EN BANC

[G.R. No. L-15427. April 26, 1962.]

SAN MIGUEL BREWERY, INC., Petitioner, v. ELPIDIO FLORESCA and the COURT OF INDUSTRIAL
RELATIONS, Respondents.

Ponce Enrile, Siguion, Reyna, Montecillo & Belo for Petitioner.

Amado J. Garcia for respondent Elpidio Floresca.

Mariano Tuason for respondent Court of Industrial Relations.

SYLLABUS

1. COURTS; JURISDICTION; CLAIM OF DISMISSED EMPLOYEE; WHEN IT DOES NOT

FALL WITHIN THE JURISDICTION OF THE COURT OF INDUSTRIAL RELATIONS. —
The claim of an employee for back salaries, with prayer for reinstatement and
separation pay, due to unjustified dismissal, will not fall within the jurisdiction of
the Court of Industrial Relations if said claim is neither about minimum wage nor
about hours of employment, or a labor dispute certified by the President to the
Industrial Court, or where no allegation is made of any unfair labor practice.
DECISION

PAREDES, J.:

On December 29, 1958, Elpidio Floresca presented with the Court of Industrial Relations, a complaint
against the San Miguel Brewery, Inc. (Case No. 1157 CIR), alleging that on May 8, 1953, or thereabouts, he
was employed, without any definite or fixed period, as poultry caretaker and subsequently as hatchery-
operator, at the San Miguel Brewery "B-MEG" Plant, located at Balintawak, Quezon City, with a monthly
compensation of P150.00, plus other privileges; that on June 2, 1958, he was, without any legal or
justifiable cause, indefinitely suspended and on June 7, 1958, dismissed without having been paid his
separation pay in lieu of the statutory notice; that because of his dismissal, which he claims to be contrary
to law, he is entitled to the payment of back salaries from the date of his dismissal until he is reinstated,
plus 2 1/2 months salary in lieu of the statutory notice. Floresca prays that the CIR order his reinstatement
and the payment of said back salaries and separation pay.

Under date of January 24, 1959, defendant San Miguel Brewery moved to dismiss the complaint, contending
that the claim of plaintiff does not fall under the jurisdiction of the CIR, both under the law (Rep. Act No.
875) and existing jurisprudence (Administrator of Hacienda Luisita Estate v. Alberto, Et Al., G. R. No. L-
12133, Oct. 31, 1958). The CIR on March 24, 1959, handed down an order denying the motion to dismiss,
citing in support thereof the doctrine laid down in the case of Gomez v. North Camarines Lumber Co. Inc.,
G.R. No. L-11945, Aug. 20 1958, San Miguel Brewery, filed a motion for reconsideration which was denied
on April 28, 1959. The case is now before Us on a Petition For Certiorari and Prohibition, petitioner San
Miguel Brewery alleging that respondent CIR, in taking cognizance of Floresca’s complaint and denying the
motion to dismiss (Order of March 24, 1959, Annex C), and the motion for reconsideration (Order of April
28, 1959, Annex G) and proceeding with said case (1157-V [CIR]), acted without jurisdiction and with grave
abuse of discretion, for which there is no appeal nor any plain, speedy or adequate remedy in the ordinary
course of law. In the prayer, it asks that that the said Orders of respondent CIR dated March 24, 1959 and
April 28, 1959, be set aside, and that said Court ordered to desist from taking cognizance of the case (Case
No. 1157-V, CIR).

It seems that the singular issue for determination is whether the claim of an employee for back salaries,
with a prayer for reinstatement and separation pay due to unjustified dismissal, falls within the jurisdiction
of the CIR.
In the recent case of Concordia Cagalawan v. Customs Canteen, Et Al., 113 Phil., 386, the facts of which are
similar to the present, We held —

"Under the law and jurisprudence the Court of Industrial Relations’ jurisdiction extends only to cases
involving (a) labor disputes affecting an industry which is indispensable to the national interest and is so
certified by the President to the Court (Sec. 10, Rep. Act No. 875); (b) controversy about the minimum
wage, under the Minimum Wage Law, Rep. Act No. 602; (c) hours of employment, under the Eight-Hour
Labor Law, Comm. Act No. 444, and (d) unfair labor practice (Sec. 5 [a], Rep. Act No. 875). And such
disputes, to fall under the jurisdiction of the CIR, must arise while the employer — employee relationship
between the parties exists or the employee seeks reinstatement. When such relationship is over and the
employee does not seek reinstatement, all claims become money claims that fall under the jurisdiction of
the regular courts (Sy Huan v. Judge Bautista, Et Al., G.R. No. L-16115, Aug. 29, 19621; and cases cited
therein).

In the case at bar, admittedly there is no labor dispute; no unfair labor practice is denounced by any of the
parties; the cause of the dismissal of the petitioner was the displeasure caused upon the respondent
manager, by the act of the petitioner for having brought a quarrel between her and another employee, to
the attention of police authorities; and when the claim was filed, there was no longer any employer-
employee relationship between the parties. While it may be true that the complaint, alleged that she was
not notified by defendants, at least one month in advance, that her services were to be terminated `in gross
violation of Republic Act No. 1052, as amended, and as such she is entitled to reinstatement, including back
salaries until she is returned to her work’ and that in her prayer she asked for the granting of such relief, it
is equally true that it is not within the authority of the Court of Industrial Relations, to reinstate her and pay
her back wages, in the event that she had a right to a separation pay, there being no allegation nor proof
that defendant had committed unfair labor practice. In the recent case of National Labor Union v. Insular-
Yebana Tobacco Corporation, L-15363, July 31, 1961, it was ruled that in the absence of unfair labor
practice, the CIR has no power to grant remedy under its general powers of mediation and conciliation, such
as reinstatement or back wages. Moreover, a violation of the law on separation pay (Rep. Act. No. 1052, as
amended by Rep. Act No. 1787), involves, at most, a breach of an obligation of the employer to his
employee or vice versa, to be prosecuted like an ordinary contract or obligation — a breach of a private right
which may be redressed by a recourse to the ordinary courts. Hence, the case at bar is cognizable by an
ordinary court, the Court of First Instance of Davao, in this particular case, it appearing that the amount
involved herein, is within the jurisdiction of said court, as per findings of the Court of Appeals."

Obviously, the claim of Floresca does not fall under any of the instances cited above. His claim is for back
salaries, and separation pay, which he contends he is entitled to because he was unjustifiably dismissed,
and prayed for reinstatement. The prayer of Floresca for reinstatement, standing alone, does not bring his
case within the jurisdiction of the CIR because, as has been stated above, his claim is neither about
minimum wage, hours of employment, labor dispute certified by the President to the Industrial Court and no
allegation is made of Unfair Labor Practice. Furthermore, even with the prayer for reinstatement and the
payment of back salaries, the CIR has no power to grant such relief — for in the absence of unfair labor
practice, the CIR, has no power to grant remedy under its general powers of mediation and conciliation,
such as reinstatement or back wages (Cagalawan v. Customs Canteen, supra). Manifestly, the CIR has no
jurisdiction over the case of respondent Floresca.

IN VIEW OF THE FOREGOING, the writs prayed for are granted. The Orders of respondent Court dated March
24, 1959, denying the Motion to Dismiss, and April 28, 1959, denying the Motion for reconsideration, are
hereby set aside and declared null and void, for having been issued without jurisdiction. Respondent CIR is
ordered to desist from further proceeding with case No. 1157-CIR. No pronouncements to costs.

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO

LAM,Petitioners, v. ROLANDO ADANA, CHONA BUMALAY, ROGER
BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO
 LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL
TORREFRANCA, and SANTOS BROÑOLA, Respondents.

DECISION

PUNO, J.:

This is a Petition for Certiorarito reverse and set aside the Decision issued by
the Court of Appeals (CA)1 in CA-G.R. SP No. 68642, entitled "Rolando
Adana, Wenefredo Loveres, et. al. v. National Labor Relations Commission
(NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the
Resolution2 denying petitioners' motion for reconsideration. The assailed CA
decision reversed the NLRC Decision which had dismissed all of respondents'
complaints,3 and reinstated the Joint Decision of the Labor Arbiter4 which
ruled that respondents were illegally dismissed and entitled to their money
claims.

The facts, culled from the records, are as follows:5

Petitioner Mayon Hotel & Restaurant is a single proprietor business

registered in the name of petitioner Pacita O. Po,6 whose mother, petitioner
Josefa Po Lam, manages the establishment.7 The hotel and restaurant
employed about sixteen (16) employees.

Records show that on various dates starting in 1981, petitioner hotel and
restaurant hired the following people, all respondents in this case, with the
following jobs:8

Due to the expiration and non-renewal of the lease contract for the rented
space occupied by the said hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March 31, 1997.9 The
operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon Hotel
& Restaurant at Peñaranda Street, Legazpi City.10Only nine (9) of the
sixteen (16) employees continued working in the Mayon Restaurant at its
new site.11

On various dates of April and May 1997, the 16 employees filed complaints
for underpayment of wages and other money claims against petitioners, as
follows:12

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave
pay (SILP) and claims for separation pay plus damages;
 Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of
wages; nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for
holiday and rest day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages;
nonpayment of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP
and night shift differential pay;

Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay,
holiday pay, SILP, and damages;13and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay;
premium pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a
Joint Decision in favor of the employees. The Labor Arbiter awarded
substantially all of respondents' money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their retirement
pay. The Labor Arbiter also held that based on the evidence presented,
Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and
all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this
was denied, they filed a Petition for Certiorariwith the CA which rendered the
now assailed decision.

After their motion for reconsideration was denied, petitioners now come to
this Court, seeking the reversal of the CA decision on the following grounds:

I. The Honorable Court of Appeals erred in reversing the decision of the National Labor
Relations Commission (Second Division) by holding that the findings of fact of the NLRC
were not supported by substantial evidence despite ample and sufficient evidence showing
that the NLRC decision is indeed supported by substantial evidence;

II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter
which ruled that private respondents were illegally dismissed from their employment,
despite the fact that the reason why private respondents were out of work was not due to
the fault of petitioners but to causes beyond the control of petitioners.

III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by
the labor arbiter in his joint decision in favor of the private respondentS, including the
award of damages to six (6) of the private respondents, despite the fact that the private
 respondents have not proven by substantial evidence their entitlement thereto and
especially the fact that they were not illegally dismissed by the petitioners.

IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the
business establishment, petitioner Mayon Hotel and Restaurant, thus disregarding the
certificate of registration of the business establishment ISSUED by the local government,
which is a public document, and the unqualified admissions of complainants-private
respondents.14

In essence, the petition calls for a review of the following issues:

1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner
Mayon Hotel & Restaurant, and the proper respondent in this case? cralawlibra ry

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally
dismissed? c ralawlib ra ry

3. Are respondents entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift
differential pay?

It is petitioners' contention that the above issues have already been

threshed out sufficiently and definitively by the NLRC. They therefore assail
the CA's reversal of the NLRC decision, claiming that based on the ruling
in Castillo v. NLRC,15 it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter, especially as in this
case the NLRC's findings are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC's competence, as an appellate

agency reviewing decisions of Labor Arbiters, to disagree with and set aside
the latter's findings.16 But it stands to reason that the NLRC should state an
acceptable cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari.17 And when the
factual findings of the Labor Arbiter and the NLRC are diametrically opposed
and this disparity of findings is called into question, there is, necessarily, a
re-examination of the factual findings to ascertain which opinion should be
sustained.18 As ruled in Asuncion v. NLRC,19

Although, it is a legal tenet that factual findings of administrative bodies are entitled to
great weight and respect, we are constrained to take a second look at the facts before us
because of the diversity in the opinions of the Labor Arbiter and the NLRC. A disharmony
between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court.20

The CA, therefore, did not err in reviewing the records to determine which
opinion was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of
administrative bodies like the NLRC are affirmed only if they are
supported by substantial evidence that is manifest in the decision
and on the records. As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision
of a Labor Arbiter. Mere variance in evidentiary assessment between the NLRC and the
Labor Arbiter does not automatically call for a full review of the facts by this Court. The
NLRC's decision, so long as it is not bereft of substantial support from the records, deserves
respect from this Court. As a rule, the original and exclusive jurisdiction to review a
decision or resolution of respondent NLRC in a Petition for Certiorariunder Rule 65 of the
Rules of Court does not include a correction of its evaluation of the evidence but is confined
to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual findings, if
supported by substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or
had misappreciated the evidence to such an extent as to compel a contrary conclusion if
such evidence had been properly appreciated. (citations omitted)22

After careful review, we find that the reversal of the NLRC's decision was in
order precisely because it was not supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees,
petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant.
Although the NLRC reversed this decision, the CA, on review, agreed with
the Labor Arbiter that notwithstanding the certificate of registration in the
name of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon
Hotel & Restaurant, and the proper respondent in the complaints filed by the
employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we
cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel
and restaurant. There were conflicting documents submitted by Josefa herself. She was
ordered to submit additional documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the [respondents] and the non-appearance
and failure to submit her own position paper by Pacita Po. But Josefa did not comply with
the directive of the Labor Arbiter. The ruling of the Supreme Court in Metropolitan Bank and
Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability
on a party, and he has it in his power to produce evidence which from its
very nature must overthrow the case made against him if it is not founded
on fact, and he refuses to produce such evidence, the presumption arises
that the evidence[,] if produced, would operate to his prejudice, and
support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the
labor arbiter relied also on the testimonies of the witnesses, during the hearing of the
instant case. When the conclusions of the labor arbiter are sufficiently corroborated by
evidence on record, the same should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the contending parties.23 (citations
omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel &
Restaurant. They allege that the documents they submitted to the Labor
Arbiter sufficiently and clearly establish the fact of ownership by petitioner
Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that
petitioner Josefa Po Lam's participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial
reports prepared and submitted by respondent Loveres; and (c) visitation of
the premises.24 They also put emphasis on the admission of the respondents
in their position paper submitted to the Labor Arbiter, identifying petitioner
Josefa Po Lam as the manager, and Pacita Po as the owner.25 This, they
claim, is a judicial admission and is binding on respondents. They protest the
reliance the Labor Arbiter and the CA placed on their failure to submit
additional documents to clearly establish ownership of the hotel and
restaurant, claiming that there was no need for petitioner Josefa Po Lam to
submit additional documents considering that the Certificate of Registration
is the best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the
claim that petitioner Josefa Po Lam is merely the overseer is not borne out
by the evidence.

First. It is significant that only Josefa Po Lam appeared in the proceedings

with the Labor Arbiter. Despite receipt of the Labor Arbiter's notice and
summons, other notices and Orders, petitioner Pacita Po failed to appear in
any of the proceedings with the Labor Arbiter in these cases, nor file her
position paper.26 It was only on appeal with the NLRC that Pacita Po signed
the pleadings.27 The apathy shown by petitioner Pacita Po is contrary to
human experience as one would think that the owner of an establishment
would naturally be concerned when all her employees file complaints against
her.

Second. The records of the case belie petitioner Josefa Po Lam's claim that
she is merely an overseer. The findings of the Labor Arbiter on this question
were based on credible, competent and substantial evidence. We again
quote the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa
Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when
the latter purchased the same from one Palanos in 1981, Josefa failed to submit the
document of sale from said Palanos to Pacita as allegedly the sale was only verbal although
the license to operate said hotel and restaurant is in the name of Pacita which, despite our
Order to Josefa to present the same, she failed to comply (p. 38, tsn. August 13, 1998).
While several documentary evidences were submitted by Josefa wherein Pacita was named
therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there
were documentary evidences also that were submitted by Josefa showing her ownership of
said enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and
 interest in the business as merely to help and assist her daughter as the hotel and
restaurant was near the former's store, the testimonies of [respondents] and Josefa as well
as her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns
Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa who exercises all
the acts and manifestation of ownership of the hotel and restaurant like transferring
employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic) reports, draws money
for payment of payables and for marketing, attending (sic) to Labor Inspectors during
ocular inspections. Except for documents whereby Pacita Po appears as the owner of Mayon
Hotel and Restaurant, nothing in the record shows any circumstance or manifestation that
Pacita Po is the owner of Mayon Hotel and Restaurant. The least that can be said is that it is
absurd for a person to purchase a hotel and restaurant in the very heart of the City of
Legazpi verbally. Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and restaurant,
considering the testimonies of [respondents], the former should [have] submitted the lease
contract between the owner of the building where Mayon Hotel and Restaurant was located
at Rizal St., Legazpi City and Pacita Po to clearly establish ownership by the latter of said
enterprise. Josefa failed. We are not surprised why some employers employ schemes to
mislead Us in order to evade liabilities. We therefore consider and hold Josefa Po Lam as
the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in these
cases.28

Petitioners' reliance on the rules of evidence, i.e., the certificate of

registration being the best proof of ownership, is misplaced. Notwithstanding
the certificate of registration, doubts were cast as to the true nature of
petitioner Josefa Po Lam's involvement in the enterprise, and the Labor
Arbiter had the authority to resolve this issue. It was therefore within his
jurisdiction to require the additional documents to ascertain who was the
real owner of petitioner Mayon Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and
the application of technical rules of procedure may be relaxed in labor cases
to serve the demand of substantial justice.29 The rule of evidence prevailing
in court of law or equity shall not be controlling in labor cases and it is the
spirit and intention of the Labor Code that the Labor Arbiter shall use every
and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the
interest of due process.30Labor laws mandate the speedy administration of
justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.31

Similarly, the fact that the respondents' complaints contained no allegation

that petitioner Josefa Po Lam is the owner is of no moment. To apply the
concept of judicial admissions to respondents - who are but lowly employees
- would be to exact compliance with technicalities of law that is contrary to
the demands of substantial justice. Moreover, the issue of ownership was an
issue that arose only during the course of the proceedings with the Labor
Arbiter, as an incident of determining respondents' claims, and was well
within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient
opportunity to be heard on the issue of ownership.33 The essence of due
process in administrative proceedings is simply an opportunity to explain
one's side or an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which would suggest
that petitioners had absolute lack of opportunity to be heard.35 Obviously,
the choice not to present evidence was made by petitioners themselves.36

But more significantly, we sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted to
negate the Labor Arbiter's finding that Pacita Po is not the real owner of the
subject hotel and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that petitioners
vehemently deny ownership by petitioner Josefa Po Lam, it is most telling
that they continue to withhold evidence which would shed more light on this
issue. We therefore agree with the CA that the failure to submit could only
mean that if produced, it would have been adverse to petitioners' case.37

Thus, we find that there is substantial evidence to rule that petitioner Josefa
Po Lam is the owner of petitioner Mayon Hotel & Restaurant.

2. Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and
Broñola.38

The Labor Arbiter found that there was illegal dismissal, and granted
separation pay to respondents Loveres, Macandog and Llarena. As
respondents Guades, Nicerio and Alamares were already 79, 66 and 65
years old respectively at the time of the dismissal, the Labor Arbiter granted
retirement benefits pursuant to Article 287 of the Labor Code as
amended.39 The Labor Arbiter ruled that respondent Atractivo was not
entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also
awarded damages.40

The NLRC reversed the Labor Arbiter, finding that "no clear act of
termination is attendant in the case at bar" and that respondents "did not
submit any evidence to that effect, but the finding and conclusion of the
Labor Arbiter [are] merely based on his own surmises and conjectures."41 In
turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC
finding that none of the above-named respondents were illegally dismissed,
or entitled to separation or retirement pay. According to petitioners, even
the Labor Arbiter and the CA admit that when the illegal dismissal case was
filed by respondents on April 1997, they had as yet no cause of action.
Petitioners therefore conclude that the filing by respondents of the illegal
dismissal case was premature and should have been dismissed outright by
the Labor Arbiter.42 Petitioners also claim that since the validity of
respondents' dismissal is a factual question, it is not for the reviewing court
to weigh the conflicting evidence.43

We do not agree. Whether respondents are still working for

petitioners is a factual question. And the records are unequivocal that since
April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel
operations and transferred its restaurant operations in Elizondo Street,
respondents Loveres, Macandog, Llarena, Guades and Nicerio have not been
permitted to work for petitioners. Respondent Alamares, on the other hand,
was also laid-off when the Elizondo Street operations closed, as were all the
other respondents. Since then, respondents have not been permitted to
work nor recalled, even after the construction of the new premises at
Peñaranda Street and the reopening of the hotel operations with the
restaurant in this new site. As stated by the Joint Decision of the Labor
Arbiter on July 2000, or more than three (3) years after the complaint was
filed:44

[F]rom the records, more than six months had lapsed without [petitioner] having resumed
operation of the hotel. After more than one year from the temporary closure of Mayon Hotel
and the temporary transfer to another site of Mayon Restaurant, the building which
[petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has been
finally constructed and the same is operated as a hotel with bar and restaurant
nevertheless, none of [respondents] herein who were employed at Mayon Hotel and
Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to
continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other
respondents as they had not filed an amended complaint to question the
cessation of their employment after the closure of Mayon Hotel & Restaurant
on March 31, 1997.45

The above factual finding of the Labor Arbiter was never refuted by
petitioners in their appeal with the NLRC. It confounds us, therefore, how
the NLRC could have so cavalierly treated this uncontroverted factual finding
by ruling that respondents have not introduced any evidence to show that
they were illegally dismissed, and that the Labor Arbiter's finding was based
on conjecture.46 It was a serious error that the NLRC did not inquire as to
the legality of the cessation of employment. Article 286 of the Labor Code is
clear - there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months.47 The cessation of
employment for more than six months was patent and the employer has the
burden of proving that the termination was for a just or authorized cause.48

Moreover, we are not impressed by any of petitioners' attempts to exculpate

themselves from the charges. First, in the proceedings with the Labor
Arbiter, they claimed that it could not be illegal dismissal because the lay-off
was merely temporary (and due to the expiration of the lease contract over
the old premises of the hotel). They specificallyinvoked Article 286 of the
Labor Code to argue that the claim for separation pay was premature and
without legal and factual basis.49Then, because the Labor Arbiter had ruled
that there was already illegal dismissal when the lay-off had exceeded the
six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the
Labor Code is misplaced, considering that the reason why private respondents were out of
work was not due to the fault of petitioners. The failure of petitioners to reinstate the
private respondents to their former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any evidence to prove their alleged
illegal dismissal. The petitioners cannot discern why they should be made liable to the
private respondents for their failure to be reinstated considering that the fact that they
were out of work was not due to the fault of petitioners but due to circumstances beyond
the control of petitioners, which are the termination and non-renewal of the lease contract
over the subject premises. Private respondents, however, argue in their Comment that
petitioners themselves sought the application of Article 286 of the Labor Code in their case
in their Position Paper filed before the Labor Arbiter. In refutation, petitioners humbly
submit that even if they invoke Article 286 of the Labor Code, still the fact remains, and
this bears stress and emphasis, that the temporary suspension of the operations of the
establishment arising from the non-renewal of the lease contract did not result in the
termination of employment of private respondents and, therefore, the petitioners cannot be
faulted if said private respondents were out of work, and consequently, they are not
entitled to their money claims against the petitioners.50

It is confounding how petitioners have fashioned their arguments. After

having admitted, in effect, that respondents have been laid-off since April
1997, they would have this Court excuse their refusal to reinstate
respondents or grant them separation pay because these same respondents
purportedly have not proven the illegality of their dismissal.

Petitioners' arguments reflect their lack of candor and the blatant attempt to
use technicalities to muddle the issues and defeat the lawful claims of their
employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and
Guades have not been permitted to work. Second, even after six
months of what should have been just a temporary lay-off, the same
respondents were still not recalled to work. As a matter of fact, the Labor
Arbiter even found that as of the time when he rendered his Joint Decision
on July 2000 - or more than three (3) years after the supposed "temporary
lay-off," the employment of all of the respondents with petitioners
had ceased, notwithstanding that the new premises had been completed
and the same operated as a hotel with bar and restaurant. This is
clearly dismissal - or the permanent severance or complete separation of
the worker from the service on the initiative of the employer regardless of
the reasons therefor.51

On this point, we note that the Labor Arbiter and the CA are in accord that at
the time of the filing of the complaint, respondents had no cause of action to
file the case for illegal dismissal. According to the CA and the Labor Arbiter,
the lay-off of the respondents was merely temporary, pending construction
of the new building at Peñaranda Street.52

While the closure of the hotel operations in April of 1997 may have been
temporary, we hold that the evidence on record belie any claim of
petitioners that the lay-off of respondents on that same date was merely
temporary. On the contrary, we find substantial evidence that petitioners
intended the termination to be permanent. First, respondents Loveres,
Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for
illegal dismissal immediately after the closure of the hotel operations in
Rizal Street, notwithstanding the alleged temporary nature of the closure of
the hotel operations, and petitioners' allegations that the employees
assigned to the hotel operations knew about this beforehand. Second, in
their position paper submitted to the Labor Arbiter, petitioners invoked
Article 286 of the Labor Code to assert that the employer-employee
relationship was merely suspended, and therefore the claim for separation
pay was premature and without legal or factual basis.53 But they made no
mention of any intent to recall these respondents to work upon
completion of the new premises. Third, the various pleadings on record
show that petitioners held respondents, particularly Loveres, as responsible
for mismanagement of the establishment and for abuse of trust and
confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for
example, squarely blamed respondents, specifically Loveres, Bumalay and
Camigla, for abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain "continuous losses until it is closed." She then asserts
that respondents "are not entitled to separation pay for they were not
terminated and if ever the business ceased to operate it was because of
losses."54 Again, petitioners make the same allegation in their memorandum
on appeal with the NLRC, where they alleged that three (3) years prior to
the expiration of the lease in 1997, the operation of the Hotel had been
sustaining consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's mismanagement and
abuse of petitioners' trust and confidence.55 Even the petition filed in this
court made reference to the separation of the respondents due to "severe
financial losses and reverses," again imputing it to respondents'
mismanagement.56 The vehemence of petitioners' accusation of
mismanagement against respondents, especially against Loveres, is
inconsistent with the desire to recall them to work. Fourth, petitioners'
memorandum on appeal also averred that the case was filed "not because of
the business being operated by them or that they were supposedly not
receiving benefits from the Labor Code which is true, but because of the fact
that the source of their livelihood, whether legal or immoral, was
stopped on March 31, 1997, when the owner of the building terminated
the Lease Contract."57 Fifth, petitioners had inconsistencies in their pleadings
(with the NLRC, CA and with this Court) in referring to the closure,58 i.e., in
the petition filed with this court, they assert that there is no illegal dismissal
because there was "only a temporary cessation or suspension of operations
of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract..."59 And yet,
in the same petition, they also assert that: (a) the separation of respondents
was due to severe financial losses and reverses leading to the closure of
the business; and (b) petitioner Pacita Po had to close shop and was
bankrupt and has no liquidity to put up her own building to house Mayon
Hotel & Restaurant.60 Sixth, and finally, the uncontroverted finding of the
Labor Arbiter that petitioners terminated all the other respondents, by not
employing them when the Hotel and Restaurant transferred to its new site
on Peñaranda Street.61 Indeed, in this same memorandum, petitioners
referred to all respondents as "former employees of Mayon Hotel &
Restaurant."62

These factors may be inconclusive individually, but when taken together,

they lead us to conclude that petitioners really intended to dismiss all
respondents and merely used the termination of the lease (on Rizal Street
premises) as a means by which they could terminate their employees.

Moreover, even assuming arguendo that the cessation of employment on

April 1997 was merely temporary, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners' claim that severe business losses

justified their failure to reinstate respondents. The evidence to prove this
fact is inconclusive. But more important, serious business losses do not
excuse the employer from complying with the clearance or report required
under Article 283 of the Labor Code and its implementing rules before
terminating the employment of its workers.63 In the absence of justifying
circumstances, the failure of petitioners to observe the procedural
requirements set out under Article 284, taints their actuations with bad faith,
especially since they claimed that they have been experiencing losses in the
three years before 1997. To say the least, if it were true that the lay-off was
temporary but then serious business losses prevented the reinstatement of
respondents, then petitioners should have complied with the requirements of
written notice. The requirement of law mandating the giving of notices was
intended not only to enable the employees to look for another employment
and therefore ease the impact of the loss of their jobs and the corresponding
income, but more importantly, to give the Department of Labor and
Employment (DOLE) the opportunity to ascertain the verity of the alleged
authorized cause of termination.64

And even assuming that the closure was due to a reason beyond the control
of the employer, it still has to accord its employees some relief in the form of
severance pay.65

While we recognize the right of the employer to terminate the services of an

employee for a just or authorized cause, the dismissal of employees must be
made within the parameters of law and pursuant to the tenets of fair
play.66 And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized
cause.67 Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal.68

Under these circumstances, the award of damages was proper. As a rule,

moral damages are recoverable where the dismissal of the employee 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.69 We believe that the dismissal of the respondents was attended with
bad faith and meant to evade the lawful obligations imposed upon an
employer.

To rule otherwise would lead to the anomaly of respondents being

terminated from employment in 1997 as a matter of fact, but without legal
redress. This runs counter to notions of fair play, substantial justice and the
constitutional mandate that labor rights should be respected. If doubts exist
between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter - the employer must
affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause.70 It is a time-honored rule that in controversies between a
laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be resolved in the
former's favor.71 The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and
protection of labor.72

We therefore reinstate the Labor Arbiter's decision with the following

modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena;
(Santos Broñola cannot be granted separation pay as he made no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of
dismissal were entitled to their retirement benefits pursuant to Article 287 of the Labor
Code as amended;73 and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and
Broñola.

3. Money claims

The CA held that contrary to the NLRC's ruling, petitioners had not
discharged the burden of proving that the monetary claims of the
respondents have been paid.74 The CA thus reinstated the Labor Arbiter's
grant of respondents' monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted argument
that as there was no illegal dismissal, then respondents are not entitled to
their monetary claims or separation pay and damages. Petitioners'
arguments are not only tiring, repetitive and unconvincing, but confusing
and confused - entitlement to labor standard benefits is a separate and
distinct concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor Code.

We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other
documents the labor standard benefits they are entitled to, and which they
alleged that petitioners have failed to pay them. It was therefore petitioners'
burden to prove that they have paid these money claims. One who pleads
payment has the burden of proving it, and even where the employees must
allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents
petitioners submitted, i.e., affidavits executed by some of respondents
during an ocular inspection conducted by an inspector of the DOLE; notices
of inspection result and Facility Evaluation Orders issued by DOLE, are not
sufficient to prove payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee files, payrolls,
records, remittances and other similar documents which would show that
respondents rendered work entitling them to payment for overtime work,
night shift differential, premium pay for work on holidays and rest day, and
payment of these as well as the COLA and the SILP - documents which are
not in respondents' possession but in the custody and absolute control of
petitioners.78 By choosing not to fully and completely disclose information
and present the necessary documents to prove payment of labor standard
benefits due to respondents, petitioners failed to discharge the burden of
proof.79 Indeed, petitioners' failure to submit the necessary documents
which as employers are in their possession, inspite of orders to do so, gives
rise to the presumption that their presentation is prejudicial to its
cause.80 As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and
he has it in his power to produce evidence which from its very nature must overthrow the
case made against him if it is not founded on fact, and he refuses to produce such
evidence, the presumption arises that the evidence, if produced, would operate to his
prejudice, and support the case of his adversary.81

Petitioners next claim that the cost of the food and snacks provided to
respondents as facilities should have been included in reckoning the
payment of respondents' wages. They state that although on the surface
respondents appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and parcel of their
wages and are allowed under existing laws.82 They claim that these benefits
make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A,
which allow the deduction of facilities provided by the employer through an
appropriate Facility Evaluation Order issued by the Regional Director of the
DOLE.84 Petitioners also aver that they give five (5) percent of the gross
income each month as incentives. As proof of compliance of payment of
minimum wages, petitioners submitted the Notice of Inspection Results
issued in 1995 and 1997 by the DOLE Regional Office.85

The cost of meals and snacks purportedly provided to respondents cannot be

deducted as part of respondents' minimum wage. As stated in the Labor
Arbiter's decision:86

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued
by the DOLE Regional Office whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the same as part of their wages,
We cannot consider the cost of meals in the Orders as applicable to [respondents].
[Respondents] were not interviewed by the DOLE as to the quality and quantity of food
appearing in the applications of [petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given such kind and quantity of food.
Also, there was no evidence that the quality and quantity of food in the Orders were
 voluntarily accepted by [respondents]. On the contrary; while some [of the respondents]
admitted that they were given meals and merienda, the quality of food serve[d] to them
were not what were provided for in the Orders and that it was only when they filed these
cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol.
II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation
of the facility (food) given to [respondents], testified that she did not inform [respondents]
concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted
facilities, such facilities could not be deducted without compliance with
certain legal requirements. As stated in Mabeza v. NLRC,87 the employer
simply cannot deduct the value from the employee's wages without
satisfying the following: (a) proof that such facilities are customarily
furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair
and reasonable value. The records are clear that petitioners failed to comply
with these requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the respondents
admitted that they were given meals and merienda, the quality of food
served to them was not what was provided for in the Facility Evaluation
Orders and it was only when they filed the cases that they came to know of
this supposed Facility Evaluation Orders.88 Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities
she had applied for.89

Considering the failure to comply with the above-mentioned legal

requirements, the Labor Arbiter therefore erred when he ruled that the cost
of the meals actually provided to respondents should be deducted as part of
their salaries, on the ground that respondents have availed themselves of
the food given by petitioners.90 The law is clear that mere availment is not
sufficient to allow deductions from employees' wages.

More important, we note the uncontroverted testimony of respondents on

record that they were required to eat in the hotel and restaurant so that
they will not go home and there is no interruption in the services of Mayon
Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if they
are granted for the convenience of the employer. The criterion in making a
distinction between a supplement and a facility does not so much lie in the
kind (food, lodging) but the purpose.91 Considering, therefore, that hotel
workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter
in the operations of a small hotel, such as petitioners' business.92 The
deduction of the cost of meals from respondents' wages, therefore, should
be removed.
We also do not agree with petitioners that the five (5) percent of the gross
income of the establishment can be considered as part of the respondents'
wages. We quote with approval the Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit
share, the same cannot be considered as part of their wages in determining their claims for
violation of labor standard benefits. Although called profit share[,] such is in the nature of
share from service charges charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed amounts and the same are paid
not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to
submit evidence that the amounts received by [respondents] as profit share are to be
considered part of their wages and had been agreed by them prior to their employment.
Further, how can the amounts receive[d] by [respondents] be considered as profit share
when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise. Profits are realized after expenses are
deducted from the gross income.

On the issue of the proper minimum wage applicable to respondents, we

sustain the Labor Arbiter. We note that petitioners themselves have
admitted that the establishment employs "more or less sixteen (16)
employees,"93 therefore they are estopped from claiming that the applicable
minimum wage should be for service establishments employing 15
employees or less.

As for petitioners repeated invocation of serious business losses, suffice to

say that this is not a defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay.94

Thus, we reinstate the award of monetary claims granted by the Labor

Arbiter.

4. Conclusion

There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents' employment in an
underhanded manner, and have used and abused the quasi-judicial and
judicial processes to resist payment of their employees' rightful claims,
thereby protracting this case and causing the unnecessary clogging of
dockets of the Court. They have also forced respondents to unnecessary
hardship and financial expense. Indeed, the circumstances of this case would
have called for exemplary damages, as the dismissal was effected in a
wanton, oppressive or malevolent manner,95 and public policy requires that
these acts must be suppressed and discouraged.96

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary

damages of P10,000.00 each to all respondents. While it is true that other
forms of damages under the Civil Code may be awarded to illegally
dismissed employees,97 any award of moral damages by the Labor Arbiter
cannot be based on the Labor Code but should be grounded on the Civil
Code.98 And the law is clear that exemplary damages can only be awarded if
plaintiff shows proof that he is entitled to moral, temperate or compensatory
damages.99

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo

and Broñola specifically claimed damages from petitioners, then only they
are entitled to exemplary damages.sjgs1

Finally, we rule that attorney's fees in the amount to P10,000.00 should be

granted to each respondent. It is settled that in actions for recovery of
wages or where an employee was forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of attorney's
fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of

January 17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding
the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos.
04-00079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to
respondents Loveres, Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog,
Llarena, Guades, Nicerio, Atractivo, and Broñola;

(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except
Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and cralawlibrary

(6) Granting attorney's fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the
total monetary benefits awarded and due to the employees concerned in
accordance with the decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this decision, with
copies furnished to the parties.

SECOND DIVISION

[G.R. NO. 151966 July 8, 2005]

 JPL MARKETING PROMOTIONS, Petitioner, v.COURT OF APPEALS,
NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES,
RAMON ABESA III and FAUSTINO ANINIPOT,Respondents.

DECISION

TINGA, J.:

This is a Petition for Review of the Decision1 of the Court of Appeals in CA-
G.R. SP No. 62631 dated 03 October 2001 and its Resolution2dated 25
January 2002 denying petitioner's Motion for Reconsideration, affirming
the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive
leave pay, and 13th month pay to private respondents.

JPL Marketing and Promotions (hereinafter referred to as "JPL") is a

domestic corporation engaged in the business of recruitment and placement
of workers. On the other hand, private respondents Noel Gonzales, Ramon
Abesa III and Faustino Aninipot were employed by JPL as merchandisers on
separate dates and assigned at different establishments in Naga City and
Daet, Camarines Norte as attendants to the display of California Marketing
Corporation (CMC), one of petitioner's clients.

On 13 August 1996, JPL notified private respondents that CMC would stop its
direct merchandising activity in the Bicol Region, Isabela, and Cagayan
Valley effective 15 August 1996.3 They were advised to wait for further
notice as they would be transferred to other clients. However, on 17 October
1996,4private respondents Abesa and Gonzales filed before the National
Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V
complaints for illegal dismissal, praying for separation pay, 13th month pay,
service incentive leave pay and payment for moral damages.5 Aninipot filed
a similar case thereafter.

After the submission of pertinent pleadings by all of the parties and after
some clarificatory hearings, the complaints were consolidated and submitted
for resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the
complaints for lack of merit.6 The Labor Arbiter found that Gonzales and
Abesa applied with and were employed by the store where they were
originally assigned by JPL even before the lapse of the six (6)-month period
given by law to JPL to provide private respondents a new assignment. Thus,
they may be considered to have unilaterally severed their relation with JPL,
and cannot charge JPL with illegal dismissal.7The Labor Arbiter held that it
was incumbent upon private respondents to wait until they were reassigned
by JPL, and if after six months they were not reassigned, they can file an
action for separation pay but not for illegal dismissal.8 The claims for 13th
month pay and service incentive leave pay was also denied since private
respondents were paid way above the applicable minimum wage during their
employment.9

Private respondents appealed to the NLRC. In its Resolution,10 the Second

Division of the NLRC agreed with the Labor Arbiter's finding that when
private respondents filed their complaints, the six-month period had not yet
expired, and that CMC's decision to stop its operations in the areas was
beyond the control of JPL, thus, they were not illegally dismissed. However,
it found that despite JPL's effort to look for clients to which private
respondents may be reassigned it was unable to do so, and hence they are
entitled to separation pay.11Setting aside the Labor Arbiter's decision, the
NLRC ordered the payment of:

1. Separation pay, based on their last salary rate and counted from the first
day of their employment with the respondent JPL up to the finality of this
judgment;

2. Service Incentive Leave pay, and 13th month pay, computed as in No.1
hereof.12

Aggrieved, JPL filed a petition for certiorariunder Rule 65 of the Rules of

Court with the Court of Appeals, imputing grave abuse of discretion on the
part of the NLRC. It claimed that private respondents are not by law entitled
to separation pay, service incentive leave pay and 13th month pay.

The Court of Appeals dismissed the petition and affirmed in toto the NLRC
resolution. While conceding that there was no illegal dismissal, it justified
the award of separation pay on the grounds of equity and social
justice.13 The Court of Appeals rejected JPL's argument that the difference in
the amounts of private respondents' salaries and the minimum wage in the
region should be considered as payment for their service incentive leave and
13th month pay.14 Notwithstanding the absence of a contractual agreement
on the grant of 13th month pay, compliance with the same is mandatory
under the law. Moreover, JPL failed to show that it was exempt from paying
service incentive leave pay. JPL filed a motion for reconsideration of the said
resolution, but the same was denied on 25 January 2002.15

In the instant Petition for Review , JPL claims that the Court of Appeals
committed reversible error in rendering the
assailed Decision and Resolution.16 The instant case does not fall under any
of the instances where separation pay is due, to wit: installation of labor-
saving devices, redundancy, retrenchment or closing or cessation of
business operation,17 or disease of an employee whose continued
employment is prejudicial to him or co-employees,18 or illegal dismissal of an
employee but reinstatement is no longer feasible.19 Meanwhile, an employee
who voluntarily resigns is not entitled to separation unless stipulated in the
employment contract, or the collective bargaining agreement, or is
sanctioned by established practice or policy of the employer.20 It argues that
private respondents' good record and length of service, as well as the social
justice precept, are not enough to warrant the award of separation pay.
Gonzales and Aninipot were employed by JPL for more than four (4) years,
while Abesa rendered his services for more than two (2) years, hence, JPL
claims that such short period could not have shown their worth to JPL so as
to reward them with payment of separation pay.21

In addition, even assuming arguendo that private respondents are entitled

to the benefits awarded, the computation thereof should only be from their
first day of employment with JPL up to 15 August 1996, the date of
termination of CMC's contract, and not up to the finality of the 27 July 2000
resolution of the NLRC.22 To compute separation pay, 13th month pay, and
service incentive leave pay up to 27 July 2000 would negate the findings of
both the Court of Appeals and the NLRC that private respondents were not
unlawfully terminated.23 Additionally, it would be erroneous to compute
service incentive leave pay from the first day of their employment up to the
finality of the NLRC resolution since an employee has to render at least one
(1) year of service before he is entitled to the same. Thus, service incentive
leave pay should be counted from the second year of service.24

On the other hand, private respondents maintain that they are entitled to
the benefits being claimed as per the ruling of this Court in Serrano v. NLRC,
et al.25 They claim that their dismissal, while not illegal, was tainted with bad
faith.26 They allege that they were deprived of due process because the
notice of termination was sent to them only two (2) days before the actual
termination.27 Likewise, the most that JPL offered to them by way of
settlement was the payment of separation pay of seven (7) days for every
year of service.28

Replying to private respondents' allegations, JPL disagrees that the notice it

sent to them was a notice of actual termination. The said memo merely
notified them of the end of merchandising for CMC, and that they will be
transferred to other clients.29 Moreover, JPL is not bound to observe the
thirty (30)-day notice rule as there was no dismissal to speak of. JPL
counters that it was private respondents who acted in bad faith when they
sought employment with another establishment, without even the courtesy
of informing JPL that they were leaving for good, much less tender their
resignation.30 In addition, the offer of seven (7) days per year of service as
separation pay was merely an act of magnanimity on its part, even if private
respondents are not entitled to a single centavo of separation pay.31

The case thus presents two major issues, to wit: whether or not private
respondents are entitled to separation pay, 13th month pay and service
incentive leave pay, and granting that they are so entitled, what should be
the reckoning point for computing said awards.

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized
only in cases of dismissals due to any of these reasons: (a) installation of
labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the
employer's business; and (e) when the employee is suffering from a disease
and his continued employment is prohibited by law or is prejudicial to his
health and to the health of his co-employees. However, separation pay shall
be allowed as a measure of social justice in those cases where the employee
is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally
dismissed.32 In addition, Sec. 4(b), Rule I, Book VI of the Implementing
Rules to Implement the Labor Code provides for the payment of separation
pay to an employee entitled to reinstatement but the establishment where
he is to be reinstated has closed or has ceased operations or his present
position no longer exists at the time of reinstatement for reasons not
attributable to the employer.

The common denominator of the instances where payment of separation pay

is warranted is that the employee was dismissed by the employer.33 In the
instant case, there was no dismissal to speak of. Private respondents were
simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo
informing them of the termination of CMC's contract with JPL. More
importantly, they were advised that they were to be reassigned. At that
time, there was no severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of
the operation of a business or undertaking for a period not exceeding six (6)
months, wherein an employee/employees are placed on the so-called
"floating status." When that "floating status" of an employee lasts for more
than six months, he may be considered to have been illegally dismissed from
the service. Thus, he is entitled to the corresponding benefits for his
separation, and this would apply to suspension either of the entire business
or of a specific component thereof.34

As clearly borne out by the records of this case, private respondents sought
employment from other establishments even before the expiration of the six
(6)-month period provided by law. As they admitted in their comment, all
three of them applied for and were employed by another establishment after
they received the notice from JPL.35 JPL did not terminate their employment;
they themselves severed their relations with JPL. Thus, they are not entitled
to separation pay.

The Court is not inclined in this case to award separation pay even on the
ground of compassionate justice. The Court of Appeals relied on the
cases36 wherein the Court awarded separation pay to legally dismissed
employees on the grounds of equity and social consideration. Said cases
involved employees who were actually dismissed by their employers,
whether for cause or not. Clearly, the principle applies only when the
employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private
respondents effectively terminated their employment with JPL.

In addition, the doctrine enunciated in the case of Serrano37 cited by private

respondents has already been abandoned by our ruling in Agabon v. National
Labor Relations Commission.38 There we ruled that an employer is liable to
pay indemnity in the form of nominal damages to a dismissed employee if,
in effecting such dismissal, the employer failed to comply with the
requirements of due process. However, private respondents are not entitled
to the payment of damages considering that there was no violation of due
process in this case. JPL's memo dated 13 August 1996 to private
respondents is not a notice of termination, but a mere note informing private
respondents of the termination of CMC's contract and their re-assignment to
other clients. The thirty (30)-day notice rule does not apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service
incentive leave pay to private respondents. Said benefits are mandated by
law and should be given to employees as a matter of right.

Presidential Decree No. 851, as amended, requires an employer to pay its

rank and file employees a 13th month pay not later than 24 December of
every year. However, employers not paying their employees a 13th month
pay or its equivalent are not covered by said law.39The term "its equivalent"
was defined by the law's implementing guidelines as including Christmas
bonus, mid-year bonus, cash bonuses and other payment amounting to not
less than 1/12 of the basic salary but shall not include cash and stock
dividends, cost-of-living-allowances and all other allowances regularly
enjoyed by the employee, as well as non-monetary benefits.40

On the other hand, service incentive leave, as provided in Art. 95 of the

Labor Code, is a yearly leave benefit of five (5) days with pay, enjoyed by an
employee who has rendered at least one year of service. Unless specifically
excepted, all establishments are required to grant service incentive leave to
their employees. The term "at least one year of service" shall mean service
within twelve (12) months, whether continuous or broken reckoned from the
date the employee started working.41 The Court has held in several instances
that "service incentive leave is clearly demandable after one year of
service."42

Admittedly, private respondents were not given their 13th month pay and
service incentive leave pay while they were under the employ of JPL.
Instead, JPL provided salaries which were over and above the minimum
wage. The Court rules that the difference between the minimum wage and
the actual salary received by private respondents cannot be deemed as their
13th month pay and service incentive leave pay as such difference is not
equivalent to or of the same import as the said benefits contemplated by
law. Thus, as properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive leave
pay.

However, the Court disagrees with the Court of Appeals' ruling that the 13th
month pay and service incentive leave pay should be computed from the
start of employment up to the finality of the NLRC resolution. While
computation for the 13th month pay should properly begin from the first day
of employment, the service incentive leave pay should start a year after
commencement of service, for it is only then that the employee is entitled to
said benefit. On the other hand, the computation for both benefits should
only be up to 15 August 1996, or the last day that private respondents
worked for JPL. To extend the period to the date of finality of the NLRC
resolution would negate the absence of illegal dismissal, or to be more
precise, the want of dismissal in this case. Besides, it would be unfair to
require JPL to pay private respondents the said benefits beyond 15 August
1996 when they did not render any service to JPL beyond that date. These
benefits are given by law on the basis of the service actually rendered by the
employee, and in the particular case of the service incentive leave, is
granted as a motivation for the employee to stay longer with the employer.
There is no cause for granting said incentive to one who has already
terminated his relationship with the employer.

The law in protecting the rights of the employees authorizes neither

oppression nor self-destruction of the employer. It should be made clear that
when the law tilts the scale of justice in favor of labor, it is but recognition of
the inherent economic inequality between labor and management. The intent
is to balance the scale of justice; to put the two parties on relatively equal
positions. There may be cases where the circumstances warrant favoring
labor over the interests of management but never should the scale be so
tilted if the result is an injustice to the employer. Justitia nemini neganda
est (Justice is to be denied to none).43

WHEREFORE, the petition is GRANTED IN PART.

The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
62631 are hereby MODIFIED. The award of separation pay is deleted.
Petitioner is ordered to pay private respondents their 13th month pay
commencing from the date of employment up to 15 August 1996, as well as
service incentive leave pay from the second year of employment up to 15
August 1996. No pronouncement as to costs

[G.R. No. 118506. April 18, 1997.]

NORMA MABEZA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL

SUPREME, Respondents.

Tenefrancia Agranzamendez, Liceralde & Associates for Petitioner.

Romeo M. Rome for Private Respondent.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; DISMISSAL; JUST CAUSE, BURDEN OF

PROOF. — In termination cases the employer bears the burden of proof to show
that the dismissal is for just cause, the failure of which would mean that the
dismissal is not justified and the employee is entitled to reinstatement.

2. ID.; ID.; ID.; ABANDONMENT; REQUISITES; CASE AT BAR. — For abandonment

to arise, there must be concurrence of two things: 1) lack of intention to work., and
2) the presence of overt acts signifying the employee’s intention not to work. While
absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a
claim. The over act (absence) ought to unerringly point to the fact that the
employee has no intention to return to work, which is patently not the case here.

3. ID.; ID.; ID.; LOSS OF CONFIDENCE; NOT APPLICABLE IN CASE AT BAR. — Loss
of confidence as a just cause for dismissal was never intended to provide employers
with a blank check for terminating their employees. Loss of confidence should
ideally apply only to cases involving employees occupying positions to trust and
confidence or to those situations where the employee is routinely charged with the
care and custody of the employer’s money or property. An ordinary chambermaid
who has to sign out for linen and other hotel property from the property custodian
each day and who has to account for each and every towel or bedsheet utilized by
the hotel’s guests at the end of her shift would not fall under any of these two
classes of employees for which loss of confidence, if ably supported by evidence,
would normally apply. Loss of confidence should not be simulated in order to justify
what would otherwise be, under the provisions of law an illegal dismissal. "It should
not be used as a subterfuge for causes which are illegal, improper and unjustified.
It must be genuine, not a mere afterthought to justify, an earlier action taken in
bad faith.

4. ID.; EMPLOYERS; UNFAIR LABOR PRACTICES; CASE AT BAR. — The pivotal

question in any case where unfair labor practice on the part of the employer is
alleged is whether or not the employer has exerted pressure, in the form of
restraint, interference or coercion, against his employee’s right to institute
concerted action for better terms and conditions of employment. Without doubt, the
act of compelling employees to sign an instrument indicating that the employer
observed labor standards provisions of law when he might have not, together with
the act of terminating or coercing those who refuse to cooperate with the
employer’s scheme constitutes unfair labor practice. The first act clearly preempts
the right of the hotel’s workers to seek better terms and conditions of employment
through concerted action. We agree with the Solicitor General’s observation in his
manifestation that" [t]his actuation . . . is analogous to the situation envisaged in
paragraph (f) of Article 248 of the Labor Code" which distinctly makes it an unfair
labor practice "to dismiss, discharge or otherwise prejudice or discriminate against
an employee for having given or being about to give testimony" under the Labor
Code. For in not giving positive testimony in favor of her employer, petitioner had
reserved not only her right to dispute the claim and proffer evidence in support
thereof but also to work for better terms and conditions of employment.

5. ID.; WAGES; SALARY LESS THAN MINIMUM BECAUSE OF OTHER FACILITIES

PROVIDED NOT JUSTIFIED. — Labor Arbiter Pati accepted hook, line and sinker the
private respondent’s bare claim that the reason the monetary benefits received by
petitioner between 1981 to 1987 were less than minimum wage was because
petitioner did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations. Granting that meals and lodging
were provided and indeed constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal requirements. Without
satisfying these requirements, the employer simply cannot deduct the value from
the employee’s wages. First, proof must be shown that such facilities are
customarily furnished by the trade. Second, the provision of deductible facilities
must be voluntarily accepted in writing by the employee. Finally, facilities must be
charged at fair and reasonable value. These requirements were not met in the
instant case. More significantly, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience of the employer is not a
facility. The criterion in making a distinction between the two not so much lies in
the kind (food, lodging) but the purpose. Considering., therefore, that hotel workers
are required to work different shifts and are expected to be available at various odd
hours. their ready availability is a necessary matter in the operations of a small
hotel, such as the private respondent’s hotel.

6. ID.; MONEY CLAIMS; PROPER MONETARY AWARD IN CASE AT BAR. — Petitioner

is entitled to the payment of the deficiency in her wages equivalent to the full wage
applicable from May 13, 1988 up to the date of her illegal dismissal. Additionally,
petitioner is entitled to payment of service incentive leave pay, emergency cost of
living allowance, night differential pay, and 13th month pay for the periods alleged
by the petitioner as the private respondent has never been able to adduce proof
that petitioner was paid the aforestated benefits. However, the claims covering the
period of October 1987 up to the time of filing the case on May 13, 1988 are barred
by prescription as P.D. 442 (as amended) and its implementing rules limit all
money claims arising out of employer-employee relationship to three (3) years from
the time the cause of action accrues.

7. ID.; ILLEGAL DISMISSAL; SEPARATION PAY IN LIEU OF REINSTATEMENT

PROPER IN VIEW OF STRAINED RELATIONS BETWEEN THE PARTIES. — We depart
from the settled rule that an employee who is unjustly dismissed from work
normally should be reinstated without loss of seniority rights and other privileges.
Owing to the strained relations between petitioner and private respondent, allowing
the former to return to her job would only subject her to possible harassment and
future embarrassment. In the instant case, separation pay equivalent to one
month’s salary for every year of continuous service with the private respondent
would be proper, starting with her job at the Belfront Hotel.

8. ID.; ID.; BACKWAGES. — In addition to separation pay, backwages are in order.

Pursuant to R.A. 6715 and our decision in Osmalik Bustamante, et al v. National
Labor Relations Commission, petitioner is entitled to full backwages from the time
of her illegal dismissal up to the date of promulgation of this decision without
qualification or deduction. Also, the dismissal of petitioner without the benefit of
notice and hearing prior to her termination violated her constitutional right to due
process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on
top of payment of the deficiency in wages and benefits for the period aforestated
would be proper.

DECISION
 KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation of
the constitutionally enshrined rights of the working class. Without the protection accorded by our laws and
the tempering of courts, the natural and historical inclination of capital to ride roughshod over the rights of
labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are
illustrative.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at
the Hotel Supreme in Baguio City were asked by the hotel’s management to sign an instrument attesting to
the latter’s compliance with minimum wage and other labor standard provisions of law. 1 The instrument
provides: 2

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,
NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say: chanrob1es v irt ual 1aw l ibra ry

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City;

2. That the said Hotel is separately operated from the Ivy’s Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly
and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of
informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

(Sgd) (Sgd.)

JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor’s Office to swear to the veracity and
contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on the
same day to the Regional Office of the Department of Labor and Employment in Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings
of the Labor Inspector of DOLE (in an inspection of respondent’s establishment on February 2, 1991)
apparently adverse to the private Respondent. 3

After she refused to proceed to the City Prosecutor’s Office — on the same day the affidavit was submitted
to the Cordillera Regional Office of DOLE — petitioner avers that she was ordered by the hotel management
to turn over the keys to her living quarters and to remove her belongings from the hotel premises. 4
According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor’s Office to
attest to the affidavit. 5 She thereafter reluctantly filed a leave of absence from her job which was denied by
management. When she attempted to return to work on May 10, 1991, the hotel’s cashier, Margarita Choy,
informed her that she should not report to work and, instead, continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner filed a complaint
for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission — CAR Baguio
City. In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-payment of
holiday pay, service incentive leave pay, 13th month pay, night differential and other benefits. The
complaint was docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P.
Pati.

Responding to the allegations made in support of petitioner’s complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without
notice to the management" 6 and that she actually abandoned her work. He maintained that there was no
basis for the money claims for underpayment and other benefits as these were paid in the form of facilities
to petitioner and the hotel’s other employees. 7 Pointing to the Affidavit of May 7, 1991, the private
respondent asserted that his employees actually have no problems with management. In a supplemental
answer submitted eleven (11) months after the original complaint for illegal dismissal was filed, private
respondent raised a new ground, loss of confidence, which was supported by a criminal complaint for
Qualified Theft he filed before the prosecutor’s office of the City of Baguio against petitioner on July 4, 1991.
8

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner’s complaint on the ground of
loss of confidence. His disquisitions in support of his conclusion read as follows: chan rob1e s virtual 1aw lib rary

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel (Exhibits ‘9’, ‘9-A,’ ‘9-B,’ ‘9-C’ and ‘10’ pages 12-14 TSN,
December 1, 1992). cdti

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for
qualified theft and perjury. The fiscal’s office finding a prima facie evidence that complainant committed the
crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit
‘4’ for respondent and Exhibit ‘B-7’ for complainant). As a consequence, complainant was charged in court
for the said crime (Exhibit ‘5’ for respondent and Exhibit ‘B-6’ for the complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which is
one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code
as amended). 9

On April 28, 1994, respondent NLRC promulgated its assailed Resolution 10 affirming the Labor Arbiter’s
decision. The resolution substantially incorporated the findings of the Labor Arbiter. 11 Unsatisfied,
petitioner instituted the instant special civil action for certiorari under Rule 65 of the Rules of Court on the
following grounds: 12

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO
CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE
PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE
COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE RULING
OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS
OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY RESPONDENT’S
EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF
WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO CONSIDER
THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE
COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent’s principal claims and defenses and urges this Court to set aside the public respondent’s assailed
resolution. 13

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is
for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement. 14

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed
to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there existed
sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of confidence,
supporting this with charges that petitioner had stolen a blanket, a bedsheet and two towels from the hotel.
15 Appended to his last complaint was a suit for qualified theft filed with the Baguio City prosecutor’s office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to sanction
the termination of her services under Article 283 of the Labor Code. For abandonment to arise, there must
be concurrence of two things: 1) lack of intention to work; 16 and 2) the presence of overt acts signifying
the employee’s intention not to work. 17

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when
she learned that the hotel management was displeased with her refusal to attest to the affidavit. The fact
that she made this attempt clearly indicates not an intention to abandon but an intention to return to work
after the period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought to unerringly point to the fact that the employee has no intention to return to work, 18
which is patently not the case here. In fact, several days after she had been advised to take an informal
leave, petitioner tried to resume working with the hotel, to no avail. It was only after she had been
repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private
respondent’s claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed: c hanro b1es vi rtua l 1aw li bra ry

Petitioner’s absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see her
in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she was prevented from working by private
respondents. 19

We now come to the second cause raised by private respondent to support his contention that petitioner was
validly dismissed from her job. chanro blesvi rt ualawlib ra ry

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check
for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of the
constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally apply
only to cases involving employees occupying positions of trust and confidence or to those situations where
the employee is routinely charged with the care and custody of the employer’s money or property. To the
first class belong managerial employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees or effectively recommend such managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property. Evidently, an ordinary chambermaid who has to
sign out for linen and other hotel property from the property custodian each day and who has to account for
each and every towel or bedsheet utilized by the hotel’s guests at the end of her shift would not fall under
any of these two classes of employees for which loss of confidence, if ably supported by evidence, would
normally apply. Illustrating this distinction, this Court, in Marina Port Services, Inc. v. NLRC, 20 has stated
that:chanrob1e s virtual 1aw lib rary

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is
one reason why he was employed in the first place. One certainly does not employ a person he distrusts.
Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only because he is
the one who opens the office in the morning and closes it at night and in this sense is entrusted with the
care or protection of the employer’s property. The keys he holds are the symbol of that trust and
confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is
charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that
property. The employer’s trust and confidence in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter’s words, ‘with the duties of safekeeping and safeguarding company policies,
management instructions, and company secrets such as operation devices.’ He is not privy to these
confidential matters, which are shared only in the higher echelons of management. It is the persons on such
levels who, because they discharge these sensitive duties, may be considered holding positions of trust and
confidence. The security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify
what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a
subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith." 22

In the case at bar, the suspicious delay in private respondent’s filing of qualified theft charges against
petitioner long after the latter exposed the hotel’s scheme (to avoid its obligations as employer under the
Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly warrant
serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor General has
himself taken a position opposite the public respondent and has observed that: chanrob 1es vi rtual 1aw lib rary

If petitioner had really committed the acts charged against her by private respondents (stealing supplies of
respondent hotel), private respondents should have confronted her before dismissing her on that ground.
Private respondents did not do so. In fact, private respondent Ng did not raise the matter when petitioner
went to see him on May 9, 1991, and handed him her application for leave. It took private respondents 52
days or up to July 4, 1991 before finally deciding to file a criminal complaint against petitioner, in an obvious
attempt to build a case against her.

The manipulations of private respondents should not be countenanced. 23

Clearly, the efforts to justify petitioner’s dismissal — on top of the private respondent’s scheme of inducing
his employees to sign an affidavit absolving him from possible violations of the Labor Code — taints with
evident bad faith and deliberate malice petitioner’s summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion, against
his employee’s right to institute concerted action for better terms and conditions of employment. Without
doubt, the act of compelling employees to sign an instrument indicating that the employer observed labor
standards provisions of law when he might have not, together with the act of terminating or coercing those
who refuse to cooperate with the employer’s scheme constitutes unfair labor practice. The first act clearly
preempts the right of the hotel’s workers to seek better terms and conditions of employment through
concerted action.chanrob les law li bra ry

We agree with the Solicitor General’s observation in his manifestation that" [t]his actuation . . . is analogous
to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which distinctly makes it an
unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee for
having given or being about to give testimony" 25 under the Labor Code. For in not giving positive
testimony in favor of her employer, petitioner had reserved not only her right to dispute the claim and
proffer evidence in support thereof but also to work for better terms and conditions of employment.

For refusing to cooperate with the private respondent’s scheme, petitioner was obviously held up as an
example to all of the hotel’s employees, that they could only cause trouble to management at great personal
inconvenience. Implicit in the act of petitioner’s termination and the subsequent filing of charges against her
was the warning that they would not only be deprived of their means of livelihood, but also possibly, their
personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same are
ably supported by the evidence on record. However, where such conclusions are based on a misperception
of facts or where they patently fly in the face of reason and logic, we will not hesitate to set aside those
conclusions. Going into the issue of petitioner’s money claims, we find one more salient reason in this case
to set things right: the labor arbiter’s evaluation of the money claims in this case incredibly ignores existing
law and jurisprudence on the matter. Its blatant one-sidedness simply raises the suspicion that something
more than the facts, the law and jurisprudence may have influenced the decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent’s bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was because
petitioner did not factor in the meals, lodging, electric consumption and water she received during the period
in her computations. 26 Granting that meals and lodging were provided and indeed constituted facilities,
such facilities could not be deducted without the employer complying first with certain legal requirements.
Without satisfying these requirements, the employer simply cannot deduct the value from the employee’s
wages. First, proof must be shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by the employee. Finally, facilities
must be charged at fair and reasonable value. 27

These requirements were not met in the instant case. Private respondent "failed to present any company
policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he failed to provide
proof of the employee’s written authorization; and, he failed to show how he arrived at the valuations. 29

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent’s own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been pointed
out in the Solicitor General’s manifestation, "secured certified copies thereof from the nearest regional office
of the Department of Labor, the SSS or the BIR." 30

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not
facilities but supplements. A benefit or privilege granted to an employee for the convenience of the employer
is not a facility. The criterion in making a distinction between the two not so much lies in the kind (food,
lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work different shifts
and are expected to be available at various odd hours, their ready availability is a necessary matter in the
operations of a small hotel, such as the private respondent’s hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to
the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the private
respondent has never been able to adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988
are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims
arising out of employer-employee relationship to three (3) years from the time the cause of action accrues.
32

We depart from the settled rule that an employee who is unjustly dismissed from work normally should be
reinstated without loss of seniority rights and other privileges. Owing to the strained relations between
petitioner and private respondent, allowing the former to return to her job would only subject her to possible
harassment and future embarrassment. In the instant case, separation pay equivalent to one month’s salary
for every year of continuous service with the private respondent would be proper, starting with her job at
the Belfront Hotel.chan roble s virtual law lib rary

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, Et. Al. v. National Labor Relations Commission, 33 petitioner is entitled to full backwages from
the time of her illegal dismissal up to the date of promulgation of this decision without qualification or
deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The first is a
written notice containing a statement of the cause(s) for dismissal; the second is a notice informing the
employee of the employer’s decision to terminate him stating the basis of the dismissal. During the process
leading to the second notice, the employer must give the employee ample opportunity to be heard and
defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner’s dismissal, it is noteworthy that
the private respondent never even bothered to inform petitioner of the charges against her. Neither was
petitioner given the opportunity to explain the loss of the articles. It was only almost two months after
petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was reported to the
police and added as a supplemental answer to petitioner’s complaint. Clearly, the dismissal of petitioner
without the benefit of notice and hearing prior to her termination violated her constitutional right to due
process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of payment of the
deficiency in wages and benefits for the period aforestated would be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April
24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are
hereby summarized as follows: chanrob1es v irt ual 1aw li bra ry

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner’s illegal
dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month’s salary for every year of petitioner’s continuous service with the
private respondent starting with her job at the Belfront Hotel; cdtech

4) Full backwages, without qualification or deduction, from the date of petitioner’s illegal dismissal up to the
date of promulgation of this decision pursuant to our ruling in Bustamante v. NLRC. 34

5) P1,000.00.

[G.R. NO. 149434 : June 3, 2004]

PHILIPPINE APPLIANCE CORPORATION (PHILACOR), Petitioner,

v. THE COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA and UNITED PHILACOR WORKERS
UNION-NAFLU,Respondents.
 DECISION

YNARES-SANTIAGO, J.:

Before us is an appeal by certiorari under Rule 45 of the Rules of Court

which seeks to set aside the decision1 of the Court of Appeals in CA-G.R. SP
No. 59011, denying due course to petitioner Philippine Appliance
Corporations partial appeal, as well as the Resolution2 of the same court,
dated August 10, 2001, denying the motion for reconsideration.

Petitioner is a domestic corporation engaged in the business of

manufacturing refrigerators, freezers and washing machines.Respondent
United Philacor Workers Union-NAFLU is the duly elected collective
bargaining representative of the rank-and-file employees of
petitioner.During the collective bargaining negotiations between petitioner
and respondent union in 1997 (for the last two years of the collective
bargaining agreement covering the period of July 1, 1997 to August 31,
1999), petitioner offered the amount of four thousand pesos (P4,000.00) to
each employee as an early conclusion bonus.Petitioner claims that this bonus
was promised as a unilateral incentive for the speeding up of negotiations
between the parties and to encourage respondent union to exert their best
efforts to conclude a CBA.Upon conclusion of the CBA negotiations,
petitioner accordingly gave this early signing bonus.3
ςrνl l

In view of the expiration of this CBA, respondent union sent notice to

petitioner of its desire to negotiate a new CBA.Petitioner and respondent
union began their negotiations.On October 22, 1999, after eleven meetings,
respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock.A few days later, on October 26, 1999,
respondent union filed a Notice of Strike with the National Conciliation and
Mediation Board (NCMB), Region IV in Calamba, Laguna, due to the
bargaining deadlock.4 ςrνll

A conciliation and mediation conference was held on October 30, 1999 at the
NCMB in Imus, Cavite, before Conciliator Jose L. Velasco.The conciliation
meetings started with eighteen unresolved items between petitioner and
respondent union.At the meeting on November 20, 1999, respondent union
accepted petitioners proposals on fourteen items,5leaving the following items
unresolved: wages, rice subsidy, signing, and retroactive bonus.6 ςrνl l

Petitioner and respondent union failed to arrive at an agreement concerning

these four remaining items.On January 18, 2000, respondent union went on
strike at the petitioners plant at Barangay Maunong, Calamba, Laguna and
at its washing plant at Paranaque, Metro Manila.The strike lasted for eleven
days and resulted in the stoppage of manufacturing operations as well as
losses for petitioner, which constrained it to file a petition before the
Department of Labor and Employment (DOLE) .Labor Secretary Bienvenido
Laguesma assumed jurisdiction over the dispute and, on January 28, 2000,
ordered the striking workers to return to work within twenty-four hours from
notice and directed petitioner to accept back the said employees.7 ςrνll

On April 14, 2000, Secretary Laguesma issued the following Order:8 ςrνll

In view of the foregoing, we fix the wage increases at P30 per day for the
first year and P25 for the second year.

The rice subsidy and retroactive pay base are maintained at their existing
levels and rates.

Finally, this Office rules in favor of Companys proposal on signing bonus.We

believe that a P3,000 bonus is fair and reasonable under the circumstances.

WHEREFORE, premises considered, Philippine Appliance Corporation and

United Philacor Workers Union-NAFLU are hereby directed to conclude a
Collective Bargaining Agreement for the period July 1, 1999 to June 30,
2001.The agreement is to incorporate the disposition set forth above and
includes other items already agreed upon in the course of negotiation and
conciliation.

SO ORDERED. (Emphasis supplied) ςrα lαωlιb rα rÿ

On April 27, 2000, petitioner filed a Partial Motion for

Reconsideration9 stating that while it accepted the decision of Secretary
Laguesma, it took exception to the award of the signing bonus.Petitioner
argued that the award of the signing bonus was patently erroneous since it
was not part of the employees salaries or benefits or of the collective
bargaining agreement.It is not demandable or enforceable since it is in the
nature of an incentive.As no CBA was concluded through the mutual efforts
of the parties, the purpose for the signing bonus was not served.On May 22,
2000, Secretary Laguesma issued an Order10 denying petitioners motion.He
ruled that while the bargaining negotiations might have failed and the
signing of the agreement was delayed, this cannot be attributed solely to
respondent union.Moreover, the Secretary noted that the signing bonus was
granted in the previous CBA.

On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of
Appeals docketed as CA-G.R. SP No. 59011 which was dismissed.The Labor
Secretarys award of the signing bonus was affirmed since petitioner itself
offered the same as an incentive to expedite the CBA negotiations.This offer
was not withdrawn and was still outstanding when the dispute reached the
DOLE.As such, petitioner can no longer adopt a contrary stand and dispute
its own offer.

Petitioner filed a Motion for Reconsideration but the same was denied.Hence
this Petition for Review raising a lone issue, to wit: ςηα ñrο blεš ν ιr† υαl l αω lιb rαrÿ

THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT RENDERED A DECISION NOT IN ACCORD
WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT, SPECIFICALLY
THE CALTEX DOCTRINE OF 1997.

The petition is meritorious.

Petitioner invokes the doctrine laid down in the case of Caltex v.

Brillantes ,11 where it was held thatthe award of the signing bonus by the
Secretary of Labor was erroneous.The said case involved similar facts
concerning the CBA negotiations between Caltex (Philippines), Inc. and the
Caltex Refinery Employees Association (CREA) .Upon referral of the dispute
to the DOLE, then Labor Secretary Brillantes ruled, inter alia: ςηαñ rοb lεš νι r†υ αl lαω l ιbrαrÿ

Fifth, specifically on the issue of whether the signing bonus is covered under
the maintenance of existing benefits clause, we find that a clarification is
indeed imperative.Despite the expressed provision for a signing bonus in the
previous CBA, we uphold the principle that the award for a signing bonus
should partake the nature of an incentive and premium for peaceful
negotiations and amicable resolution of disputes which apparently are not
present in the instant case.Thus, we are constrained to rule that the award
of signing bonus is not covered by the maintenance of existing
benefitsclause.

On appeal to this Court, it was held: ςη αñrο blεš ν ιr†υαl l αω lιb rαrÿ

Although proposed by [CREA], the signing bonus was not accepted by

[Caltex Philippines, Inc.].Besides, a signing bonus is not a benefit which may
be demanded under the law.Rather, it is now claimed by petitioner under the
principle of maintenance of existing benefits of the old CBA.However, as
clearly explained by [Caltex], a signing bonus may not be demanded as a
matter of right.If it is not agreed upon by the parties or unilaterally offered
as an additional incentive by [Caltex], the condition for awarding it must be
duly satisfied.In the present case, the condition sine qua non for its granta
non-strike was not complied with.
In the case at bar, two things militate against the grant of the signing
bonus: first, the non-fulfillment of the condition for which it was
offered, i.e., the speedy and amicable conclusion of the CBA negotiations;
and second, the failure of respondent union to prove that the grant of the
said bonus is a long established tradition or a regular practice on the part of
petitioner.Petitioner admits, and respondent union does not dispute, that it
offered an early conclusion bonus or an incentive for a swift finish to the CBA
negotiations.The offer was first made during the 1997 CBA negotiations and
then again at the start of the 1999 negotiations.The bonus offered is
consistent with the very concept of a signing bonus.

In the case of MERALCO v. The Honorable Secretary of Labor ,12 we stated

that the signing bonus is a grant motivated by the goodwill generated when
a CBA is successfully negotiated and signed between the employer and the
union.In that case, we sustained the argument of the Solicitor
General, viz: ςηαñ rοbl εš νι r†υα l lαω lι brα rÿ

When negotiations for the last two years of the 1992-1997 CBA broke down
and the parties sought the assistance of the NCMB, but which failed to
reconcile their differences, and when petitioner MERALCO bluntly invoked
the jurisdiction of the Secretary of Labor in the resolution of the labor
dispute, whatever goodwill existed between petitioner MERALCO and
respondent union disappeared.. ..

Verily, a signing bonus is justified by and is the consideration paid for the
goodwill that existed in the negotiations that culminated in the signing of a
CBA.13 ςrνll

In the case at bar, the CBA negotiation between petitioner and respondent
union failed notwithstanding the intervention of the NCMB.Respondent union
went on strike for eleven days and blocked the ingress to and egress from
petitioners two work plants.The labor dispute had to be referred to the
Secretary of Labor and Employment because neither of the parties was
willing to compromise their respective positions regarding the four remaining
items which stood unresolved.While we do not fault any one party for the
failure of the negotiations, it is apparent that there was no more goodwill
between the parties and that the CBA was clearly not signed through their
mutual efforts alone.Hence, the payment of the signing bonus is no longer
justified and to order such payment would be unfair and unreasonable for
petitioner.

Furthermore, we have consistently ruled that a bonus is not a demandable

and enforceable obligation.14 True, it may nevertheless be granted on
equitable considerations as when the giving of such bonus has been the
companys long and regular practice.15 To be considered a regular practice,
however, the giving of the bonus should have been done over a long period
of time, and must be shown to have been consistent and deliberate.16 The
test or rationale of this rule on long practice requires an indubitable showing
that the employer agreed to continue giving the benefits knowing fully well
that said employees are not covered by the law requiring payment
thereof.17 Respondent does not contest the fact that petitioner initially
offered a signing bonus only during the previous CBA negotiation.Previous to
that, there is no evidence on record that petitioner ever offered the same or
that the parties included a signing bonus among the items to be resolved in
the CBA negotiation.Hence, the giving of such bonus cannot be deemed as
an established practice considering that the same was given only once, that
is, during the 1997 CBA negotiation.

WHEREFORE, premises considered, the instant petition is GRANTED.The

decision of the Court of Appeals in CA-G.R. SP No. 59011 affirming the Order
of the Secretary of Labor and Employment, directing petitioner Philippine
Appliance Corporation to pay each of its employees a signing bonus in the
amount of Three Thousand Pesos (P3,000.00), is hereby REVERSED and SET
ASIDE.No pronouncement as to costs.

SECOND DIVISION

[G.R. NO. 152456 : April 28, 2004]

SEVILLA TRADING COMPANY, Petitioner, v. A. V. A. TOMAS E.

SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, Respondents.

DECISION

PUNO, J.:

On appeal is the Decision1 of the Court of Appeals in CA-G. R. SP No. 63086

dated 27 November 2001 sustaining the Decision2 of Accredited Voluntary
Arbitrator Tomas E. Semana dated 13 November 2000, as well as its
subsequent Resolution3 dated 06 March 2002 denying petitioners Motion for
Reconsideration.

The facts of the case are as follows: ςηαñ rοbl εš νι r†υα l lαω lι brα rÿ

For two to three years prior to 1999, petitioner Sevilla Trading Company
(Sevilla Trading, for short), a domestic corporation engaged in trading
business, organized and existing under Philippine laws, added to the base
figure, in its computation of the 13th-month pay of its employees, the
amount of other benefits received by the employees which are beyond the
basic pay. These benefits included: ςηαñ rοbl εš νι r†υα l lαω lι brα rÿ

(a) Overtime premium for regular overtime, legal and

special holidays; chanroble svirtual la wlibra ry

(b) Legal holiday pay, premium pay for special

holidays; chan roblesv irtuallaw lib rary

(c) Night premium; chanrob lesvi rtual lawlib rary

(d) Bereavement leave pay; chanroblesvi rt uallawl ibra ry

(e) Union leave pay; chanroble svirtuallaw lib rary

(f) Maternity leave pay; chanroblesvi rt uallawl ibra ry

(g) Paternity leave pay; chanroblesvi rt uallawl ibra ry

(h) Company vacation and sick leave pay; and cralawlibra ry

(i) Cash conversion of unused company vacation and sick

leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office
staff, including the computation and payment of the 13th-month pay and
other benefits. When it changed its person in charge of the payroll in the
process of computerizing its payroll, and after audit was conducted, it
allegedly discovered the error of including non-basic pay or other benefits in
the base figure used in the computation of the 13th-month pay of its
employees. It cited the Rules and Regulations Implementing P. D. No. 851
(13th-Month Pay Law), effective December 22, 1975, Sec. 2(b) which stated
that:ςηα ñrοb lεš νι r† υαl lαω l ιbrαrÿ

Basic salary shall include all remunerations or earnings paid by an employer

to an employee for services rendered but may not include cost-of-living
allowances granted pursuant to P. D. No. 525 or Letter of Instruction No.
174, profit-sharing payments, and all allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary
of the employee at the time of the promulgation of the Decree on December
16, 1975.
Petitioner then effected a change in the computation of the thirteenth month
pay, as follows: ς ηαñ rοbl εš νι r†υα l lαω lι brα rÿ

13th-month pay = net basic pay

12 months

where: ςηαñrοbl εš νι r†υ αl lαω lι brα rÿ

net basic pay = gross pay (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth
month pay are the following: ςηα ñrοb lεš νι r† υαl lαω l ιbrαrÿ

a) Overtime premium for regular overtime, legal and special holidays; cha nrob lesvi rtua llawlib ra ry

b) Legal holiday pay, premium pay for special holidays; c hanroblesv irt uallawl ibra ry

c) Night premium; chan roble svirtual lawli brary

d) Bereavement leave pay; c hanro blesvi rt uallawli bra ry

e) Union leave pay; chan ro blesvi rtual lawlib rary

f) Maternity leave pay; cha nrob lesvi rtua llawlib ra ry

g) Paternity leave pay; cha nrob lesvi rtua llawlib ra ry

h) Company vacation and sick leave pay; and cra lawlib rary

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month pay.
The daily piece-rate workers represented by private respondent Sevilla
Trading Workers Union SUPER (Union, for short), a duly organized and
registered union, through the Grievance Machinery in their Collective
Bargaining Agreement, contested the new computation and reduction of
their thirteenth month pay. The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of whether or not the
exclusion of leaves and other related benefits in the computation of 13th-
month pay is valid to respondent Accredited Voluntary Arbitrator Tomas E.
Semana (A. V. A. Semana, for short) of the National Conciliation and
Mediation Board, for consideration and resolution.
The Union alleged that petitioner violated the rule prohibiting the elimination
or diminution of employees benefits as provided for in Art. 100 of the Labor
Code, as amended. They claimed that paid leaves, like sick leave, vacation
leave, paternity leave, union leave, bereavement leave, holiday pay and
other leaves with pay in the CBA should be included in the base figure in the
computation of their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13th-
month pay is based on basic salary, excluding benefits such as leaves with
pay, as per P. D. No. 851, as amended. It maintained that, in adjusting its
computation of the 13th-month pay, it merely rectified the mistake its
personnel committed in the previous years.

A. V. A. Semana decided in favor of the Union. The dispositive portion of his

Decision reads as follows: ςη αñrοblε š νιr†υαl lαω lιb rα rÿ

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared

that:ςηα ñrοb lεš νι r† υαl lαω l ιbrαrÿ

1. The company is hereby ordered to include sick leave and vacation leave,
paternity leave, union leave, bereavement leave and other leave with pay in
the CBA, premium for work done on rest days and special holidays, and pay
for regular holidays in the computation of the 13th-month pay to all covered
and entitled employees; chanrob lesvi rtua llawlib ra ry

2. The company is hereby ordered to pay corresponding backwages to all

covered and entitled employees arising from the exclusion of said benefits in
the computation of 13th-month pay for the year 1999.

Petitioner received a copy of the Decision of the Arbitrator on December 20,

2000. It filed before the Court of Appeals, a Manifestation and Motion for
Time to File Petition for Certiorari on January 19, 2001. A month later, on
February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the
1997 Rules of Civil Procedure for the nullification of the Decision of the
Arbitrator. In addition to its earlier allegations, petitioner claimed that
assuming the old computation will be upheld, the reversal to the old
computation can only be made to the extent of including non-basic benefits
actually included by petitioner in the base figure in the computation of their
13th-month pay in the prior years. It must exclude those non-basic benefits
which, in the first place, were not included in the original computation. The
appellate court denied due course to, and dismissed the petition.

Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its
appeal, as follows: ςηαñ rοbl εš νι r†υ αl l αω lιbrα rÿ
1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD
COMPUTATION OF THE 13TH-MONTH PAY ON THE BASIS THAT THE OLD
COMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.

2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT

ERRORS IN COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE
DAMAGE TO EMPLOYERS.4 ςrνll

First, we uphold the Court of Appeals in ruling that the proper remedy from
the adverse decision of the arbitrator is a Petition for Review under Rule 43
of the 1997 Rules of Civil Procedure, not a Petition for Certiorari under Rule
65. Section 1 of Rule 43 states: ςηαñ rοblε š νι r†υα l lαω lιb rα rÿ

RULE 43

Appeals from the Court of Tax Appeals and

Quasi-Judicial Agencies to the Court of Appeals

SECTION 1. Scope. This Rule shall apply to appeals from judgments or final
orders of the Court of Tax Appeals and from awards, judgments, final orders
or resolutions of or authorized by any quasi-judicial agency in the exercise of
its quasi-judicial functions. Among these agencies are the Civil Service
Commission, Central Board of Assessment Appeals, Securities and Exchange
Commission, Office of the President, Land Registration Authority, Social
Security Commission, Civil Aeronautics Board, Bureau of Patents,
Trademarks and Technology Transfer, National Electrification Administration,
Energy Regulatory Board, National Telecommunications Commission,
Department of Agrarian Reform under Republic Act No. 6657, Government
Service Insurance System, Employees Compensation Commission,
Agricultural Inventions Board, Insurance Commission, Philippine Atomic
Energy Commission, Board of Investments, Construction Industry Arbitration
Commission, and voluntary arbitrators authorized by law. [Emphasis
supplied.]

It is elementary that the special civil action of certiorari under Rule 65 is not,
and cannot be a substitute for an appeal, where the latter remedy is
available, as it was in this case. Petitioner Sevilla Trading failed to file an
appeal within the fifteen-day reglementary period from its notice of the
adverse decision of A. V. A. Semana. It received a copy of the decision of A.
V. A. Semana on December 20, 2000, and should have filed its appeal under
Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001.
Instead, petitioner filed on January 19, 2001 a Manifestation and Motion for
Time to File Petition for Certiorari, and on February 19, 2001, it filed a
Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Clearly, petitioner Sevilla Trading had a remedy of appeal but failed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a cure
for failure to timely file a Petition for Review on Certiorari under Rule 45
(Rule 43, in the case at bar) of the Rules of Court. Rule 65 is an independent
action that cannot be availed of as a substitute for the lost remedy of an
ordinary appeal, including that under Rule 45 (Rule 43, in the case at bar),
especially if such loss or lapse was occasioned by ones own neglect or error
in the choice of remedies.5 ςrνll

Thus, the decision of A. V. A. Semana had become final and executory when
petitioner Sevilla Trading filed its Petition for Certiorari on February 19,
2001. More particularly, the decision of A. V. A. Semana became final and
executory upon the lapse of the fifteen-day reglementary period to appeal,
or on January 5, 2001. Hence, the Court of Appeals is correct in holding that
it no longer had appellate jurisdiction to alter, or much less, nullify the
decision of A. V. A. Semana.

Even assuming that the present Petition for Certiorari under Rule 65 of the
1997 Rules of Civil Procedure is a proper action, we still find no grave abuse
of discretion amounting to lack or excess of jurisdiction committed by A. V.
A. Semana. Grave abuse of discretion has been interpreted to mean such
capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or, in other words where the power is exercised in an arbitrary
or despotic manner by reason of passion or personal hostility, and it must be
so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation
of law.6 We find nothing of that sort in the case at bar.

On the contrary, we find the decision of A. V. A. Semana to be sound, valid,

and in accord with law and jurisprudence. A. V. A. Semana is correct in
holding that petitioners stance of mistake or error in the computation of the
thirteenth month pay is unmeritorious. Petitioners submission of financial
statements every year requires the services of a certified public accountant
to audit its finances. It is quite impossible to suggest that they have
discovered the alleged error in the payroll only in 1999. This implies that in
previous years it does not know its cost of labor and operations. This is
merely basic cost accounting. Also, petitioner failed to adduce any other
relevant evidence to support its contention. Aside from its bare claim of
mistake or error in the computation of the thirteenth month pay, petitioner
merely appended to its petition a copy of the 1997-2002 Collective
Bargaining Agreement and an alleged corrected computation of the
thirteenth month pay. There was no explanation whatsoever why its
inclusion of non-basic benefits in the base figure in the computation of their
13th-month pay in the prior years was made by mistake, despite the clarity
of statute and jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cable and
Radio Corp. v. NLRC,7 which petitioner Sevilla Trading invokes. In that
case, this Court decided on the proper computation of the cost-of-living
allowance (COLA) for monthly-paid employees. Petitioner Corporation,
pursuant to Wage Order No. 6 (effective 30 October 1984), increased the
COLA of its monthly-paid employees by multiplying the P3. 00 daily COLA by
22 days, which is the number of working days in the company. The Union
disagreed with the computation, claiming that the daily COLA rate of P3. 00
should be multiplied by 30 days, which has been the practice of the company
for several years. We upheld the contention of the petitioner corporation. To
answer the Unions contention of company practice, we ruled that: ς ηαñ rοblε š νιr†υαl lαω lιb rα rÿ

Payment in full by Petitioner Corporation of the COLA before the execution of

the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March
1981) to 5 (11 June 1984), should not be construed as constitutive of
voluntary employer practice, which cannot now be unilaterally withdrawn by
petitioner. To be considered as such, it should have been practiced over a
long period of time, and must be shown to have been consistent and
deliberate. .. The test of long practice has been enunciated thus: ςηαñ rοb lεš νι r†υ αl lαω l ιbrαrÿ

.. . Respondent Company agreed to continue giving holiday pay knowing

fully well that said employees are not covered by the law requiring payment
of holiday pay. (Oceanic Pharmacal Employees Union [FFW] v. Inciong, 94
SCRA 270 [1979])

Moreover, before Wage Order No. 4, there was lack of administrative

guidelines for the implementation of the Wage Orders. It was only when the
Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a
formula for the conversion of the daily allowance to its monthly equivalent
was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be

faulted for erroneous application of the law. ..

In the above quoted case, the grant by the employer of benefits through an
erroneous application of the law due to absence of clear administrative
guidelines is not considered a voluntary act which cannot be unilaterally
discontinued. Such is not the case now. In the case at bar, the Court of
Appeals is correct when it pointed out that as early as 1981, this Court has
held in San Miguel Corporation v. Inciong8 that: ς ηαñ rοblε š νι r†υα l lαω lιb rα rÿ
Under Presidential Decree 851 and its implementing rules, the basic salary of
an employee is used as the basis in the determination of his 13th-month pay.
Any compensations or remunerations which are deemed not part of the basic
pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the
following compensations are deemed not part of the basic salary: ςη αñrοblε š νιr†υαl lαω lιb rα rÿ

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and

Letter of Instruction No. 174; chanroble svirtual lawlib rary

b) Profit sharing payments; chan roble svirtuallaw lib rary

c) All allowances and monetary benefits which are not considered or

integrated as part of the regular basic salary of the employee at the time of
the promulgation of the Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing

Presidential Decree 851 issued by the then Labor Secretary Blas
Ople, overtime pay, earnings and other remunerations are excluded as part
of the basic salary and in the computation of the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and

Letter of Instruction No. 174 and profit sharing payments indicate the
intention to strip basic salary of other payments which are properly
considered as fringe benefits. Likewise, the catch-all exclusionary phrase all
allowances and monetary benefits which are not considered or integrated as
part of the basic salary shows also the intention to strip basic salary of any
and all additions which may be in the form of allowances or fringe benefits.

Moreover, the Supplementary Rules and Regulations Implementing

Presidential Decree 851 is even more empathic in declaring that earnings
and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to
include all remunerations or earnings paid by an employer to an employee,
this cloud is dissipated in the later and more controlling Supplementary
Rules and Regulations which categorically, exclude from the definition of
basic salary earnings and other remunerations paid by employer to an
employee. A cursory perusal of the two sets of Rules indicates that what has
hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and earnings
within the definition of basic salary.

The all-embracing phrase earnings and other remunerations which are

deemed not part of the basic salary includes within its meaning payments for
sick, vacation, or maternity leaves, premium for works performed on rest
days and special holidays, pay for regular holidays and night differentials. As
such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month pay. If they were not so
excluded, it is hard to find any earnings and other remunerations expressly
excluded in the computation of the 13th-month pay. Then the exclusionary
provision would prove to be idle and with no purpose.

In the light of the clear ruling of this Court, there is, thus no reason for any
mistake in the construction or application of the law. When petitioner Sevilla
Trading still included over the years non-basic benefits of its employees,
such as maternity leave pay, cash equivalent of unused vacation and sick
leave, among others in the computation of the 13th-month pay, this may
only be construed as a voluntary act on its part. Putting the blame on the
petitioners payroll personnel is inexcusable.

In Davao Fruits Corporation v. Associated Labor Unions, we likewise

held that:9ς rνll

The Supplementary Rules and Regulations Implementing P. D. No. 851

which put to rest all doubts in the computation of the thirteenth month pay,
was issued by the Secretary of Labor as early as January 16, 1976, barely
one month after the effectivity of P. D. No. 851 and its Implementing Rules.
And yet, petitioner computed and paid the thirteenth month pay, without
excluding the subject items therein until 1981. Petitioner continued its
practice in December 1981, after promulgation of the aforequoted San
Miguel decision on February 24, 1981, when petitioner purportedly
discovered its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously

included in the computation of its employees thirteenth month pay, without
the payments for sick, vacation and maternity leave, premium for work done
on rest days and special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been included by
petitioner indicates a unilateral and voluntary act on its part, sufficient in
itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established

and the payments made pursuant thereto, ripened into benefits enjoyed by
them. And any benefit and supplement being enjoyed by the employees
cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Sec. 10 of the Rules and Regulations Implementing P. D. No.
851, and Art. 100 of the Labor Code of the Philippines which prohibit the
diminution or elimination by the employer of the employees existing
benefits. [Tiangco v. Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have been
exercised to constitute voluntary employer practice which cannot be
unilaterally withdrawn by the employer, we hold that jurisprudence has not
laid down any rule requiring a specific minimum number of years. In the
above quoted case of Davao Fruits Corporation v. Associated Labor
Unions,10 the company practice lasted for six (6) years. In another
case, Davao Integrated Port Stevedoring Services v. Abarquez,11 the
employer, for three (3) years and nine (9) months, approved the
commutation to cash of the unenjoyed portion of the sick leave with pay
benefits of its intermittent workers. While in Tiangco v. Leogardo,
Jr. ,12 the employer carried on the practice of giving a fixed monthly
emergency allowance from November 1976 to February 1980, or three (3)
years and four (4) months. In all these cases, this Court held that the grant
of these benefits has ripened into company practice or policy which cannot
be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading
kept the practice of including non-basic benefits such as paid leaves for
unused sick leave and vacation leave in the computation of their 13th-month
pay for at least two (2) years. This, we rule likewise constitutes voluntary
employer practice which cannot be unilaterally withdrawn by the employer
without violating Art. 100 of the Labor Code: ςηαñ rοblε š νιr†υαl lαω lιb rα rÿ

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in

this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of

Appeals in CA-G. R. SP No. 63086 dated 27 November 2001 and its
Resolution dated 06 March 2002 are hereby AFFIRMED.

G.R. NO. 161933 : April 22, 2008]

STANDARD CHARTERED BANK EMPLOYEES UNION (SCBEU-

NUBE), Petitioner, v. STANDARD CHARTERED BANK and ANNEMARIE
DURBIN, in her capacity as Chief Executive Officer, Philippines,
Standard Chartered Bank, Respondents.

DECISION
 AUSTRIA-MARTINEZ, J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of

the Rules of Court, assailing the Decision1 dated October 9, 2002 and
Resolution2 dated January 26, 2004 issued by the Court of Appeals (CA),
dismissing their petition and affirming the Secretary of Labor and
Employment's Orders dated May 31, 2001 and August 30, 2001.

Petitioner and the Standard Chartered Bank (Bank) began negotiating for a
new Collective Bargaining Agreement (CBA) in May 2000 as their 1998-2000
CBA already expired. Due to a deadlock in the negotiations, petitioner filed a
Notice of Strike prompting the Secretary of Labor and Employment to
assume jurisdiction over the labor dispute.

On May 31, 2001, Secretary Patricia A. Sto. Tomas of the Department of

Labor and Employment (DOLE) issued an Order with the following dispositive
portion:

WHEREFORE, PREMISES CONSIDERED, the Standard Chartered Bank and the Standard
Chartered Bank Employees Union are directed to execute their collective bargaining
agreement effective 01 April 2001 until 30 March 2003 incorporating therein the foregoing
dispositions and the agreements they reached in the course of negotiations and conciliation.
All other submitted issues that were not passed upon are dismissed.

The charge of unfair labor practice for bargaining in bad faith and the claim for damages
relating thereto are hereby dismissed for lack of merit.

Finally, the charge of unfair labor practice for gross violation of the economic provisions of
the CBA is hereby dismissed for want of jurisdiction.

SO ORDERED.3

Both petitioner and the Bank filed their respective motions for
reconsideration, which were denied by the Secretary per Order dated August
30, 2001.4

Petitioner sought recourse with the CA via a Petition for Certiorari, and in the
assailed Decision dated October 9, 20025 and Resolution dated January 26,
2004,6 the CA dismissed their petition and affirmed the Secretary's Orders.

Hence, herein petition based on the following grounds:

I.

THE COURT A QUO ERRED IN DECIDING THAT THERE WAS NO BASIS FOR REVISING THE
SCOPE OF EXCLUSIONS FROM THE APPROPRIATE BARGAINING UNIT UNDER THE CBA.

II.
 THE COURT A QUO ERRED IN DECIDING THAT A ONE-MONTH OR LESS TEMPORARY
OCCUPATION OF A POSITION (ACTING CAPACITY) DOES NOT MERIT ADJUSTMENT IN
REMUNERATION.7

The resolution of this case has been overtaken by the execution of the
parties' 2003-2005 CBA. While this would render the case moot and
academic, nevertheless, the likelihood that the same issues will come up in
the parties' future CBA negotiations is not far-fetched, thus compelling its
resolution. Courts will decide a question otherwise moot if it is capable of
repetition yet evading review.[8]

The CBA provisions in dispute are the exclusion of certain employees from
the appropriate bargaining unit and the adjustment of remuneration for
employees serving in an acting capacity for one month.

In their proposal, petitioner sought the exclusion of only the following

employees from the appropriate bargaining unit - all managers who are
vested with the right to hire and fire employees, confidential employees,
those with access to labor relations materials, Chief Cashiers, Assistant
Cashiers, personnel of the Telex Department and one Human Resources
(HR) staff.9

In the previous 1998-2000 CBA,10 the excluded employees are as follows:

A. All covenanted and assistant officers (now called National Officers)

B. One confidential secretary of each of the:

1. Chief Executive, Philippine Branches

2. Deputy Chief Executive/Head, Corporate Banking Group

3. Head, Finance

4. Head, Human Resources

5. Manager, Cebu

6. Manager, Iloilo

7. Covenanted Officers provided said positions shall be filled by new

recruits.

C. The Chief Cashiers and Assistant Cashiers in Manila, Cebu and Iloilo, and in any other
branch that the BANK may establish in the country.

D. Personnel of the Telex Department

E. All Security Guards

 F. Probationary employees, without prejudice to Article 277 (c) of the Labor Code, as
amended by R.A. 6715, casuals or emergency employees; and cralawlib ra ry

G. One (1) HR Staff11

The Secretary, however, maintained the previous exclusions because

petitioner failed to show that the employees sought to be removed from the
list qualify for exclusion.12

With regard to the remuneration of employees working in an acting capacity,

it was petitioner's position that additional pay should be given to an
employee who has been serving in a temporary/acting capacity for one
week. The Secretary likewise rejected petitioner's proposal and instead,
allowed additional pay for those who had been working in such capacity for
one month. The Secretary agreed with the Bank's position that a restrictive
provision would curtail management's prerogative, and at the same time,
recognized that employees should not be made to work in an acting capacity
for long periods of time without adequate compensation.

The Secretary's disposition of the issues raised by petitioner were affirmed

by the CA.13 The Court sustains the CA.

Whether or not the employees sought to be excluded from the appropriate

bargaining unit are confidential employees is a question of fact, which is not
a proper issue in a Petition for Review under Rule 45 of the Rules of
Court.14 This holds more true in the present case in which petitioner failed to
controvert with evidence the findings of the Secretary and the CA.

The disqualification of managerial and confidential employees from joining a

bargaining unit for rank and file employees is already well-entrenched in
jurisprudence. While Article 245 of the Labor Code limits the ineligibility to
join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or
those who by reason of their positions or nature of work are required to
assist or act in a fiduciary manner to managerial employees and hence, are
likewise privy to sensitive and highly confidential records.15

In this case, the question that needs to be answered is whether the Bank's
Chief Cashiers and Assistant Cashiers, personnel of the Telex Department
and HR staff are confidential employees, such that they should be excluded.

As regards the qualification of bank cashiers as confidential

employees, National Association of Trade Unions (NATU) - Republic Planters
Bank Supervisors Chapter v. Torres16 declared that they are confidential
employees having control, custody and/or access to confidential
matters, e.g., the branch's cash position, statements of financial condition,
vault combination, cash codes for telegraphic transfers, demand drafts and
other negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank
Manual regarding joint custody, and therefore, disqualified from joining or
assisting a union; or joining, assisting or forming any other labor
organization.17

Golden Farms, Inc. v. Ferrer-Calleja18 meanwhile stated that "confidential

employees such as accounting personnel, radio and telegraph
operatorswho, having access to confidential information, may become the
source of undue advantage. Said employee(s) may act as spy or spies of
either party to a collective bargaining agreement."19

Finally, in Philips Industrial Development, Inc. v. National Labor Relations

Commission,20 the Court designated personnel staff, in which human
resources staff may be qualified, as confidential employees because by the
very nature of their functions, they assist and act in a confidential capacity
to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations.

Petitioner insists that the foregoing employees are not confidential

employees; however, it failed to buttress its claim. Aside from its
generalized arguments, and despite the Secretary's finding that there was
no evidence to support it, petitioner still failed to substantiate its claim.
Petitioner did not even bother to state the nature of the duties and functions
of these employees, depriving the Court of any basis on which it may be
concluded that they are indeed confidential employees. As aptly stated by
the CA:

While We agree that petitioner's proposed revision is in accordance with the law, this does
not necessarily mean that the list of exclusions enumerated in the 1998-2000 CBA is
contrary to law. As found by public respondent, petitioner failed to show that the
employees sought to be removed from the list of exclusions are actually rank and
file employees who are not managerial or confidential in status and should,
accordingly, be included in the appropriate bargaining unit.

Absent any proof that Chief Cashiers and Assistant Cashiers, personnel of the Telex
department and one (1) HR Staff have mutuality of interest with the other rank and file
employees, then they are rightfully excluded from the appropriate bargaining unit. x x
x21 (Emphasis supplied)c ralawl ibra ry

Petitioner cannot simply rely on jurisprudence without explaining how and

why it should apply to this case. Allegations must be supported by evidence.
In this case, there is barely any at all.

There is likewise no reason for the Court to disturb the conclusion of the
Secretary and the CA that the additional remuneration should be given to
employees placed in an acting capacity for one month. The CA correctly
stated:

Likewise, We uphold the public respondent's Order that no employee should be temporarily
placed in a position (acting capacity) for more than one month without the corresponding
adjustment in the salary. Such order of the public respondent is not in violation of the
"equal pay for equal work" principle, considering that after one (1) month, the employee
performing the job in an acting capacity will be entitled to salary corresponding to such
position.

xxx

In arriving at its Order, the public respondent took all the relevant evidence into account
and weighed both parties arguments extensively. Thus, public respondent concluded that a
restrictive provision with respect to employees being placed in an acting capacity may
curtail management's valid exercise of its prerogative. At the same time, it recognized that
employees should not be made to perform work in an acting capacity for extended periods
of time without being adequately compensated. x x x22

Thus, the Court reiterates the doctrine that:

[T]he office of a Petition for Review on Certiorari under Rule 45 of the Rules of Court
requires that it shall raise only questions of law. The factual findings by quasi-judicial
agencies, such as the Department of Labor and Employment, when supported by
substantial evidence, are entitled to great respect in view of their expertise in their
respective fields. Judicial review of labor cases does not go so far as to evaluate the
sufficiency of evidence on which the labor official's findings rest. It is not our function to
assess and evaluate all over again the evidence, testimonial and documentary, adduced by
the parties to an appeal, particularly where the findings of both the trial court (here, the
DOLE Secretary) and the appellate court on the matter coincide, as in this case at bar. The
Rule limits that function of the Court to the review or revision of errors of law and not to a
second analysis of the evidence. x x x Thus, absent any showing of whimsical or capricious
exercise of judgment, and unless lack of any basis for the conclusions made by the
appellate court be amply demonstrated, we may not disturb such factual findings.23

WHEREFORE, the petition is DENIED.

G.R. No. 82511 March 3, 1992

GLOBE-MACKAY CABLE AND RADIO CORPORATION, Petitioner,

vs. NATIONAL LABOR RELATIONS COMMISSION and IMELDA
SALAZAR, Respondents.

Castillo, Laman, Tan & Pantaleon for petitioner. chanrobles vi rtual law lib rary

Gerardo S. Alansalon for private respondent.

ROMERO, J.:

For private respondent Imelda L. Salazar, it would seem that her close
association with Delfin Saldivar would mean the loss of her job. In May
1982, private respondent was employed by Globe-Mackay Cable and Radio
Corporation (GMCR) as general systems analyst. Also employed by petitioner
as manager for technical operations' support was Delfin Saldivar with whom
private respondent was allegedly very close. chan roblesv irtualawl ibra rycha nrob les vi rtua l law lib rary

Sometime in 1984, petitioner GMCR, prompted by reports that company

equipment and spare parts worth thousands of dollars under the custody of
Saldivar were missing, caused the investigation of the latter's activities. The
report dated September 25, 1984 prepared by the company's internal
auditor, Mr. Agustin Maramara, indicated that Saldivar had entered into a
partnership styled Concave Commercial and Industrial Company with
Richard A. Yambao, owner and manager of Elecon Engineering Services
(Elecon), a supplier of petitioner often recommended by Saldivar. The report
also disclosed that Saldivar had taken petitioner's missing Fedders
airconditioning unit for his own personal use without authorization and also
connived with Yambao to defraud petitioner of its property. The
airconditioner was recovered only after petitioner GMCR filed an action for
replevin against Saldivar. 1 chan roble s virtual law l ibra ry

It likewise appeared in the course of Maramara's investigation that Imelda

Salazar violated company reglations by involving herself in transactions
conflicting with the company's interests. Evidence showed that she signed as
a witness to the articles of partnership between Yambao and Saldivar. It also
appeared that she had full knowledge of the loss and whereabouts of the
Fedders airconditioner but failed to inform her employer. chan roble svirtualawl ibra rycha nro bles vi rtua l law lib rary

Consequently, in a letter dated October 8, 1984, petitioner company placed

private respondent Salazar under preventive suspension for one (1) month,
effective October 9, 1984, thus giving her thirty (30) days within which to,
explain her side. But instead of submitting an explanations three (3) days
later or on October 12, 1984 private respondent filed a complaint against
petitioner for illegal suspension, which she subsequently amended to include
illegal dismissal, vacation and sick leave benefits, 13th month pay and
damages, after petitioner notified her in writing that effective November 8,
1984, she was considered dismissed "in view of (her) inability to refute and
disprove these findings. 2cha nrob les vi rtual law lib rary

After due hearing, the Labor Arbiter in a decision dated July 16, 1985,
ordered petitioner company to reinstate private respondent to her former or
equivalent position and to pay her full backwages and other benefits she
would have received were it not for the illegal dismissal. Petitioner was also
ordered to pay private respondent moral damages of P50,000.00. 3 chanroble s virt ual law l ibra ry
On appeal, public respondent National Labor Relations, Commission in the
questioned resolution dated December 29, 1987 affirmed the aforesaid
decision with respect to the reinstatement of private respondent but limited
the backwages to a period of two (2) years and deleted the award for moral
damages. 4 cha nrob les vi rtual law lib rary

Hence, this petition assailing the Labor Tribunal for having committed grave
abuse of discretion in holding that the suspension and subsequent dismissal
of private respondent were illegal and in ordering her reinstatement with two
(2) years' backwages. chan roble svi rtualaw lib raryc hanrobles vi rt ual law li bra ry

On the matter of preventive suspension, we find for petitioner GMCR. chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's

acts in conflict with his position as technical operations manager,
necessitated immediate and decisive action on any employee closely,
associated with Saldivar. The suspension of Salazar was further impelled by
th.e discovery of the missing Fedders airconditioning unit inside the
apartment private respondent shared with Saldivar. Under such
circumstances, preventive suspension was the proper remedial recourse
available to the company pending Salazar's investigation. By itself,
preventive suspension does, not signify that the company has adjudged the
employee guilty of the charges she was asked to answer and explain. Such
disciplinary measure is resorted to for the protection of the company's
property pending investigation any alleged malfeasance or misfeasance
committed by the employee. 5 chanrob les vi rtual law lib rary

Thus, it is not correct to conclude that petitioner GMCR had violated

Salazar's right to due process when she was promptly suspended. If at all,
the fault, lay with private respondent when she ignored petitioner's
memorandum of October 8, 1984 "giving her ample opportunity to present
(her) side to the Management." Instead, she went directly to the Labor
Department and filed her complaint for illegal suspension without giving her
employer a chance to evaluate her side of the controversy. chan ro blesvi rtualaw lib raryc han robles vi rt ual law li bra ry

But while we agree with the propriety of Salazar's preventive suspension, we

hold that her eventual separation from employment was not for cause. cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

What is the remedy in law to rectify an unlawful dismissal so as to "make

whole" the victim who has not merely lost her job which, under settled
Jurisprudence, is a property right of which a person is not to be deprived
without due process, but also the compensation that should have accrued to
her during the period when she was unemployed? chanro bles vi rtua l law li bra ry
Art. 279 of the Labor Code, as amended, provides:

Security of Tenure. - In cases of regular employment, the

employer shall not terminate the services of an employee
except for a just cause or when authorized by this
Title. An employee who is 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. 6(Emphasis supplied)

Corollary thereto are the following provisions of the Implementing Rules and
Regulations of the Labor Code:

Sec. 2. Security of Tenure. - In cases of regular

employments, the employer shall not terminate the
services of an employee except for a just cause as
provided in the Labor Code or when authorized by
existing laws. chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

Sec. 3. Reinstatement. - An employee who is unjustly

dismissed from work shall by entitled to reinstatement
without loss of seniority rights and to
backwages." 7 (Emphasis supplied)

Before proceeding any furthers, it needs must be recalled that the present
Constitution has gone further than the 1973 Charter in guaranteeing vital
social and economic rights to marginalized groups of society, including labor.
Given the pro-poor orientation of several articulate Commissioners of the
Constitutional Commission of 1986, it was not surprising that a whole new
Article emerged on Social Justice and Human Rights designed, among other
things, to "protect and enhance the right of all the people to human dignity,
reduce social, economic and political inequalities, and remove cultural
inequities by equitably diffusing wealth and political power for the common
good." 8 Proof of the priority accorded to labor is that it leads the other
areas of concern in the Article on Social Justice, viz., Labor ranks ahead of
such topics as Agrarian and Natural Resources Reform, Urban Land Roform
and Housing, Health, Women, Role and Rights of Poople's Organizations and
Human Rights. 9 chanro bles vi rtua l law lib ra ry
The opening paragraphs on Labor states

The State shall afford full protection to labor, local and

overseas, organized and unorganized, and promote full
employment and equality of employment opportunities
for all. cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

It shall guarantee the rights of all workers to self-

organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike
in accordance with law. They shall be entitled to security
of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making
processes affecting their rights and benefits is may be
provided by law. 10 (Emphasis supplied)

Compare this with the sole.provision on Labor in the 1973 Constitution under
the Article an Declaration of Principles and State Policies that provides:

Sec. 9. The state shall afford protection to labor, promote

full employment and equality in employment, ensure
equal work opportunities regardless of sex, race, or
creed, and regulate the relations between workers and
employers. The State shall ensure the rights of workers
to self-organization, collective baegaining, security of
tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration. 11 chanroble s virtual law l ibra ry

To be sure, both Charters recognize "security of tenure" as one of the rights

of labor which the State is mandated to protect. But there is no gainsaying
the fact that the intent of the framers of the present Constitution was to give
primacy to the rights of labor and afford the sector "full protection," at least
greater protection than heretofore accorded them, regardless of the
geographical location of the workers and whether they are organized or
not.cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who
substantially contributed to the present formulation of the protection to labor
provision and proposed that the same be incorporated in the Article on
Social Justice and not just in the Article on Declaration of Principles and
State Policies "in the light of the special importance that we are giving now
to social justice and the necessity of emphasizing the scope and role of
social justice in national development." 12 chanrobles vi rtua l law lib ra ry

If we have taken pains to delve into the background of the labor provisions
in our Constitution and the Labor Code, it is but to stress that the right of an
employee not to be dismissed from his job except for a just or authorized
cause provided by law has assumed greater importance under the 1987
Constitution with the singular prominence labor enjoys under the article on
Social Justice. And this transcendent policy has been translated into law in
the Labor Code. Under its terms, where a case of unlawful or unauthorized
dismissal has been proved by the aggrieved employee, or on the other hand,
the employer whose duty it is to prove the lawfulness or justness of his act
of dismissal has failed to do so, then the remedies provided in Article 279
should find, application. Consonant with this liberalized stance vis-a-
vis labor, the legislature even went further by enacting Republic Act No.
6715 which took effect on March 2, 1989 that amended said Article to
remove any possible ambiguity that jurisprudence may have generated
which watered down the constitutional intent to grant to labor "full
protection." 13
chanro bles vi rtua l law lib ra ry

To go back to the instant case, there being no evidence to show an

authorized, much less a legal, cause for the dismissal of private respondent,
she had every right, not only to be entitled to reinstatement, but ay well, to
full backwages." 14 chan roble s virtua l law lib rary

The intendment of the law in prescribing the twin remedies of reinstatement

and payment of backwages is, in the former, to restore the dismissed
employee to her status before she lost her job, for the dictionary meaning of
the word "reinstate" is "to restore to a state, conditione positions etc. from
which one had been removed" 15 and in the latter, to give her back the
income lost during the period of unemployment. Both remedies, looking to
the past, would perforce make her "whole." chan roble s virtual law l ibra ry

Sadly, the avowed intent of the law has at times been thwarted when
reinstatement has not been forthcoming and the hapless dismissed
employee finds himself on the outside looking in. c hanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

Over time, the following reasons have been advanced by the Court for
denying reinstatement under the facts of the case and the law applicable
thereto; that reinstatement can no longer be effected in view of the long
passage of time (22 years of litigation) or because of the realities of the
situation; 16or that it would be "inimical to the employer's interest; " 17 or
that reinstatement may no longer be feasible; 18 or, that it will not serve the
best interests of the parties involved; 19 or that the company would be
prejudiced by the workers' continued employment; 20 or that it will not serve
any prudent purpose as when supervening facts have transpired which make
execution on that score unjust or inequitable 21or, to an increasing extent,
due to the resultant atmosphere of "antipathy and antagonism" or "strained
relations" or "irretrievable estrangement" between the employer and the
employee. 22 chanrobles vi rt ual law li bra ry

In lieu of reinstatement, the Court has variously ordered the payment of

backwages and separation pay 23 or solely separation pay. 24 chanrobles vi rtua l law lib ra ry

In the case at bar, the law is on the side of private respondent. In the first
place the wording of the Labor Code is clear and unambiguous: "An
employee who is unjustly dismissed from work shall be entitled to
reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof
statutory construction, if a statute is clears plain and free from ambiguity, it
must be given its literal meaning and applied without attempted
interpretation. This plain-meaning rule or verba legis derived from the
maxim index animi sermo est (speech is the index of intention) rests on the
valid presumption that the words employed by, the legislature in a statute
correctly express its intent or will and preclude the court from construing it
differently. 26The legislature is presumed to know the meaning of the words,
to:have used words advisedly, and to have expressed its intent by the use of
such words as are found in the statute. 27 Verba legis non est recedendum,
or from the words of a statute there should be no departure. Neither does
the provision admit of any qualification. If in the wisdom of the Court, there
may be a ground or grounds for non-application of the above-cited
provision, this should be by way of exception, such as when the
reinstatement may be inadmissible due to ensuing strained relations
between the employer and the employee. chanrob lesvi rtualaw lib raryc han robles v irt ual law li bra ry

In such cases, it should be proved that the employee concerned occupies a

position where he enjoys the trust and confidence of his employer; and that
it is likely that if reinstated, an atmosphere of antipathy and antagonism
may be generated as to adversely affect the efficiency and productivity of
the employee concerned. chan roble svirtualawl ibra rycha nrob les vi rtua l law lib ra ry

A few examples, will suffice to illustrate the Court's application of the above
principles: where the employee is a Vice-President for Marketing and as
such, enjoys the full trust and confidence of top management; 28 or is the
Officer-In-Charge of the extension office of the bank where he works; 29 or
is an organizer of a union who was in a position to sabotage the union's
efforts to organize the workers in commercial and industrial
establishments; 30or is a warehouseman of a non-profit organization whose
primary purpose is to facilitate and maximize voluntary gifts. by foreign
individuals and organizations to the Philippines; 31 or is a manager of its
Energy Equipment Sales. 32 chanro bles vi rtua l law lib ra ry

Obviously, the principle of "strained relations" cannot be applied

indiscriminately. Otherwisey reinstatement can never be possible simply
because some hostility is invariably engendered between the parties as a
result of litigation. That is human nature. 33 chanroble s virtual law l ibra ry

Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise an employee who shall assert his right could
be easily separated from the service, by merely paying his separation pay on
the pretext that his relationship with his employer had already become
strained. 34 chan roble s virt ual law l ibra ry

Here, it has not been proved that the position of private respondent as
systems analyst is one that may be characterized as a position of trust and
confidence such that if reinstated, it may well lead to strained relations
between employer and employee. Hence, this does not constitute an
exception to the general rule mandating reinstatement for an employee who
has been unlawfully dismissed. chan roblesv irtualawl ibra rycha nrob les vi rtua l law lib rary

On the other hand, has she betrayed any confidence reposed in her by
engaging in transactions that may have created conflict of interest
situations? Petitioner GMCR points out that as a matter of company policy, it
prohibits its employees from involving themselves with any company that
has business dealings with GMCR. Consequently, when private respondent
Salazar signed as a witness to the partnership papers of Concave (a supplier
of Ultra which in turn is also a supplier of GMCR), she was deemed to have
placed. herself in an untenable position as far as petitioner was
concerned. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

However, on close scrutiny, we agree with public respondent that such a

circumstance did not create a conflict of interests situation. As a systems
analyst, Salazar was very far removed from operations involving the
procurement of supplies. Salazar's duties revolved around the development
of systems and analysis of designs on a continuing basis. In other words,
Salazar did not occupy a position of trust relative to the approval and
purchase of supplies and company assets. c hanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

In the instant case, petitioner has predicated its dismissal of Salazar on loss
of confidence. As we have held countless times, while loss of confidence or
breach of trust is a valid ground for terminations it must rest an some basis
which must be convincingly established. 35 An employee who not be
dismissed on mere presumptions and suppositions. Petitioner's allegation
that since Salazar and Saldivar lived together in the same apartment, it
"presumed reasonably that complainant's sympathy would be with Saldivar"
and its averment that Saldivar's investigation although unverified, was
probably true, do not pass this Court's test. 36 While we should not condone
the acts of disloyalty of an employee, neither should we dismiss him on the
basis of suspicion derived from speculative inferences. chanro blesvi rt ualawlib ra rychan roble s vi rtual law lib rary

To rely on the Maramara report as a basis for Salazar's dismissal would be

most inequitous because the bulk of the findings centered principally oh her
friend's alleged thievery and anomalous transactions as technical operations'
support manager. Said report merely insinuated that in view of Salazar's
special relationship with Saldivar, Salazar might have had direct knowledge
of Saldivar's questionable activities. Direct evidence implicating private
respondent is wanting from the records. chan roble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

It is also worth emphasizing that the Maramara report came out after
Saldivar had already resigned from GMCR on May 31, 1984. Since Saldivar
did not have the opportunity to refute management's findings, the report
remained obviously one-sided. Since the main evidence obtained by
petitioner dealt principally on the alleged culpability of Saldivar, without his
having had a chance to voice his side in view of his prior resignation,
stringent examination should have been carried out to ascertain whether or
not there existed independent legal grounds to hold Salatar answerable as
well and, thereby, justify her dismissal. Finding none, from the records, we
find her to have been unlawfully dismissed. chan roble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

WHEREFORE, the assailed resolution of public respondent National Labor

Relations Commission dated December 29, 1987 is hereby AFFIRMED.
Petitioner GMCR is ordered to REINSTATE private respondent Imelda Salazar
and to pay her backwages equivalent to her salary for a period of two (2)
years only.cha nrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

This decision is immediately executory.

SECOND DIVISION

[G.R. NO. 170734 : May 14, 2008]

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR

UY, Petitioners, v. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-
NAFLU (SAMARM-NAFLU), Respondent.

DECISION

TINGA, J.:
This treats of the Petition for Review1 of the Resolution2 and Decision3 of the
Court of Appeals dated 9 December 2005 and 29 September 2005,
respectively in CA-G.R. SP No. 85089 entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v.

Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary
Arbitrator Apron M. Mangabat,4 which ruled that the 13th month pay,
vacation leave and sick leave conversion to cash shall be paid in full to the
employees of petitioner regardless of the actual service they rendered within
a year.

Petitioner is a company engaged in the manufacture of metal products,

whereas respondent is the labor union of petitioner's rank and file
employees. Sometime in December 2003, petitioner paid the 13th month
pay, bonus, and leave encashment of three union members in amounts
proportional to the service they actually rendered in a year, which is less
than a full twelve (12) months. The employees were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February

2004
2. Alberto Suspension 10 June 2003 to 1 July 2003
Gamban
3. Rodelio Sickness August 2003 to February 2004
Collantes

Respondent protested the prorated scheme, claiming that on several

occasions petitioner did not prorate the payment of the same benefits to
seven (7) employees who had not served for the full 12 months. The
payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004.
According to respondent, the prorated payment violates the rule against
diminution of benefits under Article 100 of the Labor Code. Thus, they filed a
complaint before the National Conciliation and Mediation Board (NCMB). The
parties submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and

found that the giving of the contested benefits in full, irrespective of the
actual service rendered within one year has not ripened into a practice. He
noted the affidavit of Joselito Baingan, manufacturing group head of
petitioner, which states that the giving in full of the benefit was a mere
error. He also interpreted the phrase "for each year of service" found in the
pertinent CBA provisions to mean that an employee must have rendered one
year of service in order to be entitled to the full benefits provided in the
CBA.5
Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the
Court of Appeals, imputing serious error to Mangabat's conclusion. The Court
of Appeals ruled that the CBA did not intend to foreclose the application of
prorated payments of leave benefits to covered employees. The appellate
court found that petitioner, however, had an existing voluntary practice of
paying the aforesaid benefits in full to its employees, thereby rejecting the
claim that petitioner erred in paying full benefits to its seven employees. The
appellate court noted that aside from the affidavit of petitioner's officer, it
has not presented any evidence in support of its position that it has no
voluntary practice of granting the contested benefits in full and without
regard to the service actually rendered within the year. It also questioned
why it took petitioner eleven (11) years before it was able to discover the
alleged error. The dispositive portion of the court's decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED and the
Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-
345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATIONin that the
13th month pay, bonus, vacation leave and sick leave conversions to cash shall be paid to
the employees in full, irrespective of the actual service rendered within a year.7

Petitioner moved for the reconsideration of the decision but its motion was
denied, hence this petition.

Petitioner submits that the Court of Appeals erred when it ruled that the
grant of 13th month pay, bonus, and leave encashment in full regardless of
actual service rendered constitutes voluntary employer practice and,
consequently, the prorated payment of the said benefits does not constitute
diminution of benefits under Article 100 of the Labor Code.8

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full
benefits regardless of service actually rendered by an employee to the
company. According to petitioner, there is a one-year cutoff in the
entitlement to the benefits provided in the CBA which is evident from the
wording of its pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions
read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to sixteen (16) days vacation leave with pay for each
year of service. Unused leaves shall not be cumulative but shall be converted into its cash
equivalent and shall become due and payable every 1st Saturday of December of each year.
 However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being
a holiday, the management will give the cash conversion of leaves in November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave shall be

paid proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to sixteen (16) days of sick leave with pay for each year
of service. Unused sick leave shall not be cumulative but shall be converted into its cash
equivalent and shall become due and payable every 1st Saturday of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company
physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon retirement or
separation.

ARTICLE XVI - EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees covered by
this agreement and if unused shall be converted into cash and become due and payable on
the 1stSaturday of December each year.

Section 2. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to seven (7) days of Paternity Leave with pay in case
the married employee's legitimate spouse gave birth. Said benefit shall be non-cumulative
and non-commutative and shall be deemed in compliance with the law on the same.

Section 3. Maternity leaves for married female employees shall be in accordance with the
SSS Law plus a cash grant of P1,500.00 per month.

xxx

ARTICLE XVIII - 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by this
agreement. The basis of computing such pay shall be the basic salary per day of the
employee multiplied by 30 and shall become due and payable every 1stSaturday of
December.

Section 2. The Company shall grant a bonus to all employees as practiced which shall be
distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred
Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.9 (Underscoring ours)

There is no doubt that in order to be entitled to the full monetization of

sixteen (16) days of vacation and sick leave, one must have rendered at
least one year of service. The clear wording of the provisions does not allow
any other interpretation. Anent the 13th month pay and bonus, we agree
with the findings of Mangabat that the CBA provisions did not give any
meaning different from that given by the law, thus it should be computed at
1/12 of the total compensation which an employee receives for the whole
calendar year. The bonus is also equivalent to the amount of the 13th month
pay given, or in proportion to the actual service rendered by an employee
within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being
a trier of facts, does not normally embark on a re-examination of the
evidence presented by the contending parties during the trial of the case
considering that the findings of facts of the Court of Appeals are conclusive
and binding on the Court.10 The rule, however, admits of several exceptions,
one of which is when the findings of the Court of Appeals are contrary to
that of the lower tribunals. Such is the case here, as the factual conclusions
of the Court of Appeals differ from that of the voluntary arbitrator.

Petitioner granted, in several instances, full benefits to employees who have

not served a full year, thus:

Name Reason Duration

1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Sickness 23 Aug. 2002 to 4 Feb. 2003
Villaruel
7. Melandro Sickness 29 Aug. 2003 to 30 Sept.
Moque 200311

Petitioner claims that its full payment of benefits regardless of the length of
service to the company does not constitute voluntary employer practice. It
points out that the payments had been erroneously made and they occurred
in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003.
According to petitioner, it was only in 2003 that the accounting department
discovered the error "when there were already three (3) employees involved
with prolonged absences and the error was corrected by implementing the
pro-rata payment of benefits pursuant to law and their existing CBA."12 It
adds that the seven earlier cases of full payment of benefits went unnoticed
considering the proportion of one employee concerned (per year) vis à vis
the 170 employees of the company. Petitioner describes the situation as a
"clear oversight" which should not be taken against it.13 To further bolster its
case, petitioner argues that for a grant of a benefit to be considered a
practice, it should have been practiced over a long period of time and must
be shown to be consistent, deliberate and intentional, which is not what
happened in this case. Petitioner tries to make a case out of the fact that the
CBA has not been modified to incorporate the giving of full benefits
regardless of the length of service, proof that the grant has not ripened into
company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced,

diminished, discontinued or eliminated by the employer.14 The principle of
non-diminution of benefits is founded on the Constitutional mandate to
"protect the rights of workers and promote their welfare,"15 and "to afford
labor full protection."16 Said mandate in turn is the basis of Article 4 of the
Labor Code which states that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations
shall be rendered in favor of labor." Jurisprudence is replete with cases
which recognize the right of employees to benefits which were voluntarily
given by the employer and which ripened into company practice. Thus
in Davao Fruits Corporation v. Associated Labor Unions, et al.17 where an
employer had freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law, we
held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be
withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla
Trading Company v. Semana,18 we ruled that the employer's act of including
non-basic benefits in the computation of the 13th month pay was a voluntary
act and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v.
Abarquez,19 the Court ordered the payment of the cash equivalent of the
unenjoyed sick leave benefits to its intermittent workers after finding that
said workers had received these benefits for almost four years until the
grant was stopped due to a different interpretation of the CBA provisions.
We held that the employer cannot unilaterally withdraw the existing privilege
of commutation or conversion to cash given to said workers, and as also
noted that the employer had in fact granted and paid said cash equivalent of
the unenjoyed portion of the sick leave benefits to some intermittent
workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had
adopted a policy of freely, voluntarily and consistently granting full benefits
to its employees regardless of the length of service rendered. True, there
were only a total of seven employees who benefited from such a practice,
but it was an established practice nonetheless. Jurisprudence has not laid
down any rule specifying a minimum number of years within which a
company practice must be exercised in order to constitute voluntary
company practice.20 Thus, it can be six (6) years,21 three (3) years,22 or
even as short as two (2) years.23 Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error,
supported only by an affidavit of its manufacturing group head portions of
which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave
and emergency leave are computed and paid in full to employees who rendered services to
the company for the entire year and proportionately to those employees who rendered
service to the company for a period less than one (1) year or twelve (12) months in
accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the aforesaid
benefits to the employees in full regardless of whether or not the employee has rendered
services to the company for the entire year, otherwise, it would be unjust and inequitable
not only to the company but to other employees as well.24

In cases involving money claims of employees, the employer has the burden
of proving that the employees did receive the wages and benefits and that
the same were paid in accordance with law.25

Indeed, if petitioner wants to prove that it merely erred in giving full

benefits, it could have easily presented other proofs, such as the names of
other employees who did not fully serve for one year and thus were given
prorated benefits. Experientially, a perfect attendance in the workplace is
always the goal but it is seldom achieved. There must have been other
employees who had reported for work less than a full year and who, as a
consequence received only prorated benefits. This could have easily
bolstered petitioner's theory of mistake/error, but sadly, no evidence to that
effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. SP No. 85089 dated 29 September 2005 is and its
Resolution dated 9 December 2005 are hereby AFFIRMED

FIRST DIVISION

[G.R. NO. 158149 : February 9, 2006]

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF

COMMERCE), Petitioner, v. PERLA P. MANALO and CARLOS MANALO,
JR., Respondents.

DECISION
 CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision1 of the Court

of Appeals (CA) in CA-G.R. CV No. 47458 affirming, on appeal, the
Decision2 of the Regional Trial Court (RTC) of Quezon City, Branch 98, in
Civil Case No. Q-89-3905.

The Antecedents

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon
City, known as the Xavierville Estate Subdivision, with an area of 42
hectares. XEI caused the subdivision of the property into residential lots,
which was then offered for sale to individual lot buyers.3

On September 8, 1967, XEI, through its General Manager, Antonio Ramos,

as vendor, and The Overseas Bank of Manila (OBM), as vendee, executed a
"Deed of Sale of Real Estate" over some residential lots in the subdivision,
including Lot 1, Block 2, with an area of 907.5 square meters, and Lot 2,
Block 2, with an area of 832.80 square meters. The transaction was subject
to the approval of the Board of Directors of OBM, and was covered by real
estate mortgages in favor of the Philippine National Bank as security for its
account amounting to P5,187,000.00, and the Central Bank of the
Philippines as security for advances amounting
to P22,185,193.74.4 Nevertheless, XEI continued selling the residential lots
in the subdivision as agent of OBM.5

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the
services of Engr. Carlos Manalo, Jr. who was in business of drilling deep
water wells and installing pumps under the business name Hurricane
Commercial, Inc. For P34,887.66, Manalo, Jr. installed a water pump at
Ramos' residence at the corner of Aurora Boulevard and Katipunan Avenue,
Quezon City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase
a lot in the Xavierville subdivision, and offered as part of the downpayment
the P34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter
dated February 8, 1972, Ramos requested Manalo, Jr. to choose which lots
he wanted to buy so that the price of the lots and the terms of payment
could be fixed and incorporated in the conditional sale.6 Manalo, Jr. met with
Ramos and informed him that he and his wife Perla had chosen Lots 1 and 2
of Block 2 with a total area of 1,740.3 square meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the
reservation of the lots. He also pegged the price of the lots at P200.00 per
square meter, or a total of P348,060.00, with a 20% down payment of the
purchase price amounting to P69,612.00 less the P34,887.66 owing from
Ramos, payable on or before December 31, 1972; the corresponding
Contract of Conditional Sale would then be signed on or before the same
date, but if the selling operations of XEI resumed after December 31, 1972,
the balance of the downpayment would fall due then, and the spouses would
sign the aforesaid contract within five (5) days from receipt of the notice of
resumption of such selling operations. It was also stated in the letter that, in
the meantime, the spouses may introduce improvements thereon subject to
the rules and regulations imposed by XEI in the subdivision. Perla Manalo
conformed to the letter agreement.7

The spouses Manalo took possession of the property on September 2, 1972,

constructed a house thereon, and installed a fence around the perimeter of
the lots.

In the meantime, many of the lot buyers refused to pay their monthly
installments until they were assured that they would be issued Torrens titles
over the lots they had purchased.8 The spouses Manalo were notified of the
resumption of the selling operations of XEI.9 However, they did not pay the
balance of the downpayment on the lots because Ramos failed to prepare a
contract of conditional sale and transmit the same to Manalo for their
signature. On August 14, 1973, Perla Manalo went to the XEI office and
requested that the payment of the amount representing the balance of the
downpayment be deferred, which, however, XEI rejected. On August 10,
1973, XEI furnished her with a statement of their account as of July 31,
1973, showing that they had a balance of P34,724.34 on the downpayment
of the two lots after deducting the account of Ramos,
plus P3,819.6810 interest thereon from September 1, 1972 to July 31, 1973,
and that the interests on the unpaid balance of the purchase price
of P278,448.00 from September 1, 1972 to July 31, 1973 amounted
to P30,629.28.11 The spouses were informed that they were being billed for
said unpaid interests.12

On January 25, 1974, the spouses Manalo received another statement of

account from XEI, inclusive of interests on the purchase price of the
lots.13 In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated they had not
yet received the notice of resumption of Lei's selling operations, and that
there had been no arrangement on the payment of interests; hence, they
should not be charged with interest on the balance of the downpayment on
the property.14 Further, they demanded that a deed of conditional sale over
the two lots be transmitted to them for their signatures. However, XEI
ignored the demands. Consequently, the spouses refused to pay the balance
of the downpayment of the purchase price.15
Sometime in June 1976, Manalo, Jr. constructed a business sign in the
sidewalk near his house. In a letter dated June 17, 1976, XEI informed
Manalo, Jr. that business signs were not allowed along the sidewalk. It
demanded that he remove the same, on the ground, among others, that the
sidewalk was not part of the land which he had purchased on installment
basis from XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on
September 15, 1977.17

Subsequently, XEI turned over its selling operations to OBM, including the
receivables for lots already contracted and those yet to be sold.18On
December 8, 1977, OBM warned Manalo, Jr., that "putting up of a business
sign is specifically prohibited by their contract of conditional sale" and that
his failure to comply with its demand would impel it to avail of the remedies
as provided in their contract of conditional sale.19

Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer

Certificate of Title (TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-
265823 over Lot 2, Block 2, in favor of the OBM.20 The lien in favor of the
Central Bank of the Philippines was annotated at the dorsal portion of said
title, which was later cancelled on August 4, 1980.21

Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville

Estate from OBM. CBM wrote Edilberto Ng, the president of Xavierville
Homeowners Association that, as of January 31, 1983, Manalo, Jr. was one
of the lot buyers in the subdivision.22 CBM reiterated in its letter to Ng that,
as of January 24, 1984, Manalo was a homeowner in the subdivision.23

In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop
any on-going construction on the property since it (CBM) was the owner of
the lot and she had no permission for such construction.24 She agreed to
have a conference meeting with CBM officers where she informed them that
her husband had a contract with OBM, through XEI, to purchase the
property. When asked to prove her claim, she promised to send the
documents to CBM. However, she failed to do so.25 On September 5, 1986,
CBM reiterated its demand that it be furnished with the documents
promised,26 but Perla Manalo did not respond.

On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the
spouses with the Metropolitan Trial Court of Quezon City. The case was
docketed as Civil Case No. 51618. CBM claimed that the spouses had been
unlawfully occupying the property without its consent and that despite its
demands, they refused to vacate the property. The latter alleged that they,
as vendors, and XEI, as vendee, had a contract of sale over the lots which
had not yet been rescinded.28
While the case was pending, the spouses Manalo wrote CBM to offer an
amicable settlement, promising to abide by the purchase price of the
property (P313,172.34), per agreement with XEI, through Ramos. However,
on July 28, 1988, CBM wrote the spouses, through counsel, proposing that
the price of P1,500.00 per square meter of the property was a reasonable
starting point for negotiation of the settlement.29 The spouses rejected the
counter proposal,30 emphasizing that they would abide by their original
agreement with XEI. CBM moved to withdraw its complaint31 because of the
issues raised.32

In the meantime, the CBM was renamed the Boston Bank of the Philippines.
After CBM filed its complaint against the spouses Manalo, the latter filed a
complaint for specific performance and damages against the bank before the
Regional Trial Court (RTC) of Quezon City on October 31, 1989.

The plaintiffs alleged therein that they had always been ready, able and
willing to pay the installments on the lots sold to them by the defendant's
remote predecessor-in-interest, as might be or stipulated in the contract of
sale, but no contract was forthcoming; they constructed their house
worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed
the defendant, through its counsel, on October 15, 1988 that he would abide
by the terms and conditions of his original agreement with the defendant's
predecessor-in-interest; during the hearing of the ejectment case on
October 16, 1988, they offered to pay P313,172.34 representing the balance
on the purchase price of said lots; such tender of payment was rejected, so
that the subject lots could be sold at considerably higher prices to third
parties.

Plaintiffs further alleged that upon payment of the P313,172.34, they were
entitled to the execution and delivery of a Deed of Absolute Sale covering
the subject lots, sufficient in form and substance to transfer title thereto free
and clear of any and all liens and encumbrances of whatever kind and
nature.33 The plaintiffs prayed that, after due hearing, judgment be rendered
in their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:

(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over
subject lots in favor of the plaintiffs after payment of the sum of P313,172.34, sufficient in
form and substance to transfer to them titles thereto free and clear of any and all liens and
encumbrances of whatever kind or nature;

(b) The defendant should be held liable for moral and exemplary damages in the amounts
of P300,000.00 and P30,000.00, respectively, for not promptly executing and delivering to
plaintiff the necessary Contract of Sale, notwithstanding repeated demands therefor and for
having been constrained to engage the services of undersigned counsel for which they
 agreed to pay attorney's fees in the sum of P50,000.00 to enforce their rights in the
premises and appearance fee of P500.00;

(c) And for such other and further relief as may be just and equitable in the premises.34

In its Answer to the complaint, the defendant interposed the following

affirmative defenses: (a) plaintiffs had no cause of action against it because
the August 22, 1972 letter agreement between XEI and the plaintiffs was not
binding on it; and (b) "it had no record of any contract to sell executed by it
or its predecessor, or of any statement of accounts from its predecessors, or
records of payments of the plaintiffs or of any documents which entitled
them to the possession of the lots."35 The defendant, likewise, interposed
counterclaims for damages and attorney's fees and prayed for the eviction of
the plaintiffs from the property.36

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel,

proposed an amicable settlement of the case by paying P942,648.70,
representing the balance of the purchase price of the two lots based on the
current market value.37 However, the defendant rejected the same and
insisted that for the smaller lot, they pay P4,500,000.00, the current market
value of the property.38 The defendant insisted that it owned the property
since there was no contract or agreement between it and the plaintiffs'
relative thereto.

During the trial, the plaintiffs adduced in evidence the separate Contracts of
Conditional Sale executed between XEI and Alberto Soller;39 Alfredo
Aguila,40 and Dra. Elena Santos-Roque41 to prove that XEI continued selling
residential lots in the subdivision as agent of OBM after the latter had
acquired the said lots.

For its part, defendant presented in evidence the letter dated August 22,
1972, where XEI proposed to sell the two lots subject to two suspensive
conditions: the payment of the balance of the downpayment of the property,
and the execution of the corresponding contract of conditional sale. Since
plaintiffs failed to pay, OBM consequently refused to execute the
corresponding contract of conditional sale and forfeited the P34,877.66
downpayment for the two lots, but did not notify them of said forfeiture.42 It
alleged that OBM considered the lots unsold because the titles thereto bore
no annotation that they had been sold under a contract of conditional sale,
and the plaintiffs were not notified of XEI's resumption of its selling
operations.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and
against the defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant '

(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2,
Block 2 of the Xavierville Estate Subdivision after payment of the sum of P942,978.70
sufficient in form and substance to transfer to them titles thereto free from any and all liens
and encumbrances of whatever kind and nature.

(b) Ordering the defendant to pay moral and exemplary damages in the amount
of P150,000.00; and cralawlibra ry

(c) To pay attorney's fees in the sum of P50,000.00 and to pay the costs.

SO ORDERED.43

The trial court ruled that under the August 22, 1972 letter agreement of XEI
and the plaintiffs, the parties had a "complete contract to sell" over the lots,
and that they had already partially consummated the same. It declared that
the failure of the defendant to notify the plaintiffs of the resumption of its
selling operations and to execute a deed of conditional sale did not prevent
the defendant's obligation to convey titles to the lots from acquiring binding
effect. Consequently, the plaintiffs had a cause of action to compel the
defendant to execute a deed of sale over the lots in their favor.

Boston Bank appealed the decision to the CA, alleging that the lower court
erred in (a) not concluding that the letter of XEI to the spouses Manalo, was
at most a mere contract to sell subject to suspensive conditions, i.e., the
payment of the balance of the downpayment on the property and the
execution of a deed of conditional sale (which were not complied with); and
(b) in awarding moral and exemplary damages to the spouses Manalo
despite the absence of testimony providing facts to justify such awards.44

On September 30, 2002, the CA rendered a decision affirming that of the

RTC with modification. The fallo reads:

WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that

(a) the figure "P942,978.70" appearing [in] par. (a) of the dispositive
portion thereof is changed to "P313,172.34 plus interest thereon at the rate
of 12% per annum from September 1, 1972 until fully paid" and (b) the
award of moral and exemplary damages and attorney's fees in favor of
plaintiffs-appellees is DELETED.

SO ORDERED.45

The appellate court sustained the ruling of the RTC that the appellant and
the appellees had executed a Contract to Sell over the two lots but declared
that the balance of the purchase price of the property amounting
to P278,448.00 was payable in fixed amounts, inclusive of pre-computed
interests, from delivery of the possession of the property to the appellees on
a monthly basis for 120 months, based on the deeds of conditional sale
executed by XEI in favor of other lot buyers.46 The CA also declared that,
while XEI must have resumed its selling operations before the end of 1972
and the downpayment on the property remained unpaid as of December 31,
1972, absent a written notice of cancellation of the contract to sell from the
bank or notarial demand therefor as required by Republic Act No. 6552, the
spouses had, at the very least, a 60-day grace period from January 1, 1973
within which to pay the same.

Boston Bank filed a motion for the reconsideration of the decision alleging
that there was no perfected contract to sell the two lots, as there was no
agreement between XEI and the respondents on the manner of payment as
well as the other terms and conditions of the sale. It further averred that its
claim for recovery of possession of the aforesaid lots in its Memorandum
dated February 28, 1994 filed before the trial court constituted a judicial
demand for rescission that satisfied the requirements of the New Civil Code.
However, the appellate court denied the motion.

Boston Bank, now petitioner, filed the instant Petition for Review
on Certiorari assailing the CA rulings. It maintains that, as held by the CA,
the records do not reflect any schedule of payment of the 80% balance of
the purchase price, or P278,448.00. Petitioner insists that unless the parties
had agreed on the manner of payment of the principal amount, including the
other terms and conditions of the contract, there would be no existing
contract of sale or contract to sell.47 Petitioner avers that the letter
agreement to respondent spouses dated August 22, 1972 merely confirmed
their reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3
square meters, more or less, at the price of P200.00 per square meter
(or P348,060.00), the amount of the downpayment thereon and the
application of the P34,887.00 due from Ramos as part of such
downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the
terms and conditions relating to the payment of the balance of the purchase
price of the property (as agreed upon by XEI and other lot buyers in the
same subdivision) were also applicable to the contract entered into between
the petitioner and the Respondents. It insists that such a ruling is contrary
to law, as it is tantamount to compelling the parties to agree to something
that was not even discussed, thus, violating their freedom to contract.
Besides, the situation of the respondents cannot be equated with those of
the other lot buyers, as, for one thing, the respondents made a partial
payment on the downpayment for the two lots even before the execution of
any contract of conditional sale.

Petitioner posits that, even on the assumption that there was a perfected
contract to sell between the parties, nevertheless, it cannot be compelled to
convey the property to the respondents because the latter failed to pay the
balance of the downpayment of the property, as well as the balance of 80%
of the purchase price, thus resulting in the extinction of its obligation to
convey title to the lots to the Respondents.

Another egregious error of the CA, petitioner avers, is the application of

Republic Act No. 6552. It insists that such law applies only to a perfected
agreement or perfected contract to sell, not in this case where the
downpayment on the purchase price of the property was not completely
paid, and no installment payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a
notice on the respondents of cancellation or rescission of the contract to sell,
or notarial demand therefor. Petitioner insists that its August 5, 1986 letter
requiring respondents to vacate the property and its complaint for ejectment
in Civil Case No. 51618 filed in the Metropolitan Trial Court amounted to the
requisite demand for a rescission of the contract to sell. Moreover, the action
of the respondents below was barred by laches because despite demands,
they failed to pay the balance of the purchase price of the lots (let alone the
downpayment) for a considerable number of years.

For their part, respondents assert that as long as there is a meeting of the
minds of the parties to a contract of sale as to the price, the contract is valid
despite the parties' failure to agree on the manner of payment. In such a
situation, the balance of the purchase price would be payable on demand,
conformably to Article 1169 of the New Civil Code. They insist that the law
does not require a party to agree on the manner of payment of the purchase
price as a prerequisite to a valid contract to sell. The respondents cite the
ruling of this Court in Buenaventura v. Court of Appeals48 to support their
submission.

They argue that even if the manner and timeline for the payment of the
balance of the purchase price of the property is an essential requisite of a
contract to sell, nevertheless, as shown by their letter agreement of August
22, 1972 with the OBM, through XEI and the other letters to them, an
agreement was reached as to the manner of payment of the balance of the
purchase price. They point out that such letters referred to the terms of the
terms of the deeds of conditional sale executed by XEI in favor of the other
lot buyers in the subdivision, which contained uniform terms of 120 equal
monthly installments (excluding the downpayment, but inclusive of pre-
computed interests). The respondents assert that XEI was a real estate
broker and knew that the contracts involving residential lots in the
subdivision contained uniform terms as to the manner and timeline of the
payment of the purchase price of said lots.

Respondents further posit that the terms and conditions to be incorporated

in the "corresponding contract of conditional sale" to be executed by the
parties would be the same as those contained in the contracts of conditional
sale executed by lot buyers in the subdivision. After all, they maintain, the
contents of the corresponding contract of conditional sale referred to in the
August 22, 1972 letter agreement envisaged those contained in the
contracts of conditional sale that XEI and other lot buyers executed.
Respondents cite the ruling of this Court in Mitsui Bussan Kaisha v. Manila
E.R.R. & L. Co.49

The respondents aver that the issues raised by the petitioner are factual,
inappropriate in a Petition for Review on Certiorari under Rule 45 of the
Rules of Court. They assert that petitioner adopted a theory in litigating the
case in the trial court, but changed the same on appeal before the CA, and
again in this Court. They argue that the petitioner is estopped from adopting
a new theory contrary to those it had adopted in the trial and appellate
courts. Moreover, the existence of a contract of conditional sale was
admitted in the letters of XEI and OBM. They aver that they became owners
of the lots upon delivery to them by XEI.

The issues for resolution are the following: (1) whether the factual issues
raised by the petitioner are proper; (2) whether petitioner or its
predecessors-in-interest, the XEI or the OBM, as seller, and the respondents,
as buyers, forged a perfect contract to sell over the property; (3) whether
petitioner is estopped from contending that no such contract was forged by
the parties; and (4) whether respondents has a cause of action against the
petitioner for specific performance.

The rule is that before this Court, only legal issues may be raised in a
Petition for Review on Certiorari . The reason is that this Court is not a trier
of facts, and is not to review and calibrate the evidence on record. Moreover,
the findings of facts of the trial court, as affirmed on appeal by the Court of
Appeals, are conclusive on this Court unless the case falls under any of the
following exceptions:

(1) when the conclusion is a finding grounded entirely on speculations,

surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when the Court of Appeals,
in making its findings went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the findings of fact
are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the respondents; and
(10) when the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record.50

We have reviewed the records and we find that, indeed, the ruling of the
appellate court dismissing petitioner's appeal is contrary to law and is not
supported by evidence. A careful examination of the factual backdrop of the
case, as well as the antecedental proceedings constrains us to hold that
petitioner is not barred from asserting that XEI or OBM, on one hand, and
the respondents, on the other, failed to forge a perfected contract to sell the
subject lots.

It must be stressed that the Court may consider an issue not raised during
the trial when there is plain error.51 Although a factual issue was not raised
in the trial court, such issue may still be considered and resolved by the
Court in the interest of substantial justice, if it finds that to do so is
necessary to arrive at a just decision,52 or when an issue is closely related to
an issue raised in the trial court and the Court of Appeals and is necessary
for a just and complete resolution of the case.53 When the trial court decides
a case in favor of a party on certain grounds, the Court may base its
decision upon some other points, which the trial court or appellate court
ignored or erroneously decided in favor of a party.54

In this case, the issue of whether XEI had agreed to allow the respondents
to pay the purchase price of the property was raised by the parties. The trial
court ruled that the parties had perfected a contract to sell, as against
petitioner's claim that no such contract existed. However, in resolving the
issue of whether the petitioner was obliged to sell the property to the
respondents, while the CA declared that XEI or OBM and the respondents
failed to agree on the schedule of payment of the balance of the purchase
price of the property, it ruled that XEI and the respondents had forged a
contract to sell; hence, petitioner is entitled to ventilate the issue before this
Court.

We agree with petitioner's contention that, for a perfected contract of sale or

contract to sell to exist in law, there must be an agreement of the parties,
not only on the price of the property sold, but also on the manner the price
is to be paid by the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether
absolute or conditional, one of the contracting parties obliges himself to
transfer the ownership of and deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent. A contract of sale is
perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and the price. From the averment of
perfection, the parties are bound, not only to the fulfillment of what has
been expressly stipulated, but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law.55 On the
other hand, when the contract of sale or to sell is not perfected, it cannot, as
an independent source of obligation, serve as a binding juridical relation
between the parties.56

A definite agreement as to the price is an essential element of a binding

agreement to sell personal or real property because it seriously affects the
rights and obligations of the parties. Price is an essential element in the
formation of a binding and enforceable contract of sale. The fixing of the
price can never be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the other, gives
rise to a perfected sale.57

It is not enough for the parties to agree on the price of the property. The
parties must also agree on the manner of payment of the price of the
property to give rise to a binding and enforceable contract of sale or contract
to sell. This is so because the agreement as to the manner of payment goes
into the price, such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.58

In a contract to sell property by installments, it is not enough that the

parties agree on the price as well as the amount of downpayment. The
parties must, likewise, agree on the manner of payment of the balance of
the purchase price and on the other terms and conditions relative to the
sale. Even if the buyer makes a downpayment or portion thereof, such
payment cannot be considered as sufficient proof of the perfection of any
purchase and sale between the parties. Indeed, this Court ruled in Velasco v.
Court of Appeals59 that:

It is not difficult to glean from the aforequoted averments that the

petitioners themselves admit that they and the respondent still had to meet
and agree on how and when the down-payment and the installment
payments were to be paid. Such being the situation, it cannot, therefore, be
said that a definite and firm sales agreement between the parties had been
perfected over the lot in question. Indeed, this Court has already ruled
before that a definite agreement on the manner of payment of the purchase
price is an essential element in the formation of a binding and enforceable
contract of sale. The fact, therefore, that the petitioners delivered to the
respondent the sum of P10,000.00 as part of the downpayment that they
had to pay cannot be considered as sufficient proof of the perfection of any
purchase and sale agreement between the parties herein under article 1482
of the New Civil Code, as the petitioners themselves admit that some
essential matter - the terms of payment - still had to be mutually
covenanted.60

We agree with the contention of the petitioner that, as held by the CA, there
is no showing, in the records, of the schedule of payment of the balance of
the purchase price on the property amounting to P278,448.00. We have
meticulously reviewed the records, including Ramos' February 8, 1972 and
August 22, 1972 letters to respondents,61and find that said parties confined
themselves to agreeing on the price of the property (P348,060.00), the 20%
downpayment of the purchase price (P69,612.00), and credited respondents
for the P34,887.00 owing from Ramos as part of the 20% downpayment.
The timeline for the payment of the balance of the downpayment
(P34,724.34) was also agreed upon, that is, on or before XEI resumed its
selling operations, on or before December 31, 1972, or within five (5) days
from written notice of such resumption of selling operations. The parties had
also agreed to incorporate all the terms and conditions relating to the sale,
inclusive of the terms of payment of the balance of the purchase price and
the other substantial terms and conditions in the "corresponding contract of
conditional sale," to be later signed by the parties, simultaneously with
respondents' settlement of the balance of the downpayment.

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.

Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:

We agree with your verbal offer to exchange the proceeds of your contract with us to form
as a down payment for a lot in our Xavierville Estate Subdivision.

Please let us know your choice lot so that we can fix the price and terms of payment in
our conditional sale.

Sincerely yours,

XAVIERVILLE ESTATE, INC.

 (Signed)
EMERITO B. RAMOS, JR.
President

CONFORME:

(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling62

The August 22, 1972 letter agreement of XEI and the respondents reads:

Mrs. Perla P. Manalo

1548 Rizal Avenue Extensionbr>Caloocan City

Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-
subdivision plan as amended, consisting of 1,740.3 square meters more or less, at the price
of P200.00 per square meter or a total price of P348,060.00.

It is agreed that as soon as we resume selling operations, you must pay a down payment of
20% of the purchase price of the said lots and sign the corresponding Contract of
Conditional Sale, on or before December 31, 1972, provided, however, that if we resume
selling after December 31, 1972, then you must pay the aforementioned down payment
and sign the aforesaid contract within five (5) days from your receipt of our notice of
resumption of selling operations.

In the meanwhile, you may introduce such improvements on the said lots as you may
desire, subject to the rules and regulations of the subdivision.

If the above terms and conditions are acceptable to you, please signify your conformity by
signing on the space herein below provided.

Thank you.

Very truly yours,

XAVIERVILLE ESTATE, INC. CONFORME:

By:

(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO

President Buyer63

Based on these two letters, the determination of the terms of payment of

the P278,448.00 had yet to be agreed upon on or before December 31,
1972, or even afterwards, when the parties sign the corresponding contract
of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left
for future negotiations, the same is too indefinite to be enforceable.64 And
when an essential element of a contract is reserved for future agreement of
the parties, no legal obligation arises until such future agreement is
concluded.65

So long as an essential element entering into the proposed obligation of

either of the parties remains to be determined by an agreement which they
are to make, the contract is incomplete and unenforceable.66 The reason is
that such a contract is lacking in the necessary qualities of definiteness,
certainty and mutuality.67

There is no evidence on record to prove that XEI or OBM and the

respondents had agreed, after December 31, 1972, on the terms of payment
of the balance of the purchase price of the property and the other
substantial terms and conditions relative to the sale. Indeed, the parties are
in agreement that there had been no contract of conditional sale ever
executed by XEI, OBM or petitioner, as vendor, and the respondents, as
vendees.68

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing

in this case because the issue of the manner of payment of the purchase
price of the property was not raised therein.

We reject the submission of respondents that they and Ramos had intended
to incorporate the terms of payment contained in the three contracts of
conditional sale executed by XEI and other lot buyers in the "corresponding
contract of conditional sale," which would later be signed by them.69 We
have meticulously reviewed the respondents' complaint and find no such
allegation therein.70 Indeed, respondents merely alleged in their complaint
that they were bound to pay the balance of the purchase price of the
property "in installments." When respondent Manalo, Jr. testified, he was
never asked, on direct examination or even on cross-examination, whether
the terms of payment of the balance of the purchase price of the lots under
the contracts of conditional sale executed by XEI and other lot buyers would
form part of the "corresponding contract of conditional sale" to be signed by
them simultaneously with the payment of the balance of the downpayment
on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost
three years from the execution by the parties of their August 22, 1972 letter
agreement, XEI stated, in part, that respondents had purchased the
property "on installment basis."71 However, in the said letter, XEI failed to
state a specific amount for each installment, and whether such payments
were to be made monthly, semi-annually, or annually. Also, respondents, as
plaintiffs below, failed to adduce a shred of evidence to prove that they were
obliged to pay the P278,448.00 monthly, semi-annually or annually. The
allegation that the payment of the P278,448.00 was to be paid in
installments is, thus, vague and indefinite. Case law is that, for a contract to
be enforceable, its terms must be certain and explicit, not vague or
indefinite.72

There is no factual and legal basis for the CA ruling that, based on the terms
of payment of the balance of the purchase price of the lots under the
contracts of conditional sale executed by XEI and the other lot buyers,
respondents were obliged to pay the P278,448.00 with pre-computed
interest of 12% per annum in 120-month installments. As gleaned from the
ruling of the appellate court, it failed to justify its use of the terms of
payment under the three "contracts of conditional sale" as basis for such
ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of
the purchase price, net of the downpayment. Considering, however, the
Contracts of Conditional Sale (Exhs. "N," "O" and "P") entered into by XEI
with other lot buyers, it would appear that the subdivision lots sold by XEI,
under contracts to sell, were payable in 120 equal monthly installments
(exclusive of the downpayment but including pre-computed interests)
commencing on delivery of the lot to the buyer.73

By its ruling, the CA unilaterally supplied an essential element to the letter

agreement of XEI and the Respondents. Courts should not undertake to
make a contract for the parties, nor can it enforce one, the terms of which
are in doubt.74 Indeed, the Court emphasized in Chua v. Court of
Appeals75 that it is not the province of a court to alter a contract by
construction or to make a new contract for the parties; its duty is confined to
the interpretation of the one which they have made for themselves, without
regard to its wisdom or folly, as the court cannot supply material stipulations
or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the

terms of payment of the P278,448.00 to be incorporated in the
"corresponding contract of conditional sale" were those contained in the
contracts of conditional sale executed by XEI and Soller, Aguila and
Roque.76 They likewise failed to prove such allegation in this Court.

The bare fact that other lot buyers were allowed to pay the balance of the
purchase price of lots purchased by them in 120 or 180 monthly installments
does not constitute evidence that XEI also agreed to give the respondents
the same mode and timeline of payment of the P278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one
did a certain thing at one time is not admissible to prove that he did the
same or similar thing at another time, although such evidence may be
received to prove habit, usage, pattern of conduct or the intent of the
parties.

Similar acts as evidence. - Evidence that one did or did not do a certain
thing at one time is not admissible to prove that he did or did not do the
same or a similar thing at another time; but it may be received to prove a
specific intent or knowledge, identity, plan, system, scheme, habit, custom
or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a
matter of business usage, habit or pattern of conduct, XEI granted all lot
buyers the right to pay the balance of the purchase price in installments of
120 months of fixed amounts with pre-computed interests, and that XEI and
the respondents had intended to adopt such terms of payment relative to
the sale of the two lots in question. Indeed, respondents adduced in
evidence the three contracts of conditional sale executed by XEI and other
lot buyers merely to prove that XEI continued to sell lots in the subdivision
as sales agent of OBM after it acquired said lots, not to prove usage, habit or
pattern of conduct on the part of XEI to require all lot buyers in the
subdivision to pay the balance of the purchase price of said lots in 120
months. It further failed to prive that the trial court admitted the said
deeds77 as part of the testimony of respondent Manalo, Jr.78

Habit, custom, usage or pattern of conduct must be proved like any other
facts. Courts must contend with the caveat that, before they admit evidence
of usage, of habit or pattern of conduct, the offering party must establish
the degree of specificity and frequency of uniform response that ensures
more than a mere tendency to act in a given manner but rather, conduct
that is semi-automatic in nature. The offering party must allege and prove
specific, repetitive conduct that might constitute evidence of habit. The
examples offered in evidence to prove habit, or pattern of evidence must be
numerous enough to base on inference of systematic conduct. Mere
similarity of contracts does not present the kind of sufficiently similar
circumstances to outweigh the danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently

regular, the key criteria are adequacy of sampling and uniformity of
response. After all, habit means a course of behavior of a person regularly
represented in like circumstances.79 It is only when examples offered to
establish pattern of conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are admissible. The key
criteria are adequacy of sampling and uniformity of response or ratio of
reaction to situations.80

There are cases where the course of dealings to be followed is defined by the
usage of a particular trade or market or profession. As expostulated by
Justice Benjamin Cardozo of the United States Supreme Court: "Life casts
the moulds of conduct, which will someday become fixed as law. Law
preserves the moulds which have taken form and shape from life."81 Usage
furnishes a standard for the measurement of many of the rights and acts of
men.82 It is also well-settled that parties who contract on a subject matter
concerning which known usage prevail, incorporate such usage by
implication into their agreement, if nothing is said to be contrary.83

However, the respondents inexplicably failed to adduce sufficient competent

evidence to prove usage, habit or pattern of conduct of XEI to justify the use
of the terms of payment in the contracts of the other lot buyers, and thus
grant respondents the right to pay the P278,448.00 in 120 months,
presumably because of respondents' belief that the manner of payment of
the said amount is not an essential element of a contract to sell. There is no
evidence that XEI or OBM and all the lot buyers in the subdivision, including
lot buyers who pay part of the downpayment of the property purchased by
them in the form of service, had executed contracts of conditional sale
containing uniform terms and conditions. Moreover, under the terms of the
contracts of conditional sale executed by XEI and three lot buyers in the
subdivision, XEI agreed to grant 120 months within which to pay the balance
of the purchase price to two of them, but granted one 180 months to do
so.84There is no evidence on record that XEI granted the same right to
buyers of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the
property sold may be considered certain if it be so with reference to another
thing certain. It is sufficient if it can be determined by the stipulations of the
contract made by the parties thereto85 or by reference to an agreement
incorporated in the contract of sale or contract to sell or if it is capable of
being ascertained with certainty in said contract;86 or if the contract contains
express or implied provisions by which it may be rendered certain;87 or if it
provides some method or criterion by which it can be definitely
ascertained.88 As this Court held in Villaraza v. Court of Appeals,89 the price
is considered certain if, by its terms, the contract furnishes a basis or
measure for ascertaining the amount agreed upon.
We have carefully reviewed the August 22, 1972 letter agreement of the
parties and find no direct or implied reference to the manner and schedule of
payment of the balance of the purchase price of the lots covered by the
deeds of conditional sale executed by XEI and that of the other lot
buyers90 as basis for or mode of determination of the schedule of the
payment by the respondents of the P278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad
and Light Company91 is not applicable in this case because the basic price
fixed in the contract was P9.45 per long ton, but it was stipulated that the
price was subject to modification "in proportion to variations in calories and
ash content, and not otherwise." In this case, the parties did not fix in their
letters-agreement, any method or mode of determining the terms of
payment of the balance of the purchase price of the property amounting
to P278,448.00.

It bears stressing that the respondents failed and refused to pay the balance
of the downpayment and of the purchase price of the property amounting
to P278,448.00 despite notice to them of the resumption by XEI of its selling
operations. The respondents enjoyed possession of the property without
paying a centavo. On the other hand, XEI and OBM failed and refused to
transmit a contract of conditional sale to the Respondents. The respondents
could have at least consigned the balance of the downpayment after notice
of the resumption of the selling operations of XEI and filed an action to
compel XEI or OBM to transmit to them the said contract; however, they
failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to
forge a perfected contract to sell the two lots; hence, respondents have no
cause of action for specific performance against petitioner. Republic Act No.
6552 applies only to a perfected contract to sell and not to a contract with
no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of

the Court of Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City, Branch 98 is ordered to dismiss the
complaint. Costs against the Respondents