January 17, 2018

G.R. No. 219435

ALLIED BANKING CORPORATION, now merged with PHILIPPINE NATIONAL
BANK, Petitioner
vs.
REYNOLD CALUMPANG, Respondent
DECISION
VELASCO, J.:
The Case
Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules of
Court for the reversal and setting aside of the Decision1 dated September 12, 2014 and
the Resolution2 dated June 9, 2015 of the Court of Appeals (CA) - Cebu City in CA-G.R.
CEB SP No. 02906, which affirmed the findings of the National Labor Relations
Commission (NLRC) and of the Labor Arbiter, declaring respondent to have been
illegally dismissed by petitioner.
The Facts
3
Petitioner Allied Banking Corporation  ("Bank") and Race Cleaners, Inc. ("RCI"), a
corporation engaged in the business of janitorial and manpower services, had entered
into a Service Agreement whereby the latter provided the former with messengerial,
janitorial, communication, and maintenance services and the personnel therefor.4
On September 28, 2003, respondent Reynold Calumpang was hired as a janitor by RCI
and was assigned at the Bank's Tanjay City Branch ("the Branch"). He was tasked to
perform janitorial work and messengerial/ errand services. His job required him to be
out of the Branch at times to nm errands such as delivering statements and checks for
clearing, mailing letters, among others.5
Petitioner, however, observed that whenever respondent went out on errands, it takes a
long time for him to return to the Branch. It was eventually discovered that during these
times, respondent was also plying his pedicab and ferrying passengers. Petitioner also
found out through several clients of the Branch who informed the Bank Manager, Mr.
Oscar Infante, that respondent had been borrowing money from them. Because of these
acts, Mr. Infante informed respondent that his services would no longer be required at
the Branch.6
Disgruntled, respondent thereafter filed a complaint for illegal dismissal and
underpayment of wages against petitioner before the NLRC,7 which was docketed as
RAB VII-07-0094-2005-D.8
In his position paper, respondent asserted that the four-fold test of employer-employee
relationship is present between him and the Bank.9 First, he averred that he was a
regular employee of the Bank assigned as a Janitor of the Branch with a salary of
₱4,200 payable every 15 days each month, and assigned such other tasks essential
and necessary for the Bank's business.10
He alleged that petitioner engaged his services and exercised direct control and
supervision over him through the Branch Head, Oscar Infante, not only as to the results
of his work but also as to the means and methods by which the same was to be
accomplished. According to respondent, Infante gives the direct orders on the work to
be done and accomplished during working days, such as "m[o]pping, cleaning the
comfort room of the [B]ank, arrang[ing] furniture and fixture, bank documents, throw[ing]
garbage/waste disposal, cleaning the windows, tables and teller cage" as well as
directing him to "do messengerial/errand services such as mailing of letters, delivery of
bank statements and deliver[ing] checks for clearing."11
As regards the payment of salary, respondent claimed that it was the Branch that
directly paid his salaries and wages every "quincina."12 As for the power of dismissal,
respondent further alleged that it was petitioner Bank, through its Branch Head, who
terminated his services.13
For its part, petitioner alleged that respondent was not its employee, but that of RCI,
with which it had entered into a Service Agreement to provide "messengerial, janitorial,
communications and maintenance services and the personnel therefor."14 It claimed that
while respondent was required to be out of the Branch at times to accomplish his tasks,
it was observed that whenever he went out on these errands, he would take a long time
to return to the Branch. Petitioner eventually discovered that during these times,
respondent was "also plying his pedicab and ferrying passengers." Aside from this,
petitioner averred that several clients of the Branch informed Infante that respondent
had been borrowing money from them "owing to his familiarity with said clients." Upon
discovering these incidents, petitioner "had no choice but to have complainant relieved
and replaced." Accordingly, Infante informed respondent that his services would no
longer be required by the Branch.15
Petitioner denied the existence of any employer-employee relationship between itself
and respondent. It asserted that respondent was clearly an employee of RCI by virtue of
the Service Agreement which clearly indicated in Article XI thereof that there would be
no employer-employee relationship between RCI's employees and the Bank.16 It further
averred that RCI is a qualified job contractor because of its capitalization and the fact
that it exercised control and supervision over its employees deployed at the branches of
the petitioner in accordance with Rule VIII-A, Sec. 4, pars. (d) and (e) of the Omnibus
Rules Implementing the Labor Code.17
Furthermore, petitioner argued that it was merely exercising its prerogative under the
Service Agreement to seek the replacement or relief of any personnel assigned by RCI
when the Branch Head informed respondent that his services would no longer be
required at the Branch. According to petitioner, this decision to replace respondent was
not equivalent to termination of employment, especially since it was neither whimsical
nor arbitrary.18 Thus, petitioner concludes that, in the absence of any employer-
employee relationship between the parties, respondent had no cause of action against
petitioner for illegal dismissal, damages and other claims.19
Ruling of the Labor Arbiter
20
In its Decision  dated March 28, 2006, the Labor Arbiter ruled in favor of respondent,
the dispositive portion of which reads:
WHEREFORE, foregoing considered, complainant is hereby declared to be an
employee of respondent Allied Banking Corporation. It is declared further that
complainant has been illegally dismissed. Respondent Allied Banking Corporation is
hereby ordered to reinstate complainant to his former position without loss of seniority
rights or privileges, with full backwages from the time his salary was withheld until his
actual reinstatement, which is tentatively computed in the amount of ₱37,800.00.
Should reinstatement be unfeasible for valid reasons, respondent is ordered to pay the
complainant separation pay of one month salary per year of service, a fraction of six
months is considered as one year which is computed in the amount of ₱46,200.
SO ORDERED.21
The Labor Arbiter held that there was an employer-employee relationship between
petitioner and respondent, based on the following findings: (a) Respondent rendered
services to petitioner for eleven (11) unbroken years; (b) There was no evidence of a
Service Agreement between petitioner and RCI; (c) There was no evidence of a request
for replacement of respondent made by petitioner with RCI; (d) Respondent was directly
paid by petitioner and not through RCI; (e) Respondent's work was directly controlled
and supervised by petitioner; (f) It was petitioner who terminated the services of
respondent with no participation of RCI whatsoever; and (g) RCI disowned any
employment relationship with respondent.22
Considering its finding of the existence of an employer-employee relationship between
petitioner and respondent, the Labor Arbiter further ruled that the reason and manner by
which respondent was terminated fell short of the requirements of the law since due
process was not observed. Accordingly, respondent was declared to have been illegally
dismissed and ordered to be reinstated without loss of seniority or privileges, with full
backwages.23
Aggrieved, petitioner immediately filed a Notice of Appeal and Memorandum of Appeal
with the NLRC, which was docketed as NLRC Case No. V-000628-2006.24
Ruling of the National Labor Relations Commission
The NLRC affirmed the decision of the Labor Arbiter in its Decision dated February 16,
2007, to wit:
WHEREFORE, premises considered, the appeal of respondent Allied Banking
Corporation is hereby DISMISSED for lack of merit and the appealed Decision is
AFFIRMED.
SO ORDERED.25
Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner exercised all
the elements of an employer-employee relationship through the payment of wages,
control and supervision over complainant's work and the power of dismissal.26 The
NLRC discredited petitioner's argument that it merely exercised its prerogative to seek
for a replacement or relief of any personnel assigned by RCI absent any evidence that it
sought respondent's relief from RCI.27
Petitioner moved for the reconsideration of the NLRC Decision,28 but the same was
denied in a Resolution dated May 17, 2007.29 Thus, petitioner elevated the matter to the
CA in a petition which was docketed as CA-G.R. SP No. 02906.30
Ruling of the Court of Appeals
In the assailed Decision dated September 12, 2014, the CA denied the petition and
upheld the rulings of the Labor Arbiter and the NLRC. The dispositive portion of the
assailed Decision reads:
WHEREFORE, premises considered, the petition is hereby DENIED. The NLRC
Decision dated 16 February 2007 and the Resolution dated 17 May 2007, in RAB VII
Case No. 07-0094-2005-D, is AFFIRMED.
The Labor Arbiter is hereby ordered to re-compute the award of backwages and
separation pay in accordance with the above disquisitions.
SO ORDERED.31
The CA ruled that RCI is a labor-only contractor. It applied the test of independent
contractorship that "whether one claiming to be an independent contractor has
contracted to do work according to his own methods and without being subject to the
control of the employer, except only as to the results of the work" in determining that
RCI merely served as an agent of petitioner bank and that respondent was truly an
employee of petitioner.32
As to the issue of the propriety of respondent's dismissal, the CA affirmed the findings of
the Labor Arbiter and the NLRC that petitioner Bank failed to give respondent ample
opportunity to contest the legality of his dismissal since no notice of termination was
given to him. Consequently, the CA affirmed the award of reinstatement without loss of
seniority rights and other privileges, and his full backwages inclusive of allowances and
other benefits or their monetary equivalent, computed from the time his compensation
was withheld up to the time of his actual reinstatement.
Nevertheless, finding that there were strained relations between petitioner bank and
respondent, the CA ordered the award of separation pay in lieu of reinstatement,
equivalent to one (1) month salary for every year of service, with a fraction of a year of
at least six (6) months to be considered as one (1) whole year, to be computed from the
date he was hired until the finality of the decision, earning a legal interest at the rate of
six percent (6%) per annum until full satisfaction.
Petitioner filed a Motion for Reconsideration (of the Decision Dated 12 September
2014) with Entry of Appearance and Motion for Substitution of Party dated October 16,
2014,33 but it was denied in the assailed Resolution dated June 9, 2015.
Hence, this petition.
The Petition
Petitioner asserts that the CA erred in declaring RCI as a labor-only contractor. It claims
that RCI carried an independent business as reflected in the Service Agreement that
petitioner bank entered with RCI. Aside from the substantial capitalization of RCI,
petitioner bank avers that RCI exercises control and supervision over its personnel
deployed at its branches. Petitioner bank further argues that even assuming that
respondent's work is related to its business, such work is not necessary in the conduct
of the bank's principal business. Finally, petitioner contends that it does not have the
power to dismiss respondent and control his work based on the Service Agreement with
RCI.
Nevertheless, petitioner bank defends its right to ask for respondent's replacement
under Article IV of the Service Agreement. Petitioner reiterates that respondent's acts of
borrowing money from the bank's clients and plying/ferrying passengers for a fee during
his hour of duty constitute conduct which is prejudicial to the interest of petitioner. Thus,
in accordance with the Service Agreement, petitioner bank merely exercised its right to
change or have respondent replaced instead of imposing disciplinary measures on him.
According to petitioner, this act was erroneously construed by the CA as an exercise of
the power of control over or of dismissal of respondent.
In a Resolution34 dated September 28, 2015, We required respondent to comment on
the petition within ten (10) days from notice. However, respondent has failed to file any
comment thereon to date. Accordingly, respondent is deemed to have waived his right
to comment on the petition and the Court shall now proceed to rule on its merits.
The Issues
Petitioner raises the following issues:
1. Whether or not the CA erred in declaring that RCI is a laboronly contractor.
2. Whether or not the CA erred in declaring that there exists an employer-
employee relationship between the Bank and respondent.
3. Whether or not the CA erred in (i) declaring that respondent had been illegally
dismissed, and (ii) granting his monetary claims.
Essentially, the principal issue is whether the CA erred in affirming the NLRC Decision
which declared that RCI is a labor-only contractor, and in ordering the Labor Arbiter to
re-compute the award of backwages and separation pay.
The Court's Ruling
The petition is partly meritorious.
RCI is a labor-only contractor
Article 106 of the Labor Code provides the relations which may arise between an
employer, a contractor, and the contractors' employees, thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract
with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers established under the
Code. In so prohibiting or restricting, he may make appropriate distinctions between
labor-only contracting and job contracting as well as differentiations within these types
of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Permissible job contracting or subcontracting has been distinguished from labor-only
contracting such that permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out to a contractor or
subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal, while labor-
only contracting, on the other hand, pertains to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal.35
These distinctions were laid out in the Omnibus Rules Implementing the Labor Code
thus:
SECTION 8. Job Contracting. - There is job contracting permissible under the Code if
the following conditions are met:
(a) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and
(b) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
SECTION 9. Labor-only contracting. - (a) Any person who undertakes to supply workers
to an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
(c) For cases not falling under this Rule, the Secretary of Labor and Employment
shall determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the
protection and welfare of the workers.
As a general rule, a contractor is presumed to be a labor-only contractor, unless such
contractor overcomes the burden of proving that it has the substantial capital,
investment, tools and the like.36
In the present case, petitioner failed to establish that RCI is a legitimate labor contractor
as contemplated under the Labor Code. Except for the bare allegation of petitioner that
RCI had substantial capitalization, it presented no supporting evidence to show the
same. Petitioner never submitted financial statements from RCI. Even the Service
Agreement allegedly entered into between petitioner and RCI, upon which petitioner
relied to show that RCI was an independent contractor, had lapsed in August 2005, as
admitted by petitioner in its Position Paper.37 Notably, petitioner failed to allege when
the Service Agreement was executed, thus, making its claim that respondent was hired
by RCI and assigned to petitioner in 2003 even more ambiguous.
Aside from this, petitioner's claim that RCI exercised control and supervision over
respondent is belied by the fact that petitioner admitted that its own Branch Manager
had informed respondent that his services would no longer be required at the
Branch.38 This overt act shows that petitioner had direct control over respondent while
he was assigned at the Branch. Moreover, the CA is correct in finding that respondent's
work is related to petitioner's business and is characterized as part of or in pursuit of its
banking operations.
An employer-employee relationship exists between petitioner and respondent
A finding that a contractor is a labor-only contractor, as opposed to permissible job
contracting, is equivalent to declaring that there is an employer-employee relationship
between the principal and the employees of the supposed contractor, and the labor-only
contractor is considered as a mere agent of the principal, the real employer.39
In this case, petitioner bank is the principal employer and RCI is the labor-only
contractor. Accordingly, petitioner and RCI are solidarily liable for the rightful claims of
respondent.
Petitioner had valid grounds to dismiss respondent
It is an established principle that the dismissal of an employee is justified where there
was a just cause and the employee was afforded due process prior to dismissal.40 The
burden of proof to establish these twin requirements is on the employer, who must
present clear, accurate, consistent, and convincing evidence to that effect.41
The Labor Arbiter haphazardly declared that respondent was illegally dismissed when it
ruled that respondent's misconduct was not established since due process was not
observed.42 The NLRC also ruled in a similar manner and failed to address the grounds
for termination raised by petitioner, specifically respondent's transgressions.43 While the
CA addressed the aspect of substantive due process, it simply disregarded the grounds
raised by petitioner and concluded that petitioner failed to discharge the burden of proof
that valid or authorized causes under the Labor Code exist.44
We, however, find that petitioner's basis for terminating respondent rests on valid and
legal grounds. At the very first instance, petitioner had already stressed in its position
paper that respondent was found committing conduct prejudicial to the interests of the
Branch when it was discovered that 1) respondent was plying his pedicab and ferrying
passengers during his work hours and 2) he had been borrowing money from several
clients of the Branch.
Nowhere in the records was it shown that respondent denied these imputations against
him.1âwphi1 Absent any denial on the part of respondent, the Court is constrained to
believe that respondent's silence can be construed as an admission of these
accusations against him.
The very nature of the actions imputed against respondent is serious and detrimental to
the Bank's operations and reputation. Thus, petitioner's decision to relieve respondent
from his employment is justified.
Respondent's right to procedural due process was violated
Nevertheless, We agree with the findings of the appellate court that there were
procedural lapses in the dismissal of respondent.
The importance of procedural due process was expounded by this Court in King of
Kings Transport, Inc. v. Mamac, thus:
(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a reasonable period.
Reasonable opportunity under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for
their defense. This should be construed as a period of at least five calendar days from
receipt of the notice x x x. Moreover, in order to enable the employees to intelligently
prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the
employees. A general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 288 [of the Labor Code] is being charged against the employees.
(2) After serving the first notice, the employees should schedule and conduct a hearing
or conference wherein the employees will be given the opportunity to (1) explain and
clarify their defenses to the charge against them; (2) present evidence in support of their
defenses; and (3) rebut the evidence presented against them by the management.
During the hearing or conference, the employees are given the chance to defend
themselves personally, with the assistance of a representative or counsel of their choice
x x x.
(3) After determining that termination is justified, the employer shall serve the
employees a written notice of termination indicating that:
(1) all the circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of their
employment.45 (emphasis in the original)
In the present case, it is uncontested that petitioner failed to give respondent ample
opportunity to contest the legality of his dismissal since he was neither given a notice to
explain nor a notice of termination. The first and second notice requirements have not
been properly observed; thus, respondent's dismissal, albeit with valid grounds, is
tainted with illegality.
The award of backwages and separation pay is deleted but respondent is entitled to
nominal damages
Considering that there were valid and substantive grounds to terminate respondent's
employment, the award of backwages and separation pay is deleted. However,
petitioner's violation of respondent's right to statutory procedural due process warrants
the payment of indemnity in the form of nominal damages.
Nominal damages may be awarded to a plaintiff whose right has been violated or
invaded by the defendant, for the purpose of vindicating or recognizing that right, and
not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the
purpose of indemnification for a loss but for the recognition and vindication of a right.46
In fixing the amount of nominal damages whose determination is addressed to our
sound discretion, the Court should take into account several factors surrounding the
case, such as: (1) the employer's financial, medical, and/or moral assistance to the sick
employee; (2) the flexibility and leeway that the employer allowed the sick employee in
performing his duties while attending to his medical needs; (3) the employer's grant of
other termination benefits in favor of the employee; and (4) whether there was a bona
fide attempt on the part of the employer to comply with the twin-notice requirement as
opposed to giving no notice at all.47
Based on the factual considerations of the present case, We deem it appropriate to
award nominal damages in the amount of Thirty Thousand Pesos (₱30,000) in favor of
respondent as a result of petitioner's act of violating his right to procedural due process.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision dated
September 12, 2014 and the Resolution dated June 9, 2015 of the Court of Appeals-
Cebu City in CA-G.R. CEB SP No. 02906 are
hereby AFFIRMED with MODIFICATION. Since Race Cleaners Inc. is a labor-only
contractor, petitioner Allied Banking Corporation now merged with Philippine National
Bank is declared to be the employer of respondent Reynold Calumpang, whose
dismissal is declared to be substantively valid for being based on sufficient and valid
grounds. However, he was denied his right to procedural due process for lack of the
required twin notices to explain and of dismissal.
Consequently, petitioner is ordered to pay respondent nominal damages in the amount
of ₱30,000 for its non-compliance with procedural due process.
SO ORDERED.
G.R. No. 205688, July 04, 2018
VALENTINO S. LINGAT AND APRONIANO
ALTOVEROS, Petitioners, v. COCA-COLA BOTTLERS PHILIPPINES, INC.,
MONTE DAPPLES TRADING, AND DAVID LYONS,* Respondents.
DECISION
DEL CASTILLO, J.:[**]
This Petition for Review on Certiorari assails the July 4, 2012 Decision1 of the
Court of Appeals (CA) in CA-G.R SP No. 112829, which modified the July 7,
2009 Decision2 of the National Labor Relations Commission (NLRC) in NLRC
LAC No. 03-000855-09. Also challenged is the January 16, 2013 CA
Resolution3 which denied petitioners Valentino S. Lingat (Lingat) and
Aproniano Altoveros' (Altoveros) (petitioners) Motion for Reconsideration.
Factual Antecedents
On May 5, 2008, petitioners filed a Complaint4 for illegal dismissal, moral
and exemplary damages, and attorney's fees against Coca-Cola Bottlers
Phils., Inc. (CCBPI), Monte Dapples Trading Corp. (MDTC), and David Lyons
(Lyons) (respondents).
Petitioners averred in their Position Paper5 and Reply6 that, in August 1993
and January 1996, CCBPI employed Lingat and Altoveros as plant driver and
forklift operator, and segregator/mixer respectively. They added that they
had continually worked for CCBPI until their illegal dismissal in April 2005
(Lingat) and December 2005 (Altoveros).
According to petitioners, they were regular employees of CCBPI because it
engaged them to perform tasks necessary and desirable in its business or
trade. They explained that CCBPI made them part of its operations, and
without them its products would not reach its clients. They asserted that
their work was the link between CCBPI and its sales force.
Petitioners alleged that CCBPI engaged Lingat primarily as a plant driver but
he also worked as forklift operator. In particular, he drove CCBPI's truck
loaded with softdrinks and its other products, and thereafter, returned the
empty bottles as well as the unsold softdrinks back to the plant of CCBPI. On
the other hand, as segregator/mixer of softdrinks, Altoveros was required to
segregate softdrinks based on the orders of the customers. Altoveros
declared, that when a customer needed cases of softdrinks, such need was
relayed to him since no sales personnel was allowed in the loading area.
Petitioners further stated, that after becoming regular employees (as they
had been employed for more than a year), and by way of a modus operandi,
CCBPI transferred them from one agency to another. These agencies
included Lipercon Services, Inc., People Services, Inc., Interserve
Management and Manpower Resources, Inc. The latest agency to where they
were transferred was MDTC. They claimed that such transfer was a scheme
to avoid their regularization in CCBPI.
In addition, petitioners stressed that the aforesaid agencies were labor-only
contractors which did not have any equipment, machinery, and work
premises for warehousing purposes. They insisted that CCBPI owned the
warehouse where they worked; the supervisors thereat were CCBPI’s
employees; and petitioners themselves worked for CCBPI, not for any
agency. In fine, they maintained that they were regular employees of CCBPI
because:
[Petitioners] worked within the premises of [CCBPI,] use the equipment, the
facilities, cater on [its] products, [and served] the Sales Forces x x x. In
other words, while at work, [petitioners] were under the direction, control
and supervision of respondent Coca-Cola's regular employees. The situation
calls for the over-all control of the operations by Coca-Cola employees as
[petitioners] perform[ed] their work with x x x Coca-Cola and [its] premises.
x x x7
Finally, petitioners argued that CCBPI dismissed them after it found out that
they were "overstaying." As such, they posited that they were illegally
dismissed as their termination was without cause and due process of law.
For their part, CCBPI and Lyons, its President/Chief Executive Officer,
countered in their Position Paper8 and Reply9 that this case must be
dismissed because the Labor Arbiter (LA) lacked jurisdiction, there being no
employer-employee relationship between the parties.
CCBPI and Lyons declared that CCBPI was engaged in the business of
manufacturing, distributing, and marketing of softdrinks and other beverage
products. By reason of its business, CCBPI entered into a Warehousing
Management Agreement10 with MDTC for the latter to perform warehousing
and inventory functions for the former.
CCBPI and Lyons insisted that MDTC was a legitimate and independent
contractor, which only assigned petitioners at CCBPI's plant in Otis, Manila.
They posited that MDTC carried on a distinct and independent business;
catered to other clients, aside from CCBPI; and possessed sufficient capital
and investment in machinery and equipment for the conduct of its business
as well as an office building.
CCBPI and Lyons likewise stressed that petitioners were employees of MDTC,
not CCBPI. They averred that MDTC was the one who engaged petitioners
and paid their salaries. They also claimed that CCBPI only coordinated with
the Operations Manager of MDTC in order to monitor the end results of the
services rendered by the employees of MDTC. They added that it was MDTC
which imposed corrective action upon its employees when disciplinary
matters arose.
Finally, CCBPI and Lyons averred that when the Warehousing Management
Agreement between CCBPI and MDTC expired, the parties no longer
renewed the same. Consequently, it came as a surprise to CCBPI that
petitioners filed this complaint considering that CCBPI was not their
employer, but MDTC.
Meanwhile, LA Catalino R. Laderas declared that despite notice, MDTC failed
to file its position paper on this case.11
Ruling of the Labor Arbiter
On December 9, 2008, the LA ruled for the petitioners, the dispositive
portion of his Decision reads:
WHEREFORE, premised on the foregoing considerations[,] judgment is
hereby rendered declaring that complainants were ILLEGALLY DISMISSED
from their employment.
Respondent CCBPI is hereby ordered, viz.:
1. To reinstate complainants to their former positions without loss of
seniority rights and privileges and to pay complainants backwages from the
time they were illegally dismissed up to the time of this decision.
The computation unit of this Office is hereby directed to compute the
monetary award of the complainant[s] which forms part of this decision.
Other claims are DISMISSED for lack of merit
SO ORDERED.12
The LA ruled that respondents failed to refute that petitioners were
employees of CCBPI and the latter undermined their regular status by
transferring them to an agency. The LA decreed that, per the identification
cards (IDs) of petitioners, CCBPI hired Lingat in 1993, and Altoveros in
1996. Moreover, as plant driver, and segregator/mixer, petitioners
performed activities necessary in the usual business or trade of CCBPI; and,
their continued employment for more than one year proved that they were
regular employees of CCBPI.
The LA likewise ratiocinated that the contracts of employment which
petitioners may have entered with CCBPI's contractors could not undermine
their (petitioners) tenure arising from their regular status with CCBPI.
In sum, the LA decreed that, since respondents failed to debunk the
allegations raised by petitioners, then judgment must be rendered in favor of
petitioners.
Ruling of the National Labor Relations Commission
On appeal, the NLRC dismissed the illegal dismissal case. It, nonetheless,
ordered MDTC to pay Altoveros separation pay amounting to P10,725.00.
According to the NLRC, Lingat stated that CCBPI illegally dismissed him in
April2005. However, he only filed his complaint for illegal dismissal on May
5, 2008, which was beyond three years from his dismissal. Thus, Lingat's
complaint must be dismissed on the ground of prescription.
Also, the NLRC decreed that the complaint of Altoveros was bereft of merit.
It explained that per Altoveros' ID, CCBPI employed him in January 1996
until September 19, 1996; thereafter, he was employed by Genesis Logistics
and Warehouse Corporation; and, on April 7, 2003, MDTC hired him and
assigned him as loader/mixer at CCBPI's warehouse in Paco, Manila until
December 2005 when MDTC's contract with CCBPI expired.
In ruling that Altoveros was an employee of MDTC, the NLRC gave credence
to the Warehousing Management Agreement between MDTC and CCBPI as
well as to MDTC's Amended Articles of Incorporation. It held that MDTC did
not appear to be a mere agent of CCBPI but was one that provided stock
handling and storage services to CCBPI. It held that, considering MDTC was
the employer of Altoveros, then it must pay him separation pay of 1/2
month pay for every year of his service.
On November 4, 2009, the NLRC denied13 petitioners' Motion for
Reconsideration prompting them to file a Petition for Certiorari with the CA.
Ruling of the Court of Appeals
On July 4, 2012, the CA modified the NLRC Decision in that it ordered MDTC
to pay separation pay to both petitioners.
Contrary to the finding of the NLRC, the CA found that the illegal dismissal
case filed by Lingat had not yet prescribed. It held that, aside from money
claims, Lingat prayed for reinstatement, as such, pursuant to Article 1146 of
the Civil Code, Lingat had four years within which to file his case. It noted
that Lingat filed this suit on May 5, 2008 or only three years and one day
from his alleged illegal dismissal; thus, he timely filed his case against
respondents.
Nevertheless, the CA agreed with the NLRC that MDTC was an independent
contractor and the employer of petitioners. It gave weight to petitioners'
latest IDs, which were issued by MDTC as well as to the Articles of
Incorporation of MDTC, which indicated that its secondary purpose was "to
engage in the business of land transportation" and "the business of
warehousing services." It further ruled that MDTC had substantial capital
stock, as well as properties and equipment, which supported the conclusion
that MDTC was a legitimate labor contractor.
On January 16,2 013, the CA denied the Motion for Reconsideration on the
assailed Decision.
Issues
Undaunted, petitioners filed this Petition raising these issues:
1. Whether or not there exists [an] employer-employ[ee] relationship
between Petitioners and Respondent CCBPI;

2. Whether or not Petitioner Lingat's complaint is barred by prescription;

3. Whether or not the Court of Appeals gravely erred in declaring [that]

Petitioners [were] not regular employees of Respondent CCBPI;

4. Whether or not Petitioners were dismissed without cause and due

process;

5. Whether or not moral and exemplary damages lie; and

6. Whether or not the Petitioners are entitled to attorney's fees.14

Petitioners maintain that they were regular employees of CCBPI. They insist
that their engagement by CCBPI in 1993 (Lingat) and 1996 (Altoveros)
proved that they were its employees from the beginning. They also aver that
they worked at CCBPI's warehouse, wore its uniforms, operated its
machinery, and were under the direct control and supervision of CCBPI.
They likewise contend that CCBPI illegally dismissed them from work. On
this, they insist that respondents themselves admitted that petitioners'
employment contract expired; and thereafter, they were no longer given any
new assignments. They remain firm that such termination of contract was
not a valid cause for their dismissal from work.
CCBPI and Lyons, for their part, counter that this Petition was not a proper
recourse because petitioners seek a recalibration of facts and evidence which
is not within the scope of the Petition because only pure questions of law
may be raised herein. They add that MDTC was a legitimate and
independent job contractor and was the employer of petitioners, not CCBPI.
Our Ruling
The Petition is impressed with merit.
As a rule, the determination of whether an employer-employee relationship
exists between the parties involves factual matters that are generally
beyond the ambit of this Petition as only questions of law may be raised in a
petition for review on certiorari. However, this rule allows certain exceptions,
which include an instance where the factual findings of the courts or
tribunals below are conflicting. Given the situation here where the factual
findings of the NLRC and the CA are divergent from those of the LA, the
Court deems it proper to re-assess and review these findings in order to
arrive at a just resolution of the issues on hand.15
Moreover, pursuant to Article 295 of the Labor Code, as amended and
renumbered, a regular employee is a) one that has been engaged to perform
tasks usually necessary or desirable in the employer's usual business or
trade – without falling within the category of either a fixed or a project or a
seasonal employee; or b) one that has been engaged for a least one year,
whether his or her service is continuous or not, with respect to such activity
he or she is engaged, and the work of the employee remains while such
activity exists.
In this case, petitioners described their respective duties at CCBPI in this
manner:
x x x I, V. Lingat, x x x was also engaged as forklift operator [but] my main
work as plant driver [required me] to take out truck loaded with
softdrinks/Coca-Cola products after the same has been checked by the
checker area; [I also] drive back Coca-Cola trucks loaded with empty bottles
or sometimes x x x unsold softdrinks x x x This represented [my] daily
chores while employed at Coca-Cola[.]
x x x I, A. Altoveros, was with the latest work as segregator/mixer of
softdrinks according to the demands of the customers, that is, when a
customer needed ten (10) cases of Royal Tru-Orange or five (5) cases of
Coke Sakto, the same is relayed to me in the loading area (as no sales
personnel is allowed therein)[.] I have to segregate softdrinks accordingly to
fill up the order of [the] customer.16
To ascertain if one is a regular employee, it is primordial to determine the
reasonable connection between the activity he or she performs and its
relation to the trade or business of the supposed employer.17
Relating petitioners' tasks to the nature of the business of CCBPI – which
involved the manufacture, distribution, and sale of soft drinks and other
beverages – it cannot be denied that mixing and segregating as well as
loading and bringing of CCBPI's products to its customers involved
distribution and sale of these items. Simply put, petitioners' duties were
reasonably connected to the very business of CCBPI. They were
indispensable to such business because without them the products of CCBPI
would not reach its customers.
Interestingly, in Coca-Cola Bottlers Philippines, Inc. v. Agito,18 the Court held
that respondents salesmen therein were regular employees of CCBPI as their
work constituted distribution and sale of its products. The Court also
stressed in Agito that the repeated rehiring of those salesmen bolstered the
indispensability of their work to the business of CCBPI.
Similarly, herein petitioners have worked for CCBPI since 1993 (Lingat) and
1996 (Altoveros) until the non-renewal of their contracts in 2005. Aside from
the fact that their work involved the distribution and sale of the products of
CCBPI, they remained to be working for CCBPI despite having been
transferred from one agency to another. Hence, such repeated re-hiring of
petitioners, and the performance of the same tasks for CCBPI established
the necessity and the indispensability of their activities in its business.
In addition, in Pacquing v. Coca-Cola Philippines, Inc.,19 the Court ruled that
the sales route helpers of CCBPI were its regular employees. In this case,
petitioners had similarly undertook to bring CCBPI's products to its
customers at their delivery points. In Pacquing, it was even stated that
therein sales route helpers "were part of a complement of three personnel
comprised of a driver, a salesman and a regular route helper, for every
delivery truck."20 As such, it would be absurd for the Court to hold those
helpers as regular employees of CCBPI without giving the same status to its
plant driver, including its segregator of softdrinks, whose work also had
reasonable connection to CCBPI's business of distribution and sale of soft
drinks and other beverage products.
Furthermore, in Quintanar v. Coca-Cola Bottlers, Philippines, Inc.,21 therein
route helpers, like petitioners, were tasked to distribute CCBPI's products
and were likewise successively transferred to agencies after having been
initially employed by CCBPI. The Court decreed therein that said helpers
were regular employees of CCBPI notwithstanding the fact that they were
transferred to agencies while working for CCBPI. In the same vein, the
transfer of herein petitioners from one agency to another did not adversely
affect their regular employment status. Such was the case because they
continued to perform the same tasks for CCBPI even if they were placed
under certain agencies, the last of which was MDTC.
Moreover, CCBPI and Lyons' contention that MDTC was a legitimate labor
contractor and was the actual employer of petitioners does not hold water.
A labor-only contractor is one who enters into an agreement with the
principal employer to act as the agent in the recruitment, supply, or
placement of workers for the latter. A labor-only contractor 1) does not have
substantial capital or investment in tools, equipment, work premises, among
others, and the recruited employees perform tasks necessary to the main
business of the principal; or 2) does not exercise any right of control anent
the performance of the contractual employee. In such case, where a labor-
only contracting exists, the principal shall be deemed the employer of the
contractual employee; and the principal and the labor-only contractor shall
be solidarily liable for any violation of the Labor Code. On the other hand, a
legitimate job contractor enters into an agreement with the employer for the
supply of workers for the latter but the "employer-employee relationship
between the employer and the contractor's employees [is] only for a limited
purpose, i.e., to ensure that the employees are paid their wages."22
In Diamond Farms, Inc. v. Southern Philippines Federation of Labor (SPFL)-
Workers Solidarity of DARBMUPCO/Diamond-SPFL,23 the Court distinguished
a labor-only contractor and a legitimate job contractor in this wise:
The Omnibus Rules Implementing the Labor Code distinguishes between
permissible job contracting (or independent contractorship) and labor-only
contracting. Job contracting is permissible under the Code if the following
conditions are met:
(a) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(b) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
In contrast, job contracting shall be deemed as labor-only contracting, an
arrangement prohibited by law, if a person who undertakes to supply
workers to an employer:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.
Here, based on their Warehousing Management Agreement, CCBPI hired
MDTC to perform warehousing management services, which it claimed did
not directly relate to its (CCBPI's) manufacturing operations.24 However, it
must be stressed that CCBPI's business not only involved the manufacture of
its products but also included their distribution and sale. Thus, CCBPI's
argument that petitioners were employees of MDTC because they performed
tasks directly related to "warehousing management services," lacks merit.
On the contrary, records show that petitioners were performing tasks
directly related to CCBPI's distribution and sale aspects of its business.
To reiterate, CCBPI is engaged in the manufacture, distribution, and sale of
its products; in turn, as plant driver and segregator/mixer of soft drinks,
petitioners were engaged to perform tasks relevant to the distribution and
sale of CCBPI's products, which relate to the core business of CCBPI, not to
the supposed warehousing service being rendered by MDTC to CCBPI.
Petitioners' work were directly connected to the achievement of the purposes
for which CCBPI was incorporated. Certainly, they were regular employees of
CCBPI.
Moreover, we disagree with the CA when it heavily relied on MDTC's alleged
substantial capital in order to conclude that it was an independent labor
contractor.
To note, in Quintanar v. Coca-Cola Bottlers, Philippines, Inc.,25 the Court
ruled that "the possession of substantial capital is only one element."26 To
determine whether a person or entity is indeed a legitimate labor contractor,
it is necessary to prove not only substantial capital or investment in tools,
equipment, work premises, among others, but also that the work of the
employee is directly related to the work that contractor is required to
perform for the principal.27 Evidently, the latter requirement is wanting in the
case at bench.
Finally, as regular employees, petitioners may be dismissed only for cause
and with due process. These requirements were not complied with here.
It was not disputed that petitioners ceased to perform their work when they
were no longer given any new assignment upon the alleged termination of
the Warehousing Management Agreement between CCBPI and MDTC.
However, this is not a just or authorized cause to terminate petitioners'
services. Otherwise stated, the contract expiration was not a valid basis to
dismiss petitioners from service. At the same time, there was no clear
showing that petitioners were afforded due process when they were
terminated. Therefore, their dismissal was without valid cause and due
process of law; as such, the same was illegal.
Considering that petitioners were illegally terminated, CCBPI and MDTC are
solidarily liable for the rightful claims of petitioners.28
Moreover, by reason of the lapse of more than 10 years since the inception
of this case on May 5, 2008, the Court deems it more practical and would
serve the best interest of the parties to award separation pay to petitioners,
in lieu of reinstatement.29 Finally, since petitioners were compelled to litigate
to protect their rights and interests, attorney's fees of 10% of the monetary
award is given them. The legal interest of 6% per annum shall be imposed
on all the monetary grants from the finality of the Decision until paid in full.30
WHEREFORE, the Petition is GRANTED. The July 4, 2012 Decision and
January 16, 2013 Resolution of the Court of Appeals in CA-G.R. SP No.
112829 are REVERSED and SET ASIDE. Accordingly, the December 9,
2008 Decision of the Labor Arbiter is REINSTATED WITH
MODIFICATIONS in that separation pay, in lieu of reinstatement, and
attorney's fees equivalent to 10% of the monetary grants are awarded to
petitioners. All monetary awards shall earn interest at the legal rate of 6%
per annum from the finality of this Decision until fully paid.
SO ORDERED.
G.R. No. 206800, July 02, 2018
STRADCOM CORPORATION AND JOSE A. CHUA, Petitioners, v. JOYCE
ANNABELLE L. ORPILLA, Respondent.
DECISION
TIJAM, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court filed by petitioners Stradcom Corporation (Stradcom) and Jose A.
Chua (Chua) (collectively referred to as petitioners), assailing the
Decision1 dated September 28, 2012 and Resolution2 dated April 17, 2013 of
the Court of Appeals (CA) in CA-G.R. SP No. 91150, which reversed the
National Labor Relations Commission (NLRC) Decision3 dated July 30, 2004
and Resolution4 dated April 20, 2005 and reinstated the Labor Arbiter's
(LA's) ruling5 dated September 30, 2003.
The Procedural and Factual Antecedents
The Version of Respondent Joyce Anabelle L. Orpilla
On November 15, 2001, Joyce Anabelle L. Orpilla (respondent) was
employed by Stradcom as Human Resources Administration Department
(HRAD) Head, under a probationary status for six months, with a monthly
salary of P60,000.6 Her duties included administrative and training matters.7
On January 2, 2003, Chua, the President and Chief Executive Officer (CEO)
of Stradcom, issued a Memorandum addressed to the Chief Operating Officer
(COO), Ramon G. Reyes (Reyes), and Chief Financial Officer (CPO), Raul C.
Pagdanganan (Pagdanganan), announcing the reorganization of the
HRAD.8 The pertinent portions of the memorandum provides:
1. The Training Section of the Department shall be spinned off and will form
part of the Business Operations. x x x (The Training Section shall be called
Human Resources Training and Development).
xxxx
3. Under the said reorganization, new sections shall be reporting to the
following:
 The Human Resources Training and Development shall be
reporting to Mr. Ramon G. Reyes, COO.
 The Personnel and Administration shall be reporting to Mr. Raul
Pagdangan, CFO.
 Ms. Joyce Anabelle L. Orpilla and the Training Section will be
reporting directly to the COO. x x x9
After the turn-over of the documents and equipment of HRAD, respondent
inquired from Chua as to her status in the light of the said reorganization.
Chua, on the other hand, replied that the management has lost its trust and
confidence in her and it would be better if she resigned. Respondent
protested the resignation and insisted that if there were charges against her,
she was open for formal investigation. Chua, however, was not able to come
up with any charges.10
On January 9, 2003, a meeting was held wherein, Atty. Eric Gene Pilapil
(Atty. Pilapil), the Chief Legal Officer (CLO) offered a settlement to
respondent in exchange for her employment, otherwise, respondent would
have to undergo the burden of litigation in pursuing the retention of her
employment.11 Atty. Pilapil set another meeting on January 13, 2003 with
respondent, and told her to take a leave in the meantime to think about the
settlement offer. Atty. Pilapil also assured respondent that she would
continue to receive her salary.12
On January 13, 2003, per advice of Atty. Pilapil, respondent reported for
work but the guards refused her entry and advised her to take a leave of
absence.13
Respondent claimed that she was informed by Accounting Manager, Mr.
Arnold C. Ocampo, that her January 15, 2003 salary was already deposited
in her bank account which included the proportionate 13th month pay for the
year 2003 and was her last and final pay. After such, respondent no longer
received any kind of payment from petitioners.14 Respondent claimed that
she was constructively dismissed on January 2, 2003 and turned into an
actual dismissal on January 15, 2003, when she received her last pay.15
On June 29, 2003, respondent filed a complaint for constructive dismissal
with monetary claims of backwages, attorney's fees and damages.16
The Version of Petitioners Stradcom Corporation and Jose A. Chua
On November 15, 2001, respondent was employed by Stradcom as HRAD
Head, a managerial position with a monthly salary of P60,000.17 As HRAD
Head, respondent's duties and responsibilities included administration and
personnel, and training matters.18
Sometime in December 2002, Pagdanganan gave instructions to respondent
to commence preparations for Stradcom's 2002 Christmas party. Chua also
gave instructions to respondent to include the Land Registration Systems,
Inc. (Lares) officers and employees, an affiliate of Stradcom in the Christmas
party, to foster camaraderie and working relations between the two
companies.19
Contrary to Chua's instruction, respondent then called a staff lunch meeting
for Stradcom's 2002 Christmas party, wherein respondent conveyed her
intention of easing out Lares' employees from the party.20
Later, it had come to Stradcom's attention that respondent was not
comfortable with the idea to include Lares in the Christmas party, as
respondent appeared evasive on the queries about the event made by Ms.
May Marcelo, the Head Personnel and Administration of Lares.21 This matter
was brought to the attention of Chua, who decided to strip respondent of
any responsibility in organizing the Christmas party and transferred the
same to another committee. As part of the turnover, respondent furnished
the committee with a copy of the initial budget which included the catering
services from G&W Catering Services at P250 per head.22
On December 16, 2002, Ms. Rowena Q. Samson (Samson) and Mr.
Saturnino S. Galgana (Galgana), members of the new Christmas party
committee went to see Mrs. Myrna G. Sese (Sese), the proprietress of the
G&W Catering Services.23 They were surprised to find out that the price of
the food was actually P200 per head and not P250 per head as represented
by respondent. Suspicious about the correct pricing, Samson and Galgana
reported the matter to the Stradcom's management. Stradcom began its
investigation and interviewed some employees regarding the conduct of
respondent.24
After the investigation, Stradcom also discovered that respondent required
her staff to prepare presentation/training materials/manuals using company
resources for purposes not related to the affairs of the company, on
overtime and on Sundays.25
Subsequently, Pagdanganan called for a conference with respondent, and
discussed respondent's non-inclusion of Lares in Stradcom's Christmas
party, the overpricing of the food, and her moonlighting. Respondent made a
bare deniat.26
On January 3, 2003, Chua notified his employees about the reorganization of
the HRAD and the Business Operations Department.27 On the same date and
as part of routine procedure, respondent turned-over the necessary
documents and equipment.28 Respondent reported to Reyes, her new
immediate superior and secured the latter's approval for her leave of
absence on the dates of January 3 in the afternoon up to January 6, 2003,
due to personal reasons. Reyes approved her leave.29
However, before respondent's scheduled leave, she approached Chua to
discuss the reorganization and her previous conference with Pagdanganan
regarding her said infractions. Chua told respondent that the management
has lost its trust and confidence in her due to her willful disobedience in
excluding the employees of Lares in the Stradcom's Christmas party and for
willful breach of trust in connection with the canvassing of the caterer.30
Respondent explained her side and asked Chua for his advice. Chua replied
that considering her position is one that requires the trust and confidence of
the management, it would be difficult to force herself on the management.
Thus, respondent conveyed her willingness to resign. In view of this,
Stradcom's officers agreed that any formal investigation on respondent was
unnecessary in view of her willingness to resign.31
However, on January 7, 2003, respondent reported for work and suprisedly
informed Stradcom that she would not resign. When Chua found out about
the respondent's retraction of her statement to resign, he instructed Atty.
Pilapil to talk things through with respondent.32
On January 9, 2003, Atty. Pilapil invited respondent for dinner outside the
company premises. Respondent was given another chance regarding her
said infractions. Respondent then requested for four days leave to think
things through and Atty. Pilapil adhered to request and assured her that she
will receive her pay while on leave. They likewise agreed that they would
meet again on January 13, 2003, outside the office to discuss respondent's
final decision.33
Petitioners were shocked when they found out that respondent had filed a
complaint for constructive dismissal with monetary claims of backwages,
attorney's fees and damages on January 29, 2003.34
Petitioners contended that the dismissal of respondent was for just cause on
the ground of loss of trust and confidence and the same was in compliance
with the due process requirements.35 Petitioners further contended that the
acts that caused the loss of trust and confidence of the petitioners in the
respondent were her mishandling of Stradcom's 2002 Christmas party,
dishonesty in preparing the budget thereof, misrepresentation in her
application for employment, and using company personnel and resources for
purposes not beneficial to the interest of Stradcom.36
The Ruling of the LA
On September 30, 2003, the LA rendered a Decision, which ruled that
respondent was illegally dismissed and Chua is solidarily liable with
Stradcom for the payment of the monetary awards to respondent.37 The
dispositive portion of the LA Decision, provides:
WHEREFORE, decision is hereby rendered, as follows:
1. Declaring that the complainant was illegally dismissed;
2. Declaring that the dismissal was effected in violation of the due process
and notice requirements; and
3. Ordering respondents Stradcom Corporation and Jose A. Chua to pay
complainant, jointly and severally, the total amount of EIGHT HUNDRED
FORTY SEVEN THOUSAND PESOS (P847,000.00) representing her separation
pay, backwages, moral and exemplary damages and attorney fees.
The awards for separation pay, backwages and the corresponding 10%
attorney's fees shall be subject to further computation until the decision in
this case becomes final and executory.
The other claims are denied for lack of merit.
SO ORDERED.38
Aggrieved, petitioners seasonably filed a memorandum of appeal before the
NLRC.
The Ruling of the NLRC
On July 30, 2004, the NLRC issued its Decision. It partially granted the
appeal filed by petitioners and modified the Decision of the LA. The NLRC
ruled that respondent was validly dismissed on the ground of loss and trust
confidence, due to her mishandling of the 2002 budget for the Christmas
party. The NLRC awarded respondent her unpaid salary for the period of
January 16 to April 16, 2003, the date when she was formally advised of her
disengagement from service. Attorney's fees were also awarded.39 The
decretal portion of the NLRC Decision thus, reads:
WHEREFORE, in view of the foregoing considerations, the appeal is hereby
PARTIALLY GRANTED. The dispositive portion of the appealed Decision is
hereby MODIFIED and another one entered:
1. Declaring that Appellee, Joyce Anabelle L. Orpilla was validly dismissed
and;
2. Ordering appellant corporation to pay her the following:
a) Withheld wages from January 16 to April 16, 2003 (P60,000.00 x 3 plus 1/12   P195,000.00
thereof as 13th month pay)
b) attorney's fees   P 19,500.00
    --------
  Total Award   P214,500.00
40
SO ORDERED.
Respondent sought to reconsider the above-mentioned Decision but it was
denied by the NLRC in its Resolution41 dated April 20, 2005, for lack of merit.
Dismayed, respondent filed a petition for review on certiorari under Rule 65
with the CA.
The Ruling of the CA
On September 28, 2012, the CA reversed and set aside the NLRC and ruled
that respondent was illegally dismissed.42 The fallo of the CA Decision
provides:
IN VIEW OF ALL THESE, the Petition is GRANTED. The assailed Decision
and Resolution of public respondent NLRC are SET ASIDE. The Decision of
the Labor Arbiter dated September 30, 2003 is REINSTATED.
SO ORDERED.43
Petitioners promptly filed a Motion for Reconsideration but it was denied by
the CA in its Resolution dated April 17, 2013.44
Hence, the present petition.
The Issues
A. WHETHER OR NOT THE COURT OF APPEALS HAS COMMITTED SERIOUS
AND REVERSIBLE ERRORS IN REVERSING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION AND FAULTING THE SAME WITH GRAVE
ABUSE OF DISCRETION BY FINDING THAT PETITIONERS HAS ILLEGALLY
DISMISSED RESPONDENT FROM HER EMPLOYMENT AS HEAD OF THE
HUMAN RESOURCE DEPARTMENT?
A.1 WHETHER OR NOT RESPONDENT HAS WILLFULLY DISOBEYED
PETITIONERS' LAWFUL AND REASONABLE INSTRUCTIONS?
A.2 WHETHER OR NOT RESPONDENT HAS COMMITTED FRAUD,
MISREPRESENTATION, DISHONESTY AND OTHER ACTS INIMICAL TO THE
INTEREST OF THE PETITIONERS WHILE BEING EMPLOYED BY THE
PETITIONER?
A.3 WHETHER OR NOT REPONDENT HAS ENGAGED IN MOONLIGHTING
ACTIVITIES AND USED COMPANY PERSONNEL AND RESOURCES NOT IN
LINE WITH THE BUSINESS OF STRADCOM.
B. WHETHER OR NOT THE COURT OF APPEALS HAS COMMITTED SERIOUS
AND REVERSIBLE ERRORS IN REVERSING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION AND FAULTING THE SAME WITH GRAVE
ABUSE OF DISCRETION BY FINDING THAT RESPONDENT WAS DEMOTED BY
THE PETITIONERS AND THE LATTER DID NOT ACCORD THE FORMER DUE
PROCESS?
B.1 WHETHER OR NOT THE REORGANIZATION OF THE HUMAN RESOURCE
AND ADMINISTRATION (HRA) DEPARTMENT WAS A VALID EXERCISE OF
MANAGEMENT PREROGATIVE?
B.2 WHETHER OR NOT RESPONDENT WAS DENIED DUE PROCESS?
B.3 WHETHER OR NOT RESPONDENT VOLUNTARILY RESIGNED [FROM] HER
EMPLOYMENT WITH STRADCOM.
C. WHETHER OR NOT THE RESPONDENT IS ENTITLED TO BACKWAGES,
REINSTATEMENT OR SEPARATION PAY?
D. WHETHER OR NOT THE RESPONDENT IS ENTITLED MORAL AND
EXEMPLARY DAMAGES?
E. WHETHER OR NOT PETITIONER CHUA MAY BE HELD JOINTLY AND
SEVERALLY LIABLE WITH CO-PETITIONER STRADCOM FOR THE PAYMENT OF
WHATEVER MONETARY AWARD IN FAVOR OF RESPONDENT?45
The pivotal issue for Our resolution is whether or not respondent was validly
dismissed from employment on the ground of loss of trust and confidence.
The Court's Ruling
The petition is meritorious.
Generally, only errors of law are revived in petitions for review
for certiorari, since this Court is not a trier of facts. As such, the findings of
facts and conclusion of the NLRC are generally accorded not only great
weight and respect but even clothed with finality and deemed binding on this
Court as long as they are supported by substantial evidence.46 However, if
the factual findings of the LA and the NLRC are conflicting, as in this case,
the reviewing court may delve into the records and examine for itself the
questioned findings.47 The exception, rather than the general rule, applies in
the present case since the LA and the CA found facts supporting the
conclusion that respondent was illegally dismissed, while the NLRC's factual
findings contradicted the LA's findings.
Under this situation, such conflicting factual findings are not binding on Us,
and We retain the authority to pass on the evidence presented and draw
conclusions therefrom.48
After judicious review on the records of the case, this Court finds that the
petitioners proved that respondent was dismissed for a just cause.
The dismissal of respondent was founded on just cause - loss of trust and confidence
Among the just causes for termination is the employer's loss of trust and
confidence in its employee. Article 297 (c) [formerly Article 282] of the
Labor Code provides that an employer may terminate the services of an
employee for fraud or willful breach of the trust reposed in him/her.49 Article
297, provides:
Article 297. TERMINATION BY EMPLOYER.—An employer may terminate an
employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of
his employer or any immediate member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing. (Emphasis ours)
In order for the said cause to be properly invoked, however, certain
requirements must be complied with, namely: (1) the employee concerned
must be holding a position of trust and confidence; and (2) there must be an
act that would justify the loss of trust and confidence.50
The two classes of positions of trust were enunciated in the case of Alaska
Milk Corporation, et al. v. Ponce:51
(1) managerial employees whose primary duty consists of the management
of the establishment in which they are employed or of a department or a
subdivision thereof, and to other officers or members of the managerial
staff; and (2) fiduciary rank-and-file employees, such as cashiers, auditors,
property custodians, or those who, in the normal exercise of their functions,
regularly handle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and
custody of the employer's money or property, and are, thus, classified as
occupying positions of trust and confidence.52
As regards a managerial employee, the mere existence of a basis for
believing that such employee has breached the trust of his employer would
suffice for his dismissal. Hence, in the case of managerial employees, proof
beyond reasonable doubt is not required, it being sufficient that there is
some basis for such loss of confidence, such as when the employer has
reasonable ground to believe that the employee concerned is responsible for
the purported misconduct, and the nature of his participation therein renders
him unworthy of the trust and confidence demanded by his position.53
It is undisputed that at the time of respondent's dismissal, she was holding a
managerial position, which was HRAD Head of Stradcom and directly
reported to the President, herein Chua and other high ranking officials of
Stradcom. Likewise, respondent performed key and sensitive functions, as
her duties and responsibilities included the administration, personnel and
training matters of the company. Respondent held a trust and critical
position which required the conscientious observance of the company rules
and procedures.
The presence of the first requisite is thus certain. Anent to the second
requisite, the Court finds that the petitioners meet their burden of proving
that the respondent's dismissal was for a just cause.
The acts alleged to have caused the loss of trust and confidence of the
petitioners in the respondent was her mishandling of Stradcom's 2002
Christmas party, dishonesty in preparing the budget thereof,
misrepresentation in her application for employment, and using company
personnel and resources for purposes not beneficial to the interest of
Stradcom. The evidence on record support Stradcom's claims.
There was substantial evidence to support that respondent overpriced the
food for the 2002 Christmas party. The overpricing was discovered by the
new committee which took over the preparations for the said party. It is
undisputed that respondent was the one who initially negotiated with G&W
Catering Services. Respondent was also the one who prepared the budget
for the approval of the President, herein Chua. G&W billed Stradcom for food
at the rate of Two Hundred Pesos (P200) per head only, contrary to the Two
Hundred Fifty (P250) per head quoted by respondent, and the rental for
chairs at Twenty-Eight Pesos (P28), in the aggregate amount of Sixty-Three
Thousand Eight Hundred Forty Pesos (P63,840) as evidenced by the Affidavit
of Sese, the proprietress of the G&W Catering Services. Clearly, the
overpricing amounted to dishonesty.
Also, respondent's overpricing of P250 per head for the Christmas party was
corroborated by Ms. Rowena Samson,54 Chua's Secretary of the President
and CEO and Mr. Saturnino S. Galgana,55 Stradcom's Purchasing Assistant,
as evidenced by their affidavits dated March 18, 2003.
Furthermore, respondent was proven to have engaged in moonlighting
activities and used company personnel and resources for purposes not in line
with the business interest of Stradcom. In fact, respondent admitted that
she actually took home some of the training materials owned by the
company without the latter's prior clearance and without disclosed purpose.
Such dishonesty on the part of the respondent in carrying out her duties is
prejudicial to the interest of Stradcom and constitutes just cause to
terminate her employment.
Considering the foregoing, this Court agrees with the findings of the NLRC
that there was a just cause for the respondent's dismissal. We emphasize
that dismissal of a dishonest employee is to the best interest not only of the
management but also of labor.56 Stradcom, as an employer in the exercise of
self-protection, cannot be compelled to continue employing an employee
who is guilty of acts inimical to its interest.
Respondent is entitled to nominal damages for violation of her right to statutory procedural due
process
We note however that even if there is a just cause to terminate respondent's
employment, her right to due process was not satisfied.
On the matter of procedural due process, it is well-settled that the employer
must furnish the employee with two written notices before termination of
employment can be legally effected.57 The first apprises the employee of the
particular acts or omissions for which dismissal is sought.58 The second
informs the employee of the employer's decision to dismiss him.59
The case of Libcap Marketing Corp, et. al. v. Baquial60 explains:
The law and jurisprudence, on the other hand, allow the award of nominal
damages in favor of an employee in a case where a valid cause for dismissal
exists but the employer fails to observe due process in dismissing the
employee. Financial assistance is granted as a measure of equity or social
justice, and is in the nature or takes the place of severance compensation.
On the other hand, nominal damages "may be awarded to a plaintiff whose
right has been violated or invaded by the defendant, for the purpose of
vindicating or recognizing that right, and not for indemnifying the plaintiff for
any loss suffered by him. Its award is thus not for the purpose of
indemnification for a loss but for the recognition and vindication of a right."
The amount of nominal damages to be awarded the employee is addressed
to the sound discretion of the court, taking into consideration the relevant
circumstances. (Citations omitted)61
As discussed above, the Court is given the latitude to determine the amount
of nominal damages to be awarded to an employee who was validly
dismissed but whose due process rights were violated. The two causes for a
valid dismissal in the Labor Code are under Article 282, due to just causes
and Article 283, based on authorized causes. These were differentiated in
the case of Jaka Food Processing Corp. v. Pacot,62 to wit:
A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is
guilty of some fraud against the employer, or, as in Agabon, he has
neglected his duties. Thus, it can be said that the employee himself initiated
the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283
does not necessarily imply delinquency or culpability on the part of the
employee. Instead, the dismissal process is initiated by the employer's
exercise of his management prerogative, i.e. when the employer opts to
install labor saving devices, when he decides to cease business operations or
when, as in this case, he undertakes to implement a retrenchment program.
xxxx
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just
cause under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered
because the dismissal process was, in effect, initiated by an act imputable to
the employee; and (2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal process
was initiated by the employer's exercise of his management prerogative.63
Here, the cause for termination was loss of trust and confidence, thus due to
the employee or respondent's fault, but Stradcom failed to comply with the
twin-notice requirement, thus, as a measure of equity, We order Stradcom
to pay respondent nominal damages in the amount of P30,000.
The solidary liability of Chua as a corporate officer is not proper and must be recalled
It is well-settled that a corporation has its own legal personality separate
and distinct from those of its stockholders, directors or officers.64 Absence of
any evidence that a corporate officer and/or director has exceeded their
authority, or their acts are tainted with malice or bad faith, they cannot be
held personally liable for their official acts. Here, there was neither any proof
that Chua acted without or in excess of his authority nor was motivated by
personal ill-will towards respondent to be solidarily liable with the company.
We quote with affirmation the NLRC's pronouncement, viz:
Finally, on the issue of whether or not the Labor Arbiter committed manifest
error in ordering appellant Chua solidarily liable with appellant corporation,
we have to rule in the affirmative. Appellant Chua cannot be made solidarily
liable with appellant corporation for any award in favor of appellee. Appellant
corporation is separate and distinct from Appellant Chua.
xxxx
Appellant Chua's acts were official acts, done in his capacity as an officer of
appellant corporation on its behalf. There is no showing of any act, or that
he acted without or in excess of his authority or was motivated by personal
ill-will toward appellee. Stated simply, appellant Chua was merely doing his
job. In fact, he even tried to save appelle from undue embarrassment.65
Respondent is not entitled to backwages separation pay, moral and exemplary damages, as well
as attorney's fees
With the sad reality that the respondent was not illegally dismissed, she is
not entitled to backwages. Backwages may be granted only when there is a
finding that the dismissal is illegal.66 Respondent's monetary claims for
backwages, separation pay, moral and exemplary damages, as well as
attorney's fees must necessarily fail as a consequence of Our finding that her
dismissal was for a just cause and that the petitioners acted in good faith
when they terminated her services.67
WHEREFORE, premises considered, the petition is GRANTED. The assailed
Court of Appeals Decision dated September 28, 2012 and Resolution dated
April17, 2013, are hereby REVERSED and SET ASIDE, and the Decision of
the National Labor Relations Commission dated July 30, 2004,
is REINSTATED but MODIFIED to the effect that backwages and attorney's
fees are hereby DELETED, and that Stradcom Corporation is liable to pay
respondent Joyce Anabelle L. Orpilla nominal damages in the amount of
P30,000.
SO ORDERED.
G.R. No. 225125, June 06, 2018
MARLON L. ARCILLA, Petitioner, v. ZULISIBS, INC., PIANDRE SALON,
AND ROSALINDA FRANCISCO, Respondents.
RESOLUTION
CARPIO, J.:
The Case

This is a petition for review to set aside the 10 February 2016  Decision1 of
the Court of Appeals in CA-G.R. SP No. 141953 which affirmed with
modifications the Resolutions dated 30 April 20152 and 26 June 20153 of the
National Labor Relations Commission (NLRC), Third Division, in NLRC LAC
No. 04-001028-15/NLRC NCR No. 10-12582-14.

The Facts

Respondent Zulisibs, Inc. (Zulisibs) is a corporation organized and existing

under Philippine laws with respondent Rosalinda Francisco (Francisco) as its
President and Chief Executive Officer. Zulisibs operates respondent Piandre
Salon (Piandre), an establishment engaged in the operation of beauty
salons.

Petitioner Marlon L. Arcilla (Marlon) was hired by Piandre on 8 February

2000 and was assigned to the Alabang, Muntinlupa City branch. Maricel
Arcilla (Maricel), Marlon's wife, was hired on 12 November 2000 and was
assigned to the Salcedo Village, Makati City branch. After several years, both
Marlon and Maricel were promoted as senior hair stylists earning a monthly
salary of P11,672.00 plus commissions from customers and sale of products.

Sometime in September 2014, Zulisibs, through its officers, received

information that Marlon was establishing a beauty salon somewhere in
Daang Hari, Alabang, Muntinlupa City, near the Piandre Salon where Marlon
was working.

On 6 September 2014, Marlon received a notice from Piandre and Francisco

placing Marlon under preventive suspension from 6 to 14 September 2014
and requiring him to appear on 12 September 2014 at Francisco's office in
Sta. Ana, Manila.

During the 12 September 2014 investigative hearing, Marlon was accused of,
among other things, being involved in the opening of a salon near Piandre
Alabang. Marlon denied that he had an agreement or contract with the
owner of the salon along Daang Hari, Alabang. However, he admitted the
following: (1) that he extended help to the salon owner who happens to be
his brother-in-law; (2) that he called up two former employees of Piandre
and recommended them to his brother-in-law; and (3) that he gave
P50,000.00 to the salon owner which amount was a portion of the
P250,000.00 loan he borrowed from the employees' cooperative of Piandre.4

Further investigation revealed that Marlon was often absent from work and
whenever he was working, he would entertain phone calls, thus, disrupting
his work. He would be absent on days when he would be the only stylist
available. Francisco and other supervisors of Piandre verified the existence of
a new salon along Daang Hari, Alabang and alleged that "the interiors of said
salon, already with equipment, mirrors and chairs, [sic] all set to operate,
with towels folded and presented the 'Piandre' way."5 They also learned from
neighboring establishments that the salon was set to open on 8 September
2014.

On 11 September 2014, Maricel received a notice from Piandre and

Francisco, asking her to explain her alleged involvement with her husband,
Marlon, in setting up a salon along Daang Hari, Alabang and requiring her to
appear on 13 September 2014 at the Sta. Ana office. On 14 September
2014, Maricel received a notice placing her under preventive suspension
from 14 September to 13 October 2014.

Marlon received a copy of his notice of termination on 14 September 2014.

Maricel received her notice of termination on 26 September 2014. Both were
found guilty of violating Piandre's Code of Discipline 3F No. 2: Pagkawala ng
tiwala dahil sa ginawang masama.

Subsequently, Marlon and Maricel filed two separate complaints6 for illegal

dismissal, underpayment of wages, non-payment of overtime pay, service
incentive leave, 13th month pay, Emergency Cost of Living Allowance, and
separation pay, and illegal suspension, with prayer for moral and exemplary
damages, and attorney's fees.

The Ruling of the Labor Arbiter

On 9 March 2015, the Labor Arbiter rendered a Decision7 dismissing Marlon

and Maricel's complaints for lack of merit. The Labor Arbiter held that:

WHEREFORE, the complaint[s] for illegal dismissal and x x x money claims

[are] DISMISSED for lack of merit.8

The Ruling of the NLRC

On 30 April 2015, the NLRC denied Marlon and Maricel's appeal and affirmed
the Labor Arbiter's decision. The NLRC held that:

WHEREFORE, premises considered, Complainants-Appellants' appeal is

hereby DENIED. The March 9, 2015 Decision of Labor Arbiter Gaudencio P.
Demaisip, Jr. is hereby AFFIRMED.9

On 26 June 2015, Marlon and Maricel's Motion for Reconsideration10 was

denied by the NLRC for lack of merit, holding that "The resolution of [the]
Commission dated April 30, 2015 STANDS undisturbed."11

The Ruling of the Court of Appeals

On 10 February 2016, Marlon and Maricel's petition for certiorari under Rule
65 was partially granted. Marlon's termination was held to be valid. As to
Maricel, the Court of Appeals held that the NLRC and the Labor Arbiter erred
in upholding the legality of her dismissal. The dispositive portion of the
Decision12 reads:

WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated

April 30, 2015 and June 26, 2015 of public respondent National Labor
Relations Commission, Third Division, in NLRC LAC No. 04-001028-15/NLRC
NCR No. 10-12582-14 are hereby AFFIRMED with MODIFICATIONS, in that
the private respondents are ORDERED to pay MARICEL ARCILLA the
following:

1) Backwages and all other benefits from September 26, 2014 until finality of this Decision;
2) Separation pay equivalent to one (1) month salary for every year of service;
3) Moral and exemplary damages in the amount of Php 50,000.00
4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and
5) Legal interest of six percent (6%) per annum  on the total monetary awards from the finality of
this Decision until full payment thereof.

The appropriate Computation Division of the National Labor Relations

Commission is hereby ordered to COMPUTE and UPDATE the award as herein
determined WITH DISPATCH.

All other aspects of the assailed Resolutions STAND.

SO ORDERED.13

The Issues

Marlon presents the following issues:

1. Whether the Court of Appeals erred in upholding the two resolutions of

the NLRC, finding Marlon's dismissal to be valid and for just cause, and
effected after due notice and hearing; and

2. Whether the Court of Appeals gravely erred in upholding the two

resolutions of the NLRC, finding that Marlon was not entitled to his money
claims.

The Ruling of this Court

We deny the petition.

Dismissals under the Labor Code have two facets: the legality of the act of
dismissal, which constitutes substantive due process; and the legality of the
manner of dismissal, which constitutes procedural due process.14

In this case, we do not dispute the findings of the Labor Arbiter, the NLRC,
and the Court of Appeals that the manner of Marlon's dismissal was legal
and in accordance with law.15 The requirement of procedural due process
was met when Marlon was served with a first written notice containing the
specific causes or grounds for his termination, when Marlon was called to
attend an investigative hearing to explain his side, and when Marlon was
served with a second written notice containing the justification for his
termination.

Thus, the only issue to be resolved is the legality of the act of dismissal by
re-examining the facts and evidence on record. Given that this Court is not a
trier of facts, and the scope of its authority under Rule 45 of the Rules of
Court is confined only to errors of law and does not extend to questions of
fact, which are for labor tribunals to resolve, one of the recognized
exceptions to the rule is when the factual findings and conclusion of the
labor tribunals are contradictory or inconsistent with those of the Court of
Appeals.16 In this case, however, the factual findings and conclusion of the
labor tribunals and the Court of Appeals regarding Marlon's dismissal are
consistent and one. As to Maricel, the decision in her favor was not appealed
to us anymore. Thus, the decision of the Court of Appeals insofar as Maricel
is concerned is final and executory.

Respondents Zulisibs, Francisco, and Piandre alleged that Marlon committed

serious misconduct or willful disobedience of the company's lawful orders,
and of fraud or willful breach of the trust reposed in him by the company
when he helped his brother-in-law open a salon along Daang Hari, Alabang.
They justified Marlon's dismissal by citing paragraphs (a) and (c), Article 297
of the Labor Code.17 The provision reads:

Article 297. TERMINATION BY EMPLOYER. An employer may terminate an

employee for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful

orders of his employer or representative in connection with his work.
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative.

The Labor Arbiter, the NLRC, and the Court of Appeals all held that the
respondents presented substantial evidence to justify Marlon's dismissal. We
affirm all the rulings. We adopt in toto the Court of Appeals' decision with
regard to Marlon's dismissal. It held:

From the facts and circumstances obtaining with respect to petitioner Marlon
Arcilla, there exists a valid cause in terminating his employment. It was
clearly stated in paragraph 8 of the Agreement or "Kasunduan" signed by
petitioners that they are prohibited from setting up or being involved in a
business similar to that of private respondents' during the course of their
employment. Considering that the petitioners have neither controverted nor
denied the existence of the Kasunduan, they are therefore bound by the
terms and conditions thereof. Petitioners cannot likewise deny the existence
of the Code of Discipline and feign ignorance of the offense they committed
and its corresponding penalty by holding that the private respondents did
not present a copy of said Code in the proceedings below. They are deemed
to have acknowledged the existence of said Code and presumed to have
understood the provisions contained therein when they signed
the Kasunduan and agreed to abide by the Code of Discipline and the rules
and regulations of the company in paragraph 2 of their agreement. As
private respondents' trusted Senior Hairstylists for quite a number
of years, it is incumbent upon them to have read and understood its
provisions and be fully aware of the prohibitions and penalties
imposed upon erring employees.

Collorarily, as briefly summed up by the public respondent, petitioners were

later discovered to be involved in setting up another salon near the private
respondents' salon in Alabang, albeit the involvement was only indirect by
means of extending a Php50,000.00 financial assistance to the owner of the
new salon who happens to be the brother-in-law of Marlon or his wife
Maricel's brother. We agree with public respondent that it is immaterial
whether the new salon was under the petitioners' name or not, or that they
established a salon of their own. The important fact remains that
petitioner Marlon made an admission that he gave funds to his
brother-in-law for the new salon in Alabang which directly competes
with the business of his employer. It is not disputed that the new
beauty salon is located less than a kilometer away from Piandre
Salon in Alabang.

Furthermore, Marlon's admission susbtantially proves two things: 1) that a

new salon has indeed been established; and 2) that he willfully disobeyed his
contract of employment with the private respondents. His involvement in
setting up a competing salon, which albeit indirect, constitutes
serious misconduct because of his blatant disregard [of] the terms
and conditions of his contract/agreement with the private
respondents. His act of allowing himself to be involved with his
brother-in-law's business displays an act of disloyalty to the
company which is likewise sufficient to warrant his dismissal for loss
of trust and confidence. To our mind, his apology in his written letter to
private respondent Francisco [was] a mere afterthought after realizing the
gravity of his offense after he became the subject of an investigation by the
private respondents. Substantial proof, and not clear and convincing
evidence or proof beyond reasonable doubt, is a sufficient basis for the
imposition of any disciplinary action upon the employee. The standard of
substantial evidence is satisfied where the employer has reasonable ground
to believe that the employee is responsible for the misconduct that renders
the latter unworthy of the trust and confidence demanded by his or her
position.18 (Emphasis supplied)

All told, there is sufficient basis to dismiss Marlon on the grounds of serious
misconduct or willful disobedience of the company's lawful orders, and of
fraud or willful breach of the trust reposed in him by the company when he
helped his brother-in-law open a salon along Daang Hari, Alabang. The Court
of Appeals acted in accordance with the evidence on record and case law
when it affirmed and upheld the resolutions of the NLRC.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.

NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, AND LAURA MAE

FATIMA F. PALIT-ANG, PETITIONERS, V. PROHEALTH PHARMA
PHILIPPINES, INC., GENEROSO R. DEL CASTILLO, JR., AND DANTE M.
BUSTO, RESPONDENTS.

DECISION
LEONEN, J.:
This case involves fundamental principles in labor cases.
First, in appeals of illegal dismissal cases, employers are strictly mandated to file an
appeal bond to perfect their appeals. Substantial compliance, however, may merit
liberality in its application.
Second, before any labor tribunal takes cognizance of termination disputes, it must first
have jurisdiction over the action. The Labor Arbiter and the National Labor Relations
Commission only exercise jurisdiction over termination disputes between an employer
and an employee. They do not exercise jurisdiction over termination disputes between a
corporation and a corporate officer.
Third, while this Court recognizes the inherent right of employers to discipline their
employees, the penalties imposed must be commensurate to the infractions committed.
Dismissal of employees for minor and negligible offenses may be considered as illegal
dismissal.
This is a Petition for Review on Certiorari[1] assailing the Court of Appeals February 19,
2013 Decision[2] and September 10, 2013 Resolution[3] in CA-G.R. SP No. 119093,
which reversed the judgments of the Labor Arbiter and of the National Labor Relations
Commission. The Court of Appeals found that Nicanor F. Malcaba (Malcaba), a
corporate officer, should have questioned his dismissal before the Regional Trial Court,
not before the Labor Arbiter. It likewise held that Christian C. Nepomuceno
(Nepomuceno) and Laura Mae Fatima F. Palit-Ang (Palit-Ang) were validly dismissed
from service for loss of trust and confidence, and insubordination, respective1y.
ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of
pharmaceutical products and health food on a wholesale and retail basis. Generoso Del
Castillo (Del Castillo) is the Chair of the Board of Directors and Chief Executive Officer
while Dante Busto (Busto) is the Executive Vice President. Malcaba, Tomas Adona, Jr.
(Adona), Nepomuceno, and Palit-Ang were employed as its President, Marketing
Manager, Business Manager, and Finance Officer, respectively. [4]
Malcaba had been employed with ProHealth since it started in 1997. He was one of its
incorporators together with Del Castillo and Busto, and they were all members of the
Board of Directors in 2004. He held 1,000,000 shares in the corporation. He was initially
the Vice President for Sales then became President in 2005.[5]
Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a
leave on October 23, 2007. When he attempted to return on November 5, 2007, Del
Castillo insisted that he had already resigned and had his things removed from his
office. He attested that he was paid a lower salary in December 2007 and his benefits
were withheld.[6] On January 7, 2008, Malcaba tendered his resignation effective
February 1, 2008.[7]
Nepomuceno, for his part, alleged that he was initially hired as a medical representative
in 1999 but was eventually promoted to District Business Manager for South Luzon. On
March 24, 2008, he applied for vacation leave for the dates April 24, 25, and 28, 2008,
which Busto approved. When he left for Malaysia on April 23, 2008, ProHealth sent him
a Memorandum dated April 24, 2008 asking him to explain his absence. He replied
through email that he tried to call ProHealth to inform them that his flight was on April
22, 2008 at 9:00p.m. and not on April 23, 2008 but was unable to connect on the phone.
He tried to explain again on May 2, 2008 and requested for a personal dialogue with Del
Castillo.[8]
On May 7, 2008, Nepomuceno was given a notice of termination, which was effective
May 5, 2008, on the ground of fraud and willful breach of trust.[9]
Palit-Ang, on the other hand, was hired to join ProHealth's audit team in 2007. She was
later promoted to Finance Officer.[10] On November 26, 2007, Del Castillo instructed
Palit-Ang to give P3,000.00 from the training funds to Johnmer Gamboa (Gamboa), a
District Business Manager, to serve as cash advance. [11]
On November 27, 2007, Busto issued a show cause memorandum for Palit-Ang's failure
to release the cash advance. Palit-Ang was also relieved of her duties and reassigned
to the Office of the Personnel and Administration Manager. [12]
In her explanation, Palit-Ang alleged that when Gamboa saw that she was busy
receiving cash sales from another District Business Manager, he told her that he would
just return the next day to collect his cash advance.[13] When he told her that the cash
advance was for car repairs, Palit-Ang told him to get the cash from his revolving fund,
which she would reimburse after the repairs were done. Del Castillo was dissatisfied
with her explanation and transferred her to another office.[14]
On December 3, 2007, Palit-Ang was invited to a fact-finding investigation,[15] which was
held on December 10, 2007, where Palit-Ang was again asked to explain her actions.[16]
On December 17, 2007, she was handed a notice of termination effective December 31,
2007, for disobeying the order of ProHealth's highest official.[17]
Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed Complaints[18] before the
Labor Arbiter for illegal dismissal, nonpayment of salaries and 13th month pay,
damages, and attorney's fees.
The Labor Arbiter found that Malcaba was constructively dismissed. He found that
ProHealth never controverted the allegation that Del Castillo made it difficult for
Malcaba to effectively fulfill his duties. He likewise ruled that ProHealth's insistence that
Malcaba's leave of absence in October 2007 was an act of resignation was false since
Malcaba continued to perform his duties as President through December 2007.[19]
The Labor Arbiter declared that Nepomuceno's failure to state the actual date of his
flight was an excusable mistake on his part, considering that this was his first infraction
in his nine (9) years of service. He noted that no administrative proceedings were
conducted before Nepomuceno's dismissal, thereby violating his right to due process.[20]
Palit-Ang's dismissal was also found to have been illegal as delay in complying with a
lawful order was not tantamount to disobedience. The Labor Arbiter further noted that
delay in giving a cash advance for car maintenance would not have affected the
company's operations. He declared that Palit-Ang's dismissal was too harsh of a
penalty.[21]
The dispositive portion of the Labor Arbiter's April 5, 2009 Decision[22] read:
WHEREFORE, premises considered, judgment is hereby rendered declaring that
complainants were illegally dismissed by respondents. Accordingly, respondents are
directed solidarily to pay complainants the following:

1. Complainant Nicanor F. Malcaba:

a. Separation pay of P1,800,000.00;
b. Full backwages from the time of his illegal dismissal [o]n 11 November 2007 until
the finality of this decision, which as of this date amounts to P2,810,795.40;
c. 13th month pay for the years 2007 and 2008 amounting to P126,625.00;
2. Complainant Christian C. Nepomuceno:
a. Separation pay of P190,000.00;
b. Full backwages from the time of his illegal dismissal [i]n May 2007 until the
finality of this decision, which as of this date amounts to P568,827.45;
c. 13th month pay for 2008 amounting to P6,333.33;
3. Complainant Laura Mae Fatima F. Palit-Ang:
a. Separation pay of P30,000.00;
b. Full backwages from the time of her illegal dismissal on 1 January 2008 until the
finality of this decision, which as of [t]his date amounts to P266,694.63;
c. 13th month pay for 2008 of P18,000.00; and
4. Complainant Tomas C. Adona, Jr.:
a. Separation pay of P75,000.00;
b. Full backwages from time of his illegal dismissal [i]n June 2007 until the finality of
this decision, which as of this date amounts to P609,832.37;
c. 13th month pay for 2008 of P10,416.66.
Complainants are further awarded moral damages of Php100,000.00 each and
exemplary damages of Php100,000.00 each.

Finally, respondents are assessed the sum equivalent to ten percent (10%) of the total
monetary award as and for attorney's fees.

All other claims are dismissed for lack of merit.

SO ORDERED.[23]
ProHealth appealed to the National Labor Relations Commission.[24] On September 29,
2010, the National Labor Relations Commission rendered its Decision,[25] affirming the
Labor Arbiter's April 5, 2009 Decision with modifications. The dispositive portion of this
Decision read:
WHEREFORE, premises considered, the appeal is partially granted. The assailed
Decision is modified in that: a) complainant Adona is declared to have voluntarily
resigned and is entitled only to his 13th month pay; b) the award of moral and,
exemplary damages in favor of complainants Nepomuceno and Palit-Ang are deleted;
and c) respondents del Castillo and Busto are held jointly and severally liable with
ProHealth for the claims of complainant Malcaba.
All dispositions not affected by the modifications stay.

SO ORDERED.[26]
ProHealth moved for reconsideration[27] but was denied by the National Labor Relations
Commission in its January 31, 2011 Resolution.[28] Thus, ProHealth, Del Castillo, and
Busto filed a Petition for Certiorari[29] before the Court of Appeals.
On February 19, 2013, the Court of Appeals rendered its Decision[30] reversing and
setting aside the National Labor Relations Commission September 29, 2010 Decision.
On the procedural issues, the Court of Appeals found that ProHealth substantially
complied with the requirement of an appeal bond despite it not appearing in the records
of the surety company since ProHealth believed in good faith that the bond it secured
was genuine.[31]
On the substantive issues, the Court of Appeals held that there was no employer-
employee relationship between Malcaba and ProHealth since he was a corporate
officer. Thus, he should have filed his complaint with the Regional Trial Court, not with
the Labor Arbiter, since his dismissal from service was an intra-corporate dispute.[32]
The Court of Appeals likewise concluded that ProHealth was justified in dismissing
Nepomuceno and Palit-Ang since both were given opportunities to fully explain their
sides.[33] It found that Nepomuceno's failure to diligently check the true schedule of his
flight abroad and his subsequent lack of effort to inform his superiors were enough for
his employer to lose its trust and confidence in him.[34] It likewise found that Palit-Ang
displayed "arrogance and hostility" when she defied the lawful orders of the company's
highest ranking officer; thus, her insubordination was just cause to terminate her
services.[35]
While the Court of Appeals ordered the return of the amounts given to Malcaba, it
allowed Nepomuceno and Palit-Ang to keep the amounts given considering that even if
the finding of illegal dismissal were reversed on appeal, the employer was still obliged to
reinstate and pay the wages of a dismissed employee during the period of appeal.
[36]
 The dispositive portion of the Court of Appeals February 19, 2013 Decision read:
WHEREFORE, premises considered, it is hereby ruled:

(a) that the September 29, 2010 Decision and January 31, 2011 Resolution of the National
Labor Relations Commission are REVERSED and SET ASIDE for being issued with grave
abuse of discretion;

(b) that Our Decision is without prejudice to Mr. Nicanor F. Malcaba's available recourse for
relief through the appropriate remedy in the proper forum;
   
(c) that all the amounts released in favor of Mr. Nicanor F. Malcaba amounting to Four Million
Nine Hundred Thirty[-]Seven Thousand Four Hundred Twenty pesos and 40/100
(P4,937,420.[40]) be RETURNED to herein petitioners;
   
(d) that NO REFUND will be ordered by this Court against Mr. Christian Nepomuceno and
Ms. Laura Mae Fatima Palit-Ang.
SO ORDERED.[37]
Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but were denied in a
Resolution[38] dated September 10, 2013. Hence, this Petition[39] was filed before this
Court.
Petitioners argue that the Court of Appeals should have dismissed outright the Petition
for Certiorari since respondents failed to post a genuine appeal bond before the
National Labor Relations Commission. They allege that when Sheriff Ramon Nonato P.
Dayao attempted to enforce the judgment award against the appeal bond, he was
informed that the appeal bond procured by respondents did not appear in the records of
Alpha Insurance and Surety Company, Inc. (Alpha Insurance). They also claim that
respondents were notified by the National Labor Relations Commission four (4) times
that their appeal bond was not genuine, showing that respondents did not comply with
the requirement in good faith.[40]
Petitioners contend that petitioner Malcaba properly filed his Complaint before the Labor
Arbiter since he was an employee of respondent ProHealth, albeit a high-ranking one.
They argue that respondents merely alleged that petitioner Malcaba is a corporate
officer but failed to substantiate this allegation.[41] They maintain that petitioner Malcaba
did not resign on September 24, 2007 considering that the General Information Sheet
for 2007 submitted on October 11, 2007 listed him as respondent ProHealth's President.
They submit that respondent Del Castillo's action took a toll on petitioner Malcaba's
well-being; hence, the latter merely took a leave of absence and returned to work in
November 2007. They claim that respondents made it difficult for petitioner Malcaba to
continue his work upon his return, resulting in his resignation in January 2008. Thus,
they argue that petitioner Malcaba was constructively dismissed.[42]
Petitioners likewise argue that petitioners Nepomuceno and Palit-Ang were illegally
dismissed. They claim that petitioner Nepomuceno committed an "honest and negligible
mistake"[43] that should not have warranted dismissal considering his loyal service for
nine (9) years. They contend that petitioner Nepomuceno's absence did not injure
respondent ProHealth's business since he turned over all pending work to a reliever
before he left and even surpassed his sales quota for the month.[44] They likewise claim
that his dismissal was done in violation of his right to due process since he was not
given any opportunity to explain his side and was only given a notice of termination two
(2) days after he was actually dismissed.[45]
Petitioners maintain that petitioner Palit-Ang believed in good faith that Gamboa would
just claim his cash advance the day after he tried to claim it and that there was nothing
in her actions that would prove that she intended to disobey or defy respondent Del
Castillo's instructions. They insist that delay in complying with orders is not tantamount
to disobedience and would not constitute just cause for petitioner Palit-Ang's dismissal.
They likewise submit that while petitioner Palit-Ang was subjected to a fact-finding
investigation, respondents failed to inform her of her right to be assisted by counsel.[46]
Respondents, on the other hand, counter that a liberal application of the procedural
rules was necessary in their case since they acted in good faith in posting their appeal
bond.[47] They likewise contend that the issue should have already been considered
moot since petitioners "were able to garnish and collect the amounts allegedly due to
them."[48]
Respondents likewise insist that petitioner Malcaba was a corporate officer considering
that he was not only an incorporator and stockholder, but also an elected Director and
President of respondent ProHealth.[49] They also point out that he filed his labor
complaint seven (7) months after his resignation and that his voluntary resignation
already disproves his claim of constructive dismissal.[50]
Respondents argue that they were justified in dismissing petitioners Nepomuceno and
Palit-Ang. They contend that petitioner Nepomuceno's abandonment of his duties at a
critical sales period and his failure to immediately advise his superiors of his
whereabouts was ground for respondents to lose their trust and confidence in him.
[51]
 They likewise maintain that petitioner Palit-Ang was correctly found by the Court of
Appeals to have defied the lawful instructions of respondent Del Castillo and illustrated
her "grave disrespect towards authority."[52]
From the arguments and allegations of the parties, it is clear that this case involves
three (3) different illegal dismissal complaints, with three (3) different complainants in
three (3) different factual situations during three (3) different time periods. The only
commonality is that they involve the same respondents.
While this Court commends the economy by which the National Labor Relations
Commission resolved these cases, the three (3) complaints should have been resolved
separately since the three (3) petitioners raise vastly different substantive issues. This
leaves this Court with the predicament of having to resolve three (3) different cases of
illegal dismissal in one (1) Petition for Review. Thus, each petitioner's case will have to
be resolved separately within this Decision. This Court's ruling over one (1) petitioner
may not necessarily affect the other co-petitioners. The National Labor Relations
Commission's zeal for economy and convenience should never prejudice the individual
rights of each party. The National Labor Relations Commission should know the rule
that joinder of parties[53] or causes of action[54] applies suppletorily in appeals[55] and for
good reason.[56]
Petitioners raise the common procedural issue of whether or not respondents failed to
perfect their appeal when it was discovered that their appeal bond was a forged bond,
which this Court will address before proceeding with the substantive issues. The
substantive issues raised, however, are dependent on the factual circumstances
applicable to each petitioner. This Court tackles these substantive issues in order:

First, whether or not the Labor Arbiter and National Labor Relations Commission had
jurisdiction over petitioner Nicanor F. Malcaba's termination dispute considering the
allegation that he was a corporate officer, and not a mere employee;

Second, whether or not petitioner Christian C. Nepomuceno was validly dismissed for
willful breach of trust when he failed to inform respondents ProHealth Pharma
Philippines, Inc., Generoso R. Del Castillo, Jr., and Dante M. Busto of the actual dates
of his vacation leave; and

Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was validly dismissed
for willful disobedience when she failed to immediately comply with an order of her
superior.

I
Appeal is not a matter of right.[57] Courts and tribunals have the discretion whether to
give due course to an appeal or to dismiss it outright. The perfection of an appeal is,
thus, jurisdictional. Non-compliance with the manner in which to file an appeal renders
the judgment final and executory.[58]
In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to
the monetary award. Thus, Article 229 [223][59] of the Labor Code provides:
Article 229. [223] Appeal.
...
In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from.

This requirement is again repeated m the 2011 National Labor Relations Commission
Rules of Procedure:
Section 4. Requisites for Perfection of Appeal. — (a) The appeal shall be:
....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in Section 6 of this Rule[.]
....

Section 6. Bond. — In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a bond, which shall either be in the form of cash deposit or surety bond
equivalent in the amount to the monetary award, exclusive of damages and attorney's
fees.

In case of surety bond, the same shall be issued by a reputable bonding company duly
accredited by the Commission and shall be accompanied by original or certified true
copies of the following:

(a) a joint declaration under oath by the employer, his/her counsel, and the bonding
company, attesting that the bond posted is genuine, and shall be in effect until final
disposition of the case;

(b) an indemnity agreement between the employer appellant and bonding company;

(c) proof of security deposit or collateral securing the bond: provided, that a check shall
not be considered as an acceptable security; and,

(d) notarized board resolution or secretary's certificate from the bonding company
showing its authorized signatories and their specimen signatures.

The Commission through the Chairman may on justifiable grounds blacklist an

accredited bonding company.

A cash or surety bond shall be valid and effective from the date of deposit or posting,
until the case is finally decided, resolved or terminated, or the award satisfied. This
condition shall be deemed incorporated in the terms and conditions of the surety bond,
and shall be binding on the appellants and the bonding company.

The appellant shall furnish the appellee with a certified true copy of the said surety bond
with all the above-mentioned supporting documents. The appellee shall verify the
regularity and genuineness thereof and immediately report any irregularity to the
Commission.

Upon verification by the Commission that the bond is irregular or not genuine, the
Commission shall cause the immediate dismissal of the appeal, and censure the
responsible parties and their counsels, or subject them to reasonable fine or penalty,
and the bonding company may be blacklisted.
No motion to reduce bond shall be entertained except on meritorious grounds, and only
upon the posting of a bond in a reasonable amount in relation to the monetary award.

The mere filing of a motion to reduce bond without complying with the requisites in the
preceding paragraphs shall not stop the running of the period to perfect an appeal.[60]
The purpose of requiring an appeal bond is "to guarantee the payment of valid and legal
claims against the employer."[61] It is a measure of financial security granted to an
illegally dismissed employee since the resolution of the employer's appeal may take an
indeterminable amount of time. In particular:
The requirement that the employer post a cash or surety bond to perfect its/his appeal is
apparently intended to assure the workers that if they prevail in the case, they will
receive the money judgment in their favor upon the dismissal of the employer's appeal.
It was intended to discourage employers from using an appeal to delay, or even evade,
their obligation to satisfy their employees' just and lawful claims.[62]
Procedural rules require that the appeal bond filed be "genuine." An appeal bond
determined by the National Labor Relations Commission to be "irregular or not genuine"
shall cause the immediate dismissal of the appeal.[63]
In this case, petitioners allege that respondents' appeal should not have been given due
course by the National Labor Relations Commission since the appeal bond they filed
"[did] not appear in the records of [Alpha Insurance]"[64] and was, therefore, not genuine.
As evidence, they presented a certification from Alpha Insurance, which read:
This is to certify that the bond being presented by MR. JOSEPH D. DE JESUS is
allegedly a Surety Bond filed with the NATIONAL LABOR RELATIONS COMMISSION,
identified as Bond No. G(16)00358/2009 on an alleged case NLRC NCR Case No. 08-
12090-08, is a faked and forged bond, and it was not issued by ALPHA INSURANCE &
SURETY COMPANY, INC.[65]
This Court in Navarro v. National Labor Relations Commission [66] found that an
employer failed to perfect its appeal as it submitted an appeal bond that was "bogus[,]
having been issued by an officer no longer connected for a long time with the bonding
company."[67] The mere fictitiousness of the bond, however, was not the only factor
taken into consideration. This Court likewise took note of the employer's failure to
sufficiently explain this irregularity and its failure to file the bond within the reglementary
period.
In Quiambao v. National Labor Relations Commission,[68] this Court held that the
mandatory and jurisdictional requirement of the filing of an appeal bond could be
relaxed if there was substantial compliance. Quiambao proceeded to outline situations
that could be considered as substantial compliance, such as late payment, failure of the
Labor Arbiter to state the exact amount of money judgment due, and reliance on a
notice of judgment that failed to state that a bond must first be filed in order to appeal.
[69]
 Rosewood Processing v. National Labor Relations Commission [70] likewise
enumerated other instances where there would be a liberal application of the procedural
rules:
Some of these cases include: (a) counsel's reliance on the footnote of the notice of the
decision of the labor arbiter that the aggrieved party may appeal . . . within ten (10)
working days; (b) fundamental consideration of substantial justice; (c) prevention of
miscarriage of justice or of unjust enrichment, as where the tardy appeal is from a
decision granting separation pay which was already granted in an earlier final decision;
and (d) special circumstances of the case combined with its legal merits or the amount
and the issue involved.[71]
Thus, while the procedural rules strictly require the employer to submit a genuine bond,
an appeal could still be perfected if there was substantial compliance with the
requirement.

In this instance, the National Labor Relations Commission certified that respondents
filed a security deposit in the amount of P6,512,524.84 under Security Bank check no.
0000045245,[72] showing that the premium for the appeal bond was duly paid and that
there was willingness to post it.[73] Respondents likewise attached documents proving
that Alpha Insurance was a legitimate and accredited bonding company.[74]
Despite their failure to collect on the appeal bond, petitioners do not deny that they were
eventually able to garnish the amount from respondents' bank deposits.[75] This fulfills
the purpose of the bond, that is, "to guarantee the payment of valid and legal claims
against the employer[.]"[76] Respondents are considered to have substantially complied
with the requirements on the posting of an appeal bond.
II
Under the Labor Code, the Labor Arbiter exercises original and exclusive jurisdiction
over termination disputes between an employer and an employee while the National
Labor Relations Commission exercises exclusive appellate jurisdiction over these
cases:

Article 224. [217] Jurisdiction of the Labor Arbiters and the Commission. — (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or
non-agricultural:
...
(2) Termination disputes;
...
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by Labor Arbiters.[77]
The presumption under this provision is that the parties have an employer-employee
relationship. Otherwise, the case would be cognizable in different tribunals even if the
action involves a termination dispute.

Petitioner Malcaba alleges that the Court of Appeals erred m dismissing his complaint
for lack of jurisdiction, insisting that he was an employee of respondent, not a corporate
officer.

At the time of his alleged dismissal, petitioner Malcaba was the President of respondent
corporation. Strangely, this same petitioner disputes this position as respondents' bare
assertion,[78] yet he also insists that his name appears as President in the corporation's
General Information Sheet for 2007.[79]
Under Section 25 of the Corporation Code,[80] the President of a corporation is
considered a corporate officer. The dismissal of a corporate officer is considered an
intra-corporate dispute, not a labor dispute. Thus, in Tabang v. National Labor Relations
Commission:[81]
A corporate officer's dismissal is always a corporate act, or an intra-corporate
controversy, and the nature is not altered by the reason or wisdom with which the Board
of Directors may have in taking such action. Also, an intra-corporate controversy is one
which arises between a stockholder and. the corporation. There is no distinction,
qualification, nor any exemption whatsoever. The provision is broad and covers all kinds
of controversies between stockholders and corporations.[82]
Further, in Matling Industrial and Commercial Corporation v. Coros,[83] this Court stated
that jurisdiction over intra-corporate disputes involving the illegal dismissal of corporate
officers was with the Regional Trial Court, not with the Labor Arbiter:
Where the complaint for illegal dismissal concerns a corporate officer, however, the
controversy falls under the jurisdiction of the Securities and Exchange Commission
(SEC), because the controversy arises out of intra-corporate or partnership relations
between and among stockholders, members, or associates, or between any or all of
them and the corporation, partnership, or association of which they are stockholders,
members, or associates, respectively; and between such corporation, partnership, or
association and the State insofar as the controversy concerns their individual franchise
or right to exist as such entity; or because the controversy involves the election or
appointment of a director, trustee, officer, or manager of such corporation, partnership,
or association. Such controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise
known as The Securities Regulation Code, the SEC's jurisdiction over all intra-corporate
disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:

5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction
or the appropriate Regional Trial Court: Provided, that the Supreme Court in the
exercise of its authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.[84]
The mere designation as a high-ranking employee, however, is not enough to consider
one as a corporate officer. In Tabang, this Court discussed the distinction between an
employee and a corporate officer, regardless of designation:

The president, vice-president, secretary and treasurer are commonly regarded as the
principal or executive officers of a corporation, and modern corporation statutes usually
designate them as the officers of the corporation. However, other offices are sometimes
created by the charter or by-laws of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create additional offices as may be
necessary.

It has been held that an "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an "employee"
usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.[85]
The clear weight of jurisprudence clarifies that to be considered a corporate officer, first,
the office must be created by the charter of the corporation, and second, the officer
must be elected by the board of directors or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a member of the Board of
Directors.[86] Respondent corporation's By-Laws creates the office of the President. That
foundational document also states that the President is elected by the Board of
Directors:
ARTICLE IV
OFFICER
Section 1. Election/Appointment — Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice President, the
Treasurer, and the Secretary at said meeting.[87]
This case is similar to Locsin v. Nissan Lease Philippines:[88]
Locsin was undeniably Chairman and President, and was elected to these positions by
the Nissan board pursuant to its By-laws. As such, he was a corporate officer, not an
employee. The CA reached this conclusion by relying on the submitted facts and on
Presidential Decree 902-A, which defines corporate officers as "those officers of a
corporation who are given that character either by the Corporation Code or by the
corporation's by-laws." Likewise, Section 25 of Batas Pambansa Blg. 69, or the
Corporation Code of the Philippines (Corporation Code) provides that corporate officers
are the president, secretary, treasurer and such other officers as may be provided
for in the by-laws.[89] (Emphasis in the original)
Petitioners cite Prudential Bank and Trust Company v. Reyes[90] as basis that even high-
ranking officers may be considered regular employees, not corporate officers.
[91]
 Prudential Bank, however, is not applicable to this case.
In Prudential Bank, an employer was considered estopped from raising the argument of
an intra-corporate dispute since this was only raised when the case was filed with this
Court. This Court also noted that an employee rose from the ranks and was regularly
performing tasks integral to the business of the employer throughout the length of her
tenure, thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July
14, 1963. From that position she rose to become supervisor. Then in 1982, she was
appointed Assistant Vice-President which she occupied until her illegal dismissal on
July 19, 1991. The bank's contention that she merely holds an elective position and that
in effect she is not a regular employee is belied by the nature of her work and her length
of service with the Bank. As earlier stated, she rose from the ranks and has been
employed with the Bank since 1963 until the termination of her employment in 1991. As
Assistant Vice President of the foreign department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks payable in foreign currency and
to ensure the collection of foreign bills or checks purchased, including the signing of
transmittal letters covering the same. It has been stated that "the primary standard of
determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the
employer.["] Additionally, "an employee is regular because of the nature of work and the
length of service, not because of the mode or even the reason for hiring them." As
Assistant Vice-President of the Foreign Department of the Bank she performs tasks
integral to the operations of the bank and her length of service with the bank totaling 28
years speaks volumes of her status as a regular employee of the bank. In fine, as a
regular employee, she is entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to the very end to establish
loss of trust and confidence and serious misconduct on the part of private respondent
but, as will be discussed later, to no avail.[92]
An "Assistant Vice President" is not among the officers stated in Section 25 of the
Corporation Code.[93] A corporation's President, however, is explicitly stated as a
corporate officer.
Finding that petitioner Malcaba is the President of respondent corporation and a
corporate officer, any issue on his alleged dismissal is beyond the jurisdiction of the
Labor Arbiter or the National Labor Relations Commission. Their adjudication on his
money claims is void for lack of jurisdiction. As a matter of equity, petitioner Malcaba
must, therefore, return all amounts received as judgment award pending final
adjudication of his claims. This Court's dismissal of petitioner Malcaba's claims,
however, is without prejudice to his filing of the appropriate case in the proper forum.

III
]
Article 294 [279]  of the Labor Code provides that an employer may terminate the
services of an employee only upon just or authorized causes.[94] Article 297 [282]
enumerates the just causes for termination, among which is "[f]raud or willful breach by
the employee of the trust reposed in him by his employer or duly authorized
representative[.]"
Loss of trust and confidence is a just cause to terminate either managerial employees or
rank-and-file employees who regularly handle large amounts of money or property in
the regular exercise of their functions.[95]
For an act to be considered a loss of trust and confidence, it must be first, work-related,
and second, founded on clearly established facts:
The complained act must be work related such as would show the employee concerned
to be unfit to continue working for the employer and it must be based on a willful breach
of trust and founded on clearly established facts. The basis for the dismissal must be
clearly and convincingly established but proof beyond reasonable doubt is not
necessary.[96]
The breach of trust must likewise be willful, that is, "it is done intentionally, knowingly
and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently."[97]
Petitioner Nepomuceno alleges that he was illegally dismissed merely for his failure to
inform his superiors of the actual dates of his vacation leave. Respondents, however,
contend that as District Business Manager, petitioner Nepomuceno lost the
corporation's trust and confidence by failing to report for work during a crucial sales
period.

As found by the National Labor Relations Commission, petitioner Nepomuceno had filed
for leave, which was approved, for April 24, 25, and 28, 2008 to go on vacation in
Malaysia. However, he left for Malaysia on the evening of April 22, 2008, and thus,
failed to report for work on April 23, 2008.

Petitioner Nepomuceno claims that he only knew that his flight was for the evening of
April 22, 2008 on the day of his flight. Respondents, however, insist that he "deliberately
concealed the actual date of departure as he knows that he would be out of the country
on a crucial period of sales generation and bookings . . . [and] therefore knew that his
application for leave would be denied."[98] Otherwise stated, respondents contend that
his dismissal was a valid exercise of their management prerogative to discipline and
dismiss managerial employees unworthy of their trust and confidence.
The concept of a management prerogative was already passed upon by this Court
in San Miguel Brewery Sales Force Union v. Ople:[99]
Except as limited by special laws, an employer is free to regulate, according to his own
discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of work. . . .

Every business enterprise endeavors to increase its profits. In the process, it may adopt
or devise means designed towards that goal. In Abott Laboratories vs. NLRC, . . . We
ruled:
. . . Even as the law is solicitous of the welfare of the employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. The free
will of management to conduct its own business affairs to achieve its purpose cannot be
denied.

So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.[100]
While an employer is free to regulate all aspects of employment, the exercise of
management prerogatives must be in good faith and must not defeat or circumvent the
rights of its employees.

In industries that mainly rely on sales, employers are free to discipline errant employees
who deliberately fail to report for work during a crucial sales period. It would have been
reasonable for respondents to discipline petitioner Nepomuceno had he been a
problematic employee who unceremoniously refused to do his work.
However, as found by the Labor Arbiter and the National Labor Relations Commission,
petitioner Nepomuceno turned over all of his pending work to a reliever before he left for
Malaysia. He was able to reach his sales quota and surpass his sales target even
before taking his vacation leave. Respondents did not suffer any financial damage as a
result of his absence. This was also petitioner Nepomuceno's first infraction in his nine
(9) years of service with respondents.[101] None of these circumstances constitutes
a willful breach of trust on his part. The penalty of dismissal, thus, was too severe for
this kind of infraction.
The manner of petitioner Nepomuceno's dismissal was likewise suspicious. In all cases
of employment termination, the employee must be granted due process. The manner by
which this is accomplished is stated in Book V, Rule XXIII, Section 2 of the Rules
Implementing the Labor Code:

Section 2. Standard of due process: requirements of notice.

— In all cases of termination of employment, the following standards of due process

shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the
Code:

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain
his side;

(b) A hearing or conference during which the employee concerned, with the assistance
of counsel if the employee so desires, is given opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstance, grounds have been established to justify his
termination.

Here, petitioner Nepomuceno received a memorandum on April 23, 2008, asking him to
explain why no administrative investigation should be held against him. He submitted an
explanation on the same day and another explanation on May 2, 2008. On May 7, 2008,
he was given his notice of termination, which had already taken effect two (2) days
earlier, or on May 5, 2008.[102]
It is true that "[t]he essence of due process is simply an opportunity to be
heard."[103] Petitioner Nepomuceno had two (2) opportunities within which to explain his
actions. This would have been sufficient to satisfy the requirement. The delay in
handing him his notice of termination, however, appears to have been an afterthought.
While strictly not a violation of procedural due process, respondents should have been
more circumspect in complying with the due process requirements under the law.
Considering that petitioner Nepomuceno's dismissal was done without just cause, he is
entitled to reinstatement and full backwages.[104] If reinstatement is not possible due to
strained relations between the parties, he shall be awarded separation pay at the rate of
one (1) month for every year of service. [105]
IV
Under Article 297 [282] of the Labor Code, an employer may terminate the services of
an employee who commits willful disobedience of the lawful orders of the employer:

Article 297. [282] Termination by Employer. — An employer may terminate an

employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work[.]

For disobedience to be considered as just cause for termination, two (2) requisites must
concur: first, "the employee's assailed conduct must have been wilful or intentional,"
and second, "the order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he [or she] had been engaged to
discharge."[106] For disobedience to be willful, it must be "characterized by a wrongful
and perverse mental attitude rendering the employee's act inconsistent with proper
subordination."[107]
The conduct complained of must also constitute "harmful behavior against the business
interest or person of his [or her] employer."[108] Thus, it is implied in every case of willful
disobedience that "the erring employee obtains undue advantage detrimental to the
business interest of the employer."[109]
Petitioner Palit-Ang, as Finance Officer, was instructed by respondent Del Castillo to
give a cash advance of P3,000.00 to District Branch Manager Gamboa on November
26, 2007. This order was reasonable, lawful, made known to petitioner Palit-Ang, and
pertains to her duties.[110] What is left to be determined, therefore, is whether petitioner
Palit-Ang intentionally and willfully violated it as to amount to insubordination.
When Gamboa went to collect the money from petitioner Palit-Ang, he was told to return
the next day as she was still busy. When petitioner Palit-Ang found out that the money
was to be used for a car tune-up, she suggested to Gamboa to just get the money from
his mobilization fund and that she just would reimburse it after.[111] The Court of Appeals
found that these circumstances characterized petitioner Palit-Ang's "arrogance and
hostility,"[112] in failing to comply with respondent Del Castillo's order, and thus,
warranted her dismissal.
On the contrary, there was no ill will between Gamboa and petitioner Palit-Ang.
Petitioner Palit-Ang's failure to immediately give the money to Gamboa was not the
result of a perverse mental attitude but was merely because she was busy at the time.
Neither did she profit from her failure to immediately give the cash advance for the car
tune-up nor did respondents suffer financial damage by her failure to comply. The
severe penalty of dismissal was not commensurate to her infraction. In Dongon v.
Rapid Movers and Forwarders:[113]
To us, dismissal should only be a last resort, a penalty to be meted only after all the
relevant circumstances have been appreciated and evaluated with the goal of ensuring
that the ground for dismissal was not only serious but true. The cause of termination, to
be lawful, must be a serious and grave malfeasance to justify the deprivation of a
means of livelihood. This requirement is in keeping with the spirit of our Constitution and
laws to lean over backwards in favor of the working class, and with the mandate that
every doubt must be resolved in their favor.

Although we recognize the inherent right of the employer to discipline its employees, we
should still ensure that the employer exercises the prerogative to discipline humanely
and considerately, and that the sanction imposed is commensurate to the offense
involved and to the degree of the infraction. The discipline exacted by the employer
should further consider the employee's length of service and the number of infractions
during his employment. The employer should never forget that always at stake in
disciplining its employee are not only his position but also his livelihood, and that he
may also have a family entirely dependent on his earnings.[114]
Petitioner Palit-Ang likewise assails the failure of respondents to inform her of her right
to counsel when she was being investigated for her infraction. As previously discussed,
"[t]he essence of due process is simply an opportunity to be heard,"[115] not that the
employee must be accompanied by counsel at all times. A hearing was conducted and
she was furnished a notice of termination explaining the grounds for her dismissa1.
[116]
 She was not denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been illegally dismissed, her
penalty not having been proportionate to the infraction committed. Thus, she is entitled
to reinstatement and full backwages.[117] If reinstatement is not possible due to strained
relations between the parties, she shall be awarded separation pay at the rate of one (1)
month for every year of service.[118]
WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner Christian C.
Nepomuceno and petitioner Laura Mae Fatima F. Palit-Ang are DECLARED to have
been illegally dismissed. They are, therefore, entitled to reinstatement without loss of
seniority rights, or in lieu thereof, separation pay; and the payment of backwages from
the filing of their Complaints until finality of this Decision.
The Court of Appeals February 19, 2013 Decision and September 10, 2013 Resolution
in CA-G.R. SP No. 119093, finding that the National Labor Relations Commission had
no jurisdiction to adjudicate petitioner Nicanor F. Malcaba's claims is SUSTAINED.
Petitioner Malcaba is further ordered to RETURN the amount of P4,937,420.40 to
respondents for having been erroneously awarded. This shall be without prejudice to
the filing of petitioner Malcaba's claims in the proper forum.
This case is hereby REMANDED to the Labor Arbiter for the proper computation of
petitioners Christian C. Nepomuceno's and Laura Mae Fatima F. Palit-Ang's money
claims.
SO ORDERED.

January 10, 2018

G.R. No. 207354
CHARLIE HUBILLA, JOEL NAYRE, NENITA A. TAN, PEDRO MAGALLANES, JR.,
ARNEL YUSON, JANICE CABATBAT, JUDY PAPINA, VANESSA ESPIRITU, NOEMI
YALUNG, GENALYN RESCOBILLO, FIDEL ZAQUITA, NYL B. CALINGASAN,
JANICE MIRADORA, EVANGELINE CHUA, ROSCHELLE MISSION, MELANIE
BALLESTEROS, MARILYN BACALSO, RENALYN ALCANTARA, FEDERICO B.
VIERNES, CHRISTOPHER B. YARES, ANA MARY R. AGUILAR, MELANIE SAN
MARCOS, EMERLOVE MONTE, CHONALYN LUCAS, THERESA MALI COSIO, MA.
FE CERCARES, RUBELYN R. CLARO, JONALYN M. YALUNG, MARY ANN V.
MACANAG, RESLYN L. FLORES, CRISTEL C. ROQUE, TERESA G MUNAR,
SUSAN A. DELA CRUZ, SHEENA KAY P. DE VERA, ARLENE R. ANES, GINA B.
BINIBINI, CHERINE V. ZORILLA, MA. CRISTINE MAGTOTO, FRANCIS MARIE O.
DE CASTRO, VANESSA R. ESPIRITU, RACHELLE V. QUISTORIA, JULIE ANN
ILAN, ANGELIE F. PANOTES, ANABEL PAYOS, MELISSA M. PERLAS, MELANIE
B. BERSES, BARVI ROSE PERALTA, RESIE AQUE, ROWENA RIVERA, MELANIE
M. DY, CHERYLYN CORO, RANELYN SUBONG, ANGELA SUBILLAGA, THELMA
BARTOLABAC, MICHELLE C. ILAGAN, PRECIOUS MAE DE GUZMAN, MARY
CAROLINE COLINA, FRELYN HIPOLITO, MYLINE A. CALLOS, JANETH B.
SEMBILLO, LEA LYN F. FERRANCO, MAY C. SANTOS, ROSELLE A. NOBLE,
JENNIFER D. SUYOM, WARREN PETCHIE C. CAJES, ROWELYN F. CATALAN,
RIEZEL ANN A. ALEGRE, DEMETRIA B. PEREZ, GENALYN OSOC, JUVILYN N.
NERI, JOY B. PIMENTEL, AIRENE LAYON, MARY JOY TURQUEZA, MARY ANN
VALENTIN, ROSIE L. NIEBRES, MELCA MALLORCA, JOY CAGATCAGAT, DIANA
CAMARO, MARIVEL DIJUMO, SHEILA DELA CRUZ, ELIZABETH ARINGO,
JENALYN G. DISMAYA, MELANIE G. TRIA, GRETCHEN D. MEJOS, and JANELIE
R. JIMENEZ, Petitioners
vs.
HSY MARKETING LTD., CO., WANTOFREE ORIENTAL TRADING, INC., COEN
FASHION HOUSE AND GENERAL MERCHANDISE, ASIA CONSUMER VALUE
TRADING, INC., FABULOUS JEANS & SHIRT & GENERAL MERCHANDISE, LSG
MANUFACTURING CORPORATION, UNITE GENERAL MERCHANDISE, ROSARIO
Q. CO, LUCIA PUN LING YEUNG, and ALEXANDER ARQUEZA, Respondents
DECISION
LEONEN, J.:
When the evidence in labor cases is in equipoise, doubt is resolved in favor of the
employee.
This is a Petition for Review on Certiorari1 assailing the February 25, 2013
Decision2 and May 30, 2013 Resolution3 of the Court of Appeals in CA-G.R. SP No.
126522, which upheld the Labor Arbiter's finding that the employees voluntarily
terminated their employment. The assailed judgments also set aside the National Labor
Relations Commission's application of the principle of equipoise on the ground that the
employees failed to present any evidence in their favor.
HSY Marketing Ltd., Co., Wantofree Oriental Trading, Inc., Coen Fashion House and
General Merchandise, Asia Consumer Value Trading, Inc., Fabulous Jeans & Shirt &
General Merchandise, LSG Manufacturing Corporation, Unite General Merchandise,
Rosario Q. Co, Lucia Pun Lin Yeung, and Alexander Arqueza (respondents) are
engaged in manufacturing and selling goods under the brand Novo Jeans & Shirt &
General Merchandise (Novo Jeans).4
Sometime in May 2010 and June 2010, several Novo Jeans employees5 went to Raffy
Tulfo's radio program to air their grievances against their employers for alleged labor
violations. They were referred to the Department of Labor and Employment Camanava
Regional Office. 6
These employees claimed that on June 7, 2010, they were not allowed to enter the
Novo Jeans branches they were employed in. They further averred that while Novo
Jeans sent them a show cause letter the next day, they were in truth already dismissed
from employment. They sent a demand letter on July 19, 2010 to amicably settle the
case before the Department of Labor and Employment but no settlement was reached.
They alleged that upon learning that the Department of Labor and Employment was not
the proper forum to address their grievances, they decided to file a notice of withdrawal
and file their complaint with the Labor Arbiter. 7
On the other hand, Novo Jeans claimed that these employees voluntarily severed their
employment but that they filed complaints later with the Department of Labor and
Employment. They alleged that the employees' notice of withdrawal was not actually
granted by the Department of Labor and Employment but that the employees
nonetheless filed their complaints before the Labor Arbiter. 8
On May 31, 2011, Labor Arbiter Arden S. Anni rendered a Decision9 dismissing the
complaints. He found that other than the employees' bare allegations that they were
dismissed from June 6 to 9, 2010, they did not present any other evidence showing that
their employment was terminated or that they were prevented from reporting for
work. 10 The Labor Arbiter likewise ruled that the employees voluntarily severed their
employment since the airing of their grievances on Raffy Tulfo's radio program "[was]
enough reason for them not to report for work, simply because of a possible disciplinary
action by [Novo Jeans]." 11 The dispositive portion of the Labor Arbiter Decision read:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered DISMISSING
the above-captioned consolidated cases for utter lack of merit and for forum-shopping.
SO ORDERED.12
The employees appealed to the National Labor Relations Commission.13
On June 25, 2012, the National Labor Relations Commission rendered a
Decision 14 reversing that of the Labor Arbiter and finding that the employees were
illegally dismissed. It ruled that the allegations of both parties "were unsubstantiated and
thus [were] equipoised" and that "if doubt exists between the evidence presented by the
employer and that by the employee, the scales of justice must be tilted in favor of the
latter."15 The dispositive portion of the National Labor Relations Commission Decision
read:
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal
meritorious with respect to the issue of illegal dismissal. Complainants-appellants'
respective employers are hereby found liable, jointly and severally, to pay complainants-
appellants their backwages and separation pay plus ten percent thereof as attorney's
fees. Accordingly, the decision of the Labor Arbiter dated May 31, 2011 is hereby
MODIFIED. All other dispositions STANDS (sic) undisturbed.
The computation of the aforesaid awards is as follows:
....
TOTAL AWARD Php30,969,426.00
SO ORDERED.16
Novo Jeans moved for partial reconsideration17 but was denied by the National Labor
Relations Commission in its August 24, 2012 Resolution.18 Thus, it filed a Petition
for Certiorari 19 with the Court of Appeals.
On February 25, 2013, the Court of Appeals rendered a Decision20 reversing the
Decision of the National Labor Relations Commission and reinstating the Labor Arbiter
Decision. The Court of Appeals found that Novo Jeans' counsel, as the affiant,
substantially complied with the verification requirement even if his personal knowledge
was based on facts relayed to him by his clients and on authentic records since he was
not privy to the antecedents of the case.21
The Court of Appeals stated that while the employees merely alleged that they were no
longer allowed to report to work on a particular day, Novo Jeans was able to present the
First Notice of Termination of Employment sent to them, asking them to explain their
sudden absence from work without proper authorization. It likewise found that the
Notices of Termination of Employment (Notices) did not indicate that the employees
were dismissed or that they were prevented from entering the stores. 22
According to the Court of Appeals, the equipoise rule was inapplicable in this case since
it only applied when the evidence between the parties was equally balanced.
Considering that only Novo Jeans was able to present proof of its claims, the Court of
Appeals was inclined to rule in its favor. 23 Thus, the Court of Appeals concluded that
the case involved voluntary termination of employment, not illegal dismissal.24 The
dispositive portion of its Decision read:
WHEREFORE, in view of the foregoing, the instant Petition is hereby GRANTED. The
assailed Decision dated June 25, 2012 and Resolution dated August 24, 2012 rendered
by the National Labor Relations Commission in NLRC LAC No. 07-001930-11/NLRC
NCR Cases No. 08-10645-10, 08-10649-10, 08-10655-10, 08-10660-10, 08- 10662-10,
08-10666-10 and 08-10670-10 are hereby REVERSED and SET ASIDE. Corollarily, the
Decision dated May 31, 2011 rendered by the Labor Arbiter is hereby REINSTATED.
SO ORDERED.25
The employees filed a Motion for Reconsideration26 but it was denied in the Court of
Appeals May 30, 2013 Resolution.27 Hence, this Petition28 was filed before this Court.
Petitioners point out that the Court of Appeals erred in not finding grave abuse of
discretion, considering that the petition filed before it was a special civil action
for certiorari. They aver that the Court of Appeals should not have used the special
remedy of certiorari merely to re-evaluate the findings of a quasi-judicial body absent
any finding of grave abuse of discretion. 29
Petitioners likewise argue that respondents were unable to substantially comply with the
verification requirement before the Court of Appeals. They submit that respondents'
counsel would have been privy to the antecedents of the case so as to have personal
knowledge and not merely knowledge as relayed by his clients. 30 They add that
respondents "deliberately withheld the Annexes of the Position Paper of the Petitioners
submitted to the Labor Arbiter[;] hence, said Position Paper cannot be considered
authentic."31
Petitioners assert that the Court of Appeals had no factual basis to rule in respondents'
favor since there was no evidence to prove that the Notices were sent to petitioners at
their last known addresses. The evidence on record merely showed sample letters of
the Notices.32 Petitioners maintain that this is a situation where the employees allege
that they were prevented from entering their work place and the employer alleges
otherwise. They insist that if doubt exists between the evidence presented by the
employer and the evidence presented by the employees, the doubt must be resolved in
favor of the employees, consistent with the Labor Code's policy to afford protection to
labor. 33
On the other hand, respondents argue that a defect in the verification will not
necessarily cause the dismissal of the pleading and that they had sufficiently complied
with the requirement when the affiant attested that the petition was based on facts
relayed by his clients and on authentic records. 34 They also point out that only relevant
and pertinent documents should be attached to their pleadings before the courts; thus,
the annexes of petitioner, not being relevant or pertinent, need not be attached to their
pleadings. 35
Respondents contend that the Court of Appeals recognized that the issue in their
Petition for Certiorari concerned the alleged grave abuse of discretion of the National
Labor Relations Commission and thoroughly discussed the issue in the assailed
judgment. 36 They likewise submit that the Court of Appeals may review factual findings
of the National Labor Relations Commission since the finding of grave abuse of
discretion requires a re-examination of the sufficiency or absence of evidence.37
Respondents maintain that the receipt of the Notices was admitted and recognized by
the parties before the Labor Arbiter and was never brought as an issue until the
National Labor Relations Commission made a finding that the Notices were never
received.38 According to respondents, petitioners were estopped from questioning the
receipt of the Notices when they already admitted to their receipt before the Labor
Arbiter.39 They argue that the Labor Arbiter and the Court of Appeals did not err in
finding that the termination of employment was voluntary since petitioners failed to
present evidence of the fact of their dismissal. 40
The main issue before this Court is whether or not petitioners were illegally dismissed
by respondents. However, there are certain procedural issues that must first be
addressed, in particular: (1) whether or not the Court of Appeals may, in a petition
for certiorari, review and re-assess the factual findings of the National Labor Relations
Commission; and (2) whether or not verification based on facts relayed to the affiant by
his clients is valid.
I
Before discussing the merits of the case, this Court takes this opportunity to clarify
certain doctrines regarding the review of factual findings by the Court of Appeals.
Factual findings of labor officials exercising quasi-judicial functions are accorded great
respect and even finality by the courts when the findings are supported by substantial
evidence.41 Substantial evidence is "the amount of relevant evidence which a
reasonable mind might accept as adequate to support a conclusion. "42 Thus, in labor
cases, the issues in petitions for certiorari before the Court of Appeals are limited only to
whether the National Labor Relations Commission committed grave abuse of discretion.
However, this does not mean that the Court of Appeals is conclusively bound by the
findings of the National Labor Relations Commission. If the findings are arrived at
arbitrarily, without resort to any substantial evidence, the National Labor Relations
Commission is deemed to have gravely abused its discretion:
However, this does not mean that the Court of Appeals is conclusively bound by the
findings of the National Labor Relations Commission. If the findings are arrived at
arbitrarily, without resort to any substantial evidence, the National Labor Relations
Commission is deemed to have gravely abused its discretion:
On this matter, the settled rule is that factual findings of labor officials, who are deemed
to have acquired expertise in matters within their jurisdiction, are generally accorded not
only respect but even finality by the courts when supported by substantial evidence, i.e.,
the amount of relevant evidence which a reasonable mind might accept as adequate to
support a conclusion. We emphasize, nonetheless, that these findings are not infallible.
When there is a showing that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts. The [Court of Appeals] can
then grant a petition for certiorari if it finds that the [National Labor Relations
Commission], in its assailed decision or resolution, has made a factual finding that is not
supported by substantial evidence. It is within the jurisdiction of the [Court of Appeals],
whose jurisdiction over labor cases has been expanded to review the findings of the
[National Labor Relations Commission].43
The Court of Appeals may also review factual findings if quasi-judicial agencies' findings
are contradictory to its own findings. 44 Thus, it must re-examine the records to
determine which tribunal's findings were supported by the evidence.
In this instance, the Labor Arbiter and the National Labor Relations Commission made
contradictory factual findings. Thus, it was incumbent on the Court of Appeals to re-
examine their findings to resolve the issues before it. The Court of Appeals also found
that the findings of the National Labor Relations Commission were not supported by
substantial evidence, and therefore, were rendered in grave abuse of discretion.
Thus, in the determination of whether the National Labor Relations Commission
committed grave abuse of discretion, the Court of Appeals may re-examine facts and
re-assess the evidence. However, its findings may still be subject to review by this
Court.
This Court notes that in cases when the Court of Appeals acts as an appellate court, it
is still a trier of facts. Questions of fact may still be raised by the parties. If the parties
raise pure questions of law, they may directly file with this Court. Moreover,
contradictory factual findings between the National Labor Relations Commission and
the Court of Appeals do not automatically justify this Court's review of the factual
findings. They merely present a prima facie basis to pursue the action before this Court.
The need to review the Court of Appeals' factual findings must still be pleaded, proved,
and substantiated by the party alleging their inaccuracy. This Court likewise retains its
full discretion to review the factual findings.
II
All petitions for certiorari are required to be verified upon filing. 45 The contents of
verification are stated under Rule 7, Section 4 of the Rules of Court:
Section 4. Verification. Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.
A pleading required to be verified which contains a verification based on "information
and belief'', or upon "knowledge, information and belief," or lacks a proper verification,
shall be treated as an unsigned pleading.
Thus, for a pleading to be verified, the affiant must attest that he or she has read the
pleading and that the allegations are true and correct based on his or her personal
knowledge or on authentic records. Otherwise, the pleading is treated as an unsigned
pleading.
Shipside Incorporation v. Court of Appeals46required that the assurance should "not [be]
the product of the imagination or a matter of speculation, and that the pleading is filed in
good faith."47 However, verification is merely a formal, not jurisdictional, requirement. It
will not result in the outright dismissal of the case since courts may simply order the
correction of a defective verification.48
Petitioners argue that respondents' verification was invalid since it was not based on
authentic records, alleging that respondents' failure to attach petitioners' position paper
annexes to their Petition for Certiorari before the Court of Appeals made their records
inauthentic. 49
A pleading may be verified by attesting that the allegations are based either on personal
knowledge and on authentic records, or on personal knowledge or on authentic records.
The use of either, however, is not subject to the affiant's whim but rather on the nature
of the allegations being attested to. Circumstances may require that the affiant attest
that the allegations are based only on personal knowledge or only on authentic records.
Certainly, there can be situations where the affiant must attest to the allegations being
based on both personal knowledge and on authentic records, thus:
A reading of the above-quoted Section 4 of Rule 7 indicates that a pleading may be
verified under either of the two given modes or under both. The veracity of the
allegations in a pleading may be affirmed based on either one's own personal
knowledge or on authentic records, or both, as warranted. The use of the [conjunction]
"or" connotes that either source qualifies as a sufficient basis for verification and,
needless to state, the concurrence of both sources is more than sufficient. Bearing both
a disjunctive and conjunctive sense, this parallel legal signification avoids a construction
that will exclude the combination of the alternatives or bar the efficacy of any one of the
alternatives standing alone.
Contrary to petitioner's position, the range of permutation is not left to the pleader's
liking, but is dependent on the surrounding nature of the allegations which may warrant
that a verification be based either purely on personal knowledge, or entirely on authentic
records, or on both sources.50
Authentic records may be the basis of verification if a substantial portion of the
allegations in the pleading is based on prior court proceedings.51 Here, the annexes that
respondents allegedly failed to attach are employee information, supporting documents,
and work-related documents proving that petitioners were employed by
respondents. 52 The fact of petitioners' employment, however, has not been disputed by
respondents. These documents would not have been the "relevant and
pertinent"53 documents contemplated by the rules.
Petitioners likewise contend that respondents' Petition for Certiorari54 before the Court of
Appeals should not have been given due course since the verification55 signed by
respondents' counsel, Atty. Eller Roel I. Daclan (Atty. Daclan), attested that:
2. I caused the preparation of the foregoing petition and attest that, based upon facts
relayed to me by my clients and upon authentic records made available, all the
allegations contained therein are true and correct[.] 56
Thus, the issue on verification centers on whether the phrase "based upon facts relayed
to me by my clients" may be considered sufficient compliance. To resolve this issue, this
Court must first address whether respondents' counsel may sign the verification on their
behalf.
The rules on compliance with the requirement of the verification and certification of non-
forum shopping were already sufficiently outlined in Altres v. Empleo, 57 where this
Court stated:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements already reflected above respecting non-compliance with
the requirements on, or submission of defective, verification and certification against
forum shopping:
1) A distinction must be made between non-compliance with the requirement on or
submission of defective verification, and noncompliance with the requirement on or
submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily
render the pleading fatally defective. The court may order its submission or correction or
act on the pleading if the attending circumstances are such that strict compliance with
the Rule may be dispensed with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs the
verification, and when matters alleged in the petition have been made in good faith or
are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect
therein, unlike in verification, is generally not curable by its subsequent submission or
correction thereof, unless there is a need to relax the Rule on the ground of "substantial
compliance" or presence of "special circumstances or compelling reasons".
5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties to the
case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs
or petitioners share a common interest and invoke a common cause of action or
defense, the signature of only one of them in the certification against forum shopping
substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the party-
pleader is unable to sign, he must execute a Special Power of Attorney designating his
counsel of record to sign on his behalf. 58
The policy behind the requirement of verification is to guard against the filing of
fraudulent pleadings. Litigants run the risk of perjury59 if they sign the verification despite
knowledge that the stated allegations are not true or are products of mere speculation:
Verification is not an empty ritual or a meaningless formality. Its import must never be
sacrificed in the name of mere expedience or sheer caprice. For what is at stake is the
matter of verity attested by the sanctity of an oath to secure an assurance that the
allegations in the pleading have been made in good faith, or are true and correct and
not merely speculative. 60
Thus, for verification to be valid, the affiant must have "ample knowledge to swear to the
truth of the allegations in the complaint or petition."61 Facts relayed to the counsel by the
client would be insufficient for counsel to swear to the truth of the allegations in a
pleading. Otherwise, counsel would be able to disclaim liability for any
misrepresentation by the simple expediency of stating that he or she was merely
relaying facts with which he or she had no competency to attest to. For this reason, the
Rules of Court require no less than personal knowledge of the facts to sufficiently verify
a pleading.
Respondents' counsel, not having sufficient personal knowledge to attest to the
allegations of the pleading, was not able to validly verify the facts as stated. Therefore,
respondents' Petition for Certiorari before the Court of Appeals should have been
considered as an unsigned pleading.
Respondents' certification of non-forum shopping is likewise defective. The certification
of non-forum shopping must be signed by the litigant, not his or her counsel. The litigant
may, for justifiable reasons, execute a special power of attorney to authorize his or her
counsel to sign on his or her behalf. 62 In this instance, the verification and certification
against forum shopping63 was contained in one ( 1) document and was signed by
respondents' counsel, Atty. Daclan.
Corporations, not being natural persons, may authorize their lawyers through a
Secretary's Certificate to execute physical acts. Among these acts is the signing of
documents, such as the certification against forum shopping. A corporation's inability to
perform physical acts is considered as a justifiable reason to allow a person other than
the litigant to sign the certification against forum shopping.64 By the same reasoning,
partnerships, being artificial entities, may also authorize an agent to sign the certification
on their behalf.
Respondents include three (3) corporations, one (1) partnership, and three (3) sole
proprietorships. Respondents LSG Manufacturing Corporation, Asia Consumer Value
Trading, Inc., and Wantofree Oriental Trading, Inc. submitted Secretary's
Certificates65 authorizing Atty. Daclan to sign on their behalf. On the other hand,
respondent HSY Marketing Ltd., Co. submitted a Partnership Certification.66 Meanwhile,
respondents Alexander Arqueza (Arqueza), proprietor of Fabulous Jeans and Shirt and
General Merchandise, Rosario Q. Co (Co), proprietor of Unite General Merchandise,
and Lucia Pun Ling Yeung (Yeung), proprietor of Coen Fashion House & General
Merchandise, submitted Special Powers of Attorney67 on their behalf.
However, sole proprietorships, unlike corporations, have no separate legal personality
from their proprietors.68 They cannot claim the inability to do physical acts as a
justifiable circumstance to authorize their counsel to sign on their behalf. Since there
was no other reason given for authorizing their counsel to sign on their behalf,
respondents Arqueza, Co, and Yeung's certification against forum shopping is invalid.
While courts may simply order the resubmission of the verification or its subsequent
correction,69 a defect in the certification of non-forum shopping is not curable 70 unless
there are substantial merits to the case.71
However, respondents' Petition for Certiorari before the Court of Appeals was
unmeritorious. Thus, its defective verification and certification of non-forum shopping
should have merited its outright dismissal.
III
When the evidence of the employer and the employee are in equipoise, doubts are
resolved in favor of labor.72 This is in line with the policy of the State to afford greater
protection to labor. 73
Petitioners allege that they were illegally dismissed from service when they were
prevented from entering their work premises a day after airing their grievance in a radio
show. On the other hand, respondents deny this allegation and state that petitioners
were never dismissed from employment.
In illegal dismissal cases, the burden of proof is on the employer to prove that the
employee was dismissed for a valid cause and that the employee was afforded due
process prior to the dismissal. 74
Respondents allege that there was no dismissal since they sent petitioners a First
Notice of Termination of Employment, asking them to show cause why they should not
be dismissed for their continued absence from work. However, petitioners argue that
this evidence should not be given weight since there is no proof that they received this
Notice.
Indeed, no evidence has been presented proving that each and every petitioner
received a copy of the First Notice of Termination of Employment.1âwphi1 There are no
receiving copies or acknowledgement receipts. What respondents presented were
"Sample Letters of Respondents"75 and not the actual Notices that were allegedly sent
out.
While petitioners admitted that the Notices may have been sent, they have never
actually admitted to receiving any of them. In their Position Paper before the Labor
Arbiter and in their Memorandum of Appeal before the National Labor Relations
Commission:
On June 7, 2010, all employees who went to complain against the respondent[ s] were
not allowed to enter the stores of respondent[s]. The next day, respondent[s] sent
letter[s] to the employees purporting to be a show cause letter but the truth of the matter
is that all employees who went to the office of Tulfo to complain against the respondent[
s] were already terminated[.]76
The lack of evidence of petitioners' receipts suggests that the Notices were an
afterthought, designed to free respondents from any liability without having to validly
dismiss petitioners.
There is likewise no proof that petitioners abandoned their employment. To constitute
abandonment, the employer must prove that "first, the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and
second, [that] there must have been a clear intention on the part of the employee to
sever the employer-employee relationship manifested by some overt act."77
Abandonment is essentially a matter of intent. It cannot be presumed from the
occurrence of certain equivocal acts. 78 There must be a positive and overt act signifying
an employee's deliberate intent to sever his or her employment. Thus, mere absence
from work, even after a notice to return, is insufficient to prove abandonment. 79 The
employer must show that the employee unjustifiably refused to report for work and that
the employee deliberately intended to sever the employer-employee relation.
Furthermore, there must be a concurrence of these two (2) elements.80 Absent this
concurrence, there can be no abandonment.
Respondents have not presented any proof that petitioners intended to abandon their
employment. They merely alleged that petitioners have already voluntarily terminated
their employment due to their continued refusal to report for work. However, this is
insufficient to prove abandonment.
Where both parties in a labor case have not presented substantial evidence to prove
their allegations, the evidence is considered to be in equipoise. In such a case, the
scales of justice are tilted in favor of labor. Thus, petitioners are hereby considered to
have been illegally dismissed.
This Court notes that had petitioners been able to substantially prove their dismissal, it
would have been rendered invalid not only for having been made without just
cause81 but also for being in violation of their constitutional rights. A laborer does not
lose his or her right to freedom of expression upon employment.82 This is "[a] political
[right] essential to man's enjoyment of his [or her] life, to his [or her] happiness, and to
his [or her] full and complete fulfillment."83 While the Constitution and the courts
recognize that employers have property rights that must also be protected, the human
rights of laborers are given primacy over these rights. Property rights may prescribe.
Human rights do not. 84
When laborers air out their grievances regarding their employment in a public forum,
they do so in the exercise of their right to free expression. They are "fighting for their
very survival, utilizing only the weapons afforded them by the Constitution-the
untrammelled enjoyment of their basic human rights."85 Freedom and social justice
afford them these rights and it is the courts' duty to uphold and protect their free
exercise. Thus, dismissing employees merely on the basis that they complained about
their employer in a radio show is not only invalid, it is unconstitutional.
However, there not being sufficient proof that the dismissal was meant to suppress
petitioners' constitutional rights, this Court is constrained to limit its conclusions to that
of illegal dismissal under the Labor Code.
Petitioners were not dismissed under any of the causes mentioned in Article 279
[282]86 of the Labor Code. They were not validly informed of the causes of their
dismissal. Thus, their dismissal was illegal.
An employee who is found to have been illegally dismissed is entitled to reinstatement
without loss of seniority rights and other privileges. 87 If reinstatement proves to be
impossible due to the strained relations between the parties, the illegally dismissed
employee is entitled instead to separation pay.88
WHEREFORE, the Petition is GRANTED. The February 25, 2013 Decision and May 30,
2013 Resolution of the Court of Appeals in CA-G.R. SP No. 126522 are SET
ASIDE. Respondents are DIRECTED to reinstate petitioners to their former positions
without loss of seniority rights or other privileges.
SO ORDERED.

G.R. No. 207252, January 24, 2018

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION
(PGIEU), Petitioner, v. CHEVRON GEOTHERMAL PHILS. HOLDINGS,
INC., Respondent.
DECISION
REYES, JR., J.:
1
This is a Petition for Review on Certiorari  pursuant to Rule 45 of the Rules of
Court, as amended, seeking to reverse and set aside the Decision2 dated
November 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 115796,
dismissing the Petition for Review entitled "Philippine Geothermal, Inc.
Employees Union (PGIEU) vs. Chevron Geothermal Phils. Holdings, Inc.'' as
well as the Resolution3 dated May 17, 2013 denying Philippine Geothermal,
Inc. Employees Union's (petitioner) Motion4 for Reconsideration dated
November 27, 2012.
The Facts
Petitioner is a legitimate labor organization and the certified bargaining
agent of the rank-and-file employees of Chevron Geothermal Phils. Holdings,
Inc. (respondent).5
On July 31, 2008, the petitioner and respondent formally executed a
Collective Bargaining Agreement (CBA) which was made effective for the
period from November 1, 2007 until October 31, 2012. Under Article VII,
Section 1 thereof, there is a stipulation governing salary increases of the
respondent's rank-and-file employees, as follows:
Section 1. WAGE INCREASE
The COMPANY will grant the following:
- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1st year
of this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in
the amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in
the amount of P1,500.00.6
In implementing the foregoing provision, the parties agreed on the following
guidelines appended as Annex D of said CBA, viz.:
Employment Status P260K P1500 P1500
  Lump Sum (Nov. 1, (Nov. 1, 2009)
2008)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and October 31, X / /
2008
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and October 31, X X /
2009
Regularized on or before April 30, 2010 X X /
On October 6, 2009, a letter dated September 20, 2009 was sent by the
petitioner's President to respondent expressing, on behalf of its members,
the concern that the aforesaid CBA provision and implementing rules were
not being implemented properly pursuant to the guidelines and that, if not
addressed, might result to a salary distortion among union members.7
On even date, respondent responded by letter denying any occurrence of
salary distortion among union members and reiterating its remuneration
philosophy of having "similar values for similar jobs", which means that
employees in similarly-valued jobs would have similar salary rates. It
explained that to attain such objective, it made annual reviews and
necessary adjustments of the employees' salaries and hiring rates based on
the computed values for each job.8
Finding the explanation not satisfactory, petitioner, with respondent's
approval, referred the subject dispute to the Voluntary Arbitration of the
National Conciliation and Mediation Board (NCMB). It averred that
respondent breached their CBA provision on worker's wage increase because
it granted salary increase even to probationary employees in contravention
of the express mandate of that particular CBA article and implementing
guidelines that salary increases were to be given only to regular employees.9
To cite an example, petitioner alleged that respondent granted salary
increases of One Thousand Five Hundred Pesos (P1,500.00) each to then
probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales
(Cordovales) at a time when they have not yet attained regular status. They
(Lanao and Cordovales) were regularized only on January 1, 2010 and April
16, 2010, respectively, yet they were given salary increase for November 1,
2008. As a consequence of their accelerated increases, wages of said
probationary workers equated the wage rates of the regular employees,
thereby obliterating the wage rates distinction based on merit, skills and
length of service. Therefore, the petitioner insisted that its members'
salaries must necessarily be increased so as to maintain the higher strata of
their salaries from those of the probationary employees who were given the
said premature salary increases.10
On the other hand, respondent maintained that it did not commit any
violation of that CBA provision and its implementing guidelines; in fact, it
complied therewith. It reasoned that the questioned increases given to
Lanao and Cordovales' salaries were granted, not during their probationary
employment, but after they were already regularized. It further asseverated
that there was actually no salary distortion in this case since the disparity or
difference of salaries between Lanao and Cordovales with that of the other
company employees were merely a result of their being hired on different
dates, regularization at different occasions, and differences in their hiring
rates at the time of their employment.11
After due proceedings, the Voluntary Arbitrator rendered a Decision12 dated
August 16, 2010 in favor of respondent, ruling that petitioner failed to duly
substantiate its allegations that the former prematurely gave salary
increases to its probationary employees and that there was a resultant
distortion in the salary scale of its regular employees.13
Thereafter, a Petition14 for Review under Rule 65 was filed with the CA on
September 22, 2010.
On November 5, 2012, the CA rendered its Decision.15 It dismissed the
petition for review and sustained the Voluntary Arbitrator's decision. The
pertinent and dispositive portion of the assailed decision reads as follows:
In fine, We hold that the Voluntary Arbitrator of NCMB did not commit grave
abuse of discretion in dismissing petitioner union's complaint against
respondent company. Settled is the rule that factual findings of labor officials
who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality, and
they are binding when supported by substantial evidence. In this case, these
findings are supported by competent and convincing evidence.
WHEREFORE, premises considered, the instant petition is DISMISSED. The
Decision dated 16 August 2010 of the Voluntary Arbitrator of the NCMB
Regional Branch No. IV is SUSTAINED.
SO ORDERED.16
On November 28, 2012, petitioner filed its Motion17 for Reconsideration. This
was, however, denied by the CA in its Resolution18 dated May 17, 2013.
Hence, this petition.
The Issues
I.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT
RESPONDENT DID NOT VIOLATE THE CBA IN GRANTING WAGE INCREASE
OF P1,500.00 TO LANAO AND CORDOVALES AT A TIME WHEN THEY HAD
NOT YET ATTAINED REGULAR STATUS
II.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT
OF WAGE INCREASE TO LANAO AND CORDOVALES IS A VALID EXERCISE OF
MANAGEMENT PREROGATIVES BY RESPONDENT
III.
WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO
LIKEWISE INCREASE THE RATES OF OTHER REGULAR EMPLOYEES IN
ORDER TO MAINTAIN THE DIFFERENCE BETWEEN THEIR RATES AND THOSE
OF THE EMPLOYEES WHO WERE ALLEGEDLY GRANTED PREMATURE WAGE
INCREASES
Ruling of the Court
The petition is devoid of merit.
Petitioner and respondent entered into an agreement whereby employees
will be granted a wage increase depending on the date of their
regularization, viz.:
Employment Status P260K P1500 P1500
  Lump Sum (Nov. 1, (Nov. 1, 2009)
2008)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and October 31, X / /
2008
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and October 31, X X /
2009
Regularized on or before April 30, 2010 X X /
Petitioner claims that Lanao and Cordovales having been regularized only on
January 1, 2010 and April 16, 2010, respectively, are not covered by the
P260,000.00 lump sum and the initial P1500.00 wage increase effective on
Nov. 1, 2008. It appears, however, that based on the actual pay slips of
union members, Lanao and Cordovales both received wage increase in the
amount of P1500.00 effective Nov. 1, 2008 and that such increase was
immediately granted to them at the time of their hiring which resulted to the
increase of their salaries to P36,500.00 per month.
It is further stressed by petitioner that the increase granted by respondent
to Lanao and Cordovales are violative of the terms of the CBA, specifically
Section 1, Article VII and Annex D, for the reason that these employees
have not yet attained "Regular" status at the time they were granted a wage
increase and thus resulting to a salary/wage distortion.
Respondent, for its part, claims that the alleged "increase" in the wages of
these employees was not due to application of the provisions of Article VII
and Annex D of the CBA, rather it was brought about by the increase in the
hiring rates at the time these employees were hired. As a matter of fact, a
careful scrutiny of the records reveals that respondent have complied with
the terms agreed upon in the CBA.
Notably, respondent's reply to the petitioner's letter accusing them of
violation of the terms of the CBA and holding them responsible for the
alleged wage distortion, clarified the ambiguity with regard to the hiring
rates, viz.:
As for the perceived salary distortion among Union members resulting from
the non-implementation of the guidelines on Article VH-Salaries and
Allowances, Section 1 - Wage Increase, Annex D of the CBA 2007-2012, we
would like to reiterate our discussion during the recent NLMC meeting of
September 16, on Chevron's remuneration philosophy of having "similar
value for similar jobs" which simply states that employees in similarly valued
jobs will have similar salary rates. Salaries and hiring rates are reviewed
annually and adjusted as necessary based on the computed values of each
job, an employee's tenure or seniority in his/her current position will not
influence the value of the job.19 (Underlining Ours)
Clearly then, the increase in the salaries of Lanao and Cordovales was not
pursuant to the wage increase agreed upon in CBA 2007-2012 rather it was
the result of the increase in hiring rates at the time they were hired.
To illustrate, in its Reply,20 respondent discussed the difference in the hiring
rates of employees Lanao and Robert Gawat, viz.:
Mr. Robert Gawat was regularized on April 16, 2007 having been hired on
October 16, 2007 while Mr. Lanao as shown in the Company's position paper
was regularized on January 1, 2010, having been hired only on July 1,
2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay Grade
12 was P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA salary
increase under the 2002-2007 CBA of P1,700.00 per month which increased
his pay to P33,500.00 per month. He received another CBA salary increase
of P1,500.00 under the 2007-2012 CBA on November 1, 2008, thus
increasing his pay to P35,000.00. On November 1, 2009, he received
another salary increase of P1,500.00 under the 2007-2012 CBA which
further increased his pay to P36,500.00 per month until the present.
On the other hand, when Mr. Lanao was hired on July 9, 2009, the
hiring rate at the time for employees falling under Pay Grade 12 was
already P35,000.00, having been adjusted by the company in accordance
with market and industry practice. On January 1, 2010, Mr. Lanao was
regularized and as dictated by the CBA, he was given a CBA salary increase
of P1,500.00 per month effective January 1, 2010 which increased his
monthly pay at the present to P36,500.00.21 (Emphasis and underlining
Ours)
As shown above, the respondent never violated the CBA and in fact,
complied with it to the letter. Clearly, the petitioner only used the
respondent's alleged violation of the CBA when its true gripe is related to the
respondent's prerogative of setting the hiring rate of the employees over
which the petitioner neither has the personality nor the privilege to meddle
or interfere with.22
The second and third issue, being interrelated, shall be discussed jointly.
Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization
Act, amending among others, Article 124 of the Labor Code) on June 9,
1989, the term "Wage Distortion" was explicitly defined as "a situation
where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or salary
rate between and among employee groups an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills,
length of service or other logical bases of differentiation."23
Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the
Labor Code of the Philippines only cover wage adjustments and
increases due to a prescribed law or wage order, viz.:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxxx
Where the application of any prescribed wage increase by virtue of a
law or Wage Order issued by any Regional Board results in distortions
of the wage structure within an establishment, the employer and union shall
negotiate to correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration.24 (Emphasis Ours)
Prubankers Association v. Prudential Bank and Trust Company25 laid down
the four elements of wage distortion, to wit: (1) an existing hierarchy of
positions with corresponding salary rates; (2) a significant change in the
salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one; (3) the elimination of the distinction between the two
levels; and (4) the existence of the distortion in the same region of the
country.
The apparent increase in Lanao and Cordovales' salaries as compared to the
other company workers who also have the same salary/pay grade with them
should not be interpreted to mean that they were given a premature
increase for November 1, 2008, thus resulting to a wage distortion. The
alleged increase in their salaries was not a result of the erroneous
application of Article VII and Annex D of the CBA, rather, it was because
when they were hired by respondent in 2009, when the hiring rates were
relatively higher as compared to those of the previous years. Verily, the
setting and implementation of such various engagement rates were purely
an exercise of the respondent's business prerogative in order to attract or
lure the best possible applicants in the market and which We will not
interfere with, absent any showing that it was exercised in bad faith.
Management prerogative gives an employer freedom to regulate according
to their discretion and best judgment, all aspects of employment including
work assignment, working methods, the processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and
the discipline, dismissal and recall of workers.26 This right is tempered only
by these limitations: that it must be exercised in good faith and with due
regard to the rights of the employees.27
Petitioner claims that the wages of other employees should also be increased
in order to maintain the difference between their salaries and those of
employees granted a "premature" wage increase. Such a situation may be
remedied if it falls under the concept of a wage distortion as defined by
Article 124 of the Labor Code of the Philippines. However, as already
discussed, there is no wage distortion in the case at bench. Not all increases
in salary which obliterate the salary differences of certain employees should
be perceived as wage distortion.
In the case of Bankard Employees Union-Workers Alliance Trade Unions v.
National Labor Relations Commission,28 the Court discussed the possible
implication of an expanded interpretation of the concept of Wage Distortion,
to wit:
If the compulsory mandate under Article 124 to correct "wage distortion" is
applied to voluntary and unilateral increases by the employer in fixing hiring
rates which is inherently a business judgment prerogative, then the hands of
the employer would be completely tied even in cases where an increase in
wages of a particular group is justified due to a re-evaluation of the high
productivity of a particular group, or as in the present case, the need to
increase the competitiveness of Bankard's hiring rate. An employer would be
discouraged from adjusting the salary rates of a particular group of
employees for fear that it would result to a demand by all employees for a
similar increase, especially if the financial conditions the business cannot
address an across-the-board increase.29
The Court's ruling in the case of Bankard seek to address and resolve
conflicting opinions regarding the true concept of a wage distortion like the
one presented in this case whereby a legitimate exercise by an employer of
its management prerogative is being taken against it in the guise of an
allegation that it is circumventing labor laws. An employer should not be
held hostage by the whims and caprices of its employees especially when it
has faithfully complied with and executed the terms of the CBA.
It is the prerogative of management to regulate, according to its discretion
and judgment all aspects of employment. This flows from the established
rule that labor law does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management prerogative may
be availed of without fear of any liability so long as it is exercised in good
faith for the advancement of the employer's interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws
or agreements and are not exercised in a malicious, harsh, oppressive,
vindictive or wanton manner or out of malice or spite.30
On a final note, the Court has ruled time and again that factual findings of
labor officials, who are deemed to have acquired expertise in matters within
their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence and affirmed by the CA,
in the exercise of its expanded jurisdiction to review findings of the National
Labor Relations Commission.
WHEREFORE, premises considered, the petition is DENIED. The Decision
dated November 5, 2012 of the Court of Appeals in CA-G.R. SP No. 115796
is hereby AFFIRMED.
SO ORDERED.
January 24, 2018
G.R. No. 218984
ARMANDO M. TOLENTINO (deceased), herein represented by his surviving
spouse MERLA F. TOLENTINO and children namely: MARIENELA, ALYSSA,
ALEXA, and AZALEA, all surnamed TOLENTINO, Petitioners
vs.
PHILIPPINES AIRLINES, INC., Respondent
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court.
Petitioners 1 Merla F. Tolentino, as the surviving spouse of Armando M. Tolentino
(Tolentino), and Marienela, Alyssa, Alexa and Azalea, all surnamed Tolentino, as the
children of Tolentino, challenge the 30 September 2014 Decision2 and 10 June 2015
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 132519 which affirmed the
28 June 2013 Decision4 and 27 August 2013 Resolution5 of the National Labor
Relations Commission (NLRC) and the 14 March 2013 Decision6 of the Labor Arbiter.
The Facts
Tolentino was hired by respondent Philippine Airlines, Inc. (PAL) as a flight engineer on
22 October 1971. By 16 July 1999, Tolentino had the rank of A340/A330 Captain. As a
pilot, Tolentino was a member of the Airline Pilots Association of the Philippines
(ALPAP), which had a collective bargaining agreement (CBA) with PAL.
On 5 June 1998, ALPAP members went on strike. On 7 June 1998, the Secretary of
Labor issued an Order requiring all striking officers and members of ALPAP to return to
work within 24 hours from receipt of the Order and requiring PAL management to
accept them under the same terms and conditions of employment prior to the strike. On
8 June 1998, the Secretary of Labor served the Order on the officers of ALPAP. While
the union officers and members had until 9 June 1998 to comply with the directive of the
Secretary of Labor, some pilots - including Tolentino - continued to participate in the
strike.
On 26 June 1998, when Tolentino and other striking pilots returned to work, PAL
refused to readmit these returning pilots. Thus, they filed a complaint for illegal lockout
against PAL. On 20 July 1998, Tolentino reapplied for employment with PAL as a newly
hired pilot, and thus voluntarily underwent the six months probationary period. After less
than a year, Tolentino tendered his resignation effective 16 July 1999.
Meanwhile, on 1 June 1999, the Secretary of Labor issued a Resolution declaring the
strike conducted by ALPAP on 5 June 1998 illegal for being procedurally infirm and in
open defiance of the return-to-work order of 7 June 1998. Members and officers of
ALPAP who participated in the strike in defiance of the 7 June 1998 return-to-work order
were declared to have lost their employment status. This resolution was affirmed by this
Court on 10 April 2002.
Tolentino worked for a foreign airline, and thereafter returned to the Philippines. Upon
his return, he informed PAL of his intention of collecting his separation and/or retirement
benefits under the CBA. PAL refused to pay Tolentino the separation and/or retirement
benefits as stated in the CBA. Tolentino filed his complaint against PAL for non-
payment of holiday pay, rest day pay, separation pay, and retirement benefits with
prayer for the payment of damages and attorney's fees.
The Ruling of the Labor Arbiter
On 14 March 2013, the Labor Arbiter rendered his Decision dismissing the complaint of
Tolentino. The Labor Arbiter found that Tolentino was not entitled to separation pay and
other benefits as he was not illegally dismissed, having participated in the illegal strike
and defied the return-to-work order of the Secretary of Labor. The Labor Arbiter also
denied the claim for retirement benefits because Tolentino resigned from work less than
a year after he was rehired by PAL. The Decision states in part:
Since it is admitted that complainant participated in a strike prohibited by the law and
the Secretary of Labor's Return To Work Order, he was validly dismissed and is
therefore not entitled to separation pay. As for his claims for holiday pay and rest day
pay, it should be emphasized that he was considered a new hire when he rejoined
Philippine Airlines in July 1998. Complainant underwent the probationary period which
ended only on January 25, 1999. Six [6] months later, he tendered his resignation
effective July 16, 1999. Given these, complainant cannot tuck [sic] in whatever seniority
or benefits he had prior to the cessation of his employment on June 9, 1998.7
On 4 April 2013, petitioners appealed the Decision of the Labor Arbiter to the NLRC.8
The Ruling of the NLRC
On 28 June 2013, the NLRC affirmed the Decision of the Labor Arbiter, finding that
Tolentino was not entitled to holiday pay, rest day pay, separation pay, retirement
benefits, and moral and exemplary damages. 9 The NLRC found that (1) the severance
of Tolentino's employment was not due to any of the authorized causes under the Labor
Code of the Philippines; (2) Tolentino was validly terminated from employment because
of his participation in the illegal strike; and (3) when he resigned after he reapplied with
PAL, he was not able to complete the required period of five years of continuous service
under the CBA.
The Motion for Reconsideration10 was denied by the NLRC in its Resolution dated 27
August 2013. 11 Thereafter, petitioners filed a petition for certiorari under Rule 65 before
the CA on 4 November 2013. 12
The Ruling of the CA
In a Decision dated 30 September 2014, the CA affirmed, with modification, the 28 June
2013 Decision and 27 August 2013 Resolution of the NLRC. The CA found that under
the CBA, Tolentino was entitled to the payment of his vacation time and days off earned
but not taken. The CA held:
Considering the foregoing provisions, Tolentino's separation from work entitles him to
payment of his vacation time and days off earned but not taken.1avvphi1 Tolentino has
rendered 25 continuous years of service to respondent company, hence, he is entitled
to 27 calendar days of paid annual vacation leave. Furthermore, considering that the
CBA only mentions separation from the company to justify the claim for vacation pay,
but is silent on the forfeiture of the benefit upon valid termination of an employee from
the service, we are constrained to grant the same, in light of the rule that in case of
doubt, labor contracts shall be construed in favor of the worker.
WHEREFORE, the June 28, 2013 Decision and August 27, 2013 Resolution of the
NLRC are AFFIRMED, with MODIFICATION, ordering private respondent Philippine
Airlines, Inc. to pay Tolentino 's accrued vacation leave equivalent to 27 calendar days
of his salary.13
Petitioners filed a Motion for Partial Reconsideration dated 1 November 2014 alleging
that Tolentino was entitled to (1) the retirement benefits under the CBA; (2) the return of
his equity in the retirement fund under the PAL Pilots' Retirement Benefit Plan; and (3)
the payment of moral and exemplary damages and attorney's fees. 14
On the other hand, PAL filed its Motion for Partial Reconsideration dated 3 November
2014. In its Motion, PAL argued that Tolentino was not entitled to his supposed accrued
vacation leave pay considering that (1) the payment of his alleged benefits had already
been dismissed by this Court; (2) he had never prayed for the payment of his vacation
leave pay; and (3) the company's policy on forfeiture of benefits and privileges upon the
dismissal of an employee prevails over the CBA. 15
In a Resolution dated 10 June 2015,16 the CA denied the Motion for Partial
Reconsideration filed by petitioners. Hence, this petition.
The Issues
Petitioners seek a partial reversal of the decision of the CA and raise the following
arguments:
[A.] The Honorable Court of Appeals seriously erred and committed grave abuse of
discretion when it did not rule that petitioner-heirs are entitled to receive Capt.
Tolentino's retirement benefits under the Collective Bargaining Agreement with
respondent;
[B.] The Honorable Court of Appeals seriously erred and committed grave abuse of
discretion when it failed to rule that petitioner-heirs are entitled to the return of Capt.
Tolentino's equity in the retirement fund under the PAL Pilot[s'] Retirement Benefit Plan;
and
[C.] The Honorable Court of Appeals seriously erred and committed grave abuse of
discretion when it failed to award petitioner-heirs with payment for damages and
attorney's fees. 17
The Ruling of the Court
We deny the petition.
An employee who knowingly defies a return-to-work order issued by the Secretary of
Labor is deemed to have committed an illegal act which is a just cause to dismiss the
employee under Article 282 of the Labor Code. In PAL, Inc. v. Acting Secretary of
Labor, 18 we held:
A strike that is undertaken despite the issuance by the Secretary of Labor of an
assumption and/or certification is a prohibited activity and thus illegal. The union officers
and members, as a result, are deemed to have lost their employment status for having
knowingly participated in an illegal act. Stated differently, from the moment a worker
defies a return-to-work order, he is deemed to have abandoned his job. The loss of
employment status results from the striking employees' own act - an act which is illegal,
an act in violation of the law and in defiance of authority. (Emphasis supplied)
In fact, it has already been settled that those who participated in the 5 June 1998 strike
of ALPAP are deemed to have lost their employment status with PAL.19 In Rodriguez v.
Philippine Airlines, Inc.,20 we held:
In the 1st ALPAP case, the Court upheld the DOLE Secretary's Resolution dated June
1, 1999 declaring that the strike of June 5, 1998 was illegal and all ALPAP officers and
members who participated therein had lost their employment status. The Court in
the 2nd ALPAP case ruled that even though the dispositive portion of the DOLE
Secretary's Resolution did not specifically enumerate the names of those who actually
participated in the illegal strike, such omission cannot prevent the effective execution of
the decision in the 1st ALPAP case. The Court referred to the records of the Strike and
Illegal Lockout Cases, particularly, the logbook, which it unequivocally pronounced as a
"crucial and vital piece of evidence." In the words of the Court in the 2nd ALPAP
case, "[t]he logbook with the heading 'Return-To-Work Compliance/Returnees' bears
their individual signature[s] signifying their conformity that they were among those
workers who returned to work only on June 26, 1998 or after the deadline imposed by
DOLE. x x x In fine, only those returning pilots, irrespective of whether they comprise
the entire membership of ALPAP, are bound by the June 1, 1999 DOLE Resolution."
(Emphasis supplied)
Thus, Tolentino, who did not deny his participation in the strike and his failure to
promptly comply with the return-to-work order of the Secretary of Labor, could not claim
any retirement benefits because he did not retire - he simply lost his employment status.
Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age, agrees
to sever his or her employment with the former. 21 It is clear, therefore, Tolentino had not
retired from PAL - it was not a result of a voluntary agreement. Tolentino lost his
employment status because of his own actions.
Admittedly, Tolentino was hired again by PAL on 20 July 1998.22 This was after he
reapplied with the company.1âwphi1 He also voluntarily completed the probationary
period of six months. It was made clear to Tolentino, and he certainly admitted, that he
was rehired on the condition that his employment would be as a new
hire.23 Reemployment, on the condition that the employee will be treated as a new
employee, is a valid exercise of the employer's prerogative, as long as it is not done
with antiunion motivation. In Enriquez v. Zamora,24 this Court held:
Enriquez and Ecarma were, therefore, new employees with entirely new seniority
rankings when they were readmitted by PAL on January 18, 1971 and January 12,
1971, respectively. Certainly, PAL was merely exercising its prerogative as an employer
when it imposed two conditions for the reemployment of petitioners inasmuch as hiring
or rehiring policies are matters for the company's management to determine in the
absence of an anti-union motivation.25
On 16 July 1999, or less than one year after he was rehired as a new pilot, Tolentino
resigned from PAL. In this instance, Tolentino had voluntarily resigned from work.
However, the act of resignation alone does not entitle him to retirement benefits which
he claimed under the PALALPAP Retirement Plan. Article VII of the PAL-ALPAP
Retirement Plan Rules and Regulations provides:
ARTICLE VII
Retirement Benefits
Section 1. Normal Retirement. (a) Any member who completes twenty (20) years of
service as a pilot for PAL or has flown 20,000 hours for PAL shall be eligible for normal
retirement. The normal retirement date is the date on which he completes twenty (20)
years of. service or on which he logs his 20,000 hours as a pilot for PAL. The Member
who retires on his normal retirement shall be entitled either (a) to a lump sum payment
of Pl00,000.00 or (b) to such termination pay benefits to which he may be entitled under
existing laws, whichever is the greater amount.
Section 2. Late Retirement. Any Member who remains in the service of the Company
after his normal retirement date may retire either at his option or at the option of the
Company, and when so retired he shall be entitled either (a) to a lump sum payment
of ₱5,000.00 for each completed year of service rendered as a pilot, or (b) to such
termination pay benefits to which he may [sic] entitled under existing laws, whichever is
the greater amount.
Section 3. Resignation Benefit. Any Member who completes five (5) years of continuous
service with the Company may retire a[t] his option. In such event, he shall only be
entitled to the following percentage or ₱5,000.00 for each completed year of service as
a pilot, multiplied by the applicable percentage as shown below:
x x x x26
Based on the foregoing, Tolentino is not entitled to any of the retirement benefits under
the PAL-ALPAP Retirement Plan. He had not completed even one year of his new
employment with PAL. The Rules and Regulations of the PAL-ALPAP Retirement Plan
provide that the member-pilot must have completed at least five years of continuous
service with PAL to be entitled to the resignation benefit. His resignation in July 1999,
which was only about a year from when he was rehired by the company, did not qualify
him for such resignation benefit.
Petitioners argue that Tolentino had been a pilot for PAL for more than 20 years since
his employment on 22 October 1971, and thus he was qualified for normal retirement
under the first section of Article VII of the PAL-ALPAP Retirement Plan.
We disagree.
For purposes of the retirement plan, the computation of Tolentino's length of service to
the company should be reckoned from the date he was rehired after his own voluntary
application as a new pilot. His services from October 1971 to June 1998 cannot be
tacked to his new employment starting in July 1998 because the first employment had
already been finally terminated - not due to his voluntary resignation or retirement, but
because of termination due to just causes. Tolentino joined an illegal strike and defied
the return-to-work order of the Secretary of Labor. At this point, he had already lost his
employment status with PAL.
Petitioners cannot rely on the case of Enriquez v. Zamora27to argue that once a pilot
meets the requirements under the CBA, the payment of the retirement benefits "ipso
facto accrues and may be demanded when the employment relationship is severed,
regardless of the reason therefor"28 because first, there was no such declaration in the
cited case; second, the issue in the case was about the seniority of the returning pilots;
and third, the case has an entirely different factual milieu from the case at bar.
In Enriquez v. Zamora, 29 the pilots tendered their mass resignation while in the present
case, no resignation was tendered - Tolentino and the others were terminated because
of their participation in an illegal strike and their subsequent non-compliance with the
return-to-work order. The Court held that Enriquez was entitled to the retirement
benefits because precisely, he retired - he voluntarily severed his employment with PAL.
While Enriquez argued that he did not genuinely desire to terminate his employment
and that the resignation was tendered as a matter of protest, the fact remained that a
resignation was tendered, and PAL had accepted it. On the other hand, in the present
case, when Tolentino was first separated from PAL, there was no resignation to speak
of- nothing was tendered to PAL for it to accept.
The requirements under the PAL-ALPAP Retirement Plan must be present at the time
the employee resigns or retires from PAL. Unfortunately for Tolentino, when he finally
tendered his resignation with PAL, he was no longer compliant with the requirements for
the retirement benefit - as a new hire, he only completed less than one year of service.
Therefore, he is not entitled to any retirement or resignation benefits under the PAL-
ALPAP Retirement Plan.
Retirement benefits, especially those which are given before the mandatory retirement
age, are given as a form of reward for the services rendered by the employee to the
employer.30 Thus, it would be contrary to the rationale of retirement benefits to reward
an employee who was terminated due to just cause, or who committed an act that was
enough to merit his dismissal.
Additionally, petitioners argue that Tolentino is also entitled to the equity in the
retirement fund under the PAL Pilots' Retirement Benefit Plan, which is separate from
the retirement benefits under the PAL-ALPAP Retirement Plan.
While we recognize that the two benefits are indeed separate and distinct from each
other, we find that Tolentino is entitled to neither.1âwphi1
The PAL Pilots' Retirement Benefit Plan is a retirement fund raised exclusively from the
contributions of PAL.31 Contrary to petitioners' claim that the retirement fund comes from
salary deductions, 32 we find that it is non-contributory and there is no financial burden
on the pilots for the establishment of this fund. The PAL Pilots' Retirement Benefit Plan
specifically provides:
2.9 "Retirement Fund" shall mean the company's contributions to the Trust Fund
established under or in connexion [sic] with this Plan in the Participant[s'] behalf
plus/minus earnings/losses and less expenses charged to the Fund and benefit
payments previously made. The Retirement Fund shall consist of the participants' equity
and the forfeitures.
xxxx
6.1 The Plan will be wholly financed by the Company. No contributions will be required
from the participants of the Plan. The funding of the Plan and payment of the benefits
hereunder shall be provided for through the medium of a Retirement Fund held by a
trustee under an appropriate trust agreement. All contributions made by the Company to
the Retirement Fund shall be solely and exclusively for the benefit of the participants or
their beneficiaries, and no part of said contributions or its income shall be used for or
diverted to purposes other than the exclusive benefit of such employees and their
beneficiaries. None whatsoever shall revert to the Company. 33 (Emphasis supplied)
In Philippine Airlines, Inc. v. Airline Pilots Association of the Philippines, 34 this Court
held:
The PAL Pilots' Retirement Benefit Plan is a retirement fund raised from contributions
exclusively from petitioner of amounts equivalent to 20% of each pilot's gross monthly
pay. Upon retirement, each pilot stands to receive the full amount of the contribution. In
sum, therefore, the pilot gets an amount equivalent to 240% of his gross monthly
income for every year of service he rendered to petitioner. This is in addition to the
amount of not less than ₱100,000.00 that he shall receive under the 1967 Retirement
Plan. (Boldfacing and underscoring supplied)
Again, similar to the retirement benefits under the PAL-ALPAP Retirement Plan, it is
clear that the pilot must have retired first before he receives the full amount of the
contribution or the equity of the retirement fund. As earlier established, Tolentino never
retired. When he was first separated from work, it was not due to resignation or
retirement - he simply lost his employment status as a result of his participation in the
illegal strike and failure to promptly comply with the return-to-work order of the
Secretary of Labor. When he resigned from work after subsequently being rehired by
PAL, it could not be said that he retired as he barely completed one year of service.
Simply put, he was not able to satisfy the retirement requirements. As Tolentino was not
a retiring pilot, he was not entitled to receive the return of equity in the retirement fund.
Only pilots who are retiring - who have satisfactorily met the requisites for retirement -
are entitled to the full equity of the contribution. Moreover, since the contribution to the
fund was exclusively from PAL, with no participation from the employees, Tolentino is
not entitled to any amount from the PAL Pilots' Retirement Benefit Plan.
Further, we find that PAL's Personnel Policies and Procedures Manual,35 which provides
that generally, a dismissed employee forfeits all his entitlements to the company
benefits and privileges, is a valid employer policy which is applicable to Tolentino. PAL's
assertion that the loss of employment of Tolentino carried with it the forfeiture of his
benefits and privileges, which include retirement benefits under the PAL-ALPAP
Retirement Plan and the equity in the retirement fund under the PAL Pilots' Retirement
Benefit Plan, is meritorious.
We also find no reversible error in the denial of Tolentino's claim for damages and
attorney's fees. Based on the foregoing, there is no basis to grant any of the damages
claimed. Finally, we note that PAL did not question the order for the payment of
Tolentino's accrued vacation leave. Thus, this Court will not review the same.
WHEREFORE, the petition is DENIED. The assailed 30 September 2014 Decision and
10 June 2015 Resolution of the Court of Appeals in CAG. R. SP No. 132519
are AFFIRMED.
SO ORDERED.

G.R. No. 202974, February 07, 2018

NORMA D. CACHO AND NORTH STAR INTERNATIONAL TRAVEL,
INC., Petitioners, v. VIRGINIA D. BALAGTAS, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court, as amended, seeking to reverse and set aside the
Decision1 dated November 9, 2011 and Resolution2 dated August 6, 2012 of
the Court of Appeals in CA-G.R. SP No. 111637, which affirmed the Labor
Arbiter's Decision3 dated March 28, 2005.

This case stemmed from a Complaint4 for constructive dismissal filed by

respondent Virginia D. Balagtas (Balagtas) against petitioners North Star
International Travel, Inc. (North Star) and its President Norma D. Cacho
(Cacho) before the Labor Arbiter docketed as NLRC-NCR Case No. 04-04736-
04.

The facts as narrated by the Court of Appeals are as follows:

In her Position Paper submitted before the Labor Arbiter, petitioner
[Balagtas] alleged that she was a former employee of respondent TQ3 Travel
Solutions/North Star International Travel, Inc., a corporation duly registered
with the Securities and Exchange Commission (SEC) on February 12, 1990.
She also alleged that she was one of the original incorporators-directors of
the said corporation and, when it started its operations in 1990, she was the
General Manager and later became the Executive Vice President/Chief
Executive Officer.

On March 19, 2004 or after 14 years of service in the said corporation,

petitioner was placed under 30 days preventive suspension pursuant to a
Board Resolution passed by the Board of Directors of the respondent
Corporation due to her alleged questionable transactions. On March 20,
2004, she was notified by private respondent Norma Cacho of her
suspension and ordered to explain in writing to the Board of Directors her
alleged fraudulent transactions within 5 days from said notice. Petitioner
promptly heeded the order on March 29, 2004.

On April 5, 2004, while under preventive suspension, petitioner wrote a

letter to private respondent Norma Cacho informing the latter that she was
assuming her position as Executive Vice-President/Chief Executive Officer
effective on that date; however, she was prevented from re-assuming her
position. Petitioner also wrote a letter dated April 12, 2004 to the Audit
Manager inquiring about the status of the examination of the financial
statement of respondent corporation for the year 2003, which request was,
however, ignored. Consequently, petitioner filed a complaint claiming that
she was constructively and illegally dismissed effective on April 12, 2004.

In their defense, respondents averred that, on March 19, 2004, the majority
of the Board of Directors of respondent corporation decided to suspend
petitioner for 30 days due to the questionable documents and transactions
she entered into without authority. The preventive suspension was meant to
prevent petitioner from influencing potential witnesses and to protect the
respondent corporation's property. Subsequently, the Board of Directors
constituted an investigation committee tasked with the duty to impartially
assess the charges against petitioner.

Respondents alleged that petitioner violated her suspension when, on

several occasions, she went to the respondent corporation's office and
insisted on working despite respondent Norma Cacho's protestation.
Respondents also alleged that the complaint for constructive dismissal was
groundless. They asserted that petitioner was not illegally dismissed but was
merely placed under preventive suspension.5
The Decision of the Labor Arbiter

In his Decision dated March 28, 2005, the Labor Arbiter found that
respondent Balagtas was illegally dismissed from North Star, viz.:
WHEREFORE, judgment is hereby made finding the complainant to have
been illegally dismissed from employment on July 15, 2004 and
concomitantly ordering the respondent North Star International Travel, Inc.,
to pay her a separation pay computed at thirty (30) days pay for every year
of service with backwages, plus commissions and such other benefits which
she should have received had she not been dismissed at all.

The respondent North Star International Travel, Inc. is further ordered to

pay complainant three (3) million pesos as moral damages and two (2)
million pesos as exemplary damages plus ten (10%) percent attorney's
fees.6
Subsequently, petitioners appealed the case to the National Labor Relations
Commission (NLRC). In their Notice of Appeal,7 they prayed that Balagtas's
Complaint be dismissed for lack of jurisdiction. While they maintained that
Balagtas was never dismissed, they also alleged that she was a corporate
officer, incorporator, and member of the North Star's Board of Directors (The
Board). Thus, the NLRC cannot take cognizance of her illegal dismissal case,
the same being an intra-corporate controversy, which properly falls within
the original and exclusive jurisdiction of the ordinary courts.

The Ruling of the NLRC

In its Resolution8 dated September 30, 2008, the NLRC ruled in favor of

petitioners, viz.:
WHEREFORE, the questioned Decision of the Labor Arbiter is REVERSED and
SET ASIDE and the complaint is DISMISSED for lack of jurisdiction.9
The NLRC's findings are as follows: First, through a Board resolution passed
on March 31, 2003, Balagtas was elected as North Star's Executive Vice
President and Chief Executive Officer, as evidenced by a Secretary's
Certificate dated April 22, 2003. Second, in her Counter Affidavit executed
sometime in 2004 in relation to the criminal charges against her, respondent
Balagtas had in fact admitted occupying these positions, apart from being
one of North Star's incorporators. And, third, the position of "Vice
President" is a corporate office provided in North Star's by-laws.10

Based on these findings, the NLRC ruled that respondent Balagtas was a

corporate officer of North Star at the time of her dismissal and not a
mere employee. A corporate officer's dismissal is always an intra-corporate
controversy,11 a subject matter falling within the Regional Trial Court's (RTC)
jurisdiction.12 Thus, the Labor Arbiter and the NLRC do not have jurisdiction
over Balagtas's Complaint.

The NLRC also held that petitioners North Star and Cacho were not
estopped from raising the issue of lack of jurisdiction. Citing Dy v.
National Labor Relations Commission,13 the NLRC explained that the Labor
Arbiter heard and decided the case upon the theory that he had jurisdiction
over the Complaint. Thus, the Labor Arbiter's jurisdiction may be raised as
an issue on appeal.

Aggrieved, respondent Balagtas moved for reconsideration but was denied.

Thus, she elevated the case to the Court of Appeals via a petition
for certiorari.

The Ruling of the Court of Appeals

In its assailed Decision, the Court of Appeals found merit in Balagtas's

petition, viz.:
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution,
dated September 30, 2008 of the National Labor Relations Commission
dismissing the petitioner's complaint for lack of jurisdiction, is hereby
REVERSED and SET ASIDE. The Decision, dated March 28, 2005 of the Labor
Arbiter is AFFIRMED and this case is ordered REMANDED to the NLRC for the
re-computation of petitioner's backwages and attorney's fees in accordance
with this Decision.14
In ruling that the present case does not involve an intra-corporate
controversy, the Court of Appeals applied a two-tier
test, viz.: (a) the relationship test, and (b) the nature of controversy
test.

Applying the relationship test, the Court of Appeals explained that no

intra-corporate relationship existed between respondent Balagtas and North
Star. While respondent Balagtas was North Star's Chief Executive
Officer and Executive Vice President, petitioners North Star and Cacho failed
to establish that occupying these positions made her a corporate
officer. First, respondent Balagtas held the Chief Executive Officer position as
a mere corporate title for the purpose of enlarging North Star's corporate
image. According to North Star's by-laws, the company President shall
assume the position of Chief Executive Officer. Thus, respondent Balagtas
was not empowered to exercise the functions of a corporate officer, which
was lawfully delegated to North Star's President, petitioner
Cacho.15 And, second, petitioner North Star's By-laws only enumerate the
position of Vice President as one of its corporate officers. The NLRC should
not have assumed that the Vice President position is the same as the
Executive Vice President position that respondent Balagtas admittedly
occupied. Following Matling Industrial and Commercial Corporation v.
Coros,16 the appellate court reminded that "a position must be expressly
mentioned in the by-laws in order to be considered a corporate office."17

On the other hand, the Court of Appeals elucidated that based on the
allegations in herein respondent Balagtas's complaint filed before the Labor
Arbiter, the present case involved labor issues. Thus, even using
the nature of controversy test, it cannot be regarded as an intra-
corporate dispute.18

The subsequent motions for reconsideration were denied.19 Hence, the

present petition.

The Issues
Petitioners North Star and Cacho come before this Court raising the following
issues:
A.

WHETHER RESPONDENT BALAGTAS IS A CORPORATE OFFICER AS DEFINED

BY THE CORPORATION CODE, CASE LAW, AND NORTH STAR'S BY-LAWS

B.

WHETHER THE APPELLATE COURT'S DECISION REVERSING THE NLRC'S

FINDING THAT BALAGTAS WAS A CORPORATE OFFICER FOR WHICH HER
ACTION FOR ILLEGAL DISMISSAL WAS INAPPROPRIATE FOR IT TO
RESOLVE, WAS CORRECT ESPECIALLY BECAUSE NO DISCUSSION OF THAT
CONCLUSION WAS MADE BY THE APPELLATE COURT IN ITS DECISION

C.

WHETHER THE AWARD BY THE APPELLATE COURT OF SEPARATION PAY,

BACKWAGES, DAMAGES, AND LAWYER'S FEES TO BALAGTAS WAS
APPROPRIATE20
Petitioners Cacho and North Star insist that the present case's subject
matter is an intra-corporate controversy. They maintain that respondent
Balagtas, as petitioner North Star's Executive Vice President and Chief
Executive Officer, was its corporate officer. Particularly, they argue
that: first, under petitioner North Star's by-laws, vice-presidents are listed
as corporate officers. Thus, the NLRC erred when it differentiated between:
(a) "vice president" as a corporate office provided in petitioner North Star's
by-laws, and (b) "Executive Vice President," the position occupied by
respondent Balagtas. Its interpretation unduly supplanted the Board's
wisdom and authority in handling its corporate affairs. Her appointment as
one of petitioner North Star's vice presidents is evidenced by
the Secretary's Certificate dated April 22, 2003. As held in Mailing, if the
position or office is created by the by-laws and the appointing authority
is the board of directors, then it is a corporate office. Second, she had
already been a corporate officer of petitioner North Star for quite some time,
having been appointed as General Manager through a Board Resolution in
1997 and, subsequently, as Executive Vice President and General Manager in
2001, as evidenced by the Secretary's Certificate dated March 23, 2001.
And third, respondent Balagtas has openly admitted her appointments to
these positions. She even acknowledged being a member of the Board and
at the same time petitioner North Star's Executive Vice
President and General Manager.21
Considering all these in applying the relationship test, petitioners Cacho
and North Star assert that respondent Balagtas is not petitioner North Star's
mere employee but a corporate officer thereof whose dismissal is
categorized as an intra-corporate matter.22

Petitioners Cacho and North Star further cite Espino v. National Labor

Relations Commission23 where the Court held that a corporate officer's
dismissal is always a corporate act. It cannot be considered as a simple labor
case. Thus, under the nature of the controversy test, the present case is
an intra-corporate dispute because the primary subject matter herein is the
dismissal of a corporate officer.

In refuting petitioners Cacho and North Star's allegations, respondent

Balagtas avers that: first, she was not a corporate officer of petitioner North
Star. The Board Resolution and Secretary's Certificates that purportedly
support petitioners Cacho and North Star's claims were falsified, forged, and
invalid. Petitioners Cacho and North Star failed to show that the Executive
Vice President position she had occupied was a corporate office. Said
position was a mere nomenclature as she was never empowered to exercise
the functions of a corporate officer. In fact, in the 2003 General Information
Sheet (GIS) of petitioner North Star, the field "corporate position" opposite
respondent Balagtas's name was filled out as "not applicable." Second, she
was no longer a stockholder and director of petitioner North Star. Third, she
was merely an employee. Petitioner Cacho was the one who hired her,
determined her compensation, directed and controlled the manner she
performed her work, and ultimately, dismissed her from
employment. Fourth, the issue of whether or not she was a corporate officer
is irrelevant because her claim for back wages, commissions, and other
monies is clearly categorized as a labor dispute, not an intra-corporate
controversy.24 And fifth, petitioners Cacho and North Star are already
estopped from questioning the jurisdiction of the Labor Arbiter. They actively
participated in the proceedings before the Labor Arbiter and cannot assail
the validity of such proceedings only after obtaining an unfavorable
judgment.25

The Ruling of the Court

The petition is meritorious.

The sole issue before the Court is whether or not the present case is an
intra-corporate controversy within the jurisdiction of the regular courts or an
ordinary labor dispute that the Labor Arbiter may properly take cognizance
of.

Respondent Balagtas's dismissal is an intra-corporate controversy

At the onset, We agree with the appellate court's ruling that a two-tier
test must be employed to determine whether an intra-corporate controversy
exists in the present case, viz.: (a) the relationship test,
and (b) the nature of the controversy test. This is consistent with the
Court's rulings in Reyes v. Regional Trial Court of Makati, Branch
142,26Speed Distributing Corporation v. Court of Appeals,27 and Real v.
Sangu Philippines, Inc.28

A. Relationship Test

A dispute is considered an intra-corporate controversy under

the relationship test when the relationship between or among the
disagreeing parties is any one of the following: (a) between the corporation,
partnership, or association and the public; (b) between the corporation,
partnership, or association and its stockholders, partners, members,
or officers; (c) between the corporation, partnership, or association and the
State as far as its franchise, permit or license to operate is concerned; and
(d) among the stockholders, partners, or associates themselves.29

In the present case, petitioners Cacho and North Star allege that respondent
Balagtas, as petitioner North Star's Executive Vice President, was
its corporate officer. On the other hand, while respondent Balagtas admits
to have occupied said position, she argues she was Executive Vice
President merely by name and she did not discharge any of the
responsibilities lodged in a corporate officer.

Given the parties' conflicting views, We must now determine whether or

not the Executive Vice President position is a corporate office so as to
establish the intra-corporate relationship between the parties.

In Easy call Communications Phils., Inc. v. King,30 the Court ruled that a

corporate office is created by the charter of the corporation and the officer
is elected thereto by the directors or stockholders. In other words, one shall
be considered a corporate officer only if two conditions are met, viz.: (1) the
position occupied was created by charter/by-laws, and (2) the officer
was elected (or appointed) by the corporation's board of directors to
occupy said position.

1. The Executive Vice President position is one of the corporate offices

provided in petitioner North Star's By-laws

The rule is that corporate officers are those officers of a corporation who are
given that character either by the Corporation
Code or by the corporation's by-laws.31

Section 25 of the Corporation Code32 explicitly provides for the election of

the corporation's president, treasurer, secretary, and such other officers
as may be provided for in the by-laws. In interpreting this provision, the
Court has ruled that if the position is other than the corporate president,
treasurer, or secretary, it must be expressly mentioned in the bylaws in
order to be considered as a corporate office.33

In this regard, petitioner North Star's by-laws34 provides the following:

ARTICLE IV

OFFICERS

Section 1. Election/Appointment - Immediately after their election, the Board

of Directors shall formally organize by electing the Chairman, the
President, one or more Vice-President (sic), the Treasurer, and the
Secretary, at said meeting.

The Board may, from time to time, appoint such other officers as it may
determine to be necessary or proper.

Any two (2) or more positions may be held concurrently by the same person,
except that no one shall act as President and Treasurer or Secretary at the
same time.
Clearly, there may be one or more vice president positions in petitioner
North Star and, by virtue of its by-laws, all such positions shall be corporate
offices.

Consequently, the next question that begs to be asked is whether or not

the phrase "one or more vice president" in the above-cited provision
of the by-laws includes the Executive Vice President position held by
respondent Balagtas.

In ruling that respondent Balagtas was not a corporate officer of petitioner

North Star, the Court of Appeals pointed out that the NLRC should not have
assumed that the "Vice President" position is the same as the "Executive
Vice President" position that Balagtas admittedly occupied. In other words,
that the exact and complete name of the position must appear in the
by-laws, otherwise it is an ordinary office whose occupant shall be regarded
as a regular employee rather than a corporate officer.

The appellate court's interpretation of the phrase "one or more vice

president" unduly restricts one of petitioner North Star's inherent corporate
powers, viz.: to adopt its own by-laws, provided that it is not contrary to
law, morals, or public policy35 for its internal affairs, to regulate the conduct
and prescribe the rights and duties of its members towards itself and among
themselves in reference to the management of its affairs.36

The use of the phrase "one or more" in relation to the establishment of vice
president positions without particular exception indicates an intention to give
petitioner North Star's Board ample freedom to make several vice-president
positions available as it may deem fit and in consonance with sound business
practice.

To require that particular designation/variation of each vice-president (i.e.,

executive vice president) be specified and enumerated is to invalidate the
by-laws' true intention and to encroach upon petitioner North Star's inherent
right and authority to adopt its own set of rules and regulations to govern its
internal affairs. Whether the creation of several vice-president positions in a
company is reasonable is a question of policy that courts of law should not
interfere with. Where the reasonableness of a by-law is a mere matter of
judgment, and one upon which reasonable minds must necessarily differ, a
court would not be warranted in substituting its judgment instead of the
judgment of those who are authorized to make bylaws and who have
exercised their authority.37

Thus, by name, the Executive Vice President position is embraced by the

phrase "one or more vice president" in North Star's by-laws.

2. Respondent Balagtas was appointed by the Board as petitioner North

Star's Executive Vice President

While a corporate office is created by an express provision either in the

Corporation Code or the By-laws, what makes one a corporate officer is
his election or appointment thereto by the board of directors. Thus, there
must be documentary evidence to prove that the person alleged to be a
corporate officer was appointed by action or with approval of the board.38

In the present case, petitioners Cacho and North Star assert that respondent
Balagtas was elected as Executive Vice President by the Board as evidenced
by the Secretary's Certificate dated April 22, 2003, which provides:
I, MOLINA A. CABA, of legal age, Filipino citizen, x x x after being duly sworn
to in accordance with law, depose and state: That —
 1. I am the duly appointed Corporate Secretary of North Star
International Travel, Inc. x x x.

2. As such Corporate Secretary of the Corporation, I hereby certify

that at the Regular/Special meeting of the Board of Directors and
Stockholders of the Corporation which was held on March 31,
2003 during which meeting a quorum was present and majority
of the stockholders were in attendance, the following resolutions
were unanimously passed and adopted:

"RESOLVED, AS IT IS HEREBY RESOLVED, that during a

meeting of the Board of Directors held last March 31,
2003, the following members of the Board were elected to
the corporate position opposite their names:"

POSITION
NAME
NORMA D. CACHO Chairman
VIRGINIA D. BALAGTAS Executive Vice President39
(Emphasis supplied)
On the other hand, respondent Balagtas assails the validity of the above-
cited Secretary's Certificate for being forged and fabricated. However, aside
from these bare allegations, the NLRC observed that she did not present
other competent proof to support her claim. To the contrary, respondent
Balagtas even admitted that she was elected by the Board as petitioner
North Star's Executive Vice President and argued that she could not be
removed as such without another valid board resolution to that effect. To
support this claim, respondent Balagtas submitted the very same Secretary's
Certificate as an attachment to her Position Paper before the Labor
Arbiter.40 That she is now casting doubt over a document she herself has
previously relied on belies her own claim that the Secretary's Certificate is a
fake.

Thus, the above-cited Secretary's Certificate overcomes respondent

Balagtas's contention that she was merely the Executive Vice President by
name and was never empowered to exercise the functions of a corporate
officer. Notably, she did not offer any proof to show that her duties,
functions, and compensation were all determined by petitioner Cacho as
petitioner North Star's President.

In any case, that the Executive Vice President's duties and responsibilities

are determined by the President instead of the Board is irrelevant. In
determining whether a position is a corporate office, the board of directors'
appointment or election thereto is controlling. Article IV, Section 4 of North
Star's By-laws provides:
Section 4. The Vice-President(s) - If one or more Vice-Presidents
are appointed, he/they shall have such powers and shall perform such
duties as may from time to time be assigned to him/them by the Board
of Directors or by the President. [Emphasis supplied.]
When Article IV, Section 4 is read together with Section 1 thereof, it is clear
that while petitioner North Star may have one or more vice presidents and
the President is authorized to determine each one's scope of work, their
appointment or election still devolves upon the Board.

At this point, it is best to emphasize that the manner of creation (i.e.,

under the express provisions of the Corporation Code or by-laws) and
the manner by which it is filled (i.e., by election or appointment of the
board of directors) are sufficient in vesting a position the character of a
corporate office.

Respondent Balagtas also denies her status as one of petitioner North Star's
corporate officers because she was not listed as such in petitioner North
Star's 2003 General Information Sheet (GIS).

This is of no moment.

The GIS neither governs nor establishes whether or not a position is

an ordinary or corporate office. At best, if one is listed in the GIS as an
officer of a corporation, his/her position as indicated therein could only be
deemed a regular office, and not a corporate office as it is defined under the
Corporation Code.41

Based on the above discussion, as Executive Vice President, respondent

Balagtas was one of petitioner North Star's corporate officers. Thus, there is
an intra-corporate relationship existing between the parties.

B. Nature of the Controversy Test

The existence of an intra-corporate controversy does not wholly rely on the

relationship of the parties. The incidents of their relationship must also be
considered. Thus, under the nature of the controversy test, the
disagreement must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the
parties' correlative rights and obligations under the Corporation Code and
the internal and intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.42

Verily, in a long line of cases,43 the Court consistently ruled that a corporate

officer's dismissal is always a corporate act, or an intra-corporate
controversy which arises between a stockholder and a corporation. However,
a closer look at these cases will reveal that the intra-corporate nature of the
disputes therein did not hinge solely on the fact that the subject of the
dismissal was a corporate officer.

In Philippine School of Business Administration v. Leano,44 the complainant

questioned the validity of his dismissal after his position was declared vacant
and he was not re-elected thereto. The cases of Fortune Cement Corporation
v. National Labor Relations Commission45 and Locsin v. Nissan Lease Phils.
Inc.46 also share similar factual milieu.

On the other hand, the complainant in Espino v. National Labor Relations

Commission47 also contested the failure of the board of directors to re-elect
him as a corporate officer. The Court found that the board of directors
deferred his re-election in light of previous administrative charges filed
against the complainant. Later on, the board of directors deemed him
resigned from service and his position was subsequently abolished.

Finally, in Pearson and George, (S.E. Asia), Inc. v. National Labor Relations
Commission,48 the complainant lost his corporate office primarily because he
was not re-elected as a member of the corporation's board of directors. The
Court found that the corporate office in question required the occupant to be
at the same time a director. Thus, he should lose his position as a corporate
officer because he ceased to be a director for any reason (e.g., he was not
re-elected as such), such loss is not dismissal but failure to qualify or to
maintain a prerequisite for that position.

The dismissals in these cases were all considered intra-corporate

controversies not only because the complainants were corporate officers, but
also, and more importantly, because they were not re-elected to their
respective corporate offices and, thus, terminated from the corporation. "The
matter of whom to elect is a prerogative that belongs to the Board, and
involves the exercise of deliberate choice and the faculty of discriminative
selection. Generally speaking, the relationship of a person to a corporation,
whether as officer or as agent or employee, is not determined by the nature
of the services performed, but by the incidents of the relationship as they
actually exist."49

In other words, the dismissal must relate to any of the circumstances and
incidents surrounding the parties' intra-corporate relationship. To be
considered an intra-corporate controversy, the dismissal of a corporate
officer must have something to do with the duties and responsibilities
attached to his/her corporate office or performed in his/her official
capacity.50

In respondent Balagtas's Position Paper filed before the Labor Arbiter she
alleged as follows: (a) petitioner Cacho informed her, through a letter, that
she had been preventively suspended by the Board; (b) she opposed the
suspension, was unduly prevented from re-assuming her position
as Executive Vice President,51 and thereafter constructively dismissed;
(c) the Board did not authorize either her suspension and removal
from office; and (d) as a result of her illegal dismissal, she is entitled to
separation pay in lieu of her reinstatement to her previous positions,
plus back wages, allowances, and other benefits.52

The foregoing allegations mainly relate to incidents involving her capacity

as Executive Vice President, a position above-declared as a corporate
office, viz.: first, respondent Balagtas's claim of dismissal without prior
authority from the Board reveals her understanding that the appointment
and removal of a corporate officer like the Executive Vice President could
only be had through an official act by the Board. And, second, she sought
separation pay in lieu of reinstatement to her former positions, one of which
was as Executive Vice President. Even her prayer for full back wages,
allowances, commissions, and other monetary benefits all relate to her
corporate office.53

On the other hand, petitioners Cacho and North Star terminated respondent
Balagtas for the following reasons: (a) for allegedly appropriating company
funds for her personal gain; (b) for abandonment of work; (c) violation of a
lawful order of the corporation; and (d) loss of trust and confidence.54 In
their Position Paper, petitioners Cacho and North Star described in detail the
latter's fund disbursement process,55 emphasizing respondent Balagtas's role
as the one who approves payment vouchers and the signatory on issued
checks—responsibilities specifically devolved upon her as the vice
president. And as the vice president, respondent Balagtas actively
participated in the whole process, if not controlled it altogether. As a
result, petitioners Cacho and North Star accused respondent Balagtas
of gravely abusing the confidence the Board has reposed in
her as vice president and misappropriating company funds for her own
personal gain.

From these, it is clear that the termination complained of is intimately and

inevitably linked to respondent Balagtas's role as petitioner North
Star's Executive Vice President: first, the alleged misappropriations were
committed by respondent Balagtas in her capacity as vice president, one of
the officers responsible for approving the disbursements and signing the
checks. And, second, these alleged misappropriations breached petitioners
Cacho's and North Star's trust and confidence specifically reposed in
respondent Balagtas as vice president.

That all these incidents are adjuncts of her corporate office lead the Court to
conclude that respondent Balagtas's dismissal is an intra-corporate
controversy, not a mere labor dispute.

Petitioners Cacho and North Star not estopped from questioning

jurisdiction

Respondent Balagtas insists that petitioners belatedly raised the issue of the
Labor Arbiter's lack of jurisdiction before the NLRC. Relying on Tijam v.
Sibonghanoy,56 she avers that petitioners, after actively participating in the
proceedings before the Labor Arbiter and obtaining an unfavorable
judgment, are barred by laches from attacking the latter's jurisdiction.

We disagree with respondent Balagtas.

The Court has already held that the ruling in Tijam v. Sibonghanoy remains
only as an exception to the general rule. Estoppel by laches will only bar a
litigant from raising the issue of lack of jurisdiction in exceptional cases
similar to the factual milieu of Tijam v. Sibonghanoy. To recall, the Court
in Tijam v. Sibonghanoy ruled that the plea of lack of jurisdiction may no
longer be raised for being barred by laches because it was raised for the first
time in a motion to dismiss filed almost 15 years after the questioned
ruling had been rendered.57

These exceptional circumstances are not present in this case. Thus, the
general rule must apply: that the issue of jurisdiction may be raised at
any stage of the proceedings, even on appeal, and is not lost by
waiver or by estoppel. In Espino v. National Labor Relations
Commission,58 We ruled:
The principle of estoppel cannot be invoked to prevent this Court from taking
up the question, which has been apparent on the face of the pleadings since
the start of the litigation before the Labor Arbiter. In the case of Dy v. NLRC,
supra, the Court, citing the case of Calimlim v. Ramirez, reiterated that the
decision of a tribunal not vested with appropriate jurisdiction is null and
void. Again, the Court in Southeast Asian Fisheries Development Center-
Aquaculture Department v. NLRC restated the rule that the invocation of
estoppel with respect to the issue of jurisdiction is unavailing
because estoppel does not apply to confer jurisdiction upon a
tribunal that has none over the cause of action. The instant case does
not provide an exception to the said rule.59 (Emphasis supplied.)
All told, the issue in the present case is an intra-corporate controversy, a
matter outside the Labor Arbiter's jurisdiction.

WHEREFORE, the petition is hereby GRANTED. The Decision dated

November 9, 2011 and Resolution dated August 6, 2012 of the Court of
Appeals in CA-G.R. SP No. 111637 are SET ASIDE. NLRC-NCR Case No. 04-
04736-04 is dismissed for lack of jurisdiction, without prejudice to the filing
of an appropriate case before the proper tribunal.

SO ORDERED.

G.R. No. 209166, July 09, 2018

DEMETRIO ELLAO Y DELA VEGA, Petitioner, v. BATANGAS I ELECTRIC
COOPERATIVE, INC. (BATELEC I), RAQUEL ROWENA RODRIGUEZ
BOARD PRESIDENT, Respondents.
DECISION
TIJAM, J.:
1
Through this Petition for Review on Certiorari  under Rule 45 of the Rules of
Court, petitioner Demetrio V. Ellao (Ellao) seeks to annul the Decision2 dated
April 26, 2013 and Resolution3 dated August 28, 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 127281 which reversed the decisions of both
the National Labor Relations Commission and the Labor Arbiter on the
ground of lack of jurisdiction. The CA ruled that Ellao, as General Manager of
respondent Batangas I Electric Cooperative, Inc., (BATELEC I), is a corporate
officer and his dismissal is regarded as an intra-corporate controversy, the
jurisdiction over which belongs to the Securities and Exchange Commission
(SEC), now with the regional trial courts, and not the labor tribunals.
The Antecedents
BATELEC I is an electric cooperative organized and existing under
Presidential Decree No. 269 (P.D. 269) and is engaged in the business of
distributing electric power or energy in the province of Batangas, specifically
in Nasugbu, Tuy, Calaca, Balayan, Lemery, San Nicolas, Sta. Teresita, San
Luis, Calatagan, Lian and Agoncillo. At the time material to this petition,
respondent Raquel Rowena Rodriguez is the President of BATELEC I's Board
of Directors.4 Ellao was employed by BATELEC I initially as Office Supplies
and Equipment Control Officer on January 4, 1982 until he was appointed as
General Manager on June 1, 2006.5
On February 12, 2009, a complaint was filed by Nestor de Sagun and
Conrado Cornejo against Ellao, charging him of committing irregularities6 in
the discharge of his functions as General Manager.7 A fact-finding body was
created to investigate these charges and in the meantime, Ellao was placed
under preventive suspension.8
Ellao submitted his explanation refuting the charges against him, after which
the matter was set for hearing. However, the scheduled hearing was
postponed at Ellao's instance. The re-scheduled hearing did not push
through, and instead, the fact-finding body issued a report recommending
Ellao's termination. On March 13, 2009, the Board of Directors adopted and
issued Board Resolution No. 24-09 terminating Ellao as General Manager on
the grounds of gross and habitual neglect of duties and responsibilities and
willful disobedience or insubordination resulting to loss of trust and
confidence.9 On October 2, 2009, Ellao was formally informed of his
dismissal from employment made effective on October 1, 2009.10 On
December 9, 2009, the National Electrification Administration (NEA)
confirmed BATELEC I's Board Resolution No. 24-09 and approved Ellao's
termination.11
On February 23, 2011, Ellao filed a Complaint for illegal dismissal and money
claims before the Labor Arbiter against BATELEC I and/or its President
Rowena A. Rodriguez. Alleging illegal dismissal, Ellao complained that the
charges against him were unsubstantiated and that there was no compliance
with procedural due process as he was not afforded the opportunity to
explain and there was no written notice of termination specifying the
grounds of his termination.12
BATELEC I, on the other hand, moved to dismiss Ellao's complaint on the
ground that it is the NEA and not the NLRC which has jurisdiction over the
complaint. Assuming the NLRC enjoys jurisdiction, BATELEC I nevertheless
asserts that Ellao was validly dismissed.13
The Labor Arbiter rendered his Decision14 affirming jurisdiction over the
complaint. He held that while Presidential Decree No. 279 (P.D. 279), the
law creating the NEA, as amended by Presidential Decree No. 1645 (P.D.
1645), granted NEA the power to suspend or dismiss any employee of
electric cooperatives, the same does not authorize NEA to hear and decide a
labor termination case which power is exclusively vested by Presidential
Decree No. 442 or the Labor Code, to Labor Arbiters.15 Thus, assuming
jurisdiction over the Complaint, the Labor Arbiter held that Ellao was illegally
dismissed as the grounds for his dismissal were unsubstantiated.16
In disposal, the Labor Arbiter held:
WHEREFORE, judgment is hereby made finding the complainant to have
been illegally dismissed from employment by the respondents.
Concomitantly, the respondents are hereby ordered to reinstate him to his
prior position as General manager, without loss of seniority rights and with
full backwages which, on date of this Decision is computed at P1,499,106.00
(his monthly salary of P62,462.75 multiplied by twenty four (24) months). If
the complainant should reject reinstatement, the respondents are ordered to
pay him, in addition to full backwages, a separation pay computed at a full
month's pay for every year of service or the amount of P1,686,494.25
(P62,462.75 multiplied by his 27 years of service).
The respondents are further ordered to pay complainant one million pesos in
moral damages plus ten percent of the total financial award as attorney's
fees.
Other claims are dismissed for lack of merit.
SO ORDERED.17
BATELEC I interposed its appeal18 before the NLRC while Ellao filed a partial
appeal.19 BATELEC I maintains that it is the NEA which has jurisdiction over
Ellao's complaint and that in any case, Ellao was validly dismissed. In its
supplemental appeal,20 BATELEC I argued that jurisdiction over the subject
matter belongs to the regional trial court pursuant to Presidential Decree No.
902-A as amended by Republic Act No. 8799 and Administrative Matter No.
00-11-03-SC which provides that jurisdiction over intra-corporate disputes
are with the regional trial courts.
The NLRC held that BATELEC I is not a corporation registered with the SEC,
but that it was formed and organized pursuant to P.D. 269 and that Ellao is
not an officer but a mere employee.21 Accordingly, the NLRC, in its
Decision22 dated May 21, 2012 denied BATELEC I's appeal and partly granted
that of Ellao's, disposing as follows:
WHEREFORE, premises considered, the appeal of respondents is denied for
lack of merit. The partial appeal of complainant is Partly Granted in that the
cost of living allowance must be included in the computation of his
backwages and separation pay and that he must be paid his proportionate
13th month pay for the year 2009 and the moral and exemplary damages
awarded in his favor is reduced to P100,000.00.
All other dispositions not affected by the modification stands.
SO ORDERED.23
BATELEC I's motion for reconsideration met similar denial from the NLRC in
its Resolution24 dated September 28, 2012. Undaunted, BATELEC I
interposed its certiorari petition25 before the CA reiterating its argument that
the Labor Arbiter and the NLRC lacked jurisdiction over Ellao's complaint, the
latter being a corporate officer.
The Ruling of the Court of Appeals
The CA found merit in BATELEC I's certiorari petition and found that Ellao, as
BATELEC I's General Manager, is a corporate officer. The CA found that
under BATELEC I's By-laws, its Board of Directors is authorized to appoint
such officers as it may deem necessary. It noted that Ellao was appointed as
General Manager by virtue of a board resolution and that Ellao's
appointment was duly approved by the NEA Administrator.26 The CA also
found that the position of General Manager is specifically provided for under
BATELEC I's By-laws. As such, the CA concluded that Ellao's dismissal is
considered an intra-corporate controversy which falls under the jurisdiction
of the SEC, now the RTC's, and not with the NLRC.
In disposal, the CA pronounced:
WHEREFORE, in view of the foregoing premises, the instant petition for
certiorari is hereby GRANTED and the assailed May 21, 2012 Decision and
September 28, 2012 Resolution of the National Labor Relations Commission,
Sixth Division in NLRC LAC No. 01-000260-12 (NLRC RABIV Case No. 02-
00265-11-B) as well as the October 28, 2011 Decision of the Labor Arbiter
are hereby declared as NULL and VOID and consequently, SET ASIDE. The
illegal dismissal complaint of Demetrio Ellao is hereby dismissed without
prejudice to his seeking recourse in the appropriate forum.
SO ORDERED.27
Ellao's motion for reconsideration met similar rebuke from the CA. Hence,
resort to the present petition.
The Issue
Ellao presently imputes error on the part of the CA when the latter held that
the RTC enjoys jurisdiction based on the CA's alleged erroneous findings that
Ellao is a corporate officer and that the controversy involves an intra-
corporate dispute. Simply, the issue to be resolved by the Court is whether
or not jurisdiction over Ellao's complaint for illegal dismissal belong to the
labor tribunals.
The Ruling of the Court
We deny the petition.
Complaints for illegal dismissal filed by a cooperative officer constitute an
intra-cooperative controversy, jurisdiction over which belongs to the regional
trial courts.
Ellao's main resistance to the regional trial court's exercise of jurisdiction
over his complaint for illegal dismissal rests on his theory that BATELEC I, as
a cooperative, is not a corporation registered with the SEC. Registration with
the SEC, however, is not the operative factor in determining whether or not
the latter enjoys jurisdiction over a certain dispute or controversy.
To lend proper context, It is well to recall that a cooperative, as defined
under P.D. 26928, refers to a "corporation organized under Republic Act No.
603829 or [under P.D. 269] a cooperative supplying or empowered to supply
service which has heretofore been organized under the Philippine Non-
Agricultural Cooperative Act, whether covered under this Decree or
not."30 P.D. 269 further provides that "[c]ooperative non-stock, non-profit
membership corporations may be organized, and electric cooperative
corporations heretofore formed or registered under the Philippine non
Agricultural Cooperative Act may as hereinafter provided be converted,
under this Decree for the purpose of supplying, and of promoting and
encouraging the fullest use of, service on an area coverage basis at the
lowest cost consistent with sound economy and the prudent management of
the business of such corporations."31 Likewise, by express provision of PD
269, an electric cooperative is hereby vested with all powers necessary or
convenient for the accomplishment of its corporate purpose.32 Consistently,
an electric cooperative is defined under Republic Act No. 913633 (R.A. 9136)
as a "distribution utility organized pursuant to [P.D. 269], as amended,
xxx."34
Thus, organization under P.D. 269 sufficiently vests upon electric
cooperatives' juridical personality enjoying corporate powers. Registration
with the SEC becomes relevant only when a non-stock, non-profit electric
cooperative decides to convert into and register as a stock corporation.35 As
such, and even without choosing to convert and register as a stock
corporation, electric cooperatives already enjoy powers and corporate
existence akin to a corporation.
By jurisprudence, termination disputes involving corporate officers are
treated differently from illegal dismissal cases lodged by ordinary
employees. Oft-cited is the case of Tabang v. NLRC36 distinguishing between
"officers" and "employees" as follows:
xxx an "office" is created by the charter of the corporation and the officer is
elected by the directors or stockholders. On the other hand, an "employee"
usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.37
As a rule, the illegal dismissal of an officer or other employee of a private
employer is properly cognizable by the labor arbiter pursuant to Article 217
(a)238 of the Labor Code, as amended.
By way of exception, where the complaint for illegal dismissal involves a
corporate officer, the controversy falls under the jurisdiction of the SEC,
because the controversy arises out of intra-corporate or partnership
relations between and among stockholders, members, or associates, or
between any or all of them and the corporation, partnership, or association
of which they are stockholders, members, or associates, respectively; and
between such corporation, partnership, or association and the State insofar
as the controversy concerns their individual franchise or right to exist as
such entity; or because the controversy involves the election or appointment
of a director, trustee, officer, or manager of such corporation, partnership,
or association.39 With the advent of Republic Act No. 879940 (R.A. 8799) or
The Securities Regulation Code, the SEC's jurisdiction over all intra-
corporate disputes was transferred to the regional trial courts.41 Since Ellao
filed his Complaint for illegal dismissal on February 23, 2011, after the
passage and approval of R.A. 8799, his complaint may either fall under the
jurisdiction of the labor arbiter or the regional trial courts, depending on his
position. If Ellao is determined to be a corporate officer then jurisdiction over
his complaint for illegal dismissal is to be treated as an intra-corporate
dispute, hence jurisdiction belongs to the regional trial courts.
In Matling Industrial and Commercial Corporation, et al., v. Ricardo
Coros,42 the Court held that in conformity with Section 2543 of the
Corporation Code, "a position must be expressly mentioned in the By-Laws
in order to be considered as a corporate office. Thus, the creation of an
office pursuant to or under a By-Law enabling provision is not enough to
make a position a corporate office." Citing Guerrea v. Lezama, et
al.,44 Matling held that the only officers of a corporation were those given
that character either by the Corporation Code or by the By-Laws so much so
that the rest of the corporate officers could be considered only as employees
or subordinate officials.
Here, the position of General Manager is expressly provided for under Article
VI, Section 10 of BATELEC I's By-laws, enumerating the cooperative offices
as follows:
ARTICLE VI- OFFICERS
xxxx
SECTION 10. General Manager
a. The management of the Cooperative shall be vested in a General Manager
who shall be appointed by the Board and who shall be responsible to the
Board for performance of his duties as set forth in a position description
adopted by the Board, in conformance with guidelines established by the
National Electrification Administration. It is incumbent upon the Manager to
keep the Board fully informed of all aspects of the operations and activities
of the Cooperative. The appointment and dismissal of the General Manager
shall require approval of NEA.
b. No member of the board may hold or apply for the position of General
Manager while serving as a Director or within twelve months following his
resignation or the termination of his tenure.45
Evidently, the functions of the office of the General Manager, i.e.,
management of the Cooperative and to keep the Board fully informed of all
aspects of the operations and activities of the Cooperative are specifically
laid down under BATELEC I's By-laws itself. It is therefore beyond cavil that
Ellao's position as General Manager is a cooperative office. Accordingly, his
complaint for illegal dismissal partakes of the nature of an intra-cooperative
controversy; it involves a dispute between a cooperative officer on one
hand, and the Board of Directors, on the other.
On this score, the Court's pronouncement in Celso F. Pascual, Sr. and
Serafin Terencio v. Caniogan Credit and Development Cooperative,46 finds
suitable application:
Petitioners clarify that they do not take issue on the power of the Board of
Directors to remove them. Rather, they dispute the "manner, cause[,] and
legality" of their removal from their respective offices as General Manager
and Collection Manager. Even so, we hold that an officer's dismissal is a
matter that comes with the conduct and management of the affairs of a
cooperative and/or an intra-cooperative controversy, and that nature is not
altered by reason or wisdom that the Board of Directors may have in taking
such action. Accordingly, the case a quo is not a labor dispute requiring the
expertise of the Labor Arbiter or of the National Labor Relations Commission.
It is an intra-cooperative dispute that is within the jurisdiction of the
Regional Trial Court xxx.47
As such, the CA committed no reversible error when it ordered the dismissal
of Ellao's Complaint for illegal dismissal without prejudice to the latter's filing
of his complaint at the proper forum. Considering that the Labor Arbiter and
the NLRC were without ample jurisdiction to take cognizance of Ellao's
Complaint, the labor tribunals' rulings therein made are resultantly void.
There is therefore no need to discuss the issue on illegal dismissal and
monetary claims at this point.
WHEREFORE, the petition is DENIED. The Decision dated April 26, 2013
and Resolution dated August 28, 2013 of the Court of Appeals in CA-G.R. SP
No. 127281 are AFFIRMED.
SO ORDERED.
APRIL 25, 2018
G.R. No. 226727
UNIVERSITY OF THE EAST and DR. ESTER GARCIA, Petitioners
vs
VERONICA M. MASANGKAY and GERTRUDO R. REGONDOLA, Respondents
DECISION
VELASCO, JR., J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal and setting aside of the February 19, 2016 Decision1 and August 26, 2016
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 132774, entitled "Veronica
M Masangkay and Gertruda R. Regondola v. University of the East, Dr. Ester Garcia
and The National Labor Relations Commission."
Respondents Veronica M. Masangkay (Masangkay) and Gertrudo R. Regondola
(Regondola) were regular faculty members, Associate Professors, and Associate Deans
of petitioner University of the East (UE) - Caloocan Campus, prior to their dismissal on
November 26, 2007.
While holding said positions at UE, respondents submitted three (3) manuals, namely:
Mechanics, Statics, and Dynamics, requesting said manuals' temporary adoption as
instructional materials. Respondents represented themselves to be the rightful authors
thereof, together with their co-author, a certain Adelia F. Rocamora (Rocamora).
Accompanying said requests are certifications under oath, signed by respondents,
declaring under pain of perjury, and openly certifying that the manuals are entirely
original and free from plagiarism. Said certification reads:
We hereby certify that the contents of the manual MECHANICS FOR ECE AND COE by
Gertruda R. Regondola, et al. to be used in the subjects ECE 311N are entirely original
and free from plagiarism.
(SGD.)
Gertruda R.
Regondola.
(SGD.)
Veronica Masangkay2
After review, UE approved the requests for use of said manuals by students of the
College of Engineering.
Thereafter, petitioners received two (2) complaint-letters via electronic mail (e-mail) from
a certain Harry H. Chenoweth and Lucy Singer Block. Chenoweth arid Block's father are
authors, respectively, of three books, namely: Applied Engineering Mechanics,
Engineering Mechanics, 2nd Edition, 1954, and Engineering Mechanics: Statics &
Dynamics, 3rd Edition, 1975. They categorically denied giving respondents permission
to copy, reproduce, imitate, or alter said books, and asked for assistance from UE to
stop the alleged unlawful acts and deal with this academic dishonesty.
Prompted by the seriousness of the allegations, UE investigated the matter. After a
thorough evaluation of the alleged plagiarized portions, petitioner conducted an
investigation in which respondents actively participated and filed their Answer.
Eventually, UE's Board of Trustees issued Resolution No. 2007-11-84 dismissing
respondents. Notices of Dismissal effective November 26, 2007 were sent to
respondents and Rocamora via registered mail.
Unlike herein respondents, Rocamora sought reconsideration of the decision to the
Board of Trustees. Respondents, however, did not appeal the decision terminating them
and instead opted to claim their benefits due them, which consisted of leave credits,
sick leave, holiday pay, bonuses, shares in tuition fee increase, COLA, and RAT A. For
her part, respondent Masangkay requested that a portion of her benefits be applied to
her existing car loan. For the amounts that they received, they signed vouchers and pay
slips. These were duly acted upon by UE.
Rocamora's case
It appears that after the Board of Trustees denied reconsideration of Rocamora's
dismissal, the latter filed a case against UE for illegal dismissal. Eventually reaching this
Court, the illegality of her dismissal was upheld by the Court through a resolution
in University of the East and Dr. Ester Garcia v. Adelia Rocamora, G.R. No. 199959,
February 6, 2012.
Meanwhile, almost three years after having been dismissed from service and after
collecting their accrued benefits, respondents then filed a complaint for illegal dismissal
on July 20, 2010, docketed as NLRC NCR No. 07-09924-10, entitled "Veronica M.
Masangkay and Gertruda R. Re gondola v. University of the East (UE), President Ester
Garcia."
Ruling of the Labor Arbiter
In its February 28, 2011 ruling,3 the labor arbiter held that respondents were illegally
dismissed and ordered their reinstatement without loss of seniority rights and other
benefits and full backwages inclusive of allowances until actual reinstatement. UE was
directed to pay a total of ₱4,623,873.34 representing both respondents' backwages,
allowances, 13th month pay, moral and exemplary damages. Thus:
WHEREFORE, premises considered, judgment is hereby rendered finding complainants
to have been ILLEGALLY DISMISSED. Respondents are ordered 10 immediately
reinstate complainants to their position without loss of seniority rights and other benefits
and full backwages inclusive of allowances until actual reinstatement. Respondent
University of the East is directed 10 pay complainants the following:
VERONICA M. MASANGKAY    
1 BACKWAGES:    
. 11/1/07 - 2/28/11    
50,000 x 39.93 = ₱ 1,996,500.00  
th
13  MO. PAY:    
₱1,996,500/12 = ₱ 166,375.00  
ALLOWANCE: 41741    
₱3,000.00 X 39.93 = ₱ 119,790.00 ₱ 2,282, 665.
00
2 13th MO. PAY    
. 7/20/2007 - 10/31/2007    
₱50,000 x 3.40 / 12 =   ₱ 14, 166.67
3   ₱ 50,000.00
MORAL DAMAGES
.
4 EXEMPLARY DAMAGE   ₱ 25,000.00
.   TOTAL: ₱ 2,371,831.67
GERTRUDO R. REGONDOLA    
5 BACKWAGES: November 1, 2007 - February 28,  
. 2011
50,000.00 x 39.93 = ₱1,996,500.00  
13th MO. PAY:    
₱1,996,500/12 = ₱166,375.00  
ALLOWANCE:    
₱3,000.00 X 39.93 =   ₱2, 162,875.00
6 13th MO. PAY    
. July 20, 2007 - October 31,    
2007
 ₱50,000 x 3.40 I 12 =   ₱ 14, 166.67
7   ₱ 50,000.00
MORAL DAMAGES
.
8 EXEMPLARY DAMAGE   ₱ 25,000.00
. 10% Attorney's Fees 462,287.33
GRAND TOTAL: ₱4,623,873.34
SO ORDERED.4
NLRC Decision
The case reached the National Labor Relations Commission (NLRC), where the
Commission reversed the labor arbiter's ruling and disposed of the case in this wise:
WHEREFORE, the appeal of respondents is GRANTED and the labor arbiter's Decision
is REVERSED and SET ASIDE. The instant complaint is DISMISSED for lack of merit.
SO ORDERED.5
Their motion for reconsideration having been denied, 6 respondents elevated the case
to the CA.
CA Ruling
The appellate court reinstated the labor arbiter's ruling that petitioners failed to prove
that indeed a just cause for respondents' dismissal exists. Too, it emphasized, among
others, that the instant petition is bound by this Court's Decision in the Rocamora case,
calling for the application of the doctrine of stare decisis. The CA thus disposed of the
case in this manner:
IN VIEW OF ALL THESE, the petition is GRANTED. The assailed Decision dated June
29, 2012 and Resolution dated September 17, 2013 of public respondent National
Labor Relations Commission are SET ASIDE. The Decision dated February 28, 2011 of
the Labor Arbiter is REINSTATED.
SO ORDERED.
The CA denied reconsideration of the questioned Decision in the assailed Resolution of
August 26, 2016, prompting petitioners to file the instant petition, raising the following
issues, to wit:
1) Whether or not respondents' misrepresentation, dishonesty, plagiarism and/or
copyright infringement which is considered academic dishonesty tantamount to
serious misconduct is a just and valid cause for their dismissal.
2) Whether or not the CA erroneously applied the principle of stare decisis.
3) Whether or not respondents are entitled to reinstatement with full backwages,
and other monetary awards despite the fact that they were dismissed for valid
cause under the Labor Code.
4) Whether or not the award of damages and attorney's fees have factual and
legal basis.
Petitioners argue, among others, that the instant case cannot be bound by the
Rocamora case via application of the doctrine of stare decisis because of substantial
differences in Rocamora's situation and in that of respondents, as noted by the NLRC.
Too, petitioners maintain that plagiarism, a form of academic dishonesty, is a serious
misconduct that justly warrants herein respondents' dismissal.
This Court's Ruling
We resolve to grant the petition.
The principle of stare decisis requires that once a case has been decided one way, the
rule is settled that any other case involving exactly the same point at issue should be
decided in the same manner. 7 It simply means that for the sake of certainty, a
conclusion reached in one case should be applied to those that follow if the facts are
substantially the same, even though the parties may be different. It proceeds from the
first principle of justice that, absent any powerful countervailing considerations, like
cases ought to be decided alike. Thus, where the same questions relating to the same
event have been put forward by the parties similarly situated as in a previous case
litigated and decided by a competent court, the rule of stare dee is is is a bar to any
attempt to relitigate the same issue. 8
Applying said principle, the CA held that Our ruling in University of the East v. Adelia
Rocamora9 is a preceμent to the case at bar, involving, as it does, herein respondents'
co-author and tackling the same violation-the alleged plagiarism of the very same
materials subject of the instant case.
In this petition, UE, however, asserts that the case of respondents substantially varies
from Rocamora so as not to warrant the application of said rule.
Indeed, the CA erred when it relied on Our ruling in University of the East v. Adelia
Rocamora in resolving the present dispute. Our decision in Rocamora, rendered via a
Minute Resolution, is not a precedent to the case at bar even though it tackles the same
violation-the alleged plagiarism of the very same materials subject of the instant case,
which was initiated by respondents' co-author. This is so since respondents are simply
not similarly situated with Rocamora so as to warrant the application of the doctrine
of stare decisis.
A legal precedent is a principle or rule established in a previous case that is either
binding on or persuasive for a court or other tribunal when deciding subsequent cases
with similar issues or facts.
Here, We find that the Rocamora case is not on all fours with the present dispute,
thereby removing it from the application of the principle of stare decisis. First, herein
respondents categorically represented to UE under oath that the Manuals were free
from plagiarism-an act in which their co-author Rocamora did not
participate. Second, respondents benefited financially from the sale of the Manuals
while Rocamora did not. Third, respondents acquiesced to UE's decision to terminate
their services and even requested the release of and thereafter claimed the benefits due
them.
Aside from these, respondents executed a Certification categorically stating under oath
and declaring under pain of perjury that the manuals are entirely original and free
from plagiarism. To reiterate:
We hereby certify that the contents of the manual MECHANICS FOR ECE AND COE by
Gertrude R. Regondola, et al. to be used in the subjects ECE 31 IN are entirely original
and free from plagiarism.
 (SGD.)
Gertruda R. Regondola
(SGD.)
Veronica Masangka10
As correctly noted by the NLRC in its September 17, 2013 Resolution, 11 Rocarwra
made no such undertaking with respect to the subject materials. This Certification is
crucial in determining the guilt of herein respondents and cannot simply be disregarded.
By expressly guaranteeing to UE that their Manuals were entirely original, coupled by
their omission to attribute the copied portions to the original authors thereof, as per the
Memorandum submitted by Chancellor Celso D. Benologa, it is apparent that
respondents represented said copied portions as their own.
More importantly, We find that the CA erred in disregarding the evidence presented by
petitioner as regards the issue of plagiarism.
In the assailed ruling, the CA held that petitioner UE failed to prove that respondents
were indeed guilty of the charge of misconduct or dishonesty through plagiarism-a form
of academic dishonesty. It found that the evidence does not show that respondents
were motivated with wrongful intent in publishing the manuals.12 In ruling thus, the
appellate court heavily relied on the approval of the manual by the Textbook Evaluation
and Publishing Office (TEPO) and the Board of Trustees in exculpating respondents
from liability.
The CA also found that their act of allegedly plagiarizing the books of Chenoweth and
Singer was not duly proven since the two (2) e-mails from Chenoweth and Block were
not verified such that, therefore, such e-mails afford no assurance of their authenticity
and reliability. 13 The CA went on to state that "[h]aving issues on their authenticity and
reliability, the allegations in the e-mails are mere speculations that, therefore, such fact
renders such emails inadmissible in evidence against petitioners."14
The CA, in its Resolution, thereafter ruled that the evidence charging respondents with
plagiarism was inadmissible, viz:
Be that as it may, We reiterate that private respondents failed to sufficiently prove that
petitioners were guilty of plagiarism that would warrant the latter's dismissal from
service. In order to prove petitioners' act of plagiarizing the books of Chenoweth and
Ferdinand Singer, private respondents only presented the following: unauthenticated
and unverified e-mails from Chenoweth and Block and the Lecture Guides/Manuals.
The e-mails from Chenoweth and Block, being unauthenticated, are, therefore,
inadmissible in evidence against petitioners. Private respondents cannot merely rely on
the Lecture Guides/Manuals in order to show that petitioners were guilty of plagiarism.
The reason is that such Lecture Guides/Manuals were duly scrutinized and evaluated
by the TEPO, through its Board of Textbooks Review, and were eventually approved by
the UE Board of Trustees. It would be absurd for private respondents to declare the
Lecture Guides/Manuals as plagiarized documents when in the first place, private
respondents, through TEPO and the UE Board of Trustees, had initially scrutinized and
approved the same. 15
In labor cases, the deciding authority should use every reasonable means to ascertain
speedily and objectively the facts, without regard to technicalities of law and procedure.
Technical rules of evidence are not strictly binding in labor cases such as the instant
one. 16 Thus, it was error on the part of the CA to disregard the evidence presented by
petitioners to establish the act of plagiarism committed by respondents.
It is worthy to note that the CA failed to examine the actual text written in the manual
and compare the same with the work claimed to have been plagiarized. However, after
a thorough review of the records of the case, the Court finds that respondents, indeed,
plagiarized the works of Chenoweth and Singer. It is glaring from a comparison of the
subject text that respondents heavily lifted portions of the said books, as reported in the
Memorandum submitted by Chancellor Celso F. Bebologa, 17 thus:
FINDINGS:
1. In his Memorandum dated March 15, 2007, Dean Constantino T. Yap
verified Mr. Chenoweth's claim that he is one of the authors of the
textbook "Applied Engineering Mechanics". (EXHIBIT "1")
2. At least three (3) books containing the names of Masangkay,
Rocamora, Regondola, and Tolentino were copied verbatim or with slight
modifications from the following original engineering books:
- Engineering Mechanics, Second Edition, by Ferdinand L. Singer
- Applied Engineering Mechanics, Metric Edition, by Alfred Jensen,
Harry H. Chenoweth, adapted by David N. Watkins
Another author, Hibbeler, is also mentioned as a source of the
"reproduction" but the specific book is not identified (EXHIBITS "2," "3" "4"
& "5")
Tolentino's name appeared only in one of the three books copied from the
original (EXHIBITS "6" TO "6-B," "7" TO "7-B" & "8" TO "8- B").
3. No publisher is indicated in the "copied" volumes which are made of low
quality paper.
OTHER INFORMATION
- "Reproduced" copies are sold to students. Copies bought by students
are retrieved by professors at the end of the school term. Records of
students who failed to return the "reproduced" copies bought by them are
marked LFR and/or NC.
- Students interested to buy the "reproduced" book are referred to specific
bookstores. A bookstore - Special & Journal - with address at No. 76
Samson Road, Caloocan City is selling the "reproduced" books.
- Some professors reportedly own or operate printing press facilities.
Others are holding personal review classes or having their own review
centers.
- There are pending lapsed applications for removal of LFR at the
Engineering Department.1âwphi1 Professors alleged their class records
In a letter requiring respondents to provide the basis of their appeal of their dismissal,
Dr. Ester A Garcia quoted the findings of the Faculty Disciplinary Board:
SUMMARY OF FINDINGS
1. From the books of Singer, 558 sentences/figures were plagiarized
and used in the manuals of Respondents, either verbatim or with
 modification; while from the book of Jensen-Chenoweth, 52
sentences and figures were likewise taken and used in Respondents'
manuals.
2. Respondents did not mention, as required in Section 184 of the
Intellectual Property Law, the sources and the names of the authors of the
textbooks from where they lifted passages, illustrations, and tables used in
their manuals.
3. In their request to TEPO for temporary adoption of the manuals,
Respondents certified under oath that the manuals are all original and free
from plagiarism. Other investigation, however, shows otherwise.
(emphasis ours)
To this Court, the bulk of the copied text vis-a-vis the said Certification clearly shows
wrongful intent on the part of respondents. We cannot subscribe to the CA ruling that
respondents were in good faith since, being the principal authors thereof, they had full
knowledge as to what they were including in their written work. In other words, they
knew which portions were truly original and which were not.
From the foregoing, the Court finds that there is sufficient basis for dismissing
respondents from service, considering the highest integrity and morality which the
profession requires from its teachers. Respondents plagiarized the works of Chenoweth
and Singer by lifting large portions of the text of the works of said writers without
properly attributing the copied text, and, to make matters worse, they represented under
oath that no portion of the Manuals were plagiarized when, in truth and in fact, huge
portions thereof were improperly lifted from other materials.
Lastly, it is well to emphasize that Rocamora strongly opposed her dismissal from
service as contained in her December 3, 2007 Letter, 18 where she invoked denial of
due process in her termination, denied having committed plagiarism or benefiting from
the printing of the materials in question, and '"sincerely hop[ing] that the [Board of
Trustees] xx x, will see the injustice [she] got which ought to be reversed and
reconsidered."19
Such, however, is not so for herein respondents. It is well to emphasize that in her June
2, 2008 Letter,20 respondent Masangkay requested the recomputation of the amounts
due in her favor after said termination, as well as the application of said amounts to her
car loan balance. She was even cooperative with the procedure, asking the
management to advise her should there be a need for her to prepare and accomplish
her time records for purposes of recomputing her salary.
As to Regondola, aside from the cash and check vouchers21 that he signed after
receiving the amounts due him after said termination, it does not appear that he made
any similar letter request or appeal, unlike Masangkay or Rocamora, respectively.
Indeed, rights may be waived, unless the waiver is contrary to law, public order, public
policy, morals, or good customs, or prejudicial to a third person with a right to be
recognized by law.22 Within the context of a termination dispute, waivers are generally
looked upon with disfavor and are commonly frowned upon as contrary to public policy
and ineffective to bar claims for the measure of a worker's legal rights. If (a) there is
clear proof that the waiver was wangled from an unsuspecting or gullible person; or (b)
the terms of the settlement are unconscionable, and on their face invalid, such
quitclaims must be struck down as invalid or illegal.23
Thus, not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable settlement, it
is binding on the parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the waiver was wangled from
an unsuspecting or gullible person, or the terms of settlement are unconscionable on its
face, that the law will step in to annul the questionable transaction. But where it is
shown that the person making the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as a valid and binding undertaking. 24
In the case at bar, We find no reason to rule that respondents did not waive their right to
contest UE's decision.1âwphi1 Based on their actuations subsequent to their
termination, it is clear that they were amenable to UE's decision of terminating their
services on the ground of academic dishonesty. Nowhere can we find any indication of
unwillingness or lack of cooperation on respondents' part with regard to the events that
transpired so as to convince Us that they were indeed constrained to forego their right
to question the management's decision. Neither do we find any sign of coercion nor
intimidation, subtle or otherwise, which could have forced them to simp1y accept said
decision. In fact, based on their qualifications, this Court cannot say that respondents
and UE do not stand on equal footing so as to force respondents to simply yield to UE's
decision. Furthermore, there is no showing that respondents did not receive or received
less than what is legally due them in said termination.
In sum, We are of the view that their acceptance of UE's decision is voluntary and with
full understanding thereof, tantamount to a waiver of their right to question the
management's decision to terminate their services for academic dishonesty. It is as
though they have waived any and all claims against UE when they knowingly and
willingly acquiesced to their dismissal and opted to receive the benefits due them
instead.
We also find that they genuinely accepted petitioner University's decision at that time
and that their filing of the complaint almost three (3) years later was a mere afterthought
and, in their own words, inspired by their colleague's victory.25
In the light of the foregoing, the Rocamora case cannot be used as a precedent to the
case at bar. In view of the substantial evidence presented by petitioner UE that
respondents committed plagiarism, then the complaint for illegal dismissal must,
therefore, be dismissed for utter lack of basis.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated
February 19, 2016 in CA-G.R. SP No. 132774 and its August 26, 2016 Resolution are
hereby REVERSED and SET ASIDE. The complaint for illegal dismissal is
hereby DISMISSED for lack of merit.
SO ORDERED.
March 13, 2018
G.R. No. 178083
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES
(FASAP), Petitioner
vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF APPEALS,
Respondents
IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO. 178083 - FLIGHT
ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (F ASAP)
vs. PHILIPPINE AIRLINES, INC., ETAL.
RESOLUTION
BERSAMIN, J.:
In determining the validity of a retrenchment, judicial notice may be taken of the
financial losses incurred by an employer undergoing corporate rehabilitation. In such a
case, the presentation of audited financial statements may not be necessary to
establish that the employer is suffering from severe financial losses.
Before the Court are the following matters for resolution, namely:
(a) Motion for Reconsideration of the Resolution of October 2, 2009 and Second
Motion for Reconsideration of the Decision of July 22, 2008 filed by respondents
Philippine Airlines, Inc. (PAL) and Patria Chiong;1 and
(b) Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13
March 2012 ]2 of petitioner Flight Attendants and Stewards Association of the
Philippines (FASAP).
Antecedents
To provide a fitting backgrounder for this resolution, we first lay down the procedural
antecedents.
Resolving the appeal of F ASAP, the Third Division of the Court3 promulgated its
decision on July 22, 2008 reversing the decision promulgated on August 23, 2006 by
the Court of Appeals (CA) and entering a new one finding PAL guilty of unlawful
retrenchment,4 disposing:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the Decision
of the NLRC setting aside the Labor Arbiter's findings of illegal retrenchment and its
Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED
and SET ASIDE and a new one is rendered:
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;
2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were
covered by the retrenchment and demotion scheme of June 15, 1998 made effective on
July 15, 1998, without loss of seniority rights and other privileges, and to pay them full
backwages, inclusive of allowances and other monetary benefits computed from the
time of their separation up to the time of their actual reinstatement, provided that with
respect to those who had received their respective separation pay, the amounts of
payments shall be deducted from their backwages. Where reinstatement is no longer
feasible because the positions previously held no longer exist, respondent Corporation
shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1)
month pay for every year of service;
3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to ten percent
(10%) of the total monetary award.
Costs against respondent PAL.
SO ORDERED. 5
The Third Division thereby differed from the decision of the Court of Appeals (CA),
which had pronounced in its appealed decision promulgated on August 23, 20066 that
the remaining issue between the parties concerned the manner by which PAL had
carried out the retrenchment program.7 Instead, the Third Division disbelieved the
veracity of PAL’s claim of severe financial losses, and concluded that PAL had not
established its severe financial losses because of its non-presentation of audited
financial statements. It further concluded that PAL had implemented the retrenchment
program in bad faith, and had not used fair and reasonable criteria in selecting the
employees to be retrenched.
After PAL filed its Motion for Reconsideration, 8 the Court, upon motion,9 held oral
arguments on the following issues:
I
WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED
II
WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES BEFORE
IMPLEMENTING ITS RETRENCHMENT PROGRAM
III
WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN
IMPLEMENTING THE RETRECHMENT PROGRAM
IV
WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY EXECUTED
Upon conclusion of the oral arguments, the Court directed the parties to explore a
possible settlement and to submit their respective memoranda.10 Unfortunately, the
parties did not reach any settlement; hence, the Court, through the Special Third
Division,11 resolved the issues on the merits through the resolution of October 2, 2009
denying PAL’s motion for reconsideration,12 thus:
WHEREFORE, for lack of merit, the Motion for Reconsideration is
hereby DENIED with FINALITY. The assailed Decision dated July 22, 2008
is AFFIRMED with MODIFICATION in that the award of attorney's fees and expenses of
litigation is reduced to ₱2,000,000.00. The case is hereby REMANDED to the Labor
Arbiter solely for the purpose of computing the exact amount of the award pursuant to
the guidelines herein stated.
No further pleadings will be entertained.
SO ORDERED.13
The Special Third Division was unconvinced by PAL’s change of theory in urging the
June 1998 Association of Airline Pilots of the Philippines (ALP AP) pilots' strike as the
reason behind the immediate retrenchment; and observed that the strike was a
temporary occurrence that did not require the immediate and sweeping retrenchment of
around 1,400 cabin crew.
Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2,
2009 and Second Motion for Reconsideration of the Decision of July 22, 2008. 14
On October 5, 2009, the writer of the resolution of October 2, 2009, Justice Consuelo
Ynares-Santiago, compulsorily retired from the Judiciary. Pursuant to A.M. No. 99-8-09-
SC,15 G.R. No. 178083 was then raffled to Justice Presbitero J. Velasco, Jr., a Member
of the newly-constituted regular Third Division.16 Upon the Court's subsequent
reorganization,17 G.R. No. 178083 was transferred to the First Division where Justice
Velasco, Jr. was meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited
himself from the case due to personal reasons.18 Pursuant to SC Administrative Circular
No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo D. Brion, whose
membership in the Second Division resulted in the transfer of G.R. No. 178083 to said
Division.19
On September 7, 2011, the Second Division denied with finality PAL’s Second Motion
for Reconsideration of the Decision of July 22, 2008. 20
Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a
series of letters inquiring into the propriety of the successive transfers of G.R. No.
178083.21 His letters were docketed as A.M. No. 11- 10-1-SC.
On October 4, 2011, the Court En Banc issued a resolution:22 (a) assuming jurisdiction
over G.R. No. 178083; (b) recalling the September 7, 2011 resolution of the Second
Division; and (c) ordering the re-raffle of G.R. No. 178083 to a new Member-in-Charge.
Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues
raised against the recall of the resolution of September 7, 2011, the Court En
Banc promulgated its resolution in A.M. No. 11-10-1-SC on March 13, 2012,23 in which it
summarized the intricate developments involving G.R. No. 178083, viz.:
To summarize all the developments that brought about the present dispute--expressed
in a format that can more readily be appreciated in terms of the Court en bane's ruling to
recall the September 7, 2011 ruling - the F ASAP case, as it developed, was attended
by special and unusual circumstances that saw:
(a) the confluence of the successive retirement of three Justices (in a
Division of five Justices) who actually participated in the assailed Decision
and Resolution;
(b) the change in the governing rules-from the A.M.s to the IRSC regime-
which transpired during the pendency of the case;
(c) the occurrence of a series of inhibitions in the course of the case
(Justices Ruben Reyes, Leonardo-De Castro, Corona, Velasco, and
Carpio), and the absences of Justices Sereno and Reyes at the critical
time, requiring their replacement; notably, Justices Corona, Carpio,
Velasco and Leonardo-De Castro are the four most senior Members of the
Court;
(d) the three re-organizations of the divisions, which all took place during
the pendency of the case, necessitating the transfer of the case from the
Third Division, to the First, then to the Second Division;
(e) the unusual timing of Atty. Mendoza’s letters, made after the ruling
Division had issued its Resolution of September 7, 2011, but before the
parties received their copies of the said Resolution; and
(t) finally, the time constraint that intervened, brought about by the parties’
receipt on September 19, 2011 of the Special Division’s Resolution of
 September 7, 2011, and the consequent running of the period for finality
computed from this latter date; and the Resolution would have lapsed to
finality after October 4, 2011, had it not been recalled by that date.
All these developments, in no small measure, contributed in their own peculiar way to
the confusing situations that attended the September 7, 2011 Resolution, resulting in
the recall of this Resolution by the Court en banc.24
In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of
G.R. No. 178083 to the remaining Justices of the former Special Third Division who
participated in resolving the issues pursuant to Section 7, Rule 2 of the Internal Rules of
the Supreme Court, explaining:
On deeper consideration, the majority now firmly holds the view that Section 7, Rule 2
of the IRSC should have prevailed in considering the raffle and assignment of cases
after the 2nd MR was accepted, as advocated by some Members within the ruling
Division, as against the general rule on inhibition under Section 3, Rule 8. The
underlying constitutional reason, of course, is the requirement of Section 4(3), Article
VIII of the Constitution already referred to above.
The general rule on statutory interpretation is that apparently conflicting provisions
should be reconciled and harmonized, as a statute must be so construed as to
harmonize and give effect to all its provisions whenever possible. Only after the failure
at this attempt at reconciliation should one provision be considered the applicable
provision as against the other.
Applying these rules by reconciling the two provisions under consideration, Section 3,
Rule 8 of the IRSC should be read as the general rule applicable to the inhibition
of a Member-in-Charge. This general rule should, however, yield where the
inhibition occurs at the late stage of the case when a decision or signed
resolution is assailed through an MR. At that point, when the situation calls for
the review of the merits of the decision or the signed resolution made by a ponente (or
writer of the assailed ruling), Section 3, Rule 8 no longer applies and must yield
to Section 7, Rule 2 of the IRSC which contemplates a situation when
the ponente is no longer available, and calls for the referral of the case for raffle
among the remaining Members of the Division who acted on the decision or on
the signed resolution. This latter provision should rightly apply as it gives those who
intimately know the facts and merits of the case, through their previous participation and
deliberations, the chance to take a look at the decision or resolution produced with their
participation.
To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition, but it must
yield to the more specific Section 7, Rule 2 of the IRSC where the obtaining situation is
for the review on the merits of an already issued decision or resolution and
the ponente or writer is no longer available to act on the matter. On this basis,
the ponente, on the merits of the case on review, should be chosen from the remaining
participating Justices, namely, Justices Peralta and Bersamin.25
This last resolution impelled F ASAP to file the Motion for Reconsideration [Re: The
Honorable Court’s Resolution dated 13 March 2012], praying that the September 7,
2011 resolution in G.R. No. 178083 be reinstated.26
We directed the consolidation of G.R. No. 178083 and A.M. No. 11- 10-1-SC on April
17, 2012.27
Issues
PAL manifests that the Motion for Reconsideration of the Resolution of October 2, 2009
and Second Motion for Reconsideration of the Decision of July 22, 2008 is its first
motion for reconsideration vis-a-vis the October 2, 2009 resolution, and its second as to
the July 22, 2008 decision. It states therein that because the Court did not address the
issues raised in its previous motion for reconsideration, it is re-submitting the
same, viz.:
I
xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO THE
FOLLOWING COMPELLING EVIDENCE AND CIRCUMSTANCES CLEARLY
SHOWING PALS; DIRE FINANCIAL CONDITION AT THE TIME OF THE
RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S FINANCIAL LOSSES;
(B) THE UNANIMOUS FINDINGS OF THE SECURITIES AND EXCHANGE
COMMISSION (SEC), THE LABOR ARBITER, THE NATIONAL LABOR RELATIONS
COMMISSION (NLRC) AND THE COURT OF APPEALS CONFIRMING PAL'S
FINANCIAL CRISIS; (C) PREVIOUS CASES DECIDED BY THE HONORABLE COURT
RECOGNIZING PAL'S DIRE FINANCIAL STATE; AND (D) PAL BEING PLACED BY
THE SEC UNDER SUSPENSION OF PAYMENTS AND CORPORATE
REHABILITATION AND RECEIVERSHIP
II
xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S
CONCLUSION THAT PAL DID NOT EXERCISE GOOD FAITH [IN] ITS
PREROGATIVE TO RETRENCH EMPLOYEES
III
THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND
REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE RETRENCHED IS
CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON RECORD AND THE
FINDINGS OF THE NLRC AND THE COURT OF APPEALS28
PAL insists that FASAP, while admitting PAL’s serious financial condition, only
questioned before the Labor Arbiter the alleged unfair and unreasonable measures in
retrenching the employees;29 that F ASAP categorically manifested before the NLRC,
the CA and this Court that PAL’s financial situation was not the issue but rather the
manner of terminating the 1,400 cabin crew; that the Court's disregard of FASAP's
categorical admissions was contrary to the dictates of fair play;30 that considering that
the Labor Arbiter, the NLRC and the CA unanimously found PAL to have experienced
financial losses, the Court should have accorded such unanimous findings with respect
and finality;31 that its being placed under suspension of payments and corporate
rehabilitation and receivership already sufficiently indicated its grave financial
condition;32 and that the Court should have also taken judicial notice of the suspension
of payments and monetary claims filed against PAL that had reached and had been
consequently resolved by the Court.33
PAL describes the Court's conclusion that it was not suffering from tremendous financial
losses because it was on the road to recovery a year after the retrenchment as a
mere obiter dictum that was relevant only in rehabilitation proceedings; that whether or
not its supposed "stand-alone" rehabilitation indicated its ability to recover on its own
was a technical issue that the SEC was tasked to determine in the rehabilitation
proceedings; that at any rate, the supposed track to recovery in 1999 and the capital
infusion of $200,000,000.00 did not disprove the enormous losses it was sustaining;
that, on the contrary, the capital infusion accented the severe financial losses suffered
because the capital infusion was a condition precedent to the approval of the amended
and restated rehabilitation plan by the Securities and Exchange Commission (SEC) with
the conformity of PAL's creditors; and that PAL took nine years to exit from
rehabilitation.34
As regards the implementation of the retrenchment program in good faith, PAL argues
that it exercised sound management prerogatives and business judgment despite its
critical financial condition; that it did not act in due haste in terminating the services of
the affected employees considering that FASAP was being consulted thereon as early
as February 17, 1998; that it abandoned "Plan 14" due to intervening events, and
instead proceeded to implement "Plan 22" which led to the recall/rehire of some of the
retrenched employees;35 and that in selecting the employees to be retrenched, it
adopted a fair and reasonable criteria pursuant to the collective bargaining agreement
(CBA) where performance efficiency ratings and inverse seniority were basic
considerations.36
With reference to the Court's resolution of October 2, 2009, PAL maintains that:
I
PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF PAL'S LABOR
FORCE OF ABOUT 5,000 EMPLOYEES, INCLUDING THE 1,423 FASAP MEMBERS,
WAS THE RESULT OF A CONFLUENCE OF EVENTS, THE EXPANSION OF PAL’S
FLEET, THE ASIAN FINANCIAL CRISIS OF 1997, AND ITS CONSEQUENCES ON
PAL'S OPERATIONS, AND THE PILOT’S STRIKE OF JUNE 1998, AND THAT PAL
SURVIVED BECAUSE OF THE IMPLEMENTATION OF ITS REHABILITATION PLAN
(LATER "AMENDED AND RESTATED REHABILITATION PLAN") WHICH INCLUDED
AMONG ITS COMPONENT ELEMENTS, THE REDUCTION OF LABOR FORCE
II
THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION OF THE
NUMBER OF CABIN CREW IN ACCORD WITH ITS ENTRY INTO REHABILITATION
AND THE CONSEQUENT TERMINATION OF EMPLOYMENT OF CABIN CREW
PERSONNEL AS A VALID EXERCISE OF MANAGEMENT PREROGATIVE
III
PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS FINANCIAL
LOSSES, SO AS TO JUSTIFY THE ENTRY INTO REHABILITATION AND THE
CONSEQUENT REDUCTION OF CABIN CREW PERSONNEL
IV
THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO
SUFFICIENT BASIS FOR PAL TO IMPLEMENT THE RETRENCHMENT OF CABIN
CREW PERSONNEL
V
UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF LESS
DRASTIC COST-CUTTING MEASURES WAS NO LONGER POSSIBLE AND
SHOULD NOT BE REQUIRED FOR A VALID RETRENCHMENT; IN ANY EVENT, PAL
HAD IMPLEMENTED LESS DRASTIC COST-CUTTING MEASURES BEFORE
IMPLEMENTING THE DOWNSIZING PROGRAM
VI
QUITCLAIMS WERE VALIDLY EXECUTED37
PAL contends that the October 2, 2009 resolution focused on an entirely new basis -
that of PAL’s supposed change in theory. It denies having changed its theory, however,
and maintains that the reduction of its workforce had resulted from a confluence of
several events, like the flight expansion; the 1997 Asian financial crisis; and the ALP AP
pilots’ strike.38 PAL explains that when the pilots struck in June 1998, it had to decide
quickly as it was then facing closure in 18 days due to serious financial hemorrhage;
hence, the strike came as the final blow.
PAL posits that its business decision to downsize was far from being a hasty, knee-jerk
reaction; that the reduction of cabin crew personnel was an integral part of its corporate
rehabilitation, and, such being a management decision, the Court could not supplant the
decision with its own judgment’ and that the inaccurate depiction of the strike as a
temporary disturbance was lamentable in light of its imminent financial collapse due to
the concerted action.39
PAL submits that the Court’s declaration that PAL failed to prove its financial losses and
to explore less drastic cost-cutting measures did not at all jibe with the totality of the
circumstances and evidence presented; that the consistent findings of the Labor Arbiter,
the NLRC, the CA and even the SEC, acknowledging its serious financial difficulties
could not be ignored or disregarded; and that the challenged rulings of the Court
conflicted with the pronouncements made in Garcia v. Philippine Airlines, Inc. 40 and
related cases41 that acknowledged PAL’s grave financial distress.
In its comment,42 FASAP counters that a second motion for reconsideration was a
prohibited pleading; that PAL failed to prove that it had complied with the requirements
for a valid retrenchment by not submitting its audited financial statements; that PAL had
immediately terminated the employees without prior resort to less drastic measures; and
that PAL did not observe any criteria in selecting the employees to be retrenched.
FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011
decision was void for failure to comply with Section 14, Article VIII of the 1987
Constitution; that the participation of Chief Justice Renato C. Corona who later on
inhibited from G.R. No. 178083 had further voided the proceedings; that the 1987
Constitution did not require that a case should be raffled to the Members of the Division
who had previously decided it; and that there was no error in raffling the case to Justice
Brion, or, even granting that there was error, such error was merely procedural.
The issues are restated as follows:
Procedural
I
IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10- 1-SC
(RECALLING THE SEPTEMBER 7, 2011 RESOLUTION) VOID FOR FAIL URE TO
COMPLY WITH SECTION 14, RULE VIII OF THE 1987 CONSTITUTION?
 II
MAY THE COURT ENTERTAIN THE SECOND MOTION FOR RECONSIDERATION
FILED BY THE RESPONDENT PAL?
Substantive
I
DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL?
A
DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT INCURRED
SERIOUS FINANCIAL LOSSES WHICH JUSTIFIED THE DOWNSIZING OF ITS
CABIN CREW?
B
DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE RETRENCHMENT
PROGRAM?
C
DID PAL COMPLY WITH SECTION 112 OF THE PALF ASAP CBA IN SELECTING
THE EMPLOYEES TO BE RETRENCHED?
III
ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT PROGRAM,
DID THE RETRENCHED EMPLOYEES SIGN VALID QUITCLAIMS?
Ruling of the Court
After a thorough review of the records and all previous dispositions,
we GRANT the Motion for Reconsideration of the Resolution of October 2, 2009 and
Second Motion for Reconsideration of the Decision of July 22, 2008 filed by PAL and
Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court’s
Resolution dated 13 March 2012]43 of FASAP.
Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009
resolution; and AFFIRM the decision promulgated on August 23, 2006 by the CA.
I
The resolution of October 4, 2011
was a valid issuance of the Court
The petitioner urges the Court to declare as void the October 4, 2011 resolution
promulgated in A.M. No. 11-10-1-SC for not citing any legal basis in recalling the
September 7, 2011 resolution of the Second Division.
The urging of the petitioner is gravely flawed and mistaken.
The requirement for the Court to state the legal and factual basis for its decisions is
found in Section 14, Article VIII of the 1987 Constitution, which reads:
Section 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.
The constitutional provision clearly indicates that it contemplates only a decision, which
is the judgment or order that adjudicates on the merits of a case. This is clear from the
text and tenor of Section 1, Rule 36 of the Rules of Court, the rule that implements the
constitutional provision, to wit:
Section 1. Rendition of judgments and final orders. A judgment or final order
determining the merits of the case shall be in writing personally and directly prepared
by the judge, stating clearly and distinctly the facts and the law on which it is
based, signed by him, and filed with the clerk of court.
The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We
explicitly stated so in the resolution of March 13, 2012. What we thereby did was
instead to exercise the Court's inherent power to recall orders and resolutions before
they attain finality. In so doing, the Court only exercised prudence in order to ensure
that the Second Division was vested with the appropriate legal competence in
accordance with and under the Court's prevailing internal rules to review and resolve
the pending motion for reconsideration. We rationalized the exercise thusly:
As the narration in this Resolution shows, the Court acted on its own pursuant to its
power to recall its own orders and resolutions before their finality. The October 4,
2011 Resolution was issued to determine the propriety of the September 7, 2011
Resolution given the facts that came to light after the ruling Division's
examination of the records. To point out the obvious, the recall was not a ruling
on the merits and did not constitute the reversal of the substantive issues already
decided upon by the Court in the FASAP case in its previously issued Decision
(of July 22, 2008) and Resolution (of October 2, 2009). In short, the October 4, 2011
Resolution was not meant and was never intended to favor either party, but to simply
remove any doubt about the validity of the ruling Division's action on the case. The
case, in the ruling Division's view, could be brought to the Court en banc since it is one
of "sufficient importance"; at the very least, it involves the interpretation of conflicting
provisions of the IRSC with potential jurisdictional implications.
At the time the Members of the ruling Division went to the Chief Justice to recommend a
recall, there was no clear indication of how they would definitively settle the unresolved
legal questions among themselves. The only matter legally certain was the looming
finality of the September 7, 2011 Resolution if it would not be immediately recalled by
the Court en banc by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they concluded that
the matter is best determined by the Court en banc as it potentially involved questions
of jurisdiction and interpretation of conflicting provisions of the IRSC. To the extent of
the recommended recall, the ruling Division was unanimous and the Members
communicated this intent to the Chief Justice in clear and unequivocal terms.44 (Bold
underscoring for emphasis)
It should further be clear from the same March 13, 2012 resolution that the factual
considerations for issuing the recall order were intentionally omitted therefrom in
obeisance to the prohibition against public disclosure of the internal deliberations of the
Court.45
Still, F ASAP assails the impropriety of the recall of the September 7, 2011 resolution. It
contends that the raffle of G.R. No. 178083 to the Second Division had not been
erroneous but in "full and complete consonance with Section 4(3) Article VIII of the
Constitution;"46 and that any error thereby committed was only procedural, and thus a
mere "harmless error" that did not invalidate the prior rulings made in G.R. No.
178083.47
The contention of F ASAP lacks substance and persuasion.
The Court carefully expounded in the March 13, 2012 resolution on the resulting
jurisdictional conflict that arose from the raffling of G.R. No. 178083 resulting from the
successive retirements and inhibitions by several Justices who at one time or another
had been assigned to take part in the case. The Court likewise highlighted the
importance of referring the case to the remaining Members who had actually
participated in the deliberations, for not only did such participating Justices intimately
know the facts and merits of the parties' arguments but doing so would give to such
Justices the opportunity to review their decision or resolution in which they had taken
part. As it turned out, only Justice Diosdado M. Peralta and Justice Lucas P. Bersamin
were the remaining Members of the Special Third Division, and the task of being in
charge procedurally fell on either of them.48 As such, it is fallacious for FASAP to still
insist that the previous raffle had complied with Section 4(3), Article VIII of the 1987
Constitution just because the Members of the Division actually took part in the
deliberations.
FASAP is further wrong to insist on the application of the harmless error rule. The rule is
embodied in Section 6, Rule 51 of the Rules of Court, which states:
Section 6. Harmless error. No error in either the admission or the exclusion of evidence
and no error or defect in any ruling or order or in anything done or omitted by the trial
court or by any of the parties is ground for granting a new trial or for setting aside,
modifying, or otherwise disturbing a judgment or order, unless refusal to take such
action appears to the court inconsistent with substantial justice. The court at every stage
of the proceedings must disregard any error or defect which does not affect the
substantial rights of the parties.
The harmless error rule obtains during review of the things done by either the trial court
or by any of the parties themselves in the course of trial, and any error thereby found
does not affect the substantial rights or even the merits of the case. The Court has had
occasions to apply the rule in the correction of a misspelled name due to clerical
error;49 the signing of the decedents' names in the notice of appeal by the heirs;50 the
trial court's treatment of the testimony of the party as an adverse witness during cross-
examination by his own counsel;51 and the failure of the trial court to give the plaintiffs
the opportunity to orally argue against a motion.52 All of the errors extant in the
mentioned situations did not have the effect of altering the dispositions rendered by the
respective trial courts. Evidently, therefore, the rule had no appropriate application
herein.
The Court sees no justification for the urging of FASAP that the participation of the late
Chief Justice Corona voided the recall order. The urging derives from FASAP’s failure to
distinguish the role of the Chief Justice as the Presiding Officer of the Banc. In this
regard, we advert to the March 13, 2012 resolution, where the Court made the following
observation:
A final point that needs to be fully clarified at this juncture, in light of the allegations of
the Dissent is the role of the Chief Justice in the recall of the September 7, 2011
Resolution. As can be seen from the xxx narration, the Chief Justice acted only on
the recommendation of the ruling Division, since he had inhibited himself from
participation in the case long before. The confusion on this matter could have
been brought about by the Chief Justice's role as the Presiding Officer ofthe
Court en banc (particularly in its meeting of October 4, 2011), and the fact that the
four most senior Justices of the Court (namely, Justices Corona, Carpio, Velasco
and Leonardo-De Castro) inhibited from participating in the case. In the absence
of any clear personal malicious participation, it is neither correct nor proper to
hold the Chief Justice personally accountable for the collegial ruling of the Court
en banc.53 (Bold underscoring supplied for emphasis)
To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body.
By virtue of the collegiality, the Chief Justice alone cannot promulgate or issue any
decisions or orders. In Complaint of Mr. Aurelio Jndencia Arrienda Against SC Justices
Puna, Kapunan, Pardo, YnaresSantiago, 54 the Court has elucidated on the collegial
nature of the Court in relation to the role of the Chief Justice, viz.:
The complainant’s vituperation against the Chief Justice on account of what he
perceived was the latter's refusal "to take a direct positive and favorable action" on his
letters of appeal overstepped the limits of proper conduct. It betrayed his lack of
understanding of a fundamental principle in our system of laws. Although the Chief
Justice is primus inter pares, he cannot legally decide a case on his own because of the
Court's nature as a collegial body. Neither can the Chief Justice, by himself, overturn
the decision of the Court, whether of a division or the en banc.
There is only one Supreme Court from whose decisions all other courts are required to
take their bearings.While most of the Court's work is performed by its three divisions,
the Court remains one court-single, unitary, complete and supreme. Flowing from this is
the fact that, while individual justices may dissent or only partially concur, when the
Court states what the law is, it speaks with only one voice. Any doctrine or principle of
law laid down by the court may be modified or reversed only by the Court en banc.55
Lastly, any lingering doubt on the validity of the recall order should be dispelled by the
fact that the Court upheld its issuance of the order through the March 13, 2012
resolution, whereby the Court disposed:
WHEREFORE, premises considered, we hereby confirm that the Court en bane has
assumed jurisdiction over the resolution of the merits of the motions for
reconsideration of Philippine Airlines, Inc., addressing our July 22, 2008 Decision
and October 2, 2009 Resolution; and that the September 7, 2011 ruling of the
Second Division has been effectively recalled. This case should now be raffled
either to Justice Lucas P. Bersamin or Justice Diosdado M. Peralta (the remaining
members of the case) as Member-in-Charge in resolving the merits of these motions.
xxxx
The Flight Attendants and Stewards Association of the Philippines’ Motion for
Reconsideration of October 17, 2011 is hereby denied; the recall of the September
7, 2011 Resolution was made by the Court on its own before the ruling’s finality
pursuant to the Court’s power of control over its orders and resolutions. Thus, no
due process issue ever arose.
SO ORDERED.
II
 PAL's Second Motion for Reconsideration
| of the Decision of July 22, 2008
| could be allowed in the higher interest of justice
FASAP asserts that PAL’s Second Motion for Reconsideration of the Decision of July
22, 2008 was a prohibited pleading; and that the July 22, 2008 decision was not
anymore subject to reconsideration due to its having already attained finality.
FASAP’s assertions are unwarranted.
With the Court’s resolution of January 20, 2010 granting PAL’s motion for leave to file a
second motion for reconsideration,56 PAL's Second Motion for Reconsideration of the
Decision of July 22, 2008 could no longer be challenged as a prohibited pleading. It is
already settled that the granting of the motion for leave to file and admit a second
motion for reconsideration authorizes the filing of the second motion for
reconsideration.57 Thereby, the second motion for reconsideration is no longer a
prohibited pleading, and the Court cannot deny it on such basis alone.58
Nonetheless, we should stress that the rule prohibiting the filing of a second motion for
reconsideration is by no means absolute. Although Section 2, Rule 52 of the Rules of
Court disallows the filing of a second motion for reconsideration,59 the Internal Rules of
the Supreme Court (IRSC) allows an exception, to wit:
Section 3. Second motion for reconsideration. - The Court shall not entertain a second
motion for reconsideration, and any exception to this rule can only be granted in the
higher interest of justice by the Court en bane upon a vote of at least two-thirds
of its actual membership. There is reconsideration "in the higher interest of justice"
when the assailed decision is not only legally erroneous, but is likewise patently unjust
and potentially capable of causing unwarranted and irremediable injury or damage to
the parties. A second motion for reconsideration can only be entertained before
the ruling sought to be reconsidered becomes final by operation of law or by the
Court's declaration.
In the Division, a vote of three Members shall be required to elevate a second motion
for reconsideration to the Court en banc.
The conditions that must concur in order for the Court to entertain a second motion for
reconsideration are the following, namely:
1. The motion should satisfactorily explain why granting the same would be in the
higher interest of justice;
2. The motion must be made before the ruling sought to be reconsidered attains
finality;
3. If the ruling sought to be reconsidered was rendered by the Court through one
of its Divisions, at least three members of the Division should vote to elevate the
case to the Court En Banc; and
4. The favorable vote of at least two-thirds of the Court En Bane’s actual
membership must be mustered for the second motion for reconsideration to be
granted.60
Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a
showing by the movant that a reconsideration of the previous ruling is necessary in the
higher interest of justice. There is higher interest of justice when the assailed decision is
not only legally erroneous, but is likewise patently unjust and potentially capable of
causing unwarranted and irremediable injury or damage to the parties.61
PAL maintains that the July 22, 2008 decision contravened prevailing
jurisprudence62 that had recognized its precarious financial condition;63 that the decision
focused on PAL’s inability to prove its financial losses due to its failure to submit audited
financial statements; that the decision ignored the common findings on the serious
financial losses suffered by PAL made by the Labor Arbiter, the NLRC, the CA and even
the SEC;64 and that the decision and the subsequent resolution denying PAL’s motion
for reconsideration would negate whatever financial progress it had achieved during its
rehabilitation.65
These arguments of PAL sufficed to show that the assailed decision contravened
settled jurisprudence on PAL’s precarious financial condition. It cannot be gainsaid that
there were other businesses undergoing rehabilitation that would also be bound or
negatively affected by the July 22, 2008 decision. This was the higher interest of justice
that the Court sought to address, which the dissent by Justice Leonen is adamant not to
accept.66 Hence, we deemed it just and prudent to allow PAL’s Second Motion for
Reconsideration of the Decision of July 22, 2008.
It is timely to note, too, that the July 22, 2008 decision did not yet attain finality. The
October 4, 2011 resolution recalled the September 7, 2011 resolution denying PAL’s
first motion for reconsideration. Consequently, the July 22, 2008 decision did not attain
finality.
The dissent by Justice Leonen nonetheless proposes a contrary view- that both the July
22, 2008 decision and the October 2, 2009 resolution had become final on November 4,
2009 upon the lapse of 15 days following PAL’s receipt of a copy of the resolution. To
him, the grant of leave to PAL to file the second motion for reconsideration only meant
that the motion was no longer prohibited but it did not stay the running of the
reglementary period of 15 days. He submits that the Court’s grant of the motion for
leave to file the second motion for reconsideration did not stop the October 2, 2009
resolution from becoming final because a judgment becomes final by operation of law,
not by judicial declaration.67
The proposition of the dissent is unacceptable.
In granting the motion for leave to file the second motion for reconsideration, the Court
could not have intended to deceive the movants by allowing them to revel in some
hollow victory. The proposition manifestly contravened the basic tenets of justice and
fairness.
As we see it, the dissent must have inadvertently ignored the procedural effect that a
second motion for reconsideration based on an allowable ground suspended the
running of the period for appeal from the date of the filing of the motion until such time
that the same was acted upon and granted.68 Correspondingly, granting the motion for
leave to file a second motion for reconsideration has the effect of preventing the
challenged decision from attaining finality. This is the reason why the second motion for
reconsideration should present extraordinarily persuasive reasons. Indeed, allowing pro
forma motions would indefinitely avoid the assailed judgment from attaining finality.69
By granting PAL’s motion for leave to file a second motion for reconsideration, the Court
effectively averted the July 22, 2008 decision and the October 2, 2009 resolution from
attaining finality. Worthy of reiteration, too, is that the March 13, 2012 resolution
expressly recalled the September 7, 2011 resolution.
Given the foregoing, the conclusion stated in the dissent that the Banc was divested of
the jurisdiction to entertain the second motion for reconsideration for being a "third
motion for reconsideration;"70 and the unfair remark in the dissent that "[t]he basis of the
supposed residual power of the Court En Banc to, take on its own, take cognizance of
Division cases is therefore suspect"71 are immediately rejected as absolutely legally and
factually unfounded.
To start with, there was no "third motion for reconsideration" to speak of. The
September 11, 2011 resolution denying PAL’s second motion for reconsideration had
been recalled by the October 4, 2011 resolution. Hence, PAL’s motion for
reconsideration remained unresolved, negating the assertion of the dissent that the
Court was resolving the second motion for reconsideration "for the second time."72
Also, the dissent takes issue against our having assumed jurisdiction over G.R. No.
178083 despite the clear reference made in the October 4, 2011 resolution to Sections
3(m) and (n), Rule 2 of the IRSC. Relying largely on the Court's construction of Section
4(3), Article VIII of the 1987 Constitution in Fortich v. Corona,73 the dissent opines that
the Banc could not act as an appellate court in relation to the decisions of the
Division;74 and that the Banc could not take cognizance of any case in the Divisions
except upon a prior consulta from the ruling Division pursuant to Section 3(m), in
relation to Section 3(1), Rule 2 of the IRSC.75
The Court disagrees with the dissent’s narrow view respecting the residual powers of
the Banc.
Fortich v. Corona, which has expounded on the authority of the Banc to accept cases
from the Divisions, is still the prevailing jurisprudence regarding the construction of
Section 4(3), Article VIII of the 1987 Constitution. However, Fortich v. Corona does not
apply herein. It is notable that Fortich v. Corona sprung from the results of the voting on
the motion for reconsideration filed by the Sumilao Farmers. The vote ended in an
equally divided Division ("two-two"). From there, the Sumilao Farmers sought to elevate
the matter to the Banc based on Section 4(3), Article VIII because the required three-
member majority vote was not reached. However, the factual milieu in Fortich v.
Corona is not on all fours with that in this case.
In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted
the Banc to take cognizance of the matter, to wit:
On September 28, 2011, the Letters dated September 13 and 20, 2011 of Atty.
Mendoza to Atty. Vidal (asking that his inquiry be referred to the relevant Division
Members who took part on the September 7, 2011 Resolution) were "NOTED" by the
regular Second Division. The Members of the ruling Division also met to consider the
queries posed by Atty. Mendoza. Justice Brion met with the Members of the ruling
Division (composed of Justices Brion, Peralta, Perez, Bersamin, and Mendoza), rather
than with the regular Second Division (composed of Justices Carpio, Brion, Perez, and
Sereno), as the former were the active participants in the September 7, 2011
Resolution.
In these meetings, some of the Members of the ruling Division saw the problems
pointed out above, some of which indicated that the ruling Division might have had no
authority to rule on the case. Specifically, their discussions centered on the application
of A.M. No. 99-8-09-SC for the incidents that transpired prior to the effectivity of the
IRSC, and on the conflicting rules under the IRSC - - Section 3, Rule 8 on the effects of
inhibition and Section 7, Rule 2 on the resolution of MRs.
A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be made among
the other Members of the san1e Division who participated in rendering the decision or
resolution and who concurred therein, which should now apply because the ruling on
the case is no longer final after the case had been opened for review on the merits. In
other words, after acceptance by the Third Division, through Justice Velasco, of the 2nd
MR, there should have been a referral to raffle because the excepting qualification that
the Clerk of Court cited no longer applied; what was being reviewed were the merits of
the case and the review should be by the same Justices who had originally issued the
original Decision and the subsequent Resolution, or by whoever of these Justices are
still left in the Court, pursuant to the same A.M. No. 99-8-09- SC.
On the other hand, the raffle to Justice Brion was made by applying AC No. 84-2007
that had been superseded by Section 3, Rule 8 of the IRSC. Even the use of this IRSC
provision, however, would not solve the problem, as its use still raised the question of
the provision that should really apply in the resolution of the MR: should it be Section 3,
Rule 8 on the inhibition of a Member-in-Charge, or Section 7, Rule 2 of the IRSC on the
inhibition of the ponente when an MR of a decision and a signed resolution was filed.
xxx
x x x           x x x          x x x
A comparison of these two provisions shows the semantic sources of the seeming
conflict: Section 7, Rule 2 refers to a situation where the ponente has retired, is no
longer a Member of the Court, is disqualified, or has inhibited himself from acting on the
case; while Section 3, Rule 8 generally refers to the inhibition of a Member-in-Charge
who does not need to be the writer of the decision or resolution under review.
Significantly, Section 7, Rule 2 expressly uses the word ponente (not Member-in-
Charge) and refers to a specific situation where the ponente (or the writer of the
Decision or the Resolution) is no longer with the Court or is otherwise unavailable to
review the decision or resolution he or she wrote. Section 3, Rule 8, on the other hand,
expressly uses the term Member-in-Charge and generally refers to his or her inhibition,
without reference to the stage of the proceeding when the inhibition is made.
Under Section 7, Rule 2, the case should have been re-raffled and assigned to anyone
of Justices Nachura (who did not retire until June 13, 2011), Peralta, or Bersamin, either
(1) after the acceptance of the 2nd MR (because the original rulings were no longer
final); or (2) after Justice Velasco's inhibition because the same condition
existed, i.e., the need for a review by the same Justices who rendered the decision or
resolution. As previously mentioned, Justice Nachura participated in both the original
Decision and the subsequent Resolution, and all three Justices were the remaining
Members who voted on the October 2, 2009 Resolution. On the other hand, if Section 3,
Rule 8 were to be solely applied after Justice Velasco' s inhibition, the Clerk of Court
would be correct in her assessment and the raffle to Justice Brion, as a Member outside
of Justice Velasco’s Division, was correct.
These were the legal considerations that largely confronted the ruling Division in late
September 2011 when it deliberated on what to do with Atty. Mendoza’s letters.
The propriety of and grounds for
the recall of the September 7,
2011 Resolution
Most unfortunately, the above unresolved questions were even further compounded in
the course of the deliberations of the Members of the ruling Division when they were
informed that the parties received the ruling on September 19, 2011, and this ruling
would lapse to finality after the 15th day, or after October 4, 2011.
Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice Corona
and recommended, as a prudent move, that the September 7, 2011 Resolution be
recalled at the very latest on October 4, 2011, and that the case be referred to the
Court en bane for a ruling on the questions Atty. Mendoza asked. The consequence, of
course, of a failure to recall their ruling was for that Resolution to lapse to finality. After
finality, any recall for lack of jurisdiction of the ruling Division might not be understood by
the parties and could lead to a charge of flip-flopping against the Court. The basis for
the referral is Section 3(n), Rule 2 of the IRSC, which provides:
RULE 2.
OPERATING STRUCTURES
Section 3. Court en bane matters and eases.-The Court en bane shall act on the
following matters and cases:
xxxx
(n) cases that the Court en bane deems of sufficient importance to merit its attention[.]"
Ruling positively, the Court en bane duly issued its disputed October 4, 2011 Resolution
recalling the September 7, 2011 Resolution and ordering the re-raffle of the case to a
new Member-in-Charge. Later in the day, the Court received PAL's Motion to Vacate
(the September 7, 2011 ruling) dated October 3, 2011. This was followed by FASAP's
MR dated October 17, 2011 addressing the Court Resolution of October 4, 2011. The F
ASAP MR mainly invoked the violation of its right to due process as the recall arose
from the Court’s ex parte consideration of mere letters from one of the counsels of the
parties.
As the narration in this Resolution shows, the Court acted on its own pursuant to its
power to recall its own orders and resolutions before their finality. The October 4, 2011
Resolution was issued to determine the propriety of the September 7, 2011 Resolution
given the facts that came to light after the ruling Division’s examination of the records.
To point out the obvious, the recall was not a ruling on the merits and did not constitute
the reversal of the substantive issues already decided upon by the Court in the F ASAP
case in its previously issued Decision (of July 22, 2008) and Resolution (of October 2,
2009). In short, the October 4, 2011 Resolution was not meant and was never intended
to favor either party, but to simply remove any doubt about the validity of the ruling
Division's action on the case. The case, in the ruling Division's view, could be brought to
the Court en banc since it is one of "sufficient importance"; at the very least, it involves
the interpretation of conflicting provisions of the IRSC with potential jurisdictional
implications.
At the time the Members of the ruling Division went to the Chief Justice to recommend a
recall, there was no clear indication of how they would definitively settle the unresolved
legal questions among themselves. The only matter legally certain was the looming
finality of the September 7, 2011 Resolution if it would not be immediately recalled by
the Court en bane by October 4, 2011. No unanimity among the Members of the ruling
Division could be gathered on the unresolved legal questions; thus, they concluded that
the matter is best determined by the Court en bane as it potentially involved questions
of jurisdiction and interpretation of conflicting provisions of the IRSC. To the extent of
the recommended recall, the ruling Division was unanimous and the Members
communicated this intent to the Chief Justice in clear and unequivocal terms.76 (Bold
scoring supplied for emphasis)
It is well to stress that the Banc could not have assumed jurisdiction were it not for the
initiative of Justice Arturo V. Brion who consulted the Members of the ruling Division as
well as Chief Justice Corona regarding the jurisdictional implications of the successive
retirements, transfers, and inhibitions by the Members of the ruling Division. This move
by Justice Brion led to the referral of the case to the Banc in accordance with Section
3(1), Rule 2 of the IRSC that provided, among others, that any Member of the Division
could request the Court En Banc to take cognizance of cases that fell under paragraph
(m). This referral by the ruling Division became the basis for the Banc to issue its
October 4, 2011 resolution.
For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as
appellate body in relation to the acts of the ruling Division, contrary to the dissent's
position.77 The Bane's recall of the resolution of September 7, 2011 should not be so
characterized, considering that the Banc did not thereby rule on the merits of the case,
and did not thereby reverse the July 22, 2008 decision and the October 2, 2009
resolution. The referral of the case to the Banc was done to address the conflict among
the provisions of the IRSC that had potential jurisdictional implications on the ruling
made by the Second Division.
At any rate, PAL constantly raised in its motions for reconsideration that the ruling
Division had seriously erred not only in ignoring the consistent findings about its
precarious financial situation by the Labor Arbiter, the NLRC, the CA and the SEC, but
also in disregarding the pronouncements by the Court of its serious fiscal condition. To
be clear, because the serious challenge by PAL against the ruling of the Third Division
was anchored on the Third Division’s having ignored or reversed settled doctrines or
principles of law, only the Banc could assume jurisdiction and decide to either affirm,
reverse or modify the earlier decision. The rationale for this arrangement has been
expressed in Lu v. Lu Ym78 thuswise:
It is argued that the assailed Resolutions in the present cases have already become
final, since a second motion for reconsideration is prohibited except for extraordinarily
persuasive reasons and only upon express leave first obtained; and that once a
judgment attains finality, it thereby becomes immutable and unalterable, however unjust
the result of error may appear.
The contention, however, misses an important point. The doctrine of immutability of
decisions applies only to final and executory decisions. Since the present cases may
involve a modification or reversal of a Court-ordained doctrine or principle, the judgment
rendered by the Special Third Division may be considered unconstitutional, hence, it
can never become final. It finds mooring in the deliberations of the framers of the
Constitution:
On proposed Section 3(4), Commissioner Natividad asked what the effect would be of a
decision that violates the proviso that "no doctrine or principle of law laid down by the
court in a decision rendered en bane or in division may be modified or reversed except
by the court en bane." The answer given was that such a decision would be
invalid. Following up, Father Bernas asked whether the decision, if not challenged,
could become final and binding at least on the parties. Romulo answered that, since
such a decision would be in excess of jurisdiction, the decision on the case could
be reopened anytime. (emphasis and underscoring supplied)
A decision rendered by a Division of this Court in violation of this constitutional provision
would be in excess of jurisdiction and, therefore, invalid. Any entry of judgment may
thus be said to be "inefficacious" since the decision is void for being unconstitutional.
While it is true that the Court en bane exercises no appellate jurisdiction over its
Divisions, Justice Minerva Gonzaga-Reyes opined in Firestone and concededly
recognized that "[t]he only constraint is that any doctrine or principle of law laid down by
the Court, either rendered en bane or in division, may be overturned or reversed only by
the Court sitting en banc."
That a judgment must become final at some definite point at the risk of occasional error
cannot be appreciated in a case that embroils not only a general allegation of
"occasional error" but also a serious accusation of a violation of the
Constitution, viz., that doctrines or principles of law were modified or reversed by the
Court's Special Third Division August 4, 2009 Resolution.
The law allows a determination at first impression that a doctrine or principle laid down
by the court en bane or in division may be modified or reversed in a case which would
warrant a referral to the Court En Banc. The use of the word "may" instead of "shall"
connotes probability, not certainty, of modification or reversal of a doctrine, as may be
deemed by the Court. Ultimately, it is the entire Court which shall decide on the
acceptance of the referral and, if so, "to reconcile any seeming conflict, to reverse or
modify an earlier decision, and to declare the Court's doctrine."
The Court has the power and prerogative to suspend its own rules and to exempt a
case from their operation if and when justice requires it, as in the present circumstance
where movant filed a motion for leave after the prompt submission of a second motion
for reconsideration but, nonetheless, still within 15 days from receipt of the last assailed
resolution.79
Lastly, the dissent proposes that a unanimous vote is required to grant PAL’s Second
Motion for Reconsideration of the Decision of July 22, 2008. 80 The dissent justifies the
proposal by stating that "[a] unanimous court would debate and deliberate more fully
compared with a non-unanimous court. "81
The radical proposal of the dissent is bereft of legal moorings. Neither the 1987
Constitution nor the IRSC demands such unanimous vote. Under Section 4(2), Article
VIII of the 1987 Constitution, decisions by the Banc shall be attained by a "concurrence
of a majority of the Members who actually took part in the deliberations on the issues in
the case and voted thereon." As a collegial body, therefore, the Court votes after
deliberating on the case, and only a majority vote is required,82 unless the 1987
Constitution specifies otherwise. In all the deliberations by the Court, dissenting and
concurring opinions are welcome, they being seen as sound manifestations of "the
license of individual Justices or groups of Justices to separate themselves from "the
Court’s" adjudication of the case before them,"83 thus:
[C]oncurring and dissenting opinions serve functions quite consistent with a collegial
understanding of the Court. Internally within the Court itself---dissent promotes and
improves deliberation and judgment. Arguments on either side of a disagreement test
the strength of their rivals and demand attention and response. The opportunity for
challenge and response afforded by the publication of dissenting and concurring
opinions is a close and sympathetic neighbor of the obligation of reasoned justification.
Externally for lower courts, the parties, and interested bystanders-concurring and
dissenting opinions are important guides to the dynamic "meaning" of a decision by the
Court. From a collegial perspective, dissenting and concurring opinions offer grounds
for understanding how individual Justices, entirely faithful to their Court's product, will
interpret that product. The meaning each Justice brings to the product of her Court will
inevitably be shaped by elements of value and judgment she brings to the interpretive
endeavor; her dissent from the Court's conclusions in the case in question is likely to be
dense with insight into these aspects of her judicial persona.84
III
PAL implemented a valid retrenchment program
Retrenchment or downsizing is a mode of terminating employment initiated by the
employer through no fault of the employee and without prejudice to the latter, resorted
to by management during periods of business recession, industrial depression or
seasonal fluctuations or during lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to minimize business losses incurred in
the operation of its business.85
Anent retrenchment, Article 29886 of the Labor Code provides as follows:
Article 298. Closure of Establishment and Reduction of Personnel. - The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closure or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.
Accordingly, the employer may resort to retrenchment in order to avert serious business
losses. To justify such retrenchment, the following conditions must be present, namely:
 1. The retrenchment must be reasonably necessary and likely to prevent
business losses;
2. The losses, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or, if only expected, are reasonably imminent;
3. The expected or actual losses must be proved by sufficient and convincing
evidence;
4. The retrenchment must be in good faith for the advancement of its interest and
not to defeat or circumvent the employees' right to security of tenure; and
5. There must be fair and reasonable criteria m ascertaining who would be
dismissed and who would be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.87
Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses
because it did not submit its audited financial statements as evidence; (2) observe good
faith in implementing the retrenchment program; and (3) apply a fair and reasonable
criteria in selecting who would be terminated.
Upon a critical review of the records, we are convinced that PAL had met all the
standards in effecting a valid retrenchment.
A
PAL’s serious financial losses were duly established
PAL was discharged of the
| burden to prove serious
| financial losses in view of
| F ASAP's admission
PAL laments the unfair and unjust conclusion reached in the July 22, 2008 decision to
the effect that it had not proved its financial losses due to its non-submission of audited
financial statements. It points out that the matter of financial losses had not been raised
as an issue before the Labor Arbiter, the NLRC, the CA, and even in the petition in G.R.
No. 178083 in view of FASAP’s admission of PAL having sustained serious losses; and
that PAL’s having been placed under rehabilitation sufficiently indicated the financial
distress that it was suffering.
It is quite notable that the matter of PAL’s financial distress had originated from the
complaint filed by F ASAP whereby it raised the sole issue of "Whether or not
respondents committed Unfair Labor Practice." 88 F ASAP believed that PAL, in
terminating the 1,400 cabin crew members, had violated Section 23, Article VII and
Section 31, Article IX of the 1995- 2000 P AL-FASAP CBA. Interestingly, FASAP
averred in its position paper therein that it was not opposed to the retrenchment
program because it understood PAL’s financial troubles; and that it was only
questioning the manner and lack of standard in carrying out the retrenchment, thus:
At the outset, it must be pointed out that complainant was never opposed to the
retrenchment program itself, as it understands respondent PAL’s financial troubles. In
fact, complainant religiously cooperated with respondents in their quest for a workable
solution to the company-threatening problem. Attached herewith as Annexes "A" to "D"
are the minutes of its meetings with respondent PAL’s representatives showing
complainant's active participation in the deliberations on the issue.
What complainant vehemently objects to are the manner and the lack of criteria or
standard by which the retrenchment program was implemented or carried out, despite
the fact that there are available criteria or standard that respondents could have utilized
or relied on in reducing its workforce. In adopting a retrenchment program that was
fashioned after the evil prejudices and personal biases of respondent Patria Chiong,
respondent PAL grossly violated at least two important provisions of its CBA with
complainant - Article VII, Section 23 and Article IX, Sections 31and 32.89
These foregoing averments of F ASAP were echoed in its reply90 and
memorandum91 submitted to the Labor Arbiter.
Evidently, FASAP’s express recognition of PAL’s grave financial situation meant that
such situation no longer needed to be proved, the same having become a judicial
admission92 in the context of the issues between the parties. As a rule, indeed,
admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, and do not require further evidence to
prove them.93 By FASAP’s admission of PAL’s severe financial woes, PAL was relieved
of its burden to prove its dire financial condition to justify the retrenchment. Thusly, PAL
should not be taken to task for the non-submission of its audited financial statements in
the early part of the proceedings inasmuch as the non-submission had been rendered
irrelevant.
Yet, the July 22, 2008 decision ignored the judicial admission and unfairly focused on
the lack of evidence of PAL’s financial losses. The Special Third Division should have
realized that PAL had been discharged of its duty to prove its precarious fiscal situation
in the face of FASAP’s admission of such situation. Indeed, PAL did not have to submit
the audited financial statements because its being in financial distress was not in issue
at all.
Nonetheless, the dissent still insists that PAL should be faulted for failing to prove its
substantial business losses, and even referred to several decisions of the
Court94 wherein the employers had purportedly established their serious business
losses as a requirement for a valid retrenchment.
Unfortunately, the cases cited by the dissent obviously had no application herein
because they originated from either simple complaints of illegal retrenchment, or unfair
labor practice, or additional separation pay.95
LVN Pictures originated from a complaint for unfair labor practice (ULP) based on
Republic Act No. 874 (Industrial Peace Act). The allegations in the complaint concerned
interference, discrimination and refusal to bargain collectively. The Court pronounced
therein that the employer (L VN Pictures) did not resort to ULP because it was able to
justify its termination, closure and eventual refusal to bargain collectively through the
financial statements showing that it continually incurred serious financial losses.
Notably, the Court did not interfere with the closure and instead recognized LVN’s
management prerogative to close its business and dismiss its employees.
North Davao Mining was a peculiar case, arising from a complaint for additional
separation pay, among others. The Court therein held that separation pay was not
required if the reason for the termination was due to serious business losses. It clarified
that Article 283 (now Art. 298) governed payment of separation benefits in case of
closure of business not due to serious business losses. When the reason for the closure
was serious business losses, the employer shall not be required to grant separation pay
to the terminated employees.
In Manatad, the complaint for illegal dismissal was based on the allegation that the
retrenchment program was illegal because the employer was gaining profits. Hence, the
core issue revolved around the existence (or absence) of grave financial losses that
would justify retrenchment.
In the cited cases, the employers had to establish that they were incurring serious
business losses because it was the very issue, if not intricately related to the main issue
presented in the original complaints. In contrast, the sole issue herein as presented by F
ASAP to the Labor Arbiter was the "manner of retrenchment," not the basis for
retrenchment. F ASAP itself, in representation of the retrenched employees, had
admitted in its position paper, as well as in its reply and memorandum submitted to the
Labor Arbiter the fact of serious financial losses hounding PAL. In reality, PAL was not
remiss by not proving serious business losses. FASAP’s admission of PAL’s financial
distress already established the latter's precarious financial state.
Judicial notice could be taken
of the financial losses
incurred; the presentation of
audited financial statements
was not required in such
circumstances
The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In
seeming inconsistency, however, the Special Third Division refused to accept that PAL
had incurred serious financial losses, observing thusly:
The audited financial statements should be presented before the Labor Arbiter
who is in the position to evaluate evidence. They may not be submitted belatedly
with the Court of Appeals, because the admission of evidence is outside the sphere of
the appellate court's certiorari jurisdiction. Neither can this Court admit in evidence
audited financial statements, or make a ruling on the question of whether the employer
incurred substantial losses justifying retrenchment on the basis thereof, as this Court is
not a trier of facts. Even so, this Court may not be compelled to accept the contents of
said documents blindly and without thinking.
xxxx
In the instant case, PAL failed to substantiate its claim of actual and imminent
substantial losses which would justify the retrenchment of more than 1,400 of its cabin
crew personnel. Although the Philippine economy was gravely affected by the
Asian financial crisis, however, it cannot be assumed that it has likewise brought
PAL to the brink of bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment of its cabin crew
personnel.96 (Emphasis supplied)
Indeed, that a company undergoes rehabilitation sufficiently indicates its fragile financial
condition. lt is rather unfortunate that when PAL petitioned for rehabilitation the term
"corporate rehabilitation" still had no clear definition. Presidential Decree No. 902-
A,97 the law then applicable, only set the remedy.98 Section 6(c) and (d) of P.D. No. 902-
A gave an insight into the precarious state of a distressed corporation requiring the
appointment of a receiver or the creation of a management committee, viz.:
xxxx
c) To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases whenever necessary in order to
preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors: Provided, however, That the Commission may, in
appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or
other associations not supervised or regulated by other government agencies who shall
have, in addition to the powers of a regular receiver under the provisions of the Rules of
Court, such functions and powers as are provided for in the succeeding paragraph d)
hereof: Provided, further, That the Commission may appoint a rehabilitation receiver of
corporations, partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the
government agency concerned: Provided, finally, That upon appointment of a
management committee, rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly.
d) To create and appoint a management committee, board, or body upon petition
or moto propio to undertake the management of corporations, partnerships or other
associations not supervised or regulated by other government agencies in appropriate
cases when there is imminent danger of dissipation, loss, wastage or destruction
of assets or other properties of paralyzation of business operations of such
corporations or entities which may be prejudicial to the interest of minority
stockholders, parties-litigants or the general public: Provided, further, That the
Commission may create or appoint a management committee, board or body to
undertake the management of corporations, partnerships or other associations
supervised or regulated by other government agencies, such as banks and insurance
companies, upon request of the government agency concerned.
The management committee or rehabilitation receiver, board or body shall have the
power to take custody of, and control over, all the existing assets and property of such
entities under management; to evaluate the existing assets and liabilities, earnings and
operations of such corporations, partnerships or other associations; to determine the
best way to salvage and protect the interest of the investors and creditors; to
study, review and evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It shall report
and be responsible to the Commission until dissolved by order of the Commission:
Provided, however, That the Commission may; on the basis of the findings and
recommendation of the management committee, or rehabilitation receiver, board or
body, or on its own findings; determine that the continuance in business of such
corporation or entity would not be feasible or profitable nor work to the best
interest of the stockholders, parties-litigants, creditors, or the general public,
order the dissolution of such corporation entity and its remaining assets
liquidated accordingly. The management committee or rehabilitation receiver, board
or body may overrule or revoke the actions of the previous management and board of
directors of the entity or entities under management notwithstanding any provision of
law, articles of incorporation or by-laws to the contrary.
The management committee, or rehabilitation receiver, board or body shall not be
subject to any action, claim or demand for, or in connection with, any act done or
omitted to be done by it in good faith in the exercise of its functions, or in connection
with the exercise of its power herein conferred. (Bold underscoring supplied for
emphasis)
After having been placed under corporate rehabilitation and its rehabilitation plan having
been approved by the SEC on June 23, 2008, PAL’s dire financial predicament could
not be doubted. Incidentally, the SEC’s order of approval came a week after PAL had
sent out notices of termination to the affected employees. It is thus difficult to ignore the
fact that PAL had then been experiencing difficulty in meeting its financial obligations
long before its rehabilitation.
Moreover, the fact that airline operations were capital intensive but earnings were
volatile because of their vulnerability to economic recession, among others.99 The Asian
financial crisis in 1997 had wrought havoc among the Asian air carriers, PAL
included.100 The peculiarities existing in the airline business made it easier to believe
that at the time of the Asian financial crisis, PAL incurred liabilities amounting to
₱90,642,933,919.00, which were way beyond the value of its assets that then only
stood at ₱85,109,075,35l.
Also, the Court cannot be blind and indifferent to current events affecting the
society101 and the country’s economy,102 but must take them into serious consideration
in its adjudication of pending cases. In that regard, Section 2, Rule 129 of the Rules of
Court recognizes that the courts have discretionary authority to take judicial notice of
matters that are of public knowledge, or are capable of unquestionable demonstration,
or ought to be known to judges because of their judicial functions.103 The principle is
based on convenience and expediency in securing and introducing evidence on matters
that are not ordinarily capable of dispute and are not bona fide disputed.104
Indeed, the Labor Arbiter properly took cognizance of PAL’s substantial financial losses
during the Asian financial crisis of 1997.105 On its part, the NLRC recognized the grave
financial distress of PAL based on its ongoing rehabilitation/receivership.106 The CA
likewise found that PAL had implemented a retrenchment program to counter its
tremendous business losses that the strikes of the pilot's union had aggravated.107 Such
recognitions could not be justly ignored or denied, especially after PAL's financial and
operational difficulties had attracted so much public attention that even President
Estrada had to intervene in order to save PAL as the country’s flag carrier.108
The Special Third Division also observed that PAL had submitted a "stand-alone"
rehabilitation program that was viewed as an acknowledgment that it could "undertake
recovery on its own and that it possessed enough resources to weather the financial
storm." The observation was unfounded considering that PAL -had been constrained to
submit the "stand-alone" rehabilitation plan on December 7, 1998 because of the lack of
a strategic partner.109
We emphasize, too, that the presentation of the audited financial statements should not
the sole means by Which to establish the employer's serious financial losses. The
presentation of audited financial statements, although convenient in proving the
unilateral claim of financial losses, is not required for all cases of retrenchment. The
evidence required for each case of retrenchment really depends on the particular
circumstances obtaining. The Court has cogently opined in that regard:
That petitioners were not able to present financial statements for years prior to 2005
should not be automatically taken against them. Petitioner BEMI was organized and
registered as a corporation in 2004 and started business operations in 2005 only. While
financial statements for previous years may be material in establishing the
financial trend for an employer, these are not indispensable in all cases of
retrenchment. The evidence required for each case of retrenchment will still
depend on its particular circumstances. In fact, in Revidad v. National Labor
Relations Commission, the Court declared that "proof of actual financial losses
incurred by the company is not a condition sine qua non for retrenchment," and
retrenchment may be undertaken by the employer to prevent even future losses:
In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the anticipated losses are actually sustained or realized. It is
not, in other words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact materialized. If such
an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to
another.110 (Bold underscoring supplied for emphasis)
In short, to require a distressed corporation placed under rehabilitation or receivership
to still submit its audited financial statements may become unnecessary or superfluous.
Under P.D. No. 902-A, the SEC was empowered during rehabilitation proceedings to
thoroughly review the corporate and financial documents submitted by PAL. Hence, by
the time when the SEC ordered PAL’s rehabilitation, suspension of payments and
receivership, the SEC had already ascertained PAL’s serious financial condition, and
the clear and imminent danger of its losing its corporate assets. To require PAL in the
proceedings below to still prove its financial losses would only trivialize the SEC’s order
and proceedings. That would be unfortunate because we should not ignore that the
SEC was then the competent authority to determine whether or not a corporation
experienced serious financial losses. Hence, the SEC's order - presented as evidence
in the proceedings below - sufficiently established PAL’s grave financial status.
Finally, PAL argues that the Special Third Division should not have deviated from the
pronouncements made in Garcia v. Philippine Airlines, Inc., Philippine Airlines, Inc. v.
Kurangking, Philippine Airlines v. Court of Appeals, Philippine Airlines v. Zamora,
Philippine Airlines v. PALEA, and Philippine Airlines v. National Labor Relations
Commission, all of which judicially recognized PAL’s dire financial condition.
The argument of PAL is valid and tenable.
Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending
appeal because PAL had been placed under corporate rehabilitation, explaining that
unlike the ground of substantial losses contemplated in a retrenchment case, the state
of corporate rehabilitation was judicially pre-determined by a competent court and not
formulated for the first time by the employer, viz.:
While reinstatement pending appeal aims to avert the continuing threat or danger to the
survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in a judicially
monitored state of being resuscitated in order to survive.
The parallelism between a judicial order of corporation rehabilitation as a justification for
the non-exercise of its options, on the one hand, and a claim of actual and imminent
substantial losses as ground for retrenchment, on the other hand, stops at the red line
on the financial statements. Beyond the analogous condition of financial gloom, as
discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient
distinctions. Unlike the ground of substantial losses contemplated in a retrenchment
case, the state of corporate rehabilitation was judicially pre-determined by a competent
court and not formulated for the first time in this case by respondent.
More importantly, there are legal effects arising from a judicial order placing a
corporation under rehabilitation. Respondent was, during the period material to the
case, effectively deprived of the alternative choices under Article 223 of the Labor Code,
not only by virtue of the statutory injunction but also in view of the interim relinquishment
of management control to give way to the full exercise of the powers of the rehabilitation
receiver. Had there been no need to rehabilitate, respondent may have opted for actual
physical reinstatement pending appeal to optimize the utilization of resources. Then
again, though the management may think this wise, the rehabilitation receiver may
decide otherwise, not to mention the subsistence of the injunction on claims.111
In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals, Philippine
Airlines v. PALEA and Philippine Airlines v. National Labor Relations Commission, the
Court uniformly upheld the suspension of monetary claims against PAL because of the
SEC’s order placing it under receivership. The Court emphasized the need to suspend
the payment of the claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring and
rehabilitation. Philippine Airlines v. Zamora reiterated this rule and deferred to the prior
judicial notice taken by the Court in suspending the monetary claims of illegally
dismissed employees.112
Through these rulings, the Court consistently recognized PAL’s financial troubles while
undergoing rehabilitation and suspension of payments. Considering that the ruling
related to conditions and circumstances that had occurred during the same period as
those obtaining in G.R. No. 178083, the Court cannot take a different view.
It is also proper to indicate that the Court decided the other cases long before the
promulgation of the assailed July 22, 2008 decision. Hence, the Special Third Division
should not have regarded the financial losses as an issue that still required
determination. Instead, it should have just simply taken judicial notice of the serious
financial losses being suffered by PAL.113 To still rule that PAL still did not prove such
losses certainly conflicted with the antecedent judicial pronouncements about PAL’s dire
financial state.
As such, we cannot fathom the insistence by the dissent that the Court had not taken
judicial notice but merely "recognized" that PAL was under corporate rehabilitation.
Judicial notice is the cognizance of certain facts that judges may properly take and act
on without proof because they already know them. It is the manner of recognizing and
acknowledging facts that no longer need to be proved in court. In other words, when the
Court "recognizes" a fact, it inevitably takes judicial notice of it.
For sure, it would not have been the first time that the Court would have taken judicial
notice of the findings of the SEC and of antecedent jurisprudence recognizing the fact of
rehabilitation by the employer. The Court did so in the 2002 case of Clarion Printing
House, Inc. v. National Labor Relations Commission, 114 to wit:
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("REORGANIZATION
OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS
AND PLACING SAID AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF
THE OFFICE OF THE PRESIDENT"), as amended, read:
SEC. 5. In addition to the regulatory and adjudicative functions of THE SECURITIES
AND EXCHANGE COMMISSION over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees, it
shall have original and exclusive jurisdiction to hear and decide cases involving:
x x x           x x x          x x x
(d) Petitions of corporations, partnerships or associations declared in the state of
suspension of payments in cases where the corporation, partnership or
association possesses sufficient property to cover all debts but foresees the
impossibility of meeting them when they respectively fall due or in cases where
the corporation, partnership, association has no sufficient assets to cover its
liabilities, but is under the management of a Rehabilitation Receiver or
Management Committee created pursuant to this Decree.
SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess
the following powers:
x x x           x x x          x x x
(c) To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the provisions
of the Rules of Court in such other cases whenever necessary in order to preserve the
rights of the parties-litigants and/or protect the interest of the investing public and
creditors: Provided, however, That the Commission may in
appropriate cases, appoint a rehabilitation receiver of corporations, partnerships
or other associations not supervised or regulated by other government agencies
who shall have, in addition to powers of the regular receiver under the provisions
of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof: ...
(d) To create and appoint a management committee, board or body upon petition
or motupropio to undertake the management of corporations, partnership or other
associations not supervised or regulated by other government agencies in appropriate
cases when there is imminent danger of dissipation,· loss, wastage or destruction
of assets or other properties or paralization of business operations of such
corporations or entities which may be prejudicial to the interest of minority
stockholders, parties-litigants of the general public: ... (Emphasis and underscoring
supplied).
From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of
a receiver or management committee by the SEC presupposes a finding that, inter
alia, a company possesses sufficient property to cover all its debts but "foresees the
impossibility of meeting them when they respectively fall due" and "there is imminent
danger of dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations."
That the SEC, mandated by law to have regulatory functions over corporations,
partnerships or associations, appointed an interim receiver for the EYCO Group of
Companies on its petition in light of, as quoted above, the therein enumerated "factors
beyond the control and anticipation of the management" rendering it unable to meet its
obligation as they fall due, and thus resulting to "complications and problems ... to arise
that would impair and affect [its] operations ... " shows that CLARION, together with the
other member-companies of the EYCO Group of Companies, was suffering business
reverses justifying, among other things, the retrenchment of its employees.
This Court in fact takes judicial notice of the Decision of the Court of Appeals dated
June 11, 2000 in CA-G.R. SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial
Corp., et al. [including CLARION], otherwise known as the EYCO Group of Companies
v. Philippine National Bank, Solidbank Corporation, et al., collectively known and
referred as the 'Consortium of Creditor Banks,"' which was elevated to this Court via
Petition for Certiorari and docketed as G.R. No. 145977, but which petition this Court
dismissed by Resolution dated May 3, 2005:
Considering the joint manifestation and motion to dismiss of petitioners and
respondents dated February 24, 2003, stating that the parties have reached a final and
comprehensive settlement of all the claims and counterclaims subject matter of the case
and accordingly, agreed to the dismissal of the petition for certiorari, the Court Resolved
to DISMISS the petition for certiorari (Underscoring supplied).
The parties in G.R. No. 145977 having sought, and this Court having granted, the
dismissal of the appeal of the therein petitioners including CLARION, the CA decision
which affirmed in toto the September 14, 1999 Order of the SEC, the dispositive portion
of which SEC Order reads:
WHEREFORE, premises considered, the appeal is as it is hereby, granted and the
Order dated 18 December 1998 is set aside. The Petition to be Declared in State of
Suspension of payments is hereby disapproved and the SAC Plan terminated.
Consequently, all committee, conservator/receivers created pursuant to said Order are
dissolved and discharged and all acts and orders issued therein are vacated.
The Commission, likewise, orders the liquidation and dissolution of the appellee
corporations. The case is hereby remanded to the hearing panel below for that
purpose.
x x x           x x x          x x x (Emphasis and underscoring supplied),
has now become final and executory. Ergo, the SEC's disapproval of the EYCO Group
of Companies' "Petition for the Declaration of Suspension of Payment ... " and the order
for the liquidation and dissolution of these companies including CLARION, must be
deemed to have been unassailed.
That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al.
v. PNB et al., there should be no doubt.
As provided in Section 1, Rule 129 of the Rules of Court:
SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice, without
the introduction of evidence, of the existence and territorial extent of states, their
political history, forms of government and symbols of nationality, the law of nations, the
admiralty and maritime courts of the world and their seals, the political constitution and
history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time,
and the geographical divisions. (Emphasis and underscoring supplied)
which Mr. Justice Edgardo L. Paras interpreted as follows:
A court will take judicial notice of its own acts and records in the same case, of facts
established in prior proceedings in the same case, of the authenticity of its own records
of another case between the same parties, of the files of related cases in the same
court, and of public records on file in the same court. In addition judicial notice will
be taken of the record, pleadings or judgment of a case in another court between the
same parties or involving one of the same parties, as well as of the record of another
case between different parties in the same court. Judicial notice will also be taken of
court personnel. (Emphasis and underscoring supplied)
In fine, CLARION's claim that at the time it terminated Miclat it was experiencing
business reverses gains more light from the SEC's disapproval of the EYCO Group of
Companies' petition to be declared in state of suspension of payment, filed before
Miclat’stermination, and of the SEC’s consequent order for the group of companies’
dissolution and liquidation.115
At any rate, even assuming that serious business losses had not been proved by PAL, it
would still be justified under Article 298 of the Labor Code to retrench employees to
prevent the occurrence of losses or its closing of the business, provided that the
projected losses were not merely de minimis, but substantial, serious, actual, and real,
or, if only expected, were reasonably imminent as perceived objectively and in good
faith by the employer.116 In the latter case, proof of actual financial losses incurred by
the employer would not be a condition sine qua non for retrenchment,117 viz.:
Third, contrary to petitioner’s asseverations, proof of actual financial losses incurred by
the company is not a condition sine qua non for retrenchment. Retrenchment is one of
the economic grounds to dismiss employees, which is resorted to by an employer
primarily to avoid or minimize business losses. The law recognize this under Article 283
of the Labor Code x x x
xxxx
In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the anticipated losses are actually sustained or realized. It is
not, in other words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until after losses shall have in fact materialized. If such
an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as unduly taking property from one man to be given to another.
At the other end of the spectrum, it seems equally clear that not every asserted
possibility of loss is sufficient legal warrant for the reduction of personnel. In the nature
of things, the possibility of incurring the losses is constantly present, in greater or lesser
degree, in the carrying on of business operations, since some, indeed many, of the
factors which impact upon the profitability or viability of such operations may be
substantially outside the control of the employer.
On the bases of these consideration, it follows that the employer bears the burden to
prove his allegation of economic or business reverses with clear and satisfactory
evidence, it being in the nature of an affirmative defense. As earlier discussed, we are
fully persuaded that the private respondent has been and is besieged by a continuing
downtrend in both its business operations and financial resources, thus amply justifying
its resort to drastic cuts in personnel and costs.118
B
PAL retrenched in good faith
The employer is burdened to observe good faith in implementing a retrenchment
program. Good faith on its part exists when the retrenchment is intended for the
advancement of its interest and is not for the purpose of defeating or circumventing the
rights of the employee under special laws or under valid agreements.119
The July 22, 2008 decision branded the recall of the retrenched employees and the
implementation of "Plan 22" instead of "Plan 14" as badges of bad faith on the part of
PAL. On the other hand, the October 2, 2009 resolution condemned PAL for changing
its theory by attributing the cause of the retrenchment to the ALP AP pilots’ strike.
PAL refutes the adverse observations, and maintains that its position was clear and
consistent - that the reduction of its labor force was an act of survival and a less drastic
measure as compared to total closure and liquidation that would have otherwise
resulted; that downsizing had been an option to address its financial losses since
1997;120 that the reduction of personnel was necessary as an integral part of the means
to ensure the success of its corporate rehabilitation plan to restructure its
business;121 and that the downsizing of its labor force was a sound business decision
undertaken after an assessment of its financial situation and the remedies available to
it.122
A hard look at the records now impels the reconsideration of the July 22, 2008 decision
and the resolution of October 2, 2009.
PAL could not have been motivated by ill will or bad faith when it decided to terminate
FASAP’s affected members. On the contrary, good faith could be justly inferred from
PAL’s conduct before, during and after the implementation of the retrenchment plan.
Notable in this respect was PAL’s candor towards FASAP regarding its plan to
implement the retrenchment program. This impression is gathered from PAL’s letter
dated February 11, 1998 inviting FASAP to a meeting to discuss the matter, thus:
Roberto D. Anduiza
President
Flight Attendants’ and Stewards' Association of the Philippines (FASAP)
xxxx
Mr. Anduiza:
Due to critical business losses and in view of severe financial reverses, Philippine
Airlines must undertake drastic measures to strive at survival. In order to meet maturing
obligations amidst the present regional crisis, the Company will implement major cost-
cutting measures in its fleet plan, operating budget, routes and frequencies. These
moves include the closure of stations, downsizing of operations and reducing the
workforce through layoff/retrenchment or retirement.
In this connection, the Company would like to meet with the Flight Attendants' and
Stewards’ Association of the Philippines (FASAP) to discuss the implementation of the
lay-off/retrenchment or retirement of F ASAP-covered employees. The meeting shall be
at the Allied Bank Center (81h Floor-Board Room) on February 12, 1998 at 4:00 p.m.
This letter serves as notice in compliance with Article 283 of the Labor Code, as
amended and DOLE Orders Nos[.] 9 and 10, Series of 1997.
Very truly yours,
(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer123
The records also show that the parties met on several occasions124 to explore cost-
cutting measures, including the implementation of the retrenchment program. PAL
likewise manifested that the retrenchment plan was temporarily shelved while it
implemented other measures (like termination of probationary cabin attendant, and
work-rotations).125 Obviously, the dissent missed this part as it stuck to the belief that
PAL did not implement other cost-cutting measures prior to retrenchment.126
Given PAL’s dire financial predicament, it becomes understandable that PAL was
constrained to finally implement the retrenchment program when the ALPAP pilots strike
crippled a major part of PAL’s operations.127 In Rivera v. Espiritu, 128 we observed that
said strike wrought "serious losses to the financially beleaguered flag
carrier;" that "PAL’s financial situation went from bad to worse;" and that "[f]aced with
bankruptcy, PAL adopted a rehabilitation plan and downsized its labor force by more
than one-third." Such observations sufficed to show that retrenchment became a last
resort, and was not the rash and impulsive decision that F ASAP would make it out to
be now.
As between maintaining the number of its flight crew and PAL’s survival, it was
reasonable for PAL to choose the latter alternative. This Court cannot legitimately force
PAL as a distressed employer to maintain its manpower despite its dire financial
condition. To be sure, the right of PAL as the employer to reasonable returns on its
investments and to expansion and growth is also enshrined in the 1987
Constitution.129 Thus, although labor is entitled to the right to security of tenure, the
State will not interfere with the employer's valid exercise of its management prerogative.
Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and
Approval of a Rehabilitation Plan with the SEC on June 19, 1998, before the
retrenchment became effective.130 PAL likewise manifested that:
x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted by PAL in
pursuance of its corporate rehabilitation, and which obtained the joint approval of PAL’s
creditors and the SEC, had as a primary component, the downsizing of PAL’s labor
force by at least 5,000, including the 1,400 flight attendants. As conceptualized by
a team of industry experts, the cutting down of operations and the consequent
reduction of work force, along with the restructuring of debts with significant
"haircuts" and the capital infusion of Mr. Lucio Tan amounting to US$200 million,
were the key components of PAL's rehabilitation. The Interim Rehabilitation
Receiver was replaced by a Permanent Rehabilitation Receiver on June 7,
1999.131 (Bold underscoring supplies for emphasis)
Being under a rehabilitation program, PAL had no choice but to implement the
measures contained in the program, including that of reducing its manpower. Far from
being an impulsive decision to defeat its employees’ right to security of tenure,
retrenchment resulted from a meticulous plan primarily aimed to resuscitate PAL’s
operations.
Good faith could also be inferred from PAL’s compliance with the basic requirements
under- Article 298 of the Labor Code prior to laying-off its affected employees. Notably,
the notice of termination addressed to the Department of Labor and Employment
(DOLE) identified the reasons behind the massive termination, as well as the measures
PAL had undertaken to prevent the situation, to wit:
June 15, 1998
HON. MAXIMO B. LIM
THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR
Dear Sir:
This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing a
retrenchment program one (1) month from notice hereof in order to prevent bankruptcy.
PAL is forced to take this action because of continuous losses it has suffered over
the years which losses were aggravated by the PALEA strike in October 1996,
peso depreciation, Asian currency crisis, causing a serious drop in our yield and
the collapse of passenger traffic in the region. Specifically, PAL suffered a net
loss of ₱2.18 Billion during the fiscal year 1995-1996, ₱2.50 Billion during the
fiscal year 1996-1997 and ₱8.08 Billion for the period starting April 1, 1997 to
March 31, 1998.
These uncontrolled heavy losses have left PAL with no recourse but to reduce its fleet
and its flight frequencies both in the domestic and international sectors to ensure its
survival.
In an effort to avoid a reduction of personnel, PAL has resorted to other measures,
such as freeze on all hiring, no salary increase for managerial and confidential
staff (even for promotions), reduction of salaries of senior management
personnel, freeze on staff movements, pre-termination of temporary staff
contracts and negotiations with foreign investors. But all these measures failed
to avert the continued losses.
Finally, all the efforts of PAL to preserve the employment of its personnel were
shattered by the illegal strike of its pilots which has cause irreparable damage to
the company's cash flow. Consequently, the company is now no longer able to
meet its maturing obligations and is not about to go into default in all its major
loans. It is presently under threat of receiving a barrage of suits from its creditors
who will go after the assets of the corporation.
Under the circumstances, PAL is left with no recourse but to reduce its fleet and its flight
frequencies both in the domestic and international sectors to ensure its survival.
Consequently, a reduction of personnel is inevitable.
All affected employees in the attached list will be given the corresponding benefits
which they may be entitled to.
Very truly yours,
(Sgd)
JOSE ANTONIO GARCIA
President & Chief Operating Officer132
As regards the observation made in the decision of July 22, 2008 to the effect that the
recall of the flight crew members indicated bad faith, we hold to the contrary.
PAL explained how the recall process had materialized, as follows:
During this time, the Company was slowly but steadily recovering. Its finances were
improving and additional planes were flying. Because of the Company's steady
recovery, necessity dictated more employees to man and service the additional planes
and flights. Thus, instead of taking in new hires, the Company first offered employment
to employees who were previously retrenched. A recall/rehire plan was initiated.
The recall/rehire plan was a success. A majority of retrenched employees were
recalled/rehired and went back to work including the members of petitioner union. In the
process of recall/rehire, many employees who could not be recalled for various reasons
(such as, among others, being unfit for the job or the employee simply did not want to
work for the Company anymore) decided to accept separation benefits and executed,
willingly and voluntarily, valid quitclaims. Those who received separation packages
included a good number of the members of the petitioner union.133
Contrary to the statement in the dissent that the implementation of Plan 22 instead of
Plan 14 indicated bad faith,134 PAL reasonably demonstrated that the recall was devoid
of bad faith or of an attempt on its part to circumvent its affected employees’ right to
security of tenure. Far from being tainted with bad faith, the recall signified PAL’s
reluctance to part with the retrenched employees. Indeed, the prevailing unfavorable
conditions had only compelled it to implement the retrenchment.
The rehiring of previously retrenched employees should not invalidate a retrenchment
program, the rehiring being an exercise of the employer's right to continue its business.
Thus, we pointed out in one case:
We likewise cannot sustain petitioners' argument that their dismissal was illegal on the
basis that Lapanday did not actually cease its operation, or that they have rehired some
of the dismissed employees and even hired new set of employees to replace the
retrenched employees.
The law acknowledges the right of every business entity to reduce its workforce if such
measure is made necessary or compelled by economic factors that would otherwise
endanger its stability or existence. In exercising its right to retrench employees, the firm
may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. In Caffco International Limited v. Office of the Minister-Ministry of Labor and
Employment, the Court has aptly observed that -
Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt
certain changes and programs in order to enhance their profits and protect their
investments. Such changes may take various forms. Management may even choose to
close a branch, a department, a plant, or a shop.
In the same manner, when Lapanday continued its business operation and eventually
hired some of its retrenched employees and new employees, it was merely exercising
its right to continue its business. The fact that Lapanday chose to continue its business
does not automatically make the retrenchment illegal. We reiterate that in retrenchment,
the goal is to prevent impending losses or further business reversals - it therefore does
not require that there is an actual closure of the business. Thus, when the employer
satisfactorily proved economic or business losses with sufficient supporting evidence
and have complied with the requirements mandated under the law to justify
retrenchment, as in this case, it cannot be said that the subsequent acts of the employer
to rehire the retrenched employees or to hire new employees constitute bad faith. It
could have been different if from the beginning the retrenchment was illegal and the
employer subsequently hired new employees or rehired some of the previously
dismissed employees because that would have constituted bad faith. Consequently,
when Lapanday continued its operation, it was merely exercising its prerogative to
streamline its operations, and to rehire or hire only those who are qualified to replace
the services rendered by the retrenched employees in order to effect more economic
and efficient methods of production and to forestall business losses. The rehiring or
reemployment of retrenched employees does not necessarily negate the presence or
imminence of losses which prompted Lapanday to retrench.
In spite of overwhelming support granted by the social justice provisions of our
Constitution in favor of labor, the fundan1ental law itself guarantees, even during the
process of tilting the scales of social justice towards workers and employees, "the right
of enterprises to reasonable returns of investment and to expansion and growth." To
hold otherwise would not only be oppressive and inhuman, but also counter-productive
and ultimately subversive of the nation's thrust towards a resurgence in our economy
which would ultimately benefit the majority of our people. Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has authorized valid
reductions in the workforce to forestall business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the volume of business which has rendered
certain employees redundant.135
Conselquently, we cannot pass judgment on the motive behind PAL's initiative to
implement "Plan 22" instead of "Plan 14." The prerogative thereon belonged to the
management alone due to its being in the best position to assess its own financial
situation and operate its own business. Even the Court has no power to interfere with
such exercise of the prerogative.
C
PAL used fair and reasonable criteria in selecting the
employees to be retrenched pursuant to the CBA
The July 22, 2008 decision agreed with the holding by the CA that PAL was not
obligated to consult with F ASAP on the standards to be used in evaluating the
performance of its employees. Nonetheless, PAL was found to be unfair and
unreasonable in selecting the employees to be retrenched by doing away with the
concept of seniority, loyalty, and past efficiency by solely relying on the employees'
1997 performance rating; and that the retrenchment of employees due to "other
reasons," without any details or specifications, was not allowed and had no basis in fact
and in law.136
PAL contends that it used fair and reasonable criteria in accord with Sections 23, 30
and 112 of the 1995-2000 CBA;137 that the NLRC’s use of the phrase "other reasons"
referred to the varied grounds (i.e. excess sick leaves, previous service of suspension
orders, passenger complains, tardiness, etc.) employed in conjunction with seniority in
selecting the employees to be terminated;138 that the CBA did not require reference to
performance rating of the previous years, but to the use of an efficiency rating for a
single year;139 and that it adopted both efficiency rating and inverse seniority as criteria
in the selection pursuant to Section 112 of the CBA.140
PAL’s contentions are meritorious.
In selecting the employees to be dismissed, the employer is required to adopt fair and
reasonable criteria, taking into consideration factors like: (a) preferred
status; (b) efficiency; and (c) seniority, among others.141 The requirement of fair and
reasonable criteria is imposed on the employer to preclude the occurrence of arbitrary
selection of employees to be retrenched. Absent any showing of bad faith, the choice of
who should be retrenched must be conceded to the employer for as long as a basis for
the retrenchment exists.142
We have found arbitrariness in terminating the employee under the guise of a
retrenchment program wherein the employer discarded the criteria it adopted in
terminating a particular employee;143 when the termination discriminated the employees
on account of their union membership without regard to their years of service;144 the
timing of the retrenchment was made a day before the employee may be
regularized;145 when the employer disregarded altogether the factor of seniority and
choosing to retain the newly hired employees;146 that termination only followed the
previous retrenchment of two non-regular employees;147 and when there is no appraisal
or criteria applied in the selection.148
On the other hand, we have considered as valid the retrenchment of the employee
based on work efficiency,149 or poor performance;150 or the margins of contribution of the
consultants to the income of the company;151 or absenteeism, or record of disciplinary
action, or efficiency and work attitude;152 or when the employer exerted efforts to solicit
the employees' participation in reviewing the criteria to be used in selecting the workers
to be laid off.153
In fine, the Court will only strike down the retrenchment of an employee as capricious,
whimsical, arbitrary, and prejudicial in the absence of a clear-cut and uniform guideline
followed by the employer in selecting him or her from the work pool. Following this
standard, PAL validly implemented its retrenchment program.
PAL resorted to both efficiency rating and inverse seniority in selecting the employees
to be subject of termination. As the NLRC keenly pointed out, the "ICCD Masterank
1997 Ratings - Seniority Listing" submitted by PAL sufficiently established the criteria for
the selection of the employees to be laid off. To insist on seniority as the sole basis for
the selection would be unwarranted, it appearing that the applicable CBA did not
establish such limitation. This counters the statement in the dissent that the
retrenchment program was based on unreasonable standards without regard to service,
seniority, 1oya1ty and performance.154
In this connection, we adopt the following cogent observations by the CA on the matter
for being fully in accord with law and jurisprudence:
FASAP insists that several CBA provisions have been violated by the retrenchment.
They are the provisions on seniority, performance appraisal, reduction in personnel and
downgrading and pem1anent OCARs. Seniority and performance stand out because
these were the main considerations of PAL in selecting workers to be retrenched. Under
the CBA, seniority is defined "to mean a measure of a regular Cabin Attendant’s claim
in relation to other regular Cabin Attendants holding similar positions, to preferential
consideration whatever the Company exercises its right to promote to a higher paying
position of lay-off of any Cabin Attendant." Seniority, however, is not the sole
determinant of retention. This is clear under Article XIII on performance appraisal
of the CBA provisions.
Under the CBA, several factors are likewise taken into consideration like
performance and professionalism in addition to the seniority factor. However, the
criteria for performance and professionalism are not indicated in the CBA but are
to be formulated by PAL in consultation with FASAP. Where there is
retrenchment, cabin attendants who fail to attain at least 85% of the established
criteria shall be demoted progressively. Domestic cabin attendants, the
occupants of lowest rung of the organizational hierarchy, are to be retrenched
once they fail to meet the required percentage.
We have painstakingly examined the records and We find no indication that these
provisions have been grossly disregarded as to taint the retrenchment with
illegality. PAL relied on specific categories of criteria, such as merit awards,
physical appearance, attendance and checkrides, to guide its selection of
employees to be removed. We do not find anything legally objectionable in the
adoption of the foregoing norms. On the contrary, these norms are most relevant
to the nature of a cabin attendant's work.
However, the contention of FASAP that these criteria required its prior conformity
before adoption is not supported by Section 30, Article VIII of the CBA. Note
should be taken that this provision only mandates PAL to "meet and consult" the
Association (FASAP) in the formulation of the Performance and Professionalism
Appraisal System." By the ordinary import of this provision, PAL is only required
to confer with FASAP; it is not at all required to forge an addendum to the CBA,
which will concretize the appraisal system as basis for retrenchment or
retention.155
To require PAL to further limit its criteria would be inconsistent with jurisprudence and
the principle of fairness. Instead, we hold that for as long as PAL followed a rational
criteria defined or set by the CBA and existing laws and jurisprudence in determining
who should be included in the retrenchment program., it sufficiently met the standards
of fain1ess and reason in its implementation of its retrenchment program.
D
 The retrenched employees signed valid quitclaims
The July 22, 2008 decision struck down as illegal the quitclaims executed by the
retrenched employees because of the mistaken conclusion that the retrenchment had
been unlawfully executed.
We reverse.
In EDI Staffbuilders International, Inc. v. National Labor Relations Commission, 156 we
laid down the basic contents of valid and effective quitclaims and waivers, to wit:
In order to prevent disputes on the validity and enforceability of quitclaims and waivers
of employees under Philippine laws, said agreements should contain the following:
1. A fixedamount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which
the employees arc giving up in consideration of the fixed compromise amount;
3. A statement that the employer has dearly explained to the employee in English,
Filipino, or in the dialect known to the employees - that by signing the waiver or
quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are
due them under the law; and
4. A statement that the employees signed and executed the document voluntarily,
and had fully understood the contents of the document and that their consent
was freely given without any threat, violence, duress, intimidation, or undue influence
exerted on their person.157 (Bold supplied for emphasis)
The release and quitclaim signed by the affected employees substantially satisfied the
aforestated requirements. The consideration was clearly indicated in the document in
the English language, including the benefits that the employees would be relinquishing
in exchange for the amounts to be received. There is no question that the employees
who had occupied the position of flight crew knew and understood the English
language. Hence, they fully comprehended the terms used in the release and quitclaim
that they signed.
Indeed, not all quitclaims are per se invalid or against public policy.1a\^/phi1 A quitclaim
is invalid or contrary to public policy only: (1) where there is clear proof that the waiver
was wrangled from an unsuspecting or gullible person; or (2) where the terms of
settlement are unconscionable on their face.158 Based on these standards, we uphold
the release and quitclaims signed by the retrenched employees herein.
WHEREFORE, the Court:
(a) GRANTS the Motion for Reconsideration of the Resolution of October 2,
2009 and Second Motion for Reconsideration of the Decision of July 22,
2008 filed by the respondents Philippine Airlines, Inc. and Patria Chiong;
(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's
Resolution dated March 13, 2012) filed by the petitioner Flight Attendants and
Stewards Association of the Philippines;
(c) SETSASIDE the decision dated July 22, 2008 and resolution dated October
2, 2009; and
(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.
No pronouncement on costs of still.
SO ORDERED.
OLIVER V. VERGARA, PETITIONER, VS. CDM SECURITY AGENCY, INC.
AND VILMA PABLO, RESPONDENTS.

RESOLUTION
A. REYES, JR., J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to reverse and set aside the Decision[1] dated March 31, 2016 and
Resolution[2] dated July 7, 2016 of the Court of Appeals (CA) in CA-G.R. SP No.
141223.

FACTS:

As the records bear out, Oliver Vergara (Vergara) was employed as a security guard by
CDM Security Agency, Inc. (CDM), an entity engaged in the business of providing
security services to its clients. Vergara was assigned at a branch of BPI Family Savings
Bank in San Agustin, Pampanga. On March 7, 2013 at around 9:00 a.m. while Vergara
was on duty, another CDM employee named Hipolito Fernandez (Fernandez) arrived
and had an argument with him. In the course of the argument, Vergara allegedly pointed
a shotgun to Fernandez.[3]

On March 8, 2013, CDM's Operations Officer caused the personal service of a

Memorandum of Disciplinary Action (Memorandum)[4] upon Vergara, relieving him of his
post at the bank and advising him to report to CDM's office. Vergara allegedly refused to
receive the Memorandum.[5]

On March 13, 2013, Vergara filed a Complaint[6] for illegal dismissal, non-remittance of

Social Security System (SSS) contributions and loan payments, and money claims for
labor standards benefits against CDM and its corporate officer Vilma Pablo (collectively,
respondents). According to Vergara, when he went to CDM's office on March 8, 2013,
he was asked to make a written explanation and to disclose therein the gun-pointing
incident. Vergara submitted his explanation but refused to admit to aiming a shotgun at
Fernandez, because no such incident occurred. He alleged that because of such
refusal, CDM's operations manager verbally terminated him from work.[7]

In a preliminary conference held on April 11, 2013, the parties decided to settle their
dispute amicably. As full settlement of his claims, Vergara received the amount of
P11,000.00 from the respondents and he was furnished with copies of certificates of his
SSS loan contributions and payments. Respondents also committed not to file any case
against him regarding the incident with Fernandez. It was also agreed upon that
Vergara's ATM card will be returned to him.[8] Vergara then signed a Quitclaim and
Release with Motion to Dismiss[9] before the Labor Arbiter (LA).

On June 5, 2013, another conference was held by the LA to verify the parties'
compliance with their agreement.[10] Vergara manifested that the respondents failed to
comply with some of his tenus such as, returning his ATM card and remitting his loan
payments to the Social Security System (SSS).[11] The parties were then directed to
submit their respective position papers.

For their part, the respondents maintained that Vergara was merely relieved from his
post at the bank but not terminated from CDM. He was even asked to report to their
main office.[12] They also alleged that they remitted the contributions and loan payments
to SSS as evidenced by the receipt numbers provided in their Certification.[13] Moreover,
the respondents submitted an Affidavit[14] executed by Fernandez, stating that Vergara's
ATM card was with him.

RULING OF THE LA

On September 8, 2014, the LA found that Vergara was illegally dismissed from
employment. The dispositive portion of its Decision[15] reads:
WHEREFORE, consistent with the foregoing, [Vergara's] dismissal is hereby declared
ILLEGAL and respondents are ordered to reinstate [Vergara] to his former or equivalent
position without loss of seniority rights[,] privileges and benefits attached to his position.

Under paragraph 2, Section 19, Rule V of the 2011 NLRC Rules of Procedure, as
amended, the reinstatement aspect of [this] Decision is immediately executory and the
respondents are directed to submit a written report of compliance within ten (10)
calendar days from receipt of the copy of this Decision.

Further, both the respondents are jointly and severally liable to pay [the] complainant
the following:
1. HIS BACKWAGES from March 8, 2013 up to the promulgation of this decision
(September 8, 2014), in the amount of ONE HUNDRED SEVENTY FOUR
THOUSAND TWO HUNDRED TWENTY PESOS ([P]174,220.00)

2. 10% ATTORNEY'S FEES in the amount of SEVENTEEN THOUSAND FOUR

HUNDRED TWENTY TWO PESOS ([P]17,422.00); AND

3. All other monetary claims, as well as his claims for damages are hereby
dismissed with prejudice for lack of merit.
SO ORDERED.[16]
RULING OF THE NLRC

On appeal, the NLRC reversed the LA, and dismissed the complaint for lack of merit.
The decretal portion of its Decision[17] dated December 29, 2014 provides:
WHEREFORE, the instant appeal is hereby GRANTED. The decision of Acting
Executive Labor Arbiter Mariano L. Bactin dated 08 September 2014 is hereby
REVERSED and SET ASIDE and a new one entered dismissing the complaint for lack
of merit.

SO ORDERED.[18]
Vergara's motion for reconsideration was denied by the NLRC through a
Resolution[19] dated February 24, 2015.
 RULING OF THE CA

On March 31, 2016, the CA rendered its Decision, the fallo of which states:
WHEREFORE, premises considered, the instant Petition for Certiorari is DENIED. The
Decision dated 29 December 2014 and Resolution dated 24 February 2015 of the
National Labor Relations Commission (NLRC) in NLRC LAC No. 10-002552-14 [NLRC
Case No. RAB III-03-19874-13] are AFFIRMED.

SO ORDERED.[20]
The CA ruled that the NLRC rightly upheld the Quitclaim and Release executed by
Vergara since: first, Vergara acknowledged that he fully understood the consequences
and imports of signing the quitclaim; second, the settlement pay of eleven thousand
pesos appears to be credible and reasonable; and third, there is no showing that
Vergara was defrauded or forced into signing the quitclaim.[21]

The CA also noted that Vergara failed to prove that he was dismissed from work
because there was no evidence of the same, other than his allegation of having been
verbally terminated.[22]

The CA denied Vergara's motion for reconsideration through the Resolution[23] dated

July 7, 2016.
ISSUES:
I. WHETHER THE [CA] GRAVELY ERRED IN AFFIRMING THAT VERGARA WAS
NOT ILLEGALLY DISMISSED FROM EMPLOYMENT

II. WHETHER THE [CA] GRAVELY ERRED WHEN IT UPHELD THE VALIDITY OF
THE QUITCLAIM/ WAIVER[24]
RULING OF THE COURT

The appeal lacks merit.

As the CA correctly determined, the Quitclaim and Release signed by Vergara is valid
and binding upon him. It is well to mention he does not dispute the authenticity and due
execution thereof. Further, the Quitclaim was subscribed and sworn before Executive
LA Mariano L. Bactin. In the absence of any allegation or proof that Vergara was
coerced into executing the quitclaim, its validity and binding effect must be upheld.
In Radio Mindanao Network Inc., v. Amurao III,[25] the Court reiterated the rule that:
Where the party has voluntarily made the waiver, with a full understanding of its terms
as well as its consequences, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking, and
may not later be disowned simply because of a change of mind.
The fact that Vergara's ATM card was not returned to him does not render the Quitclaim
ineffective. Although returning Vergara's ATM card was mentioned in the parties'
preliminary conference,[26] the respondents had explained that the issue regarding the
ATM card is a separate matter between Vergara and Fernandez, they have no control
over this subject.[27] There is no plausible reason why Vergara insists on recovering his
ATM card from the respondents when it appears to be in the possession of Femandez,
to whom Vergara was allegedly indebted.[28]

As to Vergara's claim of illegal dismissal, the Court affirms the findings of the CA that he
was not dismissed from employment. "In illegal termination cases, jurisprudence had
underscored that the fact of dismissal must be established by positive and overt acts of
an employer indicating the intention to dismiss."[29] In this case, Vergara was not at all
able to substantiate his allegation of verbal dismissal. At most, he was subjected to a
disciplinary action inappropriately, as it was imposed without a prior investigation.

Based on the Memorandum[30] dated March 8, 2013, Vergara was relieved of his post at
BPI San Agustin branch and was asked to report to CDM's office for: 1. Violation of
Code of Ethics No. 12 (proper use of firearms); and 2. Grave threat to Fernandez
(pointing 12 ga. shotgun). This Memorandum was served to him the very next day after
the incident. Additionally, the written account of Lito Panoy, a fellow security guard who
witnessed the altercation, was dated March 13, 2013 - a week after Vergara was
discharged from his place of assignment. Thus, it is clear that no investigation was
conducted before the findings of violation came about.

However, in view of the Quitclaim and Release executed by Vergara, the respondents
cannot be held liable for relieving him from his post. Besides, even in the absence of the
quitclaim, there is no evidence to suggest that he was being suspended or dismissed
from work. Per the Memorandum, recalling Vergara from his duty is a penalty in itself; to
presume that removing him from his place of assignment is tantamount to illegal
suspension or termination would be indulging in speculation, as he may also be
subjected to a reassignment only.

WHEREFORE, the petition is DENIED. The Decision dated March 31, 2016 and
Resolution dated July 7, 2016 of the Court of Appeals in CA-G.R. SP No. 141223
are AFFIRMED.

SO ORDERED.