The concealment of candidacy angle harped upon by
Acesite can only thus be considered as mere afterthought to further justify his illegal
dismissal.
Furthermore, in the case at bar, Gonzales was Chief of Security, whose duty was to
"manage the operation of the security areas of the hotel to provide and ensure the
safety and security of the hotel guests, visitors, management, staff and their
properties according to company policies and local laws." It cannot be gainsaid that
Gonzales’ position is one of trust and confidence, he being in charge of the over-all
security of said hotel. Thus, reinstatement is no longer possible. In lieu thereof,
Acesite is liable to pay separation pay of 1 month for every year of service.
173. Manila Diamond Hotel Ee Union vs CA GR 140518
Doctrine: Under Article 263(g), all workers must immediately return to work and all
employers must readmit all of them under the same terms and conditions prevailing
before the strike or lockout.
Facts: The Union filed a petition for a certification election, which was dismissed by
the DOLE. Despite the dismissal of their petition, the Union sent a letter to the Hotel
informing the latter of its desire to negotiate for a collective bargaining agreement.
The Hotel, however, refused to negotiate with the Union, citing the earlier dismissal
of the Union’s petition for certification by DOLE.
Failing to settle the issue, the Union staged a strike against the Hotel. Numerous
confrontations followed, further straining the relationship between the Union and the
Hotel. The Hotel claims that the strike was illegal and dismissed some employees for
their participation in the allegedly illegal concerted activity. The Union, on the other
hand, accused the Hotel of illegally dismissing the workers.
A Petition for Assumption of Jurisdiction under Article 263(g) of the Labor Code was
later filed by the Union before the Secretary of Labor. Thereafter, Secretary of Labor
Trajano issued an Order directing the striking officers and members of the Union to
return to work within twenty-four (24) hours and the Hotel to accept them back
under the same terms and conditions prevailing prior to the strike.
After receiving the above order the members of the Union reported for work, but the
Hotel refused to accept them and instead filed a Motion for Reconsideration of the
Secretary’s Order.
Acting on the motion for reconsideration, then Acting Secretary of Labor Español
modified the one earlier issued by Secretary Trajano and instead directed that the
strikers be reinstated only in the payroll.
Issue: WON payroll reinstatement is proper in lieu of actual reinstatement under
Article 263(g) of the Labor Code.
Held: Payroll reinstatement in lieu of actual reinstatement is not sanctioned under
the provision of the said article.
The Court noted the difference between UST vs. NLRC and the instant case. In UST
case the teachers could not be given back their academic assignments since the
order of the Secretary for them to return to work was given in the middle of the first
semester of the academic year.
The NLRC was, therefore, faced with a situation where the striking teachers were
entitled to a return to work order, but the university could not immediately reinstate
them since it would be impracticable and detrimental to the students to change
teachers at that point in time.
In the present case, there is no similar compelling reason that called for payroll
reinstatement as an alternative remedy. A strained relationship between the striking
employees and management is no reason for payroll reinstatement in lieu of actual
reinstatement.
Under Article 263(g), all workers must immediately return to work and all employers
must readmit all of them under the same terms and conditions prevailing before the
strike or lockout.
The Court pointed out that the law uses the precise phrase of “under the same terms
and conditions,” revealing that it contemplates only actual reinstatement. This is in
keeping with the rationale that any work stoppage or slowdown in that particular
industry can be inimical to the national economy.
The Court reiterates that Article 263(g) was not written to protect labor from the
excesses of management, nor was it written to ease management from expenses,
which it normally incurs during a work stoppage or slowdown. This law was written
as a means to be used by the State to protect itself from an emergency or crisis. It is
not for labor, nor is it for management.
174. ALEJANDRO ROQUERO v. PHILIPPINE AIRLINES, INC.
22 April 2003 Puno, J.
Doctrine: Instigation is only a defense against criminal liability. It cannot be used
as a shield against dismissal from employment especially when the position
involves the safety of human lives.
Roquero and Pabayo were ground equipment mechanics of PAL. They were caught
possessing and using Shabu in a raid conducted by PAL security officers and NARCOM
personnel. Petitioner Roquero is guilty of serious misconduct for possessing and using
shabu. This is a just cause for his dismissal.
FACTS: 1. Roquero, along with Rene Pabayo, were ground equipment
mechanics of respondent Philippine Airlines, Inc. (PAL). They were caught
red-handed possessing and using Methampethamine Hydrochloride or shabu in a
raid conducted by PAL security officers and NARCOM personnel.
2. They alleged that they did not voluntarily indulge in the said act but were
instigated by a certain Jojie Alipato who was introduced to them by Joseph Ocul,
Manager of the Airport Maintenance Division of PAL. Pabayo alleged that Alipato often
bragged about the drugs he could smuggle inside the company premises and
invited other employees to take the prohibited drugs. Alipato was
unsuccessful, until one day, he was able to persuade Pabayo to join him in taking the
drugs. They met Roquero along the way and he agreed to join them. Inside the
company premises, they locked the door and Alipato lost no time in preparing the
drugs to be used. When they started the procedure of taking the drugs, armed men
entered the room, arrested Roquero and Pabayo and seized the drugs and the
paraphernalia used. Roquero and Pabayo were subjected to a physical examination
where the results showed that they were positive of drugs. They were also brought to
the security office of PAL where they executed written confessions without the
benefit of counsel.
3. On March 30, 1994, Roquero and Pabayo received a “notice of administrative
charge” for violating the PAL Code of Discipline. They were required to answer the
charges and were placed under preventive suspension.
4. In their “reply to notice of administrative charge,” they assailed their arrest and
asserted that they were instigated by PAL to take the drugs. They argued that Alipato
was not really a trainee of PAL but was placed in the premises to instigate the
commission of the crime. They based their argument on the fact that Alipato was not
arrested. Moreover, Alipato has no record of employment with PAL.
5. In a Memorandum dated July 14, 1994, Roquero and Pabayo were dismissed by
PAL. Thus, they filed a case for illegal dismissal.
6. LA upheld the dismissal of the Roquero and Pabayo. The Labor Arbiter found both
parties at fault – PAL for applying means to entice the complainants into committing
the infraction and the complainants for giving in to the temptation and eventually
indulging in the prohibited activity.
7. While the case was on appeal with the NLRC, complainants were acquitted by the
RTC in the criminal case filed against them for possession and drug use pursuant to
Sec. 16, Art III, RA6425 on the basis of instigation.
8. NLRC ruled in favor of complainants, found PAL guilty of instigation. Ordered
reinstatement. Complainants filed a motion for a writ of execution of the order of
reinstatement. LA granted motion but PAL refused to execute.
9. During the pendency of the case with CA, PAL and Pabayo entered into a
compromise agreement; thus, the case was dismissed/withdrawn as to him.
10. CA reversed NLRC, reinstated LA’s decision insofar as it upheld Roquero’s
dismissal.
Issue: WON Roquero was dismissed for just cause
RULING: Petitioner Roquero is guilty of serious misconduct for possessing and using
shabu. He violated Chapter 2, Article VII, section 4 of the PAL Code of Discipline
which states :“Any employee who, while on company premises or on
duty, takes or is under the influence of prohibited or controlled drugs, or
hallucinogenic substances or narcotics shall be dismissed.”
Serious misconduct is defined as “the transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment.” For serious misconduct to warrant
the dismissal of an employee, it (1) must be serious; (2) must relate to the
performance of the employee’s duty; and (3) must show that the employee has
become unfit to continue working for the employer.
It is of public knowledge that drugs can damage the mental faculties of the user.
Roquero was tasked with the repair and maintenance of PAL’s airplanes. He cannot
discharge that duty if he is a drug user. His failure to do his job can mean great loss
of lives and properties. Hence, even if he was instigated to take drugs he
has no right to be reinstated to his position. He took the drugs fully knowing
that he was on duty and more so that it is prohibited by company rules. Instigation
is only a defense against criminal liability. It cannot be used as a shield
against dismissal from employment especially when the position involves the
safety of human lives.
175. JUANITO A. GARCIA and ALBERTO J. DUMAGO vs PAL, INC
G.R. No. 164856 January 20, 2009
Doctrine: A dismissed employee whose case was favorably decided by the Labor
Arbiter is entitled to receive wages pending appeal upon reinstatement, which is
immediately executory. However, it is settled that upon appointment by the SEC of a
rehabilitation receiver, all actions for claims before any court, tribunal or board
against the corporation shall ipso jure be suspended.
FACTS: The case stemmed from the administrative charge filed by PAL against its
employees-herein petitioners3 after they were allegedly caught in the act of sniffing
shabu when a team of company security personnel and law enforcers raided the PAL
Technical Center’s Tool room Section on July 24, 1995.
After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the
PAL Code of Discipline,4 prompting them to file a complaint for illegal dismissal and
damages which was, by Decision of January 11, 1999,5 resolved by the Labor Arbiter
in their favor, thus ordering PAL to, inter alia, immediately comply with the
reinstatement aspect of the decision.
Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange
Commission (SEC) placed PAL (hereafter referred to as respondent), which was
suffering from severe financial losses, under an Interim Rehabilitation Receiver, who
was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999.
PAL appealed and the Labor Tribunal ruled in their favor. Subsequently, the LA issued
a writ of execution for the reinstatement and issued a notice of garnishment. The
Labor Tribunal affirmed the Writ and notice but suspended and referred the action to
the Rehabilitation Receiver of PAL. On appeal, CA found for respondent PAL.
ISSUE: WON the PAL being under the corporate rehabilitation suspends any
monetary claims to it? YES
RULING: It is settled that upon appointment by the SEC of a rehabilitation receiver,
all actions for claims before any court, tribunal or board against the corporation
shall ipso jure be suspended. As stated early on, during the pendency of petitioners’
complaint before the Labor Arbiter, the SEC placed respondent under an Interim
Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC
replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.
Case law recognizes that unless there is a restraining order, the implementation of
the order of reinstatement is ministerial and mandatory.32 This injunction or
suspension of claims by legislative fiat 33 partakes of the nature of a restraining order
that constitutes a legal justification for respondent’s non-compliance with the
reinstatement order. Respondent’s failure to exercise the alternative options of actual
reinstatement and payroll reinstatement was thus justified. Such being the case,
respondent’s obligation to pay the salaries pending appeal, as the normal effect of
the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the continuing threat or danger to
the survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in a judicially
monitored state of being resuscitated in order to survive.
There are legal effects arising from a judicial order placing a corporation under
rehabilitation. Respondent was, during the period material to the case, effectively
deprived of the alternative choices under Article 223 of the Labor Code, not only by
virtue of the statutory injunction but also in view of the interim relinquishment of
management control to give way to the full exercise of the powers of the
rehabilitation receiver. Had there been no need to rehabilitate, respondent may have
opted for actual physical reinstatement pending appeal to optimize the utilization of
resources. Then again, though the management may think this wise, the
rehabilitation receiver may decide otherwise, not to mention the subsistence of the
injunction on claims.
In sum, the obligation to pay the employee’s salaries upon the employer’s failure to
exercise the alternative options under Article 223 of the Labor Code is not a hard and
fast rule, considering the inherent constraints of corporate rehabilitation.
176. ALFREDO F. PRIMERO vs INTERMEDIATE APPELLATE COURT and DM
TRANSIT G.R. No. 72644 December 14, 1987
Doctrine: The judgment of the Labor Arbiter granting Primero separation pay
operated as a bar to his subsequent action for the recovery of damages before the
Court of First Instance under the doctrine of res judicata, The rule is that the prior
"judgment or order is, with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, conclusive between the parties
and their successors in interest by title subsequent to the commencement of the
action or special proceeding, litigating for the same thing and under the same title
and in the same capacity. The grant of jurisdiction to the Labor Arbiter by Article 217
of the Labor Code is sufficiently comprehensive to include claims for moral and
exemplary damages sought to be recovered from an employer by an employee upon
the theory of his illegal dismissal.
FACTS: Petitioner Primero was discharged from his employment as bus driver of DM
Transit Corporation (hereafter, simply DM) in August, 1974 after having been
employed therein for over 6 years. Since August 1, 1974, appellee's bus dispatcher
did not assign any bus to be driven by appellant Primero for 23 days without any
reason. For 23 days, appellant was given a run-around from one management official
to another, pleading that he be allowed to work as his family was in dire need of
money and at the same time inquiring (why) he was not allowed to work or drive a
bus of the company.
Appellant pleaded with Corporate President Demetrio Munoz, Jr. for his reinstatement
and also asked P300.00 as financial assistance, but the latter told the former that he
(Munoz, Jr.) will not give him even one centavo and that should appellant sue him in
court, then that will be the time President Munoz, Jr. will pay him, if Munoz, Jr. loses
the case.
Primero instituted proceedings against DM with the Labor Arbiters of the Department
of Labor, for illegal dismissal, and for recovery of back wages and reinstatement. It is
not clear from the record whether these proceedings consisted of one or two actions
separately filed. What is certain is that he withdrew his claims for back wages and
reinstatement, "with the end in view of filing a damage suit" "in a civil court which
has exclusive jurisdiction over his complaint for damages on causes of action founded
on tortious acts, breach of employment contract ... and consequent effects (thereof ).
The jurisdiction of Labor Arbiters over such claims was however removed by PD
1367, effective May 1, 1978, which explicitly provided that "Regional Directors shall
not indorse and Labor Arbiters shall not entertain claims for moral or other forms of
damages." 7
Some three months afterwards, Primero brought suit against DM in the Court of First
Instance of Rizal seeking recovery of damages caused not only by the breach of his
employment contract, but also by the oppressive and inhuman, and consequently
tortious, acts of his employer and its officers antecedent and subsequent to his
dismissal from employment without just cause. 8
While this action was pending in the CFI, the law governing the Labor Arbiters'
jurisdiction was once again revised. The amending act was PD 1691, effective May 1,
1980. It eliminated the restrictive clause placed by PD 1367, that Regional Directors
shall not indorse and Labor Arbiters entertain claims for moral or other forms of
damages.
On August 11, 1980 the Trial Court rendered judgment dismissing the complaint on
the ground of lack of jurisdiction, for the reason that at the time that the complaint
was filed. on August 17, 1978, the law — the Labor Code as amended by PD 1367,
eff. May 1, 1978 — conferred exclusive, original jurisdiction over claims for moral or
other damages, not on ordinary courts, but on Labor Arbiters. This judgment was
affirmed by the Intermediate Appellate Court, by Decision rendered on June 29,
1984.
ISSUE: WON the Trial Court is correct in dismissing the complaint on the ground of
lack of jurisdiction? YES
RULING: It is clear that the question of the legality of the act of dismissal is
intimately related to the issue of the legality of the manner by which that act of
dismissal was performed. But while the Labor Code treats of the nature of, and the
remedy available as regards the first — the employee's separation from employment
— it does not at all deal with the second — the manner of that separation — which is
governed exclusively by the Civil Code. In addressing the first issue, the Labor Arbiter
applies the Labor Code; in addressing the second, the Civil Code. And this appears to
be the plain and patent intendment of the law. For apart from the reliefs expressly
set out in the Labor Code flowing from illegal dismissal from employment, no
other damages may be awarded to an illegally dismissed employee other than those
specified by the Civil Code. Hence, the fact that the issue-of whether or not moral or
other damages were suffered by an employee and in the affirmative, the amount that
should properly be awarded to him in the circumstances-is determined under the
provisions of the Civil Code and not the Labor Code, obviously was not meant to
create a cause of action independent of that for illegal dismissal and thus place the
matter beyond the Labor Arbiter's jurisdiction.
Thus, an employee who has been illegally dismissed (i.e., discharged without just
cause or being accorded due process), in such a manner as to cause him to suffer
moral damages (as determined by the Civil Code), has a cause of action for
reinstatement and recovery of back wages and damages. When he institutes
proceedings before the Labor Arbiter, he should make a claim for all said reliefs. He
cannot, to be sure, be permitted to prosecute his claims piecemeal. He cannot
institute proceedings separately and contemporaneously in a court of justice upon the
same cause of action or a part thereof. He cannot and should not be allowed to sue
in two forums: one, before the Labor Arbiter for reinstatement and recovery of back
wages, or for separation pay, upon the theory that his dismissal was illegal; and two,
before a court of justice for recovery of moral and other damages, upon the theory
that the manner of his dismissal was unduly injurious, or tortious. This is what in
procedural law is known as splitting causes of action, engendering multiplicity of
actions. It is against such mischiefs that the Labor Code amendments just discussed
are evidently directed, and it is such duplicity which the Rules of Court regard as
ground for abatement or dismissal of actions, constituting either litis pendentia (auter
action pendant) or res adjudicata, as the case may be. 1 But this was precisely what
Primero's counsel did. He split Primero's cause of action; and he made one of the
split parts the subject of a cause of action before a court of justice. Consequently, the
judgment of the Labor Arbiter granting Primero separation pay operated as a bar to
his subsequent action for the recovery of damages before the Court of First Instance
under the doctrine of res judicata, The rule is that the prior "judgment or order is,
with respect to the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of the action or
special proceeding, litigating for the same thing and under the same title and in the
same capacity.
Actually we merely reiterate in this decision the doctrine already laid down in other
cases to the effect that the grant of jurisdiction to the Labor Arbiter by Article 217 of
the Labor Code is sufficiently comprehensive to include claims for moral and
exemplary damages sought to be recovered from an employer by an employee upon
the theory of his illegal dismissal.
177. G.R. No. 78345 September 21, 1990
JOSE M. MAGLUTAC VS. NLRC
PONENTE: MEDIALDEA, J.:
DOCTRINE: Where the employee's dismissal was effected without procedural
fairness, an award of exemplary damages in her favor can only be justified if her
dismissal was affected in a wanton, oppressive or malevolent manner (National
Service Corp., et al. v. NLRC, G.R. No. 69870, Nov. 29, 1988). The LA justified the
award of moral damages from its finding of the oppressive and malevolent manner
the complainant and his relatives were treated after Jesus T. Maglutac found out that
a derivative suit was filed by complainant's family with the Securities and Exchange
Commission accusing him and his wife of diverting corporation assets to their
personal accounts.
FACTS: Jose M. Maglutac, was employed by Commart (Phils.), Inc. sometime in
February, 1980 and rose to become the Manager of its Energy Equipment Sales. He
received a notice of termination signed by Joaquin S. Cenzon, Vice-President-General
Manager and Corporate Secretary of CMS International, a corporation controlled by
Commart.
Thereafter, Jose Maglutac filed a complaint for illegal dismissal against
Commart and Jesus T. Maglutac, President and Chairman of the Board of Directors of
Commart. The complainant alleged that his dismissal was part of a vendetta drive
against his parents who dared to expose the massive and fraudulent diversion of
company funds to the company president's private accounts, stressing that
complainant's efficiency and effectiveness were never put to question when very
suddenly he received his notice of termination.
Commart and Jesus T. Maglutac filed an MR of the decision of the LA which
was treated as an appeal to the NLRC. On April 30, 1987, a decision was rendered by
the NLRC modifying the decision of the LA, The NLRC affirmed the finding of the LA
that complainant was illegally dismissed by Commart but it deleted the award for
moral and exemplary damages in favor of complainant and absolved Jesus T.
Maglutac from any personal liability to the complainant.
Both parties filed their respective MR of the decision of the NLRC. Commart
and Jesus T. Maglutac questioned the NLRC's finding that the complainant was
dismissed without just cause. For his part, complainant questioned the decision
insofar as it deleted the award of moral and exemplary damages and the non-
holding of a joint and several liability of Jesus T. Maglutac and Commart.
ISSUE: WHETHER OR NOT PETITIONER IS ENTITLED TO MORAL AND EXEMPLARY
DAMAGES UNDER THE CIVIL CODE
RULING: YES. In the case of Primero v. Intermediate Appellate Court, G.R.
No. 72644, December 14,1987,156 SCRA 435, We held that in cases of illegal
dismissal, in addition to the reliefs granted under the Labor Code, other forms of
damages under the Civil Code may be granted. Thus,
The legislative intent appears clear to allow recovery in
proceedings before Labor Arbiters of moral and other forms of
damages, in all cases or matters arising from employer-employee
relations. This would no doubt include, particularly, instances where an
employee has been unlawfully dismissed. In such a case, the LA has
jurisdiction to award to the dismissed employee not only the reliefs
specifically provided by labor laws, but also moral and other forms
of damages governed by the Civil Code. Moral damages would be
recoverable, for example, where the dismissal of theemployee was
not only effected without authorized cause and /or due process for
which relief is granted by the Labor Code but was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was
done in a manner contrary to morals good customs or public policy
for which the obtainable relief is determined by the Civil Code (not
the Labor Code). Stated otherwise, if the evidence adduced by the employee
before the LA should establish that the employer did indeed terminate the
employee's services without just cause or without according him due
process, the LA’s judgment shall be for the employer to reinstate the
employee and pay him his backwages or, exceptionally, for the employee
simply to receive separation pay. These are reliefs explicitly prescribed by
the Labor Code. But any award of moral damages by the Labor Arbiter
obviously cannot be based on the Labor Code but should be grounded on
the Civil Code.
Moral damages may be awarded to compensate one for diverse injuries
such as mental anguish, besmirched reputation, wounded feelings and social
humiliation. It is however not enough that such injuries have arisen; it is
essential that they have sprung from a wrongful act or omission of the
defendant which was the proximate cause thereof (Guita v. Court of
Appeals, 139 SCRA 576)
From the findings of the Labor Arbiter as affirmed by the NLRC,
there is sufficient basis for an award of moral and exemplary damages in
the instant case. The alleged loss of trust and confidence on complainant because
of his family's establishment of MM International, a company allegedly in direct
competition with Commart, was belied by the findings of the Labor Arbiter:
Moreover, the complainant was dismissed without due process. His
dismissal was made effective immediately and he was not given an
opportunity to present his side.
We agree however, with the contention of the Solicitor General
that the award by the Labor Arbiter of P 200,000.00 moral damages and
P20,000.00 exemplary damages is excessive, In the exercise of our discretion,
We reduce the award of damages to P40,000.00 as moral damages and P10,000.00
as exemplary damages.
The second ground raised by complainant, that is, that individual respondent Jesus T.
Maglutac should be held jointly and severally liable with Commart is also meritorious.
In the case of Chua v. NLRC, G.R. 81450, Feb. 15, 1990, citing the case of A.C.
Ransom Labor Union-CCLU v. NLRC, 142 SCRA 269, We affirmed the finding of the LA
and the NLRC that the vice-president of a corporation who was the most ranking
officer of the corporation can be held jointly and severally liable with the corporation
for the payment of the unpaid wages of its president.
178. G.R. No. 118746 September 7, 1995
ATTY. WILFREDO TAGANAS, vs. NLRC
DOCTRINE: Petitioner's contingent fee falls within the purview of Article 111 of the
Labor Code. This article fixes the limit on the amount of attorney's fees which a
lawyer, like petitioner, may recover in any judicial or administrative proceedings since
the labor suit where he represented private respondents asked for the claim and
recovery of wages. In fact, We are not even precluded from fixing a lower amount
than the ten percent ceiling prescribed by the article when circumstances warrant
it.12 Nonetheless, considering the circumstances and the able handling of the case,
petitioner's fee need not be further reduced.
FACTS: Petitioner Atty. Wilfredo E. Taganas represented herein private respondents
in a labor suit for illegal dismissal, underpayment and non-payment of wages,
thirteenth-month pay, attorney's fees and damages conditioned upon a contingent
fee arrangement granting the equivalent of fifty percent of the judgment award plus
three hundred pesos appearance fee per hearing.1 The Labor Arbiter ruled in favor of
private respondents and ordered Ultra Clean Services (Ultra) and the Philippine
Tuberculosis Society, Inc., (PTSI) respondents therein, jointly and severally to
reinstate herein private respondents with full backwages, to pay wage differentials,
emergency cost of living allowance, thirteenth-month pay and attorney's fee, but
disallowed the claim for damages for lack of basis.2 This decision was appealed by
Ultra and PTSI to the National Labor Relations Commission (NLRC), and subsequently
by PTSI to the Court but to no avail. During the execution stage of the decision,
petitioner moved to enforce his attorney's charging lien. 3 Private respondents,
aggrieved for receiving a reduced award due to the attorney's charging lien,
contested the validity of the contingent fee arrangement they have with petitioner,
albeit four of the fourteen private respondents have expressed their conformity
thereto.
Finding the arrangement excessive, the Labor Arbiter ordered the reduction of
petitioner's contingent fee from fifty percent of the judgment award to ten percent,
except for the four private respondents who earlier expressed their
conformity.5 Petitioner appealed to NLRC which affirmed with modification the Labor
Arbiter's order by ruling that the ten percent contingent fee should apply also to the
four respondents even if they earlier agreed to pay a higher percentage.
ISSUE: whether or not the reduction of petitioner's contingent fee is warranted.
RULING: A contingent fee arrangement is an agreement laid down in an express
contract between a lawyer and a client in which the lawyer's professional fee, usually
a fixed percentage of what may be recovered in the action is made to depend upon
the success of the litigation.7 This arrangement is valid in this jurisdiction.8 It is,
however, under the supervision and scrutiny of the court to protect clients from
unjust charges.9 Section 13 of the Canons of Professional Ethics states that "[a]
contract for a contingent fee, where sanctioned by law, should be reasonable under
all the circumstances of the case including the risk and uncertainty of the
compensation, but should always be subject to the supervision of a court, as to its
reasonableness". Likewise, Rule 138, Section 24 of the Rules of Court provides:
Sec. 24. Compensation of attorneys; agreement as to fees. — An
attorney shall be entitled to have and recover from his client no
more than a reasonable compensation for his services, with a view
to the importance of the subject-matter of the controversy, the
extent of the services rendered, and the professional standing of
the attorney. No court shall be bound by the opinion of attorneys
as expert witnesses as to the proper compensation but may
disregard such testimony and base its conclusion on its own
professional knowledge. A written contract for services shall control
the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable.
When it comes, therefore, to the validity of contingent fees, in large
measure it depends on the reasonableness of the stipulated fees under the
circumstances of each case. The reduction of unreasonable attorney's fees is
within the regulatory powers of the courts.10
We agree with the NLRC's assessment that fifty percent of the judgment award as
attorney's fees is excessive and unreasonable. The financial capacity and economic
status of the client have to be taken into account in fixing the reasonableness of the
fee.11 Noting that petitioner's clients were lowly janitors who receive miniscule
salaries and that they were precisely represented by petitioner in the labor dispute for
reinstatement and claim for backwages, wage differentials, emergency cost of living
allowance, thirteenth-month pay and attorney's fees to acquire what they have not
been receiving under the law and to alleviate their living condition, the reduction of
petitioner's contingent fee is proper. Labor cases, it should be stressed, call for
compassionate justice.
179. FASAP vs. PAL
G.R. No. 178083. July 22, 2008
DOCTRINE: The law recognizes the right of every business entity to reduce its work
force if the same is made necessary by compelling economic factors which would
endanger its existence or stability; Retrenchment is only a measure of last resort,
when other less drastic means have been tried and found to be inadequate.
The law speaks of serious business losses or financial reverses—sliding incomes or
decreasing gross revenues are not necessarily losses, much less serious business
losses within the meaning of the law.
FACTS: PAL retrenched 5,000 of its employees, including more than 1,400 of its
cabin crew Personnel PAL adopted the retrenchment scheme allegedly to cut costs
and mitigate huge financial losses as a result of a downturn in the airline industry
brought about by the Asian financial crisis. Prior to the full implementation of the
assailed retrenchment program, FASAP and PAL conducted a series of consultations
and meetings and explored all possibilities of cushioning the impact of the impending
reduction in cabin crew personnel. However, the parties failed to agree on how the
scheme would be implemented. While consultations between FASAP and PAL were
ongoing, the latter began implementing its retrenchment program by initially
terminating the services of 140 probationary cabin attendants only to rehire them.
PAL was placed under corporate rehabilitation and a rehabilitation plan was approved
per SEC.
FASAP filed a complaint against PAL for unfair labor practice, illegal retrenchment
with claims for reinstatement and payment of salaries, allowances and backwages of
affected FASAP members.
LA: granting a writ of preliminary injunction against PAL’s implementation of its
retrenchment program with respect to FASAP members
NLRC: reversed LA’s decision. Dismissed for lack of merit
CA: denied FASAP’s MR
ISSUE: WON the retrenchment program of PAL was valid
HELD: No. The burden clearly falls upon the employer to prove economic or
business losses with sufficient supporting evidence. Its failure to prove these reverses
or losses necessarily means that the employee’s dismissal was not justified. PAL failed
to substantiate its claim of actual and imminent substantial losses which would justify
the retrenchment of more than 1,400 of its cabin crew personnel. Although the
Philippine economy was gravely affected by the Asian financial crisis, however, it
cannot be assumed that it has likewise brought PAL to the brink of bankruptcy.
Likewise, the fact that PAL underwent corporate rehabilitation does not automatically
justify the retrenchment of its cabin crew personnel. To prove that PAL was
financially distressed, it could have submitted its audited financial statements but it
failed to present the same with the Labor Arbiter. Instead, it narrated a litany of woes
without offering any evidence to show that they translated into specific and
substantial losses that would necessitate retrenchment
180. Lim vs NLRC
G.R. No. 79907. March 16, 1989
DOCTRINE: Claim that Calsado was only an independent contractor over whom
Sweet Lines had no control belied by the documents submitted by the former.
FACTS: private respondent Calsado was hired by sweetlines as senior branch officer.
On December 1, 1983, she tendered her resignation but was persuaded by sweetline
to remain with them along with an offer of promotion. She bought a second hand
Colt Lancer pursuant to a liberal car plan under which half of the cost will be paid by
the company and the other half to be deducted from her salary. Relations began to
sour later, however, when she repeatedly asked for payment of her commissions,
which had accumulated and were long overdue. She also complained of the
inordinate pursuant to a liberal car plan under which one-half of the cost was to be
paid by the company and the other half was to be deducted from her salary.
Relations began to sour later, however, when she repeatedly asked for payment of
her commissions, which had accumulated and were long overdue. She also
complained of the inordinate demands on her time even when she was sick and in
the hospital. Finally, petitioner informed her that sweet lines will terminate her
services and the company is trying to take back the car. Calsado then filed an illegal
dismissal case. The defense of the respondent is that she is not an employee of
Sweet Lines but an independent contractor.
LA: Calsado was illegally dismissed
NLRC: affirmed LA’s decision
ISSUE: WON Calsado was an employee of Sweet Lines and was illegally dismissed
WON petitioner Lim can be held solidarily liable with the company
HELD: Yes. Calsado was an employee of Sweet Lines. Employee-employer relations
between Calsado and Sweet Lines have been sufficiently established. The following
documents submitted by the former and not controverted by the latter should belie
the claim that Calsado was only an independent contractor over whom Sweet Lines
had no control. There is in the above exhibits a consistent and categorical recognition
of Calsado as an employee of petitioner Sweet Lines. Indeed, its notarized
certification that Calsado was its bona fide employee is irrefutable. If it is true that
Sweet Lines had no control over her and left her free to determine her work
schedule, there would have been no reason at all for its approval of her application
for sick leaveThe termination letter itself, which was signed by the other petitioner as
Vice President of Sweet Lines, said she was “entitled” to certain payments as a result
of the cessation of her “employment with Sweet Lines, Inc.”
Court agrees with petitioner Lim that he cannot be held personally liable with Sweet
Lines for merely having signed the letter informing Calsado of her separation. There
is no evidence that he acted with malice or bad faith. The letter, in fact, informed her
not only of her separation but also of the benefits due her as a result of the
termination of her services.
181. PLDT vs. NLRC
G.R. No. L- 80609. August 23, 1988
DOCTRINE: Grant of separation pay to the dismissed employee is just where the
separation was due to valid but inequitous causes as failure to comply with work
standards; Grant of award is based on the social justice policy even if separation is
for cause.
The cause of the separation is more serious than mere inefficiency, the
generosity of the law must be more discerning.
FACTS: Abucay is a traffic operator of PLDT, she was accused of having demanded
and received from them the total amount of P3,800.00 in consideration of her
promise to facilitate approval of their applications for telephone installation. After
investigation and hearing, she was found guilty as charged and accordingly separated
from the service. She filed an illegal dismissal case.
Ministry of Labor: ruled that since the deal happened outside the premises of PLDT
and that their act of giving P3,800.00 without any receipt is tantamount to corruption
of public officers, complainant must be given one month pay for every year of service
as financial assistance.
NLRC affirmed the decision of the Ministry of Labor
ISSUE: WON an award of financial assistance to a dismissed employee for cause
found by the public respondent is legal
HELD: No. The private respondent has been dismissed for dishonesty, as found by
the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted.
Separation pay shall be allowed only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on his moral
character; Where the reason for the valid dismissal is habitual insubordination or an
offense involving moral turpitude, the employer may not be required to give the
dismissed employee separation pay or financial assistance.
182. GUSTILO vs. WYETH PHILS
Doctrine: a habitual offender whose numerous contraventions of company rules has
left Wyeth (herein respondent) with no choice but to terminate his services
Facts: Alan D. Gustilo, petitioner, was employed by Wyeth, as a pharmaceutical
territory manager. Eventually, he was placed in charge of its various branches in
Metro Bacolod City and Negros Occidental. To ensure a profitable sale of its
pharmaceutical products, he performed various functions, such as visiting hospitals,
pharmacies, drugstores and physicians concerned; preparing and submitting his pre-
dated itinerary; and submitting periodic reports of his daily call visits, monthly
itinerary, and weekly locator and incurred expenses.
Petitioner's employment records show that respondent company, on various dates,
reprimanded and suspended him for habitually neglecting to submit his periodic
reports.
Meantime, respondent company, after integrating its pharmaceutical products with
Lederle, a sister company, conducted a nationwide on-the-job training of sales
personnel. With this development, petitioner was assigned in charge of promoting
four (4) Lederle pharmaceutical products.
Subsequently, petitioner submitted to respondent company a plan of action dated
February 6, 1996 where he committed to make an average of 18 daily calls to
physicians; submit promptly all periodic reports; and ensure 95% territory program
performance for every cycle.
However, petitioner failed to achieve the above objectives, prompting respondent
company to send him two (2) separate notices dated February 20, 1996 and April 10,
1996, charging him with willful violation of company rules and regulations and
directing him to submit a written explanation.
In his explanation, petitioner stated that he was overworked and an object of reprisal
by his immediate supervisor. Upon recommendation of a Review Panel, respondent
company terminated the services of petitioner.
Issue: WON he is validly terminated.
Ruling: Here, the Court of Appeals unequivocally ruled that "Gustilo (herein
petitioner) is a habitual offender whose numerous contraventions of company rules
has left Wyeth (herein respondent) with no choice but to terminate his services x x
x."
Evidently, there is no cogent reason why we should not accord deference and finality
to the Appellate Court's factual findings which are supported by substantial evidence
as shown by the records.
In Family Planning Organization of the Philippines, Inc. vs. NLRC,[4] we held:
"It is the employer's prerogative to prescribe reasonable rules and regulations
necessary or proper for the conduct of its business or concern, to provide certain
disciplinary measures to implement said rules and to assure that the same be
complied with. At the same time, it is one of the fundamental duties of the employee
to yield obedience to all reasonable rules, orders, and instructions of the employer,
and willful or intentional disobedience thereof, as a general rule, justifies rescission of
the contract of service and the preemptory dismissal of the employee."
In the case at bar, we find no exceptional circumstances to warrant the grant of
financial assistance or separation pay to petitioner. It bears stressing that petitioner
did not only violate company disciplinary rules and regulations. As found by the Court
of Appeals, he falsified his employment application form by not stating therein that he
is the nephew of Mr. Danao, respondent Wyeth's Nutritional Territory Manager. Also,
on February 2, 1993, he was suspended for falsifying a gasoline receipt. On June 28,
1993, he was warned for submitting a false report of his trade outlet calls. On
September 8, 1993, he was found guilty of unauthorized availment of sick, vacation
and emergency leaves. These infractions manifest his slack of moral principle. In
simple term, he is dishonest.
In sum, we find that petitioner was legally dismissed from employment and is,
therefore, not entitled to reinstatement or an award of separation pay or other
benefits. Unfortunately, respondent company did not interpose an appeal to this
Court. Hence, no affirmative relief can be extended to it. A party in a case who did
not appeal is not entitled to any affirmative relief. Thus, respondent company has to
comply with the Appellate Court's mandate to grant petitioner his separation pay.
183. DBP vs NNLRC 1994
Doctrine: “Article 110. Worker preference in case of bankruptcy.—In the event of
bankruptcy or liquidation of an employer’s business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any provision
of law to the contrary notwithstanding. Such unpaid wages, and monetary claims
shall be paid in full before the claims of the Government and other creditors may be
paid.” The case at bench concerns monetary claims of workers that are not involved
in judicial proceedings in rem in adjudication of claims of creditors vis-a-vis the assets
of the debtor, nor have such claims accrued after the effectivity of Republic Act 6715.
The petition thus raises issues heretofore squarely resolved in our aforequoted
decisions. Civil Code; Art. 110 of the Labor Code, as amended, must be read in
conjunction with the Civil Code on concurrence and preference of credits Judicial
proceedings in rem is required of creditors’ claims against debtors to become
operative. Republic Act No. 6715 (given prospective application.) has the effect of
expanding the “worker preference” to cover not only unpaid wages but also other
monetary claims of laborers, to which even claims of the Government must be
deemed subordinate.
Facts: The private respondents were employees of ATLAS, a textile firm, which
hypothecated its certain assets to DBP. After ATLAS defaulted in its obligations, DBP
foreclosed on the mortgage in March 1985. The latter acquired the mortgaged assets
by virtue of the foreclosure sale
The private respondents filed their aforementioned claim, on 30 October 1985,
against both ATLAS and DBP. The Labor Arbiter ruled for the private respondents. On
appeal by DBP, the decision was sustained by the NLRC.
The petitioner contends that it is error on the part of the public respondent to
consider the workers' preference under Article 110 of the Labor Code over that of
DBP's mortgage lien. Article 110 of the Labor Code was later amended by Republic
Act No. 6715. and so modified, the provision thenceforth provided:
Article 110. Worker preference in case of bankruptcy. - In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in
full before the claims of the Government and other creditors may be paid.
Ruling: The case at bench concerns monetary claims of workers that are not
involved in judicial proceedings in rem in adjudication of claims of creditors vis-a-vis
the assets of the debtor, nor have such claims accrued after the effectivity of
Republic Act 6715. The petition thus raises issues heretofore squarely resolved in our
afore quoted decisions.
(1) Article 110 of the Labor Code, as amended, must be viewed and read in
conjunction with the provisions of the Civil Code on concurrence and preferences of
credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor Code,
require judicial proceedings in rem in adjudication of creditors' claims against the
debtor's assets to become operative;
(3) Republic Act No. 6715 has the effect of expanding the "worker preference" to
cover not only unpaid wages but also other monetary claims of laborers, to which
even claims of the Government must be deemed subordinate; and
(4) The amendatory provisions of Republic Act 6715, which took effect on 21 march
1989, should only be given prospective application.
WHEREFORE, the petition is GRANTED.
184. DBP vs NLRC 1995
Doctrine: Article 110 should be applied in conjunction with the pertinent provisions
of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of
the assets of the debtor is avoided. Declaration of bankruptcy or a judicial liquidation
must be present before the worker’s preference may be enforced. To hold Art. 110 to
be applicable also to extrajudicial proceedings would be putting the worker in a better
position than the State which could only assert its own prior preference in case of a
judicial proceeding. Art. 110. Worker preference in case of bankruptcy.—In the event
of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any provision
of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall
be paid in full before the claims of the Government and other creditors may be paid.
The amendment of Art. 110 expanded the concept of “worker preference” to cover
not only unpaid wages but also other monetary claims to which even claims of the the fulfillment of the obligation for whose security it was constituted (Article 2176,
Government must be deemed subordinate. Once a case is decided by the Court as Civil Code). It creates a real right which is enforceable against the whole world. It is a
the final arbiter of any justiciable controversy one way, then another case involving lien on an identified immovable property, which a preference is not. A recorded
exactly the same point at issue should be decided in the same manner. mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code
on classification of credits. The preference given by Article 1l0, when not falling
Facts: Is declaration of bankruptcy or judicial liquidation required before the worker's within Article 2241 (6) and Article 2242 (3), of the Civil Code and not attached to any
preference may be invoked under Art. 110 of the Labor Code? specific property, is all ordinary preferred credit although its impact is to move it from
Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant second priority to first priority in the order of preference established by Article 2244
facilities and equipment. Nevertheless TPWII continued its business operations of the Civil Code.
interrupted only by brief shutdowns for the purpose of servicing its plant facilities and The present controversy could have been easily settled by public respondent had it
equipment. In January 1986 petitioner took possession of the foreclosed properties. referred to ample jurisprudence which already provides the solution. Stare decisions
From then on the company ceased its operations. As a consequence private et non quiet movere. Once a case is decided by this Court as the final arbiter of any
respondent was on 15 April 1986 verbally terminated from the service. justifiable controversy one way, then another case involving exactly the same point at
Issue: WON NLRC committed grave abuse of discretion in holding that Art. 110 of the issue should be decided in the same manner. Public respondent had no choice on the
Labor Code, as amended, which refers to worker preference in case of bankruptcy or matter. It could not have ruled any other way. This Court having spoken in a string of
liquidation of an employer's business is applicable to the present case cases against public respondent, its duty is simply to obey judicial precedents.9 Any
notwithstanding the absence of any formal declaration of bankruptcy or judicial further disregard, if not defiance, of our rulings will be considered a ground to hold
liquidation of TPWII. public respondent in contempt.
WHEREFORE, the petition is GRANTED.
Ruling: There is as yet no declaration of bankruptcy nor judicial liquidation of TPWII.
Hence, it would be premature to enforce the worker's preference.
The additional ratiocination of public respondent that "under Article 110 of the Labor
Code complainant enjoys a preference of credit over the properties of TPWII being
held in possession by DBP," is a dismal misconception of the nature of preference of
credit, a subject matter which we have already discussed in clear and simple terms
and even distinguished from a lien in Development Bank of the Philippines v. NLRC8
—
. . . A preference applies only to claims which do not attach to specific properties. A
lien creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of
the insolvent debtor in favor of workers. It is but a preference of credit in their favor,
a preference in application. It is a method adopted to determine and specify the
order in which credits should be paid in the final distribution of the proceeds of the
insolvent's assets. It is a right to a first preference in the discharge of the funds of
the judgment debtor . . . In the words of Republic v. Peralta, supra: Article 110 of the
Labor Code does not purport to create a lien in favor of workers or employees for
unpaid wages either upon all of the properties or upon any particular property owned
by their employer. Claims for unpaid wages do not therefore fall at all within the
category of specially preferred claims established under Articles 2241 and 2242 of the
Civil Code, except to the extent that such claims for unpaid wages are already
covered by Article 2241, number 6: "claims for laborers: wages, on the goods
manufactured or the work done;" or by Article 2242, number 3, "claims of laborers
and other workers engaged in the construction reconstruction or repair of buildings,
canals and other works, upon said buildings, canals and other works . . . . To the
extent that claims for unpaid wages fall outside the scope of Article 2241, number 6,
and 22421 number 3, they would come within the ambit of the category of ordinary
preferred credits under Article 2244.
The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately
subjects the property upon which it is imposed, whoever the possessor may be, to